Alden Smith and John W. Gosselin v. Jerome W. Van Gorkom, et al. No. Civil Action 6342 Court of Chancery of Delaware, New Castle 1985 Del. Ch. LEXIS 516 October 9, 1985 Submitted October 11, 1985 COUNSEL: [*1] William Prickett, PRICKETT, JONES, ELLIOTT, KRISTOL & SCHNEE, 1310 King Street, P. O. Box 1328, Wilmington, Delaware 19899, for Plaintiffs. Robert K. Payson, POTTER, ANDERSON & CORROON, 350 Delaware Trust Building, P. O. Box 951, Wilmington, Delaware 19899, for Individual Defendants. A. Gilchrist Sparks, III, MORRIS, NICHOLS, ARSHT & TUNNELL, Wilmington Tower, P. O.Box 1347, Wilmington, Delaware 19899, for Defendants GL Corporation, Trans Union Corporation and New T Co. JUDGES: Before BERGER OPINIONBY: BERGER OPINION: BERGER On October 7, 1985, after due notice by mail and publication, this Court held a hearing to consider a proposed settlement of the above-captioned action. There were no objections raised by any of the more than 10,000 former stockholders of Trans Union Corporation. ("Trans Union") and, after considering the record as a whole, the memoranda and affidavits submitted in support of the proposed settlement, the substantial monetary benefit to the class and the risks and additional expenses and delay of continued litigation, among other factors, this Court approved the proposed settlement as being fair, reasonable and in the best interests of the class. Pursuant to the settlement, [*2] a fund in the amount of $23.5 million was created for the benefit of the class of former Trans Union stockholders identified in this Court's Order dated July 30, 1985. At the settlement hearing, counsel for plaintiffs in this action (the "Delaware Action") and counsel for plaintiffs in a related action captioned Ridings v. Canadian Imperial Bank of Commerce Trust Company (Bahamas) Limited, No. 81 C 486 (N.D. Ill.) (the "Federal Action") requested an award of attorneys' fees and expenses to be paid from the settlement fundin the amount of $5.5 million. This is the decision on the application for attorneys' fees and expenses. In Delaware, the amount of attorneys' fees to be awarded is a matter of discretion. Krinsky v. Helfand, Del. Supr., 156 A.2d 90 (1959). In determining a reasonable award, the results achieved through the litigation are generally the primary consideration. Other factors include the time and effort expended by counsel, the complexity of the litigation, the standing and ability of counsel and the contingent nature of the fee arrangement. Sugarland Industries, Inc. v.Thomas, Del. Supr., 420 A.2d 142 (1980); Roizen v. Multivest, Inc., Del. Ch., Civil [*3] Action No. 6535, Brown, C. (December 27, 1982). The lodestar or "Lindy" approach adopted by our federal courts is not followed in Delaware. Sugarland Industries, Inc. v. Thomas, supra: Rosen v. Smith, Del. Ch., Civil Action No. 7863, Hartnett, V. C. (September 18, 1985). Viewed solely from the perspective of the monetary benefit conferred by the litigation, counsel for plaintiffs suggest that the requested award, which amounts to approximately 23.4% of the $23.5 million settlement fund, is within the range of percentages found to be reasonable. See, Sugarland Industries, Inc. v. Thomas, supra (20% as to that portion of the benefit directly resulting from the litigation); Singer v. Magnavox, Del. Ch., Civil Action No. 4929, Brown, V. C. (August 20, 1980) (28%). However, in recent settlements involving fee awards in excess ofone million dollars, the fee award as compared to the benefit achieved has been significantly lower. See, e.g., In Re Crocker Shareholders Litigation, Del. Ch., Civil Action No. 7405 Consolidated, Hartnett, V. C. (May 21, 1985) (award of .75 million where value of settlement estimated to be $35 million to $70 million); Joseph v. Shell Oil Company [*4] , Del. Ch., CivilAction No. 7450 Consolidated, Hartnett, V. C. (April 19, 1985) ($15 million fee award where benefit was $205 million). The fees requested in these multimillion dollar settlements appear to reflect a tacit understanding that a percentage of recovery approach should be tempered in casesinvolving substantial recoveries. Under the facts of this case, however, I conclude that the application by plaintiffs' counsel is reasonable and should be granted. The Delaware Action was filed almost five years ago and hasbeen vigorously litigated throughout that time period. At the outset, plaintiffs took substantial expedited discovery and briefed and argued their motion to preliminarily enjoin the Trans Union case-out merger at $55 per share. After injunctive relief was denied, plaintiffs spent the next eight months taking additional discovery and otherwise preparing for trial. Following the trial and post-trial briefing, plaintiffs again suffered an adverse decision. Their appeal to the Delaware Supreme Court was briefed and argued not once, but three times and resulted in a much publicized 3-2 opinion reversing the trial court. Smith v. Van Gorkom, Del. Supr., 488 A.2d 858 [*5] (1985). The Supreme Court held that the defendant directors did not exercise informed business judgment in approving the proposed merger, were grossly negligent in approving amendments to the merger proposal and failed to disclose all material facts to the Trans Union stockholders. The case was remanded to this Court for a trial on damages. But for the skill and persistence of plaintiffs' counsel, it is reasonable to assume that the class offormer Trans Union stockholders would have received nothing beyond the merger considerationof $55 per share. Even after prevailing in the Supreme Court, plaintiffs faced a serious risk that their hard fought victory would be a hollow one. Issues of value, upon which plaintiffs' damages trial would hinge, tend to be very close questions. Moreover, the Supreme Court decision did not address any liability on the part of the corporate defendants. Following remand, the corporate defendants sought dismissal and the parties had briefed that issue before the settlement was achieved. If the individual defendants were found to be the only parties potentially liable in the Delaware Action, plaintiffs would have faced the additional risk that theindividual [*6] defendants would be unable to fully satisfy a judgment entered against them. Counsel were representing plaintiffs essentially on a contingency basis and, as a result, did not maintain meticulous time records. However, at the Court's request, counsel in the Delaware Action
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