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By Yin Wilczek
Oct. 17 — The law firm representing Dell Inc. shareholders challenging the valuation of shares in a management-led buyout received an $8 million award for fees and expenses from the Delaware Chancery Court ( In re Appraisal of Dell Inc. , 2016 BL 344662, Del. Ch., No. 9322-VCL, 10/17/16 ).
The chancery court's Oct. 17 decision provides important guidance on how Delaware courts will treat fee applications, in particular expenses, which generally are based on case-by-case analyses.
Grant & Eisenhofer PA in May won a ruling from the chancery court that the shareholders were underpaid in the buyout by almost $4 per share (105 CARE, 6/1/16). The firm's litigation efforts in a complex case gave the appraisal shareholders an aggregate benefit of more than $25 million, Vice Chancellor J. Travis Laster wrote in his Oct. 17 ruling.
Based on that benefit, Grant & Eisenhofer's request for $3.96 million in attorneys' fees was reasonable, the judge wrote. He also found that the firm showed it should be reimbursed $4 million in out-of-pocket expenses incurred during the litigation.
Under Delaware law, law firms are entitled to receive reasonable attorneys' fees and expenses “charged pro rata” against the value of the shares that are appraised.
Grant & Eisenhofer litigated 13 consolidated appraisal proceedings before the chancery court. Among other complications, the court found that one of the firm's clients—T. Rowe Price & Associates Inc.—lacked standing to seek an appraisal (93 CARE, 5/13/16). Bloomberg BNA, which relied on T. Rowe Price to direct the voting of its Dell shares, was one of the petitioners in T. Rowe Price's case.
Laster explained that because Grant & Eisenhofer incurred significant out-of-pocket expenses over the consolidated proceedings, it was fairer to use the “expenses-first,” rather than the “all-in,” approach. Under the expenses-first approach, reimbursable expenses are deducted from the total benefit conferred before determining reasonable attorneys' fees.
The judge also rejected the argument that the law firm's fee award should be reduced because it already received $4.2 million from the T. Rowe Price proceedings. Grant & Eisenhofer's fee award is based on the amount of benefit it secured in this case, “not for the other work that it did,” Laster said.
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The ruling is available at http://www.bloomberglaw.com/public/document/In_re_Dell_Inc_No_9322VCL_2016_BL_344662_Del_Ch_Oct_17_2016_Court.
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