Following the settlement of In re Jefferies Group, Inc. Shareholders Litigation on March 26, 2015, the court issued this opinion on June 5, 2015 in response to plaintiffs’ Delaware counsel’s application for an award of attorneys’ fees and a motion by plaintiffs’ New York counsel for a share of that fee award. The court held that the Delaware counsel’s attorneys’ fees should be calculated on a gross basis, granting Delaware counsel an award of approximately 23.5% of the gross value of the settlement, and denied New York counsel’s motion for a share of that fee award.
On March 1, 2013, Jefferies Group, Inc. and Leucadia National Corporation consummated a stock-for-stock merger. On November 14, 2012, two days after the transaction was announced, the first of seven actions challenging the transaction was filed in New York state court. Eventually, the New York actions were stayed and the case proceeded in Delaware. The parties ultimately agreed to settle for payment of $70 million to the class, which settlement was approved by the court. The settlement contemplated that any award of attorneys’ fees would be in addition to the $70 million payment, with the defendants retaining the right to oppose the fee application.
After the settlement was approved, Delaware counsel for the plaintiffs requested an award of $27.5 million plus expenses of approximately $1 million, or approximately 27.5% of the gross value of the settlement after taking into account the requested fee and various expenses. The defendants argued that the fee award should be calculated as a percentage of the net payment of $70 million, and suggested a fee award of $15.75 million (22.5% of the $70 million net settlement) plus expenses. In considering Delaware counsel’s fee application, the court analyzed (1) whether the fee award should be calculated on a net or gross basis, and (2) the appropriate amount of the fee.
First, the court held that the award should be calculated on a gross basis, consistent with the calculation methodology traditionally used by the court in such circumstances. Second, in determining the appropriate amount of the fee, the Court considered the five Sugarland factors: (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. Of these, the court indicated that the benefit achieved was the most significant factor. In this instance, the court noted that the benefit achieved was unknown, as it would have varied significantly based on whether the applicable standard of review, had the case gone to trial, was the entire fairness standard or the business judgment rule. The court also stated that Delaware counsel, having made a decision to litigate the case as one for damages rather than seeking expedition, “expended meaningful but not Herculean efforts” to litigate this case. The court also stated that the factual issues in the case were not overly complex, and that Delaware counsel’s standing and ability were not questioned. After considering these factors, the court held that the fee award should be $21.5 million inclusive of expenses, which is approximately 23.5% of the gross value of the settlement.
The court also denied New York counsel’s motion for a share of the fee award. The court noted that attorneys litigating in other jurisdictions are entitled to share in a Delaware fee award, but only if their efforts elsewhere conferred a benefit realized as part of the Delaware settlement. In this case, New York counsel claimed that the Delaware plaintiffs relied heavily on New York counsel’s expedited delivery. The court stated, however, that the defendants produced all of the materials requested of them directly to Delaware counsel, and Delaware counsel did not need to rely on the product of New York counsel’s expedited delivery. Second, New York counsel claimed that its litigation efforts caused supplemental disclosures in Jefferies’ Form 8-K in February 2013, but the court held that there was no causal connection between these disclosures and the settlement payment. Third, New York counsel provided two deposition transcripts, and Delaware counsel cited to one of these in an amended complaint. However, the court opining on such amended complaint made no reference in its holding at the time to the particular deposition, and the court in this opinion concluded that these deposition transcripts therefore did not substantively contribute. Finally, although New York counsel claimed to assist the Delaware plaintiffs in surviving a motion for summary judgment, the court noted that this motion for summary judgment was presented in September 2014, over 17 months after the lifting of the initial stay of the Delaware action and after Delaware counsel had completed full discovery. As a result, the court denied the motion for a share of the fee award.