In Re Mindbody, Inc. Stockholder Litigation ( 2023 )

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN RE MINDBODY, INC., ) CONSOLIDATED
STOCKHOLDER LITIGATION ) C.A. No. 2019-0442-KSJM
MEMORANDUM OPINION
Submitted: June 5, 2023
Decided: November 15, 2023
Joel Friedlander, Jeffrey M. Gorris, Christopher M. Foulds, FRIEDLANDER &
GORRIS, P.A., Wilmington, Delaware; Gregory V. Varallo, Andrew E. Blumberg,
BERNSTEIN LITOWITZ BERGER & GROSSMANN LLP, Wilmington, Delaware;
Jeroen van Kwawegen, BERNSTEIN LITOWITZ BERGER & GROSSMANN LLP,
New York, New York; Co-Lead Counsel for Lead Plaintiffs and Petitioners Luxor
Capital Partners, L.P., Luxor Partners Offshore Master Fund, LP, Luxor Wavefront,
LP, and Lugard Road Capital Master Fund, LP.
Lisa A. Schmidt, Robert L. Burns, Matthew D. Perri, John M. O’Toole, RICHARDS,
LAYTON & FINGER, P.A., Wilmington, Delaware; Matthew Solum, P.C., John Del
Monaco, Jeffrey R. Goldfine, Jacob M. Rae, KIRKLAND & ELLIS LLP, New York,
New York; Counsel for Defendants Richard Stollmeyer, Vista Equity Partners
Management, LLC, Torreys Parent, LLC, and Torreys Merger Sub, Inc., and
Respondent Mindbody, Inc.
McCORMICK, C.
This stockholder class action arises from the 2019 acquisition of Mindbody, Inc.
by Vista Equity Partners Management, LLC for $36.50 per share. On March 21,
2023, the court issued a post-trial opinion holding Mindbody’s former CEO and Vista
jointly and severally liable to the class for damages in the amount of $1 per share.
Closing a chapter, this decision resolves the parties’ disputes over the form of final
order and judgment. The parties’ chief disagreement concerns whether the court
should apply a settlement credit of $27 million toward the final damages award. This
decision holds that the non-settling defendants are not entitled to a $27 million
settlement credit. The other major clash concerns whether the lead plaintiffs in the
fiduciary action, who also petitioned for appraisal of their shares, can elect to collect
the merger consideration and class remedy and, if so, what effect the election has on
the appraisal action. This decision holds that the appraisal petitioners can elect to
receive the merger consideration and class remedy and deconsolidates the fiduciary
and appraisal actions to permit immediate appeal of the post-trial decision. Lastly,
this decision addresses open issues concerning interest, costs, and attorney’s fees.
I. FACTUAL BACKGROUND
As described in greater detail in the March 21, 2023 Post-Trial Memorandum
Opinion (the “Post-Trial Opinion”),1 former Mindbody stockholders brought this class
action challenging the all-cash acquisition of Mindbody by Vista for $36.50 per share.
The lead plaintiffs are a group of former Mindbody stockholders referred to as
1 In re Mindbody, Inc. S’holder Litig., 2023 WL 2518149 (Del. Ch. Mar. 15, 2023)
(“Post-Trial Op.”).
“Luxor.”2 Luxor also petitioned for appraisal pursuant to 8 Del C. § 262 with another
group of former Mindbody stockholders referred to as “Blue Mountain”3 (and with
Luxor, the “Appraisal Petitioners”).4 The court consolidated the fiduciary and
appraisal actions on October 2, 2019.5
After fact discovery closed, Luxor filed the Second Amended Verified
Consolidated Class Action Complaint (the “Complaint”).6 As amended, the Complaint
asserted breach of fiduciary duty claims against Mindbody’s former CEO, Richard
Stollmeyer, and the Mindbody board nominee of private equity fund Institutional
Venture Partners (“IVP”), Eric Liaw, alleging that the two conspired in their efforts
to tilt the sale process in Vista’s favor. The Complaint also asserted claims for aiding
and abetting against IVP and Vista. Liaw, IVP, and Vista moved to dismiss, and
Stollmeyer moved for summary judgment.7 The court denied the motions.8
2 “Luxor” is Luxor Capital Partners, L.P., Luxor Capital Partners Offshore Master
Fund, LP, Luxor Wavefront, LP, and Lugard Road Capital Master Fund, LP.
3 “Blue Mountain” is Blue Mountain Credit Alternatives Master Fund L.P.,
BlueMountain Logan Opportunities Master Fund, L.P., BlueMountain Foinaven
Master Fund L.P., BlueMountain Fursan Fund L.P., and BlueMountain Kicking
Horse Fund L.P.
4 See Luxor Cap. P’rs v. Mindbody, 2019-0293-KSJM.
5 C.A. No. 2019-0442-KSJM, Dkt. 37. All docket (“Dkt.”) citations refer to C.A. No.
2019-0442-KSJM.
6 Dkt. 336 (“Compl.”).
7 See Dkt. 338 (Liaw and IVP Mot. to Dismiss); Dkt. 342 (Vista Mot. to Dismiss); Dkt.
345 (Stollmeyer Mot. for Summary Judgment).
8 See Dkt. 398 (In re Mindbody, Inc., S’holder Litig., 2021 WL 5565172 (Del. Ch. Nov.
29, 2021)); Dkt. 399 (In re Mindbody, Inc., S’holder Litig., 2021 WL 5564687 (Del. Ch.
Nov. 29, 2021)); Dkt. 401 (In re Mindbody, Inc., S’holder Litig., 2021 WL 5834263(Del. Ch. Dec. 9, 2021)).
2
On December 17, 2021, the court granted Luxor’s unopposed motion to certify
the “Class” comprising:
all holders of Mindbody . . . common stock as of the closing
of the merger with affiliates of Vista . . . on February 15,
2019 (“Closing”), whether beneficial or of record, including
their legal representatives, heirs, successors in interest,
transferees and assignees of all such foregoing holders, but
excluding (i) defendants in this action, (ii) any person who
is, or was at the time of Closing, an officer, director, or
partner of Mindbody, Vista, or [IVP], (iii) the immediate
family members, meaning the parents, spouse, siblings, or
children, of any of the foregoing, (iv) any trusts, estates,
entities, or accounts that held Mindbody shares for the
benefit of any of the foregoing, and (v) the legal
representatives, heirs, successors in interest, successors,
transferees, and assigns of the foregoing[.]9
On January 18, 2022, Luxor moved to sever and stay its claims against Liaw
and IVP because they had agreed in principle to settle those claims for $27 million.10
The court granted the motion on February 8.11
On February 26, 2022, Luxor, Liaw, and IVP submitted their Stipulation and
Agreement of Settlement (the “Settlement Agreement”).12 As reflected in the
Settlement Agreement, Luxor agreed to release all claims on behalf of the Class
arising out of the allegations in the Complaint relating to the Merger against Liaw
and IVP (the “Settling Defendants”).13 In exchange, the Settling Defendants agreed
