The Delaware Superior Court recently issued a ruling in the case of JanCo FS 2, LLC v. ISS Facility Services, Inc., C.A. No. N23C-03-005 MAA CCLD, regarding the awarding of attorneys' fees, litigation costs, and interest. The court determined that ISS Facility Services, Inc. and its affiliates are the successful parties in the litigation and are entitled to recover their attorneys' fees and costs. This ruling is significant as it clarifies how fee-shifting provisions in contracts are interpreted, particularly in the context of indemnification and fee-shifting agreements.
The case involved two parties: JanCo FS 2, LLC and JanCo FS 3, LLC (collectively referred to as JanCo), and ISS Facility Services, Inc., along with its subsidiaries ISS C&S Building Maintenance Corporation, ISS TMC Services, Inc., and ISS Facility Services California, Inc. (collectively referred to as ISS). The dispute arose from an Asset Purchase Agreement (APA) signed in September 2021, where ISS was selling its North American single-service cleaning and janitorial-services business to JanCo for $80 million. The APA included various provisions regarding the performance of obligations and the responsibilities of both parties.
The disagreement between the parties centered on which provisions of the APA governed the award of attorneys' fees and litigation costs. JanCo argued that indemnification provisions in Article 7 of the APA should apply, while ISS contended that the express fee-shifting provision in Article 9 should govern. The court had to determine whether the fee-shifting provision adopted an all-or-nothing approach or a claim-by-claim basis for awarding fees.
The court ultimately ruled that the fee-shifting provision in Section 9.12 of the APA governs the award of attorneys' fees and litigation costs. The court stated, "The APA’s express fee-shifting provision governs the award of attorneys’ fees and litigation costs in this case." The court further clarified that this provision adopts an all-or-nothing approach to awarding fees, meaning that the successful party is entitled to recover all incurred fees rather than on a claim-by-claim basis.
In determining the successful party, the court found that ISS predominated in the litigation. The court noted, "ISS predominated in the litigation and is the ‘successful Party’ under the APA’s fee-shifting provision." The court ruled that ISS's attorneys' fees and costs were reasonable and awarded both parties pre- and post-judgment interest, but clarified that it had no authority to award compound or floating interest in this case.
This ruling has implications for future cases involving fee-shifting provisions in contracts, particularly in Delaware. It reinforces the principle that clear and explicit language is necessary for indemnification provisions to serve as a basis for first-party fee-shifting. The court's decision also serves as a reminder that parties must carefully consider the language they use in contracts to avoid ambiguity in the interpretation of their rights and obligations.
Looking ahead, it is possible that JanCo may seek to appeal this ruling, although details on any potential appeal were not available in the court filing. The outcome of this case may influence similar disputes in the future, particularly in the realm of commercial contracts and the interpretation of fee-shifting provisions.