Court Opinion

ID: 9840318
Source: CourtListenerOpinion
Date Created: 2023-09-15 22:04:01.693043+00
Date Added: 2024-06-11T10:28:17.586975
License: Public Domain

COURT OF CHANCERY

                                   OF THE

                              STATE OF DELAWARE

|Morgan T. Zurn            |                            |Leonard L. Williams Justice  |
|Vice Chancellor           |                            |Center                       |
|                          |                            |500 N. King Street, Suite    |
|                          |                            |11400                        |
|                          |                            |Wilmington, Delaware         |
|                          |                            |19801-3734                   |
                             September 15, 2023

|Michael J. Barry, Esquire                |Raymond J. DiCamillo, Esquire      |
|Grant & Eisenhofer P.A.                  |Richards, Layton & Finger, P.A.    |
|123 Justison Street, 7th Floor           |920 North King Street              |
|Wilmington, DE  19801                    |Wilmington, DE  19801              |
|Thomas Curry, Esquire                    |Gregory V. Varallo, Esquire        |
|Saxena White P.A.                        |Bernstein Litowitz Berger &        |
|824 North Market Street, Suite 1003      |Grossman LLP                       |
|Wilmington, DE  19801                    |500 Delaware Avenue, Suite 901     |
|                                         |Wilmington, DE  19801              |
|Theodore A. Kittila, Esquire             |Anthony A. Rickey, Esquire         |
|Halloran Farkas + Kittila LLP            |Margrave Law LLC                   |
|5801 Kennett Pike, Suite C/D             |3411 Silverside Road, Suite 104    |
|Wilmington, DE  19807                    |Wilmington, DE  19810              |
      RE:  In re AMC Entertainment Holdings, Inc. Stockholder Litigation,
              Consol. C.A. No. 2023-0215-MTZ

Dear Counsel and Ms. Izzo:

      I write to address  objector  Rose  Izzo’s  motion  for  an  award  of
attorneys’  fees.[1]   For  the  below  reasons,  I  award  Izzo’s   counsel
$212,700.00 in fees.  I also approve Izzo’s request for a  $3,000  incentive
fee, to be paid out of her counsel’s fee.

        A. Background

      The  parties  to  this  action  sought  approval  of  a  class  action
settlement that contemplated the payment of AMC Entertainment Holdings  Inc.
(“AMC” or the “Company”) common stock to class members as consideration  for
their release of certain claims (the “Settlement  Shares”).   At  the  time,
the plaintiffs’  counsel  estimated  the  value  of  the  Settlement  Shares
exceeded $129 million.[2]  They sought a fee of $20  million,  or  15.5%  of
this value.[3]  Izzo appeared as  an  objector  and  asserted  a  flurry  of
challenges to the proposed settlement,  including  that  the  requested  fee
percentage was excessive.[4]   She  also  argued  that  settlement  approval
could have an adverse effect on the Company’s stock price, and so the  award
of attorneys’  fees  should  be  derived  from  a  post-settlement  approval
valuation of the Settlement Shares.[5]  I approved the settlement and  fixed
the fee percentage at 12%, to be applied upon issuance and valuation of  the
Settlement Shares. [6]

      The  Settlement  Shares  have  since  been  issued.   Pursuant  to  my
instructions, the parties agreed the value of the Settlement Shares  to  the
class was  $47,992,395.54.[7]   A  12%  fee  based  on  that  figure  totals
$5,759,087.46, representing a  more  than  $14  million  discount  from  the
original request.[8]

      Izzo now claims credit for  that  discount.   She  seeks  $650,000  in
attorneys’ fees and a $3,000 incentive fee for Izzo to be paid  out  of  her
counsel’s fee.  The parties took no position on Izzo’s requests.[9]

