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Judge Davis Grants Request for Attorneys' Fees but Denies Request for Interest

January 24, 2018

In Boeing Co. v. Spirit Aerosystems, Inc., C.A. No. N14C-12-055 EMD CCLD (Dec. 5, 2017), Judge Davis granted in part and denied in part the defendant’s Motion for Attorneys’ Fees, Costs, Expenses and Pre- and Post-Judgment Interest, awarding the defendant’s request for fees but denying the request for interest. This case stemmed from a dispute over certain provisions in an asset purchase agreement (“APA”) in which plaintiff Boeing Company sold certain manufacturing facilities in Kansas and Oklahoma to defendant Spirit Aerosystems, Inc. As part of the APA, Boeing and Spirit apportioned certain assets and liabilities to the employees working at particular facilities in Kansas and Oklahoma. These assets included Boeing’s collective bargaining agreements (“CBAs”).

In 2005, certain unions filed grievances in connection with the CBAs. After receiving Boeing’s December 5, 2014 complaint, Spirit filed counterclaims seeking a declaration that Boeing must indemnify Spirit for the costs associated with defending the actions filed by the unions. On July 27, 2017, Judge Davis granted Spirit’s motion for summary judgment and held that “all liabilities related to Boeing’s CBAs are considered Excluded Liabilities.” Because the Court found that fees were warranted under the contractual provisions of the APA for litigation related to the Excluded Liabilities, Judge Davis found that Boeing must reimburse Spirit for its reasonable attorneys’ fees, costs, and expenses incurred in connection with the present litigation and the underlying proceedings. Thereafter, Spirit sought $11,049,748.61 in fees, costs, and expenses ($9,609,425.60 in fees for the present litigation and $1,440,323.01 in fees for other previous litigation), $851,365.30 in pre-judgment interest, and post-judgment interest at a rate of $1,665.03 per day. In response, Boeing argued that Spirit’s motion should be denied because the request for fees lacked adequate support and was not reasonable. Boeing also claimed that Spirit was not entitled to pre- or post-judgment interest.

Noting that the Court has discretion to determine a reasonable fee award, Judge Davis awarded the defendant’s requested $11,049,748.61 in fees, but held that the defendant was not entitled to interest on that award. In so holding, Judge Davis noted that the Court was not required to conduct a line-item review of fees and concluded that the defendant’s request was adequately supported by the affidavit of a paralegal in the defendant’s legal department and 179 supporting exhibits. Furthermore, Judge Davis concluded that the amounts were reasonable and warranted under the APA.

Judge Davis also analyzed Rule 1.5 of the Delaware Rules of Professional Conduct to determine whether the fee was reasonable. In analyzing the factors articulated by the rule, Judge Davis considered: (1) the complicated issue of interpreting the APA; (2) the rates charged by the law firms employed by the defendant compared to other firms that also deal with complex corporate issues; and, (3) the $150 million that the plaintiff sought in the action compared to the approximately $9 million that the defendant sought in attorneys’ fees. Judge Davis also noted that the length of the contractual relationship between Spirit and its well-regarded counsel, the fixed hourly fee charged by Spirit’s counsel, and Spirit’s payment of invoices within 40-45 days after the date of the invoice further supported a finding that the requested fees were reasonable. Despite Boeing’s argument that Spirit’s primary counsel billed twice as many hours as Boeing’s primary counsel, the Court held that counsel’s hours were reasonable in light of Boeing’s counsel’s advantageous familiarity with the contracts at issue.

Judge Davis, however, did conclude that Spirit was not entitled to collect pre- or post-judgment interest on the attorneys’ fees award. Judge Davis commented that the Delaware Supreme Court’s reference to prejudgment interest being awarded “as a matter of right” was with respect to advancement that was already due before the judgment. Because the plaintiff did not owe the defendant a duty to advance payment of attorneys’ fees, the same outcome was not warranted. Furthermore, Judge Davis pointed to the absence of any provision for interest in the asset purchase agreement—“a highly negotiated document.” In the absence of a contractual provision granting interest on the attorneys’ fees, Judge Davis denied the defendant’s motion as to interest.

Analysis: This case highlights the benefits of negotiating for payment of attorneys’ fees and costs in the indemnification provisions commonly found in acquisition documents. Here, Judge Davis largely adopted the defendant’s request for attorneys’ fees based on the plain language of the APA at issue and after concluding that the fees were reasonable.

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