COURT OF CHANCERY

OF THE

SAM GLASSCOCK III

VICE CHANCELLOR

STATE OF DELAWARE COURT OF CHANCERY COURTHOUSE

34 THE CIRCLE

GEORGETOWN, DELAWARE 19947

Date Submitted: May 31, 2016

Date Decided: August 4, 2016

Blake A. Bennett, Esquire

Cooch and Taylor, P.A.

The Brandywine Building

1000 West Street, 10th Floor

Wilmington, DE 19801

Seth D. Rigrodsky, Esquire

Brian D. Long, Esquire

Gina M. Serra, Esquire

Jeremy J. Riley, Esquire

Rigrodsky & Long, P.A.

2 Righter Parkway, Suite 120

Wilmington, DE 19803

A. Thompson Bayliss, Esquire

Sarah E. Hickie, Esquire

Abrams & Bayliss LLP

20 Montchanin Road, Suite 200

Wilmington, DE 19807

Re: In re Xoom Corporation Stockholder Litigation, 

Consolidated Civil Action No. 11263-VCG

Dear Counsel:

This matter is before me on Plaintiffs’ application for attorneys’ fees, in what 

is known as a mootness proceeding. Specifically, in connection with a cash-out 

merger of their corporation, purported representatives of a stockholder class alleged

insufficient and misleading disclosures in addition to price and process deficiencies 

in connection with the merger; the corporation made some of the disclosures 

demanded, in response to the litigation, thereby mooting those claims; and 

subsequently, the Plaintiffs voluntarily dismissed the action with respect to the 
2

individual plaintiffs only. The Plaintiffs now seek an award of attorneys’ fees for 

the benefit worked on all stockholders, consistent with this Court’s recommended 

procedure under In re Trulia, Inc. Stockholder Litigation.

1

 

I. BACKGROUND

The underlying action concerns the merger, announced July 1, 2015, between

PayPal Holdings, Inc. (“PayPal”) and Xoom Corporation (“Xoom” or the 

“Company”), through which PayPal acquired Xoom for $25.00 per share (the 

“Merger”). The Merger closed on November 12, 2015, after receiving nearunanimous stockholder approval.2

The Plaintiffs filed their initial individual complaints in the wake of the 

announcement of the Merger, between July 8, 2015 and July 15, 2015, alleging

unfair price and process claims against the “Individual Defendants,” directors of 

Xoom, and aiding and abetting claims against the merging parties. The Company 

filed a proxy on Schedule 14A (the “Preliminary Proxy”) with the Securities and 

Exchange Commission (“SEC”) on July 21, 2015. Eight days later, on July 29, 2015, 

the Plaintiffs filed their Verified Consolidated Class Action Complaint (the 

“Complaint”), adding the allegation that the Individual Defendants breached their 

fiduciary duties by filing a false and materially misleading Preliminary Proxy to 

 

1

129 A.3d 884 (Del. Ch. 2016).

2

See Trans. Aff. of Sarah E. Hickie, Esq., Ex. A (September 2015 Form 8-K), at 2.
3

induce Xoom stockholders to support the unfair deal. Depending on how the 

deficiencies recited are counted, the Plaintiffs alleged thirty-eight mal-disclosures 

requiring relief.3

The Plaintiffs moved to expedite on August 5, 2015. Two days later, the 

Company filed a definitive proxy on Schedule 14A (the “Definitive Proxy”) with the 

SEC, supplementing the disclosures contained in the Preliminary Proxy (the 

“Supplemental Disclosures”). I heard argument on Plaintiffs’ Motion to Expedite 

on August 14, 2015—following utterance of the Definitive Proxy—after which I 

denied expedition. On November 19, 2015, the Plaintiffs voluntarily dismissed the 

action with prejudice as to the Plaintiffs only, reserving the right to seek a mootness 

fee. The Plaintiffs filed an application for fees (the “Fee Application”) on January 

19, 2016, and after full briefing, I heard argument on May 10, 2016. I requested 

additional information, and the matter was submitted for decision thereafter.