9 Dkt. 406 ¶ 1.
10 Dkt. 417.
11 Dkt. 432.
12 Dkt. 451.
13 Settlement Agr. ¶ 1(x).
3
to pay the Class $27 million. The Settlement Agreement required that the
prospective judgment include a bar order preventing “any claims for contribution
under 10 Del. C. § 6304(b)” based on the released claims against the Settling
Defendants.14 The bar order stated that:
pursuant to 10 Del. C. § 6304(b), any joint damages
recoverable against all other alleged tortfeasors, including
Non-Settling Defendants, will be reduced by the greater of
(a) the Settlement Amount, and (b) the pro rata share of
the responsibility for such damages, if any, of Settling
Defendants, should it be determined that any of the
Settling Defendants are joint tortfeasors.15
At a June 8, 2022 hearing, the court approved the settlement including the bar
order and awarded $8,556,142.95 in attorney’s fees and expenses. The awarded
expenses included $666,142.95 in expenses incurred through January 18, 2022.16
The remaining claims against Stollmeyer and Vista (the “Non-Settling
Defendants”) marched on in parallel toward trial, which took place over eight days
between February 28 and March 9, 2022.17 The parties then completed post-trial
briefing and oral argument.
In the final footnote of their post-trial answering brief, the Non-Settling
Defendants asserted that any compensatory damages awarded to the Class “must
account for the settlement of Luxor’s claims against Liaw and IVP[.]”18
14 Settlement Agr. ¶ 18.
15 Id.
16 Dkt. 481.
17 See Dkts. 461–468 (Trial Tr.).
18 Dkt. 485 at 121 n.493.
4
The Post-Trial Opinion found the Non-Settling Defendants jointly and
severally liable to the Class for $1 per share. The court held Stollmeyer liable for $1
per share for breaching fiduciary duties in connection with the sale process (the
“process damages”). The court held Stollmeyer and Vista jointly liable for $1 per
share for breaching fiduciary duties in connection with the disclosures and for aiding
and abetting in those breaches (the “disclosure damages” or “Weinberger damages”).
The court held, however, that the class is “not entitled to a double recovery” and that
“[a]ll that the class can recover is $1 per share.”19
The Post-Trial Opinion ordered the Non-Settling Defendants to pay costs and
further ordered payment of prejudgment interest in the amount of 5% over the
Federal Reserve discount rate compounded quarterly on the damages award.20
The Post-Trial Opinion directed the parties to confer on a form of final order.21
The parties failed to agree and filed cross motions for entry of a final order and
judgment.22 Co-Lead Counsel for Luxor (“Co-Lead Counsel”) also moved for an award
of attorney’s fees. The motions were fully briefed as of May 30, 2023,23 and the court
heard oral argument on June 5, 2023.24
19 Post-Trial Op., 2023 WL 2518149, at *47.
20 Id. at *47–48.
21 Id. at *48.
22 Dkt. 499 (Pls.’ Mot.); Dkt. 503 (Defs.’ Mot.).
23 Dkt. 499 (“Pls.’ Opening Br.”); Dkt. 504 (“Defs.’ Opening Br.”); Dkt. 509 (“Pls.’ Reply
Br.”); Dkt. 511 (“Defs.’ Reply Br.”).
24 Dkt. 515 (June 5, 2023 Hr’g Tr.).
5
II. LEGAL ANALYSIS
This analysis addresses five sets of issues raised by the parties in the following
order. First, are the Non-Settling Defendants entitled to a $27 million settlement
credit toward the $1-per-share damages award? Second, can the Appraisal
Petitioners elect the Class remedy and, if so, what is the effect of that election? Third,
how should the court calculate interest on the damages award? Fourth, can Co-Lead
Counsel recover costs previously reimbursed from the settlement fund? Fifth, what
amount of attorney’s fees should the court award Co-Lead Counsel?
A. The Settlement Credit
The Delaware Uniform Contribution Among Tortfeasors Act (“DUCATA”)
establishes the legal framework applicable when a plaintiff releases only some joint
tortfeasors through settlement. DUCATA codifies a right of contribution among joint
tortfeasors25 and defines “joint tortfeasors” as “[two] or more persons jointly or
severally liable in tort for the same injury to person or property, whether or not
judgment has been recovered against all or some of them.”26 Under DUCATA, such
a release does not discharge the non-settling joint tortfeasors, but rather, reduces the
claim against the other tortfeasors “in the amount of the consideration paid for the
release, or in any amount or proportion by which the release provides that the total
claim shall be reduced, if greater than the consideration paid.”27
25 10 Del. C. § 6302(a) (“The right of contribution exists among joint tortfeasors.”).
26 10 Del. C. § 6301.
27 10 Del. C. § 6304(a).
6
The Non-Settling Defendants ask that the court apply DUCATA to reduce the
total damages award in the amount of the $27 million settlement consideration.
Luxor does not dispute that if the Settling Defendants are joint tortfeasors, then the
Non-Settling Defendants are entitled to a credit equal to the full amount of the
settlement consideration, $27 million. Luxor argues, however, that a settlement
credit is inappropriate for three reasons. First, Luxor contends that the Non-Settling
Defendants waived their right to seek a credit by failing to raise the argument before
their post-trial answering brief.28 Second, Luxor argues that the trial record does not
support a finding that the Settling Defendants were joint tortfeasors.29 Third, Luxor
maintains that the doctrine of unclean hands bars the settlement credit.30 Because
this decision concludes that the Non-Settling Defendants waived their right to seek
a settlement credit, the court does not reach Luxor’s second or third arguments.
“Waiver is fundamentally an issue of fairness: the belated presentation of an
argument can deprive the opposing party of notice and the opportunity to respond.”31
This court has struggled to define when a defendant has waived its ability to
seek a settlement credit. That struggle stems in part from tension between the
28 See Pls.’ Opening Br. at 3–11; Pls.’ Reply Br. at 9–17; Defs.’ Opening Br. at 25–30;
Defs.’ Reply Br. at 13–18.
29 See Pls.’ Opening Br. at 11–16; Pls.’ Reply Br. at 17–19; Defs.’ Opening Br. at 12–
24; Defs.’ Reply Br. at 7–13.
30 See Pls.’ Opening Br. at 17–20; Pls.’ Reply Br. at 19–22; Defs.’ Opening Br. at 30–
31; Defs.’ Reply Br. at 18–20.
31 Jung v. El Tinieblo Int’l, Inc., 2022 WL 16557663, at *9 (Del. Ch. Oct. 31, 2022)
(citations omitted).
