Panzura Holdings, LLC v. Jill Stelfox

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

PANZURA HOLDINGS, LLC and )
PANZURA LLC, )
)
Plaintiff, )
)
v. ) C.A. No. 2025-0378-DH
)
JILL STELFOX, STEVEN STELFOX, )
SHELBY STELFOX and LARRY )
BRENT MCCLURE, )
)
Defendants. )
)
)
JILL STELFOX, )
Counterclaim Plaintiff, )
)
v. )
PANZURA HOLDINGS, LLC, )
)
)
Counterclaim Defendant. )
ORDER

WHEREAS:

A. Panzura Holdings, LLC and Panzura, LLC (“Holdings”) filed a

Verified Complaint for Declaratory and Injunctive Relief regarding advancement

against Jill Stelfox (“Stelfox”) and others on April 8, 2025. D.I. 1.

B. Stelfox filed an Answer and Counterclaims on May 7, 2025. D.I. 13.

C. The parties filed Cross Motions for Summary Judgment. D.I. 16, 31.
D. After briefing and oral argument, the Court granted Stelfox’s Motion

for Summary Judgment and denied Panzura’s. D.I. 53.

E. The Court granted the parties’ stipulated Fitracks Order Governing

Advancement on August 6, 2025. D.I. 55.

F. Stelfox filed her First Application for Improperly Disputed

Advancement Fees and Expenses (“Stelfox First Application”) on September 30,

2025. D.I. 60.

G. Stelfox filed her Second Application for Improperly Disputed

Advancement Fees and Expenses (“Stelfox Second Application”) on November 10,

2025. D.I. 71.

H. The Court heard oral argument on both applications on February 26,

2025.

NOW, THEREFORE, IT IS HEREBY ORDERED, this 16th day of March,

2026, as follows:

1. “Under Delaware law, an indemnitee may recover only those fees and

legal expenses that are reasonably incurred.” O’Brien v. IAC/Interactive Corp.,

2010 WL 3385798, at *5 (Del. Ch. Aug. 27, 2010). Further, the indemnitor

(Holdings) bears the burden of proving that indemnification (and consequently

advancement) is not required. Stockman v. Heartland Indus. P’rs, L.P., 2009 WL

2096213, at *13 (Del. Ch. July 14, 2009). Stelfox, however, still bears the burden

2
of demonstrating that the fees are reasonable. See, e.g., Citadel Hldg. Corp. v.

Roven, 603 A.2d 818, 825 (Del. 1992).

2. The Court determines reasonableness through three inquiries: (1)

whether the expenses were paid or incurred; (2) whether the services rendered were

“thought prudent and appropriate in the good faith professional judgment of

competent counsel;” and (3) whether the charges for those services were at a rate

“charged to others for the same or comparable services under comparable

circumstances.” Delphi Easter P’rs Ltd. P'ship v. Spectacular P’rs, Inc., 1993 WL

328079, at *9 (Del. Ch. Aug. 6, 1993). When an attorney offers a good faith

certification that the fees are reasonable, the Court is disinclined to deny

advancement of the expenses absent an adequate showing of gross abuse. See Weil

v. VEREIT Operating P’ship, L.P., 2018 WL 834428, at *8, 11 (Del. Ch. Feb. 13,

2018).

3. Holdings’s first objects to Stelfox’s contingent fee arrangement with

Delaware Counsel where Stelfox was required to pay Counsel 50% of their typical

fee if she was not entitled to advancement but would pay 150% of the typical fee if

entitlement were found.1

1
Stelfox First Application, Ex.3.
3
4. Our Courts have found similar contingent premiums to be “actually

incurred” if the indemnitee has paid or owes representing counsel. O’Brien, 2010

WL 3385798, at *5–7. These contingency fees are payable at the advancement

stage. Id. at *7. A 50% contingency premium has also been found reasonable.

IAC/InterActiveCorp v. O’Brien, 26 A.3d 174, 179 (Del. 2011).

