Court Opinion

ID: 4013806
Source: CourtListenerOpinion
Date Created: 2016-07-07 17:00:29.074614+00
Date Added: 2024-06-11T07:44:52.623815
License: Public Domain

NOT PRECEDENTIAL

                     UNITED STATES COURT OF APPEALS
                          FOR THE THIRD CIRCUIT
                              ______________

                                  No. 15-2831
                                 ______________

ELI MOR, derivatively on behalf of AMERISOURCEBERGEN CORPORATION and
   individually on behalf of himself and all other similarly-situated shareholders of
                    AMERISOURCEBERGEN CORPORATION

                                         v.

  STEVEN COLLIS, RICHARD GOCHNAUER, RICHARD GOZON, EDWARD
  HAGENLOCKER, KATHLEEN HYLE, MICHAEL LONG, HENRY MCGEE,
     CHARLES COTROS, JANE HENNEY, and AMERISOURCEBERGEN
                         CORPORATION

                                      Eli Mor,

                                         Appellant

                                ______________

                  On Appeal from the United States District Court
                             for the District of Delaware
                              (D.C. No. 1:13-cv-00242)
                  District Judge: Honorable Richard G. Andrews
                                   ______________

                     Submitted under Third Circuit LAR 34.1(a)
                                 March 17, 2016

    Before: CHAGARES, RESTREPO, and VAN ANTWERPEN, Circuit Judges

                                (Filed: July 7, 2016)
                                     ______________

                                        OPINION*
                                     ______________

RESTREPO, Circuit Judge

       On October 28, 2014, the District Court approved the parties’ negotiated

settlement of this shareholder derivative class action, reserving the issue of the amount of

attorneys’ fees to be awarded to plaintiff, Eli Mor. Although the District Court awarded

attorneys’ fees to plaintiff by Memorandum and Order filed July 1, 2015, the Court

awarded substantially less than the uncontested fees requested by plaintiff that had been

negotiated by the parties and included in the Stipulation of Settlement entered into by the

parties (“Stipulation”). See Mor v. Collis, No. 13-0242, 2015 WL 4036167, *7 (D. Del.

June 30, 2015). Mor has filed an appeal of that Memorandum and Order, and no party

has filed opposition to this appeal.1 For the reasons explained below, we vacate that

portion of the Memorandum and Order awarding fees and expenses, and we remand for

further proceedings consistent with this Opinion.

                                             I.

*
 This disposition is not an Opinion of the full Court and, pursuant to I.O.P. 5.7, does not
constitute binding precedent.

1
 Under the Stipulation, the parties mutually agreed that the fee request was fair and
reasonable, plaintiff’s counsel agreed to waive any right to seek or collect any award of
attorneys’ fees, or reimbursement of costs and expenses, exceeding $1,000,000 in total,
and defendants agreed not to oppose the fee petition. See Stip. dated 8/15/13, at 7, ¶¶ 1-
2. Thus, defendants are not participating in this appeal.
                                             2
       On February 15, 2013, Mor filed a Complaint in the District Court derivatively on

behalf of AmerisourceBergen Corporation (“ABC” or “the Company”) and individually

on behalf of himself and all other similarly-situated shareholders of ABC, naming as

defendants nine members of the Company’s Board of Directors (“Board”)2 and ABC, as

nominal defendant. The Complaint alleged the Board exceeded its authority under the

Company’s shareholder-approved Equity Incentive Plan (“Plan”) resulting in a breach of

fiduciary duties, waste of corporate assets, and unjust enrichment.

       Mor’s claims stemmed from his allegations that in 2012 the Board granted

758,810 stock awards to defendant Steven Collis, the Company’s President, Chief

Executive Officer and a Director, thereby exceeding the alleged 300,000-share limit

permitted to be granted to any individual participant in one calendar year under the Plan.

Mor claimed the Board members did not act in good faith toward the Company when

they breached their fiduciary duties by approving these improper stock options and by

filing with the U.S. Securities and Exchange Commission (“SEC”) on January 18, 2013 a

Proxy Statement (“2013 Proxy”) allegedly containing materially false and misleading

omissions that rendered shareholders unable to make informed decisions at the 2013

Annual Meeting of Stockholders.

