Court Opinion

ID: 9412607
Source: CourtListenerOpinion
Date Created: 2023-07-31 21:04:22.569444+00
Date Added: 2024-06-11T16:41:11.790211
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

IN RE DELL TECHNOLOGIES INC. ) Consol. C.A. No. 2018-0816-JTL
CLASS V STOCKHOLDERS LITIGATION )

             OPINION ON FEE AWARD AND INCENTIVE AWARD

                           Date Submitted: April 19, 2023
                            Date Decided: July 31, 2023

Ned Weinberger, Mark Richardson, Brendan W. Sullivan, Casimir O. Szustak, LABATON
SUCHAROW LLP, Wilmington, Delaware; Dominic Minerva, Joseph Cotilletta,
Nathaniel Blakney, LABATON SUCHAROW LLP, New York, New York; David M.
Cooper, Silpa Maruri, Dominic J. Pody, George T. Phillips, Christine J. Chen, QUINN
EMANUEL URQUHART & SULLIVAN, LLP, New York, New York; William C. Price,
William R. Sears, QUINN EMANUEL URQUHART & SULLIVAN, LLP, Los Angeles,
California; Co-Lead Counsel for the Plaintiff Class.

Peter B. Andrews, Craig J. Springer, Christopher P. Quinn, David M. Sborz, Jackson E.
Warren, ANDREWS & SPRINGER LLC, Wilmington, Delaware; Chad Johnson, Noam
Mandel, Desiree Cummings, Robert Gerson, Jonathan Zweig, ROBINS GELLER
RUDMAN & DOWD LLP, New York, New York; Jeremy S. Friedman, David F.E. Tejtel,
Christopher M. Windover, Lindsay La Marco, FRIEDMAN OSTER & TEJTEL PLLC,
Bedford Hills, New York; Additional Counsel for the Plaintiff Class.

John D. Hendershot, Susan M. Hannigan Cohen, Kyle H. Lachmund, Angela Lam,
RICHARDS, LAYTON & FINGER, P.A., Wilmington, Delaware; John L. Latham, Cara
M. Peterman, ALSTON & BIRD LLP, Atlanta, Georgia; Gidon M. Caine, ALSTON &
BIRD LLP, Palo Alto, California; Charles W. Cox, ALSTON & BIRD LLP, Los Angeles,
California; Counsel for Defendants Michael Dell, Egon Durban, and Simon Patterson.

Martin S. Lessner, Elena C. Norman, James M. Yoch, Jr., Lauren Dunkle Fortunato, Kevin
P. Rickert, YOUNG CONAWAY STARGATT & TAYLOR, LLP, Wilmington,
Delaware; James G. Kreissman, Stephen P. Blake, David Elbaum, SIMPSON THACHER
& BARTLETT LLP, New York, New York; Counsel for Defendant Silver Lake Group
LLC.

Michael A. Barlow, April M. Kirby, ABRAMS & BAYLISS LLP, Wilmington, Delaware;
Michele D. Johnson, Kristin N. Murphy, Ryan A. Walsh, LATHAM & WATKINS LLP,
Costa Mesa, California; Counsel for Defendants William Green and David Dorman.
Edward B. Micheletti, Arthur R. Bookout, Jessica R. Kunz, Peyton V. Carper, SKADDEN,
ARPS, SLATE, MEAGHER & FLOM LLP, Wilmington, Delaware; Counsel for
Defendant Goldman Sachs & Co., LLC.

Stephen B. Brauerman, Sarah T. Andrade, BAYARD, P.A., Wilmington, Delaware;
Counsel for Objector Pentwater Capital Management L.P.

Anthony A. Rickey, MARGRAVE LAW LLC, Wilmington, Delaware; Counsel for Law
Professors Participating as Amici Curiae.

LASTER, V.C.
       The plaintiff settled this class action on the eve of trial in exchange for the

defendants’ agreement to pay $1 billion in cash. The “b” is not a typo. It is the largest cash

recovery ever obtained by a representative plaintiff in this court.

       Plaintiff’s counsel seek an all-in award of attorneys’ fees and expenses equal to

28.5% of the common fund. They ask for permission to pay an incentive award of $50,000

to the plaintiff. The defendants agreed not to oppose those requests.

       A 28.5% award falls within the guideline range of percentages for a late-stage

settlement under the framework that the Delaware Supreme Court endorsed in Americas

Mining Corp. v. Theriault, 51 A.3d 1213 (Del. 2012). The Americas Mining decision

instructs that when a plaintiff has obtained a quantifiable result, the court should derive an

indicative fee award as a percentage of the result. To determine the percentage, the court

considers the stage of the case when the result was obtained. A court awards a higher

percentage when plaintiff’s counsel has pushed deeper into the case, which rewards

plaintiff’s counsel for taking more risk in pursuit of the best outcome. The stage-of-case

approach helps counteract the natural human tendency toward risk aversion and gives

plaintiff’s counsel an incentive to eschew an early, lower-valued settlement.

       Providing that incentive is important. Delaware’s experience during the M&A

litigation epidemic demonstrated that entrepreneurial counsel can profit by filing weak

cases on an industrial scale, putting in minimal work, and settling by offering defendants a

global release in return for no-cost or low-cost relief plus an agreement not to oppose an

attorneys’ fee award. That business model worked for everyone directly involved:

Entrepreneurial counsel got paid, defense counsel got paid, and the defendants got a
release. It only harmed absent class members (who got bupkus), the courts (who had to

process the non-litigation litigation), and society as a whole (because real claims were not

litigated, and transactional standards deteriorated when the cases always settled anyway).

By awarding fees in those cases, the court may well have contributed to the harm that they

caused.

       The stage-of-case method helped fix that. Viewed in context, Americas Mining was

an early salvo in Delaware’s multi-pronged response to the M&A litigation epidemic,

which included changes to the substantive law in Kahn v. M&F Worldwide Corp., 88 A.3d

635 (Del. 2014) (subsequent history omitted), C&J Energy Services, Inc. v. City of Miami

General Employees, 107 A.3d 1049 (Del. 2014), and Corwin v. KKR Financial Holdings,

LLC, 125 A.3d 304 (Del. 2014), plus a tightening of the standards for disclosure-only

settlements in In re Trulia, Inc. Stockholder Litigation, 129 A.3d 884 (Del. Ch. 2016). The

Chancellor recently took another salutary step along the same path in Anderson v. Magellan

Health, Inc., --- A.3d ---, 2023 WL 4364524 (Del. Ch. July 6, 2023).

       Delaware’s response recognizes that our entity law depends on private litigation for

enforcement. Entrepreneurial plaintiff’s counsel therefore perform a valuable service by

pursuing litigation in a world where stockholders are rationally apathetic. Plaintiff’s

counsel deserves to be well compensated for identifying real cases, investing real money

in those cases, and obtaining real results. But the law should not reward plaintiff’s counsel

for filing weak cases and obtaining insubstantial results.

       In this case, plaintiff’s counsel brought a real case, invested over $4 million of real

money, and obtained a real and unprecedented result. Rather than requesting an

                                              2
unprecedented fee award, plaintiff’s counsel asked for 28.5% of the common fund,

consistent with Americas Mining.

       But 28.5% of $1 billion is $285 million. That is a big fee, and it would match the

largest fee that this court has ever awarded: the $285 million fee award that the Delaware

Supreme Court affirmed in Americas Mining.

       A group of eight investment funds thinks that $285 million is too much. They argue

that the court should reduce the percentage of the benefit awarded as the size of the

common fund increases. The declining-percentage method seeks to mitigate a perceived

problem of windfall profits. It assumes that it takes a relatively constant amount of work

to litigate a case, so awarding the same percentage for a larger benefit risks

overcompensation. Scholars have shown that the federal courts use a declining-percentage

method in securities law cases and that for settlements of $1 billion or more, the prevailing

trend is to award a fee of approximately 10-12%.

       The funds have a strong economic motivation for seeking a lower fee award. They

collectively own shares comprising 26.1% of the class. Although they did not propose an

alternative amount, if the court were to follow the federal trend and award a 10% fee, the

objectors would receive another $49 million.

       After the court asked whether there was any academic learning on the declining-

percentage method, five law professors appeared as amici curiae. They make the same

arguments as the objectors, but they propose a 15% fee. If the court were to adopt that

figure, the objectors would receive another $35.78 million.

                                             3
       The declining percentage method runs counter to Americas Mining and the incentive

structure that the Delaware Supreme Court created. In practice, the declining-percentage

method represents a covert return to the lodestar method, but one that works in the opposite

direction. Under the lodestar method, the court starts from a fee based on time billed at

customary hourly rates, then applies a multiplier to increase the award to a level that the

judge feels appropriately compensates counsel for risk. Under the declining-percentage

version, the court starts with a percentage-based fee, then reduces the award to a level

where the judge feels that the multiplier does not excessively compensate counsel for risk.

       In Sugarland Industries, Inc. v. Thomas, 420 A.2d 142 (Del. 1980), the Delaware

Supreme Court rejected the lodestar method in favor of the percentage-of-benefit method.

In Americas Mining, the Delaware Supreme Court underscored that choice by adopting the

stage-of-case method. It would not make sense to return covertly to the lodestar method.

       Delaware law deals with the problem of overcompensation differently. In

Sugarland, the Delaware Supreme Court identified a list of factors for a court to consider

when determining a reasonable award. The inquiry starts with a percentage of the benefit

conferred with the percentage selected from ranges that correspond to the stage of the case.

But the inquiry does not end there. The court also considers the extent to which counsel

litigated on contingency, the time and effort counsel invested, the relative complexity of

the litigation, and the standing and ability of counsel. The court can rely on those other

factors to adjust the indicative fee upward or downward. The Delaware Supreme Court

made clear in Americas Mining that a court can reduce an excessive fee, but that analysis

                                             4
happens using the Sugarland factors. It does not happen because of a declining-percentage

methodology.

       This decision hews to Americas Mining and Sugarland. After considering

precedents involving late-stage, pre-trial settlements, this decision starts with an indicative

fee equal to 26.67% of the common fund, or $266.7 million. None of the other Sugarland

factors warrant an upward or downward adjustment. Plaintiff’s counsel is entitled to an all-

in award of $266.7 million. From that amount, plaintiff’s counsel will pay an incentive

award of $50,000 to the plaintiff.

                          I.      FACTUAL BACKGROUND

       The facts are drawn from the record presented in connection with the settlement.

Additional factual detail appears in the legal analysis.

A.     The Transaction

       In 2013, Michael Dell and Silver Lake Group LLC took Dell, Inc. private in a

management buyout. The acquirer and privately held successor to Dell, Inc. is Dell

Technologies Inc. (the “Company”). Dell and Silver Lake control the Company.

       In 2016, the Company sought to acquire EMC Corporation. That acquisition would

bring with it EMC’s ownership of 81.9% of the equity of VMware, Inc., another publicly

traded corporation. Dell and Silver Lake wanted to pay cash, but the Company remained

highly leveraged after the management buyout and could not fund an all-cash deal. So the

Company proposed to acquire EMC using a combination of cash and newly authorized

shares of Class V common stock, which would trade publicly and ostensibly track the

performance of VMware common stock on a share-for-share basis.

                                              5
       The Company and EMC ultimately completed a transaction that valued EMC at $67

billion. Each share of EMC common stock was converted into the right to receive $24.05

in cash plus 0.11146 of a Class V share. The Company listed the Class V shares on the

New York Stock Exchange where they traded under the symbol “DVMT.”

       DVMT was billed as the “highest quality tracker in the history of trackers.”

Investment bankers predicted that DVMT would trade at little to no discount relative to

VMware’s common stock.

       They were wrong. DVMT traded at a discount of 30-50% to VMware’s publicly

traded shares. One reason for the discount was that the Company had the option to forcibly

convert the DVMT shares into Class C shares using an opaque and manipulable formula.

       After completing the EMC acquisition, Dell and Silver Lake began to explore ways

of capturing the value of the DVMT discount by consolidating the Company’s ownership

of VMware. The Company retained Goldman Sachs & Co. for advice. There were three

obvious paths: (i) a transaction with VMware, (ii) a negotiated redemption of the DVMT

shares, or (iii) a forced conversion.

       Goldman advised that the Company could widen the DVMT discount by creating

uncertainty about whether and when the Company would engage in a forced conversion.

In late January 2018, the financial press reported that the Company was considering an IPO

of its Class C stock, which was a precursor to a forced conversion. DVMT’s stock price

fell 6.4%, and the DVMT discount increased to 45.6%.

       Shortly after those reports, the Company’s board of directors created a special

committee to negotiate a redemption of the DVMT shares. The committee was not

                                            6
authorized to block an IPO of the Class C stock or a forced conversion. The members of

the committee all had close ties to Dell or Silver Lake.

       Over the next three months, the Company and its advisors threatened the committee

and the DVMT stockholders with alternatives to a negotiated redemption. The committee

negotiated in the shadow of those threats, eventually agreeing to a redemption which

valued the DVMT shares at $109 per share. That price represented a 32.7% discount to

VMware’s trading price.

       Holders of DVMT stock objected, and the Company did not believe that the DVMT

stockholders would approve the deal. Rather than negotiating further with the committee,

the Company began negotiating with six investment funds. The Company entered into non-

disclosure agreements with the funds to keep them siloed and deployed a divide-and-

conquer strategy. Meanwhile, the Company continued to prepare for a forced conversion.

       After four-and-a-half months, the Company reached an agreement with the

stockholder volunteers. Each holder of DVMT stock could opt to receive (i) shares of

newly issued Class C common stock valued at $120 per share, or (ii) $120 per share in

cash, with the aggregate amount of cash capped at $14 billion. The new deal valued the

DVMT stock in the aggregate at $23.9 billion.

       On November 14, 2018, the Company informed the committee of the terms of the

transaction. The committee met for an hour and approved it.

       During a special meeting of the DVMT stockholders on December 11, 2018, the

transaction received approval from unaffiliated holders of 61% of the issued DVMT shares.

Two weeks later, the transaction closed.

                                             7
B.     This Litigation

       After the announcement of the initial committee-approved redemption, plaintiff

Steamfitters Local 449 Pension Plan made a books and records demand. Its counsel filed a

putative class action on behalf of the DVMT stockholders. Four similar actions were filed.

       The five actions were consolidated, and the lawyers organized themselves into two

groups who competed to lead the lawsuit. The court appointed the plaintiff and its counsel.

Labaton Sucharow LLP and Quinn Emanuel Urquhart & Sullivan, LLP served as co-lead

counsel. Robins Geller Rudman & Dowd LLP, Friedman Oster & Tejtel PLLC, and

Andrews & Springer LLC served as additional counsel.

       Plaintiff’s counsel filed an amended complaint, and the defendants moved to

dismiss it. Plaintiff’s counsel filed a second amended complaint, and the defendants moved

to dismiss again. After full briefing and argument, the court largely denied the defendants’

motion, although it dismissed the claims against one director. See In re Dell Techs. Inc.

Class V S’holders Litig., 2020 WL 3096748 (Del. Ch. June 11, 2020).

       For the next two-and-a-half years, the parties litigated. In February 2021, while fact

discovery was ongoing, the parties stipulated to class certification, and the court approved

the certification order. The parties completed fact discovery, then expert discovery. In

September 2022, after expert discovery closed, the parties participated in a full-day

mediation. They did not reach a settlement.

       The two sides prepared for trial, which was scheduled to begin on December 5,

2022. Fourteen fact witnesses and three expert witnesses planned to testify live.

                                              8
          At the end of October 2022, the parties filed a fifty-one-page joint pre-trial order

and identified 2,887 joint trial exhibits. On November 7, the parties filed lengthy pretrial

briefs.

C.        The Settlement

          After the pre-trial briefs were filed, the mediator asked the parties to consider a

mediator’s proposal. They agreed, and the mediator proposed a settlement for $1 billion in

cash. Both sides accepted, subject to documentation and court approval. Counsel contacted

the court and removed the trial from the calendar. After the parties filed a settlement

stipulation, the court scheduled a hearing to consider the settlement and an application for

an award of fees and expenses. Notice went out to the former DVMT stockholders.

          No one objected to the settlement. Pentwater Capital Management L.P.

(“Pentwater”) filed an objection to the fee application. Dkt. 518 (the “Objection”).

Pentwater owned DVMT shares comprising approximately 1.6% of the class. Seven other

investment funds1 joined in the Objection. They collectively owned shares comprising

another 24.45% of the class.

          The objectors took issue with the “sheer enormity of the fees sought” and claimed

that the award would be “far in excess of what is appropriate in these circumstances.” Id.

at 2. They proposed that “[r]ather than basing the attorneys’ fee award here on a strict

          1
         The seven other funds are Alpine Associates Management Inc.; Canyon Capital
Advisors LLC; Carlson Capital, L.P.; Dodge & Cox; Farallon Capital Management,
L.L.C.; Icahn Capital LP; and P. Schoenfeld Asset Management L.P.

                                               9
percentage of the Settlement Fund,” the court should apply “a declining percentage

approach.” Id. The objectors did not propose a particular percentage or suggest a reasonable

award.

         The court responded with a letter to all of the parties, including the objectors. The

court expressed appreciation for the objectors’ input and asked all of the parties to provide

three additional categories of information.

         First, the court noted the objectors had not cited any scholarship about fee awards

in mega-fund cases. The court asked whether law professors had anything to say in favor

of or against the declining-percentage method.

         Second, the court noted that the objectors did not discuss how privately negotiated

contingency fee arrangements address large recoveries. The court asked the parties to

provide information on that topic.

         Third, the court asked for information on the objectors’ own compensation

arrangements, explaining:

         [I]t occurred to me that the investment managers you represent likely have
         compensation arrangements that provide for both an annual management fee
         and a performance fee. The familiar 2-and-20 formula is an example. When
         a fund achieves gains that result in a performance fee coming due, is the
         performance fee reduced as the gains increase? In other words, do the
         investment managers for the objecting funds structure their own incentive
         compensation in the way that they propose for plaintiffs’ counsel?

Dkt. 520 at 2. The court noted that

         because an investment manager receives an annual management fee equal to
         2% of assets under management, which lets the managers keep the lights on
         and pay the employees while swinging for the gains that generate
         performance fees, the investment managers would seem to be in a less risky

                                              10
       position than plaintiffs’ counsel, who lack a comparable annual fee
       component.

Id. at 2–3. The court asked the objectors to provide information about their annual

management fees and performance fees, as well as any hurdle rates or other features that

would affect the level of risk that the fund managers undertook.

       One week after the court sent its letter, five law professors sought leave to

participate as amici curiae.2 Law professors do not generally monitor the court’s docket so

closely, and it seems likely that the objectors recruited them. The court granted the

professors leave to participate and is grateful for their input.

       The objectors filed a supplemental submission, and the professors filed their brief.

The professors’ positions on how the court should proceed tracked the objectors’ point of

view, with the professors serving as de facto experts for the objectors. Other distinguished

scholars recommend different approaches for calculating fee awards, but none of those

scholars appeared as amici curiae. The plaintiff filed its reply in support of the settlement,

fee award, and incentive award.

       2
        The professors are (in alphabetical order) Benjamin Edwards, Associate Professor
of Law at the William S. Boyd School of Law of the University of Nevada, Las Vegas;
Jessica M. Erickson, the Nancy Litchfield Hicks Professor of Law at the University of
Richmond School of Law; Sean J. Griffith, the T.J. Maloney Chair in Business Law at the
Fordham University School of Law; Joseph A. Grundfest, Senior Faculty at the Arthur and
Toni Rembe Rock Center for Corporate Governance of Stanford Law School; and Adam
C. Pritchard, the Frances and George Skestos Professor of Law at the University of
Michigan Law School.