7
competing desires of avoiding trial by ambush and promoting fair and orderly
proceedings. On the one hand, the court enforces the waiver doctrine to prevent
prejudice by surprise. On the other hand, the court has acknowledged that forcing
defendants to present evidence on joint tortfeasor status at a bench trial puts them
in the awkward position of arguing that they should not be held liable, but if they
are, they took the wrongful actions in tandem with other joint tortfeasors.32 In light
of this awkwardness, the court has permitted parties to pursue claims for
contribution after the court has made liability determinations.33
Allowing litigants to pursue claims for contribution post-trial deviates from the
norm in jury trials. In Ikeda v. Molock, the Delaware Supreme Court held that a
defendant seeking a damages award based on relative fault must file a cross-claim
against settling tortfeasors before trial to allow the jury to make factual findings
related to that claim.34 The Supreme Court reasoned that a “jury may not properly
32 See Teachers’ Ret. Sys. of Louisiana v. Greenberg, C.A. No. 20106-VCS, Dkt. 460 at
45:1–11 (Del. Ch. June 13, 2007) (TRANSCRIPT) (“That’s an awkward, weird trial to
have . . . . I will not have some sort of bifurcated thing where I get to have a week,
you know, with one face of Strine, who hears of the evidence about no one did
anything wrong, and then [] the second face of Strine and the second week shows up
and has to hear about how awful [defendants] are but that their three bosses didn’t
know about it.”); see also Odyssey P’rs, L.P. V. Fleming Cos., Inc., 1997 WL 38134, at
*3 (Del. Ch. Jan. 24, 1997) (denying leave to assert a third-party claim for
contribution against a fifth director defendant before trial when the request
“certainly represent[ed] an attempt to use the joinder of party rules to gain tactical
advantage”).
33 See In re Rural/Metro Corp. S’holders Litig., 102 A.3d 205, 245 (Del. Ch. 2014).
34 See Ikeda v. Molock, 603 A.2d 785, 787 (Del. 1991) (“Accordingly, the filing of a
cross-claim is a prerequisite to the apportionment of liability between joint tort-
feasors based upon relative degrees of fault.”).
8
fulfill its role as trier of fact unless the questions to be decided by the jury are litigated
at trial[,]” where those questions include the relative degree of fault among joint
tortfeasors.35
In In re Rural/Metro Corp. Stockholders Litigation, this court addressed
whether the requirement of Ikeda applies in bench trials.36 There, a group of
defendants settled on the eve of trial. The remaining defendant, RBC, filed a
cross-claim against the settling defendants requesting that the court reduce the
damages recoverable against RBC under DUCATA based on their degrees of relative
fault. The cross-claim did not allege that the settling defendants had committed
wrongdoing. The cross-claim also did not allege that the settling defendants were
joint tortfeasors, and RBC did not advance that theory at trial. Yet when the plaintiff
argued that RBC had waived its right to argue in post-trial proceedings that the
settling defendants were joint tortfeasors, the court disagreed. In arriving at this
holding, Vice Chancellor Laster reasoned that although Ikeda requires a formal joint
tortfeasor cross-claim in a jury trial, “the same strictures do not apply in a bench
trial[.]”37 Rather than having to argue a joint tortfeasor theory at trial, RBC “simply
had to do so based on the record created at trial and in light of the factual findings”
in the post-trial opinion.38 The Delaware Supreme Court affirmed.39
35 Id.36 102 A.3d 205, 244–45 (Del. Ch. 2014).
37 Id. at 244.
38 Id. at 245.
39 RBC Cap. Mkts., LLC v. Jervis, 129 A.3d 816, 871 (Del. 2015)
9
Under Rural/Metro, therefore, the Non-Settling Defendants’ failure to prove
joint tortfeasor status at trial does not automatically bar them from seeking a
DUCATA settlement credit post-trial. Still, the question remains whether the waiver
doctrine should preclude a settlement credit under the circumstances of this case.
The court is forced to conclude that the Non-Settling Defendants waived their
right to seek judgment reduction under DUCATA by not preserving the issue in any
manner whatsoever before trial. In Rural/Metro, RBC both filed a crossclaim for
contribution and raised the issue in the pre-trial stipulation and order. These actions,
though relatively ministerial, were the bare minimum necessary to place the
plaintiffs on notice that RBC intended to claim a settlement credit, which gave the
plaintiffs the opportunity to defend against this possibility. Here, by contrast, the
Non-Settling Defendants did not attempt to assert a crossclaim before trial or raise
the issue in pre-trial briefing, the pretrial order, or during the pretrial conference.
Rather, they did not raise the issue until the last footnote (footnote 493) on the very
last page (page 121) of their very last post-trial brief.40 To Luxor, the Non-Settling
Defendants’ failure to raise DUCATA issues timely cleared the path for a trial
strategy that aggressively implicated both Liaw and IVP, including in cross
examinations of key witnesses such as Liaw, Stollmeyer, and Professor Jesse Fried.
At trial, Luxor elicited testimony that would speak to the Settling Defendants’
joint tortfeasor status. Luxor showed that IVP’s Mindbody investment represented
40 Dkt. 485.
10
an unrealized gain of $68 million and that IVP was looking to liquidate its holdings.41
Luxor questioned Liaw about his conversation with Stollmeyer immediately after the
Audit Committee discussed the impact of reduced guidance for Q4.42 Luxor also
offered evidence that Liaw advocated to retain Qatalyst as Mindbody’s financial
adviser because Qatalyst “emphasized its relationship with Vista and recommended
a quick sale process.”43 Luxor advanced its theory in post-trial briefing that
Stollmeyer was incentivized to push for a sale at a time when Liaw was still on the
Board.44 This testimony led the court to conclude that Liaw’s role in the sale process
was “rife with the potential for conflict.”45 It is hard to believe that Luxor would have
gone so aggressively after Liaw and IVP had they known that they would have be
stuck later defending the actions of Liaw and IVP to avoid a settlement credit under
DUCATA.
Luxor cites Advanced Fluid System, Inc. v. Huber, and that case provides some
support for finding waiver here.46 Advanced Fluid addressed Pennsylvania’s
analogous joint tortfeasor statute within the context of a trade secrets case in which
one co-defendant settled before trial. When the non-settling defendants failed to raise
41 Post-Trial Op., 2023 WL 2518149, at *7.
42 Id. at *18–19.
43 Id. at *22.
44 See, e.g., Dkt. 477 (Pls.’ Opening Post-Trial Br.) at 9–13; see also Dkt. 484 (Pls.’
Answering Post-Trial Br.) at 9 (“Defendants have no answer to Stollmeyer’s behind-
the-scenes conniving with Liaw to encourage a quick sale.”).
45 Post-Trial Op., 2023 WL 2518149, at *6.
46 381 F.Supp.3d 362 (M.D. Pa. 2019), aff’d, 958 F.3d 168 (3d Cir. 2020).
11
the possibility of a settlement credit during the bench trial or in post-trial briefing,
the federal district court held that they had waived the right to seek a set-off. The
Third Circuit affirmed.47 To be sure, Advanced Fluid is not binding authority, but it
illustrates that failing to timely assert DUCATA claims can have harsh
consequences.
There is parity in finding that the Non-Settling Defendants waived their right
to a settlement credit, given that the court held that Luxor waived claims for aiding
abetting in process breaches against Vista. In the Post-Trial Opinion, the court held
that Luxor waived the process-based claims against Vista by failing to adequately
preserve them prior to trial.48 The court was convinced that Luxor’s failure to assert
claims for process breaches against Vista meant that Vista was not prepared to
defend against them. The corollary is true here—the Non-Settling Defendants’
failure to raise DUCATA issues prior to trial meant that Luxor was not on notice of
the need to defend against these arguments. Given this prior reasoning, a conclusion
that Vista did not waive its right to a settlement credit by failing to preserve it prior
to trial would seem to apply a double standard. The court finds waiver.