The Plaintiffs seek $275,000 in attorneys’ fees, noting that their efforts in 

bringing this litigation caused Xoom to make four Supplemental Disclosures in its 

Definitive Proxy, thereby mooting four disclosure claims asserted in Plaintiffs’

Complaint. The Supplemental Disclosures pertain to (1) the amount of fees received 

by Qatalyst—the Company’s financial advisor—within the past two years from 

 

3

See Am. Compl. ¶¶ 115–18.
4

eBay Inc. (“eBay”), former owner of PayPal;

4

(2) the value to the Company of any 

potential recovery for a $30 million loss due to fraud (the “BEC Fraud”); (3) certain 

elements of the financial analyses performed by Qatalyst; and (4) details of 

conversations regarding post-closing employment between PayPal and members of 

the Company’s board of directors (the “Board”) and management. I describe each 

of the Supplemental Disclosures below.

1. Qatalyst Fees

The Preliminary Proxy provides:

Qatalyst Partners provides investment banking and other services to a 

wide range of corporations and individuals, domestically and offshore, 

from which conflicting interests or duties may arise. In the ordinary 

course of these activities, affiliates of Qatalyst Partners may at any time 

hold long or short positions, and may trade or otherwise effect 

transactions in debt or equity securities or loans of Xoom, Parent, 

Holdings or eBay, or certain of their respective affiliates. During the 

two year period prior to the date of Qatalyst Partners' opinion, no 

material relationship existed between Qatalyst Partners or any of its 

affiliates and Xoom, Parent, Holdings or eBay pursuant to which 

compensation was received by Qatalyst Partners or its affiliates other 

than Qatalyst acting as financial advisor to eBay in connection with 

(i) its acquisition of Braintree, Inc. in December 2013 and (ii) its 

proposed sale of eBay Enterprise; however, Qatalyst Partners and/or its 

affiliates may in the future provide investment banking and other 

financial services to Xoom, Parent, Holdings or eBay and any of their 

respective affiliates for which it would expect to receive 

compensation.5

 

4

eBay was PayPal’s corporate parent for thirteen years until Summer 2015, when eBay spun off 

PayPal almost simultaneously with PayPal’s acquisition of Xoom.

5

See Trans. Aff. of Kent Bronson, Esq., Ex. D (“Preliminary Proxy”), at 47–48.
5

The Plaintiffs argue that the Preliminary Proxy improperly failed to disclose the 

amount of compensation Qatalyst received from Xoom, PayPal, and eBay in 

connection with services provided over the last several years. The Definitive Proxy 

added the following Supplemental Disclosure: “During the two year period ended

August 6, 2015, Qatalyst Partners received compensation for services provided to 

eBay of approximately $7 million and will receive a customary fee upon the closing 

of the proposed sale of eBay Enterprise.”6 The Plaintiffs argue that this information 

is relevant and important to stockholders because it informed them of the magnitude 

of the potential conflict of one of the Company’s financial advisors, and that the 

Board was at least aware of, and had considered, the potential conflict.

2. The BEC Fraud

The Company disclosed in its Preliminary Proxy that “[o]n January 5, 2015, 

Xoom announced that it had been a victim of a business e-mail compromise that was 

carried out against Xoom in late December 2014, as more fully disclosed in Xoom’s

Form 8-K filed with the SEC on January 5, 2015.”7 The Plaintiffs argue that the 

Preliminary Proxy was improperly “silent as to whether, and the extent to which, the 

Board considered the possibility of recouping the millions lost in the BEC Fraud,” 

and that “Xoom stockholders are entitled to know both the value attributed to any 

 

6

See Trans. Aff. of Kent Bronson, Esq., Ex. F (“Definitive Proxy”), at 48.

7 Preliminary Proxy, at 29.
6

potential recovery as well as whether such recovery was factored into the 

Acquisition price.”8 The Plaintiffs also contend that this information is significant 

because it bears on the Board’s “stance, willingness and abilities to prevent and 

recover losses incurred as a result of a threat.”

9

 The Definitive Proxy added the 

following Supplemental Disclosure: “As disclosed in our 2014 Annual Report, 

Xoom recorded a loss of $30.8 million in the fourth quarter of 2014 in connection 

with the business e-mail compromise. As our chief executive officer indicated on 

our February 10, 2015 earnings call, the Company does not expect any material 

recovery.”

