Malkani v. Cunningham, C.A. 2020-1004-SG (Del. Ch. Feb. 28, 2024)

In this decision involving a contractual fee-shifting provision, both parties argued that they were entitled to fee-shifting as the prevailing parties. The Court held that the prevailing party was the party who succeeded in the overall litigation.

The underlying litigation involved the enforcement of a contract between a private investor and a Delaware LLC. Two agreements between the parties contained fee-shifting provisions for attorneys’ fees to be awarded to the prevailing party. Each party prevailed on certain counts of the Complaint, and each claimed to be the prevailing party under the agreements in question. The Company argued that even though the investor vindicated his rights in the underlying litigation by receiving a declaratory judgment upholding such rights, he did not enforce the rights and, therefore, did not prevail under the fee-shifting provisions. The Court disagreed and pointed out that the provisions in question authorized fee shifting for “any dispute” among the parties "with respect to” the contract. The Court explained that the prevailing party was the party who prevailed on the preponderance of the action subject to the fee-shifting provision. Thus, because the investor vindicated his contractual rights when the Company claimed them to be unenforceable, which was the central issue in the litigation, he was entitled to shift his fees, costs, and expenses.