August 3, 2023, 12:24 pm CDT
In federal courts, awards between $500 million and $1 billion typically lead to fees of less than 18%, while settlements above $1 billion yield a median fee of 10.5%, according to Reuters. Image from Shutterstock.
Delaware’s chancery court appears to be more lucrative than federal court for plaintiffs lawyers in big-recovery securities class actions.
In federal courts, lawyers typically get a lower percentage of the recovery as settlements increase, according to stories by Bloomberg Law and Reuters.
Awards between $500 million and $1 billion typically lead to fees of less than 18%, while settlements above $1 billion yield a median fee of 10.5%, according to Reuters.
In Delaware chancery court, however, plaintiffs law firms on Monday were awarded 27% of a $1 billion settlement, amounting to a fee of $266.7 million, the articles report. The settlement was reached on the eve of trial.
The $1 billion settlement is the largest ever in the Delaware chancery court, and the $266.7 million fee is the second largest legal fee payout, according to prior reporting by Bloomberg Law.
Quinn Emanuel Urquhart & Sullivan and Labaton Sucharow were lead counsel for shareholders in the case. Other firms representing plaintiffs were Robbins Geller Rudman & Dowd, Andrews & Springer, and Friedman Oster & Tejtel.
According to the Austin American-Statesman, the plaintiffs obtained the settlement in a securities class action alleging that Dell Technologies Inc. harmed shareholders in an acquired company through a stock deal.
In a July 31 opinion approving the award, Vice Chancellor J. Travis Laster said Delaware courts base the percentage fee on the stage of the case when settlement was reached, an approach adopted in 2012 by the Delaware Supreme Court.
“The stage-of-case approach helps counteract the natural human tendency toward risk aversion and gives plaintiff’s counsel an incentive to eschew an early, lower-valued settlement,” Laster explained.
“Providing that incentive is important,” Laster said. “Delaware’s experience during the M&A litigation epidemic demonstrated that entrepreneurial counsel can profit by filing weak cases on an industrial scale, putting in minimal work, and settling by offering defendants a global release in return for no-cost or low-cost relief plus an agreement not to oppose an attorneys’ fee award.”
That business model worked for lawyers who got paid and defendants who were released from liability, Laster said. But it harmed absent class members “who got bupkus” and society as a whole because real claims weren’t litigated, he said.
Delaware’s stage-of-case response helped fix those problems, according to Laster. It recognizes that lawyers for plaintiffs deserve to be “well compensated for identifying real cases, investing real money in those cases and obtaining real results,” he said.
Excessive fees can be reduced based on factors that include the extent to which the case was litigated on contingency, the time and the effort invested, the complexity of the litigation, and the ability of the lawyers, he said.
“In this case,” Laster wrote, “plaintiff’s counsel brought a real case, invested over $4 million of real money, and obtained a real and unprecedented result.”