        B. Analysis

      “[A] litigant or a lawyer who recovers a common fund for  the  benefit
of persons other than himself or his client  is  entitled  to  a  reasonable
attorney’s fee from the fund as a whole.”[10]  The Court  has  “considerable
discretion when deciding the  appropriate  fee  award.”[11]   In  exercising
that discretion, the Court will apply the Sugarland factors, which  include:
 “1) the results achieved; 2)  the  time  and  effort  of  counsel;  3)  the
relative complexities of the litigation; 4) any contingency factor;  and  5)
the standing and ability  of  counsel  involved.”[12]   The  most  important
factor is the benefit created by the litigant.[13]

              1. The Benefit Achieved

      I begin by determining whether Izzo was responsible for the  reduction
in  attorneys’  fees.   As  stated,  the  plaintiffs’   counsel   originally
requested a fee equal to 15.5% of the value of the Settlement Shares,  which
the plaintiffs estimated exceeded $129 million.   Izzo  advocated  for  that
percentage to be cut to 10%, and for the valuation of the Settlement  Shares
to be reduced.  I ultimately awarded 12% of  the  value  of  the  Settlement
Shares at the time they were paid.  The market, and so the  parties,  valued
the Settlement Shares at substantially less  than  Plaintiffs’  counsel  had
predicted. The lower percentage, and more  significantly  the  lower  value,
resulted in a considerable fee reduction.  Izzo argues that she  contributed
to this reduction in three ways.

      First, Izzo takes  credit  for  the  decision  to  defer  valuing  the
Settlement Shares until they  were  issued  to  the  class.   Her  objection
argued that AMC’s retail stockholder base would  consider  the  consummation
of the settlement agreement as  a  “betrayal”  and  divest  their  holdings,
causing the market price to “tumble.”[14]  Izzo argued that the  plaintiffs’
counsel should bear some of this particular risk, suggesting that “the  most
easily administrable solution would be to rule first on the  Settlement  and
then, if it becomes  final,  address  Plaintiffs’  fee  petition  after  the
[conversion of preferred shares into common].”[15]

        I found, and still find,  Izzo’s  reasoning  to  delay  valuing  the
settlement consideration unpersuasive—she proffered no evidence  to  support
her predicted mass exodus of aggrieved  retail  investors  and  a  resulting
material impact on  AMC’s  common  stock  price.[16]   I  decided  to  defer
valuation of the Settlement Shares and therefore the fee, but for  different
reasons.   Having  found  there  was  no  need  to  definitively  value  the
Settlement Shares for purposes of settlement approval, I deferred  valuation
of the Settlement Shares until the time they were issued to the  class.   As
I explained in approving the settlement:

      Under these circumstances, speculating as to the  future  value  of  a
      share of AMC common stock makes little  sense.   I  leave  it  to  the
      parties  to  confer  on  the  value  of  the  Settlement   Shares   as
      crystallized at the time those shares are issued, and on what  12%  of
      that  value  represents.   The  parties  should   derive   Plaintiffs’
      counsel’s fee from the closing price of AMC common stock on  the  date
      Settlement Shares are issued.[17]

Izzo’s objection on this point was not helpful, and the fact we reached  the
same conclusion alone does not warrant an award of attorneys’ fees.[18]

      Second, Izzo argued that the settlement was an early-stage settlement,
meriting a fee award of 10% to 15%.  In  determining  that  the  plaintiffs’
fee  request  was  excessive,  I  explained  that  “[w]hile  the  settlement
followed highly expedited written and document discovery, the settlement  is
still an early-stage settlement” and  that  “[t]he  most  justifiable  ‘paid
separately’ percentage is 13%.”[19]  Again, Izzo  and  I  reached  the  same
conclusion, but her argument was too  underdeveloped  to  be  persuasive  or
useful.

