In re Dell Technologies Inc. Class V Stockholders Litigation

IN THE SUPREME COURT OF THE STATE OF DELAWARE

IN RE DELL TECHNOLOGIES § No. 349, 2023
INC. CLASS V §
STOCKHOLDERS § Court Below: Court of Chancery
LITIGATION § of the State of Delaware
§
§ C.A. No. 2018-0816

Submitted: May 15, 2024
Decided: August 14, 2024

Before SEITZ, Chief Justice; VALIHURA, TRAYNOR, LEGROW, and
GRIFFITHS, Justices; constituting the Court en Banc.

Upon appeal from the Court of Chancery. AFFIRMED.

Stephen B. Brauerman, Esquire (argued), Sarah T. Andrade, Esquire, BAYARD,
P.A., Wilmington, Delaware for Objector Below, Appellant Pentwater Capital
Management LP.

Ned Weinberger, Esquire (argued), Mark Richardson, Esquire, Brendan W.
Sullivan, Esquire, LABATON SUCHAROW LLP, Wilmington, Delaware;
Domenico Minerva, Esquire, Joseph Cotilletta, Esquire, LABATON SUCHAROW
LLP, New York, New York; David M. Cooper, Esquire, Silpa Maruri, Esquire,
George T. Phillips, Esquire, QUINN EMANUEL URQUHART & SULLIVAN,
LLP, New York, New York; William R. Sears, Esquire, QUINN EMANUEL
URQUHART & SULLIVAN, LLP, Los Angeles, California for Co-Lead Counsel
for Appellee.

Peter B. Andrews, Esquire, Craig J. Springer, Esquire, David M. Sborz, Esquire,
Jackson E. Warren, Esquire, ANDREWS & SPRINGER LLC, Wilmington,
Delaware; Chad Johnson, Esquire, Noam Mandel, Esquire, Desiree Cummings,
Esquire, Robert Gerson, Esquire, Jonathan Zweig, Esquire, ROBBINS GELLER
RUDMAN & DOWD LLP, New York, New York; Jeremy S. Friedman, Esquire,
David F.E. Tejtel, Esquire, Christopher M. Windover, Esquire, Lindsay La Marca,
Esquire, FRIEDMAN OSTER & TEJTEL PLLC, Bedford Hills, New York for
Additional Counsel for Appellee.

Anthony A. Rickey, Esquire, MARGRAVE LAW LLC, Wilmington, Delaware for
Amici Curiae, Law Professors, in support of Appellant.
Joel Friedlander, Esquire, Jeffery M. Gorris, Esquire, FRIEDLANDER & GORRIS,
P.A., Wilmington, Delaware for Amici Curiae, Professors Lynn A. Baker, Brian T.
Fitzpatrick and Charles Silver, in support of Appellee.

2
SEITZ, Chief Justice:

This is an appeal from a final judgment of the Court of Chancery awarding

counsel fees and expenses and an incentive award of 26.67% of a $1 billion

settlement, or $266.7 million. The settlement and fee award followed years of

contentious litigation challenging Dell Technologies’ redemption of Class V stock

for what the plaintiff claimed was an unfair price.

Pentwater Capital Management LP and other class members objected to the

amount of the fee award. In a thoughtful opinion, the Court of Chancery declined

to apply a declining percentage to the fee award. It also found that the $1 billion

settlement was a significant achievement, and no other factors warranted reducing

the percentage of fees awarded from the recovery. After our careful review, we find

that the Court of Chancery did not exceed its discretion in setting the fee percentage

and affirm its judgment.

I.

A.

We recite the facts from the settlement record and the Court of Chancery’s

decision awarding attorneys’ fees.1 In 2013, Michael Dell and Silver Lake Group

LLC took Dell, Inc. private through a leveraged buyout. Mr. Dell and Silver Lake

1
In re Dell Techs. Inc. Class V S’holders Litig., 300 A.3d 679 (Del. Ch. 2023), as revised (Aug.
21, 2023) [Dell II].

3
controlled the successor company, Dell Technologies, Inc. After the take-private

transaction closed, Dell Technologies set its sights on EMC Corporation, a publicly

traded data-storage firm which held an 81.9% equity stake in VMWare, also publicly

traded. Dell and Silver Lake would have preferred to purchase EMC on an all-cash

basis, but Dell Technologies was already highly leveraged after the take-private

transaction. Dell Technologies ended up acquiring EMC with a combination of cash

and newly authorized Class V Dell Technologies stock. Shares of Class V stock

traded publicly. After the acquisition, it was thought that the Class V shares would

track at little to no discount to the trading price of VMWare’s common stock.

Dell Technologies and EMC completed the $67 billion transaction. Each

share of EMC common stock converted into the right to receive $24.05 in cash and

0.11146 of a Class V share. Post-acquisition, the Class V shares traded at a 30 –50%

discount to VMware’s publicly traded stock. According to the Court of Chancery,

the Class V shares traded at a discount because, in part, Dell Technologies held an

option to force a conversion of the Class V shares into Class C shares through an

opaque formula that could be applied subjectively.2

Dell Technologies saw an opportunity to capture the value of the Class V

stock discount by consolidating its VMWare ownership. It had three apparent

options: (i) a transaction with VMWare; (ii) a negotiated redemption of the shares

2
Id. at 688.

4
of Class V stock; or (iii) a forced conversion of the shares. Dell Technologies

retained The Goldman Sachs Group, Inc. to advise them on the consolidation.

According to the plaintiff, Goldman advised Dell Technologies that the Class V

market discount could be widened further by creating market uncertainty about

whether the company would force a conversion of the Class V stock. When the

financial press reported that Dell Technologies was considering an IPO of its Class

C stock, the plaintiff alleged, the Class V stock discount increased to over 45%.

After the financial press reported on the possible Class C stock IPO, the Dell

Technologies board formed a special committee to negotiate the redemption of the

Class V stock.3 The committee lacked the power to block either a public listing of

the Class C stock or a forced conversion.

As negotiations ensued, Dell Technologies and its advisors were alleged to

have pressured the committee by making clear that they would consider alternatives

to a negotiated redemption. The committee and Dell Technologies eventually

arrived at a deal that valued the Class V stock at $109 per share – a 32.7% discount

to VMWare’s trading price. Stockholders objected and Dell abandoned the

committee process. Instead, it entered into non-disclosure agreements and

3
David Dorman, William Green, and Ellen Kullman were the initial special committee members.
Kullman was also a Goldman Sachs director. See In re Dell Techs. Inc. Class V S’holders Litig.,
2020 WL 3096748, at *4 (Del. Ch. June 11, 2020) [Dell I]. Early on, Kullman identified the
conflict with Dell’s advisor and recused herself. See id. at *7, *13.

