Hollywood Firefighters Pension Fund v. Malone, C.A. 220-0880-SG (Nov. 8, 2021)

A plaintiff may be entitled to a mootness fee if it shows that its action had merit and produced a corporate benefit. This case outlines the Court of Chancery’s analysis in valuing non-monetary benefits and, in turn, the appropriate mootness fee.

The plaintiff-investors alleged that a merger between GCI Liberty Incorporated and Liberty Broadband Corporation violated Section 203 of the DGCL, which restricts shareholders who own 15 percent or more of a corporation’s voting stock from engaging in a business combination with the corporation. At the time of the merger, two GCI managers had approximately 5% equity in GCI and also in Broadband, but that interest equated to 35% voting control of GCI and 49.9% of Broadband. The plaintiffs targeted this so-called “wedge,” i.e., the difference between the percentage of ownership interest and voting power – which was to increase post-merger. The parties resolved these claims by a stipulation that included supplemental disclosures and a reduction of the wedge that would exist after the merger, and that also resolved the Section 203 issue. 

This decision addressed the plaintiffs’ request for $22 million in attorneys’ fees. Applying the Sugarland factors, the Court awarded an additional $9.35 million in fees. The Court relied upon In re Activision Blizzard Inc. Shareholders Litigation, 124 A.2d 1025 (Del. Ch. 2015), which suggested that the appropriate value for this reduction in voting control fell between $3 and $8 million. The Court utilized the midpoint of that range, $5.5 million, and awarded an additional $3.85 million for other benefits received, to reach the $9.35 million total. The Court concluded that this amount fell within the range of similar precedents and did not constitute a windfall given the hours plaintiffs’ counsel spent on the matter.