UNITED STATES DISTRICT COURT 

DISTRICT OF NEW JERSEY 

IN RE: 

MEDCO/EXPRESS SCRIPTS MERGER 

LITIGATION Civil Action No. 

11-4211(DMC)(MF) 

________________________________________________________________ 

PLAINTIFF’S MEMORANDUM OF LAW IN SUPPORT OF ITS 

MOTION FOR AN AWARD OF ATTORNEYS’ FEES AND EXPENSES 

________________________________________________________________

Lindsey H. Taylor 

Donald A. Ecklund 

Zachary S. Bower 

CARELLA, BYRNE, CECCHI 

 OLSTEIN, BRODY & AGNELLO 

5 Becker Farm Road 

Roseland, New Jersey 07068 

(973) 994-1700 

Jay W. Eisenhofer 

Michael J. Barry 

Caitlin Moyna 

GRANT & EISENHOFER P.A. 

123 Justison Street 

Wilmington, Delaware 19801 

(302) 622-7000 

Gerald Silk 

Mark Lebovitch 

Brett M. Middleton 

Jeremy Friedman 

BERNSTEIN LITOWITZ BERGER 

 & GROSSMANN LLP 

1285 Avenue of the Americas 

New York, NY 10019 

(212) 554-1400 

Attorneys for Plaintiff

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TABLE OF CONTENTS

Page 

TABLE OF AUTHORITIES ................................................................................... iii 

I. PRELIMINARY STATEMENT .....................................................................1

II. PROCEDURAL HISTORY ............................................................................3 

III. FACTUAL BACKGROUND..........................................................................8 

A. The Board “Threw In The Towel” And Hastily Entered The Proposed Transaction.....................................................................9

IV. ARGUMENT.................................................................................................11

A. A Fee Is Warranted Under The Common Benefit 

Doctrine ...............................................................................................12

1. A Common Benefit Was Achieved For A Readily Ascertainable Class...................................................................13

a) Termination Fee..............................................................16

b) Matching Rights..............................................................17

c) Additional Disclosures ...................................................18

d) Postponement Of Shareholder Vote ...............................22

2. The Additional Factors For The Applicability Of The Common Benefit Doctrine Are Satisfied ..........................23

B. The Court Should Use The Percentage-Of-Recovery Method To Assess The Reasonableness Of The Fee ..........................24

C. Plaintiff Seeks A Reasonable Fee Under The Percentage- Of-Recovery Doctrine .........................................................................28

1. Class Counsel Seeks 11.8% Of The Common 

Benefit.......................................................................................28

2. 11.8% Is A Reasonable Percentage Of The Benefit To Award To Class Counsel.....................................................30

a) Complexity Of Litigation ...............................................31

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b) Contingent Nature Of Litigation ....................................34

c) Stage Of Proceedings .....................................................35

d) Competency Of Counsel.................................................37

e) Precedent Supports The Fee Here ..................................37

f) Cross-Check With Lodestar Method..............................38

V. CONCLUSION..............................................................................................40 

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TABLE OF AUTHORITIES

 Page(s) 

CASES

Briggs v. Hartford Fin. Servs. Group, Inc., 

No. 7-cv-5190, 2009 WL 2370061 (E.D. Pa. July 31, 2009).................31, 35, 37 

In re Cendant Deriv. Litig., 

232 F. Supp. 2d 327 (D.N.J. 2002).....................................................................37 

In re Compellent Techs., Inc. S’holder Litig., 

No. 6084, 2011 WL 6382523 (Del. Ch. Dec. 9, 2011)............................... passim

In re Computron Software, Inc. Sec. Litig., 

6 F. Supp. 2d 313 (D.N.J. 1998)...................................................................26, 35 

Cullen v. Whitman Med. Corp., 

197 F.R.D. 136 (E.D. Pa. 2000)..........................................................................37 

Dewey v. Volkswagen of America, 

728 F. Supp. 2d 546 (D.N.J. 2010).........................................................25, 29, 39 

In re Diet Drugs Prods. Liab., 

582 F.3d 524 (3d Cir. 2009) .........................................................................12, 39 

Eisenberg v. Chicago Milwaukee Corp., 

No. 9374, 1988 WL 112910 (Del. Ch. Oct. 25, 1988).......................................18 

First State Orthopaedics v. Concentra, Inc., 

534 F. Supp. 2d 500 (E.D. Pa. 2007)............................................................32, 38 

In re Genta Sec. Litig., 

No. 04-cv-2123, 2008 WL 2229843 (D.N.J. May 28, 2008) .............................25 

Gunter v. Ridgewood Energy Corp, 

223 F.2d 199 (3d Cir. 2000) ...............................................................................35 

In re Ins. Brokerage Antitrust Litig., 

579 F.3d 241 (3d Cir. 2009) ...............................................................................39 

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In re Ins. Brokerage Antitrust Litig., 

MDL No. 1663, No. 04-cv-5184, 2009 WL 411856 

 (D.N.J. Feb. 17, 2009)...................................................................................12, 24 

Joy Mfg. Corp. v. Pullman-Peabody Co., 

742 F. Supp. 911 (W.D. Pa. 1990)......................................................................39 

Kysor Indus. Corp. v. Margauz, Inc., 

674 A.2d 889 (Del. Super. Ct. 1996)..................................................................32 

Larson v. Sprint Nextel Corp., 

No. 07-cv-5325, 2010 WL 234934 (D.N.J. Jan. 15, 2010) ................................25 

In re LG/Zenith Rear Projection Television Class Litig., 

No. 06-cv-5609, 2009 WL 455513 (D.N.J. Feb. 18, 2009).......................... 25-26 

In re Mercedes-Benz Tele Aid Contract Litig., 

MDL No. 1914, 07-cv-2720, 2011 WL 4020862 (D.N.J. Sept. 9, 2011) ..........25 

Merola v. Atlantic Richfield Co., 

515 F.2d 165 (3d Cir. 1975) ...............................................................................13 

In re NCS Healthcare S’holders Litig., 

No. 19786, 2003 WL 21384633 (Del. Ch. May 28, 2003).................................40 

Phelps Dodge Corp. v. Cyprus Amaz Minerals Co., 

No. 17398, 1999 WL 1054255 (Del. Ch. Sept. 27, 1999)..................................33 

Polonski v. Trump Taj Mahal Assocs., 

137 F.3d 139 (3d Cir. 1998) ...............................................................................13 

In re Rite Aid Corp. Sec. Litig., 

146 F. Supp. 2d 706 (E.D. Pa. 2001)..................................................................38 

In re Rite Aid Corp. Sec. Litig., 

396 F.3d 294 (3d Cir. 2005) ...................................................................24, 25, 38 

In re Safety Components Sec. Litig., 

166 F. Supp. 2d 72 (D.N.J. 2001).................................................................37, 38 

In re Schering-Plough/Merck Merger Litig., 

No. 09-cv-1099, 2010 WL 1257722 (D.N.J. Mar. 26, 2010)...........13, 22, 23, 25 

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Serrano v. Sterling Testing Sys., Inc., 

711 F. Supp. 2d 402 (E.D. Pa. 2010)............................................................24, 25 

In re Smurfit-Stone Container Corp. S’holder Litig., 

No. 6164-VCP, 2011 WL 2028076 (Del. Ch. May 20, revised May 24, 

2011) ...................................................................................................................34 

State of Wisc. Inv. Bd. v. Bartlett, 

No. 17727, 2002 WL 568417 (Del. Ch. Apr. 9, 2002).................................14, 15 

Tandycrafts, Inc. v. Initio Partners, 

562 A.2d 1162 (Del. 1989) ...........................................................................14, 18 

In re Toys “R” Us Inc. S’holder Litig, 

877 A.2d 975 (Del. Ch. 2005) ............................................................................33 

In re Elec. Data Sys. Class Action Litig., No. 366-01078-2008 

 (Tex. Dist. Ct. Dec. 23, 2009).............................................................................19 

In re Warfarin Sodium Antitrust Litig., 

212 F.R.D. 231 (D. Del. 2002) .........................................................32, 34, 35, 38 

Weber v. Gov’t Emps.Ins. Co., 

262 F.R.D. 431 (D.N.J. 2009).............................................................................39 

STATUTES

28 U.S.C. § 1292(b) ...................................................................................................6 

OTHER AUTHORITIES

Manual for Complex Litigation 3d, § 24.121, at 191 ..............................................34 

F.R.C.P. 23.................................................................................................................1 

F.R.C.P. 54(d)(2)........................................................................................................1 

F.R.C.P. 23(h) ..........................................................................................................12 

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Pursuant to Federal Rules of Civil Procedure 23 and 54(d)(2), Plaintiff 

Louisiana Municipal Police Employees’ Retirement System (“LAMPERS” or 

“Plaintiff”) on behalf of itself and all other similarly situated public shareholders 

(the “Class”) of Medco Health Solutions, Inc. (“Medco” or the “Company”), 

respectfully submits this memorandum of points and authorities in support of its 

motion for attorneys’ fees and expenses. 

