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Law Firms Earn $23.5M in Fees in $100M CD&R Merger

January 21, 2022 | Posted in : Class Incentive Awards, Fee Allocation / Fee Apportionment, Fee Award, Fee Award Factors, Historic / Landmark Case, Settlement Data / Terms

A recent Law 360 story by Rose Krebs, “Firms Get $23.5M for $100M Merger Suit Settlement in Del.,” reports that three firms are getting a $23.5 million fee per a vice chancellor's approval of a $100 million settlement of a Delaware Chancery Court suit that accused Clayton Dubilier & Rice LLC of steering a construction industry supplier it controlled into an allegedly "grossly unfair" $1.2 billion merger.

During a settlement hearing held virtually, Vice Chancellor J. Travis Laster approved the settlement, bringing an end to a suit filed by NCI Building Systems Inc. stockholder Gary D. Voigt.  He also approved the $23.5 million fee award to go to Voigt's counsel Andrews & Springer LLC, Friedman Oster & Tejtel PLLC and Kaskela Law LLC.

The vice chancellor initially said he thought there was "room to quibble with" the fee sought, but agreed to approve the settlement and fee as it was presented to the court.  He also approved a $5,000 incentive fee to go to Voigt and said the cash settlement negotiated in the case was a "good get" for the stockholder class.

During the hearing, David M. Sborz of Andrews & Springer told the vice chancellor the fee award sought was reasonable given the significant benefit achieved for NCI and the stockholder class.  In a court filing, Voigt's counsel claimed the deal was the fourth-largest derivative settlement and sixth-largest settlement, including direct or derivative claims, in the history of the court.

The suit claimed that the private equity firm used its control as a large NCI stockholder to make it pay $1.2 billion for the Clayton Dubilier-owned successor to privately held Ply Gem Holdings Inc. in July 2018, three months after Clayton Dubilier paid $683 million for the same business.  The transaction created a nearly $600 million windfall for the private equity firm, which owned 70% of Ply Gem, while creating a huge new debt burden for NCI, the suit asserted.  Under the settlement, the defendants will have insurers pay $100 million into an escrow fund that will be turned over to NCI.