Court Grants Significantly Smaller Fee Award Than That Sought by Plaintiffs' Counsel in Connection with Settlement of Derivative Action
In re Instinet Group, Inc. Shareholders Litig., C.A. No. 1289-N, 2005 WL 3501708 (Del. Ch. Dec. 14, 2005).
Following the court's approval of settlement of derivative claims, Plaintiffs' counsel applied for an allowance of $1,450,000 in contingency fees and $173,031.07 in costs. Defendants agreed that Plaintiffs' attorneys were entitled to some award of fees and expenses, but objected to counsel's request as excessive under the circumstances on the grounds that (1) the litigation benefits achieved were modest, (2) the case settled at an early stage, and (3) Plaintiffs' counsel litigated the case ineffectively.
The court largely agreed with Defendants' objections. The court first noted that the benefits achieved by the litigation, although adequate to support the settlement of the claims asserted, were indeed modest where the settlement only resulted in an extra $.007 per share, a 15% (or $1 million) reduction in a disputed break-up fee, and certain added disclosures in the final proxy statement, the omission of which the court suggested was not necessarily material. The court also noted that Plaintiffs had only begun to take depositions when settlement discussions began and completed only three depositions before signing a memorandum of understanding with respect to settlement. The court also took issue with Plaintiffs' counsel's decision to pay $125,000 to convert documents produced in digital format into a paper format, which the court found both added unnecessary expense and greatly increased the number of attorney hours required to search and review the document production.