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Berger v. Pubco Corp., C.A. No. 3414-CC (Del. Ch. Sept. 8, 2008) (Chandler, C.)

September 8, 2008

In this decision, Chancellor Chandler addressed plaintiff’s fee petition and defendants’ motion for clarification of a few points related to the final order and judgment in the case. With respect to the fee petition, the Chancellor concluded that the attorneys for the class action plaintiff, a stockholder in Pubco Corporation who challenged disclosures regarding a short form merger between Pubco and its controlling stockholder, were entitled to fees and expenses in the amount of $250,000. Defendants conceded that plaintiff’s suit had bestowed some benefit on stockholders in the form of heightened disclosures and quasi-appraisal remedies. Thus, the only issue before the Court with respect to plaintiff’s petition was the appropriate amount of the fee award. The Court considered the traditional factors and concluded that plaintiff was entitled to an award of fees and expenses in the amount of $250,000. In its analysis, the Court noted that the risk of the litigation for plaintiff was slight since the case involved a clear violation by defendants of DGCL Section 262 (defendants had not included a current copy of the Section with their disclosures).

Second, the Court addressed defendants’ request for clarification of the order requiring defendants to “provide plaintiff’s counsel with a list of names, addresses and number of shares owned by all Pubco stockholders of record on the date of the Merger as well as all available similar information for beneficial stockholders of the Company.” (emphasis in original). Specifically, defendants queried whether the term “available” encompassed its Cede list, which listed the brokers acting as stockholders of record and the beneficial owners of those shares. The Court held that the list was “available” pursuant to the order because defendants could produce it instantaneously and because Pubco had paid for the list to be reconstructed, and therefore owned the information contained therein.

Finally, the Court addressed the defendants’ request for clarification of the order to determine whether plaintiffs’ counsel could communicate to beneficial owners information obtained during settlement discussions. Defendants argued that such communication should be prohibited, pointing to court orders limiting settlement discovery and Delaware Rule of Evidence 408 which excludes the content of settlement discussions from evidence. Rejecting defendants’ argument, the Court noted that allowing such communication would not bias future quasi-appraisal proceedings. Defendants had also already opened the door to plaintiff’s counsel communicating a settlement offer by placing on the public record a similar settlement between Pubco and a beneficial owner.

The full opinion is available here