Case Title: In Re Infinity Broadcasting Corporation Shareholders Litigation

Citation: 

Docket Number: 594, 2001, 595, 2001

State: delaware

Court: Delaware Supreme Court

Date: 2002-06-27T00:00:00Z

Document:
IN THE SUPREME COURT OF THE STATE OF DELAWARE 
IN RE   
 
 
 
 
) 
INFINITY BROADCASTING  
)  No. 594, 2001 and 595, 2001 
CORPORATION  
 
 
)  Consolidated 
SHAREHOLDERS LITIGATION 
) 
 
 
 
 
 
 
)  Court Below:  Court of Chancery 
 
 
 
 
 
 
)  of the State of Delaware in 
 
 
 
 
 
 
)  and for New Castle County 
 
 
 
 
 
 
)  C.A. No. 18219 
 
Submitted:  April 17, 2002 
Decided:  June 27, 2002 
 
Before WALSH, HOLLAND and STEELE, Justices. 
 
 
Upon appeal from the Court of Chancery.  AFFIRMED. 
 
 
Brian P. Glancy of Hughes, Sisk & Glancy, P.A., Wilmington, Delaware; 
Michael G. Brautigam, pro hac vice (argued) for Proposed Intervenor Objector 
Below, Appellant. 
 
 
William L. Garrett, Jr., Wilmington, Delaware; Richard B. Brualdi, pro hac 
vice (argued) for Appellants Linda Juarez and Anne M. Pezza-Fiorillo. 
 
 
Norman M. Monhait of Rosenthal, Monhait, Gross & Goddess, P.A., 
Wilmington, Delaware; Pamela S. Tikellis of Chimicles & Tikellis LLP, 
Wilmington, Delaware; Arthur N. Abbey, pro hac vice (argued) for Plaintiffs 
Below-Appellees. 
 
 
A. Gilchrist Sparks, III and Jon E. Abramczyk (argued) of Morris, Nichols, 
Arsht & Tunnell, Wilmington, Delaware for Appellees-Defendants David J. 
McLaughlin, William S. Levine, Arturo R. Moreno, Bruce S. Gordon, Jeffrey 
Sherman, George H. Conrades, Robert Downs Walter, Mel Karmazin, Farid 
Suleman, Sumner Redstone, Infinity Broadcasting Corporation and Viacom Inc. 
 
 
Per curiam: 
 
2
 
In October 2001, the Court of Chancery approved a settlement reached 
between Appellees, defendants-below, Infinity Broadcasting and Viacom, Inc. and 
Appellees, plaintiffs-below, Infinity shareholders in response to litigation 
challenging the fairness of a tender offer by Viacom.  Before the merger, Viacom 
owned approximately 64 percent of the outstanding equity in Infinity.  In August 
2000, Infinity announced that Viacom had offered to acquire the remaining shares 
of Infinity common stock in return for Viacom common stock.  The proposed 
exchange ratio was 0.564 shares of Viacom stock for each share of Infinity stock. 
Almost immediately after the announcement, a number of Infinity’s minority 
stockholders filed eleven separate actions in the Court of Chancery, each 
challenging the fairness of the Viacom offer.  In addition, several similar suits were 
filed in other jurisdictions, including two suits filed by Appellants, intervenors-
below, Linda Juarez and Anne M. Pezza-Fiorillo in the New York Supreme Court 
for New York County, which is the principal place of business for both Infinity and 
Viacom.  Although the Delaware cases were consolidated into a single action, 
Juarez and Pezza-Fiorillo chose not to intervene here until they filed their 
challenge to the Court of Chancery’s approval of a settlement of the consolidated 
suit and their petition for a portion of the Chancellor’s award of attorneys’ fees.  
The latter is at the heart of the appeal before us. 
 