       On April 12, 2013, defendants filed a motion to dismiss plaintiff’s Complaint, and

the motion was subsequently briefed by the parties. In the meantime, on April 26 2013,

non-party ICLUB Investment Partnership (“ICLUB”) wrote the District Court advising of

2
 Plaintiff states that Director Douglas Conant was not named as a defendant because he
joined the Board subsequently to the events challenged in the Complaint. See Pl.’s Br. 4
n.1.
                                             3
a related action it had filed in the U.S. District Court for the Eastern District of

Pennsylvania. Further, on July 11, 2013, KBC Asset Management N.V. (“KBC”) moved

to intervene.

       The parties to this action entered into and filed the Stipulation of Settlement on

August 15, 2013. The Stipulation states that on February 19, 2009, ABC’s stockholders

approved the Company’s Management Incentive Plan which provides for a 300,000-share

limit on grants of awards to eligible individuals in any calendar year commencing on or

after January 1, 2009. On May 14, 2009, ABC’s Board declared a two-for-one split of

the outstanding shares of common stock, and on June 10, 2009, pursuant to its authority

under the Plan, the Compensation Committee of the Board proportionally increased the

maximum award limit to any eligible individual in any calendar year to 600,000 shares,

effective June 15, 2009, to reflect the stock split. See Stip. 2, ¶¶ 1-3.

       The Stipulation further states that on May 6, 2011, with its regular 10-Q filing

with the SEC, ABC filed the renamed Equity Incentive Plan, amended and restated

effective January 1, 2011, but this document did not reflect the Compensation

Committee’s June 10, 2009 adjustment of the 300,000-share individual limit to a

600,000-share individual limit. Id. at 2, ¶ 4. The Stipulation also reflects that the

Compensation Committee granted Collis awards covering a total of 872,423 shares

during the 2012 calendar year. Id. at 3, ¶ 8.

       Ten days after the filing of plaintiff’s Complaint, ABC filed on February 25, 2013

a Form 8-K with the SEC that attached an electronic version of a Written Consent of the

Compensation Committee, dated June 10, 2009, that limited the grants of awards to

                                                4
eligible individuals in any calendar year to 600,000 shares of common stock. Id. at 4, ¶

12. The Stipulation reflects that defendants deny that they have breached any duty, or

violated any law, or engaged in any wrongdoing, or have any liability arising out of the

facts and circumstances described in plaintiff’s Complaint. Id. at 4, ¶ 13. The Stipulation

further acknowledges that the settlement is a result of arms’ length negotiations to settle

and resolve the dispute. Id. at 4, ¶ 15.

       Under the Stipulation, defendants agreed to cancel “272,423 of the stock options

awarded to Collis on November 14, 2012 pursuant to the Plan.” Id. at 5, ¶ II(A)(1). The

Stipulation also provides certain prophylactic corporate governance reforms for a period

of at least five years, including the requirement that the General Counsel of the Company

verify that all awards made under the Plan are compliant and certify that all amendments

to the Plan have been disclosed in the Company’s SEC filings.

       The Stipulation further provides that plaintiff would file an application for an

award of attorneys’ fees and reimbursement of costs and expenses in an amount not to

exceed $1,000,000, an amount which “[t]he Parties mutually agree[d] [was] fair and

reasonable.” Id. at 7. Defendants agreed not to oppose plaintiff’s fee application so long

as it did not seek an amount in excess of the agreed upon fee. Indeed, upon execution of

the Stipulation, defendants paid the agreed-upon fee to plaintiff’s counsel. Under the

Stipulation, payment of the fee award is subject to plaintiff’s counsel’s obligation to

make appropriate refunds or repayments to ABC in the event of any failure to obtain final

approval of the settlement, if the amount of fees and expenses actually awarded is less

                                             5
than the full amount of the fee award, or if the amount of fees and expenses is reduced by

the Court. Id. at 8.3

        The District Court dismissed the motion to dismiss and the motion to intervene

by Order dated August 16, 2013, and the Court stayed the Stipulation of Settlement until

such time as KBC had resolved its books and records request. On September 10, 2013,

plaintiff moved to lift the stay. However, following briefing by the parties, on October

21, 2013 the Court declined to lift the stay and scheduled a status conference to be held

on December 20, 2013.