Contrary to the Non-Settling Defendants’ argument, this outcome does not
result in a windfall to the Class. DUCATA makes clear that adversarial principles
47 Advanced Fluid Sys., Inc. v. Huber, 958 F.3d 168 (3d Cir. 2020).
48 See Post-Trial Op., 2023 WL 2518149, at *42–43.
12
apply to judgment debtors seeking a settlement credit.49 This aspect of the statute
reflects a policy determination favoring the injured plaintiff “rather than an admitted
or adjudged [tortfeasor] bearing less than the full cost of his or her negligent
conduct.”50 Here, the Non-Settling Defendants waived their DUCATA arguments by
failing to take minimal steps to preserve them.
B. Appraisal Petitioners’ Remedy
The parties dispute whether the Appraisal Petitioners can elect to receive
Class damages absent Mindbody’s approval.51 If the Appraisal Petitioners can elect
the Class remedy, then the court must determine the effect of that election on the
appraisal proceedings, including whether the appraisal proceedings should be
deconsolidated to permit immediate appeal.
1. Availability Of The Class Remedy
The Delaware courts addressed an appraisal petitioner’s ability to elect to
receive a class remedy for fiduciary breach in Cede & Co. v. Technicolor, Inc.52 and In
re Dole Food Co., Inc. Stockholder Litigation.53
49 See, e.g., 10 Del. C. §§ 6304(a), (b) (placing the burden of proving joint tortfeasor
status on the judgment debtor); Med. Ctr. of Del., Inc. v. Mullins, 637 A.2d 6, 8 (Del.
1994).
50 Mullins, 637 A.2d at 10 (citing State Farm Mut. Auto. Ins. Co. v. Nalbone, 569 A.2d
71, 75 (Del. 1989)).
51 See Defs.’ Opening Br. at 35–37; Defs.’ Reply Br. at 21–24; Pls.’ Reply Br. at 24–25.
52 542 A.2d 1182 (Del. 1988).
53 2015 WL 5052214 (Del. Ch. Aug. 27, 2015).
13
In Cede, a stockholder commenced an appraisal proceeding related to a
controller squeeze-out merger. During discovery, the stockholder uncovered evidence
of the directors’ fiduciary breaches and brought a class action for breach of fiduciary
duties seeking rescissory damages. The Delaware Supreme Court affirmed this
court’s finding that the stockholder had standing to pursue the claims for fiduciary
breach, holding: “Fairness and consistency require equal recourse for a former
shareholder who accepts a cash-out offer in ignorance of a later-discovered claim
against management for breach of fiduciary duty and a shareholder who discovers
such a claim after electing appraisal rights.”54
The Supreme Court also held that the stockholder’s appraisal and fiduciary
claims should be consolidated for trial and that the stockholder did not have to elect
a remedy prior to trial. The court concluded by acknowledging that consolidation
may impose “certain procedural difficulties” on this court, but that the opposite result
would impose perverse incentives on defendants while disadvantaging potential
stockholders who seek to vindicate their rights.55
Although the court allowed the stockholder to pursue simultaneously claims
for appraisal and fiduciary breach, the court described the claims as “alternative
causes of action[,]”56 observed that the stockholder would be limited to a “single
54 Cede, 542 A.2d at 1188.
55 Id. at 1192.
56 Id. at 1189; see also id. at 1191–92 (describing the causes of action as “in the
alternative to”).
14
recovery judgment[,]”57 and noted that a recovery on the claim for breach of fiduciary
duty could “moot” the appraisal petition.58
In Dole, Vice Chancellor Laster determined post-trial that a class action
stockholder-plaintiff had proven under the entire fairness standard that the
controller and his colleague breached their fiduciary duties.59 Consistent with Cede,
the Vice Chancellor had consolidated the fiduciary and appraisal claims for trial.
Post-trial, the Vice Chancellor awarded a “fairer price” remedy to the class members,
resulting in an incremental award of 20% of the deal price. 60 Noting that the
appraisal petitioners were members of the defined class, the Vice Chancellor
concluded that they were “entitled to the remedy provided by this decision.”61
Echoing Cede, the Vice Chancellor observed that the appraisal petitioners could not
receive a double recovery and that “the damages award potentially renders the
appraisal claim moot.”62 He instructed the parties to meet and confer on a path
forward.
Here, as in Cede and Dole, the court consolidated the fiduciary breach and
appraisal claims for trial, the Appraisal Petitioners were not required to make a
57 Id. at 1192.
58 Id. at 1189.
59 Dole, 2015 WL 5052214 at *1.
60 Id. at *45.
61 Id. at *47.
62 Id.
15
binding election as to remedy before trial, and the Appraisal Petitioners are members
of the Class.63
As a result, under Cede and Dole, the Appraisal Petitioners can elect to receive
the merger consideration along with the Class’s $1-per-share damages award.
2. Effect Of Election
The conclusion that Appraisal Petitioners can elect the Class remedy gives rise
to additional questions: Can the Appraisal Petitioners pursue appraisal after electing
the Class remedy? What are the effects of the Post-Trial Opinion on fair value?
Should the court deconsolidate the actions?
The answer to the first issue—whether Appraisal Petitioners can have both
options—requires a deeper dive into Cede, which changed how this court treats
appraisal petitioners pursuing concurrent claims for fiduciary breach. Before Cede,
the court narrowly interpreted the appraisal statute to mean that an appraisal
petitioner loses “for the time being all the substantial rights of a stockholder[,]”
including receiving the merger consideration.64 An appraisal petitioners’ right was
considered “primarily that of a monetary claimant against the consolidated or
surviving corporation” and “more nearly analogous to that of a creditor than to that
of a stockholder.”65
63 Dkt. 405. Both the Settling and Non-Settling Defendants consented to the class
definition. Id.
64 Southern Production Co. v. Sabath, 87 A.2d 128, 134 (Del. 1952).
65 Id.; see also Dofflemyer v. W. F. Hall Printing Co., 432 A.2d 1198, 1202 (Del. 1981)
(applying Sabath’s rationale to all-cash merger); Braasch v. Goldschmidt, 199 A.2d
760, 766–67 (Del. 1964) (holding that appraisal petitioner could not maintain
16
Then came Cede. There, the Delaware Supreme Court acknowledged the
preceding cases but concluded that an appraisal petitioner did not lose standing to
“assert a timely filed private cause of action premised upon a claim of unfair dealing,
illegality, or fraud.”66 Citing to Weinberger and Rabkin, the high court highlighted
the “disparate nature” of appraisal and entire fairness proceedings because they
“serve different purposes and are designed to provide different, and not
interchangeable, remedies.”67 Quoting Weinberger, the court observed that the
appraisal remedy “may not be adequate in certain cases, particularly where fraud,
misrepresentation, self-dealing, deliberate waste of corporate assets, or gross and
palpable overreaching are involved[.]”68 The court thus concluded that allowing
appraisal petitioners to pursue claims for fiduciary breach was necessary to avoid a
rule that would “effectively immunize” a fiduciary from answering to a claim for their
wrongdoing.69
The court in Cede also rejected the defendants’ argument that allowing the
appraisal and fiduciary breach claims to proceed concurrently would be unfair to the
defendants. The court held that since the plaintiff is “simply pleading alternative
representative action challenging merger as unfair because the effect of the appraisal
election “was to convert the status of the plaintiffs therein from that of stockholders
of the corporation to that of creditors thereof”).