                                              11
       On April 19, 2023, the court held a hearing to consider the settlement. After hearing

argument, the court approved the settlement. The court took the fee application under

advisement.

                              II.      LEGAL ANALYSIS

       Plaintiff’s counsel seek an all-in award of fees and expenses equal to 28.5% of the

common fund, resulting in a total award of $285 million. Plaintiff’s counsel seek

permission to pay an incentive award of $50,000 to the plaintiff. The defendants agreed

not to oppose those requests. The objectors and the professors oppose the fee award. No

one objects to the incentive award.

A.     The Fee Award

       The power to award fees to counsel for creating a common benefit, such as a

common fund, “is a flexible one based on the historic power of the Court of Chancery to

do equity in particular situations.” Tandycrafts, Inc. v. Initio P’rs, 562 A.2d 1162, 1166

(Del. 1989). When awarding fees, the court does not defer to what the defendants agreed

not to oppose. The court “must make an independent determination of reasonableness.”

Goodrich v. E.F. Hutton Gp., Inc., 681 A.2d 1039, 1046 (Del. 1996).

       The Sugarland decision governs how a court awards fees in representative actions.

That decision identified factors to consider when awarding fees, but the factors appeared

diffusely throughout the opinion. See Sugarland, 420 A.2d at 149–50. In Americas Mining,

the Delaware Supreme Court summarized them as follows: “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.” 51 A.3d at 1254.

                                             12
       The primary factor is the results achieved. If the results are quantifiable, then

“Sugarland calls for an award of attorneys’ fees based upon a percentage of the benefit.”

Id. at 1259. “Hours worked are considered as a crosscheck to guard against windfall

awards, particularly in therapeutic benefit cases.” Olson v. EV3, Inc., 2011 WL 704409, at

*8 (Del. Ch. Feb. 21, 2011). “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.” Id. “Precedent awards

from similar cases may be considered for the obvious reason that like cases should be

treated alike.” Id.

               1.     The Benefit Created By Counsel’s Efforts

       The primary factor in calculating a fee award is the benefit created by counsel’s

efforts. The causal dimension is critical, because Delaware public policy calls for

compensating counsel “for the beneficial results they produced.” Allied Artists Pictures

Corp. v. Baron, 413 A.2d 876, 878 (Del. 1980). Counsel cannot take credit for results they

did not produce, so a court must consider “whether the plaintiff can rightly receive all the

credit for the benefit conferred or only a portion thereof.” In re Plains Res. Inc., 2005 WL

332811, at *3 (Del. Ch. Feb. 4, 2005). Sometimes, a result will stem from multiple causes,

and the court must assess “the degree of causation between counsel’s efforts and the result

when awarding reasonable attorneys’ fees.” Smith v. Fid. Mgmt. & Rsch. Co., 2014 WL

1599935, at *11 (Del. Ch. Apr. 16, 2014). If counsel did not cause the full headline benefit,

then the court must reduce the value of the benefit to match the extent of counsel’s role.

See id. at *13–15. Although causation is not at issue in this case, it was at issue in some of

                                             13
the precedents on which the objectors rely, and the objectors’ failure to consider causation

leads them to erroneous conclusions.

       When the value of the benefit is quantifiable, Americas Mining calls for calculating

an indicative fee as a percentage of the benefit. 51 A.3d at 1259. Other Sugarland factors

may cause the court to adjust the indicative fee up or down, but the starting point under

Americas Mining is a percentage calculation. Under this method, the “common fund is

itself the measure of success.” Id. “A percentage of a low or ordinary recovery will produce

a low or ordinary fee; the same percentage of an exceptional recovery will produce an

exceptional fee.” In re Orchard Enters. Inc. S’holder Litig., 2014 WL 4181912, at *8 (Del.

Ch. Aug. 22, 2014). “The wealth proposition for plaintiffs’ counsel is simple: If you want

more for yourself, get more for those whom you represent.” Id.

       In this case, there is an obvious and self-quantifying benefit in the form of $1 billion

in cash. There is no reason to look for sufficiently reliable proxies to price non-monetary

relief. Cf. In re Compellent Techs., Inc. S’holder Litig., 2011 WL 6382523 (Del. Ch. Dec.

9, 2011) (identifying proxies for that purpose). Plaintiff’s counsel was the sole cause of the

benefit: But for the litigation, the benefit would not exist. No other causal factor contributed

to the outcome.

       Because the benefit is quantifiable, Americas Mining calls for calculating an

indicative fee award as a percentage of the benefit. Plaintiff’s counsel seeks an indicative

fee calculated using the stage-of-case method from Americas Mining. The objectors and

professors argue for using the declining-percentage method from federal securities class

actions. They also advance other arguments in support of a reduced percentage.

                                              14
              a.      The Stage-Of-Case Method

       In Americas Mining, the Delaware Supreme Court endorsed the practice of setting

the percentage for the indicative fee using the stage of the case when the result was reached.

51 A.3d at 1259–60. Awarding increasing percentages as counsel pushes deeper into a case

ensures that counsel’s incentives remain aligned with the case. A widely acknowledged

conflict exists between the incentives of class and counsel:

       The plaintiff’s financial interest is in his share of the total recovery less what
       may be awarded to counsel, simpliciter; counsel’s financial interest is in the
       amount of the award to him less the time and effort needed to produce it. A
       relatively small settlement may well produce an allowance bearing a higher
       ratio to the cost of the work than a much larger recovery obtained only after
       extensive discovery, a long trial and an appeal.

Saylor v. Lindsley, 456 F.2d 896, 900 (2d Cir. 1972) (Friendly, C.J.). “When the lawyer

gains 40 cents to the client’s dollar, the lawyer tends to expend too little effort . . . . [H]e

would not put in an extra $600 worth of time to obtain an extra $1,000 for his client,

because he would receive only $400 for his effort.” Kirchoff v. Flynn, 786 F.2d 320, 325

(7th Cir. 1986) (Easterbrook, J.).

       Scholars who have long studied this conflict recommend awarding an increasing

percentage of the benefit as a corrective measure.3 Awarding an increasing percentage of

       3
         Alon Harel & Alex Stein, Auctioning for Loyalty: Selection and Monitoring of
Class Counsel, 22 Yale L. & Pol’y Rev. 69, 71 (2004). For now-classic treatments of this
problem, see Geoffrey P. Miller, Some Agency Problems in Settlement, 16 J. Legal Stud.
189, 198–202 (1987); Kevin M. Clermont & John D. Currivan, Improving on the
Contingent Fee, 63 Cornell L. Rev. 529, 543–46 (1978); Murray L. Schwartz & Daniel
J.B. Mitchell, An Economic Analysis of the Contingent Fee in Personal-Injury Litigation,
22 Stan. L. Rev. 1125, 1133–39 (1970).

                                              15
the benefit “is at best a rough corrective . . . because it substitutes a small number of discrete

increments for what is in fact a continuous process — the reduction in the attorney’s

expected future costs as the case progresses.” Miller, supra, at 201. It nevertheless

“partially mitigates the attorney-client conflicts.” Id. at 201–02.

       Awarding a percentage that increases as the case progresses also counteracts a

natural human tendency toward risk aversion. “For plaintiffs’ counsel, risk aversion

manifests itself as a natural tendency to favor an earlier bird-in-the-hand settlement that

will ensure a fee, rather than pressing on for a potentially larger recovery for the class at

the cost of greater investment and with the risk of no recovery.” Orchard, 2014 WL

4181912, at *8. “The promise of a larger potential share of the benefit nudges

representative counsel’s incentives towards greater alignment with the class or entity on

whose behalf they are litigating.” In re Activision Blizzard, Inc. S’holder Litig., 124 A.3d

1025, 1071 (Del. Ch. 2015).

       Delaware’s experience during the M&A litigation epidemic confirms this. 4 Some

plaintiff’s lawyers pursued business models that involved filing cases indiscriminately

       4
         For discussions of the M&A litigation epidemic from different perspectives, see
Magellan, 2023 WL 4364524, at *7–9 (judicial perspective); Edward B. Micheletti &
Jenness E. Parker, Multi-Jurisdictional Litigation: Who Caused This Problem, and Can It
Be Fixed?, 37 Del. J. Corp. L. 1, 6–14 (2016) (practitioners who primarily represent
defendants); Joel Edan Friedlander, How Rural/Metro Exposed the Systemic Problem of
Disclosure Settlements, 40 Del. J. Corp. L. 877, 879–904 (2016) (practitioner who has
represented plaintiffs and defendants); Mark Lebovitch & Jeroen van Kwawegen, Of
Babies and Bathwater: Deterring Frivolous Stockholder Suits Without Closing the
Courthouse Doors to Legitimate Claims, 40 Del. J. Corp. L. 491, 493, 509–23 (2016)
(practitioners who represent plaintiffs); Jill E. Fisch, Sean J. Griffith & Steven Davidoff

                                               16
against virtually every transaction. They settled those cases quickly, typically for

supplemental disclosures and a fee. Sometimes they obtained other easy gives, such as a

reduction in the termination fee after it was obvious that no overbidder would emerge. By

contrast, other lawyers rejected a cookie-cutter approach, choosing instead to pursue real

cases, develop case-specific theories, invest real effort, and generate real results.5 The

challenge for the courts was to reward the latter business model and not the former.

        Americas Mining took an initial step by endorsing the stage-of-case method. After

surveying a range of precedents, the Delaware Supreme Court observed that “Delaware

case law supports a wide range of reasonable percentages for attorneys’ fees, but 33% is

the very top of the range of percentages.” Ams. Mining, 51 A.3d at 1259 (internal quotation

marks and citation omitted). That level of fee award is reserved for a plaintiff who prevails

after trial.

        For cases that do not go the distance to a post-trial adjudication, the Delaware

Supreme Court provided guideline percentages:

        When a case settles early, the Court of Chancery 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

Solomon, Confronting the Peppercorn Settlement in Merger Litigation: An Empirical
Analysis and a Proposal for Reform, 93 Tex. L. Rev. 557, 557–72 (2015) (law professors).

        See Friedlander, supra, at 904–10 (describing “two-tier plaintiff bar”); see also
        5

Joel Edan Friedlander, Vindicating the Duty of Loyalty: Using Data Points of Successful
Stockholder Litigation As A Tool for Reform, 72 Bus. Law. 623, 624–25 (2017) (identifying
twelve examples of representative litigation that generated eight-to-nine-figure recoveries);
Lebovitch & van Kwawegen, supra, at 528–33 (identifying five of the twelve).

                                             17
       depositions and some level of motion practice, fee awards in the Court of
       Chancery range from 15–25% of the monetary benefits conferred. . . .

Id. at 1259–60 (internal quotation marks and citations omitted).

       Selecting an appropriate percentage requires an exercise of judicial discretion. Id. at

1261. The test is not a mechanical one, but the use of guideline ranges promotes consistent

awards so that similar cases are treated similarly. Past precedents shape future behavior,

and a practice of rarely departing from guideline percentages helps create desirable

incentives.6

       This case involved a late-stage settlement. The parties informed the court that they

had reached an agreement in principle on November 16, 2022. That was nineteen calendar

       6
          The stage-of-case method is vulnerable to the criticism that it undercompensates
counsel who achieve everything they might have obtained after trial through an early-stage
settlement. Counsel can rightfully argue that they should not receive only 10% of a
recovery if they settled at an early stage for everything that the court could have awarded.
Counsel can also rightly argue that Delaware law should not provide incentives for over-
litigating a case. Those are valid points, and there always will be edge cases that put stress
on a system. The challenge for the court is to determine whether counsel achieved
everything that the court could have awarded—and to do so in the non-adversarial context
of a settlement hearing. One would think that degree of success would be rare. Defendants
usually do not settle up front for their maximum potential exposure, and there is a reason
why parties retain experts to calculate damages after the close of fact discovery, when
everyone has the most possible information about the case. It is also a short step from
seeking a higher percentage for achieving everything that counsel might have obtained to
seeking a higher percentage for achieving most of what counsel might have obtained. And
it is only another short step to seeking a higher percentage for achieving different relief
(such as therapeutic benefits) that counsel could not have obtained. Across most cases and
in most settings, the stage-of-case method creates salutary incentives to obtain the greatest
possible relief for the class. In a case where it is clear that counsel achieved everything that
they sought in their complaint, then perhaps an upward adjustment in the percentage might
be warranted, but that type of departure from the Americas Mining framework risks inviting
similar arguments in every case.

                                              18
days before trial was scheduled to begin. The parties had submitted a fifty-three-page joint

pre-trial order and filed their pre-trial briefs. Plaintiff’s counsel filed a pre-trial brief that

spanned 134 pages and contained 22,908 words. Plaintiff’s counsel truly litigated until the

eve of trial.

       Plaintiff’s counsel thus went beyond a mid-stage adjudication that should yield a

fee of 15–25% (“multiple depositions and some level of motion practice”) but stopped

short of a full adjudication that would warrant an award of 33%. Plaintiff’s counsel did not

actually try the case, invest in post-trial briefing, or prepare for and make a post-trial

argument. Most significantly, plaintiff’s counsel did not accept the risk of an adverse post-

trial outcome, and they did not confront the difficulty of defending a monetary judgment

on appeal. That final challenge is significant: Since the Americas Mining decision in 2012,

six cases have resulted in post-trial judgments awarding monetary damages in

representative actions. The Delaware Supreme Court affirmed the first two, one in 20147

and the other in 2016.8 The Delaware Supreme Court reversed the next four.9 During the

       7
         RBC Cap. Mkts., LLC v. Jervis, 129 A.3d 816 (Del. 2015) (affirming award of $70
million to class of stockholders).
       8
         CDX Hldgs., Inc. v. Fox, 141 A.3d 1037 (Del. 2016) (affirming award of $16
million to class of option holders). A dissenting justice would have reversed the liability
finding. See id. at 1042 (Valihura, J., dissenting).
       9
         Boardwalk Pipeline P’rs, LP v. Bandera Master Fund LP, 288 A.3d 1083 (Del.
2022) (reversing post-trial judgment of $690 million for plaintiff class of limited partner
investors); Dell, Inc. v. Magnetar Glob. Event Driven Master Fund, Ltd., 177 A.3d 1 (Del.
2017) (reversing post-trial judgment awarding fair value of $17.62 per share to appraisal
class comprising 5,505,730 shares, resulting in incremental value over deal price of $13.75

                                               19
post-Americas Mining era, plaintiffs in representative actions who have prevailed at the

trial court level and recovered a monetary judgment have lost on appeal 67% of the time,

per share of $21.3 million (exclusive of interest)); DFC Glob. Corp. v. Muirfield Value
P’rs, L.P., 172 A.3d 346 (Del. 2017) (reversing post-trial judgment awarding fair value of
$10.21 per share to appraisal class comprising 4,604,683 shares, resulting in incremental
value over deal price of $9.50 per share of $3.2 million (exclusive of interest)); El Paso
Pipeline GP Co., L.L.C. v. Brinckerhoff, 152 A.3d 1248 (Del. 2016) (vacating post-trial
judgment of $171 million to be implemented through investor-level remedy).

        More recently, the Delaware Supreme Court affirmed a monetary damages award
in favor of a class of minority partners, but it was the plaintiffs who took the appeal in
pursuit of a larger damages award. The defendants did not contest the liability finding. See
Bell v. AT&T Mobility Wireless Operations Hldgs. LLC, 2023 WL 3880120 (Del. June 7,
2023) (ORDER).

        From one perspective, the outcome in Aruba could be viewed as a plaintiff’s victory,
because the Delaware Supreme Court increased the appraisal award from the unaffected
market price to a value based on the deal-price minus synergies, but the fair value was still
less than what the appraisal claimants would have obtained by accepting the deal
consideration, so it was hardly a win for the appraisal class. See Verition P’rs Master Fund
Ltd. v. Aruba Networks, Inc., 210 A.3d 128 (Del. 2019).

                                             20
with a 100% reversal rate since 2016.10 A plaintiff who takes a case to trial and prevails

thus faces significant appellate risk.11 A settlement renders that risk trivial.12

       10
          The increased reversal risk appears to be limited to cases in which representative
plaintiffs recover money damages, as opposed to increasing across all cases. Outside of the
world of money judgments, representative plaintiffs have fared better, notching three
affirmances of post-trial judgments awarding non-monetary relief. See CCSB Fin. Corp. v.
Totta, 284 A.3d 713 (Del. 2022); Williams Cos., Inc. v. Wolosky, 264 A.3d 641 (Del. 2021);
Austin v. Judy, 65 A.3d 616 (Del. 2013). And outside of the world of representative
plaintiffs, large investors have had success on appeal when litigating on their own. In 2019,
the Delaware Supreme Court affirmed a judgment for $20.2 million (plus pre- and post-
judgment interest) in favor of a large investor who purchased the corporation’s claims from
a receiver. See Davenport v. Basho Techs. Holdco B, LLC, 221 A.3d 100 (Del. 2019)
(ORDER). The case was not a representative action, and the only defendant to appeal
sought to represent himself, so it was not the most effective appellate challenge. The
following year, the Delaware Supreme Court affirmed a judgment for $4.4 million in favor
of another large investor, but that case was also brought by a single, large holder that was
the sole investor in the fund. See HOMF II Inv. Corp. v. Altenberg, 268 A.3d 1013 (Del.
2021) (ORDER). Finally, defendants have enjoyed success on appeal. Since Americas
Mining, there has been only one reversal of a post-trial judgment for the defendants in a
representative action, and it was affirmed after the trial court reached the same conclusion
on remand. Compare Coster v. UIP Cos., 255 A.3d 952 (Del. 2021) with Coster v. UIP
Cos., --- A.3d ---, 2023 WL 4239581 (Del. June 28, 2023). Other post-trial judgments for
defendants in representative actions have been affirmed. E.g., In re Tesla Motors, Inc.
S'holder Litig., --- A.3d ---, 2023 WL 3854008 (Del. June 6, 2023); Brigade Leveraged
Cap. Structures Fund Ltd. v. Stillwater Mining Co., 240 A.3d 3 (Del. 2020); In re PLX
Tech. Inc. S’holders Litig., 211 A.3d 137 (Del. 2019); ACP Master, Ltd. v. Sprint Corp.,
184 A.3d 1291 (Del. 2018).
       11
           The degree of appellate risk appears to have shifted over time. Because this
decision examines fee rulings during the Americas Mining era, that decision provides a
convenient starting point for assessing appellate outcomes. Extending the date backwards
to the turn of the millennium suggests that plaintiffs faced less appellate risk during that
era, with the caution that during that period, few representative lawsuits were tried, fewer
resulted in plaintiffs’ victories, and still fewer were appealed. Between 2000 and the
issuance of the Americas Mining decision, the Delaware Supreme Court affirmed three
post-trial judgments awarding monetary relief to plaintiffs in one representative action. See
Gatz Props., LLC v. Auriga Cap. Corp., 59 A.3d 1206 (Del. 2012); William Penn P'ship v.
Saliba, 13 A.3d 749, 751 (Del. 2011); Int’l Telecharge, Inc. v. Bomarko, Inc., 766 A.2d

                                              21
       The Americas Mining decision does not expressly provide a guideline range for a

late-stage settlement, so the parties have asked the court to look to precedent. The court

has considered eight cases:

    • In Mindbody, the plaintiffs reached a partial settlement, six weeks before trial, with
      all but two defendants. The settlement created a gross common fund of $27 million.
      Counsel incurred expenses of $666,142.95 and asked for reimbursement plus a fee
      of $7.89 million, representing 30% of the net common fund. The court approved
      the request. In re Mindbody, Inc. S’holder Litig., C.A. No. 2019-0442-KSJM, at 14,
      17, 27–28, 33 (Del. Ch. June 8, 2022) (TRANSCRIPT).

