COURT OF CHANCERY
OF THE
STATE OF DELAWARE
D ONALD F. PARSONS, JR. New Castle County Courthouse
VICE CHANCELLOR 500 N. King Street, Suite 11400
Wilmington, Delaware 19801-3734
Date Submitted: May 28, 2015
Date Decided: August 14, 2015
Francis G.X. Pileggi, Esq. Samuel T. Hirzel, II, Esq.
Aimee M. Czachorowski, Esq. Proctor Heyman Enerio LLP
Eckert Seamans Cherin & Mellott, LLC 300 Delaware Avenue
222 Delaware Avenue, 7th Floor Wilmington, DE 19801
Wilmington, DE 19801
RE: Holley v. Nipro Diagnostics, Inc.
Civil Action No. 9679-VCP
Dear Counsel:
Before me is a dispute over whether certain fees qualify for advancement.
Plaintiff, George Holley, filed this action on May 21, 2014, seeking
advancement of legal fees and expenses from Defendant, Nipro Diagnostics, Inc.
(“Nipro”). On December 23, 2014, I granted Holley’s motion for partial
summary judgment, holding that he was entitled to the advancement requested
(“Holley I”). 1 On March 13, 2015, I issued an oral ruling denying Nipro’s
motion under Court of Chancery Rule 60(b) seeking relief from Holley I on the
1
Holley v. Nipro Diagnostics, Inc., 2014 WL 7336411 (Del. Ch. Dec. 23,
2014) [hereinafter “Holley I”].
Holley v. Nipro Diagnostics, Inc.
Civil Action No. 9679-VCP
August 14, 2015
Page 2
basis of newly discovered evidence (“Holley II”). 2 Holley then moved to compel
payment of certain still-disputed fees. In this Letter Opinion, I hold that those
fees are advanceable.
I. BACKGROUND
A more complete history can be found in my prior rulings, which, for the
sake of brevity, I do not repeat here.3 The crux of the present dispute relates to
$294,262.96 in total fees and expenses charged by two consulting firms hired by
Holley: National Economic Research Associates (“NERA”) and Renaissance
Associates, Ltd. (“Renaissance”). The dispute over these fees, the “Disputed
Fees,” is the sole issue requiring resolution.
In brief summary, Holley was prosecuted by the New Jersey United States
Attorney criminally (the “Criminal Action”) and by the SEC civilly (the “SEC
Action”) for violations of insider trading laws. Both actions stem from the same
course of conduct by Holley. Holley eventually pled guilty in the Criminal Action
to some, but not all, of the charges initially brought by the government, and Holley
entered into a consent judgment in the SEC Action for the same wrongdoing,
2
Holley v. Nipro Diagnostics, Inc., C.A. No. 9679-VCP (Del. Ch. Mar. 13,
2015) (TRANSCRIPT) [hereinafter “Holley II”].
3
Holley I, at *1-3, *7; Holley II, at 4-6. Unless otherwise defined, capitalized
terms have the same meaning as in Holley I and Holley II.
Holley v. Nipro Diagnostics, Inc.
Civil Action No. 9679-VCP
August 14, 2015
Page 3
which again did not encompass all of the relief initially sought. In Holley I, I held
that the fees and expenses incurred in the SEC Action were advanceable.4 Holley
contends that the Disputed Fees relate to both the SEC Action and the Criminal
Action, making them advanceable under Delaware law. Nipro argues that the
Disputed Fees are non-advanceable because they relate solely to the Criminal
Action.
II. ANALYSIS
The dispute here is not about reasonableness; instead, it concerns whether
the fees and expenses should be allocated or apportioned to the SEC Action, in
which case they are advanceable, or the Criminal Action, in which case they are
not advanceable. This Court previously has held that, in actions where only certain
claims are advanceable, the Court generally will not determine at the advancement
stage whether fee requests relate to covered claims or excluded claims, unless such
discerning review can be done realistically without significant burden on the
Court.5 Oftentimes, it cannot be done easily and will be deferred to the
4
As stated in Holley II, the SEC Action also includes the SEC Investigation.
5
See Xu Hong Bin v. Heckmann Corp., 2010 WL 187018, at *2 (Del. Ch. Jan.
8, 2010) (noting clear temporal divide making such categorization of fees
feasible).
Holley v. Nipro Diagnostics, Inc.
