Wilmington, Del (Reuters) - Two law firms were poised on Friday to collect a blockbuster $305 million in legal fees for their work on a lawsuit, after Delaware’s Supreme Court declined to consider a challenge to the payout.
The fee award to law firms Prickett, Jones & Elliott of Wilmington and Kessler Topaz Meltzer & Check of Radnor, Pennsylvania, is believed to be the biggest ever awarded by the Delaware’s Court of Chancery. It is also one of the largest legal fees awarded in securities class actions nationwide.
The fee was awarded in December for plaintiffs’ attorneys who brought a shareholder lawsuit on behalf of Southern Copper Corp (SCCO.N).
The court’s chief judge, Leo Strine, calculated the fee as 15 percent of the $2 billion judgment to be paid to Southern Copper. Strine said at the time that the fee was meant as an incentive for lawyers to achieve good outcomes for their clients.
The judgment and fee were affirmed by the full Supreme Court in August, although Justice Carolyn Berger dissented on the fee.
The defendants asked the Supreme Court to change its ruling on the fee because the high court did not consider the limited impact of the judgment on minority shareholders. The defendants argued Grupo Mexico will pay the judgment largely for the benefit of itself, because it owns 81 percent of Southern Copper.
The defendants argued the minority shareholders will get just $386 million of the actual benefit. On that basis, they argued the fee was not 15 percent, but 79 percent.
In a four-page ruling on Friday, the Supreme Court rejected the motion for reargument on procedural grounds and because they said no stockholder has a claim to any particular assets.
Strine ruled that Grupo Mexico could satisfy the judgment by returning to Southern Copper an equivalent value of the Southern Copper shares it held, but that the fee award had to be paid out of the judgment in cash.
The judgment is due immediately, said plaintiffs’ attorney Ronald Brown of Prickett Jones in a voicemail message left with Reuters. He said after 20 days if the judgment is not paid, it can be satisfied by cancelling shares of Southern Copper stock held by Grupo Mexico.
Brown also said a bond for the attorneys’ fee had been posted by Grupo Mexico. If the company did pay the plaintiffs’ attorneys next week the bond would be used to cover the payment.
An appeal to the U.S. Supreme Court is possible, but unlikely. The judgment is increasing by $212,000 a day due to interest costs, according to court records.
Lee Rudy, a partner with Kessler Topaz and Bruce Angiolillo, a partner with Simpson Thacher & Bartlett, who argued the appeal for the defendants, did not immediately return calls for comment. Grupo Mexico did not immediately respond to a request for comment.
The fee award had set off a protest among critics of trial lawyers, who pointed out it amounted to $35,000 an hour, or about 10 times the going rate in class actions with similar-sized judgments or settlements.
Other large fee awards in U.S. cases include fees and expenses of $688 million for plaintiffs’ lawyers in the Enron Corp class actions, and $493 million for attorneys in the Tyco International class actions.
The Enron and Tyco cases each required at least 88,000 hours of work, according to a legal brief by defendants. In contrast, the attorneys in the Southern Copper case invested 8,597 hours, according to court records.
Strine ordered Grupo Mexico to pay the $2 billion judgment and fee after finding that it coerced Southern Copper to overpay for Minera Mexico in 2005. Grupo Mexico controlled both companies at the time.
The lawsuit was what is known as a derivative suit. The shareholders sued on behalf of the company and the judgment will not be paid directly to stockholders but to Southern Copper.
Additional reporting by Gabriel Stargardter in Mexico City; Editing by Leslie Gevirtz and Carol Bishopric