    • In Riche v. Pappas, the parties settled “just before trial.” C.A. No. 2018-0177-JTL,
      at 23–24 (Del. Ch. Sept. 16, 2020) (TRANSCRIPT). The settlement created a gross
      common fund of $6.5 million. Counsel asked for a fee equal to 30% of the gross
      fund plus reimbursement of $250,760.81 in expenses from the common fund. The

437 (Del. 2000). In another representative action, the Delaware Supreme Court affirmed a
finding of liability against the defendants but reversed the damages award as too
conservative and remanded for consideration of whether the award should have included a
control premium. Gotham P’rs, L.P. v. Hallwood Realty P’rs, L.P., 817 A.2d 160 (Del.
2002). The Delaware Supreme Court does not appear to have reversed any post-trial
judgments awarding monetary damages to plaintiffs in representative actions in this era,
although in one case the high court did so as a practical matter: The Delaware Supreme
Court instructed the trial court to reconsider its rulings after excluding particular categories
of evidence, the trial court reached a different conclusion on remand that eliminated the
damages upside for the plaintiffs, and the Delaware Supreme Court affirmed that result on
appeal. AT&T Corp. v. Lillis, 970 A.2d 166 (Del. 2009). Defendants had relatively less
success on appeal than after Americas Mining. In one case, the Delaware Supreme Court
reversed a post-trial judgment in favor of the defendants and remanded for further
proceedings. Amirsaleh v. Bd. of Trade of City of N.Y., Inc., 27 A.3d 522 (Del. 2011). In
another, the Delaware Supreme Court brought to a close the sempiternal appraisal
proceeding in Technicolor by directing the Court of Chancery to enter judgment using
inputs that increased the value of the award. Cede & Co. v. Technicolor, Inc., 884 A.2d 26
(Del. 2005). A set of appellate rulings during the 1990s or the 1980s would likely have
different characteristics.
       12
         The only path would be for an objector to challenge the settlement, then appeal
from the trial court’s decision approving the settlement. Such an appeal faces long odds.

                                              22
   court deducted the expenses first and granted a fee equal to 30% of the net common
   fund. Id. at 4, 12, 25–26.

• In Starz, the parties “litigated right up until the brink of trial.” In re Starz S’holder
  Litig., Consol. C.A. No. 12584-VCG, at 56 (Del. Ch. Dec. 10, 2018)
  (TRANSCRIPT). The settlement created a gross common fund of $92.5 million.
  Counsel incurred expenses of $1,689,816.76 and asked for a fee of $26,060,184,
  representing 28.17% of the net amount. The odd figure and counsel’s comments
  suggest that they based their request on an all-in award equal to 30% of the gross
  amount. The court approved the award. Id. at 10, 56–57.

• In Jefferies, the parties settled five weeks before trial. The settlement created a gross
  common fund of $70 million, with any fee award to be paid separately. After
  considering the Sugarland factors, the court awarded $21.5 million, inclusive of $1
  million in expenses. The court noted that the award equated to 23.5% of a gross
  common fund of $91.5 million. In re Jefferies Gp., Inc. S’holders Litig., 2015 WL
  3540662, at *2, *4 (Del. Ch. June 5, 2015).

• In Activision, the parties settled one month before trial. The settlement consisted of
  (i) a payment of $275 million to Activision, (ii) a reduction in the cap on the voting
  power wielded by Activision’s two senior officers from 24.5% to 19.9%, and (iii)
  the expansion of Activision’s board of directors to include two individuals
  unaffiliated with the two senior officers. The plaintiffs sought an award of $72.5
  million, which the defendants agreed not to oppose. The court started from a
  guideline range of 22.5% to 25% for a late-stage settlement. After putting rough
  values on the non-monetary benefits, the court found that the requested fee fell
  between 22.7% and 24.5% of the benefit conferred, within the guideline range.
  Noting that a negotiated fee that falls within the range deserves some deference, the
  court approved the award. 124 A.3d at 1042, 1071, 1074–75.

• In Orchard, the parties settled two months before trial. The settlement created a
  common fund of $10,725,000. The plaintiffs asked for an all-in award of
  $2,810,671, equal to 30% of the fund. The court gave the plaintiff causal credit for
  a gross benefit of $9,368,904. Counsel incurred $132,000 in expenses. The court
  stated that “[w]hile there are outliers, a typical fee award for a case settling at this
  stage of the proceeding ranges from 22.5% to 25% of the benefit conferred.”
  Orchard, 2014 WL 4181912, at *8. The court approved an all-in award of
  $2,250,000, representing 24% of the gross benefit. Id.

• In Rural Metro, the plaintiffs settled with all but one defendant “deep in the case,
  after full discovery, on the eve of trial.” In re Rural/Metro Corp. S’holders Litig.,
  Consol. C.A. No. 6350-VCL, at 35 (Del. Ch. Nov. 19, 2013) (TRANSCRIPT). The
  settlement created a gross common fund of $11.6 million. Counsel incurred
  expenses of $1.3 million. Counsel requested a fee of $3.1 million, representing 30%

                                          23
       of the net settlement fund. Id. at 5. The court first deducted the expenses, then
       awarded a fee of $2.9 million, equal to 28% of the net fund. Id. at 36–37. The
       plaintiffs proceeded to trial against the remaining defendant, resulting in the post-
       trial judgment that the Delaware Supreme Court affirmed. See RBC Cap., 129 A.3d
       at 879.

    • In TeleCorp, a pre-Americas Mining case, the parties settled two weeks before trial.
      In re TeleCorp PCS, Inc. S’holders Consol. Litig., C.A. No. 19260-VCS, at 24, 91
      (Del. Ch. Aug. 20, 2003) (TRANSCRIPT). The settlement created a gross common
      fund of $47.5 million. Evidencing the type of stockholder litigation that prevailed
      at the time, there was extensive commentary about the unprecedented nature of a
      cash settlement. Plaintiff’s counsel sought a fee award of $14.2 million plus
      expenses of approximately $600,000. After deducting expenses, the request
      equated to 35.5% of the common fund. The court approved an all-in award of
      $14.25 million, equal to 30% of the gross common fund. Id. at 24, 68–69, 91, 101.

       In part because Sugarland is a multi-factor test, it is difficult to discern a pattern in

these precedents. One curiosity is that the written decisions in Jefferies, Activision, and

Orchard awarded lower percentages for eve-of-trial settlements than the five transcript

rulings. Another curiosity is that Activision and Orchard contemplated a guideline range

of 22.5% to 25% for late-stage settlements, which placed those settlements within the upper

half of the Americas Mining range for mid-case settlements and created a significant gap

of 8% between the top percentage available for a settlement and the maximum of 33%

available for a final judgment. The five transcript rulings take a different approach in which

late-stage settlements warrant a higher percentage than the upper bound of the range for a

mid-case settlement. Two of the transcript rulings award 28%; three award 30%.

       The transcript rulings point to a practice of awarding a higher percentage for a late-

case settlement than for a mid-case settlement. Eight integers scale from the 25% upper

bound for a mid-case settlement to the 33% maximum for a post-trial adjudication. A

distinction should remain between the most that a plaintiff can achieve via settlement and

                                              24
the percentage that a plaintiff can obtain for a post-trial adjudication.13 As noted earlier,

going the distance requires more effort, accepts the risk of receiving nothing after trial, and

takes on the additional work and risk associated with an appeal. A late-stage settlement

eliminates those issues. That suggests that the percentage awarded in a case that stops short

of a fully litigated judgment should top out at 30%, leaving a range of 25% to 30% for a

late-stage settlement.

       A logical point to start the late-stage phase is after the end of expert discovery.

Engaging in real litigation in an M&A case requires experts, and experts cost a lot. Once

expert discovery has concluded, plaintiff’s counsel will have incurred substantial amounts.

That is also the point when trial preparation begins in earnest and where the tasks include

negotiating the pre-trial order, preparing a pre-trial brief, and presenting any pre-trial

motions. Then comes the trial itself and the tasks associated with that effort, such as

preparing exhibits, working with witnesses, performing the stand-up trial work, and

choreographing the audio-visual component. Finally, there is post-trial briefing and

argument.

       Here, plaintiff’s counsel made it through approximately one-third of the late-stage

tasks. That points to a baseline percentage of 26.67%, one-third of the way between 25%

and 30%.

       13
         See TeleCorp, supra, tr. at 103 (“I could see holding out the full measure of 33 to
maybe 35 percent [so] that there’s a promise actually if you go to trial, it will be at the
highest end of the range.”); accord Brinckerhoff v. Tex. E. Prod. Pipeline Co., LLC, 986
A.2d 370, 395 (Del. Ch. 2010).

                                              25
       Plaintiff’s counsel has asked for a percentage 28.5%. That figure is over two-thirds

of the way between 25% and 30%. Plaintiff’s counsel did not do two-thirds of the work

called for during the final stage of a case. Plus, if plaintiff’s counsel gets 28.5% in this case,

it will be difficult to find room in the late-stage tier for a settlement that occurs during trial,

or during post-trial briefing, or after post-trial argument. It is always uncomfortable to

reduce a fee request when plaintiff’s counsel has performed well, so the judicial urge would

be to reward counsel by pushing the percentage for a late-stage settlement upward. That in

turn would compress the relative reward for going the distance to a final adjudication. To

reiterate, some step-up should exist for a post-trial adjudication.

       Although it means reducing the percentage that plaintiff’s counsel receives in this

case for a precedent-setting settlement, the most justifiable percentage under Americas

Mining is 26.67%. The fee calculation will start with that figure.

               b.     The Declining-Percentage Method

       The objectors and the professors argue that a court should reduce the percentage

that counsel receive as the size of the common fund increases. The supposed goal of this

method is to avoid windfall compensation. It rests on the assumption that a case which

generates a big recovery does not involve significantly more work, so rewarding plaintiff’s

counsel with the same percentage results in excess compensation. That perceived risk is

particularly acute in mega-fund cases. There are multiple reasons to reject the declining-

percentage approach.

                                                26
                       i.   Delaware Precedent

       Since Americas Mining, Delaware decisions have neither endorsed nor applied the

declining-percentage method, whether in mega-fund cases or otherwise. The concept itself

conflicts with Americas Mining, which calls for an increasing percentage as the plaintiff

pushes deeper into the case. If layered onto the Americas Mining method, it would penalize

counsel for seeking a larger recovery. Plaintiff’s counsel could count on an increasing

percentage for increased risk under Americas Mining, only to have the percentage cut if

plaintiff’s counsel achieved too much. Such an approach would disincentivize taking a case

through trial.

       The objectors nevertheless attempt to create the impression that Delaware precedent

already supports the declining-percentage method. They surprisingly claim that “Delaware

has accepted the ‘judicial consensus that the percentage of recovery awarded should

‘decrease as the size of the [common] fund increases.’” Obj. at 5 (quoting Goodrich, 681

A.2d at 1048). That is not so. The Goodrich case did not endorse the declining-percentage

method, and the Americas Mining decision subsequently rejected both the objectors’

interpretation of Goodrich and the argument that a trial court must decrease the percentage

awarded in a mega-fund case.

       Goodrich was not about the declining-percentage method, nor was it a mega-fund

case. The parties agreed to a settlement that created a gross common fund of $3.3 million

for aggrieved brokerage customers who submitted valid notices of claim, with both

administrative expenses and any attorneys’ fee to be deducted from the fund. The Court of

Chancery approved the settlement and awarded a fee equal to one-third of the amounts

                                            27
actually claimed by class members, up to a maximum fee of $515,000. Goodrich, 681 A.2d

at 1043. Plaintiff’s counsel appealed, arguing that the court erred by not awarding a fee

based on the headline amount. Id. at 1048. The Delaware Supreme Court observed that

when discussing the principles governing fee awards, the Court of Chancery had

“acknowledged the merit of the emerging judicial consensus that the percentage of the

recovery awarded should decrease as the size of the common fund increases.” Id. (cleaned

up). That was it. The high court did not discuss the concept further. After noting that the

Court of Chancery considered multiple factors when exercising its discretion, the Delaware

Supreme Court affirmed the award. Id. at 1050.

       The Goodrich decision predated Americas Mining, which actually addressed the

declining-percentage method and involved a mega-fund case. The defendants argued

squarely on appeal that the trial court erred by failing to “correctly apply a declining

percentage analysis given the size of the judgment.” Ams. Mining, 51 A.3d at 1252. The

Delaware Supreme Court framed the “question presented” as “how to properly determine

a reasonable percentage for a fee award in a megafund case.” Id. at 1260. The defendants

advanced the same interpretation of Goodrich as the objectors, and the Delaware Supreme

Court rejected it. Id. at 1258. The high court made clear that a declining-percentage

approach is not required, holding instead that “the multiple factor Sugarland approach to

determining attorneys’ fee awards remained adequate for purposes of applying the

equitable common fund doctrine.” Id.

       The Americas Mining decision engaged with the argument about reducing the fee

in a mega-fund case as part of its analysis of the hourly rate cross-check. Id. The Americas

                                            28
Mining decision makes clear that a trial court can adjust a percentage-based fee downward,

but that is “a matter of discretion” and “not required per se.” Id. The Delaware Supreme

Court “decline[d] to impose either a cap or the mandatory use of any particular range of

percentages for determining attorneys’ fees in megafund cases.” Id. at 1261.

       Other than Goodrich, the objectors’ only other Delaware authorities are transcript

rulings. All three predated Americas Mining. None supports the objectors’ position.

       The objectors’ best precedent is Digex, where the court at least referred to the

declining-percentage method in passing and observed that the Goodrich case had described

that approach as “appropriate and reasonable.” In re Digex, Inc. S’holders Litig., at 145–

46 (Del. Ch. Apr. 6, 2001) (TRANSCRIPT). The court did not actually apply the declining-

percentage method. Instead, the court used a straightforward Sugarland analysis.

       Digex involved an expedited pre-closing injunction application to stop an interested

transaction between the company (Digex) and its controlling stockholder (Worldcom). The

court denied the injunction application but held that the plaintiffs had shown a reasonable

likelihood of success on a claim that the defendants had breached their fiduciary duties by

gratuitously waiving Section 203 of the Delaware General Corporation Law on

Worldcom’s behalf. In re Digex Inc. S’holders Litig., 789 A.2d 1176, 1208 (Del. Ch. 2000).

A special committee had negotiated the original transaction and continued to negotiate with

all parties. Digex, supra, tr. at 5. Shortly after the injunction decision, and with the special

committee in a lead role, the parties agreed to a settlement that created a common fund

consisting of shares of Worldcom stock valued at $165 million. WorldCom agreed to

additional relief in the form of $15 million in reimbursement for Digex’s fees and expenses

                                              29
during the litigation, four commercial agreements to support Digex’s business, and a

commitment to amend Digex’s certificate of incorporation to require approvals for

interested transactions. Id. at 52–53. Plaintiff’s counsel valued the total package at $420

million. Id. at 52.

       Because of the role of the special committee, causation issues loomed large. Two

special committee members appeared at the settlement hearing and testified that plaintiff’s

counsel played only a limited role in generating the settlement. See id. at 143. In a later and

unrelated case, this court surveyed the shared-credit cases and observed that “[i]n the two

most common shared-credit scenarios—those involving topping bidders or special

committees—the actor not principally responsible for generating the benefit appears to

have been credited with 20% to 25% of the benefit conferred.” Orchard, 2014 WL

4181912, at *6. Using that range, plaintiff’s counsel could claim causal credit for a benefit

of $84 million to $105 million.

       Plaintiff’s counsel sought an all-in award of $24.75 million. Digex, supra, tr. at 108.

Plaintiff’s counsel had entered into an engagement letter with two large institutional

investors that provided for a maximum fee equal to 15% of the benefit. Id. at 80, 82. Rather

than seeking 15% of the entire benefit, plaintiff’s counsel asked for 15% of the $165 million

fund. Id. at 103.

       The expedited nature of the case meant that plaintiff’s counsel had a lodestar of

approximately $1.4 million plus expenses of $580,000. Id. at 142. The court worked

through the Sugarland factors and awarded a fee of $12.3 million, reflecting 7.5% of the

settlement fund. Id. at 147. The court declined to award the full amount requested because

                                              30
after considering the lodestar crosscheck, the court thought that the award was too

generous. Id. at 146. The court specifically noted that the 5% suggested by the committee,

although consistent with awards in mega-fund cases, would have been “unduly punishing

or unfair to the plaintiffs.” Id. at 149.

       The Digex decision does not reflect a mega-fund reduction but rather a combination

of factors, including (i) shared causation, (ii) an expedited case resulting in a comparatively

low lodestar, (iii) a negotiated fee agreement providing for a maximum fee of 15%, and

(iv) a traditional Sugarland analysis. The Digex decision is therefore not a strong case for

the declining-percentage method. It also predates Americas Mining and its adoption of the

stage-of-case method.

       Next, the objectors rely on Crawford, which they perceive as a de facto example of

a downward adjustment in a mega-fund case. Not so. The plaintiffs filed suit in Crawford

just before Christmas. Six weeks later, they obtained a disclosure-based injunction that

delayed a merger vote. La. Mun. Police Empls.’ Ret. Sys. v. Crawford, 2007 WL 625006,

at *1 (Del. Ch. Feb. 13, 2007). Two weeks after that, the Court of Chancery held that the

merger triggered appraisal rights and issued an injunction that further delayed the merger

vote pending additional disclosure. La. Mun. Police Empls.’ Ret. Sys. v. Crawford, 918

A.2d 1172, 1176 (Del. Ch. 2007). Shortly thereafter, the case settled for an increase in the

transaction consideration of $1.60 per share, worth $660 million in the aggregate. Notably,

a second bidder had appeared, and the threat of a topping bid played a major role in the

price bump. La. Mun. Police Empls.’ Ret. Sys. v. Crawford, C.A. No. 2635-CC, at 5, 13

(Del. Ch. June 8, 2007) (TRANSCRIPT).

                                              31
       Plaintiff’s counsel requested and received an all-in fee of $20 million, which the

court approved. The objectors claim that because the fee equated to only 3% of the $660

million bump, it must reflect a downward adjustment for a mega-fund. To the contrary,

there was a second bidder, so causation issues again loomed large. Using the rule of thumb

of 20% to 25% credit, plaintiff’s counsel could credibly claim a benefit of approximately

$132 million to $165 million, with the $20 million translating to 12% to 15% that range.

Those percentages are in line with an early to mid-stage settlement, which is apt for

Crawford. The expedited injunction phase of the litigation unfolded over ten weeks, and

the case progressed little after that point. The court viewed the application as a measured

request, and the lodestar cross-check suggested an implied rate of a “couple thousand

dollars or more.” Id. at 15. The Crawford decision was a straightforward application of

Sugarland, not a percentage reduction in a mega-fund case.

