A recent Law 360 story by Rose Krebs, “Firms Defend Fee Asked in ‘Risk-Laden’ GCI Liberty Suit Deal,” reports that five firms have told the Delaware Chancery Court they should get a $22 million fee award for brokering a proposed $110 million deal to end a suit filed by investors over alleged fiduciary duty breaches in GCI Liberty Inc.'s sale to Liberty Broadband Corp., in addition to another $22 million they are also seeking in the litigation.

In a brief made public late Tuesday, Bernstein Litowitz Berger & Grossmann LLP, Prickett Jones & Elliott PA, Kessler Topaz Meltzer & Check LLP, Klausner Kaufman Jensen & Levinson PA and Morris Kandinov LLP urged the court to approve the $110 million settlement to end the stockholder class litigation and award the firms fees and expenses equal to 20% of the settlement fund.

"Plaintiffs respectfully submit that the requested fee is fair and reasonable, if not conservative, given the financial benefits achieved, the stage of the litigation at which the settlement was reached, and precedent fee awards," the brief said.

The brief, which was initially filed under seal last week, was made public just days after an unsealed court filing from defendants John C. Malone and former GCI Liberty CEO Gregory B. Maffei blasted the bid by the firms to receive another $22 million award related to significant benefits the firms say were obtained per an earlier agreement.

Malone and Maffei called that separate $22 million ask "an egregious overreach," in a filing that was made public Friday.

In their filing, the firms continued to assert that they should be awarded two $22 million fees: one related to an agreement reached in November that headed off a preliminary injunction fight over the sale, and another for negotiating the proposed $110 million deal to end the litigation. The November agreement was reached after plaintiffs accused GCI Liberty's directors of violating Delaware corporation law that banned certain mergers involving controlling shareholders.

Under the agreement, GCI Liberty's then-controlling stockholder Malone and Maffei gave up "massive benefits they extracted in connection with the stock-for-stock merger of GCI Liberty Inc. and Liberty Broadband Corporation," a prior filing said. And they did so "without receiving any release from liability for additional harm arising from" their alleged misconduct, the firms previously said.

"Plaintiffs could have accepted the benefits achieved through the PI stipulation [November agreement] as consideration for an outright settlement of the action," the firms said. "Many lawyers may have preferred settling, because achieving an additional monetary benefit for stockholders was a risk-laden proposition."

But the suing investors and their counsel continued on and "took on additional risk and showed the courage of their convictions" in pursuing claims and eventually brokering the hefty settlement, the filing said. The proposed deal is set to be considered by the court at a future date.

"Plaintiffs' carefully calculated risk ultimately benefited the entire class of GCI Class A common stockholders," the filing said.

The firms said that "it is truly rare" for investors to achieve such results and prosecute claims "successfully against some of the most aggressive and creative corporate defense counsel and turn those efforts into a $110 million settlement that may exceed a possible post-trial victory."

Given the time and effort put in, the complexity of the litigation, and substantial benefits achieved on behalf of the proposed class, the firms should be awarded $22 million in connection with the settlement, the filing asserts.

"Plaintiffs' counsel are well-known to this court for their experience and skill in vigorously and efficiently representing stockholders in complex matters," the filing said. "That experience and skill is demonstrated by the significant result achieved here. Plaintiffs prevailed against opponents represented by well-regarded firms, the standing of which may also be considered in settling a fee award."

In a prior court filing, the firms argued they should get fees for what they characterized as one of the most significant results ever achieved in a Delaware stockholder litigation.

"This case highlights the worst inequities that a dual-class capital structure invites and the best results that strategically sound and effectively executed shareholder litigation can achieve," the plaintiffs' firms said in a prior filing. "Here, self-interested fiduciaries attempted to transfer substantial and valuable voting rights to themselves. Plaintiffs and their counsel challenged the scheme, secured expedition over strident opposition, and, under extreme time pressure, assembled an evidentiary record that was so strong that defendants capitulated to avoid a pre-vote injunction hearing."