       On February 4, 2014, the Court of Chancery of the State of Delaware granted the

Company’s motion for judgment on the pleadings as to KBC’s books and records

demand pertaining to ABC’s allegedly excessive grants of stock options in 2012, in that

any shareholder derivative claims were made moot in light of ABC’s aforementioned

cancellation of the excess options. The District Court then scheduled another status

conference to be held May 5, 2014. On July 23, 2014, counsel for KBC wrote the

District Court to advise that the books and records demand had been resolved with

respect to the excessive awards and that KBC no longer sought to intervene and did not

object to the Court’s consideration of the proposed settlement. The Court then entered an

Order on August 6, 2014 preliminarily approving the settlement, and plaintiff moved for

final approval of the settlement and award of attorneys’ fees.

3
 Thus, plaintiff represents that if this appeal is unsuccessful, plaintiff’s counsel will be
required to reimburse defendants $450,000. See Pl.’s Br. 8.
                                               6
       ICLUB thereafter objected to the settlement and moved for its own attorneys’ fees,

which plaintiff opposed. By Order dated October 17, 2014, the District Court directed

plaintiff and ICLUB “to submit, under oath, detailed time records related to this case for

each of its attorneys, with their usual hourly billing rates.” The parties agreed to revise

the settlement language, and ICLUB withdrew its objection. Following a hearing on

October 28, 2014, the District Court issued a Final Order and Judgment approving the

settlement that same date, reserving the issues on attorneys’ fees.

                                             II.

       On July 1, 2015, the District Court filed its Memorandum and Order addressing

plaintiff’s and ICLUB’s requests for attorneys’ fees. The Court denied ICLUB’s request

for fees and awarded plaintiff attorneys’ fees and expenses in the amount of $550,000.4

The Court found that this litigation resulted in, among other things, the creation of a

common fund equaling $5.048 million.

       The District Court pointed out, “In diversity cases, we apply state rules concerning

the award of attorneys’ fees.” Mor, 2015 WL 4036167, at *2 (quoting Sec. Mut. Life Ins.

Co. of N.Y. v. Contemporary Real Estate Assocs., 979 F.2d 329, 331-32 (3d Cir. 1992))

(internal quotations omitted). Thus, the District Court applied Delaware law in

determining its award of attorneys’ fees in this diversity action.

       The Court noted that, under Delaware law, “[i]n the realm of corporate litigation,

the Court may order the payment of counsel fees and related expenses to a plaintiff

4
 Since this appeal only involves the District Court’s award of fees and expenses to
plaintiff, the denial of ICLUB’s request for fees is not addressed herein.
                                              7
whose efforts result in the creation of a common fund, or the conferring of a corporate

benefit.” Id. (quoting Tandycrafts, Inc. v. Initio Partners, 562 A.2d 1162, 1164 (Del.

1989) (citations omitted)). The common fund doctrine states that “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.” Americas Mining Corp.

v. Theriault, 51 A.3d 1213, 1252-53 (Del. 2012) (quoting Boeing Co. v. Van Gemert, 444

U.S. 472, 478 (1980) (citations omitted)).

       The District Court noted that a determination of a reasonable award of attorneys’

fees is within the Court’s “sound judicial discretion.” Mor, 2015 WL 4036167, at *3

(quoting In re Infinity Broadcasting Corp. S’holders Litig., 802 A.2d 285, 293 (Del.

2002)). The Court considered the following factors, referred to as the Sugarland factors:

“(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.” Id.

(quoting Infinity Broadcasting, 802 A.2d at 293); see Sugarland Indus., Inc. v. Thomas,

420 A.2d 142, 149 (Del. 1980).

       After evaluating the relevant factors, the District Court “appl[ied] the percentage

of the common fund method to determine a reasonable fee award.” Mor, 2015 WL

40336167, at *5. In doing so, the Court pointed out that the agreed-upon $1 million fee

award amounted to 19.8% of the common fund. The District Court recognized that “a

court should give weight to an agreement regarding attorneys’ fees,” id. (quoting In re

Abercrombie & Fitch Co. S’holders Derivative Litig., 886 A.2d 1271, 1275 (Del. 2005)),

                                              8
but stated that “the weight given derives from and depends on the court’s sense of

confidence that the negotiations over the fee agreement were conducted in good faith and

had no effect on the other terms of the settlement,” id. (quoting In re Prodigy Commc’ns

Corp. S’holders Litig., No. 19113, 2002 WL 1767543, *6 (Del. Ch. July 26, 2002)).