66 Cede, 542 A.2d at 1188.
67 Id. at 1186 (citing Weinberger v. UOP, Inc., 457 A.2d 701, 714 (Del. 1983); Rabkin
v. Philip A. Hunt Chem. Corp., 498 A.2d 1099 (Del. 1985)).
68 Id. at 1187 (quoting Weinberger v. UOP, Inc., 457 A.2d 701, 714 (Del. 1983)).
69 Cede, 542 A.2d at 1189.
17
causes of action,” there is no risk of a double recovery.70 The court viewed
consolidation as “necessary to put [the plaintiff] in a position equivalent to the
position it would arguably be in had defendants exercised ‘complete candor’ in
disclosing all material information associated with the merger[.]”71
By permitting a stockholder to pursue appraisal claims as a “alternative” cause
of action, and limiting a stockholder to a “single recovery,” Cede aimed to minimize
unfairness to the respondent—a stockholder may pursue many theories but may
recover under just one. The implied message is that the choice of paths is binary.72
Applying the reasoning of Cede here, if the Appraisal Petitioners elect the
Class remedy, then they must be treated as members of the Class. The members of
the Class received $36.50 per share from Mindbody in the Merger and then received
an additional $1 per share from the Non-Settling Defendants through the Post-Trial
Opinion. If, however, the Appraisal Petitioners elect to pursue their appraisal claims,
then they may not receive the Class remedy and the court will determine the fair
value of the Appraisal Petitioners’ shares.
The Non-Settling Defendants argue that this outcome is inconsistent with
8 Del. C. § 262 governing appraisal. More than 60 days after the date of a merger,
Section 262 requires an appraisal claimant to obtain the corporation’s consent before
70 Id.
71 Id. at 1191 (quoting Weinberger, 457 A.2d at 710).
72 Cede, 542 A.2d at 1189; see also id. at 1191–92 (describing the causes of action as
“in the alternative to”).
18
it can withdraw its petition for appraisal.73 Although the Non-Settling Defendants’
correctly read the text of Section 262, their interpretation that it forecloses the
Appraisal Petitioners from electing the Class remedy ignores Cede and Dole. As Class
members, the Appraisal Petitioners can opt to receive the same Merger consideration
as the Class. If they opt to receive this consideration, then as discussed above, they
are barred from seeking appraisal as a double recovery. Were it otherwise, then Cede
and Dole’s permission to appraisal petitioners to avoid making a binding election
before trial would be meaningless. Cede and Dole contemplate that, upon court
approval, an appraisal claimant can elect to receive the merger consideration and
Class damages over the respondent’s objection, and this decision follows that
precedent.
This decision does not resolve the second issue—the effect of the findings in
the Post-Trial Opinion on fair value.74 To be clear, the factual findings of the Post-
Trial Opinion bind the parties; they cannot relitigate them. But it is premature to
assess the effect of those findings on fair value. The court did not determine the fair
value calculation in the Post-Trial Opinion, and the court is not going to determine
fair value unless the Appraisal Petitioners elect to pursue appraisal.75
73 8 Del. C. § 262(k).
74 The Appraisal Petitioners ask the court to treat the $37.50 figure as a “floor” for a
fair value determination, and the Non-Settling Defendants ask for a finding that fair
value is less than $30. See Pls.’ Reply Br. at 26–29; Defs.’ Opening Br. at 39–43; Defs.’
Reply Br. at 29–33.
75 Compare In re Appraisal of Columbia Pipeline Gp., Inc., 2019 WL 3778370 (Del.
Ch. Aug. 12, 2019), with, In re Columbia Pipeline Gp., Merger Litig., 299 A.3d 393(Del. Ch. 2023) [hereinafter Columbia II].
19
The answer to the last issue—whether to deconsolidate—is easy. Luxor asks
the court to deconsolidate the fiduciary and appraisal actions to permit an appeal of
the fiduciary action, which will inform its decision on whether to elect the Class
remedy.76 This approach makes a lot of sense. “It is well settled that ‘the trial court
has discretion to resolve scheduling issues and to control its own docket.’” 77 If the
parties wish to appeal the Post-Trial Opinion, it would be helpful to do so promptly
before this court values the Appraisal Petitioners’ shares in an appraisal proceeding.
A result at the appellate level could sway the appraisal petitioners to elect Class
damages, or, in the alternative, give the parties more concrete findings to use in the
appraisal proceedings. Either way, the benefits of consolidation have been achieved
by trying the actions together; at this stage, it makes more sense to deconsolidate.
C. Interest
The parties dispute a host of issues concerning interest: Is the Class entitled
to interest on the nominal damages award?78 Are the Appraisal Petitioners entitled
to equitable interest on the withheld merger consideration if they elect the Class
remedy.79 Should the court should toll interest in the appraisal proceedings?80
76 Pls.’ Opening Br. at 24 –25; Pls.’ Reply Br. at 30; Defs.’ Opening Br. at 38–39; Defs.’
Reply Br. at 24–28.
77 Coleman v. PricewaterhouseCoopers, LLC, 902 A.2d 1102, 1107 (Del. 2006)
(citations omitted).
78 Defs.’ Opening Br. at 33; Defs.’ Reply Br. at 20–21; Pls.’ Reply Br. at 23.
79 Pls.’ Opening Br. at 20–24; Pls.’ Reply Br. at 24–31.
80 Defs.’ Opening Br. at 39 (“At a minimum, if the appraisal decision is delayed, the
continued accrual of interest should be tolled.”).
20
In Delaware, prejudgment interest is awarded as a matter of right and
computed from the day payment is due.81 “Prejudgment interest serves two
purposes: first, it compensates the plaintiff for the loss of the use of his or her money;
and, second, it forces the defendant to relinquish any benefit that it has received by
retaining the plaintiff's money in the interim.”82 This court has “broad discretion,
subject to principles of fairness, in fixing the rate to be applied.”83 “[A] court may, in
its discretion, deny a plaintiff interest if he delayed prosecution of his claim.”84
1. Prejudgment Interest On Nominal Damages
The Non-Settling Defendants argue that prejudgment interest should not
accrue on the nominal damages award of $1 per share because the damages award
was not “‘readily ascertainable’ prior to the [Post-Trial Opinion]”85 and that
“uncertainty” over the extent of the harm from the disclosure claims “precludes the
application of [prejudgment] interest.”86
81 Moskowitz v. Mayor and Council of Wilmington, 391 A.2d 209, 210 (Del. 1978).
82 Brandywine Smyrna, Inc. v. Millennium Builders, LLC, 34 A.3d 482, 486 (Del.
2011); see also Wacht v. Continental Hosts, Ltd., 1994 WL 728836, at *2 (Del. Ch. Dec.
