Digital World Acquisition Corp. recently lost a bid to overturn a previous court order regarding fees and expenses owed to Patrick Orlando. The Delaware Court of Chancery denied Digital World’s “Notice of Exception” and its alternative “Motion for Reargument,” leaving the original fee order in place.
Background of the Dispute
The core issue revolves around a fee order issued on September 24, 2025, which addressed disputes regarding fees and expenses claimed by Orlando. Digital World, unhappy with the order, filed a “Notice of Exception” arguing that the court had misunderstood the facts and the law. In the alternative, they requested a “Motion for Reargument,” essentially asking the court to reconsider its decision.
Digital World’s Arguments
Digital World contended that the court erred in ordering the advancement of fees for services that led to Orlando being held in contempt and sanctioned in a related Florida case. They also challenged the awarding of “fees-on-fees” (fees incurred while litigating the fee dispute itself) and argued that the issue should be deferred to a future indemnification proceeding.
Digital World attempted to challenge the Fee Order in three ways. First, they claimed the Fee Order was a “Final Report” under Court of Chancery Rule 144 and thus immediately reviewable. Second, they suggested the court designate the Fee Order as a “partial Final Report.” Finally, they requested reargument under Rule 59(f), arguing the existing order would harm them and encourage bad behavior.
The Court’s Reasoning
The court swiftly rejected Digital World’s arguments. The court found that Digital World’s motion was procedurally improper and that the company failed to demonstrate any misunderstanding of material facts or misapplication of the law.
Procedural Issues with the “Notice of Exception”
The court explained that under Chancery Court rules, only “Draft Reports” and “Final Reports” issued by a Magistrate are subject to exceptions. A “Final Report” is defined as one that concludes a referred action or dispute. In this case, the court determined that the fee order was neither a Draft Report nor a Final Report because the overall advancement and indemnification dispute was still ongoing, with further proceedings expected. The Florida litigation had not been resolved, and the Fee Order did not even resolve all of the parties’ current dispute. The court also rejected Digital World’s attempt to create a “partial Final Report,” noting that no such mechanism exists in the Court of Chancery Rules.
Why the “Motion for Reargument” Failed
The court emphasized that motions for reargument face a “heavy burden.” The moving party must demonstrate a misunderstanding of a material fact or a misapplication of the law that would affect the outcome of the decision. Reargument is not meant to relitigate claims already considered or to offer a platform for recasting losing arguments.
The court found that Digital World failed to meet this burden. The court was fully aware of the motions, transcripts, and orders from the Florida court. Crucially, the Florida court had *not* found that Orlando had acted in bad faith.
The court also refuted Digital World’s claim that it had applied a “bad faith” standard instead of a “reasonableness” standard. The court clarified that its ruling was based on the “clear abuse” standard applicable to reasonableness objections in advancement proceedings, and that Digital World had failed to meet that standard.
The court highlighted a pattern of Digital World presenting different arguments throughout the dispute. First, they argued unreasonableness based on alleged bad faith in Florida (which was rejected because the Florida court didn’t find bad faith). Then, they argued that sanctioned conduct is never advanceable (which the court rejected on its merits). Finally, they argued that the court should have made individualized determinations about each activity leading to sanctions (which the court also rejected, citing the lack of a bad faith finding and the general practice of deferring detailed fights until final indemnification proceedings).
Ultimately, the court concluded that Digital World had not demonstrated any basis for reargument and denied the motion.