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Category: Mootness Fees

3 Law Firms Seek ‘Mootness Fees’ in Investor Suit

August 14, 2021

A recent Law 360 story by Rose Krebs, “3 Firms Seek Fee For Mooted ViacomCBS Board Suit in Del”, reports that Cooch & Taylor, Glancy Prongay & Murray, and Kranenburg have asked the Delaware Chancery Court award them $120,000 in attorneys' fees for an investor's suit dismissed earlier this year over a challenged bylaw as to how company directors can be removed.  In a stipulated agreement filed with Vice Chancellor Sam Glasscock III, Cooch & Taylor PA, Glancy Prongay & Murray LLP and Kranenburg, along with counsel for ViacomCBS and its directors, resolved the firms' bid for attorneys' fees and expenses now that the case has been dismissed after an action by the company's board mooted the underlying issue.

"The parties negotiated at arms' length and resolved Plaintiff's claim to entitlement to a mootness fee, with the company agreeing, in the exercise of business judgment, to pay $120,000 for any and all attorneys' fees and expenses" for the three firms, the stipulation said.  A notice that would be provided to the U.S. Securities and Exchange Commission, including a clause that the company has agreed to pay the fees and expenses, was attached to the filing.  The notice would be sent to the SEC once the court signs off an order finalizing the agreement.

The firms sought the fee in connection with a suit filed last year by stockholder Gerald Lovoi flagging a provision of the company's bylaws that gave directors the authority to remove other directors, contrary to Delaware law.  "Stockholders of a corporation organized and existing under Delaware law have the exclusive authority to remove directors," the lawsuit asserted.  Lovoi sought a declaration from that court "that the removal provision was invalid and sought attorneys' fees and expenses if the claim was successful," the suit said.

Delaware Supreme Court Affirms $12M Mootness Fee

February 25, 2021

A recent Law 360 story by Rose Krebs, “Del. Justices Let $12M Attorney Fee in Versum Case Stand,reports that the Delaware Supreme Court let stand a $12 million fee awarded to stockholder attorneys who won removal of poison pill measures that threatened to block Versum Materials Inc. from taking a $1.2 billion higher alternative bid in a 2019 merger.  In a brief order, the full court said that "after careful consideration" it decided to affirm Vice Chancellor J. Travis Laster's decision last year to award the fee to a class attorney in a consolidated action led by Prickett Jones & Elliott PA, along with Kessler Topaz Meltzer & Check LLP, Lynch & Pine and Labaton Sucharow LLP.

In a bench ruling last July, Vice Chancellor Laster acknowledged that he had concerns about the fee, which amounted to nearly $10,700 per hour.  But the result, he said, partly reflected an "aggressive" position taken by Versum's counsel against any award, or an award beyond the $680,000 that would cover regular billable hours for the firms and attorneys involved.

"The Delaware Supreme Court's summary affirmance by unanimous order confirmed that Vice Chancellor Laster's careful 38-page ruling was correct and rejected" efforts by Versum and certain interested parties in the case "to rewrite Delaware's well-established law on mootness fees," shareholders' attorney Michael Hanrahan of Prickett Jones & Elliott PA told Law360.

During oral arguments earlier this month on an appeal filed by Versum and its directors, a Supreme Court justice questioned calls for the reversal of the supposedly unsupported $12 million "mootness fee" awarded by the Chancery Court to the stockholder attorneys whose successful challenge of merger poison pill provisions begat a better deal.  Justice Karen L. Valihura told Versum's counsel that the vice chancellor had acknowledged concerns about the size of the fee awarded along with the semiconductor industry supplier's call to pay either nothing or $680,000 based on standard rates.

The justice suggested that if the vice chancellor had ""meaningful help" from Versum in establishing a fee, given his concerns about the amount, he might have reached a different conclusion.  The fee approved by the Chancery Court followed relatively brief stockholder litigation in early 2019 over Versum's consideration of a $3.8 billion all-stock merger with Entegris Inc. worth about $43 per share, and the adoption of a poison pill shield for the deal after Merck KGaA offered $48 per share.