3
 
Less than three months after the announcement of the offer, the Delaware 
plaintiffs entered into a global settlement with Infinity on behalf of a class 
consisting of Infinity shareholders.  Appellant, objector-below, Len Fernandes1 
objected to the settlement in the Court of Chancery on the grounds that its terms 
were unfair and tainted by inadequate class representation.  He now appeals the 
Chancellor’s decision overruling his objection.  Appellants Juarez and Pezza-
Fiorillo raise a separate issue on appeal, namely that the Chancellor erred in his 
allocation of an award of 2.25 million dollars in attorneys’ fees to counsel 
appearing in the Delaware Action.  Juarez and Pezza-Fiorillo contend that they 
conferred a substantial benefit to the class as a result of their prosecution of the 
New York litigation and that the Chancellor wrongly denied their counsel a share 
of that award.  After considering those arguments, we find that the Chancellor 
based his decision on the correct interpretation and application of Delaware law 
and that his factual findings have ample support in the record.  Therefore, we 
affirm the judgment of the Court of Chancery. 
The Delaware Action and Settlement 
 
After Infinity shareholders filed eleven substantially identical complaints in 
the Court of Chancery, the court quickly consolidated the separate suits into a 
                                          
 
1 By order of this Court dated June 18, 2002 and pursuant to Supreme Court Rule 31, Sally 
Fernandes has been substituted for Appellant, objector-below, Les Fernandes in the above 
captioned appeal.  
 
4
single action.2  Each of these putative class actions alleged that Infinity, its board 
of directors, and Viacom breached their respective fiduciary duties of loyalty and 
care arising out of the factual assertion that the amount of Viacom stock offered as 
consideration for the merger was inadequate.  In each instance, the proposed class 
consisted of all holders of Infinity common stock, excluding, of course, the 
defendants.  The plaintiffs sought to enjoin the merger and to recover both 
compensatory and punitive damages, as well as attorneys’ fees and costs.  Once the 
court had consolidated the cases, the Chancellor appointed the law firms of 
Milberg Weiss Bershad Hynes & Lerach, LLP and Abbey Gardy & Squitieri as co-
lead counsel and the Delaware firms of Chimicles & Tikellis and Rosenthal 
Monhait Gross & Goddess, P.A. as co-liaison counsel to oversee the prosecution of 
the Delaware Action. 
 
Concurrent to the litigation, and similarly in response to Viacom’s offer, 
Infinity appointed a special committee of independent directors to provide 
recommendations to its board of directors concerning the proposed merger and to 
conduct any necessary negotiations with Viacom’s representatives.  The record 
reveals that the special committee and Viacom engaged in extensive talks 
concerning the terms of the tender offer.  Among the most highly contested issues 
was the exchange ratio, which the special committee actively sought to increase.  
                                          
 
2 Hereinafter the “Delaware Action.” 
 
5
Class counsel in the Delaware Action also engaged in negotiations with Viacom’s 
representatives concerning the need for an increase in the exchange ratio as part of 
any potential settlement.  In late October, Delaware counsel reached a settlement 
with the defendants that, inter alia, increased the exchange ratio from the 0.564 
shares of Viacom stock it proposed at the outset of its bid to 0.592 shares per 
Infinity share.  During that same period of time, the special committee and 
Viacom’s representatives were reaching an identical resolution.  On October 30, 
2000, on the advice of its financial advisors,3 the committee voted to recommend 
that the Infinity board of directors approve the merger at the same exchange ratio 
of 0.592 shares of Viacom stock per Infinity share.  Shortly thereafter, the parties 
to the Delaware Action presented the settlement to the Court.  In turn, the 
Chancellor approved it. 
The Fernandes Objection 
 
Initially, we address Appellees’ contention that Appellant Fernandes lacked 
standing to object to the settlement in the Court of Chancery.  The transcript of the 
settlement hearing indicates that the parties chose not to present the issue of 
standing to the Chancellor during that proceeding.  Although class counsel stated  
                                          
 
3 At an October 30, 2000 special committee meeting, the financial advisors informed the 
committee that they believed the negotiated exchange ratio to be fair, from a financial point of 
view, to the non-Viacom holders of outstanding Infinity Class A common stock.  They later 
confirmed these opinions in writing. 
 