23, 1994); Trans World Airlines, Inc. v. Summa Corp., 1987 WL 5778, at *1, *4 (Del.
Ch. Jan. 21, 1987), aff'd, 540 A.2d 403 (Del. 1988).
83 Summa Corp. v. Trans World Airline, Inc., 540 A.2d 403, 409 (Del. 1988) (citing
Lynch v. Vickers Energy Corp., 429 A.2d 497, 506 (Del. 1981)).
84 Id. (citing Moskowitz, 391 A.2d at 211 (Del. 1978)).; see also Citadel Hldg. Corp. v.
Roven, 603 A.2d 818, 826 (Del. 1992) (observing that “the trial court has some
discretion in fixing the amount of interest where there has been inordinate delay
caused by one of the parties” but that “the determination of the date when payment
was due is ordinarily a question of law subject to plenary review” on appeal (citing
Watkins v. Beatrice Cos., Inc., 560 A.2d 1016 (Del. 1989)).
85 Defs.’ Opening Br. at 33.
86 Defs.’ Reply Br. at 20–21.
21
The Non-Settling Defendants base this argument on a 1986 wrongful death
case out of the Delaware Superior Court, Kunstek v. Alpha-X Corp.87 There, the
Superior Court declined to award prejudgment interest on the wrongful death award
that was not “readily ascertainable.”88 The court observed that arriving at an exact
figure required “complex computation[s]” and difficult estimations of lost support, pay
increases, consumption, and other factors.89
Kunstek is limited to its facts. A few years after Kunstek, the Superior Court
appeared to cabin its holding to circumstances where “a claim calls for commingling
damages for personal injuries and economic loss arising therefrom or the complex
computations required in determining economic loss relating to a death[.]”90 That
does not describe this case.
Moreover, Kunstek seems based on the “historic rule” that treated prejudgment
interest as a “penalty on defendants who failed to pay promptly” that “would be
awarded only if damages were ‘liquidated’ or ‘ascertainable.’”91 Over the course of
the last century, courts came to view prejudgment interest not as a penalty but as a
87 1986 WL 5875 (Del. Super. Ct. May 15, 1986). The cases relied on by the court in
Kunstek are all wrongful death or personal injury cases. See Lum v. Nationwide Mut.
Ins. Co., 1982 WL 1585 (Del. Super. Ct. Apr. 27, 1982), aff’d, 461 A.2d 693 (Del. 1983)
(holding no prejudgment interest on complex wrongful death suit); Harris v. Capano
Hldgs., Inc., 1981 WL 1724 (Del. Super. Ct. Nov. 17, 1981) (same for personal injury).
88 Kunstek, 1986 WL 5875, at *1.
89 Id.90 Nutt v. GAF Corp., 1987 WL 12419, at *1 (Del. Super. Ct. May 21, 1987).
91 Restatement (Third) of Torts: Remedies § 14 cmt. c (Am. L. Inst., Tentative Draft
No. 2, 2023).
22
form of compensation.92 Delaware courts came to view prejudgment interest as
serving both compensatory and disgorgement purposes. 93 Indeed, courts have noted
a long history under Delaware law of awarding prejudgment interest as a matter of
right without regard to the nature of the underlying damages.94 Given the antiquated
reasoning on which Kunstek rests, this court should be reluctant to apply its holding
to new circumstances.
Although the Non-Settling Defendants’ authority does not support their
position, it is worth questioning whether the Class has a right to prejudgment
interest on the nominal damages. Both the compensatory and disgorgement purposes
of prejudgment interest arise from the premise that the damages award was
“plaintiff’s money”—money that the plaintiff would have had in her possession absent
wrongdoing. That purpose is not served if nominal damages are merely symbolic.
This begs the question of the nature of the Weinberger-style per-share nominal
damages for disclosure violations: What purpose do they serve?
Weinberger damages for disclosure violations are not merely symbolic, as Vice
Chancellor Laster persuasively concluded in Columbia II.95 There, as here, the court
92 Id. (discussing the evolution of the doctrine of prejudgment interest, observing that
“[c]ourts and legislatures increasingly recognized that interest is not a penalty, but
an essential element of full compensation”).
93 See Moskowitz, 391 A.2d at 210.
94 See generally Super. Tube Co. v. Del. Aircraft Indus., 60 F.Supp.573 (D. Del. 1945)
(cataloguing centuries of cases applying prejudgment interest without regard to the
nature of underlying damages); E. M. Fleischmann Lumber Corp. v. Resources Corp.
Int’l, 114 F.Supp. 843 (D. Del. 1953) (same).
95 299 A.3d at 409 (Del. Ch. 2023).
23
awarded per-share “nominal” damages for disclosure violations, which the Vice
Chancellor calculated as $0.50 per share or 1.96% of the equity value.96 In arriving
at this outcome, the Vice Chancellor helpfully identified multiple throughlines
connecting the Post-Trial Opinion, Weinberger, and other decisions of this court
awarding damages for disclosure violations.97 Each decision based the per-share
award on “contemporaneous valuations of the target company”98 and the “back-and-
forth negotiations” between the parties.99 The Post-Trial Opinion described the per-
share award as a “division of the merger surplus[.]”100 As the Vice Chancellor held
in Columbia II, the cases collectively support a rule that “when disclosure violations
have deprived stockholders of their ability to cast an informed vote on a matter
affecting their economic interests, then a court can award damages equal to a
relatively small percentage of the equity value of each share.”101
96 Id. at 498.
97 Columbia II, 299 A.3d. at 495–96 (discussing the Post-Trial Opinion; Weinberger v.
UOP, Inc., 1985 WL 11546 (Del. Ch. Jan. 30, 1985), aff’d, 497 A.2d 792 (Del. July 9,
1985) (TABLE); Smith v. Shell Petroleum, Inc., 1990 WL 186446, at *5 (Del. Ch. Nov.
26, 1990), aff’d, 606 A.2d 112 (Del. 1992) (awarding $2 per share where the award
was proportionate to headline value of undisclosed assets of $3 per share not reflected
in share price); Gaffin v. Teledyne, Inc., 1990 WL 195914, at *18 (Del. Ch. Dec. 4,
1990), aff’d in part, rev’d in part on other grounds, 611 A.2d 467 (Del. 1992) (reversing
class-wide dimension of $1 per share award based on a lack of record evidence)).
98 Id. at 496 (citing Verition P’rs Master Fund Ltd. v. Aruba Networks, Inc., 210 A.3d
128, 137 (Del. 2019)); see also id. at 497 (citing In re Dunkin’ Donuts S’holders Litig.,
1990 WL 189120, at *9 (Del. Ch. Nov. 27, 1990) (“A buyer’s internal valuations carry
an extra imprimatur of reliability and are likely to provide more persuasive evidence
of value than the buyer's actual bids[.]”).