The pill would have given all shareholders the right to buy additional, potentially deal-blocking shares at a steep discount if another party or potential buyer acquired 12.5% or more of the company's equity.  Days after the stockholders sued, Versum dropped what the vice chancellor described as a related "truly expansive" provision that would trigger the poison pill if individual stockholders were deemed to be "acting in concert" in discussions about the deal, regardless of their intent.  Soon afterward, the poison pill itself was withdrawn, with Merck soon winning the deal with a higher offer of $53 per share.

In approving the fee last year, the vice chancellor said it would have been reasonably conceivable in a motion to dismiss proceeding to conclude that Versum fielded the deal protections "to block a high-value cash deal and protect its merger of equals" with Entegris.  Versum's counsel argued earlier this month that the vice chancellor erred by conflating the better, company-secured price and the "monetary, corporate, therapeutic benefit" resulting from removal of the pill and acting-in-concert provisions.

"Plaintiff played no role in the bidding dynamic and bidding process that led to the increased merger consideration," an attorney for Versum, William M. Lafferty of Morris Nichols Arsht & Tunnell LLP, argued, adding that the vice chancellor's fee award "effectively rewards counsel as if they had created a monetary fund" and benefit, "which they didn't."

In response, Hanrahan told the justices that Lafferty was asking the court to second-guess the vice chancellor's factual findings, and said that the award amounted to about 1% of the benefit.  "The defendant basically just disagreed with the court of chancery's finding of a causal connection between the litigation and the increased merger price," Hanrahan said.  "They said no fee at all should be awarded, because the litigation did not cause Merck's offer.

But Hanrahan said that Versum conceded on appeal that the litigation caused the removal of the acting-in-concert provision.  "That's fatal to their causation argument," he said.  "The vice chancellor found those were obstacles to the Merck offer, and the removal of those obstacles caused the success of the Merck offer."

Lafferty contended that the Chancery Court's fee decision was made without an assessment of the stockholder suit's likelihood of success or merit when it was actually filed.  "The bottom line here is, the court of chancery had a duty to use its discretion to set a reasonable fee, and it didn't do that, we believe," Lafferty told the justices.

Delaware Supreme Court to Decide on ‘Mootness Fee’

February 15, 2021

A recent Law 360 story by Jeff Montgomery, “Del. Justices Unsure $12M Deal ‘Mootness Fee’ Is Off-Base”, reports that a Delaware Supreme Court justice questioned calls for the reversal of a supposedly unsupported, $12 million Chancery Court "mootness fee" to stockholder attorneys whose successful challenge to a Versum Materials Inc. merger poison pill begat a deal that was $1.2 billion higher.

During arguments on an appeal filed by Versum and its directors, Justice Karen L. Valihura told the company's counsel William Lafferty of Morris Nichols Arsht & Tunnell LLP that Vice Chancellor J. Travis Laster acknowledged concerns about both the size of the fee — amounting to about $10,700 per hour for a mooted claim — and the semiconductor industry supplier's call to pay either nothing or $680,000 based on standard rates.  "So he said you started out with a non-starter, extreme position" on the fee, "but you didn't engage with the evidence and the precedents meaningfully" to back up the position, Justice Valihura said.  "What are we supposed to do with that?" she asked Lafferty during arguments before the full five-member court.

And earlier Justice Valihura had asked Lafferty, "Isn't part of the problem here, clearly, that the vice chancellor had some misgivings about the [fee] number," but also that, if he had "meaningful help from the defendant in engaging on the matter, he might have reached a different conclusion?"  The fee approved by the Chancery Court followed relatively brief stockholder litigation in early 2019 over Versum's consideration of a $3.8 billion all-stock merger with Entegris Inc. worth about $43 per share, and the adoption of a poison pill shield for the deal after Merck KGaA offered $48 per share.

The "pill" would have given all shareholders the right to buy additional, potentially deal-blocking shares at a steep discount if another party or potential buyer acquired 12.5% or more of the company's equity.  Days after the stockholders sued, Versum dropped what the vice chancellor described as a related, "truly expansive" provision that would trigger the poison pill if individual stockholders were deemed to be "acting in concert" in discussions about the deal, regardless of their intent.  Soon afterward, the poison pill itself was withdrawn, with Merck soon winning the deal with a higher, $53 per share offer.

In approving the fee last year, the vice chancellor noted it would have been reasonably conceivable in a motion to dismiss proceeding to conclude Versum fielded the deal protections "to block a high-value cash deal and protect its merger of equals" with Entegris.  Lafferty said the vice chancellor erred by conflating the better, company-secured price with the "monetary, corporate, therapeutic benefit" resulting from removal of the pill and acting-in-concert provisions.

