In Re Cablevision/Rainbow Media Group Tracking Stock Litigation, No. 19819-VCN (May 22, 2009), read opinion here.
This Chancery Court decision resolved a dispute regarding the amount of fees and the division of fees between class counsel in a Delaware shareholders’ suit that challenged the exchange by Cablevision Systems Corporation of its then-outstanding tracking stock and certain assets of its Rainbow Media Division for Cablevision common stock. Shareholder actions challenging the transaction based on the adequacy of the consideration were filed in Delaware and later in New York. The allegations in both actions were similar although the New York action contained additional claims.
According to the court, the Delaware case “did not proceed with any great dispatch. It was the better part of two years before the Delaware plaintiffs began to move forward with their litigation here. The plaintiff in the New York action did take discovery but that case was eventually confronted by a stay of that action.” The plaintiff in the New York case moved to intervene in the Delaware action to seek a stay of the Delaware action in favor of the New York action. The Delaware Chancery Court directed counsel for both the Delaware plaintiffs and the New York plaintiff to “work together to pursue cooperatively the interests of the class. Apparently that request was not implemented.”
The proposed settlement that would also include the New York action was for payment to the class of $8.25 million, inclusive of attorneys’ fees. The proposed settlement supported a fee award of 30% of the common fund recovery.
Objections to Class Action Settlement
However, the New York plaintiff made known its objections to the proposed settlement and succeeded in negotiating an increase of $1.5 million in the settlement proceeds to a total of $9.75 million. The plaintiff in New York asserted that the Delaware plaintiffs settled “on the cheap and that its ability to negotiate an even greater settlement was severely hampered as a result.”
Nonetheless, the Chancery Court approved the settlement of a payment of $9.75 million. The court regarded this as a fair and reasonable amount under the circumstances as a settlement.
Issue: How to Split Fees Among Class Counsel
The only issue was the question of attorneys’ fees in terms of the total amount and how those amounts would be divided between counsel. Counsel for the Delaware plaintiffs sought an award of 30% of the $8.25 million. However, counsel for the New York plaintiff urged the court to reduce the total award to $1.75 million (thus increasing the amount to be distributed to the class) and then divide that amount equally between counsel for Delaware plaintiffs and counsel for the New York plaintiff.
The court acknowledged that there was no “bright line test” to apply in this situation. The court explained why it decided that an award of 22.5% of the fund would be an appropriate amount for attorneys’ fees which would result in a total award of fees and expenses of $2,193,800 (with expenses for both Delaware and New York counsel approximating $195,000).
The court acknowledged the difficulty in allocating attorneys’ fees among lawyers for plaintiffs pursuing substantially similar claims in different jurisdictions. The court recited the standards generally for awarding attorneys’ fees in class actions and recognized that the attorneys for the New York plaintiff were able to secure an additional $1.5 million for the settlement. In sum, the court awarded 22.5% of the initial $8.5 million recovery to the Delaware plaintiffs “reduced from the additional amount paid to the class from what would have been fees paid to the Delaware plaintiffs if the proposal of the 30% fee award from the common fund had been approved.” Thus, the bottom line is that the Delaware plaintiffs were awarded $1,717,000 in fees and expenses and the New York plaintiff was awarded $476,800 in fees and expenses.