I. PRELIMINARY STATEMENT

The proposed settlement of this action (the “Action”) provides valuable 

benefits to Medco’s shareholders in conjunction with the acquisition of Medco by 

Express Scripts, Inc. (“Express Scripts”) (the “Acquisition”). Specifically, 

Defendants agreed to a settlement which provided the Class with significant and 

material changes to the deal terms, including an unprecedented $300 million 

reduction in the termination fee, critical amendments to the matching rights, the 

inclusion of additional disclosures in the final proxy statement, and postponement 

of the shareholder vote to approve the merger (the “Settlement”). That Plaintiff 

was able to achieve such a favorable result speaks both to its commitment to 

advancing shareholder rights and its attorneys’ effort and skill in litigating this 

case. Plaintiff seeks an award of fees of $18 million, plus out of pocket expenses, 

an amount Plaintiff believes is commensurate with the benefits achieved through 

the prosecution of this litigation (the “Action”) and the resulting Settlement. 

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The proposed Settlement, which would resolve all related litigation pending 

in the three different courts, was the product of zealous prosecution that targeted 

the illegal deal protections in the proposed Acquisition, ultimately forcing Express 

Scripts and Medco to rewrite the merger terms to bring them into compliance with 

applicable Delaware law. As detailed in the report of Professor Guhan 

Subramanian (attached as Exhibit C to the accompanying Declaration of Lindsey 

Taylor (“Taylor Dec.”)), the material changes to the deal terms required under the 

Settlement, including an unprecedented $300 million reduction in the termination 

fee and the elimination of unlimited matching rights, provided a quantifiable 

benefit to Medco’s shareholders of between $153 million and $374.8 million. The 

Settlement also provided additional material disclosures and delayed a vote on the 

proposed Acquisition to give potential alternative suitors an opportunity to present 

competing bids, and Medco’s shareholders an opportunity to consider the 

additional disclosures prior to being required to vote on the proposed Acquisition. 

Based on these substantial benefits conferred upon Medco’s shareholders, 

Plaintiff seeks a fee award of $18 million, plus out of pocket expenses in the 

amount of $99,847.67. Plaintiff’s requested fee award for its counsel is inherently 

reasonable. The requested fee amount represents a reasonable award based upon 

the benefits to the Class, and aligns the interests of Class Counsel with that of the 

Class as a whole. 

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II. PROCEDURAL HISTORY

This case was anything but a typical, cookie-cutter deal litigation where a 

plaintiff settles early during the case for additional disclosures. Instead, Plaintiff’s 

Counsel fought the Defendants at every turn until they were in a position to 

negotiate a meaningful settlement, providing substantial benefits to Medco’s 

shareholders by making the Company more attractive to a potential topping bidder. 

On July 21, 2011, Medco announced that the Medco Board agreed to sell the 

Company to Express Scripts for roughly $71.36 per Medco share. The purchase 

price consisted of $28.80 in cash and 0.81 Express Scripts shares for each Medco 

share (the “Proposed Transaction”). At that time, the Proposed Transaction valued 

Medco at approximately $29 billion, and was set to close by April 20, 2012, unless 

that deadline was extended by mutual consent. See Taylor Dec. Ex. CC, Merger 

Agreement, §7.1(b)(ii). The Merger Agreement contained a “no-shop” clause 

precluding Medco from soliciting alternative bids (§ 5.4), gave Express Scripts 

unlimited rights to match any other competitive bid that may emerge (§5.4(b)), and 

included a provision requiring Medco to pay Express Scripts up to $950 million in 

order to terminate the agreement in favor of any superior competing bid (§ 7.3(e)). 

Medco’s announcement, and particularly the onerous deal protections 

erected in the Merger Agreement, caused immediate outrage by Medco’s 

shareholders. Between July 22, 2011 and August 8, 2011, ten other cases were 

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filed by other Medco shareholders in the Delaware Court of Chancery 

(collectively, the consolidated “Delaware Action”)1

 and five cases were filed in the 

New Jersey Superior Court (the “New Jersey State Action”).2

 By Order dated 

August 17, 2011, this Court consolidated the seven related actions pending before 

it, and appointed Carella, Byrne, Cecchi, Olstein, Brody & Agnello, Grant & 

Eisenhofer P.A., and Bernstein Litowitz Berger & Grossmann LLP as Interim Lead 

Counsel for Plaintiffs (“Class Counsel”). In its Amended Complaint, Plaintiff 

alleged that the Medco Board breached their fiduciary duties owed to shareholders 

under Delaware law because the consideration offered was inadequate and certain 

deal protection provisions in the Merger Agreement, particularly a breakup fee of 

nearly $1 billion, violated Delaware law. See Am. Compl., D.I. 10. 

From the inception of the litigation before this Court, Defendants actively 

 

1

 Chevedden v. Snow, C.A. No. 6694-CS (Del. Ch.); Colanino v. Medco Health 

Solutions, Inc., C.A. No. 6708-CS (Del. Ch.); Knisley v. Snow, C.A. No. 6710-CS 

(Del. Ch.); Heimowitz v. Medco Health Solutions, Inc., C.A. No. 6711-CS (Del. 

Ch.); Wabner v. Medco Health Solutions, Inc., C.A. No. 6716-CS (Del. Ch.); 

U.F.C.W. Local 1996 & participating Emps. Pension Fund v. Medco Health 

Solutions, Inc., C.A. No. 6720-CS (Del. Ch.); Westchester Putnam Counties Heavy 

& Highway Laborers Local 60 Benefit Funds v. Medco Health Solutions, Inc., 

C.A. No. 6723-CS (Del. Ch.); Labourers’ Pension Fund of Cent. & E. Can. v. 

Snow, C.A. No. 6725-CS (Del. Ch.); Johnson v. Medco Health Solutions, Inc., 

C.A. No 6726-CS (Del. Ch.); and Schoenwald. v. Medco Health Solutions, Inc., 

C.A. No. 6727-CS (Del. Ch.). 

2

 Lasker v. Medco Health Solutions, Inc., No. C-246-11 (N.J. Super. Ct.); Levinson 

v. Snow, No. C-000215-11 (N.J. Super. Ct.); Kramer v. Snow, No. C-217-11 (N.J. 

Super. Ct.); Snider v. Medco Health Solutions, Inc., No. C-220-11 (N.J. Super. 

Ct.); and Prongay v. Medco Health Solutions, Inc., No. C-232-11 (N.J. Super. Ct.).

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sought to impede the prosecution of the case in order to prevent this Court from 

considering the merits of Plaintiff’s claims. On August 1, 2011, Plaintiff submitted 

an application for expedited discovery. Defendants opposed that request and 

instead moved to dismiss Plaintiff’s complaint for lack of subject matter 

jurisdiction on August 8, 2011. After consolidation, on August 18, 2011, Plaintiff 

moved for class certification. Defendants opposed that motion, and opposed any 

effort to expedite briefing on Plaintiff’s motion. 

Meanwhile, several of the plaintiffs in the Delaware Action filed competing 

motions for consolidation, class certification, and appointment of lead counsel. 

Despite opposing similar motions filed in this Court, Defendants consented to 

consolidation and the certification of a class in the Delaware Action. Defendants 

hand-selected a preferred plaintiff in that forum to engage in a brief deposition on 

class certification issues, and consented to the appointment of that shareholder as 

lead plaintiff in Delaware. See Express Scripts’ Response to Plaintiff U.F.C.W. 

Local 1776 & Participating Employers Pension Fund’s Motion for Class 

Certification, filed in Chevedden v. Snow, et al., C.A. No. 6694-CS (Del. Ch.), and 

each of the Delaware Actions. 

On August 23, 2011, the Delaware Court of Chancery entered an order 

certifying a non-opt out class of all record holders and beneficial owners of 

common stock of Medco together with their successors and assigns, during the 

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period commencing on the date on which the Medco Board approved the proposed 

acquisition of all of Medco’s shares by Express Scripts and ending at the effective 

time of the closing of the proposed transaction, and appointed Co-Lead Counsel 

and Liaison Counsel for the class. In light of this Order, on August 26, 2011, the 

New Jersey Superior Court granted a Consent Order, staying the New Jersey State 

Action in favor of the Delaware Action and ordering that plaintiffs in the New 

Jersey State Action would be bound by the Delaware Action. 