       Despite finding “no doubt that the parties negotiated the settlement in good faith,”

the Court “believe[d] that the amount of attorney’s fees agreed upon far exceed[ed] what

[was] appropriate in this case.” Id. Indeed, the Court stated that “but for the agreement, I

would think $250,000 was about what reasonable attorney’s fees would be.” Id.

Ultimately, however, the Court concluded: “In light of the Delaware Supreme Court’s

statements in Americas Mining regarding settlements that occur in the early stages of

litigation, and according to my own business judgment, I think a reasonable fee award is

$550,000, which is roughly 10% of the common fund plus $50,000 for the corporate

governance reforms.” Id. Mor has appealed from that portion of the District Court’s July

1, 2015 Memorandum and Order awarding him $550,000 in attorneys’ fees and expenses.

                                           III. 5

5
 The District Court had jurisdiction pursuant to 28 U.S.C. §§ 1332(a) and 1367(a). We
exercise appellate jurisdiction pursuant to 28 U.S.C. § 1291. We review the District
Court’s award of attorneys’ fees for an abuse of discretion, “which can occur if the judge
fails to apply the proper legal standard or to follow proper procedures in making the
determination, or bases an award upon findings of fact that are clearly erroneous.” In re
Rite Aid Corp. Sec. Litig., 396 F.3d 294, 299 (3d Cir. 2005) (quoting In re Cendant Corp.
PRIDES Litig., 243 F.3d 722, 727 (3d Cir. 2001) (internal quotations omitted)). “The
standards employed calculating attorneys’ fees awards are legal questions subject to
plenary review, but ‘[t]he amount of a fee award . . . is within the district court’s
discretion so long as it employs correct standards and procedures and makes findings of
fact not clearly erroneous.’” Id. (quoting Pub. Int. Research Grp. of N.J., Inc. v. Windall,
51 F.3d 1179, 1184 (3d Cir. 1995) (internal quotations omitted)).
                                             9
       Mor does not argue that the District Court erred in choosing to apply Delaware

law in this case. However, citing both federal and Delaware caselaw in his brief, Mor

argues that the District Court’s award in this action impermissibly deviates from

governing law, whether federal law or Delaware law is applied. See Pl.’s Br. 21-22.

       “State rules concerning the award or denial of attorneys’ fees are to be applied in

cases where federal jurisdiction is based on diversity . . . , provided such rules do not run

counter to federal statutes or policy considerations.” McAdam v. Dean Witter Reynolds,

Inc., 896 F.2d 750, 775 n.47 (3d Cir. 1990). In any event, in this appeal, as Mor suggests,

see Pl.’s Br. 22 (citing Dewey v. Volkswagen Aktiengesellschaft, 558 F. App. 191, 196

(3d Cir. 2014) (non-precedential)), we need not decide what law governs an award of

attorneys’ fees since both federal law and Delaware law apply the percentage of the

common fund approach in awarding attorneys’ fees, and there is no sound reason to

believe the result of this appeal would be different depending on the law applied. See,

e.g., Rite Aid, 396 F.3d at 306 (“the percentage of common fund approach is the proper

method of awarding attorneys’ fees”); Americas Mining, 51 A.3d at 1258, 1261 (finding

that, under Delaware law, an award of attorneys’ fees in a case involving a common fund

is properly based upon a percentage of the benefit achieved in the litigation and pointing

out that federal cases consider reasonableness factors “which are similar to [the]

Sugarland factors”).

                                             IV.

       Reviewing courts retain a special and predominant interest in the fairness of class

action settlements and attorneys’ fees awards. Cendant, 243 F.3d at 731. Thus, we have

                                             10
an “interest as a reviewing court in ensuring that district courts fulfill their obligations

and comply with [applicable] instructions and guidelines.” Id. While “fee award

reasonableness factors ‘need not be applied in a formulaic way,’” see In re AT&T Corp.

Sec. Litig., 455 F.3d 160, 166 (3d Cir. 2006) (citing Rite Aid, 396 F.3d at 301)), district

courts must “clearly set forth their reasoning for fee awards so that we will have a

sufficient basis to review for abuse of discretion,” id. at 166 (quoting Rite Aid, 396 F.3d

at 301).

       “There are two primary methods for calculating attorneys’ fees: the percentage-of-

recovery method and the lodestar method.” Cendant, 243 F.3d at 732 (footnote omitted).

