A recent Law 360 story by Rose Krebs, “Software Investor Gets $100K ‘Mootness’ Fee For Attys in Del.”, reports that a vice chancellor in Delaware's Chancery Court has awarded $100,000 in attorney fees and expenses to a Unity Software Inc. investor who filed a lawsuit over disclosures related to the company's $4.4 billion merger with ironSource Ltd., far less than the $850,000 sought.  In a letter decision, Vice Chancellor Lori W. Will awarded a "mootness fee" to investor plaintiff George Assad, represented by Block & Leviton LLP and Friedman Oster & Tejtel PLLC, saying his suit led to "minimally helpful rather than material" disclosures about a transaction intended to help finance the merger.

Initially, Assad sued to enjoin the merger "because of purportedly deficient disclosures," but a proxy statement was then filed that mooted the suit, according to the vice chancellor's opinion.  Assad then filed an amended suit with "additional disclosure challenges" but "supplemental disclosures were then issued to moot the amended claims," the vice chancellor said.  Assad asked for an $850,000 attorney fee and expense award, arguing that two supplemental disclosures the company issued in response to his litigation conferred a "substantial benefit" to Unity's stockholders.

"Plaintiff's counsel expended meaningful time and effort to achieve the benefit provided by the initial and second supplemental disclosures, including fully briefing a preliminary injunction motion, which was not mooted until the eve of the hearing," the fee request said.  Assad filed suit in August 2022 against the company's directors, alleging that they had failed to disclose conflicts of interest surrounding a proposed $1 billion issuance of convertible notes to the company's two largest stockholders, Silver Lake and Sequoia Capital Fund LP.

Silver Lake and Sequoia's proposed investment in Unity, structured as a "private interest in public equity" deal, was intended to help finance the ironSource merger.  Stockholders were not asked to vote on the PIPE deal itself, but were asked to approve an issuance of Unity common stock in connection with the transaction.  Assad alleged that Unity failed to provide sufficient details in a proxy to stockholders about how Morgan Stanley & Co. LLC and Goldman Sachs & Co. LLC were involved in the deal and how they had been paid. Both companies provided financial advice to Unity about the merger and the PIPE deal.

A few weeks after Assad sought to expedite the Chancery Court case, Unity amended the proxy, partly mooting the complaint by disclosing that Unity had agreed to pay Goldman Sachs $2 million on consummation of the deal, the fee request said.  After discovery produced documents "revealing additional, undisclosed banker conflicts," Assad amended the complaint, his fee request said.

Then, on the day before a preliminary injunction hearing was scheduled to take place, Unity filed a second supplemental disclosure, fully mooting the plaintiffs' claims.  Vice Chancellor Will dismissed the case as being moot last year.  Unity disclosed three categories of information in the second supplemental disclosures that rendered the case moot, Assad's fee application said.

First, Unity disclosed that Morgan Stanley had been concurrently representing Silver Lake, Sequoia and ironSource's largest stockholder, CVC Capital Partners and its affiliates.  Unity also disclosed millions in fees that Morgan Stanley and Goldman Sachs received for their work with ironSource, CVC, Sequoia and Silver Lake in the two years prior to the merger.  Unity also disclosed what Assad called a "fair summary" of Morgan Stanley's financial analyses of the convertible note transaction.

Assad's attorneys spent 271.55 hours on the case and incurred almost $10,000 in expenses, the fee request said.  The $850,000 fee award was an all-in request that includes both fee and expenses.  The defendants had argued that the supplemental disclosures "were immaterial," and that the attorney fee awarded shouldn't exceed $75,000, Vice Chancellor Will's ruling said.

"They largely relate to a separate transaction that was not the subject of a stockholder vote," the decision said.  "There are two exceptions.  It is reasonably conceivable that omissions of the compensation paid to and a potential conflict of one of the company's financial advisers would give rise to a meritorious claim.  A mootness fee of $100,000 is awarded for these material — and unremarkable — disclosures."