On August 8, 2011, Defendants moved to stay this Action in favor of the 

Delaware Action that they claimed (based on their decision to consent to class 

certification in Delaware) had advanced further than this Action. By way of 

Opinion dated September 19, 2011, this Court denied Defendants’ motion. Not 

content with this Court’s jurisdictional ruling, on September 23, 2011, Defendants 

moved to certify this Court’s order denying their motion to dismiss for appeal 

pursuant to 28 U.S.C. § 1292(b), and for a stay pending appeal. Plaintiff filed 

papers in opposition to this appeal. Meanwhile, on October 14, 2011, Express 

Scripts filed a Motion for Judgment on the Pleadings and Proposed Order for 

Briefing Schedule on their Motion for Judgment on the Pleadings in the Delaware 

Action. On October 25, 2011, the Court granted Defendants’ motion to certify for 

appeal the denial of their motion to dismiss, but denied Defendants’ motion for a 

stay pending appeal. Pursuant to the discovery orders entered by the Court of 

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Chancery and Magistrate Judge Falk, the parties began producing documents on a 

rolling basis beginning on October 28, 2011. 

On October 28, 2011, Plaintiff filed a fully briefed preliminary injunction 

motion to enjoin the scheduled shareholder vote and to strike or modify certain 

deal protection provisions in the Merger Agreement, including the preclusive 

Termination Fee. On October 27, 2011, the Court of Chancery entered a Stipulated 

Order of Case Management and set forth a schedule for discovery, briefing, and a 

preliminary injunction hearing on December 6, 2011, in the Delaware Action. 

On October 31, 2011, Express Scripts filed with the Third Circuit a petition 

for leave to appeal, a motion for a stay pending appeal, and a motion for expedited 

treatment of its appeal. Medco joined these applications. The Third Circuit 

directed that Plaintiff file opposition papers by Friday, November 4 and that 

Express Scripts file reply papers by Monday, November 7. 

While those papers were being briefed, counsel for the parties negotiated 

and memorialized the Settlement, which was approved by both Express Scripts and 

Medco’s boards of directors on Tuesday, November 8, 2011. The Court 

preliminarily approved the Settlement on November 28, 2011. Since that time, the 

parties have attempted (unsuccessfully to date) to negotiate an agreed upon 

attorneys’ fee and expense reimbursement award. 

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III. FACTUAL BACKGROUND

A. Scandal At Medco Leads To Several Lost Customer Contracts

Medco is a pharmaceutical benefits provider. A material part of its business 

is managing the pharmaceutical needs of large institutions and health insurance 

plans. In March 2011, a report by Steptoe & Johnson LLP, outside counsel to one 

of the largest health benefits providers in the world, California Public Employees 

Retirement System’s (“CalPERS”), revealed that Medco had paid a former 

CalPERS’ board member $4 million to help secure for Medco a contract with 

CalPERS. Following the disturbing revelation of this apparent act of bribery, 

(i) CalPERS dropped Medco from the list of potential candidates to administer 

prescription drug benefits for the fund’s members; and (ii) Medco has been 

subjected to several lawsuits and government investigations relating to these 

alleged improprieties. 

Just before and following disclosure of the CalPERS scandal, Medco lost 

several significant contracts. In January 2011, MemberHealth, LLC provided the 

Company with notice that it would be terminating its Medicare Part D prescription 

benefits management agreement with Medco at the end of 2011. On May 27, 

2011, Medco announced that the Blue Cross Blue Shield Association planned to 

transition its mail order and specialty pharmacy benefit coverage for the Federal 

Employee Program to an alternate provider, effective January 1, 2012. On July 21, 

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2011, Medco revealed that UnitedHealthcare had declined to renew a contract 

worth roughly $11 billion. Additionally, Medco received a subpoena from the 

U.S. Department of Justice requesting documents related to the Company’s 

relationship with drug-maker AstraZeneca PLC. 

Despite these developments, Medco’s financial performance had remained 

remarkably stable. In fact, Medco had churned out record revenues during the 

most recent quarters. However, the burgeoning scandals threaten the continued 

tenure with the Company of Medco’s Chief Executive Officer (“CEO”), and likely 

a broader swath of its senior management. 

B. The Board “Threw In The Towel” And Hastily Entered The 

Proposed Transaction 

On July 21, 2011, the same day Medco announced the loss of the 

UnitedHealthcare contract, Express Scripts and Medco announced that the 

companies had entered into a “Merger Agreement” whereby Express Scripts would 

acquire its smaller rival. In a conference call shortly thereafter, Medco admitted 

that losing the UnitedHealthcare contract was a factor in agreeing to a deal with 

Express Scripts, but insisted that the negotiations “were on completely independent 

tracks and came to their own independent conclusion.” 

Pursuant to the Merger Agreement, Express Scripts agreed to pay $28.80 in 

cash and 0.81 of an Express Scripts share for each Medco share, valuing the 

Company at $71.36 per share at the time of the announcement. Despite the size 

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and regulatory complexities of the Proposed Transaction, the deal was thrown 

together in less than one month. Plaintiff alleged that the expedited construction of 

the Proposed Transaction effectively eliminated the likelihood of any solicitation 

of interest from other possible strategic partners. 

While Express Scripts and Medco touted the Proposed Transaction as a 

significant benefit to Medco’s shareholders, Plaintiff alleged that Express Scripts 

had effectively tied Medco’s hands against considering a better offer or even 

changing its recommendation to shareholders on the Proposed Transaction. 

Among the “deal protection” terms of the Merger Agreement was a shockingly 

high $950 million Termination Fee, which was payable by Medco if, among other 

situations, the Board terminated the Merger Agreement to accept a superior bid. 

The Termination Fee was also “single-trigger” meaning that it was payable if the 

Medco Board simply decided to change its recommendation on the Proposed 

Transaction, even in the absence of a competing bid. 

Plaintiff further asserted that the Medco Board failed to negotiate for a “GoShop” provision in the Merger Agreement. In light of the Board’s failure to 

conduct a legitimate pre-signing market check, a “Go-Shop” was the only real way 

to ensure that shareholders received the highest value reasonably available for their 

shares. While not a perfect substitute for a pre-signing auction, a “Go-Shop” could 

have served a similar function by allowing the Medco Board to canvas the market 

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to determine whether potential suitors were interested in making a competing bid. 

Instead of negotiating for a “Go-Shop,” the Medco Board agreed to a prohibitive 

“No Solicitation” clause (the “No-Shop”), further limiting the Board’s ability to 

entertain superior strategic alternatives. 

Finally, the Medco Board also granted Express Scripts a “Matching Right” 

in the Merger Agreement that provided Express Scripts six business days to revise 

its proposal or persuade the Medco Board not to change its recommendation on the 

merger in the face of a proposal from a third party suitor. The Matching Right was 

intended to dissuade interested parties from making an offer for the Company by 

providing Express Scripts the opportunity to make repeated matching bids to 

counter any competing offers. Due to the complete absence of any pre-signing 

market check, Plaintiff alleged that no justification existed for the inclusion of the 

Matching Right and other bid advantages in the Merger Agreement. 

Plaintiff asserted that the agreement to the No-Shop, Matching Right and 

Termination Fee (collectively, the “Deal Protections”) as originally agreed to by 

the Medco Board served to deter competing parties from making bids and 

prevented the Medco Board from properly exercising its fiduciary duties to obtain 

the best available strategic alternative for Medco’s shareholders, particularly 

because Medco’s Board negotiated exclusively with Express Scripts. 

IV. ARGUMENT

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Rule 23(h) states, in relevant part, that “[i]n a certified class action, the court 

may award reasonable attorneys’ fees and nontaxable costs that are authorized by 

law or by the parties’ agreement.” District courts are granted great deference in 

“determining whether a request for attorneys’ fees should be granted.” So long as 

they “clearly articulate the reasons to support [their] conclusion[s].” In re Ins. 

Brokerage Antitrust Litig., MDL-No. 1663, 2009 WL 411856, at *3 (D.N.J. Feb. 

17, 2009) citing In re Rite Aid Corp. Sec. Litig., 396 F.3d 294, 301 (3d Cir. 2005). 

Plaintiff seeks an award of attorneys’ fees and expenses for Class Counsel in the 

amount of $18 million, plus reimbursement of expenses. Plaintiff’s fee application 

is fair and reasonable in light of the very substantial benefits Class Counsel 

achieved for Medco’s shareholders through the prosecution of the Action and the 

resulting Settlement. 

