A recent Law 360 story by Rose Krebs, “Attorneys Will Get $250K For Mooted EZCorp Investor Suit” reports that counsel for an EZCorp Inc. investor who alleged that officers of the Texas-based pawnshop operator oversaw the unauthorized distribution of more than $16 million worth of company shares will get a $250,000 fee award for a now-mooted Delaware Chancery Court suit. Chancellor Kathaleen St. J. McCormick approved a stipulated order voluntarily dismissing a derivative suit filed in January by stockholder Jerry Edelman and directing the company to pay $250,000 to his counsel Levi & Korsinsky LLP and Bielli & Klauder LLC for attorneys' fees and expenses.
In the suit, Edelman accused a group of current and former EZCorp directors and executives of unlawfully granting themselves and others more than 2.7 million nonvoting shares of the company between May 2020 and October 2021. Although EZCorp and the other defendants "deny any and all allegations of the complaint that defendants engaged in wrongdoing in any way," they agreed to pay attorneys' fees "to avoid the potential costs, risks and distraction associated with the defense of a fee application by plaintiff's counsel," the order said.
The stipulated order was filed and signed off on by the chancellor soon after. It was filed less than 24 hours after attorneys from Richards Layton & Finger PA entered their appearance on behalf of EZCorp and the directors and officers. At issue in the suit was a long-term incentive plan authorized by EZCorp shareholders in May 2010 that granted company shares to officers, directors and employees. The plan expired in May 2020, and no new deal had been reached at the time of the suit's filing, Edelman claimed.
Despite that, board members awarded 2,757,293 shares to themselves and others between May 2020 and October 2021, according to the lawsuit. The suit said shares were distributed six times during that period. After the suit was filed, the company's board and Phillip Cohen, the company's executive chairman and sole holder of its voting class of common stock, ratified the granting of the stock awards and issuance of company shares, according to the order.
The company's incentive plan was amended effective April 30, 2020, "to allow for the grant of awards under the plan until December 31, 2021 and to increase the number of shares of the company's Class A non-voting common stock authorized for issuance under the plan," the order said. On March 2, Cohen approved a new equity incentive plan to replace the previous one, "provided that the plan continues to govern awards made under the plan that were outstanding as of December 31, 2021 and that the authorized shares under the 2010 plan remain available to satisfy such awards," the order said.
Parties in the litigation "agree that the ratification of the grant of the awards, the issuances, and the plan amendment, and the adoption of the company's new equity incentive plan mooted the claims set forth in the complaint," the order said. Edelman's now mooted suit had asserted breach of fiduciary duty, waste of corporate assets and unjust enrichment claims and sought damages and a court order rescinding the awarded shares.