Topic: Contingency Fee

Delaware Chancery Court Grants Fee and Expense Award in Dell Appraisal Case

By: Naomi R. Ogan and Stephanie S. Liu

In In Re Appraisal of Dell, C.A. No. 9322-VCL (Del. Ch. October 17, 2016), previously discussed here, the law firm representing Dell Inc.’s stockholders in appraisal proceedings challenging the valuation of shares in connection with Dell’s 2013 “go-private” merger was awarded approximately $4 million in advanced expenses and $4 million in attorneys’ fees. The Delaware Court of Chancery held that the amounts were reasonable and that the expenses and fees should be allocated pro rata among the appraisal class. Since this was a case where counsel had incurred significant out-of-pocket expenses, the court held that the approach that best balanced the interests of the attorneys and the class was to deduct reimbursable expenses first, then award a fee based on the net benefit achieved.

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Delaware Court of Chancery Reiterates Standard for Terminating a Receivership and Finds 10% Net Recovery Contingency for a Receiver Fee Reasonable under Delaware General Corporate Law

By Scott Waxman and Anthony L Yerry

In Jagodzinski v. Silicon Valley Innovation Company, LLC, Christian Jagodzinski, a unitholder in Silicon Valley Innovation Company, LLC (“SVIC”), fueled by personal disputes with Bram Portnoy, the receiver of SVIC, brought a motion to terminate the court-appointed receivership over SVIC or, alternatively, to reduce the receiver’s pay.  Setting aside the personal disputes between Portnoy and Jagodzinski, the Delaware Court of Chancery ruled that Jagodzinski failed to make a sufficient showing to justify terminating the receivership but held that the 10% contingency portion of Portnoy’s fees are to be based off of the net, instead of the gross, recovery of the receivership.

In 2000, Jagodzinski invested $1 million in SVIC, which was an incubator for other startup technology companies.  After about four years of allegedly successful investments, SVIC stopped sending reports to the equity holders.  Jagodzinski unsuccessfully attempted to contact SVIC and investigate the state of the company’s affairs.  Eventually on February 18, 2011, Jagodzinski initiated a books and records action against SVIC in the Delaware Court of Chancery.  The then manager of SVIC refused to cooperate with the court, and the court appointed Portnoy as a limited receiver of SVIC with the specific task of collecting the books and records of the SVIC.

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