6
for the record that he was unwilling to concede Fernandes’ standing, he admitted 
that the trial court did not necessarily need to decide the issue.  Because counsel 
did not pursue the issue at that hearing and the record reveals no further inquiry 
into the standing issue, we find that it was not fairly presented to the Court of 
Chancery for decision.  This Court generally will not address the merits of any 
issue not presented to the trial court and we find no compelling reason to depart 
from that standard in our consideration of this appeal.4 
 
Any decision of the Court of Chancery regarding the fairness of a proposed 
settlement is within the discretion of that court and requires an application of its 
own business judgment.5  This Court will review a decision regarding fairness only 
to the limited extent of determining whether “the findings and conclusions of the 
trial judge are supported by the record and [are] the product of an orderly and 
logical deductive process, [if so] they will be accepted."6  We will not substitute 
our own business judgment for that of the Court of Chancery.7  Fernandes contends 
that the Chancellor abused his discretion by approving a settlement that was unfair 
to the articulated class of Infinity shareholders.  His principal argument rests on the 
notion that close scrutiny of the facts in the record reveals that the settlement 
                                          
 
4 Supr. Ct. R. 8. 
5 Rome v. Archer, 197 A.2d 49, 54 (Del. 1964). 
6 Polk v. Good, 507 A.2d 531, 536 (Del. 1986) (citing Levitt v.Bouvier, 287 A.2d 671, 673 (Del. 
1972)). 
7 Rome, 197 A.2d at 54. 
 
7
provided nothing more than an illusory benefit that failed to adequately protect the 
rights of the class members.  Specifically, he claims that this Court should hold 
that the illusory benefit is insufficient to extinguish the individual claims of 
members of the class and that it also precludes the Chancellor’s award of any 
substantial attorneys’ fees.   
Fernandes argues that this Court need not look farther than the actual 
monetary value of the Viacom shares to find that alleged benefit to be, in essence, 
a sham.  Because of a dramatic drop in the price of Viacom stock after the tender 
offer was announced, the actual cash value for Infinity’s stockholders at the time of 
settlement was significantly reduced.  In turn, he contends, this should have 
triggered an increase in the exchange ratio to maintain the cash-equivalent benefit 
conveyed to the stockholders.8  This would be a persuasive argument, however, 
only if we were to consider the cash price at settlement to be the proper measure of 
the benefit conferred in a challenged stock-for-stock merger.  In fact, our courts 
have found that the Court of Chancery need not limit itself to an examination of the 
immediate tangible results to a corporation or its shareholders in determining the 
fairness of a settlement agreement.9  The probable long-term benefits of the 
                                          
 
8 It is apparent from the record that the terms of the offer were not subject to an adjustment that 
would require a change in the exchange ratio to reflect the ongoing price of Viacom stock.  Even 
if there had been, the record reveals that a general dip in the market similarly devalued Infinity 
and other companies. 
9 Prince v. Bensinger, 244 A.2d 89, 95 (Del. Ch. 1968). 
 
8
settlement are also properly considered.10  Indeed, mergers like that at issue in this 
appeal are undertaken primarily in the anticipation of long-term benefits.  
Assuming a rational decision-making process, Viacom would only have tendered 
its offer for outstanding Infinity stock if it believed that the merger would produce 
a net increase in value.  A short-term fluctuation in stock price does nothing to 
alter this extended outlook.  Moreover this is a benefit that Infinity shareholders 
can reasonably expect to reap as new holders of Viacom stock.  Therefore, it could 
fairly be concluded that the increase in the number of Viacom shares allotted to 
each class member as a result of the settlement produces a long-term benefit even 
where there is no triggered increase in the exchange ratio to reflect an updated 
market price fluctuation.  
Having established that the benefit received by the increase in stock ratio as 
a result of negotiation was more than illusory, we now turn to the question of 
whether the terms of this settlement should properly include an award of attorneys’ 
fees.  As Fernandes is quick to point out, the timeline in the record shows that the 
Infinity special committee actively advocated an increased exchange ratio at the 
same time that class counsel sought an increase in the exchange ratio in the 
Delaware Action.  The inference he suggests we must draw from this fact is that 
the special committee’s work solely resulted in the benefit to the Infinity 
                                          
