Two recent Delaware Court of Chancery decisions awarded fees for errant pre-litigation conduct which makes then noteworthy for that point alone, although there is much else to commend them. In the matter styled Ramadurgam v. Destiny XYZ Inc., C.A. No. 2024-0057-PAF (Del. Ch. July 23, 2026), the court awarded fees for pre-litigation conduct which the court described as an independent basis to warrant fee shifting as an element of equitable relief. Slip op. at 86.
The court highlighted in a heading to the section of the opinion on this issue that the defendants’ pre-litigation conduct was “glaringly egregious and the product of unusually deplorable behavior.” Id. at 84. The court cited to multiple authorities to support its reasoning in connection with a thorough analysis of the fiduciary duty of loyalty and how it was breached in this case. Id. at 83-88. The court underscored, however, that “not every proven breach of the duty of loyalty will justify and award of attorneys’ fees damages.” Id. at 88. The nearly 100-page opinion in its original format deserves a careful review for its extensive analysis of several issues–but the limited scope of this short blog post is to highlight the aspect of the decision on fee shifting for pre-litigation conduct.
This decision should be compared on this issue with the recent Chancery ruling in Neem International CV v. Shulman, C.A. No. 2022-0187-LWW (Del. Ch. July 30, 2026). In this short letter ruling, the court relied on the bad faith exception to the American Rule to award fees for both “egregious” pre-litigation conduct, along with obstructive behavior during discovery. The court described the defendant’s conduct as “not a mere breach of contract, but extreme disloyalty.”
Notably, this letter ruling did not use the same exact formulation of the standard applied for its reasoning that pre-litigation conduct was a basis to award fees, in addition to conduct during the litigation, because it was relying on the bad faith exception to the American Rule. Cf. Ramadurgam, Slip op. at 84.
The Reem court distinguished a case where the pre-litigation conduct gave rise to the claim. To contrast the Versata decision unsuccessfully relied on by the defendant, the court explained that the defendant’s actions in this matter “infected the litigation process and forced the plaintiff to incur substantial costs to unravel the deception” which satisfied the bad faith exception. Id. at 7 (referring to Versata Enters., Inc. v. Selectica, Inc., 5 A.3d 586, 607 (Del. 2010)).
This letter ruling also explained why fees were awarded even though only 1 of 13 causes of action were successful. The court rejected objections based on alleged excessive staffing and unreasonable hours billed to the failed claims. Id. at 8. Also noteworthy was the court’s guidance that “determining reasonableness [of fees] does not require the court to examine each time entry and disbursement.” Id. See generally Rule of Professional Conduct 1.5(a).
Bonus: The court’s opinion in Ramadurgam deserves more thorough treatment for its analysis of not only the breach of the fiduciary duty of loyalty, but also for its scholarly insights into the principles of restitution, as well as comparing rescission to a constructive trust as equitable remedies. Slip op. at 75-82. Also noteworthy is the court’s citation to historic sources from Roman law on these principles, as well as its reference to a treatise on the topic published in Italian. See footnote 291. This is the first time I recall a cite in a Chancery opinion to a treatise in a foreign language.
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