Stay current on changes and developments in corporate law with a wide variety of resources and tools.
Aug. 17 — Attorneys that sought $6 million in fees after successfully representing NavSeeker Inc. minority shareholders in a derivative lawsuit over the alleged misappropriation of corporate assets were instead awarded $650,000 by the Delaware Chancery Court Aug. 16 ( Baker v. Sadiq , 2016 BL 264696, Del. Ch., No. 9464-VCL, 8/16/16 ).
The court based its award on the settlement of the lawsuit in which the minority stockholders were bought out for $2.75 million. It rejected the attorneys' argument that the award should have been based on a derivative recovery on the company's behalf.
The derivative lawsuit alleged that NavSeeker's controlling shareholder misappropriated about $25 million worth of the company's technology assets. The parties reached a stockholder-level settlement rather than a derivative settlement through a concept used frequently in Delaware known as “transitive property.” Under the concept, parties can settle derivative actions by seeking investor-level relief.
Although a derivative recovery would have been greater, Vice Chancellor J. Travis Laster noted that the parties agreed to investor-level relief. Accordingly, the maximum benefit the plaintiffs' counsel could claim to have conferred was $2.75 million plus a possible additional $500,000 in debt forgiveness, he said. He found that an award of 20 percent of the total amount—$3.25 million—was appropriate.
The court also determined that liability for the fee award could be imposed only on NavSeeker. It rejected the request by the plaintiffs' counsel that all defendants be held jointly and severally liable.
“One could envision some type of post-settlement proceeding to determine whether grounds exist to impose fee liability on NavSeeker’s controllers, but that route appears unprecedented,” Laster said. “It also would embroil the parties in precisely the type of litigation that they reached a settlement to avoid.”
To contact the reporter on this story: Michael Greene in Washington at email@example.com
To contact the editor responsible for this story: Yin Wilczek at firstname.lastname@example.org
The opinion is available at http://src.bna.com/hOg.
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)