The percentage-of-recovery method is generally favored in cases involving a common

fund. Id. (citing In re Prudential Ins. Co. Am. Sales Practice Litig., 148 F.3d 283, 333

(3d Cir. 1998)). Indeed, “[t]he percentage-of-recovery method has long been used in this

Circuit in common-fund cases.” Id. at 734. As explained above, the District Court

applied that method in determining the amount of fees and expenses to award plaintiff’s

counsel.

       Mor argues, first, that the District Court misapprehended the facts relevant to his

application for attorneys’ fees and, second, that the Court abused its discretion by

conducting a flawed and arbitrary percentage-of-recovery analysis. In support of his first

contention, Mor initially argues that the District Court relied on an erroneous

understanding of the inception of the case. In particular, he argues that the Court failed to

recognize the degree of sophistication of this litigation.

                                              11
       In considering the complexity of the litigation, the District Court stated that “[t]he

present case was less complicated than most shareholder derivative actions,” noting that

the “case was developed from public disclosures.” Mor, 2015 WL 4036167, at *4. The

Court further stated that “this matter would have been an appropriate matter for a demand

on the board.” Id. The Court describes the underlying events in this case as “a ‘one-off’

mistake by ABC,” and concludes that “ABC should, of course, have been more careful,

but what happened here was not corporate malfeasance, it was corporate carelessness.”

Id. Therefore, the District Court found that “[t]he relative straightforwardness of this

case suggests a smaller fee award.” Id.

       We cannot say that the District Court abused its discretion insofar as it described

this case as neither legally nor factually complex. Plaintiff’s Complaint alleged that

defendants exceeded their authority by granting Collis stock awards during the 2012

calendar year greater than the maximum amount permitted under the Plan. Following the

parties’ negotiations and the filing of the Stipulation only six months after the Complaint

was filed, the parties acknowledged, among other things, that the Compensation

Committee of the Board increased the maximum total individual stock awards permitted

in a calendar year, effective June 15, 2009, to 600,000 to reflect the stock split, see Stip.

2, ¶¶ 1-4, but the parties further acknowledged that Collis’ awards covered a total of

872,423 shares during the 2012 calendar year, id. at 3, ¶ 8. While we recognize that other

issues were involved, including the timing of the filing of the Written Consent disclosing

the adjusted maximum individual stock awards permitted under the Plan and the need for

corporate governance reforms, we agree that this litigation was not particularly

                                              12
complicated and that was a factor to be considered in determining reasonable attorneys’

fees to be awarded.

       Nevertheless, as Mor points out, the record does not appear to support the District

Court’s assertion that “what happened here was not corporate malfeasance, it was

corporate carelessness,” see Mor, 2015 WL 4036167, at *4, and the District Court does

not point to anything in the record supporting such a conclusion. While the record does

not necessarily support the contrary conclusion, and the Stipulation reflects that

defendants deny that they have breached any duty or engaged in any wrongdoing, see

Stip. at 4, ¶ 13, the District Court’s statement is not supported by the record.

       Similarly, the record also does not support the conclusion that this was necessarily

“a ‘one-off’ mistake,” Mor, 2015 WL 4036167, at *4, and it is not clear what the Court

relied on in making this assertion. In other words, the District Court points to nothing to

support the implication that the type of events which plaintiff’s Complaint challenged

would not have occurred again.

       Further, to the extent that the Court implies that a demand letter to the Board in

this case would have resolved this dispute, again the District Court points to nothing in

the record which supports that conclusion. As Mor points out, in defendants’ motion to

dismiss the Complaint, as well as in the Stipulation, defendants deny any Plan violation

or wrongdoing actually occurred. Plaintiff further states that he did not make a demand

upon the Board relating to excess stock awards because a majority of the Board members

were incapable of objectively considering any such demand, rendering any such demand

futile. See Pl.’s Br. 3 (citing A31, ¶ 42). Plaintiff points out that, among other things, at

                                             13
the time plaintiff filed his Complaint, a majority of the Board either participated in the

grants or, in Collis’ case received the grants, id. at 3 (citing A31, ¶ 41; A32, ¶¶ 44-45). In

any event, to the extent that by concluding that “this matter would have been an

appropriate matter for a demand on the board,” see Mor, 2015 WL 4036167, at *4, the

District Court was implying that a demand would have resolved this case in the first

instance, the Court failed to provide any basis for such a conclusion.

