Del. Court Clarifies`Mootness' Awards in Xoom-PayPal Suit

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By Michael Greene

Aug. 4 — Attorneys representing Xoom Corp. stockholders that sued over the company's $890 million merger with PayPal Holdings Inc. were awarded a $50,000 “mootness” fee by the Delaware Chancery Court Aug. 4 ( In re Xoom Corp. Stockholder Litig. , 2016 BL 252274, Del. Ch., No. 11263-VCG, 8/4/16 ).

In Delaware, plaintiffs' attorneys may seek an award of fees and costs where the claims asserted by their clients are effectively mooted by the defending party.

The Xoom shareholder plaintiffs voluntarily dismissed their lawsuit after the company filed four supplemental disclosures regarding its financial adviser and post-merger employment discussions that mooted certain claims. The plaintiffs had sought attorneys' fees of $275,000 in a mootness proceeding.

In determining the $50,000 fee award was appropriate, Vice Chancellor Sam Glasscock III said the supplemental disclosures provided only a “modest benefit” to Xoom stockholders.

Observers have suggested that mootness fees may be a recourse for plaintiffs' attorneys in the wake of In re Trulia Inc. Stockholder Litig., a case in which the chancery court said it would more closely scrutinize disclosure-only settlements of deal litigation (16 CARE, 1/26/16).

`Trulia' Analysis Not Applicable

In reaching its ruling, the court said the Trulia analysis didn't apply. It found that the standard for determining a fee award was benefit to the class, not materiality.

In the mootness fee context, claims are only dismissed as to the plaintiffs and not the stockholder class, the court said.

“Therefore, a fee can be awarded if the disclosure provides some benefit to stockholders, whether or not material to the vote,” Glasscock wrote. “In other words, a helpful disclosure may support a fee award in this context.”

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