      Third, Izzo alerted the Court  to  the  existence  of  Seb  Investment
Management AB v.  Symantec  Corp.,  a  California  decision  that  addressed
concerns that  the  plaintiffs’  counsel  and  their  client  in  that  case
“engaged in a play to pay.”[20]  There, the District Court for the  Northern
District of California ordered the parties to  allow  class  members  a  new
opportunity to opt out of the class after finding “no clear-cut evidence  of
a quid  pro  quo  emerged,  [though]  discovery  did  show  that  [Bernstein
Litowitz Berger & Grossman LLP’s] initial explanation to  the  Court  proved
misleading.”[21]  It  held  that  “in  future  cases,   [Bernstein  Litowitz
Berger & Grossman LLP] in seeking appointment as class counsel  shall  bring
this order to the attention of the assigned  judge  and  the  decision-maker
for the lead plaintiff who  is  to  select  counsel.”[22]   The  plaintiffs’
counsel failed to bring this ruling to my attention, and I  considered  this
fact in my consideration of counsel’s standing.[23]

      Together,  several  factors  weighing  on  the  plaintiffs’  counsel’s
standing resulted in a  0.5%  reduction  in  their  fee  award.   That  0.5%
reduction reflects savings of $239,961.98.   I  expressly  considered  three
separate inputs to that downward adjustment, of which the  nondisclosure  of
the California case was one.  Thus, I conclude  that  Izzo  was  responsible
for one third, or $79,987.33, of the resulting reduction.

              2. The Secondary Sugarland Factors

      I now turn to the secondary  Sugarland  factors  as  applied  to  that
benefit to the class and AMC.  “Secondary factors include the complexity  of
the litigation, the standing  and  skill  of  counsel,  and  the  contingent
nature of the fee arrangement together with the level  of  contingency  risk
actually involved in the case.”[24]

      In my August 11 decision, I explained that “[t]his litigation was both
complex and challenging,” and that the plaintiffs “filed claims  applying  a
novel legal theory, crafted in a changing legal landscape, to  sophisticated
financial engineering.”[25]   Izzo  was  faced  with  substantially  similar
legal challenges, and the complexity of the litigation  warrants  an  upward
adjustment.[26]  Izzo’s counsel, who are known  to  and  respected  by  this
Court, undertook this representation on a contingency fee basis.

      I find that a one-third contingency fee is appropriate.[27]   Applying
a one-third contingency fee to the $79,987.33 benefit Izzo  caused  entitles
Izzo to an award of approximately $27,700.00.

              3. Additional Benefits

      But Izzo’s counsel did more than secure a benefit for the class:  they
were helpful to the  Court.   When  a  case  settles,  the  parties  seeking
approval of  their  settlement  drop  their  adversarial  weapons  and  work
together towards the common goal of securing settlement approval.  This one-
handed clapping makes it more difficult for the Court  to  ensure  that  the
proposed  settlement  is  fair.   Objectors  can   assist   the   Court   by
scrutinizing the  parties’  agreement  and  identifying  issues  that  might
betray its unfairness to absent class members.[28]

      In most circumstances, even where an objector offers such  assistance,
her counsel is typically entitled to fees only where “his  efforts  improved
the final settlement or he conferred a benefit on the  class.”[29]   But  in
“a very rare case . . .  an objector will be awarded  a  fee  on  the  basis
that he did benefit the class by substantially assisting the  court  in  its
evaluation of the proposed settlement.”[30]

      This is one of those very  rare  cases.   The  parties  reached  their
settlement and urged expedited approval  before  the  discovery  record  was
presented to the Court, and the absent class members were vocal and  diverse
and unrepresented.  Izzo’s work  provided  the  adversarial  perspective  of
Delaware attorneys  on  an  expedited  and  complex  settlement  that  posed
several novel  procedural  and  substantive  difficulties.   Izzo’s  counsel
fought for access to  and  then  reviewed  the  discovery  record,  filed  a
comprehensive and multifaceted objection, took  exceptions  to  the  Special
Master’s report and recommendation, and zealously  advocated  for  her  many
positions at the hearing.  To be sure, some of  her  challenges  were  weak,
and served more as a distraction rather than a helpful check on  the  merits
of the settlement.[31]  Nevertheless, it is clear that Izzo took a  serious,
thorough look into the merits, which were far from straightforward.

