In Re: Appraisal of Dell Inc., C.A. 9322-VCL

Background

Dell completed a 2013 going-private merger paying $13.75 per share; 38.8M shares demanded appraisal and 36.7M filed thirteen petitions; Grant & Eisenhofer (G&E) represented claimants holding ~32.0M shares (including T. Rowe’s ~26.7M) under a contingency fee agreement that ties percentages to recovery bands and litigation stage.
The Court consolidated the petitions and appointed G&E lead counsel for class-wide issues while preserving other counsel’s rights for individual entitlement defenses; Section 262(j) authorizes pro rata allocation of reasonable fees/expenses across shares entitled to appraisal.
Entitlement rulings during litigation eliminated most claimants (including a post-trial ruling that T. Rowe lacked appraisal rights), reducing the appraisal class to 5,505,730 shares; the court later found fair value of $17.62, $3.87 above the deal price.
G&E sought reimbursement of $4,007,462.08 in litigation expenses (mostly expert fees) and $3,964,125.60 in attorneys’ fees based on its contingency agreement (including interest), to be charged pro rata to the appraisal class.
Opponents (Magnetar and Global) argued: (1) G&E should not recover costs tied to defending T. Rowe’s entitlement; (2) T. Rowe (now out of class) should bear some costs or G&E’s fee should be reduced because G&E was paid on the T. Rowe settlement; (3) Magnetar/Global’s own legal fees should offset their share; and (4) the fee award is premature pending final judgment/appeal.
The court reviewed expense detail, deducted amounts attributable solely to entitlement issues, found $4,007,462.08 reasonable and proportionate, and awarded fees equal to 19.06% of the net benefit after deducting reimbursable expenses; costs remain taxable and typically assessed against Dell.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether G&E may obtain pro rata reimbursement of reasonable expenses under 8 Del. C. § 262(j)	G&E: expenses (mostly valuation experts) were incurred to create the common fund and should be charged pro rata to the appraisal class	Magnetar/Global: G&E incurred substantial costs litigating entitlement (T. Rowe) that are not class-benefiting and should be excluded or allocated to T. Rowe	Court: awardable under §262(j); after allocating out entitlement-specific items, $4,007,462.08 in expenses were reasonable and charged pro rata to the appraisal class
Proper method to treat expenses vs. fee (all-in, fee-first, or expense-first)	G&E: sought reimbursement of expenses and fee per contingency agreement	Magnetar/Global: challenged size and timing; argued offsets and reductions	Court: deduct reimbursable expenses first, then award percentage-based fee on the net benefit to align incentives; here applied that method
Reasonableness and quantum of attorneys’ fees (and use of contingency agreement)	G&E: contingent agreement with sophisticated client is evidence of commercial reasonableness; seeks $3,964,125.60 (19.06% of net benefit)	Magnetar/Global: contest using T. Rowe fee arrangement to fix class fee; argue reduction because G&E already received $4.2M from T. Rowe settlement and other counsels’ fees should offset	Court: contingency agreement is an appropriate benchmark; Sugarland factors (results, effort, complexity, contingency, counsel ability) support award; requested fee is reasonable and below top-end percentages for post-trial adjudication
Whether portions of fees/expenses should be shifted to T. Rowe or offset by Magnetar/Global’s private counsel fees	Magnetar/Global: T. Rowe derived leverage from G&E’s work and should bear costs; their counsel fees should offset their pro rata obligation	G&E/Dell: §262(j) only permits charging expenses against shares entitled to appraisal; T. Rowe’s shares were no longer entitled so §262(j) cannot reach them	Court: cannot allocate under §262(j) to former claimants not entitled to appraisal; reductions/offsets would violate pro rata principle and law-of-the-case/consolidation order; declines to shift or offset
Whether fee award is premature pending final judgment/appeal	G&E: application ripe and necessary to enter final judgment	Magnetar/Global: awards premature until finality/appeal	Court: fee application must be resolved to render final judgment; denial would impede finality; award not premature

Key Cases Cited

Sugarland Indus., Inc. v. Thomas, 420 A.2d 142 (Del. 1980) (establishes factors and percentage approach for common-fund fee awards)
Americans Mining Corp. v. Theriault, 51 A.3d 1213 (Del. 2012) (summarizes weight to give benefit achieved and guidance on percentage ranges by litigation stage)
Goodrich v. E.F. Hutton Gp., Inc., 681 A.2d 1039 (Del. 1996) (Court must independently determine reasonableness of attorney fee awards in common-fund cases)
Cede & Co. v. Technicolor, Inc., 542 A.2d 1182 (Del. 1988) (describes appraisal proceeding purpose and principles)
Lipson v. Lipson, 799 A.2d 345 (Del. 2002) (holding that attorney-fee applications must be resolved before final judgment’s finality)