Gener8, LLC v. Scott Castanon

CourtCourt of Chancery of Delaware
DecidedJanuary 14, 2025
DocketC.A. No. 2022-0426-LWW
StatusPublished

This text of Gener8, LLC v. Scott Castanon (Gener8, LLC v. Scott Castanon) is published on Counsel Stack Legal Research, covering Court of Chancery of Delaware primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Gener8, LLC v. Scott Castanon, (Del. Ct. App. 2025).

Opinion

COURT OF CHANCERY OF THE STATE OF DELAWARE

LORI W. WILL LEONARD L. WILLIAMS JUSTICE CENTER VICE CHANCELLOR 500 N. KING STREET, SUITE 11400 WILMINGTON, DELAWARE 19801-3734

January 14, 2025

Jonathan M. Stemerman, Esquire Kurt M. Heyman, Esquire Armstrong Teasdale, LLP Jamie L. Brown, Esquire 1007 North Market Street Elizabeth A. DeFelice, Esquire Wilmington, Delaware 19801 Heyman Enerio Gattuso & Hirzel LLP 300 Delaware Avenue Wilmington, Delaware 19801

RE: Gener8, LLC et al. v. Scott Castanon, C.A. No. 2022-0426-LWW

Dear Counsel:

This letter opinion addresses the plaintiffs’ application for attorneys’ fees and

expenses. The application is granted, with certain reductions.

I. BACKGROUND

In February 2020, Scott Castanon sold Symbient Product Development, LLC

to Gener8, LLC for $14.4 million. In the Equity Purchase Agreement (the “EPA”)

governing the sale, Castanon agreed to restrictive covenants including a

non-compete provision and provisions barring him from soliciting Symbient

employees or customers. C.A. No. 2022-0426-LWW January 14, 2025 Page 2 of 21

After trial, I found that Castanon had breached these restrictive covenants and

harmed plaintiffs Gener8 and Symbient.1 My September 29, 2023 post-trial opinion

(the “Opinion”) awarded the plaintiffs damages of $104,356 plus interest for these

breaches of contract.2 I also awarded injunctive relief specifically enforcing the

EPA.3 But I found that the plaintiffs had failed to prove their claims for breach of

fiduciary duty, breach of the implied covenant of good faith and fair dealing, and for

intentional interference with contractual relations and with prospective economic

advantage.4

I further held that the plaintiffs were entitled to “reasonable attorneys’ fees”

under a prevailing party provision in the EPA. 5 Specifically, I observed that

“Section 10.14 of the EPA entitles the ‘prevailing party’ to recover ‘its actual out-

of-pocket costs and expenses, including without limitation reasonable attorneys’ fees

incurred in connection with’ ‘an action to enforce [that party’s] rights under [the

EPA].’”6 The Opinion explained that the plaintiffs prevailed on “[t]he predominant

1 Gener8, LLC v. Castanon, 2023 WL 6381635 (Del. Ch. Sept. 29, 2023) (“Mem. Op.”). 2 Id. at *34. 3 Id. at *35. 4 Id. at *27-30. 5 Id. at *35. 6 Id. (quoting EPA § 10.14). C.A. No. 2022-0426-LWW January 14, 2025 Page 3 of 21

issue in this case,” which “was whether Castanon breached non–compete and non–

solicit covenants in the EPA.”7 “[T]he other claims stemmed from the same factual

predicate and involved issues overlapping with Castanon’s contractual breaches.”8

I requested further submissions on the reasonableness of the plaintiffs’ requested

fees and expenses.9

I also found that Castanon had committed contempt and spoliation.10 As a

remedy, I drew adverse inferences in the plaintiffs’ favor and awarded the plaintiffs

their reasonable attorneys’ fees and expenses in bringing a motion for sanctions.11

The plaintiffs subsequently filed bills of costs and Rule 88 affidavits in

support of their application for attorneys’ fees and expenses. 12 The fees and

expenses sought total $3,011,507.89.13

7 Id. 8 Id. 9 Id. at *36. 10 Id. at *13-16. 11 Id. at *16-17. 12 See Dkts. 170-72. 13 Id. C.A. No. 2022-0426-LWW January 14, 2025 Page 5 of 21

