A recent Law 360 story by Rose Krebs, “Class Attorneys Defend $285M Fee Bid in Dell Stock Deal,” reports that class attorneys are defending their bid for a $285 million fee award as the Delaware Chancery Court gets ready to consider a proposed $1 billion settlement to end a stockholder suit challenging a $23.9 billion conversion of Dell stock, arguing the "record-breaking" deal warrants a big payout. In a filing, attorneys with Labaton Sucharow LLP, Quinn Emanuel Urquhart & Sullivan LLP, Andrews & Springer LLC, Robbins Geller Rudman & Dowd LLP and Friedman Oster & Tejtel PLLC took issue with an objection lodged by Pentwater Capital Management LP and other Dell Technologies Inc. institutional investors who oppose the fee request.
"Plaintiff's counsel invested years of professional time and millions of dollars out-of-pocket to deliver this record-breaking result for the class," the filing asserts. "Plaintiff's counsel did so on a fully contingency[sic] basis, with no guarantees, and without the comfort of knowing — as objectors do today — that plaintiff's counsel would (or even could) achieve this successful outcome."
In the filing, the class attorneys argue that they "achieved this outcome in the face of extraordinary risk, on the eve of trial, and against highly determined defendants with endless resources and a history, well known to this court, of dogged litigation." The fee and expense award sought "is eminently fair, reasonable, and well-supported by governing precedent and prevailing market practices," they contend.
Earlier this month, and in another filing, Pentwater argued that an award equal to 28.5% of the $1 billion settlement would be unfair to the class. Citing several studies, it argued last week that "empirical research uniformly confirms that in federal class actions, as settlement amounts rise, fee percentages fall." "Contrary to concerns about the decreasing percentage model, scholarship indicates that lowering fee percentages does not reward lawyers marginally less compensation for the same work," it said.
Vice Chancellor J. Travis Laster earlier this month asked for additional briefing from Pentwater, saying it would be helpful to know what "law professors say in favor of or against the declining percentage method." Pentwater had asked the court to "carefully examine" the fee application, given "the sheer enormity of the fees sought."
Last week, Vice Chancellor Laster allowed a group of professors to submit a brief as amici curiae. In the brief, five professors who said they "publish extensively on representative stockholder litigation" argued that a fee award equal to 15% of the settlement amount is warranted, rather than the 28.5% class attorneys seek. A $150 million award would "adequately" compensate counsel, they said. But in a filing, the lead plaintiff Steamfitters Local 449 Pension Plan's counsel argued that the court "should reject objectors' groundless arguments" and also toss aside the professors' argument.
Pentwater and the other objectors "do not address the court's many decisions adopting similar or larger fee percentages, the reasonableness of plaintiff's counsel's implied hourly rate, or the risk plaintiff's counsel incurred expending tens of thousands of hours and millions of dollars prosecuting this enormously complex case," the filing asserts. Those objecting to the fee request also didn't "identify anything plaintiff's counsel could have done to litigate this case more effectively or efficiently," the filing said.
"Instead, objectors demand a lower fee percentage because of the settlement's sheer value," it said. "Delaware courts have expressly rejected this approach, and for good reason: It fails to account for the greater risk in larger cases not settled early in litigation, and to properly reward outstanding results in the face of that risk; it creates perverse incentives for plaintiffs' counsel; and it defies the market among sophisticated parties negotiating fee arrangements, which seldom use a declining fee percentage (and more often have an increasing one)." Nothing in the professors' brief "warrants reducing" the requested fee award, and the professors and objectors omitted "scholarship questioning the practice of discounting fee awards in mega-fund settlements," the class attorneys said.