A. A Fee Is Warranted Under The Common Benefit Doctrine

Where the Class was benefitted by the loosening of the preclusive deal 

protections and additional disclosures, an award of attorneys’ fees is warranted 

under the “common benefit doctrine,” which recognizes Class Counsel’s efforts in 

litigating a case that results in “a substantial benefit on members of an 

ascertainable class.” In re Diet Drugs Prods. Liab., 582 F.3d 524, 546 (3d Cir. 

2009) (citation and internal quotations omitted). Importantly, under this doctrine, 

“[a]ttorney’s fees are awardable even though the benefit conferred is purely 

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nonpecuniary in nature.” Merola v. Atlantic Richfield Co., 515 F.2d 165, 169-70 

(3d Cir. 1975) (emphasis added) (citing Mills v. Elec. Auto-Lite, 396 U.S. 375 

(1970)). In determining whether to apply the common benefit doctrine, courts 

consider whether a substantial benefit was achieved for an ascertainable class, and 

also measure the proportional spread of the requested attorneys’ fees across the 

class. In re Schering-Plough/Merck Merger Litig., No. 09-cv-1099, 2010 WL 

1257722, at *15 (D.N.J. Mar. 26, 2010). Courts also examine whether “(1) the 

benefits may be traced with some accuracy; (2) whether the class of beneficiaries 

are readily identifiable; and (3) whether there is a reasonable basis for confidence 

that the costs may be shifted with some precision to those benefitting.” Polonski v. 

Trump Taj Mahal Assocs., 137 F.3d 139, 145 (3d Cir. 1998). 

1. A Common Benefit Was Achieved For A Readily 

Ascertainable Class 

In order to determine whether a benefit was conferred upon the Medco 

shareholders – and also to ascribe a value to that benefit – it is appropriate to look 

to Delaware state law for guidance because Delaware law governs the substantive 

elements of this case and the rights of the shareholders. 

There is no doubt that the modifications to the Merger Agreement provided 

a substantial benefit to Medco’s shareholders under guiding Delaware law. In In 

re Compellent Technologies, Inc. Shareholder Litigation, No. 6084, 2011 WL 

6382523 (Del. Ch. Dec. 9, 2011), Vice Chancellor Laster of the Delaware 

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Chancery Court explained that the “benefit generated from modifying deal 

protections” stem from the “increased opportunity for stockholders to receive 

greater value.” Id. at *19. See also Tandycrafts, Inc. v. Initio Partners, 562 A.2d 

1162, 1165 (Del. 1989); State of Wisc. Inv. Bd. v. Bartlett, No. 17727, 2002 WL 

568417, at *5 (Del. Ch. Apr. 9, 2002)(finding that a therapeutic benefit was created 

by supplemental disclosures and determining the reasonable fee for that benefit). 

Vice Chancellor Laster noted that in order for the court to quantify that 

“increased opportunity for stockholders to receive greater value,” it must apply its 

“own ‘sound business judgment’ when setting a fee award” and “evaluating 

changes to deal protections necessarily involves healthy measures of discretion, but 

assessing a non-monetary benefit always does.” Id. at *21 (the court focused on 

the “value of the changes [to the deal protections] to Compellent’s shareholders” in 

determining reasonable attorneys’ fees). As that court further explained (at *20): 

The incremental value that stockholders receive includes both the 

direct benefit from a reduction in the termination fee or other hard 

costs, as well the additional, more contingent and causally attenuated 

value from price increases generated by the topping bid and further 

bidding. The probability of receiving a higher bid must take into 

account that reducing the barriers makes a bid marginally more 

likely. The calculation consequently depends on the increased 

likelihood of a topping bid under the revised defensive measures. 

Because more extreme defensive measures should have a more 

powerful dampening effect, settlements that ameliorate stronger 

forms of deal protections should warrant larger fees. [Emphasis 

supplied]. 

The court in Compellent also confirmed that whether a topping bid actually 

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emerges is irrelevant when determining the amount of the benefit achieved through 

modifications to deal protections. As that court recognized, “[t]he principal benefit 

conferred by the settlement was therefore to increase the likelihood of a topping 

bid.” Id. at *1 (emphasis added). The Court explained further that “the size of the 

benefit is not affected by whether or not a topping bid actually emerges” because 

“[a]ssessing the benefits of the settlement as of the time it was agreed to, rather 

than in light of after-the-fact events knowable only through hindsight, comports 

with how Delaware courts evaluate decisions made by fiduciaries.” Id. at *20. 

Such is the case here – the attorneys’ fees analysis does not rely on whether a 

topping bidder for Medco actually emerged. 

There is no question that the benefits to the Class achieved through this 

litigation warrant an award of attorneys’ fees under Compellent. Without 

intervention by Plaintiffs, consummation of the Merger Agreement was a near fait 

accompli. See Subramanian Decl. ¶¶17, 22. As drafted, the Merger Agreement 

effectively precluded the Medco Board from considering a better offer, or 

changing its recommendation with regard to the Proposed Transaction. Attacking 

these preclusive “deal protection” terms was Plaintiff’s primary goal when 

instituting this litigation, and the result of the Settlement is significantly weakened 

deal protective devices, which greatly increased the chances of a topping bid. 

The nature of this relief negotiated by Plaintiff was particularly important 

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here (and thereby particularly valuable to Medco’s shareholders), because Medco 

negotiated exclusively with Express Scripts and performed no market check prior 

to the consummation of the Merger Agreement. See Subramanian Decl. ¶¶15-16. 

Accordingly, these modifications to the deal protection terms made it more likely 

that Medco’s shareholders were receiving the highest price reasonably available. 

As the court recognized in Compellent, whether the board reaches out to other 

potential bidders prior to executing a merger agreement affects the likelihood of 

another bidder arising after modification to the deal protection terms of that 

agreement. The board in Compellent had reached out to potential bidders prior to 

executing the merger agreement, therefore making it less likely that a topping bid 

would arise in the wake of the modifications to the deal protection terms. That is 

not the case here, further evidencing the value of the modifications to the deal 

protection terms provided by the Settlement. 

a) Termination Fee

Among the deal protection terms of the Merger Agreement was a shockingly 

high $950 million Termination Fee, which was payable by Medco if, among other 

situations, the Board terminated the Merger Agreement to accept a superior bid. 

See Taylor Dec. Ex. CC, Merger Agreement, Section 7.3(e). The Termination Fee 

was also payable if the Medco Board simply decided to change its 

recommendation on the Proposed Transaction, even in the absence of a competing 

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bid. Thus, a change of recommendation, even if the in the best interest of the 

Company, was virtually barred by the prospect of an immediate $1 billion cash 

divestiture. By agreeing to the punitive $950 million Termination Fee, the Medco 

Board significantly reduced the possibility of maximizing shareholder value. 

Subramanian Decl. ¶¶18-20. Most notably, the Settlement requires a reduction in 

the Termination Fee by an unprecedented $300 million. Unless Medco were to 

terminate the Agreement without a competing bid, the Termination Fee was 

reduced from $950 million to $650 million, therein bringing the termination fee 

below a level that otherwise would have dissuaded even the most aggressive third 

party bidders from pursuing a deal for Medco. Subramanian Decl. ¶¶18-20, 24. 

b) Matching Rights

Similarly, the Medco Board granted Express Scripts a “Matching Right” that 

provided Express Scripts with six business days to revise its proposal or persuade 

the Medco Board not to change its recommendation on the Merger Agreement in 

the face of a proposal from a third party suitor. See Taylor Dec. Ex. CC, Merger 

Agreement, Section 5.4(b). Additional third-party bids would trigger a three-day 

match right. Id. The matching right meant that Express Scripts would always have 

the final look at any third-party bid. Just like the Termination Fee, the Matching 

Right dissuaded interested parties from making an offer for Medco by providing 

Express Scripts the opportunity to make repeated matching bids to counter any 

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competing offers. See Subramanian Decl. ¶¶21-22. Due to the complete absence of 

any pre-signing market check, no justification existed for the inclusion of the 

Termination Fee, Matching Right and the other bid advantages in the Merger 

Agreement. 

The Settlement provides for modifications to the Matching Right to allow 

Express Scripts only one opportunity, rather than unlimited opportunities, to match 

a competing bid. The modification limiting Express Scripts to a one-time 

matching right, relieved concern by potential topping bidders that a bidding war 

would ensue and further increased the likelihood that a determined third party 

bidder would have a path to success. Id. at ¶25. 

c) Additional Disclosures

The Settlement further provides that Express Scripts and Medco would 

include additional disclosures in the final proxy statement that was filed on 

November 18, 2011 and distributed to both companies’ shareholders in soliciting 

approval of the Proposed Transaction. In common benefit cases, “a heightened 

level of corporate disclosure, if attributable to the filing of a meritorious suit, may 

justify an award of counsel fees.” Tandycrafts, 562 A.2d at 1165; Eisenberg v. 