Castanon objected to the plaintiffs’ application and asserted that any fee and

expense award should not exceed $1,500,000.21

Proceedings were delayed when a suggestion of death of Castanon was filed

by defense counsel.22 I granted defense counsel’s motion to substitute the executor

of Castanon’s estate for Castanon in this action.23 But defense counsel subsequently

notified the court that the executor had not been formally appointed the personal

representative of Castanon’s estate by a California court. 24 The plaintiffs thus

objected to the suggestion of death.25 Eventually, the executor’s appointment was

finalized and an amended motion for substitution was filed, which I granted.26 In

doing so, Castanon’s objection to the plaintiffs’ fee application was deemed ratified

by the executor.27

21 Def.’s Opp’n 6. 22 Dkt. 176. 23 Dkt. 181. 24 Dkt. 182. 25 Dkt. 184; see Ch. Ct. R. 25(a)(3) (“Any statement noting death should identify the decedent’s successor or representative, and that person’s attorney, if any.”). 26 Dkt. 186 at 1. 27 Id. at 2 (“Defendant Scott Castanon’s Objections to Plaintiffs’ Fees, filed on February 1, 2024, is hereby deemed ratified by the Executor, as requested by the Executor’s Amended Motion for Substitution.”). C.A. No. 2022-0426-LWW January 14, 2025 Page 6 of 21

II. ANALYSIS

“Delaware law dictates that, in fee shifting cases, a judge determines whether

the fees requested are reasonable.”28 This court “has broad discretion in determining

the amount of fees and expenses to award.”29 In assessing the reasonableness of a

fee application, the court is guided by the factors set out in Rule 1.5(a) of the

Delaware Lawyers’ Rules of Professional Conduct.30 Rule 1.5(a) directs the court

to consider:

(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly; (2) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer; (3) the fee customarily charged in the locality for similar legal services; (4) the amount involved and the results obtained; (5) the time limitations imposed by the client or by the circumstances; (6) the nature and length of the professional relationship with the client; (7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and (8) whether the fee is fixed or contingent.31

28 Mahani v. Edix Media Gp., Inc., 935 A.2d 242, 245 (Del. 2007). 29 Black v. Staffieri, 2014 WL 814122, at *4 (Del. Feb. 27, 2014) (TABLE) (citation omitted). 30 Mahani, 935 A.2d at 245-46; see also Greenstar IH Rep., LLC v. TutorPerini Corp., 2019 WL 6884752, at *2 (Del. Ch. Dec. 4, 2019). 31 Del. Laws.’ R. Pro. Conduct 1.5(a); see also Aveta v. Bengoa, 2010 WL 3221823, at *4 (Del. Ch. Aug. 13, 2010). C.A. No. 2022-0426-LWW January 14, 2025 Page 7 of 21

“Determining reasonableness does not require [the] Court [to] examine

individually each time entry and disbursement” or “assess independently whether

counsel appropriately pursued and charged for a particular motion, line of argument,

area of discovery, or other litigation tactic.”32 Instead, the court may find “[a] party’s

expenses are reasonable if they were actually paid or incurred, were thought prudent

and appropriate in the good faith professional judgment of competent counsel, and

were charged at rates, or on a basis, charged to others for the same or comparable

services under comparable circumstances.”33

A. The Overall Fee Request

Castanon asserted that the fee request is excessive because the plaintiffs only

prevailed on one of five claims and were awarded a small portion of the damages

sought.34 He claimed that the litigation was “economically irrational” because the

plaintiffs’ fees are “nearly 30 times [their] compensatory damages.” 35 Even so,

Aveta, 2010 WL 3221823, at *6; see also Weil v. VEREIT Operating P’ship, L.P., 2018 32

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Bluebook (online)
Gener8, LLC v. Scott Castanon, Counsel Stack Legal Research, https://law.counselstack.com/opinion/gener8-llc-v-scott-castanon-delch-2025.