Opinion ID: 2266285
Heading Depth: 1
Heading Rank: 11

Heading: Goodrich Fee Award Equitable and Reasonable

Text: In this case, the Court of Chancery recognized the merit of the arguments which support a general preference for the immediate lump-sum payment of an attorney's fee award, that has been determined by the reasonable percentage of the fund method, when a common fund is created. It also acknowledged the merit of the emerging judicial consensus that the percentage of recovery awarded should decrease as the size of the [common] fund increases. Report of the Third Circuit Task Force, Court Awarded Attorney Fees, 108 F.R.D. at 256. See also 3 HERBERT B. NEWBERG & ALBA CONTE, NEWBERG ON CLASS ACTIONS § 14:03, at 14-13 to 14-14 (3d ed. 1992). The Court of Chancery concluded, however, that it would not be desirable to adopt Boeing as a per se rule that awarded attorney's fees as a percentage in relation to the maximum common fund available, without regard to the benefits actually realized by class members. The Court of Chancery's rejection of Boeing as a per se rule is not novel or unique. In fact, it is supported by the leading century-old precedent the Boeing decision relied upon with approval. See Central Railroad & Banking Co. v. Pettus, 113 U.S. 116, 5 S.Ct. 387, 28 L.Ed. 915 (1885). In Pettus, attorney's fees were awarded also in a class action based upon the claims actually submitted, rather than the total common fund. Id. In this case, the Court of Chancery used the percentage of recovery method. It also increased the percentage of the award from 16½% to 331/3% when it reduced the measure of benefits. The Court of Chancery concluded, however, that the $3.3 million settlement might not be an accurate quantification of the actual benefits conferred by the attorneys' efforts: In summary, ... this form of order seemed equitable, and within the sound discretion of the court, in this instance because the particular facts of the case raise a very significant risk that some portion and perhaps a large portion of the total fund available for payments to the class will in fact not be distributed to the class members. This is so for several reasons. First the class is very large and the losses that class members may have suffered, if the claims made are assumed to be valid, are quite small. Moreover the transaction costs that class members will necessarily encounter in making a claim are relatively high. Members of the class will need to have complete brokerage records going back over the entire period to make a full claim and will need to locate and search such records. It is quite likely that many and perhaps most class members will not be able to or motivated to make such a claim. In fact, ... for some class members with smaller transaction totals, if one assumes even a modest opportunity cost in searching out old records, it will be economically irrational to make a claim. Thus, the order limited the fee awarded to one-third of the benefits actually delivered to class members. Goodrich has a three-part response to that ruling in this appeal. First, Goodrich contends that to limit the award of attorney's fees to a percentage of the settlement fund claimed unfairly penalizes the attorneys whose efforts created the common fund, by conditioning payment on events beyond the attorneys' control. Second, Goodrich argues that the condition which the Court of Chancery placed on the fee award penalize[s] [his attorneys] unfairly for the practical difficulties of administering the settlement based upon the potentially small size of individual claims; the need for claimants to establish their claims by producing transaction records; and the passage of time [ten years]. Third, Goodrich argues that the Court of Chancery has permitted E.F. Hutton to benefit at the expense of the plaintiff's attorneys and the class, by causing a portion of the attorney's fee award to revert as part of the unclaimed settlement fund. Goodrich's arguments demonstrate the equity in the Court of Chancery's decision. The condition precedent to invoking the common fund doctrine is a demonstration that a common benefit has been conferred. The Court of Chancery expressed concern about whether the common fund was an accurate quantification of the actual benefit that had been conferred in this case. By conditioning the award of attorney's fees upon the claims actually submitted, the Court of Chancery exercised its discretion equitably, to correlate the attorneys' compensation with the structure of the settlement benefits the attorneys had negotiated for the class. [11] This case establishes, once again, that the Court of Chancery's existing multiple factor approach to determining attorney's fee awards remains adequate for purposes of applying the equitable common fund doctrine. Tandycrafts, Inc. v. Initio Partners, 562 A.2d at 1167. See Sugarland Industries, Inc. v. Thomas, Del.Supr., 420 A.2d 142, 150 (1980); Maurer v. International Re-Insurance Corp., Del.Supr., 95 A.2d 827 (1953). See also 3 ERNEST FOLK, III, RODMAN WARD, JR., & EDWARD P. WELCH, FOLK ON THE DELAWARE GENERAL CORPORATION LAW § 327.6.1 (3d ed.1991). Compare FEDERAL JUDICIAL CENTER, MANUAL FOR COMPLEX LITIGATION, THIRD § 24.121, at 190-91 (1995). [12] The adoption of a mandatory methodology or particular mathematical model for determining attorney's fees in common fund cases would be the antithesis of the equitable principles from which the concept of such awards originated. Trustees v. Greenough, 105 U.S. 527, 26 L.Ed. 1157 (1881); Central Railroad & Banking Co. v. Pettus, 113 U.S. 116, 5 S.Ct. 387, 28 L.Ed. 915 (1885). New mechanical guidelines are neither appropriate nor needed for the Court of Chancery. Sugarland Industries, Inc. v. Thomas, 420 A.2d at 150. Accord Tandycrafts, Inc. v. Initio Partners, 562 A.2d 1162 (1989); Maurer v. International Re-Insurance Corp., Del. Supr., 95 A.2d 827 (1953).