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
July 30, 2026
Thomas W. Briggs, Jr., Esquire Jonathan M. Stemerman, Esquire Lauren K. Neal, Esquire Armstrong Teasdale LLP Morris, Nichols, Arsht & Tunnell LLP 1007 North Market Street, 1201 North Market Street 3rd Floor
Wilmington, Delaware 19801 Wilmington, Delaware 19801
Scott B. Czerwonka, Esquire
Wilks Law, LLC
4250 Lancaster Pike, Suite 200
Wilmington, Delaware 19805
RE: Neem International CV et al. v. Vadim Shulman et al.,
C.A. No. 2022-0187-LWW
Dear Counsel:
This letter opinion addresses the plaintiffs’ motion for attorneys’ fees, costs,
and expenses against defendant Vadim Shulman. The plaintiffs invoke the bad
faith exception to the American Rule. Shulman opposes the motion, arguing that
the exception does not apply and that the fees sought are disproportionate to the
plaintiffs’ limited success. For the reasons that follow, the motion is granted in
part.
C.A. No. 2022-0187-LWW
July 30, 2026
Page 2 of 11
I. RELEVANT BACKGROUND
The background of this dispute is detailed in my December 31, 2025
Post-Trial Memorandum Opinion.1 Pathway Genomics Corporation was a
once-promising startup that fell into financial distress.2 Shulman, its largest
outside investor, moved from a passive role to taking over the company—
including its management and board of directors.3 He purportedly loaned millions
of dollars to the company through convertible notes and directed corporate officers
to sign security agreements collateralizing those notes with substantially all of the
company’s assets.4 These actions were taken without board approval, rendering
the debt unauthorized and unenforceable.5
As the company’s financial position worsened, Shulman staged an Article 9
foreclosure sale.6 He and his personal counsel sidelined independent directors,
populated the board with loyalists and patsies, manufactured approvals, and forged
1
Post-trial Mem. Op. (Dkt. 295) (“Mem. Op.”).
2
Id. at 1, 3-9.
3
Id. at 1, 5-9.
4
Id. at 9-12, 17-18.
5
Id. at 55-58, 60.
6
Id. at 27-32.
C.A. No. 2022-0187-LWW
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letters to stockholders.7 At the conclusion of the auction, an entity owned by
Shulman acquired Pathway’s assets via a credit bid of the invalid debt, wiping out
the plaintiffs’ contractual liquidation preferences.8
The plaintiffs filed this action in February 2022 and advanced thirteen
claims against Shulman and other defendants.9 After trial, I found in favor of the
defendants on the plaintiffs’ ten derivative claims because Pathway’s corporate
charter was void due to unpaid franchise taxes, which deprived the plaintiffs of
standing to sue on the entity’s behalf.10 I found in favor of the plaintiffs on their
direct claim for breach of the liquidation preference in Pathway’s certificate of
incorporation.11 I also concluded that Shulman caused Pathway to commit that
breach through bad-faith conduct in violation of his duty of loyalty.12 The
plaintiffs were awarded equitable restitution of $1,849,437.93, representing their
ratable share of the distributable assets.13
7
Id. at 53-54, 58-59.
8
Id. at 31-32.
9
Verified Compl. for Breach of Fiduciary Duties (Dkt. 1).
10
Mem. Op. 35-36.
11
Id. at 49-50.
12
Id. at 66.
13
Id. at 74-77.
C.A. No. 2022-0187-LWW
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The plaintiffs then filed the present motion, seeking $3,530,230.80 in
attorneys’ fees and expenses.14 Shulman opposes the motion.15
II. ANALYSIS
Under Delaware law, the American Rule serves as the baseline, meaning that
litigants are generally expected to bear their own attorneys’ fees.16 The court may
depart from this default under recognized exceptions, including when a party
engages in bad-faith conduct.17 The bad faith exception allows the court to shift
fees in “extraordinary circumstances” to deter abusive behavior and safeguard the
integrity of the judicial process.18 To invoke the exception, the moving party must
demonstrate by “clear evidence” that the opposing party acted in “subjective bad
faith.”19 Satisfying this “more stringent ‘clear evidence’ standard of proof”
14
Pls.’ Mot. for Attys’ Fees, Costs, and Expenses (Dkt. 298) (“Pls.’ Mot.”); see also Pls.’ Reply in Further Supp. of Mot. for Attys’ Fees, Costs, and Expenses (Dkt. 308) (“Pls.’ Reply”).
15
Def.’s Opp’n to Pl.’s Mot. for Attys’ Fees, Costs, and Expenses (Dkt. 306) (“Def.’s Opp’n”).
16
See Montgomery Cellular Hldg. Co. v. Dobler, 880 A.2d 206, 227 (Del. 2005). 17
See Scion Breckenridge Managing Member, LLC v. ASB Allegiance Real Est. Fund, 68 A.3d 665, 687 (Del. 2013) (outlining exceptions to the American Rule). 18
Shawe v. Elting, 157 A.3d 142, 149 (Del. 2017) (quoting Montgomery Cellular, 880 A.2d at 227).