5
negotiated separately with six investment funds who held a large block of Class V

stock.

Eventually, Dell Technologies arrived at an agreement with the funds. In

exchange for their Class V stock, Dell Technologies agreed to offer the funds the

option to receive (i) shares of newly issued Class C common stock valued at $120

per share; or (ii) $120 per share in cash, with the aggregate amount of cash capped

at $14 billion. The deal valued the Class V stock at $23.9 billion. Dell informed the

committee of the negotiated redemption’s terms. The committee approved the same

terms for the remaining Class V stockholders after meeting for an hour. Sixty-one

percent of the unaffiliated Class V stockholders voted to approve the redemption.

B.

Former Class V stockholders filed putative class actions, which were

consolidated by the Court of Chancery. The lead plaintiff, Steamfitters Local 449

Pension Plan, filed a Verified Amended Consolidated Stockholder Class Action

Complaint on behalf of the plaintiff and all similarly situated former holders of Class

V stock. The complaint brought direct claims for breach of fiduciary duty against

Mr. Dell, Silver Lake, and other Dell Technologies directors and sought damages

for the unfair redemption of Class V stock.

The complaint alleged that the director defendants breached their fiduciary

duties by approving the redemption, coercing the Class V stockholders to vote in

6
favor of the redemption, and for making materially false and/or misleading proxy

statements. Further, the plaintiff claimed that Mr. Dell and Silver Lake, as Dell

Technologies’ controlling stockholders, breached their fiduciary duties by causing

the company to enter an unfair redemption and by consummating the redemption at

the negotiated price.

The defendants moved to dismiss the complaint. They argued that the

transaction was approved by a well-functioning independent committee of directors

and the affirmative vote of fully informed and uncoerced minority stockholders.

They contended that, under Kahn v. M & F Worldwide Corp., the transaction should

be subject to the deferential business judgment rule standard of review.4 The court

denied the motion. It held that the plaintiff had sufficiently alleged that the two-

member special committee was not wholly independent, making entire fairness the

operative standard of review.5

The plaintiff later amended its complaint twice, adding various Silver Lake

affiliates as defendants. The amended complaint alleged that, throughout the

redemption, Mr. Dell, Silver Lake, and Silver Lake affiliates were the controlling

stockholder group of Dell Technologies. The plaintiff also added Goldman Sachs

4
88 A.3d 635, 639 (Del. 2014) [MFW], overruled on other grounds by Flood v. Synutra, Int’l,
Inc., 195 A.3d 754 (Del. 2018).
5
Dell I, 2020 WL 3096748.

7
as a defendant, alleging that they knowingly aided and abetted the fiduciary breaches

of the control group and the director defendants.

For the next two and a half years, the plaintiff pursued the case through

discovery. The parties stipulated to class certification, which was approved by the

court. They completed both fact and expert discovery. After expert discovery

closed, the parties at first unsuccessfully mediated the dispute. The court set a trial

date. As trial approached, the parties filed a pre-trial order. The trial would involve

testimony from fourteen fact witnesses and three expert witnesses. The parties listed

2,887 joint trial exhibits.6 After the parties filed their pre-trial briefs, the mediator

asked the parties to consider a mediator’s proposal. The mediator proposed a

settlement of $1 billion in cash, which both sides accepted, subject to court approval.

The Class V stockholders were notified of the proposed settlement. No one objected.

Class counsel sought 28.5% of the $1 billion settlement as a fee and expenses,

translating into a $285 million fee award – the second largest attorneys’ fee ever

awarded by the Court of Chancery.7 Pentwater Capital Management L.P. filed an

6
App. to Appellant’s Opening Br. at A328, Dell II [hereinafter “A__”].
7
A296.

8
objection.8 Seven other investment funds joined the fee objection. All told, the

objectors owned about 24% of the class.9

Pentwater argued that awarding a percentage of the settlement sought without

considering the size of the settlement was unfair to the class. They contended that,

in this case, the proposed fee was disproportionate to the value of the settlement.

The objectors urged the court to apply a declining percentage to the fee award, which

is similar to the approach used by federal courts in large federal securities law

settlements. The declining percentage method reduces the percentage of the fee

awarded to counsel as the size of the recovery increases. According to Pentwater,

fee awards “are meant to reasonably incentivize the attorneys taking these cases,”

and, in its view, “the amount of work, time, and effort spent on a case does not grow

proportionately with the transaction size.”10 In other words, “it is not a hundred

times more difficult (or riskier) to litigate and try a $10 billion case than it is to

litigate and try a $100 million case.”11 They argued that the Delaware Supreme

Court and Court of Chancery have applied the declining percentage method in other

cases.12

8
A367–84.
9
A367.
10
A372.
11
Id.
12
Id. (citing Ams. Mining Corp. v. Theriault, 51 A.3d 1213 (Del. 2012)).

9
Finally, they contended that the benefit achieved by counsel in this case did

not merit such a substantial fee. Although the $1 billion figure is large, Pentwater

claimed that the recovery was only a small fraction of what could have been achieved

if counsel had tried the case to judgment. Before the settlement hearing, the court

asked the objectors to provide, among other things, information about their annual

management fees and performance fees.13 The court also solicited the views of the

academic community. Five law professors filed an amicus brief in support of the

objectors’ position.14

C.

In a carefully considered opinion, the Court of Chancery awarded counsel

26.67% of the settlement, or $266.7 million.15 At the outset, the court observed that

the Supreme Court’s seminal decision in Sugarland Industries, Inc. v. Thomas

governs fee awards in representative actions.16 As the Vice Chancellor noted, when

the court considers a fee application, the court should review: (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

13
A450–52.
14
A478–98.
15
Dell II, 300 A.3d at 735. The court also included expenses and an incentive fee for the plaintiff.
For ease of reference, we will simply refer to the total amount as the fee award. Pentwater did not
object to the expense amount or the incentive fee.
16
Id. at 692 (citing Sugarland Indus., Inc. v. Thomas, 420 A.2d 142, 149–50 (Del. 1980)).

10
involved.17 The court also observed that the results achieved is the primary factor

for consideration. The hours worked, according to the court, should be used “as a

cross-check to guard against windfall awards, particularly in therapeutic benefit

cases.”18

1.

