Showing one post in Interim Fee Applications.
by Lewis Lazarus
Originally published in the Delaware Business Court Insider | August 31, 2011
Stockholder litigation challenging a merger transaction before it is consummated often has two phases. First, plaintiffs seek to enjoin the transaction. Second, if that fails, plaintiffs proceed with claims that the transaction was unfair because of a flawed process and an inadequate price.
When plaintiffs succeed in causing the corporation to issue corrective disclosure prior to a stockholder vote, they generally will be found to have conferred a benefit upon the corporation and its stockholders. Having done so, they are then entitled to an award of attorney fees. But can they get fees before the case is finally resolved?
Two recent decisions, Frank v. Elgamal and In re Del Monte Foods Company Shareholders Litigation, illustrate that the question is one for the discretion of the court and that that discretion may be exercised differently depending upon the chancellor or vice chancellor deciding the case and the underlying facts and circumstances.
Although the Frank court declined to entertain an application for interim fees while the Del Monte court did and awarded $2.75 million in interim fees, the court in each opinion agreed that "interim fee awards may be appropriate where a plaintiff has achieved the benefit sought by the claim that has been mooted or settled and that benefit is not subject to reversal or alteration as the remaining portion of the litigation proceeds," quoted from the 2001 decision in Louisiana State Employees Retirement System v. Citrix Systems Inc.
The court in each opinion also recognized that a trial court is never required to consider an interim fee application and that a trial court may well prefer to have applications determined at the end, when a single fee can be awarded. Vice Chancellor John W. Noble in Frank noted that "judicial economy and the orderly conduct of litigation are usually better served if interim awards of attorneys' fees are avoided."