19
Id. at 150.
C.A. No. 2022-0187-LWW
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requires a showing that the conduct was “so fraudulent, frivolous, vexatious,
wanton or oppressive as to amount to egregiousness.”20
Here, the plaintiffs assert that Shulman’s conduct preceding and during this
litigation justifies an award of fees. They have met their heavy burden.
A. Entitlement
The plaintiffs ask that I shift the attorneys’ fees and expenses they incurred
prosecuting this action. They assert that Shulman’s egregious pre-litigation
conduct, along with his obstructive behavior during discovery, satisfies the bad
faith exception to the American Rule.21 I agree. The record provides clear
evidence that Shulman engaged in an extraordinary pattern of subjective bad faith.
Pre-litigation, Shulman’s conduct was not a mere breach of contract, but
extreme disloyalty.22 As detailed in the Memorandum Opinion, he orchestrated a
sham Article 9 sale to acquire Pathway’s assets for his own entity, without regard
to the plaintiffs’ liquidation preferences or his fiduciary duties.23 To execute this
scheme, Shulman and his personal counsel manufactured board approvals through
20
Reagan v. Randell, 2002 WL 1402233, at *3 (Del. Ch. June 21, 2002) (citation omitted).
21
See Pls.’ Mot. ¶¶ 18, 24.
22
See Mem. Op. 55.
23
Id. at 2, 31.
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coercion and fabrication, forged letters to stockholders, and directed corporate
officers to sign clandestine security agreements—bypassing the board.24
Shulman’s bad faith extended into the litigation itself. Rather than concede
the invalidity of the debt or impropriety of the foreclosure process, he forced the
plaintiffs to incur massive costs to uncover the truth. He consistently obfuscated,
resisting discovery to the point of warranting sanctions.25 During his deposition,
for example, he admitted to his evasiveness, testifying that “maybe [he] [was] not
saying the entire truth” because he was “not on a lie detector.”26
Shulman opposes the plaintiffs’ motion by arguing that it is improperly
based on the same conduct underlying the substantive claims. Relying on Versata
Enterprises, Inc. v. Selectica, Inc., he contends that the bad faith exception does
24
Id. at 54, 58-59.
25
Pls.’ Mot. ¶ 24 (citing Dkts. 114, 143); see also Tr. of Oral Arg. and Rulings of the Ct. on Pls.’ Mot. to Compel (Dkt. 127).
26
Pls. Mot. ¶ 24 (quoting Shulman Dep. 11, 33 (Dkts. 247, 248)).
C.A. No. 2022-0187-LWW
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not apply to pre-litigation conduct giving rise to a cause of action.27 That case is
inapposite.28
In Versata, the challenged conduct—deliberately triggering a poison pill and
aggressively negotiating a settlement—constituted the factual basis for the
underlying declaratory judgment claim.29 Here, Shulman and his personal counsel
fabricated corporate records, including board minutes and loan materials, to create
a false narrative.30 In contrast to Versata, where the pre-litigation conduct gave
rise to a claim, Shulman’s actions infected the litigation process and forced the
plaintiffs to incur substantial costs to unravel the deception.31 These actions fit
squarely within the bad faith exception.32
27
Def.’s Opp’n ¶¶ 11-12 (citing Versata Enters., Inc. v. Selectica, Inc., 5 A.3d 586, 607 (Del. 2010) (“[T]he bad faith exception . . . ‘does not apply to the conduct that gives rise to the substantive claim itself.’” (citation omitted))).
28
Shulman did not engage with the plaintiffs’ authorities recognizing that sufficiently egregious pre-litigation conduct may support fee shifting. See Pls.’ Reply ¶¶ 1, 3-4; see also Emerald P’rs v. Berlin, 726 A.2d 1215, 1224 (Del. 1999) (“Issues not briefed are deemed waived.”).
29
Versata, 5 A.3d at 607-08.
30
Mem. Op. 58-59.
31
See Versata, 5 A.3d at 607-08; see also Star Am. Rail HoldCo, LLC v. Cathcart, 2024 WL 5239938, at *10-11 (Del. Ch. Dec. 17, 2024) (shifting fees for pre-litigation conduct that involved manufacturing false financial statements to trigger a contractual right and then doubling down on that falsity in litigation).