       In considering the complexity of the litigation, the District Court also stated that

the “case was developed from the public disclosures,” and the Court asserted “the only

complexity was the jockeying among the shareholders’ attorneys for their pieces of the

pie.” Id. However, it is not clear what the District Court was relying on in making this

assertion and suggesting that the alleged Plan violation would have been detected despite

the investigation by plaintiff’s counsel. While other related actions were filed by ICLUB

and KBC, those actions were filed after plaintiff’s counsel had issued a press release

announcing their investigation into this issue, see A95.

       Again, while the conclusion that this case was relatively uncomplicated is not per

se an abuse of discretion, the aforementioned unsupported assertions by the District Court

in support of its award of fees affected the weight the District Court gave to the relevant

factors, and also could have had a significant effect on the Court’s ultimate determination

as to what amount of fees would be a reasonable award. Since the District Court failed to

“clearly set forth [its] reasoning” in support of multiple factual assertions it provided in

support of its award of attorneys’ fees, we do not have a “sufficient basis to review for

                                              14
abuse of discretion,” see AT&T Corp., 455 F.3d at 166 (quoting Rite Aid, 396 F.3d at

301), and a remand is warranted.

       Mor next argues that the District Court undervalued the recovery obtained by

plaintiff. In particular, Mor contends that although the District Court stated that it

accepted that the benefit to ABC as a result of plaintiff’s efforts resulting in the

cancellation of stock options awarded to Mr. Collis had a value of $5.048 million,

language in the Court’s discussion belies that conclusion.

       In discussing the benefit conferred to ABC, the District Court pointed out that,

pursuant to the Stipulation, the Company cancelled the excess 272,423 stock options

which had been awarded to Mr. Collis in 2012 and that plaintiff’s and ICLUB’s experts

agreed that the spread value of those cancelled options, as of the cancellation date,

August 7, 2013, would have been about $5.048 million. See Mor, 2015 WL 4036167, at

*3. The District Court noted that it accepted plaintiff’s argument “that the cancellation of

Mr. Collis’s excess stock options created a common fund in the amount of $5.048 million

– the ‘spread value’ of the 272,423 cancelled options,” id., and the Court specifically

stated that “for [the] purpose of this analysis, I accept that the benefit to ABC is $5.048

million,” id. at *4 (emph. added). Such a conclusion with respect to the benefit to ABC

resulting from plaintiff’s efforts is not an abuse of discretion.

       The Court stated that it accepted this amount as the common fund benefit

conferred in this litigation for purposes of its analysis, and we do not agree with Mor’s

contention that the District Court did not “truly factor into its analysis” the $5.048 million

as the benefit conferred to ABC as a result of the cancelled excess options, see Pl.’s Br.

                                              15
18. Nevertheless, the following portion of the Court’s Memorandum Opinion gives us

pause:

                    In my opinion, however, the common fund calculated
              by determining the spread value of the returned excess stock
              options overstates the significance of the recovery predicated
              as it is by the value of a volatile asset on the day it was
              returned. Once the various lawsuits and records demands
              were made in February 2013, the excess stock options were,
              for all practical purposes, frozen. They were going to end up
              back with ABC. On February 15, 2013, the stock closing
              price was $45.24 per share. The spread value then was
              $1,370,287.69. As of June 29, 2015, the per share value of
              ABC stock was about $106, more than double what it was on
              August 7, 2013. Thus, depending on the perspective taken,
              the benefit to ABC caused solely by this lawsuit is smaller
              than Plaintiff’s argument suggests, as most of the benefit has
              arisen from the rapid appreciation of the stock. Nonetheless,
              for purpose of this analysis, I accept that the benefit to ABC
              is $5.048 million.

Mor, 2015 WL 4036167, at *4. In light of the fact that the Court specifically

“accept[ed]” the $5.048 million as “the benefit to ABC” for purposes of its analysis, id.,

the District Court’s purpose in including this discussion in support of its Memorandum

Opinion is not altogether clear. Moreover, among other things, the Court fails to provide

a basis as to why conceptually freezing the value of the options at the time of this suit’s

inception, would be appropriate. In any event, since the Court specifically indicated that

it was considering the $5.048 million as the benefit conferred as a result of the

cancellation of the options, any conclusions that may have been based on this alternative

“perspective” shared by the District Court, would be error in that it is inconsistent with

the District Court’s explicit finding that the value to ABC of the cancellation of the

                                             16
excess shares was $5.048 million and, moreover, the Court failed to provide any basis for

using the value of the options at the time of this lawsuit’s inception.

