Delaware Supreme Court Rejects Motion for Re-argument on Record Attorney Fees

09/24/12

The record $305 million awarded in attorney fees by the Delaware Chancery Court earlier this year in the battle involving Grupo Mexico, Southern Copper, and Minera Mexico, had drawn immediate flak from critics who argued the quotient of $35,000 per hour for legal work was unfair. However, a motion for reargument on the attorney fees award was rejected by the Delaware Supreme Court on Friday on procedural grounds and because no stockholder has a claim to any particular assets.

Interestingly, while the chief judge of the Delaware Chancery Court, Leo Strine, had calculated the attorney fees as 15 percent of the total judgment award of $2 billion, the defendants challenged the attorney fees component on grounds that it was disproportionate to the relief received by the actual plaintiffs in the case.

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The lawsuit was primarily a derivative lawsuit where a group of shareholders of Southern Copper, sued on behalf of the company. The award would not be paid directly to stockholders but to the company. Defendants argued that Grupo Mexico would be paying the award largely to itself, as it owns 81% of Southern Copper, which is to benefit from the judgment.

The defendants pointed out that the attorney fees component was grossly disproportionate to the benefits received by the minority shareholders, who would receive only $386 million out of the matter, and hence vis-à-vis their position, the attorney fees was not 15 percent, but tantamount to 79% of award received.

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In its four-page ruling rejecting the motion for reargument on attorney fees awarded, the Delaware Supreme Court clearly stated that no stockholder has a claim to particular assets. Also the reargument was not possible due to procedural law as the judgment and attorney fee awards were reaffirmed by the full Supreme Court in August with a single dissent.

While the matter can make its way to the U.S. Supreme Court, the chances are slim as interest accruing on the judgment per day is more than $210,000.

The fee award has been made to the law firms of Prickett, Jones & Elliott of Wilmington and Kessler Topaz Meltzer & Check of Radnor, Pennsylvania, and is believed to be the biggest-ever attorney fees award made by the Delaware Chancery Court.

At the time of making the award, the chief judge of the Delaware Chancery Court had held that he had calculated the fees not only according to a percentage of the judgment award, but also as an incentive for lawyers to achieve positive outcomes for their clients.