Chicago Milwaukee Corp., No. 9374, 1988 WL 112910, at *3 (Del. Ch. Oct. 25, 

1988) (“Where a representative shareholder succeeds in correcting invalid 

disclosures in connection with a transaction between the corporation and its 

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stockholders, our case law recognizes that for fee awarding purposes, the 

corporation and all of its shareholders are benefitted.”)(citations omitted). 

 The Settlement resulted in numerous additional or amended disclosures in 

the Proxy Statement which allowed Medco’s shareholders to make a decision on 

whether to vote to approve the Transaction based upon a full and complete 

understanding of the relevant facts. First, the Settlement resulted in additional 

disclosures to the discussion of the Board’s analysis and consideration of whether 

to agree to the Proposed Transaction including: 

• The fact that Medco analyzed potential business combinations with CVS 

Caremark and United Healthcare; 

• Medco’s management’s efforts to keep the Medco board and M&A 

committee apprised of negotiations between United Healthcare and Medco 

to renew various strategic agreements between the two companies, and 

furthermore, that discussions with United Healthcare took place prior to 

execution of the merger agreement; 

• The fact that Medco management believed a merger with Express Scripts 

would produce higher benefits to Medco, including $1 billion in annual 

synergies, than any other potential combination or a plan for Medco to 

remain a standalone company; 

• The reasons supporting Express Scripts’ views with respect to the valuation 

of Medco and appropriate consideration to be paid to Medco shareholders; 

• Medco’s and Express Scripts’ views on the possibility of premiums to the 

current market price of Medco’s common stock; 

• Various financial metrics considered by the Medco board; 

• The fact that Express Scripts retained a second financial advisor because of 

the size of the transaction; 

• The fact that Express Scripts’ management believed that Express Scripts 

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would require a second lead financing source given the amount of financing 

required; 

• The fact that the United Healthcare negotiations were discussed at a July 15, 

2011 Medco board meeting; 

• The fact that, over the course of the negotiations, the Medco board and 

senior management considered various factors to determine whether the mix 

of consideration – 60% stock and 40% cash – was appropriate; and 

• The fact that there were no discussions between Medco and Express Scripts 

regarding which of Medco’s directors would be considered for the board of 

directors at Express Scripts following the merger and no discussion 

concerning future employment of executive officers prior to the execution of 

the merger. 

Second, the Settlement Agreement secured the following additional details 

concerning the financial analyses that were performed by J.P. Morgan in arriving 

at the conclusion that Express Scripts was fairly compensating Medco 

shareholders: 

• The fact that unlevered after-tax cash flows treated stock-based 

compensation as a cash expense; 

• Clarifications concerning how the pro forma combined company implied 

equity value per share was calculated; 

• The expected payments to J.P. Morgan, which were calculated based on a 

percentage of the value of the transaction; and 

• The aggregate compensation received by J.P. Morgan and its affiliates from 

Express Scripts during the prior two years. 

Third, the Settlement Agreement secured the following additional details 

concerning the financial analyses that were performed by Lazard in arriving at the 

conclusion that Express Scripts was fairly compensating Medco shareholders: 

• The fact that Lazard’s discounted cash flow analysis treated stock-based 

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compensation as a cash expense; 

• The enterprise values and EBITDA multiples of the comparable transactions 

selected by Lazard; 

• Lazard’s estimates of the values of the synergies to be realized from the 

mergers for 2012, 2013 and 2014; 

• The fact that Lazard had received compensation from Medco in connection 

with a 2010 acquisition of United Biosource; and 

• The expected payments to Lazard, which were calculated based on a 

percentage of the value of the transaction. 

Fourth, the Settlement Agreement secured the following additional details 

concerning the financial analyses that were performed by Credit Suisse in arriving 

at the conclusion that Express Scripts was fairly compensating Medco 

shareholders: 

• The dates of announcements for the comparable transactions selected by 

Credit Suisse and 

• EBITDA multiples for the selected comparable transactions. 

Fifth, the Settlement Agreement secured the following additional details 

concerning the financial analyses that were performed by Citigroup in arriving at 

the conclusion that Express Scripts was fairly compensating Medco shareholders: 

• The Firm Value/Standalone Target LTM EBTIDA values for the comparable 

transactions selected by Citigroup; 

• The value of the aggregate fees Citigroup and its affiliates received from 

Express Scripts since January 1, 2010; and 

• The fact that Express Scripts’ forecasts were prepared with the assumption 

that its contract would Walgreens would continue, but that Express Scripts 

did not believe that termination of that contract would be material. 

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Material supplemental and corrective disclosures by themselves can merit 

the award of a substantial fee. See, e.g., In Schering-Plough/Merck, 2010 WL 

1257722, at *18 (awarding $3.5 million in fees and expenses in connection with 

settlement that provided additional disclosures relating to $41.1 billion merger 

between Schering-Plough Corporation and Merck & Co., Inc.); In re The DirecTV 

Group, Inc. S’holder Litig, No. 4581 (Del. Ch. Nov. 30, 2009) (Order) (awarding 

$7 million in attorneys’ fees in a mainly-disclosure settlement concerning the 

$14.6 billion merger of DirecTV Group, Inc. and Liberty Media Entertainment 

Incorporated)(Taylor Dec. Ex. EE); Minneapolis Firefighters Relief Assoc. v. 

Ceridian Corp., No. 29660 (Del. Ch. Mar. 24, 2008) (Order) ($7 million fee 

awarded in mainly-disclosure settlement concerning $5.3 billion merger)(Taylor 

Dec. Ex. GG); In re Elec. Data Sys. Class Action Litig., No. 366-01078-2008 (Tex. 

Dist. Ct. Dec. 23, 2009) (Order) ($3.25 million fee awarded in disclosure-only 

settlement concerning $13 billion merger) Taylor Dec. Ex. DD; In re Mony Group 

Inc. S’holders Litig., No. 20554 (Del. Ch. Oct. 2. 2004) (Order) ($2.7 million fee 

awarded in disclosure-only settlement concerning $1.5 billion merger) (Taylor 

Dec. Ex. FF). 

d) Postponement Of Shareholder Vote

Finally, Express Scripts and Medco agreed to postpone a shareholder vote 

by at least five days, to no earlier than December 21, 2011. 

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2. The Additional Factors For The Applicability Of The 

Common Benefit Doctrine Are Satisfied 

There is a “readily ascertainable class” of Medco shareholders who 

benefitted from the changes to the merger terms and additional disclosures outlined 

above. The “ascertainable class consists of the corporation’s shareholders.” 

Schering-Plough/Merck, 2010 WL 1257722, at *16. 

Finally, the benefits outlined above can be traced directly to Plaintiff’s and 

Class Counsel’s prosecution of the Action and the resulting Settlement. The 

“benefit conferred may be accurately traced by comparing the original” terms of 

the deal and the original disclosures given to shareholders to the supplemental 

terms and disclosures. Id. at *16. Here, it is easy to trace the benefits conferred by 

comparing the original terms of the deal, which included a $950 million 

termination fee, to the ultimate terms of the deal, which slashed that termination 

fee to $650 million. And, the Settlement provides for modifications to the 

Matching Right to allow Express Scripts only one opportunity, rather than 

unlimited opportunities, to match a competing bid. Furthermore, the additional 

disclosures may be accurately traced by comparing the subsequent proxy statement 

to the original. Id. These benefits will inure to “readily identifiable beneficiaries,” 

who are the class members, the shareholders of Medco. See Ex. CC, Merger 

Agreement Section 1(i). 

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B. The Court Should Use The Percentage-Of-Recovery 

Method To Assess The Reasonableness Of The Fee

Having established that an award of fees is appropriate under the common 

benefit doctrine, the court must next determine how to calculate a reasonable fee 

award, deciding between the “percentage-of-recovery” method or the lodestar 

method. It has been noted that “[e]ach has distinct attributes suiting it to particular 

types of cases.” In re Ins. Brokerage Antitrust Litig., No. 04-cv-5184, 2009 WL 

411856, at *4 (D.N.J. Feb. 17, 2009) citing Varacallo v. Massachusetts Mut. Life 

Ins. Co., 226 F.R.D. 207, 249 (D.N.J. 2005). In particular, the percentage-ofrecovery method is used in instances where a class benefits from a common fund 

or benefit because otherwise “class members would be unjustly enriched if they 

did not adequately compensate counsel responsible for generating the fund.” In re 

Rite Aid Corp. Sec. Litig., 396 F.3d 294, 300 (3d Cir. 2005); In re Ins. Brokerage 

Antitrust Litig., No. 09-5184, 2009 WL 411856, at *4 (D.N.J. Feb. 17, 2009). In 

addition, the percentage-of-recovery method “rewards counsel for success and 

penalizes counsel for waste or failure.” Serrano v. Sterling Testing Sys., Inc., 711 

F. Supp. 2d 402, 418 (E.D. Pa. 2010). In contrast, the lodestar method is more 

commonly used when fees are awarded pursuant to a fee-shifting statute, where the 

fees are paid by defendants, contrary to the traditional “American Rule” where 

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parties bear their own expenses. Id.3

 

Importantly, the benefit need not be monetary in order to be quantifiable and 

for the court to assess a fee award on a percent-of-recovery basis. In Dewey v. 