         Finally, with regard to the District Court’s factual findings supporting its award of

fees, Mor argues that the Court failed to credit the significant majority of hours worked

by plaintiff’s counsel. Specifically, Mor complains that the Court ignored the hours spent

litigating the case subsequent to the beginning of settlement discussions.

         In considering the time and effort expended by plaintiff’s counsel, the District

Court found the following:

                      The parties were in the very early stages of litigation
                when settlement discussions began, and settled the case
                before any discovery had commenced. Nevertheless,
                Plaintiff’s counsel spent 63.5 hours on the case prior to filing
                the complaint, and another 172 hours through the motion to
                dismiss. Thus, Plaintiff’s attorneys spent a total of 235.5
                hours, amounting to around $150,000 in attorney’s fees, prior
                to shifting their focus to settlement. The early stage at which
                the case settled, and the low number of hours spent prior to
                settlement, suggest a smaller fee award.

Id. at *4. The Court was correct in pointing out that settlement discussions began in the

early stages of litigation. In fact, the parties filed the Stipulation only six months after the

filing of plaintiff’s Complaint, defendants’ motion to dismiss never needed to be resolved

by the Court, and there is no mention in the record before us that any depositions were

taken.

         However, the District Court did not explain why it ignored or failed to

acknowledge the hours spent by plaintiff’s counsel in connection with this case

subsequent to “shifting their focus to settlement,” see id. Plaintiff argues in his brief that

                                               17
counsel worked 741 hours litigating the action, see Pl.’s Br. 20 (citing A138 ¶ 5; A218 ¶

4), and that all of counsel’s efforts “were necessary to the successful prosecution of this

litigation,” id. at 21.

       In determining the amount of fees to award, the District Court considered the

Sugarland factors. See Mor, 2015 WL 4036167, at *3 (citing Infinity Broadcasting, 802

A.2d at 293 (identifying the Sugarland factors)). As the District Court identified, see id.,

the Supreme Court of Delaware has described the “time and effort” factor as “the efforts

of counsel and the time spent in connection with the case.” See Infinity Broadcasting,

802 A.2d at 293 (citing Sugarland Indus., 420 A.2d at 149); see also Gunter v.

Ridgewood Energy Corp., 223 F.3d 190, 195 n.1 (3d Cir. 2000) (including “the amount

of time devoted to the case by plaintiffs’ counsel” as a factor to consider in setting a fee

award). Here, the District Court neither explained why it only acknowledged about one-

third of the total hours plaintiff allegedly spent in connection with the case, nor did the

Court provide a basis or authority for doing so.

                                             V.

       In addition to challenging the aforementioned factual conclusions upon which the

District Court based its decision, Mor challenges the percentage-of-recovery analysis

conducted by the Court, and also argues that the District Court’s award of fees conflicts

with public policy. Mor does not challenge the fact that the District Court applied the

percentage-of-recovery method of calculation or the factors which the Court considered

in determining the amount of a reasonable award. Rather, he argues that the District

                                             18
Court failed to award an amount of fees within “the lower bound of the applicable

range(s)” consistent with other cases. See Pl.’s Br. 22.

       It is unnecessary for us to address the specific percentage of the benefit conferred

by the District Court or whether it is consistent with public policy, in light of the fact that

the case is being remanded for a proper consideration and re-weighing of the relevant

factors based on facts supported by the record in this case consistent with this Opinion.

Nevertheless, we point out that the Delaware Supreme Court in Americas Mining

emphasized, “The percentage awarded as attorneys’ fees from a common fund is

committed to the sound discretion of the [trial] Court” who has “broad discretion” in

applying the reasonableness factors under the circumstances of the case. Americas

Mining, 51 A.3d at 1262; see also Northeast Women’s Ctr. v. McMonagle, 889 F.2d 466,

475 (3d Cir. 1989) (The amount of a fee award is within the district court’s discretion so

long as it “employs correct standards and procedures, and makes findings of fact not

clearly erroneous.”). Thus, the Court in Americas Mining “decline[d] to impose . . . the

mandatory use of any particular range of percentages,” see Americas Mining, 51 A.3d at

