Fee Awards Have Been Rejected or Reduced in Recent String of Cases.
As reported by Sheri Qualters in a September 19, 2011 post at The National Law Journal, Delaware Chancery judges are putting shareholder derivative plaintiffs’ fee requests “under the microscope” in recent cases challenging corporate deals where the shareholders reap minimal benefits from the suits.
For example, in In re Sauer-Danfoss Inc. Shareholders Litig., Vice Chancellor J. Travis Laster awarded plaintiffs’ lawyers $75,000 rather than their requested $750,000, finding the lawyers “never engaged in meaningful litigation activity.” Only one of the 12 disclosures at issue in the settlement merited a fee award, with the article surveying other decisions where fee requests have been slashed greatly when the deal disclosures did not bring value of the overall corporate derivative picture. However, Vice Chancellor Laster did award interim fees of $2.75 million to plaintiffs’ lawyers in June of this year for the disclosures in In re Del Monte Foods Co. Shareholders Litig., although a more hefty $12 million fee request is still pending in that case.
Although $400,000 was thought to be a past “benchmark” for a disclosures only settlements in the derivative area, that sort of predictability seems to have disappeared in the wake of these recent Delaware decisions. In contrast, Professor Michael Perino of St. John’s University School of Law was quoted as saying that lawyers usually get what they want in the vast majority of federal securities fee proceedings, unlike what apparently is going on in the Delaware chancery courts. However, there are exceptions, with U.S. District Judge Sidney Stein of the Southern District of New York nixing a $180-200,000 fee request in a tender offer case, Stevens v. Sembcorp Utilities Pte. Ltd.
There also is a huge difference in the status of fee proceedings as between federal securities and derivative actions. Although it is common to have agreements between counsel for some level of fee awards in securities cases, counsel in derivative cases seldom head into settlement hearings with any agreement on plaintiffs’ fees, which means more of these proceedings are contested in nature.
The “bottom line” for one quoted lawyer in derivative cases is that the settlements must have worth in order to justify substantial fee awards to plaintiffs’ counsel.