"I don't feel guilty about making a lawyer very, very rich if what he achieves on behalf of a class warrants it," Delaware Court of Chancery Chancellor Leo E. Strine Jr. told a roomful of lawyers in New York in November. The judge lived up to his word the next month by granting $300 million to Lee Rudy of Kessler Topaz Meltzer & Check LLP in Radnor, Pa., and Ronald Brown Jr. of Prickett, Jones & Elliott PA in Wilmington, Del., for their work in a derivative suit for shareholders of Southern Peru Copper Corp., which won $2 billion in damages against Grupo México SAB de CV in October. The award would be the largest ever by a Delaware chancellor by a factor of 10, and because Grupo México has appealed the decision, it will be one of the few awards upon which the Delaware Supreme Court has had a chance to opine.
The massive award in Southern Peru underscores the increase in plaintiffs' fees awarded by Chancery in recent years. Between 2004 and 2006, Chancery awarded between $21 million and $30 million to plaintiffs' lawyers annually, according to data compiled by the Register in Chancery Office since the advent of e-filing in late 2003. But from 2007 on, the court has awarded between $50 million and $80 million annually. Most of the difference comes from a few large awards. In the earlier period, the court's largest award was $7 million, but from 2007 on, the court has awarded fees of $10 million or more twice a year and has become somewhat more apt to grant fees of between $1 million and $5 million, though awards of between $5 million and $10 million have held steady.
The reasons for the increase are widely debated. The Southern Peru award "can be viewed as a further attempt by Chancellor Strine to attract corporate shareholder litigation to Delaware," argue Matthew Cain, an assistant professor of finance at the University of Notre Dame, and Steven Davidoff, an associate professor of law at Ohio State University's Michael E. Moritz College of Law, in their paper "A Great Game: The Dynamics of State Competition and Litigation." Many lawyers in the defense bar share that view.
The awards are also a product of a plaintiffs' bar with more good lawyers who command the resources at their firm to litigate cases aggressively -- a necessity as Delaware judges become more skeptical of the value of disclosure-only settlements and therefore stingier in granting fees for them. "When corporate America learns from previous cases and disclosure gets better, the target for disclosure-only settlements gets narrower," Strine said. -- D.M.