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P. Clarkson Collins Jr.P. Clarkson Collins Jr. ()

Persuaded by the arguments of the appellant noteholders, the Delaware Supreme Court ruled that two fee-shifting provisions in the promissory notes entitled them to recover attorney fees the noteholders incurred filing suit to secure warrants issuable under the notes. Relying on an exception to the American rule permitting fee-shifting where a contract so provides, the Supreme Court in Washington v. Preferred Communications Systems, No. 436, 2016 (Del. Supr. Feb. 27), ruled that the amended notes unambiguously provided fee-shifting in this case. It rejected the company’s argument that under the relevant contractual provisions the warrants did not constitute “any indebtedness” and that the noteholders action to recover them did not amount to a collection action after default. Having found a clear basis in the contract to support its fee award, the Supreme Court declined the opportunity to broaden its ruling and have Delaware address an emerging trend in other states to treat a one-sided fee provision as a mutual fee-shifting provision.

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