GREENSBORO, N.C. (Legal Newsline) – An order was issued by the North Carolina Business Court to grant the attorneys for former Krispy Kreme shareholders $150,000 in fees and denying the request for fees and costs associated with the litigation, noting that the attorneys are barred from recovering expenses according to state bar regulations.
Chief Business Court Judge James L. Gale wrote the order on June 20, granting less than half of the $350,000 that the attorneys requested.
“The underlying fee agreements fail to comply with RPC 1.8(e) because they hold plaintiffs harmless at the inception of the litigation from any potential liability for expenses, and that any expense recovery would violate the public policy on which RPC 1.8(e) is based,” Gale wrote.
Several shareholders for Krispy Kreme Doughnuts Inc. filed a putative class action after Krispy Kreme announced its merger with JAB Beech Inc. in May 2016, claiming the merger violated the shareholder agreement to notify shareholders of mergers.
The plaintiffs are former shareholders Stuart Bonnin, Barbara Grajzl, Patricia Horton, Ronnie Stillwell, Melissa Weers, James Graham, Jonnie Lomax and Harold Lomax, who sued on behalf of the putative class as representatives.
In July 2016 the parties "entered into a memorandum of understanding to settle all of the actions based on defendants’ agreement to provide supplemental disclosures prior to a shareholder vote on the merger,” the opinion states.
Krispy Kreme and the shareholders agreed in the settlement that the defendants would pay the shareholders’ attorney’s fees and court costs.
The shareholders’ counsel stated that they incurred expenses of $19,531.76, and that they had put in 826 hours, which would normally result in a lodestar amount of $533,038.
The court determined after a supplemental briefing that the fee agreements violated the Revised Rules of Professional Conduct of the North Carolina State Bar.
Gale stated that the fee agreements for the lead and co-lead counsel, Levi & Korsinsky and Rigrodsky & Long, “violate RPC 1.8(e)’s requirement that the repayment of advanced litigation costs be contingent upon the outcome of a matter.”
The fee agreements state that counsel would advance any costs for the litigation, and regardless of outcome, would not ask clients to directly pay their expenses.
“The court, in its discretion, concludes that the violation of RPC 1.8(e) offends the public policy on which the rule is based and should bar plaintiffs’ counsel from recovering any of the expenses of the litigation, even if those expenses would be paid by defendants,” Gale wrote.
Gale awarded $150,000 for attorney’s fees and denied granting the plaintiff’s counsel fees.
Plaintiffs are represented by counsel with Levi & Korsinsky LLP, Rigrodsky & Long P.A., Brodsky & Smith LLC, The Weiser Law Firm P.C., Brower Biven, WeissLaw LLP, Faruqi & Faruqi LLP, or Monteverde & Assciates PC, Ward Black Law, The Hausler Law Firm, PLLC Wilson & Helms LLP, or Erwin Bishop Capitano & Moss P.A.