John Fehlhaber, Individually and on Behalf of all Other Similarly Situated v. David R. Carlucci et al. (2012)

Memorandum of Decision on Plaintiffs' Application for Award of Attorneys Fees and Expenses (Part of Fehlhaber, No. 154) and Defendants' Objection to Application for An Award of Attorneys Fees and Expenses (Fehlhaber, No. 159)

BACKGROUND AND DESCRIPTION OF THE LITIGATION

On November 5, 2009, IMS Health Incorporated (“IMS” or the “Company”), Healthcare Technology Holdings, Inc. (“Holdings”) and Healthcare Technology Acquisition, Inc. (“Merger–Sub”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) pursuant to which Holdings would acquire IMS in an all-cash transaction for a total consideration of approximately $5.2 billion.   Under the terms of the Merger Agreement, Merger Sub would be merged with and into IMS, and IMS would become a wholly-owned subsidiary of Holdings, and the holders of the Company's 182,657,719 shares of outstanding common stock would be entitled to receive $22.00 per share in cash, representing a 50% premium above the unaffected market price of IMS shares (the “Proposed Transaction”).

On or about November 6, 2009, plaintiff, the Trust for the Benefit of Sylvia B. Piven Under Trust Agreement Dated April 3, 1973 (“Plaintiff Piven”), filed a class action without opt-out rights complaint in the Superior Court of Connecticut, in this Judicial District, styled Trust for the Benefit of Sylvia B. Piven v. IMS Health Incorporated et al., CV09–5013110–S, which seeks, among other things, injunctive and equitable relief against IMS, its board of directors (the “Individual Defendants”), TPG Capital, L.P. (“TPG”) and the Canada Pension Plan Investment Board (“CPPIB”) with respect to the proposed acquisition of IMS by Holdings (the “Merger”).

On or about November 10, 2009 plaintiff John Fehlhaber (“Plaintiff Fehlhaber” and together with Plaintiff Piven, the “Plaintiffs”) filed a second class action without opt-out rights complaint in this court styled John Fehlhaber v. David R. Carlucci et al., CV09–5013139–S (the “Fehlhaber Action” and together with the Piven Action, the “Actions,” which now have been consolidated), which seeks, among other things, injunctive and equitable relief against IMS, the Individual Defendants, TPG, Holdings and Merger–Sub (collectively and together with CPPIB, the “Defendants”) (together with Plaintiffs, collectively, the “Settling Parties”) with respect to the Merger.

On November 25, 2009, a Preliminary Proxy Statement (the “Preliminary Proxy”) was filed with the Securities and Exchange Commission (the “SEC”) relating to the Proposed Transaction.

On or about December 8, 2009, Plaintiff Fehlhaber filed an Amended Class Action Complaint challenging the Merger, including the disclosures in the Preliminary Proxy and certain terms of the Merger Agreement, alleging, among other things, that the Individual Defendants breached fiduciary duties to the stockholders of IMS by, among other things, failing to adequately disclose certain material information in the Preliminary Proxy concerning the Merger and the Proposed Transaction, and that IMS, TPG, Holdings and Merger Sub aided and abetted such breaches.

On December 15, 2009, the Company issued a Form 8–K setting February 8, 2010 as the date of the special meeting of the stockholders of the Company (the “Special Meeting”) for the purpose of considering and voting on, among other things, adoption of the Merger Agreement.

On December 29, 2009, a Definitive Proxy Statement (the “Proxy Statement”) was filed with the SEC relating to the Proposed Transaction and the Special Meeting.

On or about January 5, 2010, Plaintiffs filed a Verified Application for Temporary Injunction in both of the Actions.

Beginning on January 13, 2010, counsel for the Settling Parties engaged in arm's-length negotiations regarding a potential settlement of the claims raised in the Actions.   In connection with these negotiations, counsel for Defendants have provided Plaintiffs with about 1,900 pages of non-public documents concerning the approval of the Merger by the IMS board of directors and a committee of independent directors (the “Transaction Committee”), including:  (i) the minutes of the Transaction Committee and the IMS board relating to the Merger, (ii) bid letters received from potential bidders for the Company and (iii) the written presentations made to the Transaction Committee and the IMS board by their financial advisors, Deutsche Bank Securities, Inc. (“Deutsche Bank”), Foros Securities, LLC (“Foros”) and Lazard Freres & Co., LLC (“Lazard”), that related to the Merger.

On January 27, 2010, counsel to the parties in the Actions entered into a Memorandum of Understanding (the “MOU”) providing for the settlement of the Actions pursuant to which supplemental information relating to the Merger would be provided to the Company's shareholders in a Form 8–K (the “Supplemental Disclosure”) to be filed with the SEC prior to and sufficiently in advance of the Special Meeting.   In return, the plaintiffs agreed to withdraw their application for temporary injunction and agreed not to renew or refile any motion or application for temporary injunction.   Plaintiffs further agreed, subject to reasonable and appropriate confirmatory discovery on which the parties agreed, to enter into a stipulation of settlement and such other related documentation as may be necessary (collectively, the “Settlement Agreement”) to effectuate the settlement and dismissal of the Actions.

On January 28, 2010, pursuant to the MOU, the Company filed the Form 8–K (supplementing the Proxy Statement).   The Supplemental Disclosure contained about nine pages of specific disclosures sought by Plaintiffs including certain disclosure claims asserted in the Amended Complaint.

On February 8, 2010, IMS's shareholders approved the Merger Agreement, with approximately 95.4% percent of the Company's outstanding shares of common stock as of the close of business on the record date for the Special Meeting and entitled to vote thereon voting to approve the proposal to adopt the Merger Agreement.   On February 26, 2010, IMS completed the Merger with Merger–Sub.   As a result of the Merger, the Company is now an indirect wholly-owned subsidiary of Holdings.   On February 18, 2012 the plaintiffs withdrew their motions for temporary injunction.

On March 2, 2010, the parties submitted a Stipulation and Order for the Production and Exchange of Confidential Information, which was granted by the Court on March 3, 2010.   Plaintiffs, through their counsel, thereafter investigated the claims and allegations asserted in the Actions.   Plaintiffs completed their confirmatory post-closing discovery consisting of the review of additional documents produced by defendants and third parties, and taking of the depositions of (i) defendant William C. Van Faasen (Chair, Transaction Committee) and (ii) Jean Manas (Chief Executive Officer of Foros, one of the two financial advisors to the Transaction Committee), following which the plaintiffs concluded that it was in the best interests of the class members to proceed with the settlement.