"Plaintiff played no role in the bidding dynamic and bidding process that led to the increased merger consideration," Lafferty said, adding that the vice chancellor's fee award "effectively rewards counsel as if they had created a monetary fund" and benefit, "which they didn't."

Michael Hanrahan of Prickett Jones & Elliott PA, counsel to the stockholders, told the justices that Lafferty was asking the court to second-guess the vice chancellor's factual findings, and said that the award amounted to about 1% of the benefit.  "The defendant basically just disagreed with the court of chancery's finding of a causal connection between the litigation and the increased merger price," Hanrahan said.  "They said no fee at all should be awarded, because the litigation did not cause Merck's offer.  The question is, what the board did" on the issues.  "They didn't put in any evidence on that."

Hanrahan said that Versum conceded on appeal that the litigation caused the removal of the acting-in-concert provision.  "That's fatal to their causation argument," he said. "The vice chancellor found those were obstacles to the Merck offer, and the removal of those obstacles caused the success of the Merck offer."  Lafferty said Versum's decision to accept Merck's offer came weeks after the stockholder suit had been mooted, while the court's fee decision was made without an assessment of the stockholder suit's likelihood of success or merit when it was filed.

"So what you're suggesting is, the process the Court of Chancery should have followed here, if your standard is likelihood of success, do they have to relitigate this case as part of the fee application?"  Chief Justice Collins J. Seitz Jr. asked. "I think what you're advocating has practical consequences for the court."  Lafferty said the case implicated important public policy considerations regarding the institutional role of shareholder suits, and the fact that past court cases have found that "generosity plays no role" in determining benefit amounts.

"If the court below wanted to exercise its discretion, if it thought there was a strong correlation between pulling the pill and the outcome, it could have awarded a multiple of plaintiff's attorney fees, not 17 times, but something reasonable," Lafferty said.  "The bottom line here is, the court of chancery had a duty to use its discretion to set a reasonable fee, and it didn't do that, we believe."

The Nation’s Top Attorney Fee Experts of 2020

June 24, 2020

NALFA, a non-profit group, is building a worldwide network of attorney fee expertise. Our network includes members, faculty, and fellows with expertise on the reasonableness of attorney fees.  We help organize and recognize qualified attorney fee experts from across the U.S. and around the globe.  Our attorney fee experts also include court adjuncts such as bankruptcy fee examiners, special fee masters, and fee dispute neutrals.

Every year, we announce the nation's top attorney fee experts.  Attorney fee experts are retained by fee-seeking or fee-challenging parties in litigation to independently prove reasonable attorney fees and expenses in court or arbitration.  The following NALFA profile quotes are based on bio, CV, case summaries and case materials submitted to and verified by us.  Here are the nation's top attorney fee experts of 2020:

"The Nation's Top Attorney Fee Expert"
John D. O'Connor
O'Connor & Associates
San Francisco, CA
 
"Over 30 Years of Legal Fee Audit Expertise"
Andre E. Jardini
KPC Legal Audit Services, Inc.
Glendale, CA

"The Nation's Top Bankruptcy Fee Examiner"
Robert M. Fishman
Cozen O'Connor
Chicago, IL

"Widely Respected as an Attorney Fee Expert"
Elise S. Frejka
Frejka PLLC
New York, NY
 
"Experienced on Analyzing Fees, Billing Entries for Fee Awards"
Robert L. Kaufman
Woodruff Spradlin & Smart
Costa Mesa, CA

"Highly Skilled on a Range of Fee and Billing Issues"
Daniel M. White
White Amundson APC
San Diego, CA
 
"Extensive Expertise on Attorney Fee Matters in Common Fund Litigation"
Craig W. Smith
Robbins LLP
San Diego, CA
 
"Highly Experienced in Dealing with Fee Issues Arising in Complex Litigation"
Marc M. Seltzer
Susman Godfrey LLP
Los Angeles, CA

"Total Mastery in Resolving Complex Attorney Fee Disputes"
Peter K. Rosen
JAMS
Los Angeles, CA
 
"Understands Fees, Funding, and Billing Issues in Cross Border Matters"
Glenn Newberry
Eversheds Sutherland
London, UK
 
