Posts in Corporate Benefit Doctrine

Chancery Evaluates Supplemental Disclosures to Determine the Corporate Benefit and Awards Plaintiffs a Proportional Fee

Allen v. Harvey, C.A. No. 2022-0248-MTZ (Del. Ch. Oct. 30, 2023)
Delaware cases provide guidance on the standard for evaluating the “corporate benefit” from supplemental disclosures in advance of a stockholder vote – and the fees that should be awarded to plaintiffs for prompting such disclosures. This case involved supplemental disclosures of potential sources of conflicts held by a special committee’s chair and advisors in advance of a merger vote. The Court held that such disclosures were not extraordinary, but they still warranted a proportional fee award. More ›

Chancery Rejects Declining-Percentage Method, Awards $266.7 Million in Attorneys’ Fees for $1 Billion Class Action Settlement

In re Dell Techs. Inc. Class V S'holders Litig., C.A. No. 2018-0816-JTL (Del. Ch. July 31, 2023, revised Aug. 22, 2023)
Stockholders filed class actions in the Court of Chancery challenging the terms of a redemption of a special class of common stock. After years of litigation and the filing of pre-trial briefs, nineteen days before trial, the parties reached a cash settlement of $1 billion. The plaintiff's counsel submitted a fee application for 28.5 percent of the common fund. Stockholders holding more than 25 percent of the class objected to the fee application and asked that the Court instead apply the declining-percentage method used for calculating fees in federal securities litigation. More ›

Chancery Finds Stockholder Conferred a Substantial Corporate Benefit by Challenging the Joint Vote of Two Classes of Common Stock under Section 242(b)(2) of the DGCL

Garfield v. Boxed Inc., C.A. No. 2022-0132-MTZ (Del. Ch. Dec. 27, 2022).
Section 242(b)(2) of the DGCL requires the separate approval of different classes of stock for charter amendments that, inter alia, “increase or decrease the aggregate number of authorized shares of such class…” Section 242(b)(2) permits corporations to opt-out of this separate class approval requirement via a charter amendment – but any such amendment also must be approved by a separate class vote. This decision awards attorneys’ fees under the corporate benefit doctrine to a stockholder who questioned the validity of Class A and Class B common shares voting together on proposed amendments triggering these requirements, which then caused the corporation to provide separate class votes.  More ›

Court of Chancery Awards Plaintiffs Attorneys’ Fees and Costs in Section 225 Action for Obtaining a Substantial Benefit for the Corporation and its Stockholders

Totta v. CCSB, LLC, C.A. No. 2021-0173-KSJM (Del. Ch. Nov. 3, 2022)
Delaware follows the “American Rule”: each party bears its own legal fees and expenses. However, there are certain exceptions. This includes the “corporate benefit exception,” where a party has obtained a substantial benefit for the corporation or its stockholders through prosecuting the lawsuit. In this recent decision from the Court of Chancery, the Court awarded attorneys’ fees and expenses to a plaintiff in a Section 225 action under the corporate benefit exception. More ›

Chancery Awards $9.5 Million Mootness Fee for Reduction of Voting Control and Other Benefits

Hollywood Firefighters Pension Fund v. Malone, C.A. 220-0880-SG (Nov. 8, 2021)
A plaintiff may be entitled to a mootness fee if it shows that its action had merit and produced a corporate benefit. This case outlines the Court of Chancery’s analysis in valuing non-monetary benefits and, in turn, the appropriate mootness fee. More ›

Court of Chancery Denies Lead Plaintiff’s Application for Incentive Fee from Overall Fee Award

Morrison v. Berry, C.A. No. 12808-VCG (Del. Ch. July 12, 2021)
Delaware courts generally do not award special compensation to lead plaintiffs in class action litigation. Delaware courts typically limit awards to out-of-pocket costs and expenses, unless lead plaintiffs take on extra—essentially, exceptional—burdens in the litigation. Submitting a modest award request does not necessarily portend success that an applicant will receive an award. More ›

Chancery Awards Attorneys’ Fees for Monetary and Therapeutic Benefits from Goldman Sachs Director Compensation Settlement and Considers Objector’s Fee Request

Stein v. Blankfein, C.A. No. 2017-0354-SG (Del. Ch. Jul. 12, 2021)
This decision concerns fee applications under the “corporate benefit” doctrine for benefits achieved in derivative litigation.  More ›

Chancery Awards $3 Million in Attorneys’ Fees Following Invalidation of Charters’ Forum-Selection Provisions for Securities Act Claims

Sciabacucchi v. Salzberg, C.A. No. 2017-0931-JTL (Del. Ch. Jul. 8, 2019).

In December 2018, the Court of Chancery held that forum-selection provisions in three corporate charters were ineffective.  The provisions had required any claim under the Securities Act of 1933 to be filed in federal court (“Federal Forum Provisions”).  The Court held them to be invalid, because federal securities claims were not “internal affairs” claims for which a Delaware corporation’s charter may choose a forum.  Seven months later, the Court granted an application for an all-in award of attorneys’ fees and expenses in the amount of $3 million under the corporate benefit doctrine.  Defendants had argued that the award should not exceed $364,723 plus expenses.  Reasoning that “the plaintiff achieved a significant and substantive result by successfully invalidating the Federal Forum Provisions,” the Court turned to Delaware precedent to determine an appropriate fee for this kind of non-monetary relief. More ›

Chancery Declines to Award Fees to Stockholders Who Opposed “Corporate Benefit”

Almond v. Glenhill Advisors LLC, C.A. No. 10477-CB (Del. Ch. Apr. 10, 2019). 

Under the “corporate benefit doctrine,” litigants whose efforts result in a substantial benefit to a Delaware corporation or its stockholders generally are entitled to an award of their attorneys’ fees and expenses.  This opinion emphasizes that the doctrine is a flexible one based on the Court of Chancery’s prerogative to do equity in each case. 

Here, the Court considers and denies a fee application by stockholder-plaintiffs who challenged a defective short-form merger.  The basis for the plaintiffs’ claims included technical errors in the language of certain corporate instruments that resulted in a reverse stock split with a ratio much larger than intended (2,500 to 1, rather than 50 to 1).  That, in turn, resulted in the merger receiving less than the required stockholder approval.  When the corporation attempted to ratify the defective corporate acts under Section 204 of the DGCL and sought judicial validation under Section 205, the plaintiffs opposed it.  Plaintiffs ultimately lost on the issue at trial.  Although the end-result—removing a cloud over the merger’s validity—could be considered a “benefit” resulting from the plaintiffs’ litigation efforts, the Court denied their subsequent fee application.  According to the Court, in particular, it would be inequitable to reward plaintiffs for conferring a benefit they opposed.