300 A.3d 679
Del. Ch.2023Background
- Plaintiff class challenged a Dell/EMC transaction and, after extensive discovery and eve-of-trial mediation, obtained a $1 billion cash common fund — the largest cash recovery in the Court of Chancery.
- Co-lead counsel (Labaton Sucharow and Quinn Emanuel, among others) litigated for ~2.5 years: pleadings, Section 220 discovery, fact and expert discovery, mediation, and prepared for trial (pre-trial order, briefs, witnesses).
- Plaintiff’s counsel requested an all‑in fee and expenses equal to 28.5% ($285M) of the common fund and a $50,000 incentive award for the named plaintiff; defendants did not oppose. Objecting institutional investors (holding ~26% of the class) and five law‑professor amici argued for a substantially lower percentage using a declining‑percentage approach.
- Central legal issue: appropriate method and percentage for awarding attorneys’ fees from a large common fund in Delaware representative litigation — whether to apply Americas Mining’s stage‑of‑case percentage framework (with Sugarland multi‑factor adjustments) or a declining‑percentage rule modeled on federal securities practice.
- Court found plaintiffs’ counsel created the entire $1B benefit (no shared causation), incurred significant time and expenses ($4.28M costs, ~53,000 hours), litigated on full contingency, and that Sugarland/Americas Mining governs fee calculation; it awarded an all‑in fee of $266.7M (26.67% of the fund) and approved the $50,000 incentive award (to be paid from the fee).
Issues
| Issue | Plaintiff's Argument | Defendant/Objectors' Argument | Held |
|---|---|---|---|
| Proper fee‑setting method: stage‑of‑case % (Delaware) vs declining‑percentage (federal trend) | Apply Americas Mining stage‑of‑case percentages; for a late‑stage (eve‑of‑trial) settlement, a high percentage is appropriate (plaintiff sought 28.5%). | Use declining‑percentage scale for mega‑funds (settlements ≥ $1B) to avoid windfalls; federal securities courts average ~10‑12% at that scale. | Americas Mining / Sugarland control. Declining‑percentage is not required in Delaware; court used stage‑of‑case approach and set late‑stage baseline at 26.67%. |
| Causation / quantification of benefit (credit for settlement value) | Counsel solely produced the $1B cash fund; where benefit is quantifiable, fee is a percentage of the benefit caused by counsel. | Objectors suggested the $1B overstates counsel’s causal contribution or relative value. | Court found counsel was sole cause and used full $1B as the measurable benefit. |
| Treatment of out‑of‑pocket expenses: all‑in % vs reimburse then % of net | Plaintiffs requested an all‑in award (fee inclusive of costs). | Objectors implied the court should deduct expenses first and award fee on net. | Where counsel pushed deep, preferable to reimburse costs first then award fee on net; but plaintiffs asked for all‑in and the court exercised discretion: given the huge fund, it approved an all‑in award but noted it would have deducted costs first if asked. |
| Incentive award to class representative | $50,000 to compensate time, effort, reputational risk; typical and modest here. | No opposition to the incentive award. | Approved: $50,000 payable from the fee. |
Key Cases Cited
- Sugarland Indus., Inc. v. Thomas, 420 A.2d 142 (Del. 1980) (establishes multi‑factor framework for representative‑action fee awards)
- Americas Mining Corp. v. Theriault, 51 A.3d 1213 (Del. 2012) (adopts stage‑of‑case percentage guide for common‑fund fee awards)
- Goodrich v. E.F. Hutton Gp., Inc., 681 A.2d 1039 (Del. 1996) (Court of Chancery discretion on fee awards; discussed declining‑percentage language but did not mandate it)
- Activision Blizzard, Inc. v. [Unnamed], 124 A.3d 1025 (Del. Ch. 2015) (applies Americas Mining stage‑of‑case analysis; discusses percentage ranges for late‑stage settlements)
- In re S. Peru Copper Corp. S’holder Deriv. Litig., 52 A.3d 761 (Del. Ch. 2011) (mega‑fund derivative recovery; trial court applied substantial downward adjustment after multi‑factor analysis; discussed in Americas Mining)
- Tandycrafts, Inc. v. Initio P’rs, 562 A.2d 1162 (Del. 1989) (equitable authority for awarding fees for creating a common benefit)
- Allied Artists Pictures Corp. v. Baron, 413 A.2d 876 (Del. 1980) (courts compensate counsel for benefits produced; causation requirement for crediting benefit)