On August 26, 2010 the parties jointly submitted their Stipulation of Settlement (Fehlhaber, Docket Entry No. 152) setting forth, subject to the court's approval, the terms of settlement they had agreed upon through their counsel.   The settlement does not involve any payment of additional compensation to the IMS shareholders in addition to the $22 per share agreed upon in the Merger Agreement.   The Stipulation recites the foregoing history of the Actions, and asks the court to approve both Actions as class actions without opt-out rights for the Settlement Class members consisting of the persons or entities legally or equitably owning shares of IMS common stock between November 5, 2009 and February 26, 2010 (excluding defendants and their families) and asks the court to issue an order of notice to all potential class members and, after hearing, to approve the settlement, with broad language of release of any further claims relating to the merger.   The stipulation purports to resolve all issues between the Settling Parties relating to the underlying Merger Transaction with the sole exception of the amount of attorneys fees to be awarded to the plaintiffs' counsel.   The Stipulation provides, in that regard, at ¶ 10:

Defendants acknowledge that Plaintiffs' counsel, Levi & Korinski, LLP (“Levi & Korinski”) intend to assert a claim for attorneys fees and expenses based on the benefits they claim the Settlement has and will provide to IMS shareholders and their role in negotiating for the settlement.   Plaintiffs acknowledge that defendants have the right to oppose any such claim.   The parties may, subject to Court approval, negotiate in good faith regarding the amount of an appropriate award of attorneys fees and expenses commensurate with the benefit provided to the class and the time and money expended in achieving this outcome, as well as for an incentive award for the class plaintiffs.   Defendants may oppose this application.   Plaintiffs' counsel will petition the court for such attorneys fees and expenses in conjunction with the motion seeking final approval of the settlement and entry of the final judgment IMS (or its successor) agrees to pay fees and expenses as are awarded and approved by the court as a result of the filing of such petition within five (5) business days of entry of an order awarding them, subject to Plaintiffs' counsel's joint and several obligations to make refunds or repayments to IMS, if, as a result of any appeal and/or further proceedings on remand, or successful collateral attack, the award of attorneys fees and expenses is reduced or reversed.   No other Defendant shall have any responsibility for any award of fees and expenses, and no defendant shall have any responsibility or liability associated with the allocation of fees and expenses among Plaintiffs' various counsel in the event of such an award.   Any judicial decision concerning the award of attorneys fees shall not affect the validity or finality of the settlement.

The Stipulation recites plaintiffs' counsel's considerations for entering into the settlement including their view of the benefits to the members of the Settlement Class, the facts developed during discovery, the attendant risks of continued litigation and the uncertainty of outcome, probability of success on the merits, the desirability of permitting the settlement to be consummated, and counsel's conclusion that the settlement terms are fair, reasonable, and adequate and in the best interest of plaintiffs and the Settlement Class.   Plaintiffs' position is essentially that the Actions provided a substantial benefit to the class in the form of information necessary to make an informed decision on the proposed merger, that the supplemental disclosures obtained “added texture” to the previous IMS disclosures, permitting the shareholders to “cast a fully informed vote.”   The stipulation also recites defendants' position that they had at all times denied that any further disclosures were needed and that any of them had committed or threatened any violations of law of any nature whatsoever or had in any way breached any fiduciary duty or other duty in connection with any matter or in any way related to the Merger.   “Defendants are entering into this Stipulation solely because the proposed Settlement will eliminate the burden, risk, and expense of further litigation.”  (Stip.Preamble, ¶ R.)

The court entered an order providing for notice and opportunity to be heard to be sent to all potential members of the Settlement Class.   Thousands of notices were sent to IMS shareholders of record, and additional notices were sent to bank and brokerage firms in an effort to reach equitable owners of shares of unknown address which resulted in 16,880 additional notices mailed to equitable owners, advising of the terms of the proposed settlement and of the settlement hearing to be held in this court on April 18, 2011.   One shareholder objected by letter to the court complaining of adequacy of the notice of terms of settlement (“legalese throughout”), the lack of a settlement website, and “taking particular offense to the fact that the attorneys will be requesting an undisclosed amount of money in attorneys fees.”   The court heard extensive argument of counsel at the hearing and has simultaneously herewith entered the Order and Final Judgment approving the settlement and granting Plaintiffs' Motion for Final Approval of Class Action Settlement, Class Certification, and an Award of Attorneys Fees and Expenses (Docket Entry No. 154) in all respects other than the amount of attorneys fees to be awarded to counsel for the plaintiffs, which is the only portion of the motion not consented to by counsel for the defendants.

DISCUSSION

Plaintiffs are claiming an award of legal fees to the firms of Levi & Korinski, Izard Nobel, P.C., and Brower Piven, A Professional Corporation.   Izard Nobel appeared as counsel for plaintiffs in both cases through the juris number of its Hartford office.   Other Izard Nobel lawyers from outside Connecticut were allowed to appear pro hac vice.   Several counsel of Levi & Korinski also were permitted to appear pro hac vice in both cases.   The court has found no record of any appearance for the plaintiff in either case by Brower Piven or any of its lawyers, but Attorney David A.P. Brower has submitted an affidavit which includes the statement, “My firm acted as one of plaintiffs' counsel in the above entitled action [the Fehlhaber action].   At oral argument on April 18, 2012 Atty. Hopkins for the plaintiffs listed Brower Piven as one of the experienced class action firms on plaintiffs' team.   The three law firms have submitted affidavits listing the hours of lawyer time and their hourly rates for work performed on behalf of the plaintiffs in these cases.   The combined total “lodestar” ¹ fees come to $303,171 for 630.85 billable hours, which works out to an average hourly rate of $480.65.   Levi & Koriski accounts for the majority of that time:  $222,162 for 474.75 hours at rates ranging from $425 to $685.   Three hundred eighty-seven of those hours were put in by Atty. Holleman at the $425 per hour rate.   Izard Nobel seeks $34,525 for 87.50 hours at rates ranging from $350 to $700.   Five partners and one associate billed on the file, with most of the time put in by the associate, Atty. Boulton, at the $350 rate.   Brower Piven asks for $46,684 for 68.6 hours at rates ranging from $400 to $820 per hour.   Atty. Piven billed most of those hours (41.4) at the $750 rate.   In addition to the basic lodestar fee of $303,171 plaintiffs ask the court to increase the award they seek to $825,000 by application of a “modest multiplier of approximately 2.6.” as “typically awarded in situations where counsel has undertaken a litigation on behalf of an entire class on a wholly contingent basis without receiving any payment and with the risk of non-payment.”  (Oral Argument 4/18/11, TR p. 28.)

Defendants object to plaintiffs' requested award of attorneys fees.   While recognizing that plaintiffs are entitled to an award of some fees for bringing the Actions and reaching a settlement and stipulated judgment on behalf of their clients without a trial, defendants contest the reasonableness of the hours expended and the hourly rates applied in calculating the lodestar fee, and vigorously oppose the application of any multiplier.  “Applicable case law, public policy and common sense all dictate that an award of attorneys fees should be commensurate with the benefit achieved by the applying attorneys.   Plaintiffs' Motion contradicts that basic principle.   The scant work performed by Plaintiffs' counsel during this litigation produce negligible benefits for the IMS shareholders, and their fee award should align with that outcome.   The defendants settled the case to extinguish a nuisance;  as such, and attorneys fee award of no more than $50,000 is appropriate in this case.”  (Objection to Plaintiffs' Application for an Award of Attorneys Fees and Expenses, No. 159, pp. 1–2.)[”W]hat fee is justified?   I don't say nothing and don't say nothing because we settled the case.   We want Your Honor to enter the settlement, we want Your Honor to certify the class, we want your Honor to enter the final judgment, and if I'm getting a release I'm willing to pay for it.”  (Oral Argument TR 65, quoting Atty. John Donovan, representing the defendants TPG and CPPIB.)

The issue thus framed for the court to decide is the amount of attorneys fees to be awarded to counsel for the plaintiffs.   Since defendants do not oppose the award of at least some attorneys fees to the plaintiffs, it will not be necessary to delve into the “substantial benefit” threshold test to determine the eligibility of a class action plaintiffs in a securities case such as this to receive any attorneys fee award at all.   See Mills v. Electric Auto–Lite Co., 396 U.S. 375, 392 (1973);  In re Talley Indus., Inc. S'holdrs Litigation, No. 15961, 1998 WL 191939, at *15 (Del.Ch.Apr., April 13, 1998).   The extent of benefit conferred will, however, be discussed in determining the amount of attorneys fees to be awarded.

