In re Duke Energy Corp. Derivative Litigation
CA 7705-VCG
| Del. Ch. | Nov 13, 2017Background
- Court approved a $5,940,000 attorneys’ fee award in settlement of consolidated derivative litigation against Duke Energy and asked lead plaintiffs’ firm PJ&E to propose a distribution among plaintiffs’ firms.
- Two firms objected to PJ&E’s proposed allocation: Levy & Korinsky LLP (L&K), which had brought a pre-consolidation action, and counsel for plaintiffs in a related federal case ("Tansey Counsel").
- Tansey Counsel claimed their federal litigation created significant pressure (securities-law exposure) that produced $25 million of the cash settlement, justifying a share of the fee.
- L&K argued its pre-consolidation work (the Burdine matter) merited a much larger fee share than PJ&E’s proposed $25,000 allocation.
- The court analyzed entitlement under the corporate-benefit doctrine (Sugarland factors) and assessed whether non-participating/outside counsel demonstrated a causal contribution to a discrete portion of the common benefit.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Tansey Counsel contributed to the common fund | Tansey: federal case created substantial settlement pressure and caused $25M of cash recovery | PJ&E: presumptively the Delaware plaintiffs produced the benefit; outside counsel must show discrete causal contribution | Court: Tansey Counsel met burden of contributing; award appropriate but limited to their lodestar + costs rather than percentage of fund |
| Proper method to calculate fee for outside counsel who contributed | Tansey: seek share of the common fund proportionate to contribution | PJ&E: fee should be percentage of fund awarded to Delaware plaintiffs | Court: applied Sugarland factors but awarded Tansey Counsel lodestar + expenses because Delaware counsel also produced the fund and Tansey’s contribution was supplementary |
| Whether L&K’s pre-consolidation work justifies larger share | L&K: pre-consolidation Burdine work materially added to corporate benefit and warrants larger fee | PJ&E: L&K was appointed to a largely inactive committee post-consolidation and contributed little; proposed $25,000 award | Court: pre-consolidation impact hard to quantify; found PJ&E’s proposed distribution should be adopted but increased L&K allocation to $100,000 (to match Regor) |
| Validity of PJ&E’s proposed distribution overall | Regor and others: content with PJ&E proposal | Objectors: disputed specific allocations for Tansey and L&K | Court: approved PJ&E’s distribution largely as proposed, except (1) award Tansey Counsel lodestar + costs and (2) allocate $100,000 to L&K; directed revised order |
Key Cases Cited
- Sugarland Industries, Inc. v. Thomas, 420 A.2d 142 (Del. 1980) (sets factors for corporate-benefit fee awards)
- In re Infinity Broadcasting Corp. S’holders Litig., 802 A.2d 285 (Del. 2002) (presumption that plaintiffs in the action created the common fund)
- Americas Mining Corp. v. Theriault, 51 A.3d 1213 (Del. 2012) (result achieved is the most important factor; percentage-of-fund approach discussed)
- In re Sauer-Danfoss Inc. Shareholders Litig., 65 A.3d 1116 (Del. Ch. 2013) (explains limits of lodestar and policy favoring contingent-fee incentives)