 
10 Id. 
 
9
shareholders and that class counsel’s efforts can fairly be considered redundant, 
insignificant or superficial.  This disregards our well-established case law that, in 
the absence of evidence that the litigation did not result directly in a cognizable 
benefit to the class, we recognize a presumption that there is a causal relationship 
between the benefit and a timely filed suit.11  Moreover, the settlement stipulation 
in the case at bar specifically states that Viacom “took into account the desirability 
of satisfactorily addressing the claims asserted in the [Delaware] Action in 
agreeing to increase the consideration to be conveyed to Infinity’s public 
stockholders…and as such the Action was a positive contributing factor in 
Viacom’s decision to increase the Merger consideration.”  Even though this 
suggests that the Delaware Action was only a partial cause of the benefit received 
as a result of the increase, counsel applying for attorneys’ fees do not need to show 
that they were the sole cause of a benefit conferred by settlement in order to have 
earned a fair, adequate and reasonable fee for their work on behalf of the class.12 
Fernandes also appeals the Chancellor’s determination that the named 
plaintiffs adequately represented the class as required by Court of Chancery Rule 
23(a)(4) and implied in Rule 23.1.13  We have held that the Court of Chancery’s 
                                          
 
11 McDonnell Douglas Corp. v. Palley, 310 A.2d 635 (Del. 1973) 
12 In re Resorts Int’l S’holders Litig., Del. Ch., Civ. A. Nos. 9470, 9605, 1990 WL 154154, 
Hartnett, V.C. (October 11, 1990)  
13 See Goodrich v. E.F. Hutton Group, Inc., 681 A.2d at 1039, 1045 (Del. 1996) (Rule 23.1 
includes an implicit requirement that the named plaintiffs in a settlement class have adequately 
represented the class as a whole). 
 
10
determination of the adequacy of a class representative is an “essential component” 
of the settlement approval process.14  The Chancellor clearly addressed this issue 
both from the bench and in his final order approving the settlement, explicitly 
stating that the shareholder class had been adequately represented.  Although 
Fernandes cites deposition testimony taken from class counsel that suggests limited 
contact and substantially passive involvement by certain named plaintiffs, a 
nominal plaintiff’s lack of personal familiarity with an action is not determinative 
of that representative’s adequacy.15  Our case law requires little more than that a 
representative be generally familiar with the litigation.16  Indeed, our legal system 
has long recognized the appropriateness of an attorney taking the dominant role in 
derivative proceedings.17  Therefore, the mere fact that class counsel undertook the 
dominant role in this litigation in no way suggests that the class representatives 
must be found to have inadequately represented the class.  We find that sufficient 
evidence exists in the record to support the Chancellor’s conclusions on the 
adequacy of the named plaintiffs’ representation.   
                                                                                                                                        
 
14 Id. 
15 In re Fuqua Indus., Inc. S’holder Litig., 752 A.2d 126 (Del. Ch. 1999) 
16 Id. 
17 Id.  In fact, as the Chancellor noted in In re Fuqua Indus., allowing private attorneys to bring 
suits on behalf of nominal shareholder is vital to the functioning of our partially privatized 
enforcement mechanism for policing fiduciaries.  Id.  
 
