50 A.3d 429
Del.2012Background
- EMAK shareholders dispute between Crown and Kurz over control; Crown held 27.6% voting power via preferred shares with conversion rights and anti-unilateral-director appointment features.
- Kurz sought to regain control; EMAK’s stock declined under Holbrook’s tenure, creating tension among control factions.
- In 2009-2010, exchanges and consents (Exchange Transaction, Ratification Consent, Crown Consent) prompted Kurz’s lawsuit challenging disclosures and governance actions.
- The Vice Chancellor awarded $2.5 million interim fee to plaintiffs’ counsel for obtaining non-monetary corporate benefits, including preserving voting rights and invalidating Crown actions.
- EMAK filed bankruptcy in 2010, emerged in 2011 with plan that left Crown controlling post-reorganization; the interim award became final, and EMAK appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does preserving voting rights qualify as a corporate benefit for fee recovery? | Voting rights preservation provides a non-monetary benefit to shareholders. | The award should be limited given EMAK’s cash constraints and corporate value. | Yes; voting rights preservation is a corporate benefit warranting fee recovery. |
| Do Sugarland factors justify the fee amount in this complex case? | Factors support a substantial award given complex issues, contingency work, and benefits achieved. | Court should scrutinize amount due to financial strain on EMAK. | Record supports the Sugarland analysis and the awarded amount. |
| Was Crown’s control of EMAK inevitable? | Crown’s control could have been inevitable under the facts presented. | Crown could and would have controlled due to strategic actions. | Not inevitable; record supports non-inevitability. |
Key Cases Cited
- Sugarland Industries, Inc. v. Thomas, 420 A.2d 142 (Del.1980) (establishes Sugarland factors for fee awards)
- Crown EMAK Partners, LLC v. Kurz, 992 A.2d 377 (Del.2010) (non-monetary corporate-benefit fee framework in control contests)
- Kurz v. Holbrook, 989 A.2d 140 (Del.Ch.2010) (interim fee decisions and disclosures in corporate-control litigation)
- William Penn P’ship v. Saliba, 13 A.3d 749 (Del.2011) (cited in context of Delaware corporate governance and fee principles)