Opinion ID: 2159056
Heading Depth: 1
Heading Rank: 3

Heading: The Challenge to the Award of Attorneys' Fees

Text: Juarez and Pezza-Fiorillo, on the other hand, do not, in this appeal, challenge the adequacy of the settlement or an award of fair, adequate and reasonable fees. Instead, they claim that the Chancellor erred as a matter of both law and fact by failing to assign or allocate a portion of the attorneys' fees actually awarded to counsel who solely participated in the New York litigation. Appellants first contend that the Chancellor based his ruling on an inaccurate interpretation of Delaware law. Juarez and Pezza-Fiorillo argue that the Chancellor ruled as a matter of law that only counsel who litigated before him in the Court of Chancery were entitled to a portion of the attorneys' fees, regardless of any benefit that may have been conferred by actions pursued in other jurisdictions. We fully agree that, had the Chancellor, in fact, ruled as alleged by Appellants, he would have incorrectly stated the law. Counsel pursuing litigation in any jurisdiction is entitled to a share of attorneys' fees in a settlement of a Delaware action if their efforts elsewhere conferred a benefit realized as part of the Delaware settlement. [18] Nevertheless, we do not read the Chancellor's final order and remarks from the bench to be an asserted deviation from or variation on a well-established principle of our corporate law. We find it clear on this record that the basis for his ruling that New York counsel would not share in the fee award was not because they had failed to appear in the Delaware Action, but because the New York litigation neither promoted or influenced the global settlement in any meaningful way nor resulted directly in any benefit to the shareholder class. We do not assign the same importance as Juarez and Pezza-Fiorillo to the Chancellor's comment from the bench that the only way counsel can be assured of a part of the award is to appear before the Court of Chancery and petition to become class counsel or co-counsel in Delaware litigation. Indeed, this is hardly a new statement of law. Instead we read it simply as a common sense statement of a readily observable fact, specifically intended for the future reference of counsel to whom he was denying fees. At no point does the Chancellor suggest that this was the basis for his decision. He merely voiced the rather obvious reality that the only sure way for any judge to know if, and to what extent, counsel have conferred a benefit in shareholder litigation is if they have actively appeared in front of him throughout the litigation. This in no way excludes any proper application for fees, including those arising from litigation in other fora, so long as counsel can substantiate that their involvement and efforts in other litigation resulted in a benefit to the class derived from the settlement. Juarez and Pezza-Fiorillo allege that the language of the Chancellor's cover letter to his final order supports their claim that the Chancellor misstated the law. The single sentence to which they point in that brief letter states: If New York counsel want to apply for counsel fees in the New York cases, that is up to them. First, we note that the cover letter accompanying an order is hardly the definitive place for a party to seek the legal underpinnings of a judge's ruling, especially when that actual ruling can be found in a detailed written order, supplemented by extensive comment from the bench on the ruling. To avoid other misguided inferences that some might seek to draw from the Chancellor's statement, we restate that our law allows counsel pursuing litigation in other jurisdictions to seek attorneys' fees in Delaware so long as their efforts elsewhere have conferred a benefit that contributed to the settlement of similar suits here. Here, the suggestion that the Chancellor ruled that the New York court was the sole forum in which counsel litigating there could seek a fee award is misleading. We conclude in light of the record in this case and the Chancellor's comments both from the bench and in his final order, that he neither based his ruling upon the premise asserted by Juarez and Pezza-Fiorillo, nor did he intend that the parties consider it to be the law of the case. This Court cannot state with any assurance what prompted the Chancellor's almost tangential comment in that letter. However, we can speculate that it was in part a result of the frustration that accompanies chimeric claims for awards of attorneys' fees. As we discuss infra, counsel for Juarez and Pezza-Fiorillo offered no substantial evidence to support their claim that they conferred a benefit on the class by positively affecting the settlement in Delaware which could entitle them to an allocation of the fee award. Despite invitations to join the Delaware litigation and represent the interests of their clients before the Court of Chancery, counsel chose not to intervene until the time arose to allocate a fee. While our courts welcome the intervention of any party, including attorneys with valid claims for attorneys' fees, we can certainly understand the Chancellor's impatience with hollow claims, especially in light of the tendency for those claims to consume our limited judicial resources. Since we find it clear that the Chancellor applied the correct legal standard, this Court must now turn to the secondary question of whether the Chancellor abused his discretion by determining that counsel for the New York litigants were not entitled to a share of the fee award. Juarez and Pezza-Fiorillo's claim that their attorneys are entitled to a portion of the fee award requires an analysis of the impact that the New York litigation had on the settlement of the Delaware Action. The determination of any award is a matter within the sound judicial discretion of the Court of Chancery. [19] A careful study of the record indicates that the Chancellor's decision not to award fees to counsel for the New York litigants is fully supported by the evidence that was before him and that, therefore, he did not abuse his discretion. We have articulated several factors that the Court of Chancery must consider in determining any award of attorneys' fees. They include: (1) the results accomplished for the benefit of the shareholders; (2) the efforts of counsel and the time spent in connection with the case; (3) the contingent nature of the fee; (4) the difficulty of the litigation; and (5) the standing and ability of counsel involved. [20] All of the Sugarland factors are contingent upon the benefit at issue being causally related to the efforts of counsel in pursuing their action. A number of factors in the record support the Chancellor's conclusion that counsel for the New York litigants failed to confer a benefit upon the class that would entitle them to an award of attorneys' fees. Because Juarez and Pezza-Fiorillo failed to participate in the Delaware litigation in any meaningful way, any evidence of a benefit must result from the impact of the New York litigation itself. When determining the amount and distribution of an award, the mere pendency of litigation alone does not establish the causal connection between counsel's efforts and changes in the merger terms that benefit the shareholder class. In this appeal, the record is devoid of evidence that the New York litigation in any way influenced the settlement approved by the Court of Chancery. Juarez and Pezza-Fiorillo conceded at the settlement hearing that their counsel did not take part in any settlement negotiations with the special committee or the directors of the defendant corporations as part of their prosecution of their claims. More importantly, the record belies Appellants claims that they actively pursued the litigation in the New York Supreme Court. The mere fact that Juarez and Pezza-Fiorillo served document requests does not necessarily demonstrate a seriousness of purpose and an intent to litigate hard that would move the defendants to settlement, as Appellants contend; nor does their briefing and argument of a motion for expedited discovery. When it denied that motion, the New York Supreme Court made clear that it considered the proper forum for resolving this dispute to be the Court of Chancery. This is consistent with our reading of New York case law, which favors the resolution of corporate governance disputes in the state of incorporation, under the internal affairs doctrine. [21] Although the record does not indicate that there was a formal stay in the New York proceedings, it is clear not only that the case was not actively prosecuted during the existence of the Delaware litigation, but that it presented a threat so insubstantial that it is unlikely to have had meaningful influence on the decision of Viacom and Infinity to settle the Delaware Action. We find that the Chancellor did not abuse his discretion when he denied Juarez and Pezza-Fiorillo's counsel a percentage of the attorneys' fees award under these circumstances. The judgment of the Court of Chancery is affirmed.