Before determining the amount of fee to be awarded, the court must address the issue of applicable law.   Is the determination of the amount of an award of legal fees a procedural issue to be decided under the law of the forum (Connecticut law), or a substantive issue to be decided under the law of Delaware where IMS was incorporated?   In Capgrowth Partners v. W.P. Watsa et al., Docket No. X08CV–09–6002152S, Superior Court, Complex Litigation Docket at Stamford (December 30, 2010, Jennings, J.), 2011 Ct.Sup. 2240, 2241, this court held that a motion to strike a shareholder class action complaint against a merger of a Delaware corporation would be decided under Delaware's law pursuant to the “internal affairs doctrine” which provides that the law of the state of incorporation normally determines issues relating to the internal affairs of a corporation because application of that body of law achieves the need for certainty and predictability of result while generally protecting the justified expectations of parties with interests in the corporation.   But Capgrowth Partners also held that “the forum state [Connecticut] will apply its own procedure.”   Here, both parties argue, and the court agrees, that the test to employ in considering a grant of attorneys fees in this case is a substantive issue to be governed by the law of Delaware.   See Absolute Recovery Hedge Fund L.P. v. Gaylord Container Corp., 185 F.Sup.2d 381, 386 (S.D.N.Y 2002) (holding that Delaware law governed a plaintiff's entitlement to fees in a case against a Delaware corporation insofar as the action asserted claims for breach of fiduciary duty);  and Smith v. La Cote Basque, 519 F.Sup. 663, 667 (S.D.N.Y 1981) (“the question of attorneys fees is substantive and not procedural”).

“[T]he amount of an attorneys fee award is within the discretion of the court.”  In re Plains Res., Inc. S'holder Litig., 2005 WL 332811, at *3 (Del.Ch., Feb 4, 2005).   In determining an appropriate award, a court applying Delaware law should consider:

(i) the amount of time and effort applied to the case by counsel for the plaintiffs;  (ii) the relative complexities of the litigation;  (iii) the standing and ability of petitioning counsel;  (iv) the contingent nature of the litigation;  (v) the stage at which the litigation ended;  (vi) whether the plaintiff can rightly receive all the credit for the benefit conferred or only a portion thereof;  and (vii) the size of the benefit conferred.

Id. at *3 (citing the seminal case of Sugarland Indus., Inc. v. Thomas, 420 A.2d. 142, 149 (Del.1980), the name of which case is often attached to the foregoing criteria as the “Sugarland factors”).   The Delaware Chancery Court has traditionally placed greatest weight upon the benefits achieved by the litigation.  In re Anderson Xlayton S'holders Litig., 1998 WL 97480, at *3 (Del.Ch., Sept. 19, 1998).   The time expended by counsel [the lodestar] is considered as a cross check to guard against windfalls, particularly in therapeutic benefit cases.   See Brinkerhoff v. Texas E. Prods Pipeline Co., LLC, 986 A.2d 370 at 396 (Del.Ch.2010).

Several of the Sugarland factors weigh in plaintiffs' favor.   Despite their relatively short lifespan, these two consolidated lawsuits did present complexities—a possible injunction stopping a $5.2 billion international merger transaction closely tied to the evaluation in a falling market of a large corporation with a worldwide scope of operation in a highly specialized service business providing detailed and current electronic data and information solutions to the pharmaceutical and healthcare industries.   Shareholder litigation challenging proposed corporate transactions presents complex legal and factual issues.  United Vanguard Fund, Inc. v. Takecare, Inc., 727 A.2d 844, 855 (Del.Ch.1998).   The standing and ability of petitioning counsel also weighs in plaintiffs' favor.   The court has reviewed the resumes of the three law firms representing the plaintiffs in this litigation and I find that they are highly skilled lawyers specializing in the filing of corporate litigation with extensive experience in corporate litigation in general and class action securities cases in particular, having handled dozens of such lawsuits in courts throughout the United States.   Their skills have been applied in these actions by drafting and filing the complaints and the amended complaint and, although later withdrawn without having been heard, a verified application for a temporary injunction.   The court notes from the record, however, that there were no contested discovery proceedings nor any arguments on contested motions.   Counsel reviewed and analyzed the Preliminary Proxy, the Definitive Proxy Statement. and the Supplemental Form 8–K filed with the SEC plus about 1900 pages of document discovery provided by IMS, and identified issues for negotiation which ultimately led to the Memorandum of Understanding and the Stipulation of Settlement.   After the Stipulation of Settlement they conducted further confirmatory discovery including additional document review and took two confirmatory depositions.   The stage at which the litigation ended seems to work against the plaintiffs.   These actions were pending only about three months before the Memorandum of Understanding was signed.   The application for temporary injunction was withdrawn without ever being heard by the court.   Likewise, a motion to dismiss filed by the defendants was never heard.   The court will address the contingency factor below under the discussion of the multiplier requested by plaintiffs' counsel.

The final and most important Sugarland factor to be considered by the court is the benefit achieved by the litigation, which is the factor accorded the greatest weight by the Delaware Chancery Court.   Plaintiffs do not claim that their efforts produced any monetary benefit to the class.   The settlement contemplates that the initial offering of $22 per share of IMS stock as announced on November 5, 2009 would be consummated without increase.   Their sole claim of benefit to the class is that their efforts caused IMS to agree to file the Supplemental Disclosure Form 8–K with the SEC which enabled the plaintiff class of stockholders to be fully informed as to all material facts concerning the merger transaction which required their approval.   They claim that defendants misrepresented or omitted material information concerning the merger and that they—plaintiffs' counsel—”worked around the clock (literally) to secure corrective disclosures before the February 8, 2010 vote” which resulted in the Supplemental Disclosure filed on January 28, 2010 setting forth “important information concerning the sales process leading up to the merger as well as the financial analyses by the Board's various financial advisors.”  (Plaintiffs' Corrected Memorandum of Law, Docket Entry No. 157, p. 24.)   Plaintiffs further claim that the Supplemental Disclosures produced by their efforts provided a substantial benefit to the Settlement Class because they contained highly material information and enabled IMS stockholders to cast a fully informed vote on the Merger, thereby preventing “the irreparable harm which would occur by permitting a stockholder to vote on a merger to proceed without all material information necessary to make an informed decision,” citing MONY Group, Inc. S'holder Litig., 852 A.2d 9, 32 (Del.Ch.2004).   Plaintiffs argue that the Delaware Chancery Court has affirmed the proposition that enhanced and supplemental disclosures “provide substantial ․ benefit to the members of the class.”   See In re Talley Indus., Inc. S'holders Litig., No. 15961, 1998 WL 191939, at *15 (Del.Ch., April 15, 1998).   They also cite Mills v. Electric Auto–Lite Company, 396 U.S. 375, 396 (1970) (noting that “an increasing number of lower courts have acknowledged that a corporation may receive a ‘substantial benefit’ from a [stockholders' action]” and that “regardless of the relief granted, private stockholders' actions of this sort ‘involve corporate therapeutics' and furnish a benefit to all shareholders by providing an important means of enforcement of the proxy statute”).