As expected, much of the court’s decision focused on the results achieved.19

The court first pointed out that the benefit accruing to the class was extraordinary:

$1 billion.20 Next, it examined what percentage of that amount should be awarded

to counsel because of their work. The court looked to this Court’s precedent and

precedent of the Court of Chancery to set litigation-stage percentages. Taking the

lead from Americas Mining, it observed that, when the benefit is quantifiable and

the litigation settles in the late stage of the litigation but before trial, the resulting fee

award is usually 25–30% of the settlement.21 According to the court, other

Sugarland factors can cause the court to adjust the base percentage.22 There were

also no causation issues as the plaintiff’s counsel was the sole cause of the benefit.

17
Id. (quoting Ams. Mining, 51 A.3d at 1254).
18
Id. (quoting Olson v. EV3, Inc., 2011 WL 704409, at *8 (Del. Ch. Feb. 21, 2011)).
19
Id. at 692–726.
20
Id. at 693.
21
Id. at 699.
22
Id. at 692; see also 726–28 (discussing the other Sugarland factors).

11
The court reasoned that the plaintiff completed all pre-trial activities, but not

the trial itself or post-trial work. Under what it termed the “stage-of-case” method,

the plaintiff’s counsel was presumptively entitled to a baseline award of 26.67% –

one third through the late-stage range percentage.23 In lowering the presumptive

amount from 28.5% to 26.67%, the court reasoned that 28.5% for this stage of the

case settlement would impact the relative award available for taking a case through

trial. It would also interfere with the balance of incentives in the fee award process.24

Next, the court considered the objectors’ request to lower the percentage based

on the size of the award. The objectors proposed that the court adopt the declining-

percentage method. They argued that larger settlements should result in smaller

percentage fees to prevent windfalls to counsel at the expense of the class.25 The

declining percentage approach is used often in federal securities law cases, where

settlements of $1 billion or more typically see fee awards around 10 –12% regardless

of the stage of proceedings.

The court declined to adopt a declining percentage approach because it did

not align with Delaware precedent. According to the court, “[u]nder Americas

Mining and Sugarland, a court does not make a downward adjustment to the

23
Id. at 699–700.
24
Id.
25
Id. at 700–01.

12
indicative percentage based on the size of the fund.”26 The court disagreed with the

objectors that, in Goodrich v. E.F. Hutton Grp., Inc., the Supreme Court endorsed

the federal declining percentage approach.27 And in Americas Mining, the court

observed, this Court rejected a mandatory declining-percentage approach, and

instead endorsed the multi-factor Sugarland test. As the court held, the declining-

percentage approach was a covert return to the lodestar method, which this Court

considered and rejected in Sugarland.28

The court then examined various Court of Chancery decisions relied on by the

objectors and concluded that none stood for use of the percentage reduction in

megafund cases. Instead, the court held, the cases were all “straightforward”

applications of Sugarland.29 When it reviewed the Court of Chancery’s decision in

Americas Mining, the court observed that, even though the court awarded 15% of

the judgment, it did not base the percentage solely on the size of the award.30

Next, the court compared Delaware as a forum for corporate litigation with

federal securities litigation, where the declining percentage method has been

26
Id. at 703–04.
27
Id.
28
Id. at 687.
29
Id. at 703.
30
Id. (“The objectors regard this as an endorsement of the declining-percentage approach, but it
actually reflects the Chancellor’s consideration of all of the Sugarland factors, including the
plaintiff’s delay in prosecuting the case. Elsewhere in the transcript, the Chancellor criticized the
concept of a reduction in mega-fund cases.”).

13
employed.31 According to the court, federal cases, governed by Rule 10b-5 and other

federal statutes, often involve higher volumes and larger recoveries, and focus

primarily on monetary damages. In contrast, Delaware M&A litigation centers on

fiduciary duties and corporate governance, with settlements that might not always

involve substantial financial awards.

The court reviewed a variety of differences between the two systems that

could justify a different treatment for fee awards.32 In the end, the court determined

that the reasons that could justify a megafund reduction did not apply to this case.33

The court held that “[t]he risk of a non-recovery in this case (at trial or on appeal)

was significant, and the risk intensified as trial approached. The recovery of $1

billion does not seem to have been the product of deal size.”34 The court concluded

that “[t]he rationales for using the declining-percentage method in federal securities

litigation have not been shown to apply to Chancery M&A litigation” and “do not

apply to this case.”35 The court did not adjust the percentage based on the size of

the settlement.36

31
Id. at 704.
32
Id. at 704–15.
33
Id. at 715.
34
Id.
35
Id.
36
Id.

14
The court next examined market practice in privately negotiated contingency

fee arrangements.37 According to one study, the majority of private fee agreements

used fixed or increasing percentage arrangements, rather than a declining percentage

approach.38 The study found that clients in pharmaceutical antitrust and patent

litigation frequently accept fixed percentages around one-third of the recovery,

consistent with the fee structures seen in high-stakes litigation.39 According to the

court, clients either paid a fixed percentage or an increasing percentage as the stage

of litigation progressed.40 The plaintiff’s counsel also provided the court with

information about their fee agreements.41 Most agreements did not use a declining

percentage approach.42 The court held that market practice did not justify a departure

from Americas Mining by adopting a declining percentage approach.43

Further, the court criticized the objectors for advocating for a reduced fee

percentage when, as fund managers, they agreed that they do not use similar

37
Id. at 715–16 (citing Brian T. Fitzpatrick, A Fiduciary Judge’s Guide to Awarding Fees in Class
Actions, 89 Fordham L. Rev. 1141 (2021) [hereinafter “Judge’s Guide”]).
38
Id. (citing Judge’s Guide, at 1170).
39
Id. at 716 (citing Judge’s Guide, at 1161).
40
Id. The court cited another study which found similar results. Id. at 717 (citing David L.
Schwartz, The Rise of Contingent Fee Representation in Patent Litigation, 64 Ala. L. Rev. 335
(2012)).
41
Id. at 717–18.
42
Id.
43
Id.

15
arrangements in their risk-based business.44 According to the court, even though the

fee agreements are not negotiated in class action litigation, [t]he lack of negotiation

is not a distinction” and “[t]he absence of an ex ante agreement is what forces the

court to consider other sources of market evidence . . . .”45 The court held that the

objectors chose to “free ride” and “[t]he settlement was a windfall for the objectors

because they did nothing to create it.”46 The court expressed its antipathy for the

objectors’ position by stating that the objectors’ position “masks self-interest with

an appeal to equity” and that “envy is not a sound basis for reducing a fee award.”47

The court also refused to credit the objectors’ argument that the settlement did

not confer a substantial benefit on the class even though it was the second largest

recovery ever achieved in Delaware.48 The objectors argued that the plaintiff’s

counsel sought damages of $10.7 billion. By settling for only 9.3% of the maximum

recovery, they argued, counsel settled for too little.49 The court disagreed, finding

that the recovery here was four times larger than the next largest class recovery. And

44
Id. at 718–20.
45
Id. at 719.
46
Id. at 720.
47
Id. (citing In re Clear Channel Outdoor Holdings Inc., Deriv. Litig., 2013 WL 5563370 (Del.
Ch. Sept. 9, 2013), tr. at *19; In re S. Peru S’holder Litig., 2011 WL 7121732 (Del. Ch. Dec. 19,
2011), tr. at *82).
48
Id. at 725.
49
Id. at 721.