       Finally, the objectors rely on the fee award in Southern Peru, which the Delaware

Supreme Court affirmed in Americas Mining. That case involved a derivative recovery of

$1.9 billion (including pre-judgment interest). See In re S. Peru Copper Corp. S’holder

Deriv. Litig., 52 A.3d 761, 819 (Del. Ch. 2011). Even though the case went all the way to

a judgment, the plaintiffs sought only 22.5%, not 33%, which still represented a fee request

of $428.2 million. The defendants proposed $14 million. Chief Justice Strine, then serving

as Chancellor, reduced the percentage from 22.5% to 15%, citing a series of factors. In a

passage that the objectors emphasize, he stated:

       Now, I gave a percentage of only 15 percent rather than 20 percent, 22 1/2
       percent, or even 33 percent because the amount that’s requested is large. I
       did take that into account. Maybe I am embracing what is a declining thing.

                                            32
       I’ve tried to take into account all the factors, the delay, what was at stake,
       and what was reasonable. And I gave defendants credit for their arguments
       by going down to 15 percent. The only basis for some further reduction is,
       again, envy or there’s just some level of too much, there’s some natural
       existing limit on what lawyers as a class should get when they do a deal.

Ams. Mining, 51 A.3d at 1259 (quoting trial court ruling). The objectors regard this as an

endorsement of the declining-percentage approach, but it actually reflects the Chancellor’s

consideration of all of the Sugarland factors, including the plaintiff’s delay in prosecuting

the case. Elsewhere in the transcript, the Chancellor criticized the concept of a reduction

in mega-fund cases. See In re S. Peru S’holder Litig., No. 961-CS, at 77, 83 (Del. Ch. Dec.

19, 2011) (TRANSCRIPT). As part of his remarks, he noted that other contingently

compensated professionals, such as investment bankers and fund managers, do not have

their fees reduced as the value that they generate increases, and he queried why lawyers

should be treated differently. Id. at 81–82, 97–99, 102–04. While serving on this court,

Chief Justice Strine had made similar comments in other transcript rulings approving fee

awards.14

       14
          See In re Clear Channel Outdoor Hldgs., Inc., Deriv. Litig., 2013 WL 5563370, at
*19 (Del Ch. Sept. 9, 2013) (TRANSCRIPT) (“We’ve always adhered to the idea that if
you get a very solid recovery, you should have a very solid fee. That’s the way the best
incentive system works. You don’t want to say, ‘If you get really good results, we’re going
to shave your fee.’ That doesn’t make any sense. We should be shaving a fee when there are
not really good results.”); Forgo v. Health Grades, Inc., 2011 WL 9535201, at 65 (Del. Ch.
June 29, 2011) (TRANSCRIPT) (“[T]he declining percentage doesn’t interest me because I
do think you want people––if people swing for the fences and they hit the home run, they
deserve the home run fee.”); In re Am. Int’l Gp., Inc. Cons. Deriv. Litig., C.A. No. 769-
VCS, at 9–10 (Del. Ch. Jan. 25, 2011) (“I’ve said this before and I will continue to say it—
that, you know, you don’t reduce people’s fees because they gain much. You should, in
fact, want to create an incentive for real litigation.”).

                                             33
       As these precedents show, Americas Mining and its progeny neither call for nor

commend a practice of reducing the percentage of the benefit awarded as a fee in a mega-

fund case. The Americas Mining framework uses a stage-of-case method that rewards

plaintiff’s counsel for the greater risk associated with pushing deeper into the case. “The

incentive effects of the sliding [fee] scale apply equally to large and small settlements.”

Activision, 124 A.3d at 171. Under Americas Mining and Sugarland, a court does not make

a downward adjustment to the indicative percentage based on the size of the fund.

                       ii.   Federal Securities Cases

       The objectors and professors are on stronger ground when they look to fee awards

in federal securities actions. They have shown that when awarding fees for settlements of

$1 billion or more, federal courts award approximately 10% of the common fund. They

have also shown that some federal courts expressly adjust the percentage downward if it

generates an implied hourly rate that strikes the judge as too high. But while the objectors

and professors have shown that the federal courts use that framework for securities actions,

they have not shown that the same framework should apply in a Chancery M&A case where

a plaintiff seeks post-closing monetary relief. The two types of litigation are superficially

similar, but there are significant differences.

       As noted, the objectors and the professors have demonstrated that federal courts use

a declining-percentage method for securities class actions. A 2022 report by Nera

Consulting that studied federal securities cases from 2012 to 2021 found that the median

percentage award gradually declines from 33.5% to 25.8% as the common fund increases

from $5 million or less to $500 million. The median percentage then drops to 17.7% for

                                              34
common funds between $500 million and $1 billion. Finally, the median percentage drops

to 10.5% for common funds exceeding $1 billion. Obj., Ex. B at 27. The ten largest federal

securities settlements of all time—all common funds of $1 billion or more—generated an

average award of 9.4%. Id. at Ex. C. Likewise, an academic study published in 2010 found

that “fee percentage is strongly and inversely associated with settlement size . . .; [when] a

settlement size of $100 million was reached . . . fee percentages plunged well below 20

percent.” Brian T. Fitzpatrick, An Empirical Study of Class Action Settlements and Their

Fee Awards, 7 J. Empirical Legal Stud. 811, 814 (2010). For settlements between $500

million and $1 billion, the median was 12.9%, and for settlements over $1 billion, the

median was 9.5%. Id. at 839, tbl. 11.

       Two of the professors are co-authors of a forthcoming article that drills deeper into

these issues. See Stephen Choi, Jessica M. Erickson & A.C. Pritchard, The Business of

Securities    Class     Action     Lawyering,      99     Ind.    L.     J.   (forthcoming),

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4350971         [hereinafter   Securities

Lawyering]. The authors collected data on every federal class action involving a securities

disclosure claim against a public company from 2005 and 2018, for a total of 2,492 class

actions. From the dockets, they hand-collected more than 200 variables for each case. By

any measure, it is an impressive effort. Organizing the cases by deciles, they find that

percentage fee awards range between 26% and 28% until the seventh decile, when they

decline moderately, then decline further in the tenth decile to 19.6%.

                                             35
       The professors also seek to counter the argument that the declining-percentage

method creates disincentives for plaintiff’s counsel to litigate large cases. Using their

decile-based system, they calculate the fee award as a multiple of lodestar. They find that

although the award as a percentage of the common fund declines as the fund increases, the

lower percentages generate higher multiples to lodestar. Larger cases are thus more

profitable, even with lower percentage-based awards. The professors conclude that the

declining-percentage method does not create a disincentive for lawyers to litigate larger

securities cases.

                                            36
       The authors of the Securities Lawyering article also find that the likelihood of non-

recovery for a plaintiff’s firm falls dramatically after a securities case survives a motion to

dismiss. Id. at 60. The authors suggest that the hours that a plaintiff’s firm incurs after

surviving a motion to dismiss carry a smaller risk of non-recovery and should be worth less

when a court awards fees. The article concludes that, relative to risk, plaintiffs’ counsel are

undercompensated before a motion to dismiss, but overcompensated afterward. Relatedly,

the authors find that top-earning plaintiff’s firms tend to win lead counsel fights in cases

with stronger indicia of wrongdoing. They note that because of those stronger indicia, those

cases are more likely to achieve settlements. The professors conclude that for the cases that

top-tier lawyers file, the hours are less risky still, suggesting that those firms are

overcompensated.

                                              37
       Finally, the professors observe that in federal securities actions, larger issuers will

have larger damages (all else equal). Id. at 62. Earlier scholars made the same point:

“Damages reflect the market losses when the fraud is uncovered. A larger company will

have correspondingly larger market losses, regardless of the skills or performance of the

law firms in the resulting litigation.” Eisenberg & Miller, supra, at 64. If a principal driver

of the larger recoveries is the larger capitalizations associated with big issuers, then

awarding the same percentage of a larger recovery simply rewards plaintiffs’ counsel for

suing a larger firm.

       These all seem to be valid points for federal securities actions, but that does not

mean that the declining-percentage method is optimal for judges to use, even in federal

securities cases. Professor Brian Fitzpatrick has authored a helpful overview of different

approaches for setting fees. See Brian T. Fitzpatrick, A Fiduciary Judge’s Guide to

Awarding Fees In Class Actions, 89 Fordham L. Rev. 1141 (2021) [hereinafter Judge’s

Guide]. He argues that judges should attempt to replicate the terms on which a sophisticated

client would retain counsel, and he evaluates how sophisticated clients structure contingent

fees in the real world. He finds that sophisticated clients consistently opt for a percentage-

of-the-benefit model, “either with fixed percentages or escalating percentages as litigation

matures.” Id. at 1160. Professor Fitzpatrick believes that judges likewise should use that

method. Id. at 1163; accord id. at 1153–54. That is what the Americas Mining stage-of-

case method does.

       Professor Fitzpatrick has little good to say about the declining-percentage method.

He notes that this approach “is unheard of in the marketplace.” Id. at 1167. Thus, “[i]f

                                              38
judges want to do what rational absent class members would want to do, then they should

not do this.” Id. He also offers reasons why clients would not want to bargain for a

decreasing percentage, notwithstanding the possibility of economies of scale. The reasons

include (i) the transaction costs associated with negotiating away from a one-third, fixed-

percentage arrangement, (ii) strategic uncertainties if parties have asymmetric information

about the merits of the case, and (iii) the need for increased monitoring for premature

settlements. Id. at 1163. Increased monitoring is necessary because the declining-

percentage method fails to provide counsel with a predictable incentive to press forward

with the case. Instead, a client (or the court) must assess the legitimacy of the hours that

the attorneys have invested to test for overcompensation. Id. at 1167. He concludes with

the observation that while incorporating the benefits of economies of scale might be

desirable, “bringing marginal price down to marginal cost is not free.” Id. at 1168.

       Professor Fitzpatrick makes a strong argument against using the declining-

percentage method in federal securities cases, notwithstanding the data that the professors

have presented. But assuming the declining-percentage method is a reasonable approach

for federal securities litigation, it still may not be a reasonable approach for Chancery M&A

litigation.

       For starters, the federal courts seem to be using the declining-percentage method as

a backdoor—and backward looking—lodestar method. Under the traditional lodestar

method, a court begins with counsel’s lodestar and applies a risk multiplier to increase the

fee to account for risk. Under the declining-benefit method, the court starts with a

percentage of benefit conferred, then decreases the fee until the risk multiplier seems

                                             39
appropriate for the risk. In Sugarland, the Delaware Supreme Court rejected the lodestar

approach. 420 A.2d at 150. This court should not be deploying the declining-percentage

methodology to undermine that decision.

       Next, it is far from clear that the attributes of Chancery M&A litigation in the post-

Trulia era are sufficiently similar to federal securities actions to warrant similar treatment.

What we lack—and what would be wonderful to have—is a thorough study akin to the

analysis conducted in Securities Lawyering. For now, I must operate based on my own

experience as a judge and practitioner, plus learning from a handful of articles that have

looked at aspects of Chancery M&A litigation during the pre-Trulia period.15

       15
          See Matthew B. Cain & Steven Davidoff Solomon, A Great Game: The Dynamics
of State Competition and Litigation, 100 Iowa L. Rev. 465 (2015); John Armour, Bernard
Black & Brian Cheffins, Delaware’s Balancing Act, 87 Ind. L. J. 1345 (2012); John
Armour, Bernard Black & Brian Cheffins, Is Delaware Losing Its Cases?, 9 Empirical
Legal Stud. 605 (2012); Bernard Black, Brian Cheffins & John Armour, Delaware
Corporate Litigation and the Fragmentation of the Plaintiff’s Bar, 2012 Colum. Bus. L.
Rev. 427; Elliott J. Weiss & Lawrence J. White, File Early, Then Free Ride: How
Delaware Law (Mis)Shapes Shareholder Class Actions, 57 Vand. L. Rev. 1797 (2004);
Randall S. Thomas & Robert B. Thompson, The New Look of Shareholder Litigation:
Acquisition-Oriented Class Actions, 57 Vand. L. Rev. 133 (2004).

        Only two articles have examined Chancery M&A litigation post-Trulia. One
examined suits in 2017, the first post-Trulia year, so its value is limited. Matthew B. Cain
et al., The Shifting Tides of Merger Litigation, 71 Vand. L. Rev. 603 (2018) [hereinafter
Shifting Tides]. The other charted a diaspora in which the lawyers responsible for filing the
lowest quality lawsuits fled from Delaware to the federal courts. Sean J. Griffith, Frequent
Filer Shareholder Suits in the Wake of Trulia: An Empirical Study, 2020 Wis. L. Rev. 443
(2020) [hereinafter Frequent Filer]. Those lawsuits do not generate monetary recoveries
and so are not pertinent. I have nevertheless drawn on those articles to the extent possible.

                                              40
       At the outset, candor demands conceding the existence of a number of surface-level

similarities between federal securities cases and Chancery M&A litigation.

•      Both seek to supply private enforcement of legal norms but are vulnerable to abuse.

•      Similar types of plaintiffs appear in both types of actions.

•      Both types of litigation are largely lawyer driven, and some of the same firms appear
       in both types of cases.

•      Both types of litigation involve contingent compensation arrangements that give rise
       to similar conflicts of interest and agency costs.

       But there are significant differences. One is the sheer volume of federal securities

litigation and the magnitude of the recoveries. During the period from 2017 to 2021, there

were 850 core federal securities lawsuits that asserted claims under Rule 10b-5. See

Cornerstone Research, Securities Class Action Filings: 2021 Year In Review 4 (2022).

Over the same period, there were 397 settlements that generated common funds totaling

$15.4 billion. Cornerstone Research, Securities Class Action Settlements: 2021 Review and

Analysis 3 (2022). Nearly half (46.7%) of the cases resulted in favorable settlements.

       Across the same period (2017 to 2021), there were 913 lawsuits filed in the

Delaware Court of Chancery asserting claims for breach of fiduciary duty. 16 More finely

grained data is not available, so this figure includes not only M&A litigation but also all

other types of fiduciary duty litigation, such as derivative actions. While the topline figure

is roughly similar to the number of federal securities filings, the other datapoints are vastly

       16
         The per-year figures are 142 in 2017, 165 in 2018, 196 in 2019, 194 in 2020, and
216 in 2021.

                                              41
lower. The plaintiff has identified just ten settlements generating common funds in cases

subject to entire fairness review, and those cases yielded aggregate settlement proceeds of

$449.47 million.17 They identified another nine settlements generating common funds in

cases governed by enhanced scrutiny, and those cases yielded aggregate settlement

proceeds of $226 million.18 Between 2017 and 2021, Chancery M&A litigation thus

generated a total of nineteen common fund settlements (versus 397 in federal securities

actions) and a total of $675.47 million in proceeds (versus $15.4 billion from federal

       17
           See Dkt. 514 Ex. 7 at 1–7. For the period from 2012 to 2022, the plaintiff identified
a total of twenty-three settlements in entire fairness cases. The ten settlements reached in
the years from 2017 to 2021 were Cornerstone (2017), Starz (2018), Good Technology
(2018), Calamos (2019), Handy & Harmon (2019), Schuff (2020), Weinstein (2020),
Malone (2021), Amtrust (2021), and Alon USA (2021). There were six settlements reached
in 2022: TD Bank, Pivotal, Straight Path, AVX, Akcea, and HomeFed. Those six
settlements generated aggregate proceeds of $164 million. There were another seven
settlements during the period from 2012 to 2016: Delphi (2012), CNX Gas (2013), Orchard
(2014), Jefferies (2015), GFI Group (2016), Venoco (2016), and C&D Tech (2016). Those
seven settlements generated aggregate proceeds of $199 million. There was also a post-
trial settlement in Dole in 2016, which the plaintiffs did not identify, that generated a
common fund of $115.7 million. The plaintiff identified one settlement from 2023, but to
avoid an open-ended inquiry, the court cut off the sample at year-end 2022.
       18
          See Dkt. 514 Ex. 7 at 8–14. For the period from 2012 to 2022, the plaintiff
identified a total of nineteen settlements in enhanced scrutiny cases. The nine settlements
reached in the years from 2017 to 2021 were ExamWorks (2017), Dreamworks (2018),
Saba Software (2018), Appel (2020), KCG Holdings (2020), Tangoe (2020), Towers
Watson (2021), Searles (2021), and Weiss (2021). There were three settlements reached in
2022: Columbia Pipeline, CVR, and Mindbody. Those three settlements generated
aggregate proceeds of $184.5 million. There were another seven settlements during the
period from 2012 to 2016: El Paso (2012), Gardner Denver (2014), Arthrocare (2014),
Globe Specialty Materials (2016), PLX (2016), Tibco (2016), and Chen v. Howard-
Anderson (2016). Those settlements generated aggregate proceeds of $262.6 million. There
was also the damages recovery of $70 million in Rural Metro in 2014.

                                              42
securities actions). In federal securities actions, settlements were reached in approximately

46.7% of the new filings over the same period. Assuming conservatively that M&A

litigation represented one-third of the breach of fiduciary duty cases filed over the same

period, settlements were reached in less than 10% of new filings during that period. These

figures suggest that per case filed, plaintiff’s lawyers in Chancery M&A litigation face far

higher rates of dismissal, far lower prospects of settlement, and far smaller potential

recoveries.

       Another difference is the ability of plaintiff’s counsel to identify high quality cases.

As the Securities Litigation article notes, high quality securities cases often follow the

filing of criminal charges, the firing of a top officer, or a financial restatement. See

Securities Litigation, supra, at 13–14. Although half of all securities actions are dismissed

at the pleading stage, that statistic plummets for cases where there are strong initial indicia

of wrongdoing. Only 9.1% of cases are dismissed where there is a parallel SEC

investigation, only 13.9% where there is another government investigation, only 25.9%

where there is an officer termination, and only 9.6% where there is a restatement. Id. at 29.

Although derivative actions in the Court of Chancery often follow a corporate trauma,

suggesting similar dynamics may be in play, there is no similar set of signals for Chancery

M&A litigation. True, some types of M&A cases—such as transactions involving

controlling stockholders—involve conflicts of interest and make a complaint more likely

to survive a motion to dismiss, but rarely are deals singled out by federal or state

prosecutors, flagged by agency investigations, or marked by similar red flags. To the

contrary, the defendants in Chancery M&A litigation are well-represented by sophisticated

                                              43
law firms who are trying to craft a record that causes the litigation to fail at the outset. See

generally Leo E. Strine, Jr., Documenting the Deal: How Quality Control and Candor Can

Improve Boardroom Decision-Making and Reduce the Litigation Target Zone, 70 Bus.

Law. 679 (2015). For Chancery M&A litigation, plaintiff’s lawyers must read between the

lines of the background section of a proxy statement, then conduct their own investigations

using Section 220 of the Delaware General Corporation Law or other tools at hand. I

suspect there is no class of cases where dismissal rates drop to the levels seen for high-

quality securities class actions.

       Along similar lines, the mega-settlements achieved in federal securities actions have

often benefited from criminal or regulatory investigations. The massive securities

settlements that the objectors and the professors have cited include some of the greatest

hits of corporate malfeasance: Enron (2012), Cendant (2000), Petrobras (2018), Bank of

America (2013), Nortel (2006), Valeant (2021), Worldcom (2005), Tyco (2007), AOL

Time Warner (2006), Household (2016), and Royal Ahold (2006). Prosecutors criminally

charged senior executives from Enron, WorldCom, Cendant, Tyco, Petrobras, Nortel,

Royal Ahold, and Valeant. They charged mid-level executives from AOL Time Warner.