Defendants vigorously dispute the claimed value of the Supplemental Disclosures, claiming they are immaterial as a matter of Delaware law, providing only negligible benefit to the shareholders because, they argue, the Supplemental Disclosure provides only “(1) minor details concerning the sales process already described at length in six single-spaced pages in the Definitive Proxy's Background of the Merger Section;  and additional trivia regarding the financial analyses performed by the three investment banks retained as financial advisors by the transaction Committee and the board.”   (Objection to Plaintiffs' Application Docket Entry No. 159, p. 14.)   “Supplemental ‘around the edges' or ‘tell me more’ type of disclosures of the kind included in the Disclosure Supplement do not provide any type of ‘tangible benefit’ and correspondingly do not warrant a substantial fee.   See In re Burlington N. Santa Fe S'holder Litig., C.A. No. 5043–VCL, Tr. at 50–51 (Del.Ch., Oct 28, 2010).”  Id.

Under Delaware law directors must fully and fairly disclose all material information in the Recommendation Statement they circulate to shareholders and, if they do not, plaintiff has an actionable claim.   See In Re Siliconix Shareholder Litigation, 2001 Del.Ch. LEXIS 83, *36 (Del.Ch., June 19, 2001) (“A majority stockholder ․ who makes a tender to acquire the stock of the minority shareholders owes the minority shareholders a fiduciary duty to disclose accurately all material facts surrounding the tender”).   See also, McMullin v. Beran, 765 A.2d 910, 917 (Del.2000).  (“[Directors are] also obliged to disclose with entire candor all material facts concerning the merger, so that the minority shareholders would be able to make an informed decision whether to accept the tender offer price or to seek judicial remedies such as appraisal or an injunction”).   The definition of what is “material” information under Delaware law has been stated:

An omitted fact is material if there is a substantial likelihood that a reasonable shareholder would consider it important in deciding how to vote ․ It does not require proof of a substantial likelihood that a disclosure of the omitted fact would have caused the reasonable investor to change his vote.   What the standard does contemplate is a showing of substantial likelihood that, under all the circumstances, the omitted fact would have assumed actual significance in the deliberations of the reasonable shareholder.   Put another way, there must be a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the “total mix” of information made available.  Zirn v. VLI Corp., 621 A.2d. 773, 778–79 (Del.1993), quoting TSC Indus. v. Northway, 426 U.S. 438, 449 (1976);  Gantler v. Stevens, 965 A.2d 695, 710 (Del.2009).

Plaintiffs, as the proponents of the fee application, have the burden of establishing the value of the claimed benefit.  In re Diamond Shamrock Corp., 1988 WL 94752, Tr. *4 (Del.1998).   Plaintiffs in the Declaration of Scott Holleman (Docket Entry No. 156) have identified nine allegedly material nondisclosures of information by IMS rectified, clarified or corrected for the first time in the Supplemental Disclosure, by which they claim to have produced a material benefit to the plaintiff class of shareholders.

The U.S. Supreme Court in TCS Indus. v. Northway, 426 U.S. 438 449 (1976), cited and quoted by the Delaware Supreme Court in Zirn v. VLI Corp., supra, on the definition of materiality of nondisclosures, also said “[t]he determination [of materiality] requires delicate assessments of the inferences a ‘reasonable shareholder’ would draw from a given set of facts and the significance of those inferences to him, and these assessments are peculiarly ones for the trier of fact.”  426 U.S. at 450.   The court has reviewed the relevant disclosures made in the Definitive Proxy Statement as compared to the additional information disclosed in the Supplemental Disclosure as to the nine subjects identified by plaintiffs and has attempted to make those “delicate assessments” as to each area to determine whether or not a reasonable shareholder would find the supplemental disclosure brought forward as a result of this litigation would be deemed to be of “actual significance” in his or her determinations or would have significantly altered the “total mix” in information available.   Each of the nine claims of materiality will be discussed.²

(i) What Was Done to Contact Parties Who Expressed Interest in Acquiring IMS Health Following Story in the Online Edition of the Wall Street Journal

The Definitive Proxy disclosed at page 30 that a story appeared in the online edition of the Wall Street Journal (“WSJ”) reporting that IMS was engaged in discussions with several private equity firms regarding a potential transaction and that several parties called to express an interest in acquiring the Company.   The Supplemental Disclosure added that “all 18 of the parties that called to express an interest ․ were subsequently contacted by representatives of Foros, at the direction of the independent directors, along with representatives of Deutsche Bank.” This is a disclosure of slightly more than negligible value to the class.   Plaintiff's expert financial analyst Cynthia Jones, Managing Director of Financial Market Analysts, LLC, describes this information in her affidavit (the “Jones affidavit”) as a “market check.”   The supplemental disclosure adds somewhat to the total mix of information, but the court notes the extensive disclosures in the Definitive Proxy as to the efforts made by the Company and the transaction committee and its professional advisors to reach out to possible strategic buyers and/or private investors.   All of those original parties expressing interest had ample opportunity to follow up or submit bids, which any reasonable shareholder could discern, which is why the court considers this disclosure to be of little real value.

(ii) Criteria Used by the Board to Select and Engage Deutsche Bank and Foros as Financial Advisors

The Definitive Proxy discloses at page 30 that on October 20, 2009 the Company publicly announced that it was exploring a variety of strategic alternatives and that, as part of the process, the board of directors had retained Deutsche Bank as its financial advisor and formed the transaction committee which had retained Foros Securities, LLC as its financial advisor.   The Supplemental Disclosure adds that both financial advisors were selected on consideration, “among other factors, of their qualifications, expertise, reputation, experience in investment banking and mergers and acquisitions, and familiarity with the Company's business.”   The court finds this disclosure immaterial.   The criteria given for selection are identical for each advisor, and generic.   Although they provide a certain comfort in that the reasons listed are all very appropriate considerations, other less appropriate considerations are not excluded in that the listed considerations are given as being “among other factors.”   This disclosure does not alter the mix of available information in any meaningful way.

(iii) The Basis for Identifying Certain Entities as “Potential Strategic Acquirors”

The Definitive Proxy discloses at page 31 that on October 20, 2009 representatives of Foros and Deutsche Bank, at the request of the independent directors, contacted seven potential strategic acquirors and 17 additional private equity firms to assess their interest in a potential transaction with the Company.   The Supplemental Disclosure adds:  “The seven potential strategic acquirors ․ were identified based on such parties' possible strategic interest in the Company's business, and the 17 additional private equity firms were identified based on such firms' experience in similar transactions.”   This disclosure is also very generic, and almost self-evident, and immaterial.

