The stakes are high for the law firms competing to take the lead in litigation blaming Rupert Murdoch and other Fox Corp. senior leaders for leaving the conservative news network vulnerable to potentially billions of dollars in liability.
Any damages awarded after a trial or in a settlement would be paid into Fox’s corporate coffers by its directors or their insurers, regardless of which team of shareholders is named the lead plaintiff in a consolidated lawsuit following a hearing Thursday in Delaware’s Court of Chancery. But considering some of the eye-watering attorneys’ fees sought—and in some cases approved—in recent Delaware shareholder lawsuits, the firms named lead counsel stand to take home a significant payday for holding Fox’s top brass accountable for false conspiracy theories the network broadcast about the 2020 election.
1. Which law firms are involved?
One group seeking leadership includes public employee pension funds for New York City and Oregon, who argue Fox’s business model invites defamation risk and the network has no controls to prevent it. Their attorneys come from Friedlander & Gorris PA, Cohen Milstein Sellers & Toll PLLC, and Lieff Cabraser Heimann & Bernstein LLP.
They argue they have the superior case, with the funds owning Fox shares worth nearly $33 million combined and sharing experience in obtaining corporate governance reforms and recovering millions in shareholder derivative litigation, according to their application to be the lead plaintiff.
Some of the derivative action wins they tout: Cohen Milstein’s recovery of $41 million for
The competing group of pension and investment funds, including those representing workers in Rhode Island and Sweden, argue Fox ignored compliance reforms required by a 2013 settlement. They’re represented by Bernstein Litowitz Berger & Grossmann LLP, Robbins Geller Rudman & Dowd LLP, and Kessler Topaz Meltzer & Check LLP. Labaton Sucharow LLP and Friedman Oster & Tejtel PLLC are additional counsel.
They’ve got a better case, they say in their application, because the funds together hold over $50 million of Fox common stock, their “interests are directly aligned with all other stockholders,” and their complaint “has generated no potential vulnerabilities or distractions” such as, they explain in an additional brief, their opponents’ “ongoing media campaign” and the New York City comptroller’s “long, adversarial history with Fox itself.”
The firms have worked together on a number of recent shareholder wins in Chancery Court, including: a $1 billion recovery from
2. How big could the attorneys’ payday be?
Delaware tends to more generously reward attorneys who work to hold major corporations accountable through lengthy or complex litigation than do federal courts that have stricter limits on fees for lawyers doing similar work on securities class actions. The factors considered in Chancery Court for fee awards include a case’s complexity, the attorneys’ experience and effort put into a case, and the stage of litigation reached.
“The bigger the recovery, the bigger the settlement, the bigger the fee,” said Charles Elson, a University of Delaware professor emeritus who focuses on corporate governance. “In the end, is that a windfall? Or is it a fairly and legitimately earned fee? That’s the issue.”
This year, the court awarded $266.7 million to attorneys leading the Dell litigation, including Labaton Sucharow. The award matched precedents reflecting Delaware’s policy of rewarding attorneys for taking on risky, complicated cases and effectively litigating them to secure “a real and unprecedented result,” said Vice Chancellor J. Travis Laster, who approved the award.
The Dell award was the second largest in the court’s history. A 2011 fee award netted $305 million—15% of $2 billion in damages following a trial—for attorneys representing shareholders challenging a takeover of a Mexican mining company.
Attorneys who negotiated a settlement worth up to $919 million with
A big payday isn’t automatic. In another high-profile settlement this year, the court awarded $5.7 million to the lawyers who negotiated a settlement that let
Those attorneys, including Bernstein Litowitz, had sought $20 million. Attorneys for a retail investor whose settlement objections played a role in delaying the stock conversion received about $213,000, roughly a third of the $650,000 they requested.
Any lawyer who would share in an award of attorney’s fees must submit documentation for their fees and expenses, under newly updated Chancery Court rules.
3. Who’s the judge?
The lead plaintiff and counsel for the Fox litigation will be decided by Laster as well.
In the Dell case, he chose a steamfitters pension fund as lead plaintiff. His 2019 order noted the steamfitters had “by far the largest stake” and “exhibited greater persistence” in seeking internal files to support their lawsuit. Their attorneys were “focused on achieving the best outcome in this litigation.”
The law firms representing a competing group of police pension funds, meanwhile, had expressed a “desire for glory,” he said.
Laster, known for his scholarly mien, cautioned them with a reference from epic Greek poetry: the hero Achilles chose everlasting glory when he sailed for war against Troy, but in the afterlife he had some regrets. “And although Troy fell, reasonable minds could disagree” about whether the Greeks “benefited as a class,” Laster wrote.
“It’s important to ensure that the case is about damage to the shareholder and less about fees the lawyers will take, and like all the other judges, he’s been very tough on this,” Elson said, adding that Laster represented both sides in similar lawsuits when he was in private practice “and he is keenly aware of how the game is played.”
“The goal of the court is, frankly, you have to compensate the lawyer fairly for the work they’ve done. However, the real victim here is the shareholder, and you have to ensure that as much goes to the shareholder as is fair and reasonable,” he said.
Read more:
- AMC’s Post-APE Stock Crash Reduces Attorney Fees to $5.7 Million
- Top US Business Court Bolsters Reputation With Big Lawyer Fees (1)
- Tesla Balks at $919 Million Board Pay Deal’s Hefty Lawyer Fee
- Fox’s Dominion Deal Puts Squeeze on Murdoch in Investor Lawsuits
—With assistance from Roy Strom.
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