Helaba Invest Kapitalanlagegesellschaft mbH v. Fialkow, 2008 WL 1128721 (Del. Ch., April 11, 2008), read opinion here. [Yes, that is a long and unusual case name. No, it is not a typo.] The Delaware Chancery Court decided an issue in this case that is usually of great interest to both lawyers and clients alike: attorneys’ fees awarded by the court. As the court summarized it:
At a hearing held on March 13, 2008, this court approved the settlement of this action as fair and reasonable, but withheld decision on the award of attorneys’ fees. This opinion considers the $1,500,000 fee application. The attorneys contend that they are entitled to this fee because they secured a $3,760,000 benefit to the stockholders and a substantial therapeutic benefit through several purportedly material disclosures. For the reasons set forth below, the application for attorneys’ fees and expenses is granted in the amount of $500,000, plus expenses [of over $125,000.]
Instead of the 26.4% of the monetary benefit that the plaintiff’s counsel sought, the defendants only would agree to pay them 5% or less–roughly $244,000. In this case, there was no issue that the plaintiff’s counsel were entitled to fees, the only issue was how much.
The court recited the familar 5 factors in the Delaware Supreme Court’s Sugarland case, cited more recently in the Chancery Court’s decision of In Re Plains Resources, 2005 WL 33281, at *3 (Del. Ch. 2005).
In addition to emphasizing that the benefit to the corporation must be caused by the litigation and not merely "post hoc ergo procter hoc" (the Latin phrase used by the court is a logical fallacy that means literally: "after this, therefore, because of this"); the court observed that as an alternative to the "common fund doctrine", attorneys’ fees can be awarded pursuant to the "corporate benefit doctrine" when a "tangible monetary benefit has not been conferred, but some other valuable benefit is realized by the corproate enterprise or the stockholders as a group." (footnote omitted.)
The court based its analysis partially on the common fund doctrine and partially on the corporate benefit theory, but notably, the court allowed in footnote 16 that the fee:
"would not be paid from a common fund itself since the funds have already been paid to the class and the defendants agreed, in the stipulation of settlement, themselves to pay the fee and the expenses awarded by the court. Nevertheless, the court will determine this aspect of the fee petition by applying the same principles that guide the court where an actual common fund still exists."