5. Panzura owes the contingency premium fees to Stelfox. As opposed to

the situation in O’Brien, there was incentive here for Delaware Counsel not to “run

up” the billing since Stelfox was still responsible for at least 50% of the standard

fees. She has paid fees to or owes them to Counsel. It has been incurred, and the

50% premium is reasonable.2

2
The public policy purpose for advancement generally is to protect those in corporate
governance from having to pay out of pocket to defend themselves from lawsuits that result
from performance of their duties. Advancement furthers a remedial purpose. Covered
parties should be able pursue litigation strategy for claims arising from their official duties.
See Homestore, Inc. v. Tafeeen, 886 A.2d 502, 505 (Del. 2005) (quoting the decision
below). A question persists—when should premiums above the normal fees be paid?
Based on the public policy purpose, there is a viable argument that the premium portion
(above the standard fee) should be paid at the indemnification rather than advancement
stage since representing counsel is fully compensated their standard fees at advancement.
Failure to advance the premium does not hinder the covered party from freely making
litigation strategy or engaging counsel in her defense. Declining to advance premiums
would foreclose the indemnitor from having to clawback such premiums should the
indemnitor prevail. Moreover, where the premiums apply only to fees on fees, the
defending entity exposes itself to double penalties if it fails to prevail at the advancement
stage: not only must it pay the contractually guaranteed advancement right, but an
additional premium for advancee counsel’s success. But this is a question for another day.
4
6. Second, Panzura objects to the Cochran Firm’s fees. 3 The focus of the

argument is on oral modification of the original contingent fee agreement into an

hourly arrangement. Panzura desires additional discovery into the fee agreements

before it will agree to pay. Both sides agree that Stelfox acknowledged the oral

modification. Panzura argues that Stelfox has not provided support for the ability to

orally modify the fee agreement.

7. California Business and Professions Code (CBPC) Section 6147

governs contingent fee agreements. It requires that contingent fee agreements be in

writing. CBPC § 6147(a). Even so, failure to do so “renders the agreement voidable

at the option of the plaintiff, and the attorney shall thereupon be entitled to collect a

reasonable fee.” CBPC § 6147(b). Panzura’s reliance on Missakian v. Amusement

Indus., Inc. is misplaced. 285 Cal. Rptr. 3d 23 (Cal. Ct. App. 2021). There, in-house

counsel argued that CBPC section 6147 did not apply to in-house attorneys because

in-house counsel received wages, not fees. Id. at 29. The California court disagreed

and ruled that the oral contract was voidable. Id. at 29–30 (emphasis added).

8. This is no different. Stelfox has the option of voiding the contract with

the Cochran Firm. She does not wish to do so. No such option exists for Holdings

because it is not party to the contract. The oral modification remains valid.

3
The Cochran Firm is Stelfox’s California Counsel.
5
9. Stelfox’s Delaware Counsel’s affidavit affirms that the Cochran Firm’s

fees, submitted time entries, and expenses are reasonable under Delaware Lawyers’

Rule of Professional Conduct 1.5(a).4 Panzura owes Stelfox the Cochran Firm’s

fees.

10. Third, Panzura objects to fees related to a Motion to Disqualify its

California Counsel, Ropes & Gray, LLP. Stelfox contends that this qualifies for

advancement because there was a cross-complaint in the California action.

11. The test for such an arrangement at the advancement stage is whether

the work that benefits both covered and non-covered claims would have been

performed absent the non-covered claims. Weil, 2018 WL 834428, at *7.

12. Here I find that a Motion to Disqualify would have been filed absent

the non-covered claim. Stelfox was entitled to file the motion based on her defense

of the California cross-complaint. The fact that it could have also impacted counsel

in the original complaint has no bearing. Therefore, at the advancement stage,

Stelfox is entitled to payment.

13. Fourth, Panzura objects to subpoenas issued and other motions filed in

the California matter. Stelfox argues that the subpoenas and motions relate, partly,

to the cross-complaint.

4
Stelfox First Application, Ex. 1.
6
14. I will not delve into the minutiae of the subpoenas and other motions at

this stage. Our Court has held:

in actions where only certain claims are advanceable, the Court
generally will not determine at the advancement stage whether fee
requests relate to covered claims or excluded claims, unless such
discerning review can be done realistically without significant burden
on the Court . . . . If fees cannot be apportioned with rough precision
between advanceable claims and non-advanceable claims or the work
was useful for both sets of claims, then the fees will be advanced in
whole.

White v. Curo Tex. Hldgs., LLC (“Curo II”), 2017 WL 1369332, at *10 (Del. Ch.