16
the court observed that, when adjusted for risk, the common fund was an exceptional

result for the class.50

The court examined other settlement data, comparing the settlement against

the maximum damages of each sample case and the percentage of equity value of

the respective deal.51 Of the cases reviewed, the data showed a median settlement

of 16.5% of maximum damages and 2.95% for equity value of the deal.52 Despite

appearing less impressive as a percentage of maximum damages (9.34%), the court

found that the settlement ranks highly when considering the equity value of the

transaction (4.18%).53 Thus, the court held, “[p]laintiff’s counsel achieved an

unprecedented result and deserve the full percentage that the stage-of-case method

supports.”54

In sum, the court determined that Americas Mining favored a “stage of case”

approach and not a declining percentage approach, and that none of the evidence

presented by the objectors or amici should lead the court to apply a declining

percentage approach in this case.

50
Id. at 723.
51
Id. at 724–25.
52
Id.
53
Id. at 725.
54
Id. at 725–26.

17
2.

The court concluded its decision by reviewing the remaining Sugarland

factors. It found that none warranted a reduction in the percentage award.55

According to the court, the plaintiff’s counsel worked on a fully contingent basis,56

expended 53,000 hours litigating the case,57 faced nearly 100 attorneys from

prestigious firms,58 addressed complex legal and factual issues,59 and were of good

standing in the legal community.60 Finally, the court rejected the objectors’

argument that counsel should have structured the settlement to pay the attorneys’

fees award separately.61 The court found that the weight of authority supports

awarding fees from the common fund in the class setting.62

D.

On appeal, Pentwater claims that the court erred in three ways. First,

Pentwater argues that the court should not have awarded attorneys’ fees based on a

percentage of the settlement fund without considering the size of the fund. Pentwater

55
Id. at 726–28.
56
Id. at 726–27.
57
Id.
58
Id. at 727.
59
Id. at 728.
60
Id.
61
Id.
62
Id. at 730.

18
argues that the Court of Chancery ignored our Americas Mining decision by

employing a “stage-of-case” analysis without considering the actual result in a

megafund case – the court affirmed a 15% award for a case that, unlike here, was

decided after trial. Pentwater asks this Court to adopt the federal declining

percentage method for megafund cases as a way to prevent windfalls to counsel.

Next, Pentwater argues that the court misapplied the first two Sugarland

factors – the results achieved and the time and effort of counsel. For the former,

Pentwater repeats its argument that the recovery was a small fraction of what could

have been obtained after trial. They contend that the court should have considered

how the result achieved compared to what counsel could otherwise have obtained

after trial. Regarding the time and effort factor, Pentwater faults the court for not

giving greater weight to a cross-check of the fee award’s implied hourly rate of

$5,000 per hour. Pentwater argues that the fee is seven times counsel’s customary

rate, resulting in an award at the high end of fee awards in the Court of Chancery.

Finally, Pentwater contends that the court erred when it considered

Pentwater’s compensation structure in the fee inquiry. It argues that the objectors

and their private arrangements are irrelevant to the fee inquiry. Pentwater also

claims that intrusive discovery aimed at objectors will discourage good faith

objections to fee awards.

19
We review the reasonableness of the percentage awarded from a common

fund to class counsel by the Court of Chancery to decide whether the court exceeded

its discretion.63 Errors of law are reviewed de novo.64

II.

In Delaware, litigants typically pay their own attorneys’ fees.65 There are

exceptions to the rule – bad faith assertion of claims, statutory and contractual fee

shifting, and in equity.66 In equity, under the “common fund” exception, if a party

creates a common fund for the benefit of others, attorneys’ fees can be paid from the

common fund.67 The common fund exception is “founded on the equitable principle

that those who have profited from litigation should share its costs.”68 Spreading the

costs over all common fund beneficiaries eliminates the free-rider problem – reaping

the gains without sharing the expenses that created the common fund.69

63
Id. at 694–95 (citing Ams. Mining, 51 A.3d at 1260).
64
Dover Historical Soc’y, Inc. v. City of Dover Planning Comm’n, 902 A.2d 1084, 1089 (Del.
2006) (“Where it is in issue, we review the [trial court’s] formulation of the appropriate legal
standard de novo.”); see also Gannett Co. v. Bd. of Managers of the Del. Criminal Just. Info. Sys., 840
A.2d 1232, 1240 n.25 (Del. 2003).
65
Maurer v. Int’l Re-Ins. Corp., 95 A.2d 827, 830 (Del. 1953).
66
Goodrich v. E.F. Hutton Grp., Inc., 681 A.2d 1039, 1044 (Del. 1996).
67
Id.
68
Id. (citing Maurer, 95 A.2d at 830).
69
Id. (citing Boeing Co. v. Van Gemert, 444 U.S. 472, 478 (1980)). Under the Delaware Lawyers’
Rules of Professional Conduct, the fee must be reasonable. See Del. Lawyers’ R. Prof’l Conduct
1.5(a).

20
When a judgment or settlement creates a common fund, counsel may apply

to the court for an award of attorneys’ fees and expenses from the fund.70 As

fiduciaries for the class and under professional conduct rules, counsel’s fee request

must be reasonable.71 Even with equitable and professional constraints, an inherent

conflict still arises between the class members and their attorneys.72 The more the

attorneys receive, the less goes to the class. As such, the reviewing court – here the

Court of Chancery – has an essential role to play to evaluate a fee application and to

set a fair and reasonable fee.73 The court’s task is not cursory.74 As we have said,

“a request for an award of attorney’s fees from a common fund must be subjected to

the same heightened judicial scrutiny that applies to the approval of class action

settlements[,]” and “the Court of Chancery must make an independent determination

of reasonableness on behalf of the common fund’s beneficiaries, before making or

approving an attorneys’ fee award.”75

70
Goodrich, 681 A.2d at 1045.
71
Id.
72
Id. at 1045 (citing Rawlings v. Prudential–Bache Props., Inc., 9 F.3d 513, 516 (6th Cir. 1993);
Third Circuit Task Force, Court Awarded Attorney Fees, 108 F.R.D. 237, 255 (1985)).
73
Sugarland, 420 A.2d at 153 (Del. 1980).
74
Goodrich, 681 A.2d at 1045–46 (citing Nottingham Partners v. Dana, 564 A.2d 1089, 1102
(Del. 1989)).
75
Id. Although a fee award request requires intensive review, it is common, in the interests of
efficiency, for the Court of Chancery to address fee awards in transcript rulings.