Civil Action No. 9679-VCP
August 14, 2015
Page 4
indemnification stage.6 If fees cannot be apportioned with rough precision
between advanceable claims and non-advanceable claims, or the work was useful
for both sets of claims, then the fees will be advanced in whole.7 This same line of
reasoning has been held to apply to counsel representing multiple defendants. In
such an instance, Chancellor Bouchard determined that such fees were wholly
advanceable if the expenses would have been incurred for the advancee’s own
defense, regardless of the existence of other co-defendants.8
Just as among claims, and just as among co-defendants, the same logic
applies here as among different proceedings: if the fees would have been incurred
independently in defense of the advanceable proceeding, such fees are wholly
advanceable, even though the fees also were useful or applicable in a non-
advanceable proceeding. As applied to these facts, the question is this: Would the
Disputed Fees have been incurred in defense of the SEC Action even if there was
no Criminal Action? If the answer is yes, then the Disputed Fees are advanceable.
6
See Danenberg v. Fitracks, 2012 WL 11220, at *6 (Del. Ch. Jan. 3, 2012)
(rejecting the Xu Hong Bin approach as unworkable on the facts).
7
Paolino v. Mace Sec. Int’l, Inc., 985 A.2d 392, 408 (Del. Ch. 2009).
8
Konstantino v. Angioscore, C.A. No. 9681-CB (Del. Ch. Feb. 16, 2015)
(TRANSCRIPT) at 10-12.
Holley v. Nipro Diagnostics, Inc.
Civil Action No. 9679-VCP
August 14, 2015
Page 5
The SEC Action and the Criminal Action initially proceeded in tandem. On
August 19, 2011, the SEC Action was stayed pending resolution of the Criminal
Action. Holley entered a guilty plea in the Criminal Action on August 8, 2012.
The stay in the SEC Action later was lifted and Holley entered into a consent
judgment in that action in December 2014. The Disputed Fees in this case involve
invoices dated June 2, 2011 through November 11, 2011. At least some of that
work occurred after the SEC Action was stayed. Thus, the Court must answer the
counterfactual question of whether these fees would have been incurred if only the
SEC Action existed, notwithstanding the fact that the SEC Action was stayed.
Holley’s attorneys who coordinated his defense of the various actions are the
most competent to opine as to what would have been required for the defense of
the SEC Action, even if the Criminal Action did not exist. Holley’s Delaware
counsel and his New Jersey counsel both submitted affidavits averring that the fees
incurred would have been necessary solely for the defense of the SEC Action. 9 In
most cases, unless the certifications obviously were in error or were not made in
good faith, this should end the matter. “Advancement is not the proper stage for a
9
Affidavit of John D. Tortorella in Supp. of Pl.’s Mot. for Ruling on Disputed
Fees [hereinafter “Tortorella Aff.”] Ex. 2 (“Certification of Samuel T.
Hirzel, Esq.”) ¶ 2 (Delaware counsel); Tortorella Aff. Ex. 3 (“Supplemental
Affidavit of Kevin H. Marino”) ¶ 2 (New Jersey counsel).
Holley v. Nipro Diagnostics, Inc.
Civil Action No. 9679-VCP
August 14, 2015
Page 6
detailed analytical review of the fees, whether in terms of the strategy followed or
the staffing and time committed. Typically, a good faith certification from counsel
should suffice. In the absence of clear abuse, the fees should be advanced.”10
Nipro does not argue that the certifications were not made in good faith.
Instead, Nipro asks this Court to examine the invoices and conclude,
notwithstanding the certifications of counsel, that, in the hypothetical world in
which only the SEC Action existed, the Disputed Fees would not have been
incurred in defense of that action. As an outsider to the litigation and on a paper
record, the Court is ill-equipped to make that determination. “For a Court to
second-guess, on a hindsight basis, an attorney’s judgment concerning whether to
retain an expert for a specific purpose, is hazardous and should whenever possible
be avoided.”11
I take Plaintiff’s attorneys’ certifications as the best evidence that the
Disputed Fees would have been incurred solely in defense of the SEC Action. The
arguments advanced by Plaintiff in that regard are plausible: the defense of the
10
Duthie v. CorSolutions Med., Inc., 2008 WL 4173850, at *2 (Del. Ch. Sept.
10, 2008).
11
Arbitrium (Cayman Is.) Handels AG v. Johnston, 1998 WL 155550, at *4
(Del. Ch. Mar. 30), aff’d, 720 A.2d 542 (Del. 1998).
Holley v. Nipro Diagnostics, Inc.
Civil Action No. 9679-VCP
August 14, 2015
Page 7
Criminal Action and the SEC Action largely overlapped because the same conduct
was at issue in each proceeding; NERA provided a market analysis that would
have been required for the SEC Action and the Criminal Action; and Renaissance
provided a forensic analysis of computer data and interviewed key witnesses, work
that likely would have been required for either action.