Volkswagen of Am., 728 F. Supp. 2d 546, 561 (D.N.J. 2010), for example, the 

parties agreed to a settlement which included “educational preventative 

maintenance information” for all class members, who were Volkswagen car 

purchasers. The court assessed the fee award by using the “percentage-ofrecovery” method, and used an expert’s valuation of the “educational preventative 

maintenance information,” to quantify the value of that portion of the settlement, 

adjusting for certain errors in the expert’s analysis. Id. at 595-97. Similarly, in In 

re LG/Zenith Rear Projection Television Class Litigation, No. 06-cv-5609, 2009 

WL 455513, at *9 (D.N.J. Feb. 18, 2009), the settlement involved an extension of 

 

3

 Where an award of fees is warranted, but where the benefits provided through 

litigation are unquantifiable, courts often will award fees based on the counsel’s 

lodestar in prosecuting the case. See, e.g., Schering-Plough/Merck, 2010 WL 

1257722 at *17; In re Mercedes-Benz Tele Aid Contract Litig., MDL No. 1914, 07-

cv-2720, 2011 WL 4020862, at *7 (D.N.J. Sept. 9, 2011) (using the lodestarmultiplier method where the “dollar value of the settlement . . . is too uncertain”). 

However, where the benefit is quantifiable, the percentage-of-recovery is preferred 

over the lodestar method in such instances. For example, where there is a common 

fund, courts generally apply the percentage of the recovery method in determining 

an appropriate award of fees. Rite Aid Sec. Litig., 396 F.3d at 300; In re Genta 

Sec. Litig., No. 04-cv-2123, 2008 WL 2229843, at *7 (D.N.J. May 28, 2008) (“The 

percentage-of-recovery method is generally favored in common fund cases. . . .”); 

Serrano, 711 F. Supp. 2d at 418; Larson v. Sprint Nextel Corp., No. 07-cv-5325, 

2010 WL 234934, at *18 (D.N.J. Jan. 15, 2010) (“[T]he percentage of recovery 

method is viewed as best approximating a contingent fee award in a common fund 

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warranties on television sets. Class counsel argued that “a conservative valuation 

of the warranty valuation would be $450, and aver that the class consists of more 

than 60,000 individuals.” Id. Based upon those estimations, the court determined 

that a requested fee representing 5.7% of the value of the warranties was 

reasonable, particularly where applying more conservative numbers, the 

percentage would still be reasonable. Id.4

 

Benefits achieved by negotiating less restrictive deal lock-up provisions are 

quantifiable. Noting that “[m]odifications to ... defensive measures can be” 

quantified, Vice Chancellor Laster opined that “[l]oosening a no-shop cause, 

weakening information rights or matching rights, and ameliorating restrictions on a 

board changing its recommendation should, all else equal, increase the chance of a 

topping bid. The resulting benefits can be estimated as a function of the 

incremental amount that stockholders would receive if a higher bid emerged times 

the probability of the higher bid.” Compellent, 2011 WL 6382523, at *20. 

Although non-monetary, the benefits achieved through the Settlement are 

readily quantifiable under applicable Delaware law. As detailed in the 

accompanying Declaration of Professor Subramanian, the Settlement provided 

significant value to Medco’s shareholders based upon the following relevant 

 

recovery.”). 

4 Cf. In re Computron Software, Inc. Sec. Litig., 6 F. Supp. 2d 313, 323 (D.N.J. 

1998) (“At the very least, the district court ... needs to make some reasonable 

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factors: (1) the increased likelihood of a topping bid in light of the modifications 

to the deal protections; and (2) the expected markup of a topping bid. See 

Subramanian Decl. ¶¶26-27. Based on Vice Chancellor Laster’s analysis in 

Compellent, Professor Subramanian explains that the benefit to Medco’s 

shareholders can be quantified through application of the following formula: 

Benefit Conferred = ((Likelihood of Higher Bidder) x ($ Reduction in Termination 

Fee)) + (Original Deal Value) x (Incremental Likelihood of 

Higher Bidder) x (Expected Markup) 

Professor Subramanian explains: “The first term captures the benefit that 

shareholders receive from the simple fact that, in the event of a higher bid, value 

that would have gone to the first bidder in the form of the termination fee now goes 

to the target shareholders. The second term captures the benefit that shareholders 

receive from the markup over the original deal price, either through greater value 

from the second bidder (if the second bidder is successful) or through a higher bid 

from the initial bidder.” Subramanian Decl. ¶26. Based on his analysis of the facts 

of this case and the terms of the Settlement, and comparing historical information 

regarding corporate mergers since 1988, and applying the formula described 

above, Professor Subramanian estimates the value of the Settlement to be in excess 

of $252 million, based on the mid-range of his analysis, and approximately $153.0 

million using the very lowest range of his analysis. Subramanian Decl. Ex. 3. 

 

assessment of the settlement’s value”). 

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C. Plaintiff Seeks A Reasonable Fee Under The Percentage-OfRecovery Doctrine 

Applying the most conservative valuation of the benefit achieved, Class 

Counsel’s application for $18 million represents just 11.8% of the most 

conservative estimate of the common benefit, a figure which is patently reasonable 

considering all the relevant factors. 

1. Class Counsel Seeks 11.8% Of The Common Benefit

Under the original terms of the Merger Agreement, the size of the 

termination fee combined with the large size of the deal and the six-day matching 

right made the likelihood of a topping bid emerging for Medco negligible. See 

Subramanian Decl. ¶¶17, 30. Indeed, there is little evidence that any deal “larger 

than $10 billion in value with a termination fee of this magnitude that has been 

jumped.” Id. at ¶¶30, 35. Conversely, after the modifications of the deal 

protection terms, Medco’s shareholders enjoyed an incremental increase in the 

likelihood of a topping bid emerging. Id. at ¶45. As described by Professor 

Subramanian,5

 this increased likelihood of a higher bid emerging in light of the 

Settlement reflects the general historical probabilities of third-party bidders 

emerging as well as the pertinent aspects of the Proposed Transaction challenged 

by Plaintiff in particular. Id. at ¶¶30-44. Considering all of these factors, a 

 

5

 There is precedent for a court to consider an expert’s analysis of the value of the 

benefit conferred for non-monetary class benefits achieved in a settlement. See 

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reasonable jump rate here is in the range of 5-9%. Id. at ¶45. 

In addition to determining the likelihood of a topping bid emerging in light 

of the modifications provided in the Settlement, establishing the likely range of 

such a potential topping bid is also necessary. As the court in Compellent

recognized, the lower bound in this analysis should be the initial termination fee 

“[b]ecause a target board would breach its fiduciary duties by approving a 

termination fee so large as to preclude any topping bid” and the “original 

transacting parties cannot reasonably dispute that a topping bidder should be 

willing to pay at least the value implied by the deal price plus the original 

termination fee.” Compellent, 2011 WL 6382523 at *19; Subramanian Decl., at 

¶46. A review of the studies cited by the Compellent court, and those referenced in 

Professor Subramanian’s Declaration, shows that the average markup of a thirdparty bid is anywhere from 10.5-21.8 % above the original offer price. See

Compellent, 2011 WL 6382523 at *24; Subramanian Decl. at ¶49. More precisely 

for the analysis here, the mean markup for deals above $10 billion is 12.7%. See

Subramanian Decl. ¶49. Conservatively, therefore, the expected markup of a third 

party bidder for Medco would be 10-14% above the Express Scripts offer. Id. at 

¶50.6

 The increased likelihood of a topping bid in light of the modifications to the 

 

Dewey, 728 F. Supp. 2d at 613. 

6

 The Compellent court adopted an expected markup of 11.37%. 2011 WL 

6382523, at *25. 

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deal protections is in the range of 5-9% and the expected markup of a topping bid 

would be anywhere from 10-14% above Express Scripts’ offer. 

