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Attorney Defends $6M Fee Request For $2.75M Class Award

June 15, 2016 | Posted in : Fee Award Factors, Fee Collection, Fee Request

A recent Law 360 story, “NavSeeker Attorney Defends $6M Fee, $2.75M Class Award,” reports that attorneys seeking a $6 million fee for winning a proposed $2.75 million buyout of minority shareholders stranded in an allegedly “stolen” company defended the class deal Friday in Delaware Chancery Court, saying the suit also proved NavSeeker Inc.’s overall worth despite the controlling company’s claims that it had no value.

At a hearing, class attorney Kurt M. Heyman of Proctor Heyman Enerio LLP called the $6 million a justifiable attorney share for work on the derivative suit, which was pursued by shareholders on the company’s behalf and yielded a $25.6 million company valuation used for the fee calculation.

Minority shareholders accused controlling shareholder HIMEX Ltd. of a boardroom takeover in 2012 and of profiting from NavSeeker assets without compensation.  Under the settlement, the minority holders would exit the company with $2.75 million they otherwise would not have gotten.

“Defendants have always characterized that stock as being worthless.  From the moment this litigation started through now,” Heyman said.  “We arrived at $2.75 million purchase price for plaintiff’s worthless stock,” along with establishing an overall value, he said.

But Heyman also conceded that the company could get pushed into bankruptcy by its remaining, hostile directors and controlling corporate shareholders unwilling to pay the fee bill.  “There have been constant, thinly veiled threats that they would file for bankruptcy and leave us and our clients without remedy,” Heyman said.

Vice Chancellor J. Travis Laster said he would approve the settlement but deferred a decision on the fee and overall deal, and at one point referred to the “predator profile” of the firms involved.  He also said the case reflected a systemic problem that makes it difficult for lawyers to risk taking on a minority shareholder oppression case.  “That then creates a scenario where we have the least incentive for enforcement in the situation where we need it the most,” Vice Chancellor Laster said.

NavSeeker distributes and manages devices that monitor motor vehicles and fleets for businesses and insurance companies.  In 2014, minority shareholders filed a suit accusing HIMEX of using its 80 percent ownership of NavSeeker shares to take control of its real and intellectual property.

NavSeeker’s loss of control worsened in 2013 and early 2014, when, the minority holders say, HIMEX counted NavSeeker’s assets with its own in agreements that gave U.K.-based Quindell, now Watchstone Group, an 85 percent ownership of HIMEX.

Navseeker attorney A. Thompson Bayliss of Abrams & Bayliss LLP said that the case and settlement were never presented to the company as a “pay us $25 million as settlement for the pillaging of NavSeeker.”  It was, he said, a matter of “what’s a fair buyout price for the plaintiffs?”

NavSeeker individual director attorney John L. Reed of DLA Piper said Heyman’s firm deserved a fee, but one based on the $2.75 million and secured from the minority shareholders who filed the suit, rather than other parties.

“We’re not all friends on this side of the courtroom,” said Reed, who also argued against a shareholder proposal to impose the settlement costs across all parties on a joint and several basis.  “I don’t have any reason to trust HIMEX or Quindell.”  Bayliss said NavSeeker is financed month to month with cash infusions from HIMEX and Quindell, including for its legal fees.