This short overview was prepared by a former associate of Eckert Seamans.
The Court of Chancery’s decision in the case of In Re Del Monte Foods Company Shareholder Litigation, C.A. No. 6027-VCL (Del. Ch. June 27, 2011), clarifies the standard for awarding and calculating interim attorneys’ fees.
In this latest opinion concerning the merger of Del Monte Foods the Court focuses only on the award of interim attorneys’ fees following plaintiffs’ successful motion for a preliminary injunction. Earlier opinions in the case were summarized here.
After plaintiffs filed their motion for injunctive relief, but before defendants responded, defendants supplemented Del Monte’s proxy statement concerning the proposed merger with additional disclosures and information that defendants learned only through plaintiffs’ efforts in pursuing its motion for preliminary injunction. The supplemental proxy statement effectively mooted plaintiffs’ disclosure claims; however, the Court ruled on the remaining issues in plaintiffs’ favor and granted the injunction.
Following their success on the injunction motion, plaintiffs moved the Court for an award of interim attorneys’ fees and expenses.
The Court of Chancery has the equitable power to award interim fees. Following the standard set out in Louisiana State Employees Retirement System v. Citrix Systems, Inc., the Court held that an interim fee award was appropriate here because (1) the plaintiffs achieved the benefit sought by the claim that had been mooted (i.e., the supplemental disclosures), and (2) the benefit received by the plaintiffs would not be subject to reversal or alteration as the remaining portion of the litigation proceeded.
The Court of Chancery awarded plaintiffs $2.75 million in interim attorneys’ fees, which the Court broke down (in much more detail that I can provide here) as follows: $1.6 million for uncovering a third-party’s “surreptitious activities;” $950,000 for Del Monte’s supplemental bankers’ disclosures; and $200,000 for the executive compensation disclosures. Notably, the Court awarded fees only for the plaintiffs’ success on the issuance of the qualitatively important supplemental proxy statements; not for succeeding on the preliminary injunction motion. In doing so, the Court stated that although discretion permitted the award of interim fees for that success, future proceedings would help the Court to refine its fee analysis.
While the Court commented in a positive manner regarding plaintiffs’ contingent risk in pursuing this litigation, those factors did not increase the interim fee awarded to plaintiffs. Perhaps those factors will be considered in the Court’s final, more complete, post-litigation award.
Providing some insight on his personal preferences for counsel seeking interim fees in the future, Vice Chancellor Laster explained that he generally prefers to address fee petitions relating to injunction applications promptly on an interim basis.
Editor’s Note: However, one must also be aware that not all members of the Court of Chancery share this view. In two recent decisions highlighted here and here, Vice Chancellor Noble explained why, generally speaking, he is not a big supporter of interim fee applications.