(iv) The Board's Outreach to Potential Transaction Partners and How to Bring a Potential Strategic Partner Into the Process

The Definitive Proxy discloses at page 31 that on October 13, 2009 the Board met to discuss a revised proposal by the TPG/CPPIP Group and other developments in the strategic process, including the result of the outreach to potential transaction partners and how best to bring a potential strategic partner into the process.   Representatives of Deutsche Bank, Foros, Sullivan and Cromwell and Morris Nichols participated in this meeting.   Following this discussion the transaction committee requested that the advisors analyze more fully the documents included in the TPG/CCIP Group's revised proposal and be prepared to discuss their analyses at a meeting scheduled for the next day.   The Supplemental Disclosure added:  “The transaction committee discussed a desire for, and efforts to bring, one or more strategic bidders into the process.   On October 27, 2009 it was noted that three potential strategic partners indicated that they were not interested in a potential transaction, but that one strategic partner had been included in the Bidder E consortium.   The transaction committee's advisors indicated that negotiating, entering into and consummating a transaction with Bidder E would be more difficult because of competitive and regulatory concerns.   On October 30, 2009, after the private equity firms in Bidder E had received non-public information but before any non-public information was shared with the strategic acquiror forming a part of Bidder E, the transaction committee was informed that Bidder E had dropped out of the process.   During the “go shop” process following the execution of the merger agreement, representatives of Foros again solicited interest from, among other parties, three potential strategic acquirors who had earlier indicated that they were not interested in a potential transaction and the private equity firms forming apart of Bidder E. None of the entities solicited during the “go shop” process expressed an interest in a potential transaction with the Company.   The transaction committee did not draw any specific conclusions regarding the attempts to involve a potential strategic acquiror in the process of reviewing the Company's strategic alternatives.”   Although this additional disclosure does not articulate the basis of any plan or methodology for identifying and reaching out to potential strategic acquirors, it does confirm in detail the transaction committee's desire to have one or more strategic bidders in the process, and the efforts the committee's advisors took to attract a strategic bidder.   This information had actual significance to a reasonable shareholder and added information to the “mix.”

(v) The Board's Actions to Maintain Discussions With TPG/CPPIB While Ensuring That Other Potential Buyers Would Not be Excluded

The Definitive Proxy at page 32 discloses that:  “On October 24, 2009, the transaction committee held a meeting to continue its discussion of the status of the strategic review process and the revised proposal from the TPG/CPPIB Group.   Representatives of Deutsche Bank, Foros, Sullivan & Cromwell and Morris Nichols also participated in this meeting.   The transaction committee was informed that Foros, at the direction of the transaction committee, had continued its outreach to potential strategic transaction partners and other private equity groups.   The transaction committee discussed at length the TPG/CPPIB Group's revised proposal, including the improved certainty regarding the funding of the debt financing contemplated by financing commitment documents as compared to the TPG/CPPIB Group's prior proposal, and the potential impact of the deadline imposed by the TPG/CPPIB Group on the strategic review process.   In particular, the transaction committee discussed the importance of continuing the strategic review process that was underway, the risk that the TPG/CPPIB Group would not agree to a transaction if the Company ignored the TPG/CPPIB Group deadline and did not move more promptly towards execution of an agreement, and ways to strike an appropriate balance between these two countervailing issues ․”

Following this discussion, the transaction committee determined that it was in the best interests of the Company and its stockholders to continue the strategic review process that was already underway while at the same time continuing to work with—but not acceding to the deadline imposed by—the TPG/CPPIB Group, and it instructed representatives of Deutsche Bank, Foros, Sullivan & Cromwell and Morris Nichols to do so, including by continuing discussions with representatives of the TPG/CPPIB Group and Ropes & Gray, LLP ․ in order to improve the terms of the merger agreement and related documents, including the financing commitment documents.   The transaction committee also instructed representatives of Foros to inform the TPG/CPPIB Group that the Company would not accede to the TPG/CPPIB Group deadline, and representatives of Foros did that following the meeting.   The TPG/CPPIB Group was further informed that they should be prepared to submit an improved proposal on November 3, 2009 at the same time as other interested parties.”

The Supplemental Disclosure added:  “The transaction committee determined that an appropriate way to balance the countervailing issues of the importance of continuing the strategic review process that was already underway and the risk that the TPG/CPPIB Group would not agree to a transaction if the Company ignored the TPG/CPPIB deadline and did not move more promptly towards execution of an agreement was to require the TPG/CPPIB Group to submit an improved proposal by November 3, 2009, which was the deadline previously communicated to potential interested parties to submit indications of interest to the Company.   On the one hand, the transaction committee believed that this date was not set too far in the future to cause the TPG/CPPIB Group to drop its bid despite non-adherence to the October 25 deadline it sought to impose in connection with its proposal, and on the other hand, based on prior feedback received from potentially interested parties, this deadline would allow other potential interested parties to have sufficient time to submit indications of interest to the Company.”

Any information added by the Supplemental Disclosure on this topic is immaterial.   The Supplemental Disclosure is essentially a paraphrase of the disclosure in the Definitive Proxy.   There are no meaningful differences.   The Supplemental Disclosure adds nothing which a reasonable shareholder would consider important.   There is no claim in the Jones affidavit regarding any value of this supplemental disclosure.

(vi) The Reasons Why the Transaction Committee of the Board Retained Lazard to Render a Fairness Opinion on the Merger

The Definitive Proxy at page 33 discloses:  “During the period of time that several consortia were preparing bids, the transaction committee determined to retain Lazard to render an opinion to he transaction committee as to the fairness from a financial point of view, to holders of the common stock (other than Parent, Merger Sub and any other direct or indirect wholly owned subsidiary of Parent) of the per share merger consideration to be paid to such holders in the merger.   On November 5, 2009, Lazard rendered its oral opinion to the transaction committee, subsequently confirmed in writing, that, as of such date, and based upon and subject to the assumptions, procedures, factors, qualifications and limitations set forth therein, the per share merger consideration to be paid to holders of the common stock (other than Parent, Merger Sub and any other direct or indirect wholly owned subsidiary of Parent) in the merger was fair, from a financial point of view, to such holders ․

Lazard's opinion was directed to the transaction committee for the information and assistance of the transaction committee in connection with its evaluation of the consideration to be paid to the holders of the common stock (other than Parent, Merger Sub and any other direct or indirect wholly owned subsidiary of Parent) in the merger as of the date of Lazard's opinion.   Lazard's opinion was not intended to, and does not constitute are commendation to any stockholder as to how such stockholder should vote or act with respect to the merger or any matter relating thereto.”

The Supplemental Disclosure added:  “On October 30, 2009, the transaction committee retained Lazard for purposes of rendering a fairness opinion to the extent requested by the transaction committee.   The transaction committee had discussed the possibility of retaining an independent financial advisor other than Foros to render such an opinion at the October 23, 2009, October 24, 2009, October 27, 2009 and October 28, 2009 meetings of the transaction committee.   The transaction committee considered the benefits of retaining another independent financial advisor who would be compensated with a flat fee.   After communicating with representatives of Lazard, the transaction committee evaluated Lazard's qualifications, expertise, experience and prior work with TPG and the parties comprising Bidder B and Bidder C, and determined that an opinion from Lazard would aid the transaction committee in determining the advisability of a potential transaction involving the Company.   Accordingly, the transaction committee determined that it was in the best interests of the Company and its stockholders to retain Lazard in the above-referenced capacity.”   This is immaterial information and would not be considered important to a reasonable shareholder.   The transaction committee had a fiduciary duty to inform itself as to adequacy of the TPG/CPPIB, bid as compared to the true value of the Company.   The decision to engage its own financial advisor was well within its discretion and the committee's reasons for selecting a particular advisor are not material so long as the advisor is competent and has no interest adverse to the Company.   Delaware Joes not require that a fiduciary disclose its underlying reasons for acting.  Newman v. Warren, 684 A.2d 1239, 1245–46 (Del.Ch.1996).