Feb 21, 2017). Determining whether the subpoenas apply to covered or non-covered

claims would require the Court to explore the specific facts and circumstances of the

California action to determine whether they relate to the initial claim or have some

relation to the cross-complaint. That is not an appropriate task during advancement.

15. Fifth, Panzura objects to additional legal work along with fees that took

place after Panzura informed Stelfox of its intent to dismiss claims but before it

dismissed the claims with prejudice.5 But Panzura neither dismissed the California

claims with prejudice until September 5, 2025, nor the Delaware claims with

prejudice until September 29, 2025.

5
Stelfox Second Application.
7
16. This Court has terminated advancement claims when parties have been

precluded from proceeding by judicial estoppel or have affirmed that they will no

longer proceed in any forum against the party seeking advancement. See Carr v.

Glob. Payments, 2019 WL 6726214, at *7 (Del. Ch. Dec. 11, 2019), aff’d 227 A.3d

555 (Del. 2020) (TABLE); Duthie v. CorSolutions Med., Inc., 2009 WL 1743650,

at *3 (Del. Ch. June 16, 2009) (“When the threat [of litigation] has ended, there

cannot be a right to advancement of fees and expenses for affirmative claims

designed substantively to defeat that threat.”). Voluntary dismissal of the underlying

action, however, does not preclude advancement if the threat of litigation exists.

Centrella v. Avantor, Inc., 2024 WL 3249274, at *16 (Del. Ch. July 1, 2024). The

threat of litigation includes claims dismissed without prejudice. As Vice Chancellor

Cook recognized in Centrella, “this is an analysis that considers ‘substance as well

as form[,]’ so even where an entity makes similar representations to a court, the court

need not always agree that it is appropriate to terminate advancement.” Centrella at

*17 (quoting Brown v. LiveOps, Inc., 903 A.2d 324, 329 (Del. Ch. June 12, 2006)).

17. Panzura argues that its known financial struggles coupled with a

representation that it would dismiss claims should preclude Stelfox from receiving

advancement for additional legal work. But Panzura does not get to dictate Stelfox’s

defense when Panzura controls the viability of the litigation. A threat of litigation

remained until Panzura dismissed claims with prejudice. Had Panzura been so

8
concerned, it could have dismissed its claims with prejudice earlier than it did in the

California and Delaware actions.

18. Panzura’s remaining arguments are the type of line-item objections that

I should not consider at the advancement stage and in the Fitracks process. Because

this dispute relates to advancement of fees, and not the entitlement to

indemnification, the Court undertakes a less scrutinizing look at the requested fees

and expenses. See Aveta Inc. v. Bengoa, 2010 WL 3221823, at *6 (Del. Ch. Aug.

13, 2010). The Court is under no duty to examine the fee requests line by line but

assumes the responsibility to determine whether the requested fees are

“commercially reasonable.” Danenberg v. Fitracks, Inc., 58 A.3d 991, 997 (Del. Ch.

2012) (quoting Wis. Inv. Bd. v. Bartlett, 2002 WL 568417, at *6 (Del. Ch. Apr. 9,

2002)). Under this Court’s precedent, advancement is normally “not the proper stage

for a detailed analytical review” of fees, including disputes over “the terms of the

strategy followed or the staffing and time committed.” Duthie, 2008 WL 4173850,

at *2. While the Fitracks process considers a party’s opportunity to allege “clear

abuse” of assessed fees, questions concerning “precision and integrity” of

advancement requests belong in the indemnification stage, and not the advancement

stage. Fitracks, 58 A.3d at 998 (citing Fasciana v. Elec. Data Sys. Corp., 829 A.2d

160, 177 (Del. Ch. 2003)).

9
19. Stelfox is entitled to fees-on-fees. 6 She is also entitled to prejudgment

interest. 7

20. Based on the above, the parties shall meet and confer regarding the

amount due to Stelfox and provide a proposed form of order. If the parties cannot

agree, each should provide a letter outlining the area(s) of disagreement and the basis

for the party’s proposed valuation.

21. This is a Final Report under Court of Chancery Rule 144.

/s/ David Hume, IV

David Hume, IV
Magistrate in Chancery

6
Order Governing Advancement at 3. D.I. 55.
7
Id. at 7.
10