11
The Challenge to the Award of Attorneys’ Fees 
 
Juarez and Pezza-Fiorillo, on the other hand, do not, in this appeal, challenge 
the adequacy of the settlement or an award of fair, adequate and reasonable fees.  
Instead, they claim that the Chancellor erred as a matter of both law and fact by 
failing to assign or allocate a portion of the attorneys’ fees actually awarded to 
counsel who solely participated in the New York litigation.  Appellants first 
contend that the Chancellor based his ruling on an inaccurate interpretation of 
Delaware law.  Juarez and Pezza-Fiorillo argue that the Chancellor ruled as a 
matter of law that only counsel who litigated before him in the Court of Chancery 
were entitled to a portion of the attorneys’ fees, regardless of any benefit that may 
have been conferred by actions pursued in other jurisdictions.  We fully agree that, 
had the Chancellor, in fact, ruled as alleged by Appellants, he would have 
incorrectly stated the law.  Counsel pursuing litigation in any jurisdiction is entitled 
to a share of attorneys’ fees in a settlement of a Delaware action if their efforts 
elsewhere conferred a benefit realized as part of the Delaware settlement.18  
Nevertheless, we do not read the Chancellor’s final order and remarks from the 
bench to be an asserted deviation from or variation on a well-established principle 
of our corporate law.  We find it clear on this record that the basis for his ruling 
                                          
 
18 See, e.g., Sanders v. Wang, Del. Ch., 2001 WL 599901, C.A. No. 16640, Steele, V.C. (May 
29, 2001) (let. op.) (denying attorneys fees to counsel who filed suit in New York on grounds 
that the New York action failed to contribute to the beneficial results of the Delaware litigation). 
 
12
that New York counsel would not share in the fee award was not because they had 
failed to appear in the Delaware Action, but because the New York litigation 
neither promoted or influenced the global settlement in any meaningful way nor 
resulted directly in any benefit to the shareholder class. 
 
We do not assign the same importance as Juarez and Pezza-Fiorillo to the 
Chancellor’s comment from the bench that the only way counsel can be assured of 
a part of the award is to appear before the Court of Chancery and petition to 
become class counsel or co-counsel in Delaware litigation.  Indeed, this is hardly a 
new statement of law.  Instead we read it simply as a common sense statement of a 
readily observable fact, specifically intended for the future reference of counsel to 
whom he was denying fees.  At no point does the Chancellor suggest that this was 
the basis for his decision.  He merely voiced the rather obvious reality that the only 
sure way for any judge to know if, and to what extent, counsel have conferred a 
benefit in shareholder litigation is if they have actively appeared in front of him 
throughout the litigation.  This in no way excludes any proper application for fees, 
including those arising from litigation in other fora, so long as counsel can 
substantiate that their involvement and efforts in other litigation resulted in a 
benefit to the class derived from the settlement. 
 
Juarez and Pezza-Fiorillo allege that the language of the Chancellor’s cover 
letter to his final order supports their claim that the Chancellor misstated the law.  
 
13
The single sentence to which they point in that brief letter states: “If New York 
counsel want to apply for counsel fees in the New York cases, that is up to them.”  
First, we note that the cover letter accompanying an order is hardly the definitive 
place for a party to seek the legal underpinnings of a judge’s ruling, especially 
when that actual ruling can be found in a detailed written order, supplemented by 
extensive comment from the bench on the ruling.  To avoid other misguided 
inferences that some might seek to draw from the Chancellor’s statement, we 
restate that our law allows counsel pursuing litigation in other jurisdictions to seek 
attorneys’ fees in Delaware so long as their efforts elsewhere have conferred a 
benefit that contributed to the settlement of similar suits here.  Here, the suggestion 
that the Chancellor ruled that the New York court was the sole forum in which 
counsel litigating there could seek a fee award is misleading.  We conclude in light 
of the record in this case and the Chancellor’s comments both from the bench and 
in his final order, that he neither based his ruling upon the premise asserted by 
Juarez and Pezza-Fiorillo, nor did he intend that the parties consider it to be the 
law of the case. 
This Court cannot state with any assurance what prompted the Chancellor’s 
almost tangential comment in that letter.  However, we can speculate that it was in 
part a result of the frustration that accompanies chimeric claims for awards of 
attorneys’ fees.  As we discuss infra, counsel for Juarez and Pezza-Fiorillo offered 
 