State investigators sued Household and settled for $484 million. The Bank of America

issues were the subject of intense investigations into the events leading to the 2008

financial crisis. As the authors of Securities Litigation acknowledge, “The billion-dollar

settlements in cases against companies like Enron or Petrobas may function as a lottery

ticket of sorts.” Securities Litigation, supra, at 36. There is no similar lottery effect in

Chancery M&A litigation. Plaintiff’s counsel can only secure a large settlement by

                                              44
conducting a detailed investigation before filing suit, surviving a motion to dismiss,

building a strong case through discovery, then being prepared to litigate through trial.

       A third difference is the relative risk that plaintiff’s counsel undertakes after a case

survives a motion to dismiss. Securities class actions almost never go to trial, and many

settle prior to discovery. Id. at 8 n.37, 54. Chancery M&A litigation is different, even for

transactions governed by the entire farness test. “While the reverberations of isolated

plaintiffs’ victories continue to echo in the collective consciousness, scholarly research

establishes that only exceptional entire fairness cases result in meaningful damages

awards.”19 Since Americas Mining, there have been at least ten post-trial decisions in entire

fairness cases where the defendants prevailed,20 plus three more where the court awarded

       19
          Basho, 2018 WL 3326693, at *35. See, e.g., Reza Dibadj, Networks of Fairness
Review in Corporate Law, 45 San Diego L. Rev. 1, 22 (2008) (noting that “[w]hile the
conventional wisdom might suggest that standards of review are typically outcome
determinative, the empirical research suggests the fairness standard is not” and cataloging
cases where defendants prevailed (footnote omitted)); Julian Velasco, A Defense of the
Corporate Law Duty of Care, 40 J. Corp. L. 647, 689 (2015) (collecting cases where
defendants prevailed under entire fairness and noting that “[o]nce applied, the entire
fairness test is no longer considered outcome-determinative”).
       20
          See In re Oracle Corp. Deriv. Litig., 2023 WL 3408772 (Del. Ch. May 12, 2023);
In re BGC P’rs, Inc. Deriv. Litig., 2022 WL 3581641 (Del. Ch. Aug. 19, 2022); Coster v.
UIP Cos., Inc., 2022 WL 1299127 (Del. Ch. May 2, 2022), aff’d, 255 A.3d 953 (Del. 2023);
In re Tesla Motors, Inc. S’holder Litig., 2022 WL 1237185 (Del. Ch. Jan. 18, 2022), aff’d,
--- A.3d ----, 2023 WL 3854008 (Del. June 6, 2023); Dieckman v. Regency GP LP, 2021
WL 537325 (Del. Ch. Feb. 15, 2021); Frederick Hsu Living Tr. v. Oak Hill Cap. P’rs III,
L.P., 2020 WL 2111476 (Del. Ch. May 4, 2020); ACP Master, Ltd. v. Sprint Corp., 2017
WL 3421142, at *1 (Del. Ch. July 21, 2017), aff’d, 184 A.3d 1291 (Del. 2018); Quadrant
Structured Prods. Co. v. Vertin, 102 A.3d 155 (Del. Ch. 2014); In re Trados Inc. S’holder
Litig., 73 A.3d 17 (Del. Ch. 2013); Zimmerman v. Crothall, 62 A.3d 676 (Del. Ch. 2013).

                                              45
only nominal damages of $1.00.21 Not only that, but plaintiffs who have prevailed at trial

continue to face significant risk on appeal. As noted previously, since Americas Mining,

the Delaware Supreme Court has heard appeals from six post-trial damages awards in

which representative plaintiffs obtained cash recoveries and the defendants challenged the

liability determination. The high court affirmed the first two and reversed the next four. In

federal securities litigation, prevailing on a motion to dismiss makes settlement highly

likely. Cases are not tried, so there is no risk of a post-trial loss or a reversal of a victory

       Defendants enjoyed success under the entire fairness standard before Americas
Mining as well. For earlier Delaware Supreme Court decisions affirming post-trial
judgments finding that transactions were entirely fair, see Kahn v. Lynch Commc’n Sys.,
Inc., 669 A.2d 79 (Del. 1995); Cinerama, Inc. v. Technicolor, Inc., 663 A.2d 1156 (Del.
1995); Nixon v. Blackwell, 626 A.2d 1366 (Del. 1993); Rosenblatt v. Getty Oil Co., 493
A.2d 929 (Del. 1985). For earlier Delaware Court of Chancery decisions finding that
transactions were entirely fair, see S. Muoio & Co. LLC v. Hallmark Ent. Invs. Co., 2011
WL 863007 (Del. Ch. Mar. 9, 2011), aff’d, 35 A.3d 419 (Del. 2011); In re John Q.
Hammons Hotels Inc. S’holder Litig., 2011 WL 227634 (Del. Ch. Jan. 14, 2011); Hanover
Direct, Inc. S’holders Litig., 2010 WL 3959399 (Del. Ch. Sept. 24, 2010); Kates v. Beard
Rsch., Inc., 2010 WL 1644176 (Del. Ch. Apr. 23, 2010); In re Cysive, Inc. S’holders Litig.,
836 A.2d 531 (Del. Ch. 2003); Emerald P’rs v. Berlin, 2003 WL 21003437 (Del. Ch. Apr.
28, 2003), aff’d, 840 A.2d 641 (Del. 2003); Liberis v. Europa Cruises Corp., 1996 WL
73567 (Del. Ch. Feb. 8, 1996), aff’d, 702 A.2d 926 (Del. 1997); Van de Walle v. Unimation,
Inc., 1991 WL 29303 (Del. Ch. Mar. 7, 1991); Citron v. E.I. Du Pont de Nemours & Co.,
584 A.2d 490 (Del. Ch. 1990); Rabkin v. Olin Corp., 1990 WL 47648 (Del. Ch. Apr. 17,
1990), aff’d, 586 A.2d 1202 (Del. 1990) (TABLE); Shamrock Hldgs., Inc. v. Polaroid
Corp., 559 A.2d 257 (Del. Ch. 1989); see also Kleinhandler v. Borgia, 1989 WL 76299
(Del. Ch. July 7, 1989) (summary judgment).
       21
         See Ravenswood Inv. Co., L.P. v. Est. of Winmill, 2018 WL 1410860 (Del. Ch.
Mar. 21, 2018), aff’d, 210 A.3d 705 (Del. 2019); Ross Hldg. & Mgmt. Co. v. Advance
Realty Gp., LLC, 2014 WL 4374261 (Del. Ch. Sept. 4, 2014); In re Nine Sys. Corp.
S’holders Litig., 2014 WL 4383127 (Del. Ch. Sept. 4, 2014). For an earlier decision
awarding only nominal damages, see Oliver v. Bos. Univ., 2006 WL 1064169 (Del. Ch.
Apr. 14, 2006).

                                              46
on appeal. In Chancery M&A litigation, the calculus is quite different. Cases are tried. The

risk of a post-trial loss is real, and the risk of reversal is high.

       That said, this case provides some indicative support for one consideration that the

professors rely on to support the declining-percentage method in federal securities cases.

The data from the precedent settlements indicates that just as securities law settlements

vary based on market capitalization, Chancery M&A settlements vary based on deal size.

While I have neither an extensive dataset nor the professors’ technical expertise, I have run

some simple regressions using the settlement data that plaintiff’s counsel provided.

       The first group consists of twenty-four settlements in deal cases since Americas

Mining where entire fairness presumably applied. See Dkt. 514 Ex. 7. Eight involved

transactions valued at less than $100 million (Handy & Harmon; Cornerstone; C&D

Technology; Salladay; Good Technologies; Schuff; Orchard; and Weinstein). Scholars

often exclude deals under $100 million from datasets because they have unique attributes.22

This decision does the same.

       22
         See, e.g., Matthew D. Cain, Antonio J. Macias & Steven Davidoff Solomon,
Broken Promises: The Role of Reputation in Private Equity Contracting and Strategic
Default, 40 J. Corp. L. 565, 579–580 (2015); Brian JM Quinn, Optionality in Merger
Agreements, 35 Del. J. Corp. L. 789, 809 (2010); Steven M. Davidoff, The Failure of
Private Equity, 82 S. Cal. L. Rev. 481, 483–84 n.11 (2009).

                                                47
       That leaves a total of seventeen datapoints: sixteen precedents plus the settlement

in this case.

                                    Transaction Value       Settlement Value
                   Transaction              (Millions)             (Millions)
       1   Calamos                            $130.00                 $30.00
       2   Homefed                            $156.30                 $15.00
       3   Venoco                             $363.00                 $19.00
       4   GFI Group                          $366.00                 $10.75
       5   Alon USA Energy                    $407.00                 $44.75
       6   Akcea                              $446.50                 $12.50
       7   CNX Gas                            $605.88                 $42.70
       8   AVX                             $1,030.00                  $49.90
       9   Amtrust                         $1,040.00                  $40.00
      10   Pivotal                         $1,430.00                  $42.50
      11   Jefferies                       $2,400.00                  $70.00
      12   Straight Path                   $2,450.00                  $12.50
      13   Delphi                          $2,500.00                  $49.00
      14   Starz                           $4,400.00                  $92.50
      15   Malone                          $7,400.00                 $110.00
      16   Dell Class V                   $23,900.00               $1,000.00
      17   TD Bank                        $26,000.00                  $31.50

       A linear regression using this data generates a best-fit line with an R-squared of

0.4109, a P value of 0.0056, and an F value of 10.46, indicating that approximately 41%

of the variation in the size of the settlement is explained by the size of the transaction using

the formula Y= 0.01885*X + 15.22. The following plot illustrates that result:

                                               48
      The second group consists of twenty settlements in deal cases since Americas

Mining where enhanced scrutiny presumably applied. See Dkt. 514 Ex. 7. None of the

transactions had deal values under $100 million, so none need to be excluded.

                                  Transaction Value      Settlement Value
          Case                            (Millions)            (Millions)
      1   Chen                              $130.10               $35.00
      2   CVR                               $240.50               $78.50
      3   Tangoe                            $256.00               $13.00
      4   PLX                               $260.00               $14.10
      5   Weiss                             $302.00               $17.50
      6   Saba Software                     $400.00               $19.50
      7   KCG                               $932.00               $22.00
      8   Globe Specialty                   $937.00               $32.50
      9   Arthrocare                     $1,360.00                $12.00
     10   ExamWorks                      $1,400.00                $86.50
     11   MindBody                       $1,700.00                $27.00
     12   Appel v. Berkman               $2,100.00                $25.50
          Searles v.
     13   DeMartini                      $2,160.00                 $23.00
     14   Dreamworks                     $3,120.00                  $4.50

                                            49
      15   Gardner Denver                   $3,900.00                  $29.00
      16   Tibco                            $3,900.00                  $30.00
      17   Towers Watson                    $9,192.00                  $15.00
      18   Columbia Pipeline               $10,200.00                  $79.00
      19   El Paso                         $20,770.00                 $110.00

       A linear regression using this data generates a best-fit line with an R-squared of

0.3477, a P value of 0.0079, and an F value of 9.063, indicating that approximately 35%

of the variation in the size of the settlement is explained by the size of the transaction using

the formula Y= 0.003446*X + 23.98. The following plot illustrates that result:

       Although both datasets show a statistically significant relationship between

transaction size and settlement size, the sample sizes are small. The relationship could be

a Type-I error (false positive), or the explanatory power could be low. I am particularly

leery of the latter risk. The settlements in TD Bank and this case are significant outliers in

                                              50
the dataset for entire fairness cases, which is the more relevant dataset for this case.23

Without those two datapoints, a basic linear regression using the other fifteen datapoints

generates a best-fit line with an R-squared of 0.704, a P value of less than 0.0001, and an

F value of 30.92, indicating that approximately 70% of the variation in the size of the

settlement is explained by the size of the transaction using the formula Y= 0.01246*X +

21.87. Adding the settlements in TD Bank reduces the explanatory power of transaction

size to approximately 41%. Not only that but the equation without those two datapoints

predicts that a settlement in a case challenging a $23.9 billion deal should be around $320

million, yet this case the settlement is over three times that amount, and the settlement in

TD Bank (a challenge to a $26 billion deal) was under one-tenth that amount.

       The indications from the two datasets are not sufficiently persuasive to support a

departure from Americas Mining. The other reasons that plausibly justify using the

declining-percentage method in federal securities actions do not carry over to Chancery

M&A litigation. If future research points to greater crossover or otherwise supports a

different method, then I personally would be open to considering it. At present, that

       23
          Or so I thought. The separate datasets for enhanced scrutiny and entire fairness
cases reflect a prior expectation that the standard of review would affect the distribution of
outcomes. Interestingly, using the combined dataset and regressing a dummy variable for
whether the transaction was subject to entire fairness review did not generate a statistically
significant result. When the datasets are combined, the relationship between deal size and
settlement size remains significant. A linear regression using the combined dataset
generates a best-fit line with an R-squared of 0.3287, a P value of 0.0003, and an F value
of 16.65, indicating that approximately 33% of the variation in the size of the settlement is
explained by the size of the transaction using the formula Y= 0.01430*X + 10.21.

                                             51
showing has not been made. One of the professors said it best in a tweet about the Securities

Litigation study: “Delaware cases are different and not part of our study.”24 I agree.

       Turning from the general to the specific, none of the reasons for a mega-fund

reduction apply to this case. The risk of a non-recovery in this case (at trial or on appeal)

was significant, and the risk intensified as trial approached. The recovery of $1 billion does

not seem to have been the product of deal size. It is rather a landmark settlement that dwarfs

the aggregate recoveries in all other settlements in entire fairness cases since Americas

Mining, which total $642 million. The $1 billion recovery in this case is approximately

equal to the aggregate recoveries in all of the Chancery M&A settlements since Americas

Mining, which generated total recoveries of $1.055 billion. Reducing the requested award

is not necessary from a compensatory perspective, because the implied rate of

approximately $5,000 per hour is lower than rates this court has approved for smaller

recoveries. See Brief for Plaintiff at 64, Activision, 124 A.3d 1025 (2015) (C.A. No. 8885-

VCL) (collecting fee awards with higher implied hourly rates). The multiple to lodestar of

7x in this case would not raise a federal eyebrow.25

       24
             @ProfJErickson, X f/k/a Twitter (Mar. 2,                  2023,    6:24     PM),
https://twitter.com/ProfJErickson/status/1631435295840149504.
       25
         See, e.g., Farrell v. Bank of Am. Corp., N.A., 827 F. App’x 628, 630 (9th Cir.
2020) (10.15x multiplier); Kane Cnty., Utah v. United States, 145 Fed. Cl. 15, 19–20 (Fed.
Cl. 2019) (6.13x multiplier; collecting cases approving or referencing multipliers between
5.39x to 19.6x); In re Doral Fin. Corp. Sec. Litig., No. 05-MDL-1706 (S.D.N.Y. July 17,
2007) (Dkt. 107) (10.26x multiplier); New Eng. Carpenters Health Benefits Fund v. First
Databank, Inc., 2009 WL 2408560, at *2 (D. Mass. Aug. 3, 2009) (8.3x multiplier); Stop
& Shop Supermarket Co. v. SmithKline Beecham Corp., 2005 WL 1213926, at *18 (E.D.

                                             52
       The rationales for using the declining-percentage method in federal securities

litigation have not been shown to apply to Chancery M&A litigation. In particular, they do

not apply to this case. The court will not make a downward adjustment based on the size

of the common fund.

                      c.     Evidence From Arm’s-Length Agreements

       A separate source of evidence for determining an appropriate percentage of the

results obtained comes from privately negotiated contingency fee agreements. The

objectors and the professors encouraged the court to look to these sources. Other scholars

commend that practice.26 A series of federal decisions have approved using private fee

Pa. May 19, 2005) (15.6x multiplier); In re Merry-Go-Round Enters., Inc., 244 B.R. 327,
337–38 (Bankr. D. Md. 2000) (19.6x multiplier); Conley v. Sears, Roebuck & Co., 222
B.R. 181, 182 (D. Mass. 1998) (8.9x multiplier).
       26
          See Choi, supra, at 12–13 (“Sophisticated institutional investors, however, may
negotiate an ex ante fee agreement when selecting lead counsel. Although a court is not
bound by these agreements, courts often take them into account.” (internal footnotes
omitted)); Lynn A. Baker, Michael A. Perino & Charles Silver, Is the Price Right? An
Empirical Study of Fee-Setting in Securities Class Actions, 115 Colum. L. Rev. 1371,
1433–34 (2015) (advocating for a system of “[e]x ante review of fee agreements [to]
enable[ ] judges to distinguish lead plaintiffs who are doing their jobs from those who are
not, before litigation proceeds very far”); Charles Silver, Unloading the Lodestar: Toward
a New Fee Award Procedure, 70 Tex. L. Rev. 865, 869 (1992) (advocating the replacement
of “the lodestar method in all fee-shifting cases, regardless of the kind of relief sought,”
with an award system “base[d] . . . on fee agreements plaintiffs enter into with their
lawyers”); Charles Silver, A Restitutionary Theory of Attorneys’ Fees in Class Actions, 76
Cornell L. Rev. 656, 700–01, 702–03 (1991) (“Unjust enrichment occurs in class actions
because absent plaintiffs enjoy the fruits of an attorney’s labor without purchasing the right
to do so. The remedy should therefore require absent plaintiffs to pay an amount which, if
offered in advance, an attorney would willingly accept. The best guess at that amount is an
attorney’s usual and customary rate. . . . In cases waged by contingent fee practitioners, it
is inappropriate to focus on effective hourly rates ex post; . . . What is important . . . is to

                                              53
agreements as a basis for determining an appropriate fee award in a common fund case.27

And this court has considered an attorneys’ fee arrangement with its stockholder client

when determining a reasonable fee.28

pay attorneys on terms they would probably accept in an ex ante bargain . . . .”); Coffee,
supra, at 669 (“‘[L]aw should mimic the market.’. . . [which] mean[s] attempting to award
the fee that informed private bargaining . . . might have reached.”).
       27
          See In re Trans Union Corp. Priv. Litig., 629 F.3d 741, 744 (7th Cir. 2011)
(holding that lead counsel in a class action should receive a fee award consistent with the
“the contingent fee that the class would have negotiated with the class counsel at the outset
had negotiations with clients having a real stake been feasible”); In re Synthroid Mktg.
Litig., 264 F.3d 712, 718 (7th Cir. 2001) (“We have held repeatedly that, when deciding
on appropriate fee levels in common-fund cases, courts must do their best to award counsel
the market price for legal services, in light of the risk of nonpayment and the normal rate
of compensation in the market at the time.”); In re Cendant Corp. Litig., 264 F.3d 201,
282–84 (3d Cir. 2001) (holding that for purposes of fee awards under the PLSRA, “courts
should accord a presumption of reasonableness to any fee request submitted pursuant to a
retainer agreement that was entered into between a properly-selected lead plaintiff and a
properly-selected lead counsel”); Allapattah Servs., Inc. v. Exxon Corp., 454 F. Supp. 2d
1185, 1211 (S.D. Fla. 2006) (“[T]he more appropriate measure of a reasonable percentage
is the market rate for a contingent fee in commercial cases.”); Nilsen v. York Cnty., 400 F.
Supp. 2d 266, 277–78 (D. Maine 2005) (examining various methods for measuring the
reasonableness of a common fund attorneys’ fee and concluding that “the methodology of
the Seventh Circuit” is the most attractive).
       28
           See Wis. Inv. Bd. v. Bartlett, 2002 WL 568417, at *6 (Del. Ch. Apr. 9, 2002)
(“[A]lthough not specifically listed as [a] factor in our [Sugarland] analysis, the terms of a
fee arrangement between the law firm and its client are appropriate for the Court to
consider. Fee agreements cannot absolve the Court of its duty to determine a reasonable
fee; on the other hand, an arm’s-length agreement, particularly with a sophisticated client,
as in this instance, can provide an initial ‘rough cut’ of a commercially reasonable fee.”),
aff’d, 808 A.2d 1205 (Del. 2002); see also Danenberg v. Fitracks, Inc., 58 A.3d 991, 997
(Del. Ch. 2012) (noting that when determining a reasonable fee for indemnification or
advancement, an arm’s-length agreement can provide a starting point for a reasonable fee).