21
In Sugarland v. Thomas, this Court affirmed the Court of Chancery’s decision

that the counsel in a derivative case were “entitled to a fair percentage of the benefit

inuring to Sugarland and its stockholders.”76 We looked to five factors that are now

the yardstick to measure whether a fee award is “reasonable”: (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.77 The first factor – the results achieved – is paramount. The court must

also consider the degree of the “cause and effect” between what counsel

accomplished through the litigation and the ultimate result.78

We also rejected the federal lodestar approach. This approach takes the time

expended by counsel and multiplies it by an approved hourly rate. The result can be

adjusted based on case-specific factors.79 We concluded that adopting the loadstar

approach would require the Court of Chancery to engage in “elaborate analyses”

when the existing practice was sufficient.80 In other words, instead of adopting a

76
Sugarland, 420 A.2d at 150 (Del. 1980).
77
Id. at 149.
78
Id. at 150–51 (discussing that counsel is entitled to only 5% of the benefit achieved because the
final sale price was influenced by factors beyond the initial bids and not caused by the petitioners’
actions).
79
Id. at 150 (citing Lindy Bros. Builders of Phila. v. Am. Radiator & Standard Sanitary Corp., 487
F.2d 161 (3d Cir. 1973)).
80
Id.

22
formulaic approach to fee requests, we committed the fee award to the discretion of

the Court of Chancery.

In Goodrich v. E.F. Hutton Grp., Inc., we reiterated that the Delaware courts

would not follow the federal lodestar method.81 Instead, we reaffirmed that

Sugarland’s multi-factor approach is the appropriate inquiry for an equitable award

of attorneys’ fees from a common fund.82 At the same time, we also noted that the

Court of Chancery correctly “acknowledged the merit of the emerging judicial

consensus that the percentage of recovery awarded should ‘decrease as the size of

the fund increases.’”83 We concluded, however, that:

[t]he adoption of a mandatory methodology or particular
mathematical model for determining attorney’s fees in common fund
cases would be the antithesis of the equitable principles from which
the concept of such awards originated. . . . New mechanical
guidelines are neither appropriate nor needed for the Court of
Chancery.84
81
681 A.2d 1039 (Del. 1996).
82
Id. at 1049 (rejecting a federal rule that awarded attorneys’ fees as a percentage in relation to the
maximum common fund available, without regard to what benefits were realized by class
members).
83
Id. at 1048 (citing report of the Third Circuit Task Force, Court Awarded Attorney Fees, 108
F.R.D. at 256). See Seinfeld v Coker, 847 A.2d 330, 335–36 (Del. Ch. 2000) (“The Delaware
courts have often considered methods employed by other courts. For example, the Goodrich Court
discussed the percentage of the fund method, noting that the Court of Chancery rightly
‘acknowledged the merit of the emerging judicial consensus that the percentage of recovery
awarded should ‘decrease as the size of the fund increases.’’ But that Court also stressed that
‘[t]his case establishes, once again, that the Court of Chancery’s existing multiple factor approach
to determining attorney’s fee awards remains adequate for purposes of applying the equitable
common fund doctrine.’” (citations omitted)).
84
Goodrich, 681 A.2d at 1050 (citing Trustees v. Greenough, 105 U.S. 527 (1881); Cent. R.R. &
Banking Co. v. Pettus, 113 U.S. 116 (1885); Sugarland, 420 A.2d at 150; Tandycrafts, Inc. v. Initio
Partners, 562 A.2d 1162 (Del. 1989); Maurer, 95 A.2d 827).

23
The Goodrich decision involved a settlement of up to $3.3 million and an

attorneys’ fee award of up to $515,000, depending on the amount paid to the

claimants. In Americas Mining Corp. v. Theriault, we addressed for the first time

what our Court described as a “megafund” case.85 The derivative plaintiff claimed

that Americas Mining Corporation, a subsidiary of Southern Copper Corporation’s

controlling shareholder and its affiliate directors breached their fiduciary duty of

loyalty to Southern Copper and its minority stockholders by causing Southern

Copper to acquire the controller’s 99.15% interest in a Mexican mining company at

an unfair price. After a trial applying entire fairness review, the Court of Chancery

entered judgment for the minority shareholder. It awarded more than $2 billion in

damages.86 The damage award was the largest recovery in the history of the Court

of Chancery. The plaintiff’s counsel requested 22.5% of the recovery for attorneys’

fees and expenses. The court awarded a fee of 15% of the $2.03 billion judgment,

or $304,742,604.45. Like the judgment, it was the largest fee award by the court.

On appeal, after affirming the damage award, we addressed the defendants’

objections to the attorneys’ fee award. The defendants argued, among other things,

85
51 A.3d at 1260. The question presented was “how to properly determine a reasonable
percentage for a fee award in a megafund case.” Id.
86
Id. at 1252. The controller still retained 81% of the interest in the subsidiary it would pay the
judgment to and would therefore, given the derivative nature of the action, indirectly benefit by
their pro rata share of the judgment amount. Id. at 1263. Here, the Court of Chancery used this
point as support for why the $1 billion settlement in the present case was so impressive. Dell II,
300 A.3d at 721.

24
that the Court of Chancery erred by not adopting a per se rule that the percentage of

attorneys’ fees awarded from the fund should decline as the fund amount increases.87

We started the analysis by reiterating Sugarland’s central holdings. We reinforced

the notion that “this Court rejected any mechanical approach to determining

common fund fee awards.”88 And, like the Goodrich decision, “we explicitly

disapproved the Third Circuit’s ‘lodestar method.’”89

Further, in discussing Sugarland and Goodrich, we held that the Supreme

Court “did not adopt an inflexible percentage of the fund approach.”90 Instead, we

reaffirmed that the court should consider the five Sugarland factors when making an

equitable award of attorneys’ fees.91 We also noted that, when applying the

Sugarland factors, “Delaware courts have assigned the greatest weight to the benefit

achieved in litigation.”92 When assessing this factor, we affirmed the Court of

Chancery’s determination that the plaintiffs’ attorneys “were entitled to a fair

percentage of the benefit” achieved for the company and its stockholders in the

derivative litigation.93

87
Ams. Mining, 51 A.3d at 1258.
88
Id. at 1254.
89
Id.
90
Id. (quoting Sugarland, 420 A.2d at 149–50).
91
Ams. Mining, 51 A.3d at 1261.
92
Id. at 1254.
93
Id. at 1258 (emphasis omitted).