10

 

3. Multiples in Qatalyst Financial Analysis

The Preliminary Proxy did not disclose the selected multiples used by Qatalyst 

in its Illustrative Selected Companies and Illustrative Selected Transactions analysis, 

providing only the median numbers. The Supplemental Disclosure provided the 

comparable companies’ individual multiples. The Plaintiffs argue that this 

disclosure “was valuable and material because multiples are a crucial element of 

these market-based analyses, as these analyses are fundamentally based on 

comparison and relative valuation.”11

 

8 Pl’s Mot. to Expedite (“MTE”) 13.

9 Pl’s Opening Br. 15–16.

10 Definitive Proxy, at 29.

11 MTE, at 22.
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4. Management Employment

The Preliminary Proxy was silent as to the details of discussions with Xoom

management about the retention of certain employees. The Supplemental Disclosure

disclosed that such communications had taken place, the extent of those 

communications, and the intention to retain Xoom’s CEO post-Merger, but that no 

specific employment terms had been discussed. The Plaintiffs contend that these 

disclosures are relevant and material because they “speak to whether there are 

individual interests held by management and/or the Board in play which could 

potentially override the interests of shareholders.”12

* * *

The Defendants contend that Plaintiffs’ Fee Application should be denied in 

its entirety because the Supplemental Disclosures did not significantly alter the total 

mix of information, and therefore were immaterial; in the alternative, they argue that, 

should the Court determine some fee is appropriate, the Sugarland13 factors cannot 

support an award close to the $275,000 that Plaintiffs seek.

II. ANALYSIS

This Court follows the American Rule, under which parties are responsible 

for their own fees and costs.14 Exceptions exist. The theory under which a mootness 

 

12 Pl’s Opening Br. 16.

13 Sugarland Indus., Inc. v. Thomas, 420 A.2d 142 (Del. 1980).

14 See, e.g., Horsey v. Horsey, 2016 WL 1274021, at *1 (Del. Ch. Mar. 21, 2016).
8

fee is awarded is a subspecies of the common-benefit doctrine, which recognizes 

that, where a litigation provides a benefit to a class or group, costs necessary to the 

generation of that benefit should also be shared by the group or its successor.15 Here, 

the Plaintiffs generated four additional disclosures, which the Defendants concede 

resulted from the litigation. The question is whether those disclosures added value 

to the stockholders, and, if so, how much of Plaintiffs’ costs should thus be borne by 

the Defendants, in equity.

I first address whether the Supplemental Disclosures must have been material 

to stockholders to support an award of fees. This Court in Trulia made clear that, to 

support a settlement and class-wide release based on disclosures only, the materiality 

of the disclosures to stockholders must be plain.16 The mootness context, in my 

view, supports a different analysis. That is because, here, the individual Plaintiffs 

have surrendered only their own interests; the dismissal is to them only, not to the 

stockholder class. Thus, with respect to the class, there is no “give” to balance 

against the disclosure “get”; the benefit is the “get” of the disclosures, with no waiver 

 

15 Fees may be awarded “where litigation is rendered moot through resulting action by the 

defendants.” Waterside Partners v. C. Brewer & Co., Ltd., 739 A.2d 768, 770 (Del. 1999). A 

party is entitled to fees where “the suit was meritorious when filed; action producing benefit to the 

corporation was taken by the defendants before a judicial resolution was achieved; and the 

resulting corporate benefit was causally related to the lawsuit.” Allied Artists Pictures Corp. v. 

Baron, 413 A.2d 876, 878 (Del. 1980).

16 Trulia, 129 A.3d at 898 (“[P]ractitioners should expect that disclosure settlements are likely to 

be met with continued disfavor in the future unless the supplemental disclosures address a plainly 

material misrepresentation or omission . . . .”) (emphasis added).
9

of class rights to be set against that benefit.

17

 Therefore, a fee can be awarded if the 

disclosure provides some benefit to stockholders, whether or not material to the vote. 

In other words, a helpful disclosure may support a fee award in this context.

In examining whether and to what extent a fee is appropriate here, I am guided 

by the factors our Supreme Court enumerated in Sugarland Industries, Inc. v. 

Thomas.

18 Most important here is the benefit worked; any disclosure benefit is, of 

course, unquantifiable, and the fee awarded therefore is unavoidably arbitrary to 

some degree. 

