When a defendant engages in arguably unlawful conduct, a plaintiff files an action to complain about and seek relief prohibiting the unlawful conduct, and the defendant thereafter changes its practices and moots the plaintiff’s complaint, a plaintiff may be entitled to attorney fees based upon the benefit conferred. Absent such a rule, a plaintiffs counsel could undertake a contingent-fee case, incur fees to investigate and file the action and then wind up with no case and no compensation, even though the defendant had changed its practices in a manner consistent with the plaintiff’s demand.

Even under this scenario, however, Delaware law requires that the action was meritorious when filed. For a derivative claim where a plaintiff does not make a demand upon the board, a complaint is not meritorious when filed if it is subject to dismissal because the plaintiff fails to plead the facts with sufficient particularity to demonstrate that demand was excused. As the plaintiff inFreedman v. Adams , C.A. No. 4199-VCN (Del. Ch.) learned in the March 30 opinion of Vice Chancellor John W. Noble, a plaintiff is not entitled to a fee if he or she fails in his or her derivative complaint to plead facts demonstrating compliance with Rule 23.1 of the Court of Chancery Rules, even if post-filing the defendant board members cause the corporation to alter its conduct in the manner sought in the complaint.

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