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The Mrs. Fields Brand, Inc. v. Interbake Foods LLC

Court of Chancery of Delaware

January 5, 2018

The Mrs. Fields Brand, Inc.
v.
Interbake Foods LLC

          Submitted: October 20, 2017

          David A. Jenkins, Esquire Robert K. Beste III, Esquire Smith, Katzenstein & Jenkins LLP

          Chad S.C. Stover, Esquire Kevin G. Collins, Esquire Barnes & Thornburg LLP

          ANDRE G. BOUCHARD CHANCELLOR.

         Dear Counsel:

         This letter constitutes the court's decision on both parties' applications for attorneys' fees and expenses under Section 22(j) of their Trademark License Agreement dated March 16, 2012 (the "License Agreement") as the "prevailing party" at trial. For the reasons explained below, both of the applications are denied.

         I. Background

         On April 13, 2016, The Mrs. Fields Brand, Inc. ("Mrs. Fields") filed a complaint against Interbake Foods LLC ("Interbake") asserting various claims arising out of the License Agreement. On November 2, 2016, shortly before trial, Mrs. Fields filed an amended complaint asserting four claims (the "Complaint"). Two days later, Interbake filed an answer and an amended counterclaim asserting three claims (the "Counterclaim"). The court held a six-day trial on the parties' respective claims beginning on November 9, 2016.

         On June 26, 2017, the court issued a 107-page post-trial Memorandum Opinion (the "Opinion") that: (i) ruled in Mrs. Fields' favor on Count I of the Complaint, in part, and on Counts I-III of the Counterclaim in their entirety; (ii) ruled in Interbake's favor on Count I of the Complaint, in part, and on Counts II-III of the Complaint in their entirety; (iii) dismissed Count IV of the Complaint without prejudice for lack of ripeness; and (iv) requested further briefing on the parties' respective requests for an award of attorneys' fees and expenses as the prevailing party under Section 22(j) of the License Agreement.

         On July 27, 2017, the court issued an Order of Clarification and Denial of Motion for Reargument in which the court clarified that a certain aspect of Count I of the Complaint that mirrored the relief sought in Count IV of the Complaint was to be dismissed without prejudice for lack of ripeness. On August 7, 2017, the court issued an Order and Partial Judgment documenting the disposition of each of the claims in the Complaint and the Counterclaim, and retaining jurisdiction for the purpose of addressing the parties' respective applications for attorneys' fees and expenses.

         On September 18, 2017, Interbake filed an application for an award of attorneys' fees and expenses in the amount of $2, 699, 924.41, asserting it was the prevailing party at trial under Section 22(j) of the License Agreement. The next day, Mrs. Fields filed an application for an award of attorneys' fees and expenses in the amount of $5, 369, 178.45, asserting it was the prevailing party at trial. On October 20, 2017, Mrs. Fields and Interbake each filed briefs in opposition to the other side's application for an award of attorneys' fees and expenses.

         II. Analysis

         The Court of Chancery generally adheres to the American Rule with respect to attorneys' fees, under which each party is responsible for paying for the expense of its own counsel.[1] "A recognized exception to this rule applies when a contractual agreement exists between the parties regarding payment of attorneys' fees."[2] In such cases, the court will "routinely enforce provisions of a contract allocating costs of legal actions arising from the breach of a contract."[3]

         The License Agreement in this case contains such a provision. Specifically, Section 22(j) of the License Agreement states, in relevant part, that:

[I]f MRS. FIELDS or [INTERBAKE] are [sic] required to enforce this Agreement in any judicial proceeding or appeal thereof, the Party prevailing in such proceeding shall be entitled to reimbursement of its reasonable costs and expenses, including reasonable accounting and legal fees, whether incurred prior to, or in preparation for, or in contemplation of the filing of any written demand, claim, action, hearing or proceeding to enforce the obligations of this Agreement.[4]

         Thus, the disposition of each party's application for attorneys' fees and expenses turns on whether it was the "prevailing" party ...


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