Del. SC: Attorneys owed $2.5M for preserving shareholder rights
DOVER, Del. (Legal Newsline) - The Delaware Supreme Court has ruled that plaintiffs attorneys are entitled to $2.5 million in a case that will not bring immediate monetary relief.
The court decided April 17 that the lawsuit, however, will preserve shareholders' voting rights, and therefore the attorneys who filed it are entitled to the fee award determined by a Chancery Court vice chancellor.
The case involved shareholders of EMAK Worldwide and former CEO Donald Kurz, who was the company's largest shareholder. Kurz attempted to regain control of the company after its stock tanked in the three-and-a-half years his successor ran the company.
Chief Justice Myron Steele wrote the court's opinion. He said the court would not substitute its own notions of what is right for those of the trial judge if the judgment was based upon conscience and reason.
"As the vice chancellor found, this case presented complex and novel legal issues, made more difficult by the fact that plaintiff's counsel faced five large law firms and a rapidly evolving case," Steele wrote.
"Counsel worked on a contingency basis, and the vice chancellor credited counsel's standing and ability."
The benefits of the case were sizeable, the vice chancellor ruled.
"Delaware law rewards plaintiffs' attorneys who provide a benefit to a Delaware corporation, even if the benefit does not produce immediate monetary rewards," Steele wrote. "Preserving shareholder voting rights, for example, produces a non-monetary benefit."
The dispute began with a proposed 2009 transaction in which Crown EMAK Partners would exchange its old preferred shares, which could not vote in directors' elections, for new preferred shares, which could vote on the elections.
In exchange, Crown EMAK was relinquishing its power to unilaterally appoint two directors. Kurz contested the exchange, and it was rescinded.
Crown EMAK, then, began an effort to reduce EMAK's board from seven members to three. Because it still had the power to appoint two directors, Crown EMAK could have controlled EMAK's board. The Chancery Court ruled the move violated Delaware General Corporation Law.
From Legal Newsline: Reach John O'Brien by e-mail at firstname.lastname@example.org.