On remand from the Delaware Supreme Court, the Court of Chancery has awarded XRI more than $6 million in litigation expenses and recoupment of fees advanced to a former LLC member who breached the governing LLC Agreement. XRI Inv. Holdings LLC v. Holifield, C.A. No. 2021-0619-JTL (July 24, 2024). The former LLC member, Gregory Holifield, breached contractual transfer provisions in connection with loans he obtained from a third-party mezzanine lender, Assurance. After Holifield defaulted on the Assurance loans, Assurance sued XRI in Texas, claiming that XRI had violated rights to Holifield’s XRI equity that Assurance had obtained as part of the loan transaction. XRI spent $4.1 million defending against and ultimately settling Assurance’s claims. The Court of Chancery awarded XRI damages reflecting those expenditures in full. The decision marks the first time a Delaware court has awarded expenses incurred in third-party litigation as breach of contract damages. The Court of Chancery also held that XRI is entitled to recoup all attorneys’ fees previously advanced to Holifield—approximately $2 million and counting—under the indemnification provisions of the LLC Agreement. The latter holding marks the rare occasion on which a Delaware court has allowed a company to claw back previously advanced fees.
The post In Case of First Impression, Court of Chancery Awards Expenditures Incurred in Third-Party Litigation as Breach of Contract Damages appeared first on Enhanced Scrutiny.