                                          COURT OF CHANCERY
                                                OF THE
                                          STATE OF DELAWARE
MORGAN T. ZURN                                                             LEONARD L. WILLIAMS JUSTICE
 MASTER IN CHANCERY                                                                             CENTER
                                                                     500 NORTH KING STREET, SUITE 11400
                                                                            WILMINGTON, DE 19801-3734
                                  Final Report: August 23, 2018



   Donald L. Gouge, Jr., Esquire
   Donald L. Gouge, Jr., LLC
   800 N. King Street, Suite 303
   Wilmington, DE 19801

   Roland L. Davenport, II
   39 East McCaulley Court
   Wilmington, DE 19801

            Re:    McCaulley Court Maintenance Corp. v. Roland L. Davenport, II
                   C.A. No. 2017-0726-MTZ

   Dear Counsel and Litigant:
            In this deed restriction case, Petitioner McCaulley Court Maintenance

   Corporation (“Petitioner”) has obtained a default judgment pursuant to which

   Respondent Ronald L. Davenport, II (“Respondent”) must remove any window air

   conditioning units from his residence. Pending before me is Petitioner’s motion

   for attorneys’ fees and costs.

            Under the so-called American Rule, each party is responsible for its own

   legal fees. There are several recognized exceptions, including where fees are

   authorized by statute.1 In deed restriction cases, 10 Del. C. § 348 provides a


   1
       Arbitrium (Cayman Is.) Handels AG v. Johnston, 705 A.2d 225, 231 (Del. Ch. 1997).
C.A. No. 2017-0726-MTZ
August 23, 2018
Page 2


statutory authorization for fee-shifting. Subsection (e) of that statute states, “The

nonprevailing party at a trial held pursuant to the provisions of this section must

pay the prevailing party’s attorney fees and court costs, unless the court finds that

enforcing this subsection would result in an unfair, unreasonable, or harsh

outcome.” 2 This Court cannot second-guess the plain language of the statute. 3

        There has been no trial in this matter. Rather, Petitioner obtained a default

judgment after Respondent failed to appear at mediation, failed to answer the

complaint, and failed to respond to Petitioner’s motion for default judgment and to

appear at the hearing on that motion. Section 348’s narrow statutory exception to

the American Rule, which requires prevailing “at a trial,” does not apply in this

case.

        Petitioner also seeks costs under Court of Chancery Rule 54(d). “As has

long been recognized by our courts, ‘[a]t the common law costs were unknown.

The right to recover them depends on statutory authority, express or implied.’” 4

Rule 54(d) provides the Court authority to shift costs “as of course to the

prevailing party unless the Court otherwise directs.”5



2
  10 Del. C. § 348(e) (emphasis added).
3
  Swann Keys Ass’n v. Shamp, 2008 WL 4698478, at *1 (Del. Ch. Oct. 10, 2008).
4
  Comrie v. Enterasys Networks, Inc., 2004 WL 936505, at *4 (Del. Ch. Apr. 27, 2004) (quoting
Peyton v. William C. Peyton Corp., 8 A.2d 89, 91 (Del. 1939)).
5
  Ct. Ch. R. 54(d).
C.A. No. 2017-0726-MTZ
August 23, 2018
Page 3


       Case law under Rule 54 explains that costs are allowances in the
       nature of incidental damages awarded by law to reimburse the
       prevailing party for expenses necessarily incurred in the assertion of
       his rights in court. An allowance of court costs does not amount to
       an attempt by the court to fully compensate a litigant for all the
       expenses the litigant incurred. 6

“Courts have interpreted ‘costs’ to include expert witness fees that are covered by

statute, court filing fees, and the usual and customary costs incurred in serving of

process.”7 Items such as computerized legal research, transcripts, and

photocopying are not recoverable.8

       Petitioner is the prevailing party under Rule 54(d), and has requested

$706.52 in costs. The requested costs include filing fees and customary costs in

serving of process, which are properly shifted under Rule 54(d). The requested

costs also include $156.57 to pay the mediator’s fee. 9

       Mediation is mandatory in Section 348 deed restriction cases.10 But “[a]

successful litigant is not entitled to reimbursement under Chancery Rule 54(d)

merely because the expenditure was necessary to the prosecution … of the case.”11




6
  Dewey Beach Lions Club v. Longacre, 2006 WL 2987052, at *1 (Del. Ch. Oct. 11, 2006)
(internal quotations and citations omitted) (emphasis added).
7
  Id. (citing 10 Del. C. § 8906).
8
  Gaffin v. Teledyne, Inc., 1993 WL 271443, at *1-2 (Del. Ch. (July 15, 1993).
9
  I presume this is the Petitioner’s share of the mediator’s fee, and that the mediator has
separately billed Respondent for his share. But this presumption does not affect my analysis.
10
   10 Del. C. §§ 348(a), (c), (d).
11
   Gaffin, 1993 WL 271443, at *1.
C.A. No. 2017-0726-MTZ
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The mediator’s fee is dissimilar from service of process fees and filing fees, which

are required to assert a party’s rights in court.12 I conclude the mediator’s fee is

not a “cost” under Rule 54(d). It is more akin to an expert’s fee, which may only

be shifted due to additional statutory authority pursuant to 10 Del. C. § 8906.13 No

such separate statute exists to shift a mediator’s fee.

       Even if a mediator’s fee were a “cost,” the Court would have some

discretion in awarding it. Rule 54(d) states costs shall be awarded “unless the

Court otherwise directs.” I consider the request for the mediator’s fee in the

context within which it is made, in a Section 348 case. Then-Vice Chancellor

Strine described Section 348 as a “very unusual and prescriptive statute, which

imposes a number of onerous requirements on parties and this court in deed

restriction enforcement cases between homeowner associations and residents.”14

He went on, “Until § 348 is amended, the reality is that this court will be required

to enter a fee shifting order in a variety of cases in which the court would

ordinarily conclude that each side should bear not only its own attorneys’ fees, but




12
   See Dewey Beach Lions Club, 2006 WL 2987052, at *1-2.
13
   See, e.g., Miles, Inc. v. Cookson Am., 1995 WL 214397, at *1 (Del. Mar. 24, 1995) (providing
that Section 8906 creates an exception to the American Rule shifting only the fee for the time
necessarily spent in court for the purpose of testifying); Dewey Beach Lions Club, 2006 WL
2987052, at *1 n.4 (“Fees outside the statute are not recoverable.”).
14
   Swann Keys, 2008 WL 4698478, at *1.
C.A. No. 2017-0726-MTZ
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its own costs.”15 I agree that Section 348 forces the Court to place a finger on the

scales in deed restriction cases in a manner the Court avoids in other cases where

there is no bad faith. Under the discretion afforded by Rule 54(d), even if the

mediator’s fee were a “cost,” I would decline to further weight the scales by

shifting that fee.

          I therefore recommend the Court award Petitioner $549.95 in costs, but not

its attorneys’ fees or the mediator’s fee. This is a final report pursuant to Court of

Chancery Rule 144.

                                         Respectfully,

                                         /s/ Morgan T. Zurn

                                         Master in Chancery




15
     Id. at *2.