25
Next, the Court reviewed how the Court of Chancery applied each of the

Sugarland factors. In setting the percentage of fee award from the judgment, we

observed that, in Delaware, 33% is the upper range for attorneys’ fees.94 When a

case settles early, the Court of Chancery tends to award 10–15% of the monetary

benefit conferred. If, however, a case settles after meaningful litigation, the range is

typically 15–25%.95 We also noted at the time that, in the federal setting, once a

recovery exceeds $500 million, the median attorneys’ fees fall to 11% from the

typical range of 22–30% in routine actions.96

The defendants in Americas Mining argued that, after Goodrich, we required

the Court of Chancery to employ a declining percentage to the fee award request in

a megafund case. We disagreed, and rejected “[a] mechanical, per se application of

the ‘megafund rule,’” which would be out of step with the trend in federal court

decisions.97 We followed the federal trend and stated that a declining percentage

could be applied in a megafund case as a matter of discretion:

In Goodrich, we discussed the declining percentage of the fund
concept, noting that the Court of Chancery rightly “acknowledged the
merit of the emerging judicial consensus that the percentage of recovery
94
Id. at 1259.
95
Id. at 1260.
96
Id. (citing Dr. Renzo Comolli et al., Recent Trends in Securities Class Action Litigation: 2012
Mid-Year Review, NERA Econ. Consulting, July 2012, at p.31).
97
Id. (quoting In re Enron Corp. Sec., Deriv. & ERISA Litig., 586 F. Supp. 2d 732, 753–54 (S.D.
Tex. 2008)); see also In re Rite Aid Corp. Sec. Litig., 396 F.3d 294, 302–03 (3d Cir. 2005)
(“[T]here is no rule that a district court must apply a declining percentage reduction in every
settlement involving a sizable fund.”).

26
awarded should ‘decrease as the size of the [common] fund increases.’”
We also emphasized, however, that the multiple factor Sugarland
approach to determining attorneys’ fee awards remained adequate for
purposes of applying the equitable common fund doctrine. Therefore,
the use of a declining percentage, in applying the Sugarland factors in
common fund cases, is a matter of discretion and is not required per
se.98

In Americas Mining, we also noted that “the record does not support the

Defendants’ argument that the Court of Chancery failed to apply a ‘declining

percentage.’”99 Instead, we concluded that: “the Court of Chancery reduced the

award . . . based, at least in part, on its consideration of the Defendants’ argument

that the percentage should be smaller in light of the size of the judgment.”100 In other

words, “the record reflect[ed] that the Court of Chancery did reduce the percentage

it awarded due to the large amount of the judgment. The Defendants are really

arguing that the Fee Award percentage did not ‘decline’ enough.”101

Thus, in Americas Mining, we “decline[d] to impose either a cap or the

mandatory use of any particular range of percentages for determining attorneys’ fees

in megafund cases” and “reaffirm[ed] that our holding in Sugarland sets forth the

98
Ams. Mining, 51 A.3d at 1258.
99
Id.
100
Id. at 1258–59.
101
Id. As noted earlier, the Court of Chancery in Americas Mining ruled: “Now, I gave a
percentage of only 15 percent rather than 20 percent, 22 1/2 percent, or even 33 percent because
the amount that’s requested is large. I did take that into account. Maybe I am embracing what is a
declining thing. I’ve tried to take into account all the factors, the delay, what was at stake, and
what was reasonable. And I gave defendants credit for their arguments by going down to 15
percent.” Id. (quoting trial court ruling).

27
proper factors for determining attorneys’ fee awards in all common fund cases.”102

After Americas Mining, the Court of Chancery has the discretion to apply a declining

percentage based on the size of the award. We also approved its use in the only

megafund fee award challenged in this Court.

III.

A.

The Court of Chancery refused to apply a declining percentage to the fee

awarded in this case. According to the court, applying a declining percentage “runs

counter to Americas Mining and the incentive structure that the Delaware Supreme

Court created.”103 It also held that, after Americas Mining, “a court can reduce an

excessive fee, but that analysis happens using the Sugarland factors” and not by

applying a declining percentage to the fee award.104

Pentwater argues that, after Americas Mining, the Court of Chancery should

have applied a declining percentage in this case.105 In Americas Mining, the Court

of Chancery recognized that it was, at least in part, applying a declining percentage

in a megafund case when it arrived at a 15% fee.106 On appeal, our Court also

102
Ams. Mining, 51 A.3d at 1261.
103
Dell II, 300 A.3d at 687.
104
Id.
105
Appellant’s Second Corrected Opening Br. at 23, Dell II [hereinafter “Opening Br.”].
106
51 A.3d at 1259, 1262.

28
recognized that the Court of Chancery had done so and affirmed the court when it

reduced the percentage based, at least in part, on the size of the recovery.107

But Pentwater fails to confront another essential holding of Americas Mining

that the Court of Chancery relied on in this case. Consistent with the cases preceding

it, in Americas Mining we refused to adopt rigid rules in fee award cases.108 We

agree with the Court of Chancery in the present case that, after Americas Mining, the

Sugarland factors control a megafund fee award, rather than any per se rule, whether

declining percentage or any other rule. After Americas Mining, we follow the

consensus in the federal courts that it is within the discretion of the court to reduce

a fee percentage to account for the size of the award.109 On appeal, this Court will

not usually disturb the Court of Chancery’s ruling if the court adequately explains

107
See Ams. Mining, 51 A.3d at 1262.
108
51 A.3d at 1261 (“As we stated in Goodrich, ‘[n]ew mechanical guidelines are neither
appropriate nor needed for the Court of Chancery.’” (quoting Goodrich, 681 A.2d at 1049)).
109
Ams. Mining, 51 A.3d at 1261 (“The Third Circuit reasoned that it has ‘generally cautioned
against overly formulaic approaches in assessing and determining the amounts and reasonableness
of attorneys’ fees,’ and that ‘the declining percentage concept does not trump the fact-intensive
[In re] Prudential [Ins. Co. Am. Sales Litigation, 148 F.3d 283 (3d Cir. 1998)]/Gunter [v.
Ridgewood Energy Corp., 223 F.3d 190 (3d Cir. 2000) ] [factors,]’ which are similar to this Court’s
Sugarland factors.” (citing In re Rite Aid Corp. Sec. Litig., 396 F.3d 294, 302–03 (3d Cir. 2005))).
The Prudential/Gunter factors include: “(1) the size of the fund created and the number of persons
benefitted; (2) the presence or absence of substantial objections by members of the class to the
settlement terms and/or fees requested by counsel; (3) the skill and efficiency of the attorneys
involved; (4) the complexity and duration of the litigation; (5) the risk of nonpayment; (6) the
amount of time devoted to the case by plaintiffs’ counsel; and (7) the awards in similar cases.”
Gunter, 223 F.3d at 195 n.1.