99 Columbia II, 299 A.3d at 497.
100 Post-Trial Opinion, 2023 WL 2518149, at *47.
101 Columbia II, 299 A.3d at 409.
24
The court’s analysis in Columbia II reveals one implied justification for the
methodologies employed when calculating Weinberger damages—that disclosure
violations affecting votes on economic rights impair those economic rights. Under
this justification, Weinberger damages are compensatory. The cases discussed in
Columbia II suggest an additional justification for Weinberger damages—to
redistribute merger consideration surplus retained due to wrongdoing. Under this
justification, Weinberger damages are a form of disgorgement. In all events,
Columbia II made clear that per-share “nominal” damages are not “symbolic.” That
is, it “is not the symbolic award of $1 that a court grants when no greater damages
were suffered or proven.”102 Rather, it is nominal in the sense that it is a “relatively
small percentage of the value of each share.”103
Given the compensatory and disgorgement nature of Weinberger damages,
there is no reason to conclude that prejudgment interest should not accrue on that
amount.104
102 Columbia II, 299 A.3d at 495 (citing Macrophage Therapeutics, Inc. v. Goldberg,
2021 WL 2582967, at *22 (Del. Ch. June 23, 2021); Ravenswood Inv. Co., L.P. v. Est.
of Winmill, 2018 WL 1410860, at *25 (Del. Ch. Mar. 21, 2018); Penn Mart
Supermarkets, Inc. v. New Castle Shopping LLC, 2005 WL 3502054, at *16 (Del. Ch.
Dec. 15, 2005)).
103 Columbia II, 299 A.3d at 409.For this reason, Columbia II advocated redubbing
per-share nominal damages awarded in this context as “disclosure damages.” Id. at
495. The court agrees that “disclosure damages” or “Weinberger damages” is more
accurate.
104 And to the extent Delaware courts must look to whether the damages awarded
were “ascertainable” before a finding of liability, then the reasoning discussed above,
along with the studies concerning the value of voting rights relied on by the Vice
Chancellor as crosschecks in Columbia II, instructs that Weinberger damages are
25
2. Equitable Interest On Merger Consideration
The Appraisal Petitioners request an order that they are entitled to equitable
interest on the merger consideration if they elect the Class remedy.105
Awarding equitable interest is consistent with the purpose of awarding a
prevailing party prejudgment interest. Applied to this context, those purposes are to
compensate the stockholder for the loss of its money and force the surviving company
to relinquish the benefit of retaining it. Here, Stollmeyer and Vista are adjudicated
wrongdoers. There is no equity in allowing them to retain the economic value of the
merger consideration for the duration of the litigation.
Manti Holdings, LLC v. Authentix Acquisition Company, Inc. supports
awarding equitable interest on the withheld Merger consideration.106 There,
stockholders attempted to exercise their appraisal rights and abstained from
receiving merger consideration. Although the court ultimately concluded that the
stockholders were barred from seeking appraisal under a stockholder agreement, the
court awarded equitable interest at the legal rate on the withheld merger
consideration from the date of the merger. The court reasoned as follows:
Through the 2017 Merger, the merger consideration
became available to Petitioner. Nonetheless, they had
significant questions regarding their contractual and
statutory rights and in good faith tested those rights by
filing an appraisal petition. The litigation required the
resolution of several novel issues at the intersection of
sufficiently ascertainable. Columbia II, 299 A.3d at 498 (discussing “[s]tudies in
which scholars have valued voting rights”).
105 Pls.’ Reply Br. at 24.
106 2020 WL 4596838 (Del. Ch. Aug. 11, 2020).
26
contract and corporate law, and has been lengthy. The
equities of the situation are this: the Petitioners were
stripped of their stock and entitled to consideration
therefore from the time of the 2017 Merger. These funds of
the Petitioners have been held by the Respondent for the
duration of tis now-lengthy action. It would, to my mind,
be inequitable not to award interest on that amount. It is
within the Court’s discretion to award such interest.107
The Delaware Supreme Court affirmed the award of equitable interest.
Examining “the totality of these circumstances,” the high court observed that
“although the merger consideration was deposited in a non-interest-bearing account,
the fact remains that the Petitioners were deprived of the beneficial use of their
property for an extended period of time to resolve a dispute regarding a merger
agreement to which they did not agree[.]”108 The court further observed that, during
that period, the company and the acquiror “had the power to choose and control where
the funds belonging to the Petitioners were deposited.”109
Mehta v. Smurfit–Stone Container Corporation is also instructive.110 There,
the question was whether the surviving corporation was entitled to withhold the
merger consideration from a former stockholder who demanded appraisal but failed
to file an appraisal petition within the statutory time limit. The court ordered the
company to pay the merger consideration, “plus an award of pre- and post-judgment
107 Id. at *10 (emphasis added).
108 Manti Hldgs, LLC v. Authentix Acq. Co., Inc., 261 A.3d 1199, 1229 (Del. 2021).
109 Id.110 2014 WL 5438534 (Del. Ch. Oct. 20, 2014).
27
interest running from September 25, 2011, the day after the 120-day filing period
ran, until the date of payment.”111
Manti and Mehta weigh in favor of awarding equitable interest here. Here, as
in Manti, the Appraisal Petitioners had significant questions regarding their rights
and in good faith tested them. Moreover, unlike Manti and Mehta, Luxor prevailed
on the fiduciary claims. Thus, Mindbody and Vista obtained the economic benefit of
holding petitioners’ merger consideration in a wrongful merger.
As Class members, the Appraisal Petitioners are entitled to elect a remedy that
compensates them for the adjudicated appropriate value of the merger consideration
($37.50 per share). If the Appraisal Petitioners opt for the Merger consideration plus
Class damages, then they are owed equitable interest on the withheld merger
consideration for the appraisal shares.
3. Tolling Interest
The court has deconsolidated the fiduciary and appraisal proceedings to allow
for an immediate appeal of the Post-Trial Opinion. An immediate appeal would help
inform the Appraisal Petitioners’ election concerning the Class remedy and promote
judicial economy. But it would also delay resolution of the appraisal proceeding.
Mindbody—or, the real party in interest, Vista—therefore asks that the court toll
interest in the appraisal proceeding pending the Appraisal Petitioners’ election of
remedies.112
111 Id. at *6.
112 Defs.’ Opening Br. at 39.
28
The court is sympathetic to Vista’s concern. Of course, the appraisal statute
offers one way to address that concern. Section 262(h) permits a corporation to
prepay appraisal claimants in an amount of the corporation’s choosing to stop accrual
of interest.113 And Mindbody has taken advantage of that statute to a degree.114 That
said, if appeal of the fiduciary action or time spent while the Appraisal Petitioners
determine whether to elect the Class remedy has the effect of delaying the appraisal
action, then tolling arguments might resonate, and Vista may reassert them after the
Appraisal Petitioners make their election.115
D. Costs
The Post-Trial Opinion awarded costs to Luxor under Court of Chancery Rule
54(d).116 “Delaware law dictates that, in fee shifting cases, a judge determine whether
the fees requested are reasonable.”117 “The trial court has broad discretion in
113 8 Del. C. § 262(h).
114 See Dkt. 499 (Blumberg Aff.) ¶ 13.
115 See generally Moskowitz, 391 A.2d at 211 (identifying “whether the plaintiff has
been guilty of delay in pursuing his claim” as a factor to consider when computing
prejudgment interest, and noting that “[w]hile interest is a matter of right in
Delaware, the Trial Court does have some discretion in determining the amount of
interest where there has been undue delay in the process of a lawsuit . . . ; for it is
improper for a plaintiff to benefit by his failure to prosecute his own claim” (citation
omitted)).
