San Antonio Fire and Police Pension Fund v. Bradbury, C.A. No. 4446-VCN (Del. Ch. Oct. 28, 2010), read opinion here. A prior Chancery decision in this matter was highlighted here.
The issue addressed in this 37-page opinion was the determination of the amount of fees that would be awarded based on the alleged benefits derived from a suit that was filed, in which the argument was made that the benefit to the company was to force the amendment (deletion) of terms in debt instruments that were referred to as “continuing director provisions”. The relevant terms provided that it would constitute an event of default in the event of a change in composition of the majority of directors. Plaintiffs argued that it was a breach of the fiduciary duties of the directors when they agreed to such provisions in the loan documents.
Brief Summary of Decision
This is a very helpful decision for anyone seeking an understanding of the standards that the Delaware courts will use to award fees based on something less than a conventional “common fund” but rather when a "therapeutic benefit" for the corporation is obtained. In footnote 107, the Court acknowledged the “angst” that Amylan had about paying counsel fees especially in light of what the Court referred to as the “challenged provisions in its debt documents [being] fairly common.”
The Court also noted that Amylan even assisted in achieving the result. Although the Court concluded that Amylan “may be entitled to some credit for the outcome here, Plaintiffs’ counsel were the primary cause.” Amylan wanted to limit the fees awarded to about 5% of the amount requested, but the Court agreed to approximately 50% of the amount of fees and costs requested.
The prior Chancery decision in this case linked above, contains noteworthy advice to directors and lawyers who advise them, regarding the application of fiduciary duties in the context of approving complex documents in the range of 100-pages, and whether directors are expected to read, discuss and understand each word in such documents.