29
its reasons and properly exercises its discretion when it applies the Sugarland

factors.

We note that it is not inconsistent with the incentive structure in Americas

Mining for the court to decrease the percentage of fees in a megafund case. As

explained earlier, in Americas Mining, the Court of Chancery awarded 15% of the

recovery following trial rather than a higher percentage based, at least in part, on the

size of the recovery.110 Given the equitable principles underpinning fee awards in

common fund cases, and this Court’s concern for excessive compensation or

windfalls, it is entirely appropriate, and indeed essential, for the court to consider the

size of the award in a megafund case when deciding the fee percentage.111 An award

can be so large that typical yardsticks, like stage of the case percentages, must yield

to the greater policy concern of preventing windfalls to counsel.112

110
Ams. Mining, 51 A.3d at 158–59 (“In exercising its discretion and explaining the basis for the
Fee Award, the Court of Chancery reduced the award from the 22.5% requested by the Plaintiff to
15% based, at least in part, on its consideration of the Defendants’ argument that the percentage
should be smaller in light of the size of the judgment . . . .”).
111
See, e.g., Sugarland, 420 A.2d at 150–51 (discussing the risk of windfall when granting a fee
award); Goodrich, 681 A.2d at 1046 (“The equitable nature of awarding attorney’s fees from a
common fund requires a court to exercise broad discretion by applying a reasonableness
standard.”); see also Dann v. Chrysler Corp., 215 A.2d 709, 716 (Del. Ch. 1965), aff’d, 223 A.2d
384 (Del. 1966).
112
This Court and the Court of Chancery have had limited opportunities to consider the declining
percentage approach. As the court here pointed out, only two judgments or settlements have ever
exceeded $500 million – Ams. Mining and the present one – and only a handful of settlements have
exceeded $100 million. See Dell II, 300 A.3d at 711–13 (listing only two settlements post-Trulia,
including the present one, that exceed $100 million). In Americas Mining, the only such fee award
considered on appeal, this Court approved the use of the declining percentage given the size of the
recovery.

30
Windfalls are a particular concern in megafund cases. As lawyers and judges,

we understand that representative litigation performs a valuable service to

stockholders who individually might not have the resources or the will to pursue

fiduciaries for breach of their duties. The potential for large fees incentivizes

counsel to accept challenging cases. They assume the risk of recovering nothing in

the end. In Delaware, we are used to big numbers.

But it is also legitimate to ask, outside our somewhat insular legal universe,

whether the public would ever believe that lawyers must be awarded many hundreds

of millions of dollars in any given case to motivate them to pursue representative

litigation or to discourage counsel from settling cases for less than they are worth.

At some point, the percentage of fees awarded in a megafund case exceed their value

as an incentive to take representative cases and turn into a windfall. The Court of

Chancery in Seinfeld v. Coker aptly described the competing policy concerns the

court must balance when it arrives at a reasonable percentage in any case:

This Court has proceeded in the past on the unstated premise that
awarding large fees will necessarily produce the incentives of
encouraging meritorious suits and encouraging efficient litigation. But
a point exists at which these incentives are produced, and anything
above that point is a windfall. In other words, if a fee of $500,000
produces these incentives in a particular case, awarding $1 million is a
windfall, serving no other purpose than to siphon money away from
stockholders and into the hands of their agents. Thus, it is important
that we attempt, in a self-conscious and transparent manner, to estimate
the point at which proper incentives are produced in a particular case.
If one can at least approximate this point, one can in theory award fees
in an amount that produces appropriate incentives without a significant
31
risk of producing socially unwholesome windfalls. That point likely
will be different in every case, based in large part on the difference in
risks among and within cases. As a result, this process is necessarily
fact-specific and case-specific.113

Here, the Court of Chancery awarded 26.67% of the common fund.114 The

court acknowledged that, under Americas Mining, it had the discretion to reduce the

percentage.115 But it also found that “none of the reasons for a mega-fund reduction

apply to this case.”116 According to the court, “[t]he risk of a non-recovery in this

case (at trial or on appeal) was significant, and the risk intensified as trial

approached.”117 The court also decided that “the recovery of $1 billion does not

seem to have been the product of deal size.”118 There was no windfall to plaintiff’s

counsel, the court held, given the all the circumstances of the case.119 We agree with

the court’s observations that it was a highly contentious litigation, spanning two and

a half years, with nearly 100 lawyers entering appearance for the defense.120 The

113
847 A.2d 330, 334 (Del. Ch. 2000) (footnotes omitted).
114
Dell II, 300 A.3d at 730.
115
Id. at 701.
116
Id. at 715.
117
Id.
118
Id.
119
Id. (“Reducing the requested award is not necessary from a compensatory perspective, because
the implied rate of approximately $5,000 per hour is lower than rates this court has approved for
smaller recoveries. . . . The multiple to lodestar of 7x in this case would not raise a federal
eyebrow.”).
120
Id. at 727 (“[P]laintiff’s counsel propounded sixty-six document requests, 710 interrogatories,
and 179 requests for admission to the defendants. Plaintiff’s counsel also served forty-one non-
party subpoenas. Through these efforts, plaintiff’s counsel developed an extensive record that
32
underlying transaction was complex, and counsel achieved an excellent settlement

for the class on the eve of trial.121

The Court of Chancery supported the reasons for its fee award percentage,

including the reasons for no downward adjustment to the fee percentage. We review

its determination to decide whether it exceeded its discretion. We conclude in this

case that the court acted within its discretion in awarding 26.67% of the common

fund.

B.

Pentwater also argues on appeal that the Court of Chancery misapplied two of

the Sugarland factors.122 Under the first Sugarland factor, the results achieved,

Pentwater claims that the benefit was limited because the settlement was only a tenth

of what plaintiff’s counsel sought before trial.123 This argument, however, would

have been better lodged by way of an objection to the adequacy of the settlement

and not to the fee award. The class – which included sophisticated major Dell

included nearly 2.9 million pages of documents from over forty parties and non-parties. Plaintiff’s
counsel took thirty-two fact depositions, four of which lasted two days. Plaintiff’s counsel also
responded to the defendants’ expansive discovery demands.).
121
Id. at 728 (“Plaintiff’s counsel had to work with their expert to develop novel valuation
approaches for a transaction involving a one-of-a-kind tracking stock (DVMT), another complex
security (VMware common stock), and a privately held company (Dell). Plaintiff’s counsel also
had to analyze complicated tax issues, alternative transactions like a forced conversion, and novel
questions about market expectations and minority discounts.”).
122
Opening Br. at 17, 21. Pentwater did not challenge the other Sugarland factors.
123
Id. at 20–21.