"Solid Expertise with Fee and Billing Matters in Complex Litigation"
Bruce C. Fox
Obermayer Rebmann LLP
Pittsburgh, PA
 
"Excellent on Attorney Fee Issues in Florida"
Debra L. Feit
Stratford Law Group LLC
Fort Lauderdale, FL
 
"Nation's Top Scholar on Attorney Fees in Class Actions"
Brian T. Fitzpatrick
Vanderbilt Law School
Nashville, TN
 
"Great Leader in Analyzing Legal Bills for Insurers"
Richard Zujac
Liberty Mutual Insurance
Philadelphia, PA

Judicial Review of ‘Mootness Fees’ Before Seventh Circuit

October 24, 2019

A recent Law 360 story by Rachel Graf, “’Mootness Fees’ Are Beyond Court’s Purview, 7th Circ. Hears,” reports that, in what appears to be a first, plaintiffs attorneys are asking a federal appellate court to allow a controversial practice in which they file merger objections that result in a few extra disclosures for investors and privately negotiated "mootness fees" for the lawyers, which they say are out of the lower courts' reach.

Investors represented by Monteverde & Associates and Geyser PC have asked the Seventh Circuit to review an Illinois federal judge’s order revoking $322,500 in attorney fees they had won after securing additional disclosures about Akorn Inc.’s planned merger with Fresenius Kabi AG, arguing the lower court no longer had a say in the proceedings.

As with many of these cases, the defendants’ disclosures “mooted” the investors’ allegations, and the plaintiffs then voluntarily dismissed their claims and negotiated fees with the defendants without the need for a judge’s approval.

In this instance, however, U.S. District Judge Thomas Durkin ordered the attorneys to return their fees, calling the disclosures sought by the plaintiffs “worthless to the shareholders.”  The judge reviewed the resolution after Akorn shareholder Theodore Frank, who founded the Center for Class Action Fairness, asked to intervene in the lower court proceedings to object to the attorney fees — a bid that ultimately failed.

The plaintiffs are now arguing that Judge Durkin had no right to issue the order because the allegations had already been voluntarily dismissed.  “At that point, the court’s jurisdiction had officially lapsed over the merits, and it had no authority to continue,” they said in a brief.  “Its decision to review the merits of the complaint — to determine whether it should ‘abrogate’ the parties’ resolution of the core dispute — is directly at odds with settled law.”  Even if the court did have jurisdiction, it applied the wrong standard when evaluating the significance of the disclosures, the investors argued.

Judge Durkin evaluated whether the disclosures sought by investors were “plainly material,” a standard established in a landmark 2016 Delaware Chancery Court opinion in a case called Trulia.  But the plaintiffs told the Seventh Circuit this standard applies only to settlements that give defendants a broad release of additional claims stemming from the merger, which their resolution did not.

Frank has asked the Seventh Circuit to appoint him as amicus curiae to argue in support of the district court’s ruling, since Akorn and its board don’t intend to defend the decision.  An attorney representing Akorn and its board confirmed they don’t intend to file a brief with the appellate court.

Frank has also argued for sanctions against the law firms and an injunction barring them from securing attorneys fees without court approval.  He said he can’t afford to intervene in each of the many dozens of cases that are resolved with mootness fees.

Mootness fees, like those at issue in the Akorn dispute, have generated a fair amount of controversy in recent years.  Law professors, defense attorneys and even other plaintiffs attorneys contend that everyone but the lawyers filing the complaint loses, because courts become more skeptical of legitimate allegations and defendants have to address frivolous lawsuits.  The significance of the disclosures is up for debate and, unlike in past resolutions, defendants aren’t protected against the possibility of future claims.  In court documents, attorneys have defended their lawsuits by saying that companies are being forced to disclose information that’s important to investors.

The Seventh Circuit seems to be the first federal appellate court to review the practice, said Jill Fisch, a professor at the University of Pennsylvania Law School and joint author of a draft paper about mootness fees.  “They are pretty conscientious in terms of policing what goes on in the court,” she told Law360.  “So to the extent they view this as an effort to evade judicial oversight, they might be skeptical of the claim.”  Either way, the ruling will likely shed some light on whether the practice will be dealt with in the courts or through an amendment to the Federal Rules of Civil Procedure, she said.