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In re Duke Energy Corp. Derivative Litigation
Citation: Not availableDocket: CA 7705-VCG
Court: Court of Chancery of Delaware; November 12, 2017; Delaware; State Appellate Court
Original Court Document: View Document
On November 13, 2017, Vice Chancellor Sam Glasscock III addressed the legal fee distribution related to the Duke Energy Corporation derivative litigation, following a settlement hearing on January 13, 2017, which awarded $5,940,000 in legal fees. The firm Prickett, Jones, Elliott, P.A. (PJ&E) was tasked with drafting an Order of Distribution to allocate the fee among various plaintiffs' firms involved in the litigation. Two firms, Levy Korinsky LLP and Tansey Counsel (involved in a related federal action), objected to PJ&E's proposed distribution. Tansey Counsel contended that their efforts contributed significantly to a $25 million portion of the settlement, arguing that their litigation created pressure leading to the settlement. The court noted that under the Corporate Benefit Doctrine, any non-participating attorneys must demonstrate their contribution to the benefits realized from the litigation to be eligible for a fee award. The court recognized that the Tansey litigation likely influenced Duke Energy Corp.'s decision to settle, as it introduced alternative liability theories. Ultimately, the court found that Tansey Counsel met their burden of showing some responsibility for the monetary award, leading to the conclusion that their contributions warranted consideration for a fee based on the Sugarland factors, particularly emphasizing the results achieved in the context of a contingent fee arrangement. The loadstar amount, representing the compensation based on time spent and out-of-pocket costs by plaintiffs’ counsel, serves primarily as a check rather than a basis for determining awards. Concerns exist that a quantum meruit approach could incentivize undesirable outcomes and insufficiently compensate contingent-fee counsel for their risks. In this case, it is acknowledged that counsel, including Tansey Counsel, contributed to the creation of a common fund, warranting an award to Tansey Counsel of their loadstar amount plus costs. L&K aimed to lead the consolidated Delaware action but was appointed to a non-active committee by PJ&E, the lead counsel. The contributions of L&K post-consolidation did not appear to enhance the corporate benefit, and there is disagreement between PJ&E and L&K regarding the impact of L&K’s pre-consolidation work on the corporate benefit. PJ&E proposed a $25,000 award to L&K, while L&K argues for a larger share based on their earlier efforts. PJ&E's rationale for recommending $100,000 to Regor, another firm with similar pre-consolidation involvement, raises questions about fairness in L&K's proposed amount. The proposed distribution of legal fees is approved, with the exception of the Tansey Counsel amount, calculated based on loadstar, and a $100,000 allocation for L&K. Plaintiffs’ counsel is instructed to submit a revised order reflecting these decisions, which is formally ordered by Vice Chancellor Sam Glasscock III.