A reasonable application of this analysis to the facts of this case and the 

attorneys’ fees requested herein shows that an award of $18 million is warranted.7

 

For example, applying the percentages adopted by the Compellent court (likelihood 

of a topping bid of 8%, average incremental value of a topping bid of 11.37% and 

attorney’s fees allocation of 25%), would provide for an award of $68.76 million in 

attorney’s fees here [($300,000,000 x 0.08) + ($27,600,000,000 x 

.1137)(.08)](0.25). Here, even under the most conservative of the percentages 

provided in Professor Subramanian’s Declaration, i.e a 5% likelihood of a topping 

bid and an expected markup of only 10%, would almost always result in an award 

of attorney’s fees greater than $18 million. 

2. 11.8% Is A Reasonable Percentage Of The Benefit To Award 

To Class Counsel 

In assessing fees under the percentage-of-recovery method, courts weigh a 

variety of factors including the benefit of the settlement to the class, any objections 

to the settlement or fees requested; the skill and efficiency of the attorneys 

involved; the complexity and duration of the litigation; the risk of non-payment; 

the amount of time devoted by Class Counsel to the litigation; and fee awards in 

similar cases. Briggs v. Hartford Fin. Servs. Group, Inc., No. 7-cv-5190, 2009 WL 

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2370061, at *14 (E.D. Pa. July 31, 2009) (citing Gunter v. Ridgewood Energy 

Corp., 223 F.3d 190, 195 n.1 (3d Cir. 2000)). 

As already discussed herein and detailed in the Subramanian Declaration, 

the benefits achieved through this proposed Settlement are significant and warrant 

the award of a commensurate fee. Notably, Vice Chancellor Laster reasoned that 

“[b]ecause more extreme defensive measures should have a more powerful 

dampening effect, settlements that ameliorate strong forms of deal protection 

should warrant larger fees.” Compellent, 2011 WL 6382523, at *20. This Court 

should thus place great weight in Class Counsel’s ability to negotiate a $300 

million reduction in the $950 million fee, an extremely preclusive deal protection 

device, in assessing the reasonableness of the requested fee. Having established 

herein and in the Subramanian Declaration the tremendous benefit of the 

Settlement to the Class, we turn to the additional factors considered by the Third 

Circuit in assessing reasonableness of a fee. 

a) Complexity Of Litigation

The novelty and complexity of the issues presented in this action created a 

meaningful risk that Plaintiff would not prevail, and that Class Counsel – who 

accepted this case on a fully contingent fee basis – would not recover their 

expenses or the value of their time. Courts generally recognize that where, as here, 

 

7

 With 404,456,685 shares outstanding, this equals $0.045 per Medco share. 

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counsel’s compensation is contingent on recovery, a premium over counsel’s 

hourly rate is appropriate. See, e.g., First State Orthopaedics v. Concentra, Inc., 

534 F. Supp. 2d 500, 523 (E.D. Pa. 2007) (approving a substantial fee award where 

there were “complex legal and factual issues and procedural difficulties of [a] 

nationwide class”); In re Warfarin Sodium Antitrust Litig., 212 F.R.D. 231, 261 (D. 

Del. 2002) (awarding fee of 22.5% of settlement value where there were “complex 

legal and factual issues and procedural difficulties of this nationwide class action 

and related state cases”). This was not a standard, cookie-cutter deal litigation. 

Instead, it involved a complex deal structure that centered on an unprecedented 

$950 million termination fee approved by the Board, which had not reached out to 

any other potential suitors prior to agreeing to the offer by Express Scripts. 

The central focus of the litigation – the $950 million termination fee – 

presented unique issues of Delaware law, and Plaintiff was, by no means, assured 

that Defendants would capitulate. Termination fees “are not unusual the corporate 

sale or merger contexts. They are used to reimburse the prospective buyer for 

expenditures in pursuing the transaction and also for lost opportunities.” Kysor 

Indus. Corp. v. Margauz, Inc., 674 A.2d 889, 897 (Del. Super. Ct. 1996). 

Nevertheless, there is a point at which the amount of a termination fee can become 

so excessive that it exceeds the bounds of reasonableness and serves no purpose 

but to freeze out any potential competitive bids. See Phelps Dodge Corp. v. 

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Cyprus Amaz Minerals Co., No. 17398, 1999 WL 1054255, at *2 (Del. Ch. Sept. 

27, 1999) (stating that the termination fee at issue “certainly seems to stretch the 

definition of range of reasonableness and probably stretches the definition beyond 

its breaking point.”). In challenging the $950 million termination fee here, 

Plaintiff argued that the unique circumstances of this case rendered the termination 

fee unreasonable as a matter of law. For example, Plaintiff pointed out that the 

termination fee had a “single trigger,” which would give rise to a payment 

obligation if the Medco Board simply changed its mind regarding the 

recommendation that shareholders support the Acquisition. Further, Plaintiffs 

demonstrated that a $950 million payment would equal 70% of Medco’s 2010 net 

earnings, presenting the Company’s shareholders with a classic Hobson’s choice of 

accepting a merger at the offered terms, or forfeiting 70% of the Company’s 2010 

earnings to a significant competitor. Finally, by approaching $1 billion, the 

termination fee at issue here approached a range that had been criticized (albeit not 

rejected outright) by Delaware courts. See In re Toys “R” Us Inc. S’holder Litig., 

877 A.2d 975, 1021-23 (Del. Ch. 2005) (courts should consider “the preclusive 

differences between termination fees starting with a ‘b’ rather than an ‘m.’”). 

Nevertheless, Plaintiff’s ability to prevail was far from certain. As 

Defendants pointed out, “standstill” agreements, “matching rights,” “no-shop” 

provisions, and termination fees are among the sort of deal protections that have 

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been approved by Delaware courts. See In re Smurfit-Stone Container Corp. 

S’holder Litig, No. 6164-VCP, 2011 WL 2028076, at *21 n. 141 (Del. Ch. May 20, 

revised May 24, 2011) (acknowledging that such terms “are customary in public 

company mergers today”). The fact that Plaintiff was able to extract Defendants’ 

agreement to significantly modify the terms of the Merger Agreement through the 

Settlement, therefore, speaks to the strength of Plaintiff’s claims and the 

importance of the changes negotiated here. In short, Plaintiff’s claims presented 

complex and novel issues of law with serious ramifications to the rights and 

expectations of Medco’s shareholders. 

b) Contingent Nature Of Litigation

“A reasonable percentage award must compensate the contingent risks borne 

by counsel so as to ensure that ‘competent counsel continue to be willing to 

undertake risky, complex, and novel litigation.’”); Warfarin Sodium, 212 F.R.D. at 

261, citing Manual for Complex Litigation 3d, § 24.121, at 191. Here, despite the 

complexity of the issues presented in this action Class Counsel accepted this case 

on a fully contingent fee basis, creating a significant risk that they would not 

recover their expenses or the value of their time. Courts generally recognize that 

where, as here, counsel’s compensation is contingent on recovery, a premium over 

counsel’s hourly rate is appropriate. See Briggs, 2009 WL 2370061, at *15 

(recognizing that where Plaintiff’s counsel proceeded “on a contingent fee 

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agreement” and “risked nonpayment due to the nature of the case and the inherent 

risk in losing” a substantial fee was warranted); Gunter v. Ridgewood Energy 

Corp, 223 F.2d 199, 199 (3d Cir. 2000)(“[T]he risk that counsel takes in 

prosecuting a client’s case should also be considered when assessing a fee 

award.”); In re Computron Software Sec. Litig., 6 F. Supp. 2d 313, 323 (D.N.J. 

1998) (noting the “significant attendant risks of proceeding with the instant 

litigation” in light of the “complexity of the issues” and awarding fee of 25% of 

amount of recovery); Wafarin Sodium, 212 F.R.D. at 216 (awarding substantial fee 

where class counsel “faced considerable contingent risk in pursuing this litigation). 

c) Stage Of Proceedings

Courts also look to the stage at the amount of time spent by Class Counsel 

and the stage at which the litigation settled and award a greater percentage of the 

benefit the further a case has progressed: 

When a case settles early, this Court tends to award 10-15% of the 

monetary benefit conferred... When a case settles after the plaintiffs 

have engaged in meaningful litigation efforts, typically including 

multiple depositions and some level of motion practice, fee awards 

range from 15-25% of the monetary benefits conferred. . . [H]igher 

percentages are warranted when cases progress further or go the 

distance to a port-trial adjudication. 

 Compellent, 2011 WL 6382523 at *25, citing In re Emerson Radio S'holder Deriv. 

