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Chancery Approves $7.9M in Attorney Fees in Bancorp Class Action

July 10, 2019 | Posted in : Expenses / Costs, Fee Award, Fee Reduction, Fee Request, Practice Area: Class Action / Mass Tort / MDL

A recent Law 360 story by Jeff Montgomery, “Chancery Oks $7.9M Fee for Investors Bancorp Class Attys,” reports that the Delaware Chancery Court awarded nearly $7.9 million in fees to attorneys who won a reversal of stock awards issued to Investors Bancorp directors and officers in 2015, trimming what had been a $10.9 million fee request but rejecting the bank's call to grant just $1.9 million.  Vice Chancellor Joseph R. Slights III's decision capped a three-year battle over claims that stockholders were misled prior to grants of excessive stock awards and compensation to top executives and directors of the regional bank.

The litigation included an initial Chancery Court dismissal, a reversal and remand by Delaware's Supreme Court and a settlement just before trial, with Smith Katzenstein & Jenkins LLP and Purcell Julie & Lefkowitz LLP sharing in the award.  The dispute over the regional bank's flawed process for approving director and top officer compensation led to a precedent-setting Delaware Supreme Court ruling limiting the freedom of directors to stray from compensation plans that have been ratified by stockholders.

During settlement arguments in May, Vice Chancellor Slights described the litigation as "a case where the plaintiffs succeed in having cancelled ill-gotten awards of equity compensation. Ill-gotten in the sense that there was a flawed process."  Stockholder attorneys branded the original $51.5 million package an "orgy of self-compensation" in 2016.  They estimated that their suit, which led to cancellations of awards, provided a $39 million benefit to stockholders and requested 28% of that amount, or $10.9 million, for fees and expenses.

Attorneys for the bank, directors and officers argued that the benefits were greatly overstated, pointing out that, among other complications, the directors of Investors Bancorp agreed in May to issue replacement equity awards for company President and CEO Kevin Cummings and Chief Operating Officer Domenick A. Cama.  The bank estimated that that action reduced the net benefit of the litigation from $39 million to $7.9 million, and it said class attorneys should get only 22.5% of that amount, or about $1.8 million, to reflect a more common percentage for pretrial settlements.

Vice Chancellor Slights' order specified that the award covered both fees and expenses for the litigation, but did not specify the final benefit determination or the percentage granted for fees.  Attorneys for the stockholders, in arguing for the higher award, pointed out that the settlement came late in litigation, with nearly all discovery completed and trial preparations underway.  The requested fee percentage, above the ordinary range for pre-trial settlements, also reflected stockholder attorney efforts in taking the case through a successful dismissal appeal, David A. Jenkins of Smith Katzenstein, counsel to the stockholders, said during arguments last month.