      And Izzo weighed in on not only the merits of the settlement, but also
other issues the Court had to address  on  the  path  to  the  merits.   She
offered represented advocacy on objector access  to  discovery[32]  and  the
withdrawal of one of the representative plaintiffs.[33]

      Under these rare circumstances, and gauging the extent to which Izzo’s
work was helpful to  the  Court,  the  forgoing  warrants  a  fee  award  of
$185,000.00, equal  to  around  two-thirds  of  her  counsel’s  lodestar  of
$277,960.00.[34]

      This leaves the question of who should pay that  fee.   Izzo  did  not
suggest  who  should  pay,  and  her  proposed  order  leaves  the  question
open.[35]  When Izzo presented her motion  to  the  parties,  they  took  no
position.  Izzo’s counsel’s advocacy was helpful to the Court  in  part  due
to the lack of adversarial advocacy between the parties  in  the  settlement
context.  And so I believe it is fair, and within my  discretion,  to  split
the objector’s fee between the defendants and the plaintiffs’ counsel.

              4. Izzo’s Incentive Fee

      Izzo has requested an incentive fee of $3,000 to be paid  out  of  any
fee award  to  her  counsel.   The  Court  may  grant  incentive  awards  to
representative plaintiffs where  justified  by  the  factors  identified  in
Raider v. Sunderland: (i) the “time, effort and expertise  expended  by  the
class representative,” and (ii) the “benefit to the class.”[36]  She  points
out she was an active litigant, attended the settlement hearing,  and,  like
the   representative   plaintiffs,   “endured   an    unusual    level    of
harassment.”[37]  As  explained  in  my  August  11  decision,  this  was  a
difficult case for all involved.[38]   Under  the  unique  circumstances  of
this case, Izzo’s requested fee is warranted.

        C. Conclusion

      Izzo’s counsel is entitled to  a  fee  award  of  $27,700.00  for  the
reduction in attorneys’ fees, to be paid by the  Company.   Her  counsel  is
also entitled to  $185,000.00,  to  be  split  between  the  defendants  and
plaintiffs’ counsel.[39]  Izzo is to be paid  an  incentive  fee  of  $3,000
from that amount.  To the extent an order is necessary, IT IS SO ORDERED.

                                              Sincerely,
                                              /s/ Morgan T. Zurn

                                              Vice Chancellor

MTZ/ms

cc:   All Counsel of Record, via File & ServeXpress

-----------------------
[1] Docket Item (“D.I.”) 655 at Mot.

[2] D.I. 206 at Op. Br. 30–31.

[3] Id. at 51, 57.

[4] D.I. 450 at Corrected Transmittal Aff. of Thomas  Curry  in  Support  of
Pls.’ Reply in Further Supp.  of  Settlement,  Award  of  Att’ys’  Fees  and
Expenses, and Incentive Awards, Ex. 2 at 53–54 [hereinafter “Izzo Obj.”].

[5] Id. at 47–48.

[6] In re AMC Ent. Hldgs., Inc. S’holder Litig., 2023  WL  5165606,  at  *40
(Del. Ch. Aug. 11, 2023).  The  August  11  opinion  is  also  available  at
docket item 615.  For a more complete recitation of the brief yet  extensive
history of this litigation, I refer readers to my  July  22  and  August  11
opinions in this matter.  In re AMC Ent. Hldgs.,  Inc.  S’holder  Litig.,  —
A.3d —, 2023 WL 4677722 (Del. Ch.  July  21,  2023);  In  re  AMC,  2023  WL
5165606.  The July 21 opinion is also available at docket item 581.

[7] D.I. 663 at 3.

[8] Id. ¶ 1.

[9] D.I. 658, Ex. A.