(vii) The Selected Public Companies, Discounted Cash Flow, Illustrated Present Value of Future Stock Price, Selected Transactions, Premiums Paid, and Illustrative Leveraged Buyouts Analyses Performed by Foros

The valuation of IMS performed by Foros Securities LLC is reproduced in the Definitive Proxy at page 43.   In doing its analysis of the Company, Foros selected for comparison purposes nine Selected Pharmaceutical Service Companies and four Selected U.S. Pharmaceutical Companies, all identified in the Foros report.   For each of the selected companies the report sets forth in tabular form four financial metrics for each company, being “Revenue Growth CY 2009E–2010E”;  “Gross Margin CY 2010E”;  “EBITDA [earnings before interest, taxes, depreciation and amortization] Margin CY 2010E”;  and “EPS Long–Term Growth.”   For each metric Foros listed only the “mean” and the “median.”   In the Supplemental Disclosure the Company set forth the same charts but, in addition to the mean and the median of each metric, the Company also showed the “high” and the “low.”   The Jones affidavit claims the value of the supplemental disclosure to be that it included “․ the entire range of multiples, so that one might be able to determine:  a) if there were outliers that skewed the results;  and b) where the Company's multiple fell in terms of the high and low for its peers.”   The court does not consider the omission of the highs and lows to be a material nondisclosure.

[T]his kind of quibble with the substance of a banker's opinion does not constitute a disclosure claim ․

By setting forth a fair summary of the valuation work [the financial advisor] in fact performed, the board met its obligation under our law ․

Omitted facts are not material simply because they might be helpful.   A disclosure that does not include all financial data needed to make an independent determination of fair value is not per-se misleading ․

[A] reasonable line has to be drawn or else disclosures in proxy solicitations will become so detailed and voluminous that they will no longer serve their purpose.  (Internal quotation marks omitted.)  Globis Partners, L.P. v. Plumtree Software, Inc., 2007 WL 4292024 (Del.Ch.) at *11, *12.

(viii) The Forecasts Used and Discounted Cash Flow the Comparable Public Companies Premiums Paid, and Illustrative Leveraged Buyout Analyses Performed by Foros

The Definitive Proxy at page 44 discusses the discounted cash flow analysis by Foros Securities, LLC and particularly the Company forecasts utilized by Foros in its analysis of the value of the Company.   The Proxy disclosure said:  “In connection with rendering its opinion, Foros ․ reviewed certain information, including financial forecasts, which are referred to as the Company forecasts, and other financial and operating data concerning the Company, prepared by the management of the Company.   See ‘The Merger—Certain Company Forecasts.’   “ Under the heading “The Merger—Certain Company forecasts,” the Proxy further explained:  “The Company does not, as a matter of course, publicly disclose financial forecasts as to future financial performance, earnings or other results and is especially cautious of making financial forecasts for extended periods due to unpredictability of the underlying assumptions and estimates.   However, in connection with the evaluation of a possible transaction involving the Company, the Company provided the TPG/CPPIB Group (and other interested bidders), the board of directors, the transaction committee and their respective advisors certain non-public financial forecasts that were prepared by management of the Company and not for public disclosure ․ A summary of these financial forecasts is not being included in this document to influence your decision whether to vote for or against the proposal to adopt the merger agreement, but because these financial forecasts were made available to the TPG/CPPIB Group (and other interested bidders), the board of directors, the transaction committee and their respective advisors.   The inclusion of this information should not be regarded as an indication that our board of directors, the transaction committee, their respective advisors or any other person considered, or now considers, such financial forecasts to be material or to be a reliable prediction of actual future results.   Management's internal financial forecasts, upon which the financial forecasts were based, are subjective in many respects.   There can be no assurance that these financial forecasts will be realized or that actual results will not be significantly higher or lower than forecasted.   The financial forecasts cover multiple years and such information by its nature becomes subject to greater uncertainty with each successive year.   As a result, the inclusion of the financial forecasts in this proxy statement should not be relied on as necessarily predictive of actual future events.   In addition, the financial forecasts were prepared solely for internal use in assessing strategic direction, related capital and resource needs and allocations and other management decisions and to provide performance targets for management (including for purposes of performance based compensation), and not with a view toward public disclosure or toward complying with generally accepted accounting principles, which we refer to as GAAP, the published guidelines of the SEC regarding projections and the use of non GAAP measures or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information.   The financial forecasts included below were prepared by, and are the responsibility of, our management.   Neither our independent registered public accounting firm, nor any other independent accountants, have compiled, examined or performed any procedures with respect to the financial forecasts contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability.”   The Company forecasts referred to are then printed in the Definitive Proxy.

The Supplemental Disclosure added:  “Foros used the Company forecasts described under ‘The Merger–Certain Company Forecasts,” or the base case, in performing its discounted cash flow analysis on the Company.   Foros reviewed the unlevered free cash flows, or the after-tax EBITDA minus capital expenditures minus changes in working capital, provided in the Company forecasts.   Foros derived the discount rate of 11% used in calculating the net present value by taking into account, among other things, the weighted average cost of capital calculation for the Company based in part on the selected publicly traded companies in the pharmaceutical services and pharmaceutical industries.   Foros derived unlevered free cash flows for the Company for calendar year 2014 based on the Company forecasts for calendar year 2013 and assuming a constant revenue growth rate, EBITDA margin, EBIT margin and tax rate for the Company.”

The Jones affidavit describes the value of this supplemental disclosure:  ‘The [Definitive] Proxy Statement said that Foros used Company forecasts of cash flow in its analysis.   The [Supplemental] 8–K stated, more clearly that Foros used the Company forecasts described under “The Merger—Certain Company Forecasts” or the base case.   These forecasts were included in the Proxy Statement.   Knowing precisely which forecasts Foros relied upon is important because it allows a shareholder or analyst to replicate the DCF analysis and determine whether the results Foros presented here are reliable.   It also ensures that the Company's financial advisor was relying on the same set of objections that were provided to the TPG/CPPIB Group and publicly disclosed.” (Emphasis in original.)

The court finds it hard to believe that Ms. Jones was looking at the same documents the court has excerpted above.   Every single benefit she attributes to the Supplemental Disclosure (which she refers to as the “8–K”) is clearly and expressly disclosed in detail in the Definitive Proxy—the fact hat the forecasts used by Foros were those described under ‘The Merger—Certain Company Forecasts;  and that the forecasts relied upon by Foros are the forecasts described under that heading and are the forecasts printed in the Definitive Proxy, which was a publicly filed document.   There is nothing new in the Supplemental Disclosures regarding these forecasts.   They are totally immaterial and provided no benefit to the shareholders.