33
Technologies’ stockholders – received notice, and no one objected to the adequacy

of the settlement. The court, experienced with entire fairness review litigation,

determined that the common fund reflected an “exceptional result” of approximately

5% of equity value and that “the settlement consideration of $1 billion represents a

substantial fraction of the likely recoverable damages.”124 According to the court,

when compared to the risk-adjusted value of the case, the settlement was adequate.

The court did not exceed its discretion by holding that the benefit was significant

under the first Sugarland factor.

Pentwater also claims that “when assessing the ‘benefit achieved’ the value of

the settlement to the class members should be considered on a net basis.”125

Pentwater argues that, for a gross basis settlement, defendants rarely have a reason

to dispute the plaintiff’s fee application. Their exposure is capped at the gross

settlement amount.126 As a result, it argues, attorneys’ fees are not subject to

adversarial testing because the court typically has a limited record to evaluate the

Sugarland factors.

In Goodrich, however, we recognized that “‘there is often no one to argue for

the interests of the class,’ because class members with small claims often do not file

124
Dell II, 300 A.3d at 723 (quoting Dkt. 536 at 41).
125
Opening Br. at 17 (citing A380).
126
Opening Br. at 18.

34
objections to proposed settlements and fee applications.”127 As a result, the Court of

Chancery has an independent obligation to evaluate fee applications – a task subject

to “heightened judicial scrutiny.”128 The rigorous review takes place irrespective of

whether any stockholder class member has asked to be heard, as Pentwater has done

here. While a court may benefit from adversarial briefing on a fee application, such

briefing is not required for the Court of Chancery to faithfully carry out its duty to

class members to ensure a fair settlement.

The Court of Chancery observed that the court and this Court describe fee

awards as a “percentage of a gross common fund.”129 And a “common fund with a

fee paid separately is mathematically equivalent to a larger common fund with a

lower percentage fee coming out of the gross amount.”130 We agree with the Court

of Chancery that, in Delaware, attorneys’ fees are typically awarded as a percentage

127
Goodrich, 681 A.2d at 1045 (citing Rawlings v. Prudential-Bache Props., Inc., 9 F.3d 513, 516
(6th Cir. 1993)).
128
Id. at 1045–46.
129
Dell II, 300 A.3d at 728.
130
Id at 729. In the Court of Chancery, the objectors relied on a decision where the fee was
negotiated separately from the settlement amount. See In re Jefferies Grp., Inc. S’holders Litig.,
2015 WL 3540662, at *4 (Del. Ch. June 5, 2015). That decision ultimately considered whether to
approve the fee based on its percentage of the gross value. Id. (“Taking into account each of the
Sugarland factors, and placing the greatest weight on the settlement fund that was created as a
result of the settlement, in my judgment the appropriate award for this case is $21.5 million,
inclusive of expenses. This equates to approximately 23.5% of the gross value (approximately
$91.5 million) of the settlement.”).

35
of the gross benefit. Delaware law does not require that the fees be calculated on a

net basis.

Under the second Sugarland factor, the time and effort of counsel, Pentwater

contends that the Court of Chancery did not properly cross-check the time and effort

of counsel against the size of the award.131 According to Pentwater, the implied rate

of counsels’ time is at the high end of Delaware fee awards, meaning it signals a

windfall to counsel. The court determined, however, that “the implied rate of

approximately $5,000 per hour is lower than rates this court has approved for smaller

recoveries” and “[t]he multiple to lodestar of 7x . . . would not raise a federal

eyebrow.”132 While the amount is at the high end, it is not so unusual that we are

required to undo the court’s thorough consideration of all the Sugarland factors.

C.

Finally, the Court of Chancery found that there was a “particular irony in who

is arguing for [the declining percentage] method” when “as fund managers, the

objectors do not use similar arrangements.”133 According to the court, “[t]he

objectors do, however, engage in litigation, yet they declined to do so in this case.”134

131
Opening Br. at 21.
132
Dell II, 300 A.3d at 715 & n.26 (citing federal cases greatly exceeding a 7x multiplier).
133
Id. at 718.
134
Id.

36
In the court’s words, their objections “come with ill grace.”135 Pentwater contends

that its business practices are irrelevant to the Court of Chancery’s task of closely

scrutinizing fee awards based on the Sugarland factors.136 To allow otherwise,

Pentwater asserts, penalizes objectors for lodging objections and discourages

objections in future cases by sophisticated parties.

We have already decided that the Court of Chancery more than adequately

justified its fee award. Thus, the court’s decision to inquire into a class member’s

business practices, does not affect our decision to affirm the court’s judgment. We

do, however, question the utility of singling out objectors for their business practices.

The objectors suffered the same type of financial injury as other members of the

class. Upon receiving notice, Pentwater and the other objectors were told that they

could lodge objections. They did not make unreasonable or frivolous arguments.

And although it might sound quaint, lawyers are not in the same position as

investment bankers and fund managers when it comes to class action settlements –

they are fiduciaries for the class.137 In our view, the court should not deter

135
Id.
136
Opening Br. at 30.
137
In re M & F Worldwide Corp. S’holders Litig., 799 A.2d 1164, 1174 n.34 (Del. Ch. 2002) (“By
asserting a representative role on behalf of a proposed class, representative plaintiffs and their
counsel voluntarily accept a fiduciary obligation towards members of the putative class.” (citing
Fed. Jud. Ctr., Manual for Complex Litigation § 30 at 31–32 (3d ed.1995)); Del. Lawyers’ R. Prof’l
Conduct 1.5(a) (“A lawyer shall not make an agreement for, charge, or collect an unreasonable
fee . . . .”).

37
meritorious objections from stockholders who have been harmed by subjecting their

business practices to scrutiny as part of fee award proceedings.138 Their non-

frivolous objections, when appropriate, act as another check on the reasonableness

of the fees sought by counsel from a common fund.

IV.

The judgment of the Court of Chancery is affirmed.

138
Goodrich, 681 A.2d at 1045 (“This divergence of interests requires a court to continue its ‘third-
party’ role in reviewing common fund fee applications. ‘[T]here is often no one to argue for the
interests of the class,’ because class members with small claims often do not file objections to
proposed settlements and fee applications.” (quoting Rawlings v. Prudential–Bache Props., Inc.,
9 F.3d 513, 516 (6th Cir. 1993))).

38