1261,6 and reaffirmed that “the multiple factor Sugarland approach to determining

attorneys’ fee awards remained adequate for purposes of applying the equitable common

fund doctrine,” id. at 1258 (citing Goodrich v. E.F. Hutton Grp., Inc., 681 A.2d 1039,

6
 Although Americas Mining involved the Court’s refusal to impose a mandatory range of
percentages for determining fees in “megafund cases,” the Court was clearly
“reaffirm[ing] . . . [its] holding in Sugarland [which] set[] forth the proper factors for
determining attorneys’ fees awards in all common fund cases,” see Americas Mining, 51
A.3d at 1261, and confirming that the “percentage awarded as attorneys’ fees from a
common fund is committed to the sound discretion of the [trial] Court,” id. (citing
Chrysler Corp. v. Dann, 223 A.2d 384, 386 (Del. 1966)).
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1050 (Del. 1996)); see also Cendant, 243 F.3d at 736 (“These varying ranges of

attorneys’ fees confirm that a district court may not rely on a formulaic application of the

appropriate range in awarding fees but must consider the relevant circumstances of the

particular case.”). “Delaware courts have assigned the greatest weight to the benefit

achieved in litigation.” Americas Mining, 51 A.3d at 1254.

       In this case, for the reasons explained above, in considering the relevant

reasonableness factors, the District Court failed to provide a sufficient explanation and

based its award on certain factual assertions which appear to have no basis in the record

and which certainly could have had a significant effect on the ultimate award of

attorneys’ fees. Therefore, to that extent, Mor is correct that the percentage-of-recovery

analysis was flawed.

                                            VI.

       Mor argues that the District Court failed to properly value the corporate

therapeutics obtained by plaintiff. In discussing the benefit conferred as a result of

counsel’s efforts, the District Court acknowledged that, as a result of the Stipulation of

Settlement, “ABC received an additional benefit in the form of corporate governance

reforms that are intended to prevent future violations of the compensation limits provided

by ABC’s equity incentive plan.” Mor, 2015 WL 4036167, at *4. Citing Ryan v.

Gifford, No. 2213-CC, 2009 WL 18143, *10 (Del. Ch. Jan. 2, 2009), the District Court

noted that “‘significant corporate governance reforms designed to prevent future

wrongful option grants’ [are] ‘properly considered by the Court in determining a fee

award,’” see Mor, 2015 WL 4036167, at *4 (quoting Gifford, 2009 WL 18143, at *13),

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and that “corporate governance reforms can provide a substantial corporate benefit, even

if they are nonpecuniary in nature,” id. However, the District Court’s explanation for

awarding $50,000 for the corporate governance reforms is inadequate in that it is unclear

from the District Court’s Opinion its basis for asserting that ABC’s reforms resulting

from this litigation were “modest,” despite the fact that they appear to be significant

therapeutic reforms to prevent future wrongful options from being granted. Without

further explanation, it is not clear that the amount of the award for the negotiated

corporate governance reforms is not arbitrary.

                                            VII.

       For reasons explained above, the District Court’s award of attorneys’ fees and

expenses was at least partially based on factual assertions which were not supported by

the record, and the District Court failed to provide an adequate explanation in support of

its award so that we, as a reviewing court, have a sufficient basis to review for abuse of

discretion. Accordingly, that portion of the District Court’s Memorandum and Order

awarding plaintiff $550,000 in attorneys’ fees and expenses is vacated,7 and we remand

to the District Court for an award of fees and expenses consistent with this Opinion.8

7
 In addition to awarding fees and expenses to plaintiff, the District Court’s Memorandum
and Order filed July 1, 2015 also denied ICLUB’s petition for attorneys’ fees, but this
appeal only involves the District Court’s award of fees and expenses to plaintiff.
8
  Plaintiff argues that he “incurred substantial expenses in the course of litigation that
were not addressed in the [District Court’s] Opinion, including $11,587 in expert fees,
and totaling $14,606.” See Pl.’s Br. 30. On remand, the District Court should address the
issue of plaintiff’s expenses in awarding attorneys’ fees and expenses. See Goodrich,
681 A.2d at 1045 (“[Plaintiff’s] attorneys, whose efforts resulted in the creation of [a]
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common fund, are entitled to receive a reasonable fee and reimbursement for expenses
from that fund.”).
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