                                             54
       In Professor Fitzpatrick’s 2021 study, he found that sophisticated clients choose to

pay fixed one-third percentages or even higher escalating percentages based on litigation

maturity. Judge’s Guide, supra, at 1170. In patent cases, he found that fee agreements

provided for either (i) a fixed percentage, with a mean of 38.6%, or (ii) a percentage that

escalated as the litigation matured, with a mean percentage of 28% upon filing and up to

40.2% through appeal. Id. at 1161. Not only that, but more clients chose the latter (the

Americas Mining style stage-of-case method) than the former. “No one escalated or

deescalated based on recovery size.” Id.

       Professor Fitzpatrick also looked at large antitrust cases in the pharmaceutical

industry where classes of large corporations sue other large corporations, such as a class of

drug wholesalers suing drug manufacturers. The potential damages were enormous. He

found that the fee requests ranged from a fixed percentage of 27.5% to a fixed percentage

of one-third, that the one-third figure “heavily dominated,” and that the average was

32.85%. Id. He concluded that “corporations in these cases appear perfectly happy with the

percentage method and perfectly happy with the same fixed percentage of one-third that

most unsophisticated clients also choose.” Id. at 1162. Those percentages were all-in

percentages, inclusive of expenses. None of the clients sought decreasing fee percentages

based on economies of scale. Id. at 1163.

       A 2012 study reached similar conclusions. See David L. Schwartz, The Rise of

Contingent Fee Representation In Patent Litigation, 64 Ala. L. Rev. 335 (2012). That study

examined forty-two contingency fee agreements in patent cases, where large companies

sued one another, and found that ten used a fixed flat rate, thirty-two used an increasing

                                             55
rate, and none used a diminishing percentage. See id. at 360 & nn.136–37. The mean

percentage was 38.6% of the recovery. Id. at 360. When clients deviated from a fixed

percentage, the fee percentage increased as the case progressed, as under the Americas

Mining framework, but with higher percentages. Those agreements started at an average

percentage of 28% upon filing and ended with an average of 40.2% for taking the case

through appeal. Id.

      Two anecdotal examples comport with those studies. In a recent Chancery M&A

case, the fee agreement with a major law firm provided for a fixed, one-third contingency

fee which the court described as “quite typical and commercially reasonable.” S’holder

Representative Servs. LLC v. Shire US Hldgs., Inc., 2021 WL 1627166, at *2 (Del. Ch.

Apr. 27, 2021). In another Chancery M&A case, the court noted that the plaintiff hired a

white-shoe firm under a contingency agreement that contemplated reimbursement of out-

of-pocket expenses plus “40% of any excess recovery as attorneys’ fees.” In re Nine Sys.

Corp. S’holders Litig., 2015 WL 2265669, at *1 (Del. Ch. May 7, 2015). The court

enforced the agreement.

      The professors suggested that the court ask plaintiff’s counsel in this case to produce

their past contingent fee agreements for in camera review. The court did, and it made the

same request of the objectors. Plaintiff’s counsel expended significant efforts to provide

the information that the court requested. Except for Pentwater, none of the objectors did.

Pentwater provided one agreement, and it was not for a Delaware case.

      The fee agreements submitted by plaintiff’s counsel fully support the base award.

                                            56
• One firm collected and analyzed 107 responsive ex ante fee agreements,
  constituting approximately one-third of the firm’s contingent fee
  engagements. Approximately 80% were flat percentage arrangements, with
  the mean and median percentages above the base percentage. That held true
  in cases with an expected recovery in excess of $100 million. Approximately
  15% provided increasing percentages as the amounts recovered increased.
  Only 5% provided for a decreasing percentage, and only one involved a case
  with an expected recovery greater than $100 million. Under that agreement,
  the percentage of the recovery started materially higher than the base
  percentage such that even after the full decrease, the percentage recovery
  still exceeded the base percentage.

• A second firm collected and reviewed 339 ex ante fee agreements,
  constituting all of the firm’s contingent fee engagements during the past five
  years. Approximately 69% of that firm’s agreements simply permitted the
  firm to apply for a court-approved fee. Some iterations of the agreement
  provided for a cap on the application at 33% of the recovery. In a subset of
  agreements limited to a particular agreement, the cap was set at 25% of the
  recovery. Less than 1% of the firm’s agreements provided for an increasing
  percentage as the recovery increases. Approximately 3% of the firm’s
  agreements provided for a decreasing percentage as the recovery increases.
  Some of those agreements are with public entities where a decreasing
  percentage is mandated by statute. The firm has some stage-of-case
  arrangements that top out at 33.3% of the recovery.

• A third firm collected and reviewed 210 ex ante fee agreements, constituting
  23% of the firm’s contingent fee agreements during the past five years.
  Approximately 88% provided for flat percentage regardless of magnitude.
  Approximately 86% provided for a fee recovery of 25% of higher.
  Approximately 36% provided for a fee recovery greater than the base award
  in this case. Approximately 9.5% provided for an increasing percentage.
  Approximately 2.5% provided for a decreasing percentage.

• A fourth firm collected and reviewed 43 ex ante fee agreements, constituting
  all of the firm’s contingent fee agreements during the past five years. All of
  the agreements permitted the firm to apply for a court-approved award up to
  a cap of 30% or 33.3% of the total amount of funds received. Eight
  agreements provided for the 30% cap. The remainder provided for the 33.3%
  cap. The firm did not have any ex ante fee agreements providing for
  increasing percentages or decreasing percentages.

                                        57
    • A fifth firm does not generally use ex ante engagement letters and had
      negotiated only one during the past five years. It provided for a flat recovery
      of 25%.

       The agreements that plaintiff’s counsel provided for in camera review demonstrate

that when they negotiate ex ante fee agreements with private clients, they consistently enter

into arrangements that support the indicative fee in this case. The ex ante fee agreements

provide persuasive evidence against any downward reduction.

       The objectors collected fee applications from federal securities actions, including

actions in which some of plaintiff’s counsel were involved, and those applications sought

fee awards consistent with the general trends in federal securities actions. Just as the

evidence about the use of the declining-percentage methodology in federal securities cases

is not persuasive for purposes of this action, the illustrative fee requests and fee agreements

that the objectors collected are not persuasive.

                     d.      The Irony Of The Objectors Arguing For A Declining
                             Percentage

       So far, this decision has identified strong reasons for rejecting the declining-

percentage method. There is also a particular irony in who is arguing for that method,

because as fund managers, the objectors do not use similar arrangements. The objectors

do, however, engage in litigation, yet they declined to do so in this case. The objectors’

arguments therefore come with ill grace.

       The objectors concede that the incentive fee arrangements that they have as fund

managers do not contemplate a decreasing percentage as fund gain increases. They also

concede that no one in the investment industry uses a decreasing-percentage model.

                                              58
Investors and fund managers thus universally opt for an incentive fee arrangement that

scales with the size of the return and does not decline. The general takeaway is that the

market for highly trained professionals who use symbolic reasoning based primarily on

numbers and secondarily on words to identify opportunities and generate risk-based returns

(i.e., financial professionals) does not use incentive-based compensation arrangements in

which percentages decline as the amount of the gain increases. The same should be true in

the market for highly trained professionals who use symbolic reasoning based on primarily

words and secondarily on numbers to identify opportunities and generate risk-based returns

(i.e., financially savvy lawyers).

       Not surprisingly, the objectors argue that their compensation arrangements as fund

managers are not relevant, and the professors join in that effort. Their main point is that

fund manager agreements are negotiated, and investors can decide whether they want to

invest. No similar negotiations took place here, nor is there an opt-out opportunity.

       The lack of negotiation is not a distinction. It is the reason why the court is looking

to other sources in the first place. The absence of an ex ante agreement is what forces the

court to consider other sources of market evidence, like the objectors’ compensation

arrangements.

       More aptly, the objectors observe that their compensation arrangements as fund

managers contain features designed to reward above-market performance and incorporate

past losses. The first issue is addressed through a hurdle rate, which only permits a fund

manager to earn performance fees above a specified percentage, sometimes tied to a

benchmark index. The second issue is addressed through a loss carryforward, which only

                                             59
entitles the fund manager to receive performance fees on profits in excess of the highest

value that an investor’s account has reached. But those issues and their solutions are not

unique to fund managers; they apply to any contingently compensated professional. An

engagement letter could include a hurdle that would pay counsel only if the lawsuit

generated a recovery that exceeded a certain level. And if a client employed counsel across

multiple matters, the engagement letter could include a loss carryforward. What

distinguishes a court-awarded contingent fee from a fund management arrangement is that

the award is a one-off payment, determined after the fact.

       The objectors also try to distinguish their compensation arrangements as fund

managers on the theory that they receive performance fees on gains, not on invested capital.

The objectors then assert “awarding class counsel a straight-percentage of the entire

settlement fund would be akin to an investment manager earning a performance fee on the

entire value of an investor’s initial investment.” Suppl. Obj. at 14. That is wrong. The value

of the initial investment here is not the settlement, but the $20.7 billion in value that the

class received at closing. Applying a fund manager’s 20% performance fee to the $1 billion

settlement would result in a performance fee of $200 million. That is less than the $266.7

million that plaintiffs’ counsel stand to receive here, but it is only part of the story. In the

interim, as fund managers, the objectors would have received a management fee on all of

the invested capital, which makes their business model more lucrative and less risky than

contingency fee work. A management fee of 2% on the $20.7 billion would have generated

another $414 million in fees. And that is without taking into account the different tax

treatment afforded to the carried interest that generates the investment manger’s

                                              60
performance fee. Relative to how the objectors are compensated, plaintiff’s counsel are

undercompensated.

       The objectors are thus not well positioned to insist on a declining-percentage

method given that they do not use it in their own risk-based businesses. The objectors are

also not well positioned to object to the fee application because the objectors could have

stepped up and chose not to. All are sophisticated funds. All are highly litigious. Any of

them could have hired counsel, negotiated a fee arrangement, and pursued this case. None

did. They decided to free ride, then only roused themselves after the $1 billion settlement

had been achieved. At that point, they did not object to the settlement itself, nor did they

offer to take over the case on the theory that they and their own handpicked counsel could

do better. They were content to snipe at the fee.

       The settlement was a windfall for the objectors because they did nothing to create

it. Two of the objectors signed agreements to support the transaction (Canyon and Dodge

& Cox). Another touted its benefits. It was the plaintiff and its counsel that pursued the

litigation and generated the results.

       Having sat back and done nothing, the objectors now claim that a fee award without

a sizable reduction would “not yield equitable results.” Obj. at 2. That assertion masks self-

interest with an appeal to equity. Wanting more money for yourself is understandable, but

                                             61
it is not grounds for a fee objection. As Chief Justice Strine often observed while serving

on this court, envy is not a sound basis for reducing a fee award.29

                      e.     The Not-As-Good-As-It-Seems Argument

       As a final argument for a lower percentage, the objectors maintain that the

settlement is not as good as it seems. They admit that $1 billion is a big number, but they

say the outcome is not so impressive given (i) the likelihood of success, (ii) the settlement’s

value relative to the maximum possible damages, and (iii) the settlement’s value as a

percentage of transaction value. None of those arguments are persuasive.

       Let’s start with the basics. The common fund that plaintiff’s counsel created is the

largest class recovery ever obtained by nearly a factor of four. The next largest class

recovery is Activision at $275 million. The common fund exceeds all of the settlements

       29
           Clear Channel, supra, tr. at *19 (“We don’t build fees on envy because there are
cases where people get something that sounds like the salary of a former Chicago Bears
linebacker for their efforts.”); S. Peru, supra, tr. at 82 (“[T]o me, envy is not an appropriate
motivation to take into account when you set an attorney fee. It’s not. I’m sure that people
will envy the law firms who get awarded this fee. They have to defend this appeal. They
had to win it. But that’s not rational. We’re setting a system here. And if envy was the rule,
then, again, I think the real windfall cases I talked about before is where the real envy
comes in, where people do nothing or close to nothing and fees are awarded. Those are the
cases in our society where we have to be, I think, more careful.”); see also Forgo, supra,
tr. at 81 (“I don’t believe, when I look at this, that I’m awarding a lower fee in Alberto-
Culver. That is not what I’m trying to say, lest anyone get a hurt feeling or lest anyone say,
‘Hey, . . . the Court loved us more in Alberto-Culver than they loved you in Health Grades.’
That’s when I just have a fundamentally different way of looking at it, which is because
there’s a whole other way of saying, ‘Well, actually Chancellor Strine awarded a higher
hourly rate to the lawyers in Health Grades and compensated their efforts more. And so he
actually valued what they did higher.’”).

                                              62
from entire fairness cases over the last decade and nearly exceeds all of the settlements in

both entire fairness and enhanced scrutiny cases.

       With one exception, the $1 billion recovery is the largest that any representative

lawsuit has ever achieved in this court. The lone competitor is the $1.9 billion judgment in

Southern Peru, which consisted of $1.347 billion in damages plus pre-judgment interest.

See 52 A.3d at 819. That judgment, however, did not involve cash, and it did not inure only

to an injured class. The plaintiffs sued derivatively on behalf of a majority-owned

subsidiary (Southern Peru) to challenge a transaction between Southern Peru and its parent

(Minera Mexico). Minera Mexico was itself a controlled corporation, and the ultimate

controller (Grupo Mexico) caused Southern Peru to acquire Minera Mexico in a stock-for-

stock deal. The court found that the exchange rate resulted in Southern Peru overpaying

and issuing too much stock. Although the judgment was framed as a cash recovery, the

court permitted Grupo Mexico to satisfy the judgment by returning excess shares, so there

was no cash outlay. After the transaction, Grupo Mexico held an 81% interest in Southern

Peru, and Grupo Mexico benefited from the recovery to that extent. If, for example,

Southern Peru had distributed the returned shares as a dividend, then $1.539 billion in value

would have gone to Grupo Mexico and only $351 million to the minority stockholders.

Here, only the unaffiliated DVMT stockholders will benefit from the $1 billion common

fund. The defendants and their affiliates are excluded from the class.

       The objectors next argue that the $1 billion common fund is not so impressive

because plaintiff’s counsel had a high likelihood of prevailing at trial. They say that the

                                             63
combination of the entire fairness test plus as-pled flaws in the deal process meant that

“liability was seriously contested but never seriously in doubt.” Obj. at 12.

       No one who is actually familiar with litigation in this court could think that. “A

determination that a transaction must be subjected to an entire fairness analysis is not an

implication of liability.” Emerald P’rs v. Berlin, 787 A.2d 85, 93 (Del. 2001). As discussed

previously, defendants regularly prevail at trial under the entire fairness test. Plaintiff’s

counsel did not have a laydown hand on liability. They had a strong case that the fiduciary

defendants did not follow a fair process, but fair price was debatable, and damages were a

wildcard. If this court or the Delaware Supreme Court concluded that the defendants had

proved that the price was sufficiently fair to carry their burden on entire fairness, then the

class would lose.

       The objectors also complain that the class is receiving a relatively small percentage

of the maximum potential damages. The plaintiff argued for damages of $10.7 billion,

equal to the difference in value between what the class gave up (DVMT stock valued at

$158.38 per share for a total of $31.5 billion) and what the class received (cash plus Class

C stock valued at $104.27 per share for a total of $20.8 billion). The objectors say

confidently that the damages award “was based on simple arithmetic” and “is well

supported by expert analyses.” Obj. at 12. They criticize the plaintiff for settling for only

9.3% of the maximum potential recovery.

       The question of fair price and the magnitude of any recovery would have come

down to a battle of the experts. The outcome was particularly unpredictable given the

novelty of the DVMT tracking stock and the plaintiff’s damages theories. Evidencing the

                                             64
importance of these issues, the parties collectively devoted nearly forty pages in their pre-

trial briefs to fair price and damages, drawing extensively from the experts’ reports and

depositions. Both sides proffered well-respected experts who took parallel approaches but

reached diametrically opposite conclusions.

       In their briefs, plaintiff’s counsel explained persuasively why this court or the

Delaware Supreme Court might reject their top-end damages figure entirely or discount the

computation. To obtain the full amount, both this court and the Delaware Supreme Court

would have had to believe that the Company’s credit risk was nearly zero and that virtually

all of the DVMT discount was attributable to the controllers. Yet the Company had a highly

leveraged, non-investment grade balance sheet, and virtually every tracking stock in history

has traded at a meaningful discount, albeit less than DVMT. Investors contemporaneously

attributed some of the DVMT discount to credit risk and a conglomerate discount.

       To reach $10.7 billion, the plaintiffs would have needed to pitch a perfect game at

trial, then repeat that performance on appeal. Assuming the plaintiff had a one-in-five

chance of success, then the risk-adjusted recovery would fall to $2.14 billion, and the

settlement would represent 46.7% of the likely damages. If liability was a toss-up, then the

risk-adjusted damages recovery would fall to $5.35 billion, and the settlement would

represent 18.69% of the likely damages. And recall that the Delaware Supreme Court has

not affirmed a monetary recovery for a representative plaintiff since 2016. Might a one-in-

five estimate, or an even-money chance be putting the odds a bit high?

       Recognizing that the $10.7 billion represented a swing for the fences, plaintiff’s

counsel presented alternative remedies that would support damages between $400 million

                                              65
and $3.1 billion. Those alternatives were tied to contemporaneous evidence and to issues

on which the experts agreed. The objectors cannot fathom why those alternative scenarios

would be more plausible, but any experienced litigator would perceive why: They are based

on what the parties thought at the time, rather than after-the-fact expert opinions, and they

produce recoveries that remain stratospheric, but which are far less than the out-of-this-

world figure of $10.7 billion. In this court, when plaintiffs prevail, they rarely receive their

full requested damages.30

       When deciding to accept a settlement equal to 9.35% of the maximum possible

damages, plaintiff’s counsel understandably placed greater weight on the alternative

recoveries and discounted heavily the prospect that the court would enter what would be

the largest class action judgment in Delaware history by more than an order of magnitude

and that such a judgment would withstand appeal. If this court or the Delaware Supreme

Court rejected any of the core premises of the plaintiff’s valuation theories, then any

damages recovery could have been significantly reduced or eliminated or the defendants

might succeed in proving entire fairness (by demonstrating that the price was sufficiently

fair to overcome any process problems).

       30
          See, e.g., In re Columbia Pipeline Gp., Merger Litig., --- A.3d ----, 2023 WL
4307699, at *5–6 (Del. Ch. June 30, 2023) (awarding economic damages of $1 per share
where “plaintiffs sought rescissory damages of $3.032 billion with no alternative damages
theory”); Mindbody, 2023 WL 2518149, at *45–47 (awarding $1 per share in damages
where plaintiffs sought damages “of $3.50 per share and quasi-appraisal damages for their
disclosure claim in the amount of $5.75 per share”); Vianix Del. LLC v. Nuance Commc’ns,
Inc., 2010 WL 3221898 (Del. Ch. Aug. 13, 2010) (noting that the plaintiff “recover[ed]
what may be millions of dollars in damages, but far less than it claimed”).