(ix) The Selected Publicly Traded Companies, Selected Precedent Transactions, Present Value of Hypothetical Future Stock Price, and Discounted Cash Flow Analysis Performed by Deutsche Bank

The Definitive Proxy disclosures as well as the Supplemental Disclosure regarding the Deutsch Bank evaluation report on IMS are each lengthy, complex, and technical, and will not be excerpted here.   The best understanding of the claimed benefit of the Supplemental Disclosure on the Deutsche Bank valuation can be found in the Jones affidavit, ¶ 25:  “DB [Deutsche Bank] prepared an analysis of the implied value of IMS based on certain publicly traded companies deemed comparable to IMS. That analysis, including the range of multiples and the mean and median multiples appears at page 56 of the Proxy.   DB appears to have selected the low end of the computed comparable company range to apply to IMS metrics.   There is no explanation in the Proxy as to why DB did not apply the upper end of the range of multiples in valuing IMS. For example the range of EV/2009 EBITDA multiples (medians) shown in the Proxy is 6.3X to 11x.   DB applied the range 6.25x to 8x which appears to ignore the upper end of the range.   The 8–K [Supplemental Disclosure] discloses that DB considered other criteria in determining the appropriate multiples range, namely, growth rate expectations, operations, and customer profiles of IMS relative to the selected companies and informs shareholders that it was not a purely mathematical process.”  (Emphasis in original).   Paragraph 26 of the Jones affidavit also relates to the supplemental disclosures regarding Deutsche Bank's report:  “DB's Analysis of Selected Precedent Transactions appears on pages 56–57 of the Proxy and shows that it examined 11 deals announced between December 2000 and July 2008.   It then computed an implied value for IMS based on a price to earnings growth reference range of 1.2x to 2.0x and showed that the range of multiples for the precedent transactions was 1.0x to 2.6x. The 8–K reveals that DB also computed other multiples for these transactions—namely earnings per share growth rates and price-to-earnings growth multiples, and includes the table of results for those metrics.   The 8–K explains further that DB considered the price to earnings growth multiple as the most relevant and meaningful because it reflects the varying growth rate expectations for the selected transactions.   The addition of the table for the other transaction multiples and the explanation of why DB applied only one metric to value IMS informs shareholders that DB's transaction analysis was rigorous and, in fact included various metrics.   It also explains the rationale behind DB's reliance on a single multiple in making its determination of IMS's implied value.”   (Emphasis in original).

The supplemental disclosure of the two additional multiples calculated and used by Deutsche Bank in comparing this merger to 11 other comparable transactions, especially the price to earnings growth multiple which DB itself considered to be most relevant and meaningful is a material additional disclosure which would be of value to a reasonable shareholder.

Defendants have cited my 2010 opinion in Capgrowth Partners v. Watsa, supra, where, applying Delaware law, I granted a motion to strike a complaint against a successful tender offeror brought by minority shareholders who did not tender their shares, claiming money damages for, reach of fiduciary duties in inadequacy of the tender price and in that the defendants allegedly omitted relevant information from the tender offer disclosures.   The basis of granting the motion to strike the second count (failure to disclose) was that six of the seven alleged omissions had actually been disclosed in the Form 14D–9 Recommendation Statement filed with the SEC. The seventh omission, a claimed inadequacy in the specificity of the disclosure of stock ownership in the company stock by one of the financial advisors which might place the advisor in a conflict of interest situation was found to be immaterial under Delaware law.   But there is no contested issue in these cases claiming nondisclosure of any possible conflict of interest.  Capgrowth, furthermore, was decided on a motion to strike the complaint, which is decided essentially on the pleadings.   These cases have progressed beyond the pleadings phase, having been settled after discovery and detailed negotiations for a Supplemental Disclosure that resulted in a stipulation for final judgment on every issue but for this claim for attorneys fees.

The court, having considered all the foregoing Sugarland factors, and particularly the plaintiffs' claims as to the benefits they attribute to their litigation efforts, now a dollar amount must be put on the plaintiffs' application for fees and expenses.   The Chancery Court has noted that all supplemental disclosures are not equal, and the court must therefore evaluate the “qualitative importance” of the disclosures obtained.  In Re Sauer–Danfoss, Inc. Shareholders Litigation, 2011 WL 2519210, at *17 (Del.Ch.2011).   The Vice Chancellor in Sauer–Danfoss recognized the unfairness and inconsistencies that could result if Delaware courts and courts of other jurisdictions applying Delaware law [such as this court in these cases] lacked a body of law to consult for guidance:

Similar disclosures merit similar fee awards.   See Plains Res., 2005 WL 322811 at *5 (“The court awards fees for supplemental disclosures by juxtaposing the case before it with cases in which attorneys have achieved approximately the same benefits.  (Internal quotation marks omitted.));  In Re Dr. Pepper/Seven Up Cos S'holders Litig., 1996 WL 74214, at *5 (Del.Ch. Feb. 9, 1996).  (“ Fee applications in class actions resulting in nonquantifiable, nonmonetary benefits have generated decisions from this court that provide guidance for the exercise of ․ discretion.”)   Consistency promotes fairness by treating like cases alike and rewarding similarly situated plaintiffs equally ․ Recognizing the ranges developed by case-by case adjudication—often in unreported transcript rulings—provides sister jurisdictions with helpful guidance when awarding fees in cases governed by Delaware law.  Id.

To effectuate that guidance, the Sauer–Danfoss court attached to the opinion three appendices citing to Chancery Court decisions listing the amount awarded with brief indications of the plaintiff's efforts and the principal disclosures/benefits.   Appendix A lists eleven recent cases “with one or two meaningful disclosures, such as previously withheld projections or undisclosed conflicts faced by fiduciaries or their advisors.”   Appendix A awards range from $300,000 to $550,000.   Appendix B lists five recent cases with “[d]isclosures of questionable quality.”   Appendix B awards range from $75,000 to $225,000.   Appendix C lists two recent cases where plaintiffs have “obtained particularly significant or exceptional disclosures.”   The two Appendix C awards are $800,000 and $1,200,000.

This is not an Appendix C case.   I characterized the disclosure in plaintiffs' claim (i) (followup with interested parties who responded to the first Wall Street Journal article) as “slightly more than negligble value to the class.”   That would fall under the Appendix B. After careful consideration I will treat the disclosure in plaintiffs' claim (iii) (outreach to potential strategic partners) as an Appendix A disclosure, and the disclosure in plaintiffs claim (ix) (omission of two multiples from the Deutsche Bank comparable transactions analysis, one of which Deutsche Bank considered important) as an Appendix B disclosure.   The fee to be awarded, then, should be something more than the highest Appendix B award, but something less than the lowest Appendix A award.   The fee I have decided upon is $275,000.   This compares favorably on a cross check with the $303,171 lodestar fee, which, as previously mentioned, should be discounted to some extent because it represents the combined billable hours of fifteen attorneys.  “We have, for good reasons having to do with efficiency and incentives, resisted the tendency to make hours expended in the effort a central inquiry.”  Sauer–Danfoss, at *20, quoting from In re Anderson Clayron S'holders Litig., 1998 WL 97480, at *1 (Del.Ch., Sept. 19, 1998).

The final issue to be decided is the plaintiffs' claim that the basic fee awarded be increased by a 2.6x multiplier which would work out to be a total award of $728,000.³  The sole justification claimed for the multiplier is that “counsel has undertaken litigation on behalf of an entire class on a wholly contingent basis without receiving any payment and with the risk of non-payment.”

Plaintiffs' counsel's fee arrangement with the two class representative plaintiffs is not a traditional contingent fee arrangement, which for purposes of personal injury negligence cases is defined as a “fee [that] shall be paid contingent upon, and as a percentage of:  (1) damages awarded and received by the claimant;  or (2) the settlement amount received, pursuant to a settlement agreement.”  Conn. Gen Stat. § 52–251e.  “A contingent fee is defined as ‘a fee charged for a lawyer's services only if the lawsuit is successful or is favorably settled out of court.   Contingent fees are usually collected as a percentage of a client's net recovery.’   Black's Law Dictionary, 9th Edition (2009).”   Disciplinary Counsel v. Cohen, Superior Court, Judicial District of Stamford/Norwalk at Stamford, Docket No. CV08–4014502S (December 2, 2010, Tierney, J.T.R.), 2010 Ct.Sup. 23156, 51 Conn. L. Rptr. 151.

