A contract provision in a limited liability company agreement that entitles the prevailing party to reimbursement for all reasonable fees and costs in connection with enforcement of the agreement, including reasonable attorney fees, is not unusual. In defending against such a claim, a nonprevailing party may challenge whether the claims arose under the agreement, whether expenses incurred in related litigation in other courts merit reimbursement and whether the fees are reasonable in light of the comparable fees and rates of the nonprevailing party. Sometimes a question arises, where similar issues exist involving substantially similar contracts but different parties, of whether the court must allocate the fees among the separate parties. What is unusual is for all of these issues to be addressed in one opinion. The Court of Chancery’s recent decision inASB Allegiance Real Estate Fund v. Scion Breckenridge Managing Member , 2012 WL 3027351 (Del. Ch. July 9, 2012), does just that and provides important guidance to practitioners regarding the nature of a claim for breach of the implied covenant of good faith and fair dealing and enforcement of contractual fee-shifting provisions.
Breach of the Implied Covenant
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