In re Dell Techs. Inc. Class V S'holders Litig., C.A. No. 2018-0816-JTL (Del. Ch. July 31, 2023, revised Aug. 22, 2023)

Stockholders filed class actions in the Court of Chancery challenging the terms of a redemption of a special class of common stock. After years of litigation and the filing of pre-trial briefs, nineteen days before trial, the parties reached a cash settlement of $1 billion. The plaintiff's counsel submitted a fee application for 28.5 percent of the common fund. Stockholders holding more than 25 percent of the class objected to the fee application and asked that the Court instead apply the declining-percentage method used for calculating fees in federal securities litigation.

The Court declined to adopt the declining-percentage method, which the Court held runs counter to the Delaware Supreme Court's adoption of the stage-of-case method in Americas Mining Corp. v. Theriault, 51 A.3d 1213 (Del. 2012). Under Americas Mining, the primary factor in calculating a fee award is the benefit created by the counsel's efforts. The starting point for the calculation is a percentage of the benefit, the range of which is guided by the stage of the case at which the result was reached. The highest percentage is 33 for post-trial adjudication; mid-stage adjudication tends to yield a fee of 15-25 percent. The Court considered eight recent cases involving late-stage settlements and noted a fee range of 25-30 percent. The Court awarded a fee of 26.67 percent—one-third through the late-stage range, given that the plaintiff's counsel had completed approximately one-third of late-stage tasks. 

The Court reviewed objectors' precedent for a declining-percentage method and determined that their cited authorities were inapposite for a mega-fund case or had involved selective references that, in any event, predated Americas Mining. The Court noted differences between federal securities litigation and Delaware corporate litigation that should discourage Delaware from adopting a declining-percentage method, including the relative ease of federal plaintiff's counsel identifying high-quality claims via federal agency investigations. The Court also noted that the plaintiff's counsel's contingent fee agreements track the late-stage guideline under the stage-of-case method and that the objectors themselves were fund managers who used incentive fee arrangements for their own risk-based business activities that did not rely on a decreasing-percentage model. Further, there had been a real risk of non-recovery or a recovery lower than the $1 billion settlement, whether at trial or on appeal, notwithstanding that plaintiffs had been preparing to seek up to $10.7 billion in damages. In light of precedent, the final settlement represented a reasonable percentage of the maximum damages sought. The contingent nature of counsel's compensation, the extensive time and effort of counsel, and the complexity of litigation also supported an award of 26.67 percent. The Court rejected objectors' argument that the fee award should be decreased simply because the plaintiff's counsel had structured it as a percentage of the common fund rather than as a separate amount on top of a fixed recovery; the Court has no preference for fees proposed as a separate amount, and the tradition has been to calculate fees as a percentage of a common fund. The Court honored the plaintiff's counsel's request for costs to be awarded as part of the fee rather than separate from it, though it noted that costs and efforts had been significant enough that the Court would have awarded costs separately had the plaintiff's counsel made that request. The Court approved a $50,000 incentive award for the named plaintiff, to be paid out of the fee award.