Plaintiffs' counsel in this case had no such fee arrangement with the named plaintiff clients.   In fact they had no fee arrangement at all.   At oral argument Atty. Hopkins explained that “There's no contingency agreement with the client, Your Honor.   When I said contingent, I mean we took this on a contingent basis, meaning there was a risk we wouldn't get paid.   Our client doesn't—I mean our client's not paying us anything for this.”  “THE COURT:  Is there a fee arrangement with your client, a written fee agreement?   ATTY. HOPKINS:  No, Your Honor, there's a retainer agreement.⁴  Our client retained us to represent him in connection with this case.”  (TR 4/18/11 p. 32.)  “These are typically how these agreements are done in these types of cases;  the client understands the duties as I said, no obligation to pay for anything and if we are successful, then the Court decides what if any fee we are entitled to [from the adversary].”  Id. 74.   The deal, then, seem to be that the client allows the lawyers to use his or her name with no fee agreement other than an understanding that he or she will not under any circumstances be obligated to pay any fee or reimburse any expenses.   The lawyers then start the case as a class action on behalf of the client and all other shareholders, and if they are successful in any way the attorneys petition the court for an award of attorneys fees and expenses against the defendant company which is the only expectation the attorney has of being paid.   In asserting this petition, however, plaintiffs make the very same policy arguments that apply to a lawyer having a traditional contingent fee contract with his or her client:

ATTY HOPKINS:  In addition I'd like to add the public policy considerations here further support the requested fee award.   The complexity and societal importance of shareholder litigation requires the involvement of the best counsel obtainable and to encourage qualified attorneys to bring actions to represent shareholders' interests on a contingent basis of this type is socially important litigation and further supports our request for attorneys fees.   TR. 27

But there is no indication whatsoever that these plaintiffs were having difficulty or would have had any difficulty getting a lawyer to challenge this merger.   The first of these lawsuits, the Piven Trust case, was served on November 6, 2009, one day following the public announcement of the merger.   There is no socially rewardable policy at work here to make sure that deserving clients who cannot otherwise pay a fee are able to get competent legal representation.   It seem to me that the policy at work by this “no obligation to pay anything” unwritten understanding is not to get a lawyer for the client but to get a client for the lawyer as soon as possible so as to win the race to the courthouse so as to be in the favored position to get class action status and be appointed as class counsel.   As Vice Chancellor Laster said in Sauer–Danfoss at *21:

Plaintiffs' counsel technically pursued this case on a contingent basis.   But “[d]isclosure claims ․ are regularly safe in terms of forcing a settlement” ․ Because disclosure settlements are cheap and easy, and because defendants like to use supplemental disclosures to resolve deal litigation, entrepreneurial plaintiffs' lawyers do not face significant contingency risk when challenging transactions.   See Weiss & White, supra,5 57 Vand.L.Rev. at 1830 (“[O]ur examination of all merger related class actions filed in 1999–2001 suggest that attorneys who brought these cases did not face much in the way of contingency risk”).   Plaintiffs' counsel entered this case “knowing that the defendants' ability to issue supplemental disclosures and the hydraulic pressures of deal closure w[ould] combine to create a ready-made settlement opportunity.”

In Re Emerson Radio S'holder Deriv.   Litig., 2011 WL 1135006 at*6 (Del.Ch., Mar. 28, 2011).   They started with “an obvious and well-marked exit in sight.”  Id.

There is little or no meaningful risk of nonpayment, and whatever risk there may be is self-imposed to facilitate the getting of an immediate shareholder client to hopefully be the first to file a class action lawsuit.   There is no public policy support for this request to apply a multiple to add hundreds of thousands of dollars to the reasonable fee which has been awarded.   The request for a multiple is denied.   The court grants the petition for an award of attorneys fees in the amount of $275,000 and awards reimbursement for costs and expenses in the amount of $9,898.76.   The total amount to be paid to the plaintiffs by the defendants is $284,898.76.

SO ORDERED.

Alfred J. Jennings, Jr.

Judge Trial Referee

FOOTNOTES

FN1. “․ [L]odestar is, by definition, the amount that counsel would have charged a paying client on a straight hourly basis—win, lose, or draw ․” In re Prudential Secs, Inc. Limited Partnerships Litigation, 985 F.Sup. 410, 417 (S.D.N.Y.) 1997..  FN1. “․ [L]odestar is, by definition, the amount that counsel would have charged a paying client on a straight hourly basis—win, lose, or draw ․” In re Prudential Secs, Inc. Limited Partnerships Litigation, 985 F.Sup. 410, 417 (S.D.N.Y.) 1997.

FN2. The Supplemental Disclosure makes some seventeen additional statements or disclosures.   Plaintiffs are claiming that nine of those disclosures were material and provided a benefit to the class.   The court will therefore not address the value of the other eight disclosures..  FN2. The Supplemental Disclosure makes some seventeen additional statements or disclosures.   Plaintiffs are claiming that nine of those disclosures were material and provided a benefit to the class.   The court will therefore not address the value of the other eight disclosures.

FN3. The total dollar amount of $825,000 requested by plaintiffs would work out to a multiplier of approximately 2.95..  FN3. The total dollar amount of $825,000 requested by plaintiffs would work out to a multiplier of approximately 2.95.

FN4. The Connecticut Rules of Professional Conduct which are binding on all Connecticut attorneys and all attorneys admitted pro hoc vice to appear in Connecticut courts, require at Rule 1.5(a) that, except in the case of a lawyer regularly representing a client on multiple matters, “The scope of representation, the basis or rate of the fee and expenses for which a client will be responsible, shall be communicated to the client in writing, before or within a reasonable time after commencing the representation.”   Rule 1.5(c) specifically provides, “A fee may be contingent on the outcome of the matter for which the service is rendered, except in a matter in which a contingent fee is prohibited by subsection (d) or other law.   A contingent fee agreement shall be in a writing signed by the client and shall state the method by which the fee is to be determined ․”.  FN4. The Connecticut Rules of Professional Conduct which are binding on all Connecticut attorneys and all attorneys admitted pro hoc vice to appear in Connecticut courts, require at Rule 1.5(a) that, except in the case of a lawyer regularly representing a client on multiple matters, “The scope of representation, the basis or rate of the fee and expenses for which a client will be responsible, shall be communicated to the client in writing, before or within a reasonable time after commencing the representation.”   Rule 1.5(c) specifically provides, “A fee may be contingent on the outcome of the matter for which the service is rendered, except in a matter in which a contingent fee is prohibited by subsection (d) or other law.   A contingent fee agreement shall be in a writing signed by the client and shall state the method by which the fee is to be determined ․”

FN5. The article is discussed at *8, fn.3 of the opinion.   The full citation is Elliott J. Weise and Lawrence White.  “File Early, Then Free Ride:  How Delaware Law (Mis)Shapes Stockholder Class Actions,” 57 Vand.L.Rev. 1797 (2004)..  FN5. The article is discussed at *8, fn.3 of the opinion.   The full citation is Elliott J. Weise and Lawrence White.  “File Early, Then Free Ride:  How Delaware Law (Mis)Shapes Stockholder Class Actions,” 57 Vand.L.Rev. 1797 (2004).

Jennings, Alfred J., J.T.R.