32
See In re Straight Path Commc’ns Inc., 2024 WL 4602914, at *5 (Del. Ch. Oct. 29, 2024) (explaining that an award of attorneys’ fees is appropriate “where the C.A. No. 2022-0187-LWW
July 30, 2026
Page 8 of 11
B. Apportionment
The plaintiffs seek $3,530,230.80 in attorneys’ fees, costs, and expenses.33
Shulman asserts that this request is unreasonable because the plaintiffs succeeded
on only one of their thirteen causes of action.34 He also questions the sufficiency
of the plaintiffs’ fee affidavits and complains of excessive staffing and
unreasonable hours billed to failed claims.35
Delaware courts assess the reasonableness of fee awards by reference to the
factors in Rule 1.5(a) of the Delaware Lawyers’ Rules of Professional Conduct.36
But determining reasonableness does not require the court to examine each time
entry and disbursement.37 Nor must a fee award be mathematically prorated by a
judge concludes a litigant brought a case in bad faith or through his bad faith [litigation] conduct increased the litigation’s cost”), aff’d, 351 A.3d 448 (Del. 2025) (TABLE); Scion Breckenridge, 68 A.3d at 687 (holding fees may be shifted when pre-litigation conduct involves fraud or is “totally unjustified”).
33
Pls.’ Mot. ¶¶ 14, 15.
34
Def.’s Opp’n ¶¶ 2, 28.
35
Id. ¶¶ 19-23, 41-43.
36
See Mahani v. Edix Media Gp., Inc., 935 A.2d 242, 245 (Del. 2007) (citing Del. Lawyers’ R. Prof’l Conduct 1.5(a)).
37
Sorrento Therapeutics, Inc. v. Mack (Sorrento II), 2026 WL 906110, at *5 (Del. Ch. Apr. 2, 2026) (ORDER).
C.A. No. 2022-0187-LWW
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party’s win-loss ratio on individual counts.38 When a plaintiff achieves mixed
success on claims that arise from a “common factual predicate[,]” the court may
award a flat percentage of the overall fees.39
In this case, the plaintiffs’ fees cannot be cleanly segregated claim by claim.
Their successful direct claim for breach of the liquidation preference and their
failed derivative claims rested on the same factual predicate. The legal work
required to expose Shulman’s breach of his duty of loyalty was likewise
inextricably intertwined across all counts.
Even so, an award of the plaintiffs’ full fees is unwarranted. Ten of the
plaintiffs’ thirteen claims failed for a threshold reason: the plaintiffs lacked
derivative standing because Pathway’s corporate charter was void due to unpaid
franchise taxes.40 That standing defect counsels against awarding the full amount
requested.41
38
See Mahani, 935 A.2d at 248 (affirming the refusal to “give primary weight to [the] limited trial success” when assessing reasonableness).
39
Sorrento Therapeutics, Inc. v. Mack (Sorrento I), 2025 WL 2172268, at *19 (Del. Ch. July 31, 2025).
40
See Mem. Op. 35-36; see also 8 Del. C. § 510 (stating that the charter of a corporation that fails to pay its franchise taxes becomes “void” and the corporation becomes “inoperative”).
41
See Mem. Op. 36; cf. Def.’s Opp’n ¶ 41 (noting that plaintiffs’ counsel billed 149.6 hours researching and drafting the complaint).
C.A. No. 2022-0187-LWW
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Balancing the severity of Shulman’s bad faith against the plaintiffs’ standing
oversight and limited success, I conclude that an award of one-third of the
requested fees and expenses is appropriate. This approach aligns with recent
precedent involving similar fiduciary and litigation misconduct coupled with
partial success.42 The reduction also accounts for Shulman’s objections regarding
staffing inefficiencies and time billed to failed claims, making a line-by-line audit
unnecessary.43 Thirty-three percent of the requested fees and expenses equals
$1,164,976.16.
To ensure this award is reasonable, I must weigh the relevant factors in
Rule 1.5(a). The litigation was complex and painstaking, driven in part by
Shulman’s obstruction.44 The plaintiffs were represented by skilled Delaware
counsel whose hourly rates are customary for practitioners of their caliber.45 At the
same time, the plaintiffs’ $3,530,230.80 fee request far exceeds their
42
See Sorrento I, 2025 WL 2172268, at *19-20 (awarding one-third of a $16 million fee request where the plaintiffs were only partially successful, but the defendant breached its duty of loyalty).
43
See Def.’ Opp’n ¶¶ 41-43; see also Sorrento II, 2026 WL 906110, at *4 (rejecting a request for line-item reductions where the court awarded a flat percentage of overall fees).
44
Del. Lawyers’ R. Prof’l Conduct 1.5(a)(1).
45
Id. at 1.5(a)(3), 1.5(a)(7).
C.A. No. 2022-0187-LWW
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$1,849,437.93 monetary recovery.46 Discounting the request to 33% brings the fee
award into proportion with the result achieved.
III. CONCLUSION
Fees are shifted, in part, under the bad faith exception to the American Rule.
The plaintiffs are entitled to fees of $1,164,976.16. This amount is reasonable,
proportionate, and sufficient to address Shulman’s bad faith without
overcompensating the plaintiffs. IT IS SO ORDERED.
Sincerely yours,
/s/ Lori W. Will
Lori W. Will
Vice Chancellor
46
See id. at 1.5(a)(4) (explaining that a reasonable fee includes consideration of “the amount involved and the results obtained”).