Class Representative Awarded Additional Fee Compensation For Shouldering Extra Burden By Court Of Chancery
Raider v. Sunderland, et al., C.A. No. 19357 NC, 2006 WL 75310 (Del. Ch. Jan. 04, 2006) (Revised Jan. 05, 2006).
This is a class action involving board actions and fee requests by the plaintiff representative.
Pursuant to an earlier order and judgment of the court reserving in escrow $240,000 of class counsel's fee allowance/bonus, the court awarded the class counsel $197,600 and the balance to plaintiff for his personal initiative and persistence as a minority shareholder.
The court analyzed the law of fee awards and the accompanying justifications under Delaware and federal law. The court explained that a fee award to lead plaintiff is in the nature of a rescissory measure, although Delaware courts are hesitant to award lead plaintiffs anything beyond their out-of-pocket costs and expenses.
The court held that the presumption against a separate bonus fee payment award was overcome in this case on the basis of three factors that validated such an award: (1) the extensive time spent by the plaintiff; (2) the direct benefits derived from his efforts in the final settlement; and (3) the volume of effort rendered by plaintiff as a small shareholder. The court however determined the size of the award only on the amount of effort and expertise rendered.
The court explained that it refrained from linking the award to the benefit drawn by the class to preempt future holdups of settlements by "unrealistic hopes of extracting direct benefits for the shareholders from a defendant willing to go to trial in the face of such increased demands."