                                              66
       When approving the settlement, the court found that the common fund reflects an

“exceptional result” of approximately 5% of equity value and that “the settlement

consideration of $1 billion represents a substantial fraction of the likely recoverable

damages.” Dkt. 536 at 41. Those observations remain true.

       Plaintiff’s counsel also demonstrated that the settlement reflected a reasonable

percentage of the maximum damages sought when compared to precedent settlements. The

calculations are difficult, because reliable public data concerning maximum damages is

unavailable. Many cases settle before expert reports are submitted, leaving only the less-

precise allegations in pleadings or briefing. Even when the parties have submitted expert

reports, references to the quantum of alleged damages are often redacted. Settlement briefs

and transcripts of settlement hearings are often unhelpful, because when presenting a

settlement to the court, counsel seldom mentions the maximum possible damages, focusing

instead on the more plausible, risk-adjusted recoveries. That makes the settlement sound

better, and it reflects how the court evaluates the settlement. A court should know what

plaintiff’s counsel thought their best day would bring, but the real test is what the settlement

achieves relative to the risk-adjusted value of the case.

       To compare the settlement in this case with precedents, this decision again turns to

the twenty-four settlements in deal cases after Americas Mining where entire fairness

would apply. Plaintiff’s counsel could not generate reliable estimates of maximum possible

damages for two of the settlements (TD Bank and Calamos). Plaintiff’s counsel did not

include the post-trial settlement in In re Dole Food Co., Inc. Stockholders Litig., 110 A.3d

                                              67
1257 (Del. Ch. 2015). As noted previously, eight of the settlements involved transactions

valued at less than $100 million, and the court excludes them.

       That leaves fourteen precedents. The deal values range from $156 million

(Homefed) to $7.4 billion (Malone). The mean deal value is $1.785 billion; the median is

$1.042 billion. The mean settlement is $43.65 million, and the median is $42.60 million.

The precedent transactions are materially smaller in absolute size, averaging less than 10%

of the $23.9 billion deal in this case. The gross settlement funds are also materially smaller

in terms of absolute size, averaging less than 5% of the settlement achieved in this case.

Yet the values as a percentage of maximum damages are much higher, with a mean of

34.34% and a median 16.5%. Those figures are driven upward by outlier results in GFI

Group ($10.75 million; 176.23%) and Delphi ($49 million; 89%), plus three other

settlements that involved recoveries of 30% or higher: AVX ($49 million; 41.58%); Malone

($110 million; 38.19%); and Starz ($92 million; 38.07%).

       Excluding the two high-end outliers (GFI at 176% and Delphi at 89%) lowers the

mean recovery to 17.95% and the median to 12.35%. Excluding the two high-end outliers

and the two low-end outliers (Straight Path at 1.13% and Venoco at 5.3%) results in the

mean recovery increasing to 20.91% and a median recovery staying at 16.5%.

       If added to the sample and evaluated as a percentage of claimed maximum damages,

the settlement in this case would rank eleventh. The full list appears below:

                              Transaction Value      Settlement Value      As % of Max
       #   Settlement               (in millions)          (in millions)      Damages
       1   GFI Group                    $366.00                 $10.75        176.23%
       2   Delphi                     $2,500.00                 $49.00         89.00%
       3   AVX                        $1,030.00                 $49.90         41.58%

                                                68
       4    Malone                   $7,400.00             $110.00         38.19%
       5    Starz                    $4,400.00              $92.50         38.07%
       6    Homefed                    $156.00              $15.00         19.80%
       7    CNX Gas                    $605.88              $42.70         19.00%
       8    Alon USA Energy            $407.00              $44.75         14.00%
       9    Jefferies                $2,400.00              $70.00         10.70%
      10    Akcea                      $446.50              $12.50          9.53%
      11    Dell Class V            $23,900.00           $1,000.00          9.34%
      12    Amtrust                  $1,040.00              $40.00          9.20%
      13    Pivotal                  $1,430.00              $42.50          9.00%
      14    Venoco                     $363.00              $19.00          5.30%
      15    Straight Path            $2,450.00              $12.50          1.13%
            Mean (Ex. Dell)          $1,785.31              $43.65         34.34%
            Median (Ex. Dell)        $1,035.00              $42.60         16.50%

       I was surprised by the wide variation across outcomes. I suspect that it would require

a deeper dive into the settlements to unpack the result. All involve M&A cases, but some

of the plaintiffs may have pursued different damages theories. I also suspect that it is easier

for a plaintiff to achieve a relatively high percentage recovery in a case where the claimed

damages are less than $100 million. The cost to defend an entire fairness case through trial

can be high. I would guess conservatively at figures between $10 million and $30 million

depending on the number of defendants and firms involved, the hourly rates of the defense

lawyers, and the cost of the experts.31 Settlements at or below that level may present

defendants (or their insurers) with an attractive way to mitigate risk. As the dollar value of

the settlement gets higher, it becomes more difficult to rationalize a settlement as money

that would have been spent anyway. It is also notable that six of the fourteen settlements

       31
         In Mindbody, plaintiff’s counsel represented that the defendants had exhausted a
$40 million insurance tower before trial began. See Mindbody, supra, tr. at 8.

                                              69
land in the vicinity of $45 million, which could be a sweet spot that takes into account the

defense costs that the settlement saves plus something for the elimination of risk.

       A less noisy proxy for the strength of a settlement in an M&A case is the magnitude

of the recovery as a percentage of the equity value of the transaction. This analysis

considers the same sample of entire fairness cases and excludes transactions with a value

of $100 million or less. There are fifteen precedents, because the deal size for TD Bank is

known. The list provided by plaintiff’s counsel does not include the settlement in Dole,

which this decision adds.

       This time, deal value ranges from $156 million (Homefed) to $26 billion (TD Bank).

The mean transaction value is $3.26 billion; the median is $1.12 billion. The mean

settlement value is $49.43 million, and the median is $42.6 million. Measured as a

percentage of the transaction value, the mean settlement value is 4.47% and the median is

2.95%. There is a considerably tighter spread across the dataset.

       The settlement in this case is 4.18% of deal value. That puts it just below the mean

and above the median for that metric. Strikingly, the settlement in this case dwarfs the only

precedent involving a deal of comparable size—TD Bank at $26 billion—where a

settlement of $31.5 million reflected only 0.12% of deal value. If added to the sample, the

settlement in this case ranks seventh. The full list appears below:

                             Transaction Value      Settlement Value      As % of Equity
       #   Settlement              (in millions)          (in millions)    Value of Deal
       1   Dole                      $1,210.00                $148.20           12.24%
       2   Alon USA Energy             $407.00                 $44.75           11.00%
       3   Homefed                     $156.00                 $15.00             9.60%

                                                   70
       4   CNX Gas                    $605.88            $42.70           7.20%
       5   Venoco                     $363.00            $19.00           5.20%
       6   AVX                      $1,030.00            $49.90           4.80%
       7   Dell Class V            $23,900.00         $1,000.00           4.18%
       8   Amtrust                  $1,040.00            $40.00           3.80%
       9   Pivotal                  $1,430.00            $42.50           3.00%
      10   Jefferies                $2,400.00            $70.00           2.90%
      11   Akcea                      $446.50            $12.50           2.80%
      12   GFI Group                  $366.00            $10.75           2.79%
      13   Starz                    $4,400.00            $92.50           2.10%
      14   Delphi                   $2,500.00            $49.00           2.00%
      15   Malone                   $7,400.00           $110.00           1.49%
      16   Straight Path            $2,450.00            $12.50           0.51%
      17   TD Bank                 $26,000.00            $31.50           0.12%
           Mean (Ex. Dell)          $3,262.77            $49.43           4.47%
           Median (Ex. Dell)        $1,125.00            $42.60           2.95%

       As the court found when approving the settlement, plaintiff’s counsel achieved an

excellent outcome. The objectors are correct to point out that what plaintiff’s counsel

achieved is not as impressive when measured as a percentage of maximum damages

claimed, but that is a noisy indicator. They are also correct that the settlement looks more

typical when considered as a percentage of deal value, rather than in absolute terms. But

the precedents also show that plaintiff’s counsel in M&A cases are obtaining low-to-mid

eight-figure recoveries. There have been only two nine-figure recoveries, one of $110

million and another of $148.2 million. No one has previously obtained a ten-figure

recovery. Plaintiffs’ counsel are thus generally hitting singles and doubles, with two triples.

This is the first home run.

       To the extent the objectors think that the court should discount the $1 billion

settlement because the defendants were likely to pay a big amount, the court has a different

                                                71
view. Plaintiff’s counsel achieved an unprecedented result and deserve the full percentage

that the stage-of-case method supports.

              2.     The Extent To Which The Fee Was Contingent On Results

       The lengthy discussion so far has only calculated an indicative fee using the first

Sugarland factor: the results caused by the litigation. Fortunately, the analysis of the

remaining factors is straightforward.

       The next factor to be considered is the extent to which counsel’s compensation was

contingent on the result. Activision, 124 A.3d at 1072. It is the “public policy of Delaware

to reward risk-taking in the interests of shareholders.” Plains Res., 2005 WL 332811, at

*6. Accepting contingency risk is what enables counsel to receive an award based on the

results generated by the litigation that exceeds their lodestar. When counsel does not

litigate on contingency, then counsel cannot receive more than their actual billings and

expenses, and if the results-based award under Sugarland calls for less, then they receive

less. A full contingency fee arrangement is not required. A hybrid fee arrangement could

generate a hybrid result.

       Here, plaintiff’s counsel litigated on a fully contingent basis. If they lost, they would

get nothing. They also were responsible for funding their expenses. Plaintiff’s counsel are

therefore entitled to a results-based fee based on the Sugarland factors.

       That said, “[n]ot all contingent cases involve the same level of contingency risk.”

Activision, 124 A.3d at 1073. During the litigation epidemic, lawyers filed cases and sought

expedited pre-closing injunctive relief in a setting where the desire to close the transaction

put pressure on the defendants and there was a ready-made settlement opportunity that took

                                              72
the form of the issuance of supplemental disclosures. See Orchard, 2014 WL 4181912, at

*9. Those cases did not involve real contingency risk.

       This case involved true contingency risk. Plaintiff’s counsel did not enter the case

with a ready-made exit or obvious settlement opportunity. There was a serious possibility

that plaintiff’s counsel would lose and receive nothing.

       The true contingency risk in this case supports a results-based award using the

Americas Mining percentages. No downward reduction is warranted under this factor.

              3.     The Time And Effort Of Counsel

       The next factor to consider is the time and effort expended by counsel. This factor

serves as a cross-check on the reasonableness of a fee award. It has two separate but related

components: (i) time and (ii) effort. In re Sauer-Danfoss Inc. S’holders Litig., 65 A.3d

1116, 1138 (Del. Ch. 2011).

       Based on the discussion in the prior section, plaintiff’s counsel is entitled to an

indicative fee equal to 26.67% of the benefit, for an award of $266.7 million. Plaintiff’s

counsel spent 53,000 hours litigating this case. According to counsel’s affidavits, the value

of the time incurred at customary rates would be $39,431,415.50. The indicative award

represents a multiplier of seven times lodestar and an implied rate of approximately $5,000

per hour. Neither is excessive under this court’s precedents.

       “The more important aspect is effort, as in what plaintiffs’ counsel actually did.” Id.

at 1139. “When an entrepreneurial plaintiffs’ firm engages in adversarial discovery, obtains

documents from third parties, pursues motions to compel, and litigates merits-oriented

                                             73
issues, they are likely representing the interests of the class.” Id. The outcome here resulted

from significant effort.

       The effort that plaintiff’s counsel put in began with the filing of a Section 220

demand. That demand enabled plaintiff’s counsel to obtain books and records and prepare

a strong complaint that survived a motion to dismiss. Considerable effort was necessary,

because the transaction had been designed so that on the surface it would meet the

requirements of MFW and be protected by an irrebuttable version of the business judgment

rule. Plaintiff’s counsel adeptly advanced arguments to negate the MFW structure and

create a pleading-stage inference that the entire fairness test would govern the transaction.

       After the ruling on the motion to dismiss, an army of skilled defense counsel fought

the plaintiffs at every turn. The defendants retained a phalanx of high-powered attorneys

from Alston & Bird LLP; Simpson Thacher & Bartlett LLP; Latham & Watkins LLP;

Wachtell, Lipton, Rosen & Katz LLP; Williams & Connolly LLP; Abrams & Bayliss LLP;

Richards, Layton & Finger, P.A.; and Young Conaway Stargatt & Taylor, LLP. Later in

the lawsuit, after Goldman was added as a defendant, Skadden, Arps, Slate, Meagher &

Flom LLP joined the mix. Nearly 100 lawyers from those firms entered appearances.

       Between June 2020 and March 2022, plaintiff’s counsel propounded sixty-six

document requests, 710 interrogatories, and 179 requests for admission to the defendants.

Plaintiff’s counsel also served forty-one non-party subpoenas.

       Through these efforts, plaintiff’s counsel developed an extensive record that

included nearly 2.9 million pages of documents from over forty parties and non-parties.

                                              74
Plaintiff’s counsel took thirty-two fact depositions, four of which lasted two days.

Plaintiff’s counsel also responded to the defendants’ expansive discovery demands.

       Expert discovery followed. The plaintiff hired one testifying expert. The defendants

hired two. The experts served lengthy opening and rebuttal reports and sat for depositions.

       As noted, the case did not settle until nineteen calendar days before trial. By that

point, the parties had prepared and filed a joint pre-trial order. They had also filed lengthy

pre-trial briefs.

       In federal securities cases, concern exists that after surviving a motion to dismiss in

a case that seems likely to support a large settlement, plaintiff’s counsel will not settle

promptly because their lodestar will be too low to support an adequate fee. Instead,

plaintiff’s counsel works the case, churning hours on document review and possibly a

handful of depositions to generate the lodestar necessary to make a big fee award plausible.

See Stephen J. Choi et al., Working Hard or Making Work? Plaintiffs’ Attorneys Fees in

Securities Fraud Class Actions, 17 J. Empirical Legal Stud. 438, 464 (2020). Nothing like

that happened here. After surviving the motion to dismiss, plaintiff’s counsel engaged in

real work and prepared the case for trial. Mediation did not take place until after fact and

expert discovery had concluded. The mediation was initially unsuccessful, and plaintiff’s

counsel continued to prepare the case for trial.

       The time and effort expended by counsel supports the indicative award.

                                             75
              4.     The Complexity Of The Litigation

       “One of the secondary Sugarland factors is the complexity of the litigation. All else

equal, litigation that is challenging and complex supports a higher fee award.” Activision,

124 A.3d at 1072.

       This case was challenging and complex. The preceding section discusses the

extensive discovery that plaintiff’s counsel pursued to make the settlement a reality. Fact

discovery included multiple third parties, and it involved spoliation issues.

       Expert discovery was also challenging. Plaintiff’s counsel had to work with their

expert to develop novel valuation approaches for a transaction involving a one-of-a-kind

tracking stock (DVMT), another complex security (VMware common stock), and a

privately held company (Dell). Plaintiff’s counsel also had to analyze complicated tax

issues, alternative transactions like a forced conversion, and novel questions about market

expectations and minority discounts.

       The complexity of the litigation supports the indicative award.

              5.     The Standing And Ability Of Counsel

       “Law firms establish a track record over time, and they ‘build (and sometimes burn)

reputational capital.’” In re Del Monte Foods Co. S’holders Litig., 2010 WL 5550677, at

*9 (Del. Ch. Dec. 31, 2010) (quoting In re Revlon, Inc. S’holders Litig., 990 A.2d 940, 956

(Del. Ch. 2010)). Scholars have found that the involvement of a top-tier firm makes a

difference for case outcomes in Chancery M&A litigation, although they have been unable

to unpack the endogeneity problem and differentiate between selection effects versus an

actual positive contribution. See Alan B. Badawi & David W. Webber, Does the Quality

                                             76
of the Plaintiffs’ Law Firm Matter in Deal Litigation?, 41 J. Corp. L. 359, 390–91 (2015).

My intuitive answer is “both.” Clearly, case selection matters, but the difference in what a

top plaintiff’s firm brings to a case is obvious.

        Plaintiff’s counsel included experienced stockholder advocates who have taken

multiple cases through trial and appeal. This factor supports the indicative award.

              6.      Should The Percentage Be Adjusted Because It Was Not Paid
                      Separately?

       Last, the objectors criticize plaintiff’s counsel for not structuring the settlement to

provide for a fixed recovery to the class and for the defendants to pay the attorneys’ fee

award separately. The objectors contend that the court prefers that approach, and they

imply that the court should reduce the fee to reflect the parties’ failure to acknowledge that

preference. This judge does not have such a preference, and under the Americas Mining

framework, framing a settlement that way simply means that I have to do more math.

       This court has traditionally calculated fee awards as a percentage of a gross common

fund. The Americas Mining percentages are framed that way. That is the general method

that courts have long used.32

       32
          The concept of awarding a fee out of the common fund and not in addition to the
common fund dates back to the nineteenth century. See Cent. R.R. & Banking Co. v. Pettus,
113 U.S. 116, 125, 128 (1885) (awarding fee out of amounts recovered on behalf of a class
of unsecured creditors; calculating fee as a percentage of the amount recovered); Trustees
v. Greenough, 105 U.S. 527, 532 (1881) (awarding fee out of amounts recovered on behalf
of a class of bondholders; reimbursing plaintiff from fund for amounts paid to counsel); id.
at 534–35 (citing earlier cases). “The doctrine rests on the perception that persons who
obtain the benefit of a lawsuit without contributing to its cost are unjustly enriched at the
successful litigant’s expense.” Boeing Co. v. Van Gemert, 444 U.S. 472, 478 (1980).

                                              77
       The only post-Americas Mining case that the objectors rely on for the side-payment

theory is Jefferies. There, the parties settled on a common fund of $70 million in cash. The

defendants agreed to pay the fee separately and reserved the right to oppose any

application. The parties failed to reach agreement, and the plaintiffs sought $27.5 million

plus expenses of $1 million. The plaintiffs pitched this request as an implied gross fund of

$100 million from which they would recover a fee of approximately 27.5%. The defendants

argued that a fee should be calculated using the recovery of $70 million and a percentage

of 22.5%, resulting in an award of $15.75 million. Jefferies, 2015 WL 3540662, at *2.

       In a footnote, the court noted that it was helpful to have adversarial briefing on the

fee award. The court also noted that the adversarial briefing likely happened because the

parties agreed to have the fee paid separately. Id. at *2 n.5. That meant the defendants’

total outlay was not capped by the common fund, and they had an incentive to resist the

fee. The court observed that “[f]rom a policy perspective, it would be beneficial in my view

for fee applications to be subject to adversarial inquiry to provide the Court with a better

record with which to evaluate the Sugarland factors.” Id. The objectors cite this passage,

but they incorrectly translate a comment about the benefits of adversarial briefing into an

endorsement of separately paid fee awards.

“Jurisdiction over the fund involved in the litigation allows a court to prevent this inequity
by assessing attorney’s fees against the entire fund, thus spreading fees proportionately
among those benefited by the suit.” Id. The fees are assessed against the entire fund and
paid out of the fund, not in addition to the fund. See id.; accord Goodrich, 681 A.2d at
1045 (“[T]he common fund doctrine permits an attorney to independently request an award
of fees from that same settlement fund.”).

