A recent Law 360 story by Leslie Papper, “Southern Copper’s $24.5M Settlement Approved,” reports that a $24.5 million cash settlement resolving a stockholder's derivative suit that alleged Southern Copper Corp. has been exploited by its controlling investors got the green light from a Delaware Chancery Court judge, ending more than two years of litigation. Delaware Chancery Court Vice Chancellor Lori W. Will approved the settlement at a virtual hearing along with a $5,000 incentive award for the lead plaintiff, stockholder Carla Lacey. She also awarded $4.18 million in fees plus expenses for Lacey's attorneys at Andrews & Springer LLC and Friedman Oster & Tejtel PLLC.
The fee award was less than the $7.5 million that the firms originally sought, which they argued was reasonable given the size of the cash settlement and the corporate governance reforms that were made while the suit was being litigated. Southern Copper had objected to the fee request, arguing that $3.675 million would be more appropriate.
The lawsuit is the second that Lacey filed against Arizona-based Southern Copper, a Delaware-incorporated company with mining and mineral processing facilities in Mexico and Peru. Her first suit over the sale of two power plants led to a $50 million settlement and a $13.5 million award of attorney fees for class counsel in 2019. In arguments, Southern Copper's attorney, Samuel T. Hirzel II of Heyman Enerio Gattuso & Hirzel LLP, argued that Lacey's second case built heavily on the first and that the corporate governance reforms that the company implemented came as a result of the first case, not the second.
"Plaintiff's counsel was paid handsomely in Lacey 1," Hirzel said. "And we don't dispute that they should get a fee award for the monetary settlement." Lacey's attorney, David F.E. Tejtel of Friedman Oster & Tejtel PLLC, argued that the key corporate governance benefits weren't adopted by the company until 10 months after Lacey filed the second lawsuit.
The corporate governance benefits that Lacey's lawsuits achieved include the appointment of two new independent directors, the creation of a permanent board subcommittee to review related-party transactions, and the adoption of a new related-party transaction policy in February 2020, the vice chancellor found. But the subcommittee was established in 2017 and the directors were appointed in 2017 and 2018, so they could not be attributed to the second lawsuit, which was filed in April 2019, the vice chancellor concluded.
"Only the new policy post-dates the filing of the complaint," she said. By her calculations, the nonmonetary value of Lacey's second suit was $1.625 million for the company, bringing the total benefits of the settlement to $26.125 million, she said. Given that no depositions were taken and many of the documents in the second lawsuit were copies of those produced in the first, a 16% award plus full expense is appropriate, she said.