Nipro’s main arguments to the contrary are unavailing.12 I address them
briefly for completeness. With respect to Renaissance, Nipro argues that those
fees could not have been related to the SEC Action because they occurred after the
SEC Action was stayed. This argument misconstrues the inquiry, which is whether
those fees would have been incurred if the Criminal Action did not exist. With that
focus in mind, I conclude that Nipro’s reliance on the stay is misplaced. Because
there was overlap between the Criminal Action and the SEC Action, it would not
be surprising if the work of a consultant, like Renaissance, could be needed in both
actions. Nipro has advanced no other colorable basis for challenging the
12
Nipro relies extensively on the fact that Plaintiff’s New Jersey counsel did
not seek advancement for a meeting for which Plaintiff did seek
advancement as to another attendee, Renaissance. Holley provided a
convincing explanation for this apparent discrepancy. Pl.’s Reply 3-7. In
any event, this $2,648.25 charge is exactly the sort of line-item review that is
inappropriate at the advancement stage. E.g., Fasciana v. Elec. Data Sys.
Corp., 829 A.2d 160, 177 (Del. Ch. 2003).
Holley v. Nipro Diagnostics, Inc.
Civil Action No. 9679-VCP
August 14, 2015
Page 8
Renaissance fees. Also, I note that the Renaissance bills disputed by Nipro all bear
the same matter number as the earlier bills that Nipro paid and did not dispute.
This suggests that Renaissance was engaged in the same overarching project
throughout the engagement.13
As to the NERA fees, I first note that, although the final invoice bears the
date August 24, 2011, it was for work done between July 1 through July 31, 2011.
Accordingly, NERA’s fees were incurred while the SEC Action was active. Nipro
relies on the fact that the “Re:” line on the April 27, 2011 invoice that it did not
dispute referred to both the SEC Action and the Criminal Action, 14 while the “Re:”
lines on the four later invoices that it does dispute refer only to the Criminal
Action.15 Bearing in mind that the invoices for the disputed and undisputed
invoices all bear the same project number,16 I find the differences in the “Re:” lines
13
Def.’s Answering Br. Ex. B at GH-REN 1, GH-REN 3, GH-REN 4, GH-
REN 5, GH-REN 11.
14
Def.’s Answering Br. Ex. A at GH-NERA 1.
15
Id. at GH-NERA 7, GH-NERA 16, GH-NERA 21, GH-NERA 26.
16
Id. at GH-NERA 2, GH-NERA 8, GH-NERA 17, GH-NERA 22, GH-NERA
27.
Holley v. Nipro Diagnostics, Inc.
Civil Action No. 9679-VCP
August 14, 2015
Page 9
to be too slim a reed to warrant overriding the affidavits of Plaintiff’s counsel in
support of advancement.
Nipro’s contentions do not convince me that the Disputed Fees relate only to
the Criminal Action and would not have been incurred in the SEC Action. Each
consulting firm used one project number; there is no indication that either NERA
or Renaissance, in the disputed invoices, treated the Criminal Action differently
than the SEC Action; nor is there any readily apparent basis in these invoices to
allocate charges among those actions. Indeed, the invoices themselves are as
Plaintiff described them: the NERA invoices refer to one continuous market
analysis project and the Renaissance invoices relate to forensic data analysis and
witness interviews. Nothing in the line-item descriptions leads me to doubt
Plaintiff’s attorneys’ representations that the Disputed Fees would have been
incurred in the SEC Action even if the Criminal Action did not exist. Nipro’s
contrary arguments involving the subject lines of the cover letters and the timing of
the work do not overcome the good faith attorney certifications. Nor do I have any
independent reason to doubt those certifications.
III. CONCLUSION
For the foregoing reasons, I conclude that the Disputed Fees qualify for
advancement because they would have been incurred if only the SEC Action
Holley v. Nipro Diagnostics, Inc.
Civil Action No. 9679-VCP
August 14, 2015
Page 10
existed. Thus, Plaintiff is entitled to advancement of the $294,262.96 at issue
here. In addition, pursuant to the March 13, 2015 advancement order governing
fee disputes in this case, I hold that Holley is entitled to the reasonable attorneys’
fees and expenses he incurred in pursuing this motion.
IT IS SO ORDERED.
Sincerely,
/s/ Donald F. Parsons, Jr.
Donald F. Parsons, Jr.
Vice Chancellor
DFP/ptp