                                             78
       If everyone paid fees separately, then it would be easy to compare fee awards across

settlements. But when precedents like Americas Mining refer to fees as a percentage of a

gross fund, then an agreement by the defendants to pay the fee separately means that the

court has to convert that structure into the Americas Mining format. The commitment to

pay the fee separately operates as an additional form of consideration. The resulting benefit

is not just the fund, but rather the fund plus whatever amount the court awards in settlement.

       A common fund with a fee award paid separately is mathematically equivalent to a

larger common fund with a lower percentage fee award coming out of the gross amount.

The Jefferies case illustrates this. The court ultimately awarded a fee of $21.5 million,

inclusive of expenses, which it described as “approximately 23.5% of the gross value

(approximately $91.5 million) of the settlement.” Id. at *4. The court thus recognized that

the side payment of the fee increased the gross amount of the settlement, viewed the gross

amount as $91.5 million, and viewed the fee award as 23.5% of that gross amount.

       The same equivalency operates when parties negotiate a settlement, which enables

parties to convert an impasse over the gross amount of the settlement into an agreement on

a gross amount plus a dispute over a fee award. The defendants’ all-in proposal to the court

in Jefferies equated to a total outlay of $85.75 million ($70 million to the class plus $15.75

million to counsel). The plaintiffs’ all-in proposal in Jefferies equated to a total outlay of

$100 million ($70 million to the class plus $27.5 million plus expenses to counsel). It is

easy to envision that the parties initially bargained on those terms but could not bridge the

delta between $85 million and $100 million. The solution was to agree on a net amount,

                                             79
then fight over the fee. The court effectively determined that the right price for the

settlement was $91.5 million.

       Under Delaware law, parties must agree to the settlement consideration first, before

turning to the fee award. The Jefferies decision correctly observes that in that setting, the

defendants have already capped their total exposure and have little incentive to fight about

the fee percentage. That means there is a good public policy reason for separately paid fee

awards. But there are other important policy interests, including encouraging settlement.

The current method of deducting fees from the total amount serves that goal, precisely

because defendants can assess their overall exposure. A standard in which separately paid

awards were the norm could reduce settlement rates.

       Regardless, to keep levels of compensation consistent, switching to separately paid

awards would require reframing the Americas Mining ranges as lesser percentages of the

implied gross fund. The following table provides them:

                Stage of Case      Americas           Paid Separately
                                   Mining             Percentage
                                   Percentage
                 Early             10% to 15%         9% to 13%
                 Mid               20% to 25%         16% to 20%
                 Late              25% to 30%         20% to 23%
                 Max               33%                25%

                                             80
Unless those adjustments are made, using the Americas Mining percentages for a separately

paid award simply gives plaintiff’s counsel a raise.33

       Under current law, there is no basis for criticizing the parties for structuring their

settlement as they did. The court will award a fee as a percentage of the gross fund.

               7.    The Overall Conclusion

       The Sugarland factors support a fee award of $266,700,000. The stage-of-case

method endorsed by Americas Mining calls for a percentage equal to 26.67% of the benefit

caused by the litigation. Grounds do not exist to reduce the award in this case in light of

the size of the common fund. The other Sugarland factors fully support the award.

B.     Out-Of-Pocket Costs

       A recurring issue when ruling on fee applications is whether to make an all-in award

or to approve a separate reimbursement of out-of-pocket costs.34 When plaintiff’s counsel

       33
         The following table provides illustrative calculations. The general formula is as
follows: Equivalent Percentage of Larger Fund = Fee Award / (Common Fund + Fee
Award).

 Common Fund        Americas          Fee Award          Equivalent        Equivalent
                    Mining                               Larger Fund       Percentage of
                    Percentage                                             Larger Fund
 $10 million        10%               $1 million         $11 million       9%
 $10 million        15%               $1.15 million      $11.5 million     13%
 $10 million        20%               $2 million         $12 million       16%
 $10 million        25%               $2.5 million       $12.5 million     20%
 $10 million        33%               $3.3 million       $13.3 million     24.8%

       34
         This decision uses the term “out-of-pocket costs” because seemingly simple terms
like “expenses” and “costs” are confusing. On the one hand, the concept of “expenses” can

                                             81
has pushed deep into the case, the generally optimal approach is reimbursement of out-of-

pocket costs with the fee award calculated as a percentage of the net fund.

          Court of Chancery decisions have taken a case-by-case approach to this issue.

During the era of ritualized disclosure-only and Cox Communications settlements, the court

expressed a preference for an all-in award. With cases settling early and routinely, an all-

in award was easier for the court and encouraged counsel to be efficient. See In re Celera

Corp. S’holder Litig., 2012 WL 1020471, at *33 & n.248 (Del. Ch. Mar. 23, 2012), aff’d

in part, rev’d in part on other grounds, 59 A.3d 418 (Del. 2012); Telecorp PCS, supra, tr.

at 101.

          When a plaintiff has engaged in real litigation efforts, then an all-in approach can

generate unfairness by reducing the effective percentage of the award. The Rural Metro

encompass more than just out of pocket costs, as shown by Section 145 of the Delaware
General Corporation Law. That section uses the term “expenses” to refer collectively both
to attorneys’ fees and amounts paid out of pocket. See, e.g., 8 Del. C. § 145(a) (authorizing
a corporation in a proceeding other than one brought by or in the right of the corporation
to provide indemnification “against expenses (including attorneys’ fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred”); id. § 145(b)
(authorizing a corporation in a proceeding brought by or in the right of the corporation to
provide indemnification “against expenses (including attorneys’ fees) actually and
reasonably incurred”); id. § 145(c) (mandating corporation to indemnify a director or
officer who was successful on the merits or otherwise in defending a proceeding “against
expenses (including attorneys’ fees) actually and reasonably incurred”). On the other hand,
the concept of “costs” can be narrower than any out-of-pocket costs, as shown by the statute
which entitles a prevailing party to recover “costs.” See 10 Del. C. § 5106; Scion
Breckenridge Managing Member, LLC v. ASB Allegiance Real Est. Fund, 68 A.3d 665,
686–88 (Del. 2013). The term “out-of-pocket costs” seeks to bridge the gap by referring to
all of the out-of-pocket costs and expenses, as opposed to attorneys’ fees, that either a
plaintiff or its counsel must incur to pursue a case.

                                               82
litigation provides an example. Counsel settled with all but one defendant on the eve of

trial for a gross settlement fund of $11.6 million. The out-of-pocket costs were $1.29

million, or 11% of the total. If plaintiff’s counsel absorbed the out-of-pocket costs, then an

all-in award of 30% of the gross settlement fund ($3.48 million) would equate after

expenses to an effective award of 18.9%.

       Recognizing that problem, some decisions have awarded a fee to counsel as a

percentage of the gross fund, then awarded reimbursement of out-of-pocket costs on top of

the fee award.35 That method forces the class to bear all of the out-of-pocket costs from its

share of the recovery. It has the opposite effect of an all-in award in that it increases the

effective percentage that counsel receives and reduces the class’s share. In an extreme case

involving a small settlement, the combination could wipe out the class recovery altogether.

Just as it is unfair to force counsel to internalize all out-of-pocket costs, it is unfair to put

the class in a comparable position.

       35
          See, e.g., In re TD Banknorth S’holders Litig., Cons. C.A. No. 2557, at 5 (Del.
Ch. June 25, 2009) (ORDER) (awarding 27.5% of common fund in fees plus $964,086.61
in expenses); Ryan v. Gifford, 2009 WL 18143, at *13–14 (Del. Ch. Jan. 2, 2009) (awarding
one-third of the monetary portion of the settlement in fees plus $398,100.79 in expenses);
In re Chaparral Res., Inc. S’holders Litig., Cons. C.A. No. 2001, at 4 (Del. Ch. Mar. 13,
2008) (ORDER) (awarding one-third of common fund in fees plus expenses of
$1,089,298.10); In re TeleCommunications, Inc. S’holders Litig., Cons. C.A. No. 16470,
at 9, 13 (Del. Ch. Feb. 1, 2007) (TRANSCRIPT) (awarding 30% of the common fund in
fees plus $827,658.91 in expenses); In re Berkshire Realty Co., Inc. S’holder Litig., 2004
WL 5174889 (Del. Ch. Aug. 10, 2004) (ORDER) (awarding 30% of the common fund in
fees plus $577,787.61 in expenses).

                                               83
       Some federal courts have resolved the dilemma by deducting out-of-pocket costs

first, then awarding a percentage-based fee using the net award.36 That approach treats the

out-of-pocket costs as a higher priority debt claim, representing amounts paid to third

parties necessary to generate the residual return. It treats counsel’s fee percentage as a

carried interest in the net recovery, with counsel participating pari passu with the class.

The approach still encourages diligence in controlling out-of-pocket costs because “the

lawyer and the client share the goal of maximizing the net recovery.” Immunex, 864 F.

Supp. at 145.

       In a case where counsel have incurred significant out-of-pocket costs, the approach

that best balances the interests of the attorneys and the class is to reimburse for out-of-

pocket costs first, then award a fee based on a percentage of the net fund. Here, plaintiff’s

counsel pushed deep into the case and incurred $4,284,608.04 in out-of-pocket costs. If

plaintiff’s counsel had asked for out-of-pocket costs to be reimbursed, then the court would

have deducted them first and awarded a fee as a percentage of the net benefit.

       Why didn’t plaintiff’s counsel ask the court to reimburse out-of-pocket costs

separately? If this case had generated a seven or eight-figure settlement, then plaintiff’s

counsel likely would have made the request. In this case, the common fund is so large that

       36
         See In re Immunex Sec. Litig., 864 F. Supp. 142, 145 (W.D. Wash. 1994);
Morganstein v. Esber, 768 F. Supp. 725, 727–28 (C.D. Cal. 1991); see also Lachance v.
Harrington, 965 F. Supp. 630, 648 (E.D. Pa. 1997).

                                             84
the out-of-pocket costs become a rounding error. The real action is in the percentage

awarded, with each percentage point worth $10 million.

       Framing a request is a matter of judgment. Plaintiff’s counsel could have been

concerned about how a request for reimbursement might come across. When the fee award

itself is so large, would it seem greedy to ask for out-of-pocket costs to be reimbursed

separately? On the other hand, the optics of an all-in award might be helpful. If a request

for an all-in award made it palatable for the court to approve an additional percentage point,

then plaintiff’s counsel would come out ahead by over $5.7 million—itself a decent fee

award in many cases.

       If I had to guess, plaintiff’s counsel made the call that asking for an all-in award of

28.5% sounded better and could pay off in a larger bottom line amount. Because plaintiff’s

counsel asked for an all-in award, the court will not reimburse expenses separately. If

plaintiff’s counsel had asked for it, then this decision would have deducted out-of-pocket

costs first, then calculated a fee based on a net award. As a practical matter, counsel’s

decision only cost them $3,141,903.08, reflecting the 73.33% share of the out-of-pocket

costs that the class would have born. In the context of the fee award of $266.7 million, that

is barely one-tenth of one percent—a rounding error.

C.     The Incentive Award

       Finally, plaintiff’s counsel asks the court to approve an incentive award of $50,000

for the named plaintiff, to be paid out of the fee award, as restitution for the considerable

time and effort the plaintiff devoted to this action. The Delaware Supreme Court has

recognized that a class representative can receive an incentive fee based on (i) the time,

                                             85
effort, and expertise expended by the class representative, and (ii) the benefit to the class.

Raider v. Sunderland, 2006 WL 75310, at *1 (Del. Ch. Jan. 4, 2006), cited in Isaacson v.

Niedermayer, 200 A.3d 1205, 1205 n.1 (Del. 2018).

       Public policy favors incentive awards in appropriate circumstances: “Compensating

the lead plaintiff for efforts expended is not only a rescissory measure returning certain

lead plaintiffs to their position before the case was initiated, but an incentive to proceed

with costly litigation (especially costly for an actively participating plaintiff) with uncertain

outcomes.” Raider, 2006 WL 75310, at *1. Scholars have provided sound reasons for the

Delaware courts to move beyond purely restitution-oriented awards and for expanding,

rather than restricting, the payment of incentive fees, albeit with criteria to minimize

agency costs and avoid windfalls. See Charles R. Korsmo & Minor Myers, Lead Plaintiff

Incentives in Aggregate Litigation, 72 Vand. L. Rev. 1923 (2019). Incentive awards are

common in the federal courts, where scholars have expressed strong support for them,

particularly when they reward sophisticated investors for performing a meaningful

monitoring function and adding value for the class.37

       37
          See, e.g., Theodore Eisenberg & Geoffrey P. Miller, Incentive Awards to Class
Action Plaintiffs: An Empirical Study, 53 UCLA L. Rev. 1303, 1320 (2006); 5 William B.
Rubenstein et al., Newberg and Rubenstein on Class Actions § 17:4, at 510–11 (6th ed.
2022), Westlaw (database updated June 2023). The exception is federal securities actions,
where they are prohibited by statute. 15 U.S.C. § 78-u-4(a)(4). Scholars have criticized this
prohibition as running contrary to the incentive structure crafted by the Private Securities
Litigation Reform Act of 1995 and as having deleterious and unintended consequences for
the role of sophisticated investors in supervising class actions. See Richard A. Nagreda,
Restitution, Rent Extraction, and Class Representatives: Implications of Incentive Awards,
53 UCLA L. Rev. 1483, 1491 (2006); Eisenberg & Miller, supra, at 1348; Charles Silver

                                               86
       A restitution-based award necessarily includes out-of-pocket costs, but it must go

beyond that to fulfill its mission. A representative plaintiff must devote time to the

litigation, and if that time has to be offered gratis, then the representative plaintiff

effectively pays for taking on the role of class representative. Rather than receiving the

same amount as the class, the named plaintiff receives less.

       Nor is serving as a representative plaintiff an easy task. In the current litigation

environment, a stockholder who files plenary litigation faces “the very real possibility of

having their computer and other electronic devices imaged and searched, sitting for a

deposition—perhaps more than one if they also institute [Section] 220 litigation—and then

perhaps testify at trial.” Verma v. Costolo, C.A. No. 2018-0509-PAF, at 52–53 (Del. Ch.

July 27, 2021) (TRANSCRIPT); accord Voigt v. Metcalf, C.A. No. 2018-0828-JTL, at 44–

45 (Del. Ch. Jan. 19, 2022) (TRANSCRIPT).

       A named plaintiff also accepts reputational risk, as demonstrated by the fate of Herb

Chen, the named plaintiff in Chen v. Howard-Anderson, 2017 WL 2842185 (Del. Ch. June

30, 2017). Professors Korsmo and Myers tell Chen’s story well. See Korsmo & Myers,

supra, at 1938–39. Chen was a securities analyst and professional investor who contributed

significantly to the $35 million settlement that the class obtained. As one of the named

plaintiffs, Chen was subjected to discovery and deposed. The defendants used the

discovery to accuse Chen of trading on confidential information. Although both the court

& Sam Dinkin, Incentivizing Institutional Investors to Serve as Lead Plaintiffs in Securities
Fraud Class Actions, 57 DePaul L. Rev. 471, 481 (2008).

                                             87
and the SEC cleared Chen of any charges, he incurred substantial expenses defending

himself. The allegations ensnared another investor and the original named plaintiff, whom

Chen regarded as his mentor, and destroyed their relationship. See Steinhardt v. Howard-

Anderson, 2012 WL 29340 (Del. Ch. Jan. 6, 2012). Chen attested that media articles

associated with the allegations had prevented him from finding another job on Wall Street.

Korsmo & Myers, supra, at 1940.

       The defendants used a similar playbook against the plaintiff in this case. Although

the plaintiff is a pension fund that had no direct involvement in the transaction other than

as a passive, outside investor that voted its shares and accepted the consideration, defense

counsel pursued discovery from the plaintiff aggressively, serving forty-six document

requests, 173 interrogatories, and fifty-nine requests for admission (excluding subparts).

Defense counsel demanded that the plaintiff search for documents dating back to its origins

as a pension fund and collect documents from multiple members of its board of trustees,

even though they had no involvement in the DVMT investment or the litigation. In total,

the plaintiff made ten separate document productions, comprising 48,620 pages. At defense

counsel’s request, the plaintiff provided three separate sets of supplemental or amended

interrogatory responses. The defendants also served the plaintiff’s outside asset managers

and advisors with broad discovery demands. A representative of the plaintiff sat for a full-

day deposition, as did a representative from one of its asset managers. Defense counsel did

not turn up any evidence of the type of wrongdoing in Chen v. Howard-Anderson, but the

scorched earth strategy was the same.

                                            88
       Delaware courts have approved meaningful incentive awards under similar

circumstances.38 The requested award of $50,000 is reasonable, even modest, given the

time and effort that the plaintiff and its personnel expended to represent the class.

       The requested award will be paid out of the fee award, so it does not reduce the

recovery to the class. Paying an incentive award from the fee award is customary, and it

recognizes that without a successful recovery, the named plaintiff is not entitled to an

incentive award, just as plaintiff’s counsel is not entitled to a fee. Treating the incentive

award as part of the fee recognizes that plaintiff’s counsel and the named plaintiff work as

a team to pursue the litigation. See Chen, 2017 WL 2642185, at *2. The incentive award is

“not so large as to raise specters of conflicts of interest or improper lawyer-client

entanglements.” See Orchard, 2014 WL 4181912, at *13.

       38
          See, e.g., In re El Paso Pipeline P’rs, L.P., 2016 WL 451320, at *2 (Del. Ch. Feb.
4, 2016) (ORDER) (incentive award of $450,000 to lead plaintiff); Fox v. CDx Hldgs., Inc.,
2015 WL 5163790, at *1 (Del. Ch. Sept. 2, 2015) (ORDER) (incentive award of $100,000
for named plaintiff who “risked his employment to step forward and challenge the
treatment of the Class” and “braved the risk of adverse consequences resulting from his
decision”); Activision, 124 A.3d at 1076–77 (approving award of $50,000 to lead plaintiff
who “participated meaningfully in the case, sat for a deposition, and attended hearings and
the mediation” and was “subjected to vigorous attacks throughout these proceedings, first
by Hayes and his counsel during the leadership fight, next by defendants at the class
certification phase, and now by both during the settlement phase”); Forsythe v. ESC Fund
Mgmt. Co. (U.S.), Inc., 2012 WL 1655538, at *8 (Del. Ch. May 9, 2012) (approving awards
of $35,000, $20,000, and $7,500 for plaintiffs who gave depositions and other assistance);
Brinckerhoff, 986 A.2d at 396 (approving payment of $100,000 to lead plaintiff who spent
approximately 1,000 hours assisting with litigation); Oliver v. Bos. Univ., 2009 WL
1515607, at *1 (Del. Ch. May 29, 2009) (awarding $40,000 to lead plaintiff where he spent
approximately 2,000 hours assisting with litigation); Raider, 2006 WL 75310, at *2
(approving award of $42,000 for plaintiff who spent a total of 205 hours on litigation and
incurred out-of-pocket expenses of $1,400).

                                             89
                                III.     CONCLUSION

       Plaintiff’s counsel is entitled to an all-in award of $266.7 million, representing

26.67% of the benefit caused by the litigation. Plaintiff’s counsel will pay $50,000 of the

fee award to the plaintiff as an incentive award.

                                             90