A recent Thomson Reuter story, “Record $285M Fee Award is Strine’s Message to Plaintiffs’ Bar” reports that in a footnote at the end of his October 14 ruling granting Southern Peru shareholders $1.3 billion from majority stockholder Grupo Mexico, Delaware Chancery Court Chancellor Leo Strine Jr. had cautionary words for the plaintiffs’ firms that won the recovery.  Prickett, Jones & Elliott and Kessler Topaz Meltzer & Check, the judge said, had been too slow to prosecute the derivate suit when it was filed back in 2005.  He instructed the firms to confer with defense counsel from Milbank Tweed (for Grupo Mexico) and Ashby & Geddes (for Southern Peru, now Southern Cooper) to see if they could agree on a “reasonable” fee request, “with the plaintiffs’ counsel taking into account the reality [that] their delays affected the remedy and are a basis for conservatism in any fee award.”

Kessler Topaz and Prickett Jones had originally asked for 22.5 percent of the recovery they obtained.  In a Oct. 28 brief that liberally quoted Strine’s own words from previous cases, the plaintiffs’ firms argued that they should be rewarded for the “huge risk” of hard-fought derivative litigation.  The firm said they’d kept Strine’s admonition in mind, which is why they were asking for 22.5 percent instead of the customary 33 percent.  But they asserted that if the chancellor refused to award a big percentage just because it amounted to hundreds of millions of dollars, he would encourage plaintiffs’ firms to settle quickly rather than fight for the best possible recovery.

“Limiting fee awards in large cases would create a strong disincentive to take the huge risk of trying large cases,” the brief said.  “For example, how would lawyers be incentivized to take a potential billion dollar case to trial it they know that they win a billion dollar they will get the same fee award as they would have if they settled the case for $200 million?  It is clear that such a declining percentage approach would misalign the interests of the lawyers and those they represent.”

So why did Strine agree to grant such a large fee award?  Because he was sending a message not just to lawyers in the Southern Cooper case, but to the entire securities class action bar.  The chancellor spoke about rewarding plaintiffs’ lawyers for taking risks – and chided defense lawyers for being envious when those risks pay for in big fee awards.  If lawyers are willing to litigate big cases through discovery and trial, he suggested, we’ll make sure they’re compensated for their efforts.