Litig., No. 3392-VCL, 2011 WL 1135006, at *3 (Del. Ch. Mar. 28, 2011)(internal 

quotations omitted). Here, Plaintiff has clearly engaged in meaningful litigation 

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efforts, including significant amounts of discovery (briefing, document production 

and depositions) as well as briefing motions for preliminary injunction, motions to 

dismiss, motions to stay and appeals to the Third Circuit. Plaintiff also briefed and 

filed its Motion for Class Certification. And all of this occurred on an expedited 

basis, further revealing the immense litigation efforts of Plaintiff's counsel in their 

struggle to obtain the most favorable settlement possible on behalf of the Class, as 

reflected in the Settlement Agreement. 

 In addition, Class Counsel have expended a total amount of 5,726.75 hours 

in litigating this case. Attached as exhibits to the accompanying Declaration of 

Lindsey Taylor are individual affidavits from each of the firms involved in this 

Action and the Delaware Action. Taylor Dec., Exs. D through BB. These 

individual affidavits attest to the hours, billing rates, work performed by, and 

expenses of each firm. As detailed in these affidavits, plaintiffs’ counsel devoted 

significant time and resources to investigating the case, preparing discovery, 

responding to Defendants’ extensive motion practice, preparing injunction papers, 

and reviewing documents produced by Medco and Express Scripts. In addition, 

plaintiffs’ counsel deposed Ravi Sachdev, a managing director at J.P. Morgan who 

played an instrumental role in structuring the transaction, and Richard Rubino, the 

Chief Financial Officer of Medco, who testified regarding the history of and 

Medco’s reasons for entering into the transaction with Express Scripts. Awards of 

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much higher percentages have been granted to cases where counsel expended 

fewer hours than here. In re Safety Components Sec. Litig., 166 F. Supp. 2d 72, 

100-101 (D.N.J. 2001) (awarding 25% of settlement benefit to counsel who 

devoted only 1,508 hours over a 22-month period); Briggs, 2009 WL 2370061, at 

*15-16 (awarding 30% fee where counsel spent no more than 850 hours litigating 

the case). Accordingly, a fee award equal to 11.8% of the benefit conferred is 

appropriate here. 

d) Competency Of Counsel

Finally, the standing of Plaintiff’s counsel is well known to this Court, as is 

the standing of Defense counsel. It was only through the perseverance and skill of 

Plaintiff’s counsel that the Class realized such substantial benefits. The quality of 

Class Counsel is also measured by the benefit achieved for the Class, which as 

noted above was substantial. See In re Cendant Deriv. Litig., 232 F. Supp. 2d 327, 

338 (D.N.J. 2002)(noting that the “single clearest factor reflecting the quality of 

counsel’s services is the result obtained”); see also Cullen v. Whitman Med. Corp., 

197 F.R.D. 136, 149 (E.D. Pa. 2000); Warfarin Sodium, 212 F.R.D. at 261(“The 

class counsel ... showed their effectiveness in the case at bar through the favorable 

cash settlement they were able to obtain.”) 

e) Precedent Supports The Fee Request Here

The fee requested is 11.8% of a conservative estimate of the value of the 

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benefits provided through the Settlement. This percentage is in accord fee awards 

in with other cases. Indeed, courts typically award fees that comprise a much 

higher percentage of the value of the benefit to the fund. In the Third Circuit, 

“[m]any courts have considered 25% to be the benchmark figure for attorney fee 

awards in class action lawsuits . . . and awards above this percentage amount are 

common.” First State Orthopaedics v. Concentra, Inc., 534 F. Supp. 2d 500, 523 

(E.D. Pa. 2007); Warfarin Sodium, 212 F.R.D. at 261. See also In re Rite Aid 

Corp. Sec. Litig., 146 F. Supp. 2d 706, 735 (E.D. Pa. 2001) (reviewing 289 

settlements which demonstrated an “average attorney’s fees percentage [of] 

31.71%, with a median value of “one-third”); In re Rite Aid Corp. Sec. Litig., 396 

F.3d 294, 303 (3d Cir. 2005) (affirming In re Rite Aid Corp. Sec. Litig., 146 F. 

Supp. 2d 706 and crediting three studies of class action settlements that found that 

awards from between 25-31% were “average” and “fairly standard”); Safety 

Components Inc. Sec. Litig., 166 F. Supp. 2d at 101-02 (collecting cases with fees 

ranging up to $37 million, ranging from 27.5% to 33.8% of their respective 

settlement amounts); First State Orthopaedics, 534 F. Supp. 2d at 523-24 

(characterizing a fee of 11.5% as “well below the norm” and citing cases with fees 

ranging from 21.25% to 33%). 

f) Cross-Check With Lodestar Method

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recovery method are reasonable, courts will often perform a cross-check under the 

lodestar method. Dewey, 728 F. Supp. 2d at 606. Under the lodestar method, “a 

district court in calculating the attorney fee to be awarded first determines the 

hours reasonably expended by counsel in successfully achieving the result sought 

by litigation and then multiplies those hours by a reasonable hourly rate for the 

attorney’s services.” Joy Mfg. Corp. v. Pullman-Peabody Co., 742 F. Supp. 911, 

912 (W.D. Pa. 1990). Once the lodestar amount is calculated, the court “may 

increase or decrease that amount by applying a lodestar multiplier,” which 

“attempts to account for the contingent nature or risk involved in a particular case 

and the quality of the attorneys’ work.” In re Diet Drugs, 582 F.3d at 540 n.33. 

(citations omitted). In setting the lodestar amount, the court multiplies the number 

of hours reasonably worked on a client’s case by a reasonable billing rate for such 

services in the given geographical area provided by a lawyer of comparable 

experience. In re Ins. Brokerage Antitrust Litig., 579 F.3d 241, 280 (3d Cir. 2009). 

The lodestar method is “strongly presumed to yield a reasonable fee.” Weber v. 

Gov’t Emps. Inc. Co., 262 F.R.D. 431, 451 (D.N.J. 2009)(citation omitted). 

The combined lodestar of Plaintiff’s Lead Counsel is $3,149,852.25, based 

on total of 5,726.75 hours. Taylor Dec., Exs. D through BB. This lodestar 

includes time spent by counsel for plaintiffs in this Action as well as the Delaware 

Action. Notably, Defendants insisted on a global Settlement, and therefore it is 

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appropriate to include the time spent on all of the cases when considering the 

loadstar amount. 

In addition, the average hourly rate was reasonable. In this regard, the fee 

requested here is comparable to, or below, those awarded in other cases in this 

Circuit. Compare Franklin Balance Sheet Inv. Fund v. Crowley, No. 888-VCP, 

2007 WL 2495018, at *14 (Del. Ch. Aug. 30, 2007) (Order) ($4.2 million fee 

represented an hourly rate of $4,023 per hour); In re NCS Healthcare S’holders 

Litig., No. 19786, 2003 WL 21384633, at *3 (Del. Ch. May 28, 2003) ($10 million 

fee represented an hourly rate of approximately $3,030 per hour); Dagron v. 

Perelman, No. 15101, Tr. at 48-51 (Del. Ch. Aug. 29, 1997) ($3,000,000 fee 

represented an hourly rate of approximately $3,500) (Taylor Dec. Ex. HH); In re 

Digex, Inc. S’holder Litig., No. 18336, Tr. at 141-47 (Del. Ch. Apr. 6, 2001) 

(lodestar of $1.4 million awarded fee of $12.3 million, representing lodestar 

multiplier of 9) (Taylor Dec. Ex. II); Louisiana Mun. Police Emps.’ Ret. Sys. v. 

Crawford, No. 2635 (Del. Ch. June 8, 2007) (Order)(order approving fees of $20 

million representing a lodestar multiplier of 6.5) (Taylor Dec. Ex. JJ). 

V. CONCLUSION

For the foregoing reasons, Class Counsel respectfully request that the Court 

grant the relief requested herein. 

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 Respectfully submitted, 

 CARELLA, BYRNE, CECCHI, 

OLSTEIN, BRODY & AGNELLO, P.C. 

Attorneys for Plaintiff 

By: /s/ Lindsey H. Taylor 

 LINDSEY H. TAYLOR 

Dated: March 2, 2012 

Of Counsel: 

Gerald Silk 

Mark Lebovitch 

Brett M. Middleton 

Jeremy Friedman 

BERNSTEIN LITOWITZ BERGER 

 & GROSSMANN LLP 

1285 Avenue of the Americas 

New York, NY 10019 

(212) 554-1400 

Jay W. Eisenhofer 

Michael J. Barry 

Caitlin Moyna 

GRANT & EISENHOFER P.A. 

123 Justison Street 

Wilmington, Delaware 19801 

(302) 622-7000 

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