116 Post-Trial Op., 2023 WL 2518149, at *48; Ct. Ch. R. 54(d).
117 Mahani v. Edix Media Gp., Inc., 935 A.2d 242, 245 (Del. 2007); Peyton v. William
C. Peyton Corp., 8 A.2d 89, 91–92 (Del. 1939) (‘[T]he Court should have authority to
consider and determine the reasonableness of the [costs], where such expense is
objected to as being excessive.”); Gaffin v. Teledyne, Inc., 1993 WL 271443, at *2 (Del.
Ch. July 13, 1993) (reviewing reasonableness of costs).
29
determining the amount of fees and expenses to award.”118 Prevailing party costs
under Rule 54(d) do not cover all litigation expenses, but rather, only those
“necessarily incurred in the assertion of [the prevailing party’s] rights in court.”119
Co-Lead Counsel submitted affidavits itemizing $180,301.24 in costs
recoverable under Court of Chancery Rule 54(d).120 The Non-Settling Defendants
challenge only $32,657.80 of that amount on the ground that it was incurred before
January 18, 2022,121 and thus previously reimbursed to counsel from the settlement
fund. Luxor argues that, effectively, the Class covered this portion of the recoverable
costs, which the Post-Trial Opinion assessed against the Non-Settling Defendants,
and thus the Non-Settling Defendants should not reimburse the Class. Luxor’s
position is not unreasonable, but it is inconsistent with the court’s Order and Final
Judgment approving the settlement. That Order provided that the $32,657.80 in
“Litigation Expenses shall be paid solely out of the Settlement Fund.”122 Luxor is not
entitled to the $32,657.80 that the court previously ordered be paid from the
settlement fund.
118 Black v. Staffieri, 2014 WL 814122, at *4 (Del. Feb. 27, 2014); see also Lynch v.
Gonzalez, 2020 WL 5587716, at *7 (Del. Ch. Sept. 18, 2020), aff’d, 253 A.3d 556 (Del.
2021) (noting the court’s discretion in awarding costs under Rule 54(d)).
119 Donovan v. Delaware Water & Air Resources Corn., 358 A.2d 717, 723 (Del. 1976)
120 Dkt. No. 499 (Friedlander Aff. & Blumberg Aff.); Pls.’ Opening Br. at 26.
121 Defs.’ Opening Br. at 32–33.
122 Dkt. 481 ¶ 12.
30
E. Attorney’s Fees
Co-Lead Counsel request a fee award equal to 33% of the $1 per-share Class
remedy excluding shares held by any Appraisal Petitioner.123
“The Court of Chancery has broad discretion in fixing the amount of attorney
fees to be awarded.”124 In exercising this discretion, the Court applies the five
Sugarland factors: “1) the results achieved; 2) the time and effort of counsel; 3) the
relative complexities of the litigation; 4) any contingency factor; and 5) the standing
and ability of counsel involved.”125
When the benefit achieved is quantifiable, “Sugarland calls for an award of
attorney[’s] fees based upon a percentage of the benefit.”126 To select the appropriate
percentage, this court follows the stage-of-case method set out in Americas Mining
Corp.127 Under that method, this court awards a percentage-based fee that turns on
the stage of the litigation and efforts undertaken by counsel.128 Those percentages
range from 10% for an early-stage settlement to a maximum of 33% for a post-trial
adjudication.129 “Other Sugarland factors may cause the court to adjust the
123 Pls.’ Opening Br. at 26 –33; Pls.’ Reply Br. at 32–34.
124 Johnston v. Arbitrium (Cayman Islands) Handels AG, 720 A.2d 542, 547
(Del. 1998).
125 Ams. Mining Corp. v. Theriault, 51 A.3d 1213, 1254 (Del. 2012) (citing Sugarland
Industries Inc. v. Thomas, 420 A.2d 142, 149–50 (Del. 1980)).
126 In re Activision Blizzard, Inc. S’holder Litig., 124 A.3d 1025, 1070 (Del. Ch. 2015).
127 Ams. Mining Corp., 51 A.3d 1213.
128 In re Dell Techs. Inc. Class V S’holder Litig., 300 A.3d 679, 687 (Del. Ch. 2023).
129 Ams. Mining Corp., 51 A.3d at 1259–60; Dell, 300 A.3d at 699.
31
indicative fee up or down, but the starting point under Americas Mining is a
percentage calculation.”130
Under this approach, which aligns the interests of counsel with the interests
of the stockholders, “[a] percentage of a low or ordinary recovery will produce a low
or ordinary fee; the same percentage of an exceptional recovery will produce an
exceptional fee. The wealth proposition for [counsel] is simple: If you want more for
yourself, get more for those whom you represent.”131
This case went as far as a case can go before a trial court. In these
circumstances, it is appropriate to award fees in the amount of the maximum
percentage of the common fund.132 None of the other Sugarland factors warrant a
downward adjustment.
Co-Lead Counsel’s request for an award of 33% of the common fund excluding
damages payable to Appraisal Petitioners is granted.133
130 Dell, 300 A.3d at 692 (quoting In re Orchard Enters. Inc. S’holder Litig., 2014 WL
4181912, at *8 (Del. Ch. Aug. 22, 2014)).
131 Id.132 See generally Pls.’ Opening Br. at 29–32 (citing cases).
133 The Non-Settling Defendants request that the court order Co-Lead Counsel to
disclose their fee agreement. They suspect that Co-Lead Counsel did not represent
the Appraisal Petitioners on a fully contingent basis and they demand that the fee
agreement be disclosed to inform the fee award. Co-Lead Counsel represented at oral
argument that, upon personal review of the appraisal fee arrangements, the
Appraisal Petitioners’ fee arrangements were entirely contingent. June 5, 2023 Hr’g
Tr. at 70:16–24. Given this representation, the court the Non-Settling Defendants’
request for discovery.
32
III. CONCLUSION
The Non-Settling Defendants are not entitled to a settlement credit. The
Appraisal Petitioners may elect to receive the merger consideration and Class
damages. The fiduciary and appraisal actions shall be deconsolidated, allowing for
immediate appeal of the Post-Trial Opinion. If Luxor elects to receive the Class
damages and merger consideration, then Luxor is entitled to equitable interest.
Prejudgment interest is awarded on both the process damages and disclosure
damages. The Non-Settling Defendants may re-assert their tolling arguments if the
Appraisal Petitioners pursue appraisal. Luxor’s proposed bill of costs is approved
except for amounts previously reimbursed from the Settlement Fund. Co-Lead
Counsel is entitled to a fee award equal to 33% of the damages award excluding any
damages payable to the Appraisal Petitioners. The parties are instructed to prepare
a form of final order consistent with this decision within five days. It is possible that
the court failed to resolve one of the many issues raised in the rich thicket of disputes
concerning the form of final order; the parties’ briefing did not join issues neatly. If
the parties believe that the court missed something, then they are instructed to
contact Chambers immediately to schedule a status conference.
33