WILMINGTON, Delaware (Reuters) - The plaintiffs’ attorneys in a shareholder lawsuit involving Southern Copper Corp won a blockbuster $285 million fee award from Delaware’s Chancery Court on Monday.
It is believed to be the biggest fee award ever by the court, one of the busiest venues in the United States for commercial litigation.
“This creates incentives for real achievement,” said Leo Strine, the chief judge of the Chancery Court.
Strine approved the payment, which amounts to about $35,000 per hour of work on the case by two law firms, Kessler, Topaz, Meltzer & Check LLP of Radnor, Pennsylvania, and Prickett, Jones & Elliott, of Wilmington, Delaware.
The firms had requested $428.2 million in fees. The defense attorneys for Southern Copper and its board of directors had suggested a fee of less than $14 million.
Strine said he expected the defense to appeal the award to Delaware’s Supreme Court. A member of the defense team declined comment to Reuters on a possible appeal.
The award ranks among the largest in securities litigation. Plaintiffs’ attorneys in lawsuits involving the collapse of Enron Corp got $688 million in fees, while lawyers for plaintiffs in Tyco International Ltd litigation were awarded $492 million.
The case stems from Southern Copper’s 2005 acquisition of Minera Mexico for $3.75 billion in stock. Both were controlled by Grupo Mexico.
Southern Copper shareholders sued the company’s board in 2004, before the deal closed, arguing that the company was overpaying. The lawsuit was not a class action, but instead was a type of case known as a shareholder derivative action.
Strine agreed with the plaintiffs, and in October he ordered Grupo to repay Southern $1.9 billion. He allowed Grupo to make that payment by returning Southern Copper shares it received in the deal.
The attorney’s fees must be paid in cash by Southern Copper.
At Monday’s hearing, attorneys for Southern Copper and the company’s directors argued the judgment did not benefit the company, and therefore the $1.9 billion should not be the basis for determining attorneys’ fees.
Strine rejected that, and noted repeatedly that Southern Copper’s board had authorized a $1 billion stock buyback. Thanks to his ruling, the company would now be getting for free those shares they previously expected to pay for.
The Southern Copper plaintiffs’ attorneys will rake in about $35,000 per hour for less than 9,000 hours of work, according to Strine’s calculation.
In contrast, plaintiffs’ attorneys in the Enron case billed 289,593 hours, and 488,000 were billed in Tyco. Hourly rates in both those cases worked out to less than $2,500, according to an exhibit presented by defense attorneys.
“I don’t think I’ve ever seen anything above $3,000 per hour,” said Stephen French, an auditor of legal fees for LegalBill of Brentwood, Tennessee, who is not involved in the case.
The Kessler firm specializes in bringing large securities cases. The 29-partner firm last cracked the top five plaintiffs firms in securities class-action settlements in 2008, when as Barroway Topaz Kessler Meltzer & Check it won $536 million that year for its clients, according to RiskMetrics Group’s annual rankings.
Prickett Jones, with 11 directors, specializes in corporate litigation in Delaware.
Strine spent a large portion of the 90-minute hearing responding to the defense’s argument that the fee award amounted to a “windfall.”
He noted that many of the cases that the defense cited for comparable fee awards were civil actions brought after the U.S. government had done much of the investigative work.
A windfall, he said, was a quickly settled case in which the plaintiffs’ attorneys get a fee of a few hundred thousand dollars and the shareholders they represent get meaningless disclosures - a type of litigation that has surged recently.
Some plaintiffs’ attorneys view Delaware as stingy in awarding legal fees compared with some other states. At a law conference last month in New York, Strine hit back at that charge, telling the gathering that good cases will be rewarded by the Chancery Court.
The case is In re Southern Peru Copper Corp. Shareholders Derivative Litigation; Delaware Chancery Court, No. 961.
Reporting by Tom Hals in Wilmington, Delaware; Editing by Gary Hill