I note first that the Supplemental Disclosure regarding the conflict of the 

financial advisor, although providing some information as to magnitude lacking in 

the initial disclosure, was only mildly helpful to stockholders. While banker 

conflicts can be central to the primary consideration on which the stockholders must 

vote—the sufficiency of the consideration—here, stockholders had already been told 

that the advisor had done work for the acquirer and were aware that a second advisor

had been retained. In this context, the amount of fees received in the two years 

before the Merger from the acquirer’s parent—$7 million—adds some detail that is 

mildly helpful to stockholders. Next, with respect to the information provided 

 

17 Of course, the costs of litigation borne by corporations theoretically affects deal prices generally.

18 The Sugarland factors are: “(1) the benefit achieved in the action; (2) the contingent nature of 

the undertaking; (3) the difficulty of the litigation and the efforts of counsel; (4) the quality of the 

work performed; and (5) the standing and ability of counsel.” Franklin Balance Sheet Inv. Fund 

v. Crowley, 2007 WL 2495018, at *12 (Del. Ch. Aug. 30, 2007).
10

regarding the lack of value the Company ascribed to potential recovery in regard to 

the BEC Fraud, this is information I consider somewhat valuable at best; it clarified 

that an asset of the Company was (in management’s view) worthless, but did not 

provide information contrary to that view or otherwise call the Merger consideration 

into question. Similarly, I find the Supplemental Disclosure that provided

stockholders with information about management discussions of future employment 

with the acquirer only somewhat of value. In other circumstances, this type of 

disclosure might be important to stockholders evaluating a sale, but here, the 

discussions revealed were at a general level only, and, importantly in my view, this 

was a sale where PayPal was the only bidder; in other words, this was not a case 

where one bidder might receive an advantage over another due to management 

concerns about future employment. Finally, I find that the supplemental disclosure

of additional financial metrics concerning Qatalyst’s comparable-companies 

analysis are of minimal benefit to a stockholder considering this Merger.

Of the four disclosures that resulted from the litigation, those involving the 

banker conflict and post-Merger employment discussions are the most valuable. 

None of the four is particularly strong. Cumulatively, I find the Supplemental 

Disclosures represent a modest benefit to the stockholders.

The Plaintiffs seek a fee of $275,000 for having produced the benefits 

described above. They affirm that attorney time invested, another Sugarland factor, 
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is 63 hours in regard to the Supplemental Disclosures achieved, implying a rate of 

something over $4,000/hour, which they characterize as reasonable given the 

contingent nature of the representation. I take this representation of time invested 

as made in good faith, but also recognize the difficulty in segregating out time 

productively spent obtaining disclosures from time spent, unfruitfully, on the many 

unsuccessful allegations brought by the Plaintiffs. The Defendants, for their part, 

advocate for no fee, in light of what they characterize as the non-materiality of the 

Supplemental Disclosures. I have found above that the standard is benefit to the 

class, not materiality, and I have found some benefit here.

In the merger context, under our model, this Court relies on the plaintiffs’ bar, 

as representatives of stockholders, to vindicate those stockholders’ rights to a fair

transaction and an informed vote. Given the fast-moving process typical in the 

merger context, it is common that suit is filed at a preliminary phase of the 

proceedings. The decision of plaintiffs’ counsel, proceeding on a contingent-fee 

basis, to pursue such litigation involves significant risk; any recovery to counsel is 

contingent on producing value for the stockholder class. Because no recovery is 

available absent value so produced, when counsel have in fact worked a benefit on 

the class, this Court must award a fee sufficient to encourage wholesome levels of 

litigation.
12

The position of the Plaintiffs’ counsel is reminiscent of a rodeo bull-rider. The 

cowboy gets his bull by the luck of the draw. A “good” bull is aggressive and 

vigorous; a “bad” bull is the opposite. A successful ride of a good bull results in a 

high score. It takes a good rider to ride a good bull, but not even a great rider can 

wring a high score from a bad bull. Not even great counsel can wring significant 

stockholder value from litigation over an essentially loyal and careful sales process.

Where litigation develops significant stockholder value, this Court will set 

fees accordingly. Here, I find that the Supplemental Disclosures worked a modest 

benefit on the stockholders, and that in light of that benefit and the other Sugarland

factors, and in light of the stage of the litigation at which settlement occurred, that 

an award of fees and costs of $50,000 is appropriate here. 

To the extent the foregoing requires an Order to take effect, IT IS SO 

ORDERED.

Sincerely,

/s/ Sam Glasscock III

Sam Glasscock III