14
no substantial evidence to support their claim that they conferred a benefit on the 
class by positively affecting the settlement in Delaware which could entitle them to 
an allocation of the fee award.  Despite invitations to join the Delaware litigation 
and represent the interests of their clients before the Court of Chancery, counsel 
chose not to intervene until the time arose to allocate a fee.  While our courts 
welcome the intervention of any party, including attorneys with valid claims for 
attorneys’ fees, we can certainly understand the Chancellor’s impatience with 
hollow claims, especially in light of the tendency for those claims to consume our 
limited judicial resources.   
Since we find it clear that the Chancellor applied the correct legal standard, 
this Court must now turn to the secondary question of whether the Chancellor 
abused his discretion by determining that counsel for the New York litigants were 
not entitled to a share of the fee award.  Juarez and Pezza-Fiorillo’s claim that their 
attorneys are entitled to a portion of the fee award requires an analysis of the 
impact that the New York litigation had on the settlement of the Delaware Action.  
The determination of any award is a matter within the sound judicial discretion of 
the Court of Chancery.19  A careful study of the record indicates that the 
Chancellor’s decision not to award fees to counsel for the New York litigants is 
                                          
 
19 Johnston v. Arbitrium (Cayman Islands) Handels AG, 720 A.2d 542, 547 (Del. 1998). 
 
15
fully supported by the evidence that was before him and that, therefore, he did not 
abuse his discretion. 
We have articulated several factors that the Court of Chancery must consider 
in determining any award of attorneys’ fees.  They include: (1) the results 
accomplished for the benefit of the shareholders; (2) the efforts of counsel and the 
time spent in connection with the case; (3) the contingent nature of the fee; (4) the 
difficulty of the litigation; and (5) the standing and ability of counsel involved.20  
All of the Sugarland factors are contingent upon the benefit at issue being causally 
related to the efforts of counsel in pursuing their action. 
A number of factors in the record support the Chancellor’s conclusion that 
counsel for the New York litigants failed to confer a benefit upon the class that 
would entitle them to an award of attorneys’ fees.  Because Juarez and Pezza-
Fiorillo failed to participate in the Delaware litigation in any meaningful way, any 
evidence of a benefit must result from the impact of the New York litigation itself.  
When determining the amount and distribution of an award, the mere pendency of 
litigation alone does not establish the causal connection between counsel’s efforts 
and changes in the merger terms that benefit the shareholder class.  In this appeal, 
the record is devoid of evidence that the New York litigation in any way 
influenced the settlement approved by the Court of Chancery.   
                                          
 
20 Sugarland Industries Inc. v. Thomas, 420 A.2d 142, 149 (Del. 1980). 
 
16
Juarez and Pezza-Fiorillo conceded at the settlement hearing that their 
counsel did not take part in any settlement negotiations with the special committee 
or the directors of the defendant corporations as part of their prosecution of their 
claims.  More importantly, the record belies Appellants claims that they actively 
pursued the litigation in the New York Supreme Court.  The mere fact that Juarez 
and Pezza-Fiorillo served document requests does not necessarily demonstrate “a 
seriousness of purpose and an intent to litigate hard” that would move the 
defendants to settlement, as Appellants contend; nor does their briefing and 
argument of a motion for expedited discovery.  When it denied that motion, the 
New York Supreme Court made clear that it considered the proper forum for 
resolving this dispute to be the Court of Chancery.  This is consistent with our 
reading of New York case law, which favors the resolution of corporate 
governance disputes in the state of incorporation, under the “internal affairs 
doctrine.”21  Although the record does not indicate that there was a formal stay in 
the New York proceedings, it is clear not only that the case was not actively 
prosecuted during the existence of the Delaware litigation, but that it presented a 
threat so insubstantial that it is unlikely to have had meaningful influence on the 
decision of Viacom and Infinity to settle the Delaware Action.  We find that the 
                                          
 
21 Hart v. GMC citing Mantei v. Creole Petroleum Corp., 402 N.Y.S.2d 822 (N.Y. App. Div. 
1978). 
 
17
Chancellor did not abuse his discretion when he denied Juarez and Pezza-Fiorillo’s 
counsel a percentage of the attorneys’ fees award under these circumstances.  
The judgment of the Court of Chancery is affirmed.