[10] Americas Mining Corp. v. Theriault, 51 A.3d 1213, 1252–53  (Del.  2012)
(internal quotation marks omitted) (quoting Boeing Co. v.  Van  Gemert,  444
U.S. 472, 478 (1980)); Korn v. New Castle Cnty., 922  A.2d  409,  412  (Del.
2007) (“The ‘common fund’ exception  enables  a  litigant  who  succeeds  in
conferring a monetary benefit upon an ascertainable class of individuals  to
recover costs from the fund that he or she created.”).

[11] Griffith v. Stein ex rel. Goldman Sachs  Grp.,  Inc.,  283  A.3d  1124,
1139 (Del. 2022).

[12] Americas Mining, 51 A.3d at 1254.

[13] Id. (“Delaware courts have assigned the greatest weight to the  benefit
achieved in litigation.”).

[14] Izzo Obj. 47.

[15] Id. at 48.

[16] This is true notwithstanding the fact that  AMC’s  common  stock  price
declined following settlement approval.

[17] In re AMC, 2023 WL 5165606, at *40.

[18] Griffith, 283 A.3d at 1139.

[19] In re AMC, 2023 WL 5165606, at *37 (quoting  In  re  Dell  Techs.  Inc.
Class V S’holders Litig., 2023  WL  4864861,  at  *34  (Del.  Ch.  July  31,
2023)).

[20] Seb Inv. Mgmt. AB v. Symantec Corp., 2021 WL 1540996, at *1 (N.D.  Cal.
Apr. 20, 2021).

[21] Id. at *2.

[22] Id.

[23] In re AMC, 2023 WL 5165606, at *39.

[24] Judy v. Preferred Commc’n Sys., Inc., 2016 WL  4992687,  at  *15  (Del.
Ch. Sept. 19, 2016).

[25] In re AMC, 2023 WL 5165606, at *38.

[26] In re Activision Blizzard, Inc. S’holder Litig., 124  A.3d  1025,  1072
(Del. Ch. 2015)  (“All  else  equal,  litigation  that  is  challenging  and
complex supports a higher fee award.”).

[27] See Stein v. Blankfein, 2019 WL  2750100,  at  *2  (Del.  Ch.  July  1,
2019).

[28] See In re Amsted Indus. Inc. Litig., 1988 WL 92736, at  *11  (Del.  Ch.
Aug. 24, 1988) (“This effort, while it  failed  to  win  acceptance  of  his
position, contributed to the class in increasing the assurance that  a  fair
compromise had been reached.”), aff’d sub  nom.  Barkan  v.  Amsted  Indus.,
Inc., 567 A.2d 1279 (Del. 1989).

[29] Schultz v. Ginsburg, 965 A.2d 661, 670–71  (Del.  2009),  overruled  on
other grounds by Urdan v. WR Cap. P’rs, LLC, 244 A.3d 668 (Del. 2020).

[30] Amsted Indus., 1988 WL 92736, at *12; see also In  re  Riverbed  Tech.,
Inc. S’holders Litig., 2015 WL 7769861, at *3 (Del. Ch. Dec. 2, 2015).

[31]  See,  e.g.,  Izzo  Obj.  13–19  (explaining  why  each  representative
plaintiff is not an “Ape”).

[32] D.I. 311 at Ltr.

[33] D.I. 357 at Response.

[34] D.I. 655 at Mot. ¶ 27.

[35] D.I. 655 at Proposed Order ¶ 3.

[36] Raider v. Sunderland, 2006 WL 75310, at *2 (Del. Ch. Jan. 4, 2006).

[37] D.I. 655 at Mot. ¶ 31.

[38] In re AMC, 2023 WL 5165606, at  *41  n.367  (explaining  the  requested
$5,000  incentive  fees  may  be  low  considering,  among   other   things,
“Plaintiffs, like their counsel and the Court, were subject  to  an  unusual
level of harassment from the time of filing the complaints  throughout  this
settlement process”).

[39] Izzo did not separately request expenses, and so no separate  award  of
expenses will be issued.