The November agreement "caused the conversion of Malone's and Maffei's GCI super-voting shares (and options) into Broadband non-voting shares (and options)," the firms said previously. As a result, Malone's and Maffei's voting power in the combined company was reduced from more than 60% to less than the 49% that they held in Liberty Broadband prior to the merger.

"Plaintiffs believe that these are among the most significant — and valuable — non-monetary benefits ever achieved in Delaware stockholder litigation and warrant plaintiffs' requested fee," they said.

In the latest filing, the firms characterized the agreement's terms as "among the most valuable adjustments to voting powers of any case to come before this court."

However, in their filing, Malone and Maffei accused plaintiffs' counsel of attempting "to rewrite history" by misrepresenting the impact of that agreement.

"To an unfamiliar reader, it may appear from plaintiffs' counsel's mootness fee request that the parties agreed, pre-merger, to an earth-shattering set of deal modifications that conferred billions of dollars of new value on the target's unaffiliated stockholders, thus justifying plaintiffs' counsel's $22 million ask," the brief said. "That did not happen. In reality, only a single claim was mooted, and the mooting actions conferred no observable benefit on any stockholder class."

They argue that the firms' request for a $22 million award in connection with the agreement, in addition to seeking $22 million for the settlement, "is an egregious overreach" that the court should reject.

"Despite the fact that plaintiffs never alleged or tried to remedy any harm to Broadband or its stockholders, plaintiffs' counsel seek an additional $22 million fee for allegedly benefiting all of post-closing Broadband's equity holders by dramatically increasing the value of their stock by reducing the disparity between Malone and Maffei's collective voting power and economic interests in postclosing Broadband," they said. "But plaintiffs' counsel are not entitled to a fee for supposedly helping a class they never purported to represent, obtaining benefits they never sought and mooting claims they never raised."

The suing investors did obtain "some benefit" with the November agreement, but it only warrants a "modest" fee of no more than $1 million, Malone and Maffei argue.

In a previous filing, the firms told the court they are seeking $22 million in connection with the November agreement because "the settlement does not reduce the benefits provided by the PI stipulation, which are continuing, permanent benefits for the equity holders of Broadband, including members of the class."

"Any award of attorneys' fees and expenses in connection with the PI stipulation will not be paid out of the settlement fund while any award of attorneys' fees and expenses in connection with the $110 million settlement will be paid out of the settlement fund," the firms said.

The proposed deal would compensate shareholders in connection with what were claimed to be self-interested deal terms that were aimed in part at expanding Malone and Maffei's hold on the post-merger business.

The five firms represented three union pension funds in the litigation, and their claims focused on the actions of Malone, described by the complaint as a giant in the cable television and media industry and as a "mogul's mogul."

"Having 'play[ed] the long game in an industry that has consolidated over the past three decades,' Malone is famous for deals with 'fiendishly complex structure aimed at delivering the maximum amount of influence and tax savings for himself,'" a second amended version of the suit asserted.

"This case is the latest example of Malone using his supervoting stock — which gave him de facto control over GCI Liberty and Liberty Broadband Corporation — to push through a merger on unfair terms providing him improper side benefits," the suit contended.

All those named in the suit denied the stockholders' claims as part of the settlement, however. Terms of the agreement would oblige insurers for those named in the suit or the merger successor to GCI Liberty to pay the settlement.

Liberty Broadband closed the acquisition in December, and stockholder investigations and negotiations toward a settlement continued for months afterward.

Malone and Maffei were accused in the amended suit of breaches of fiduciary duty in their capacities as controlling stockholders. Director Gregg Engles, a member of the independent committee, and his close friend Maffei were accused of breaches of fiduciary duty in connection with Engles' appointment to the special committee, and six directors were also accused of breaches.

The amended action also would have advanced claims that Malone "stampeded" the deal during negotiations by creating a trading plan and trust under U.S. Securities and Exchange Commission rules for insiders that threatened to make details about the merger terms public.

The merger was announced in August 2020. It combined Liberty Broadband's stake in Charter Communications Inc. and its subsidiary Skyhook, a global positioning and "contextual location intelligence" venture, with GCI Liberty. GCI Liberty, in addition to its own premerger Liberty Broadband stake, provided telecommunications and television services for enterprises.