In re Riverbed Technology, Inc. Stockholders Litigation

COURT OF CHANCERY
OF THE
SAM GLASSCOCK III STATE OF DELAWARE COURT OF CHANCERY COURTHOUSE
VICE CHANCELLOR 34 THE CIRCLE
GEORGETOWN, DELAWARE 19947
Date Submitted: November 6, 2015
Date Decided: December 2, 2015
Joseph L. Christensen, Esquire Bradley D. Sorrels, Esquire
Joseph Christensen P.A. Wilson Sonsini Goodrich & Rosati, PC
921 Orange Street 222 Delaware Avenue
Wilmington, DE 19801 Wilmington, DE 19801
Peter B. Andrews, Esquire William M. Lafferty, Esquire
Craig J. Springer, Esquire Ryan D. Stottmann, Esquire
Andrews & Springer, LLC Morris Nichols Arsht & Tunnell LLP
3801 Kennett Pike 1201 N. Market Street
Building C, Suite 305 Wilmington, DE 19801
Wilmington, DE 19807
Seth D. Rigrodsky, Esquire
Brian D. Long, Esquire
Gina M. Serra, Esquire
Jeremy J. Riley, Esquire
Rigrodsky & Long, P.A.
Righter Parkway, Suite 120
Wilmington, DE 19803
Re: In re Riverbed Technology, Inc. Stockholders Litigation,
Consol. Civil Action No. 10484-VCG
Dear Counsel:
Early in my tenure on the bench, I described the realm of corporate law as not
just different from the arena of commonplace torts and contracts, but, in paraphrase
of L. P. Hartley, as a “foreign country.”1 The foundation for that remark was
apparent in my Memorandum Opinion2 in this matter, in which I referred at length
to the many agency problems that complicate the seemingly simple matter of
deciding whether to approve the settlement of a run-of-the-mill merger litigation,
and the odd position the Court finds itself in regarding such a settlement: it acts both
as a kind of surrogate fiduciary for the class in evaluating the settlement and as a
surrogate market in setting fee awards, with regard to which it must attempt to
efficiently incentivize corporate litigation.
In addressing the settlement and the award of counsel fees in this matter, I had
before me the presentations of learned counsel for the individual Plaintiffs and the
Defendants, parties that were by that point no longer adversarial. In addition, for the
reasons set out at length in the Memorandum Opinion, those presentations, while no
doubt erudite and sincere, were necessarily colored by the interests of counsel
themselves and their clients, interests not indisputably aligned with the class for
which I was charged with acting. I also had the benefit of the presentation, in
briefing and argument, of a stockholder–objector (the “Objector”), who provided a
perspective aligned, presumably, with his fellow stockholders. The previous
1
Dias v. Purches, 2012 WL 689160, at *1 (Del. Ch. Mar. 5, 2012) (citing L. P. HARTLEY, THE
GO-BETWEEN 17 (N.Y.RB Classics 2002) (1953)).
2
In re Riverbed Tech., Inc. S’holders Litig., 2015 WL 5458041 (Del. Ch. Sept. 17, 2015).
2
sentence is qualified because the Objector purchased his stock specifically with the
aim of presenting his objection, which he has advanced generically in academic
literature. His counsel here, however, presented objections specific to the settlement
under consideration. The Objector seeks fees in connection with his opposition to
the settlement, an opposition that, for reasons addressed fully in the Memorandum
Opinion, was unsuccessful. I am again put in a situation that is unusual for a
common-law judge: examining whether a party–objector, in the context of my
consideration of a proposed settlement in a corporate class action, merits a fee award
as having bestowed a benefit on the stockholder class even where the objection is
unsuccessful; and, if so, determining an equitable award in light of the service
rendered, mindful that such an award will simulate a market mechanism,
encouraging or discouraging such objections in the future.
My consideration must start with the following premise: in considering
class-action settlements, I must act, not just in a manner consistent with the law, but
in light of the interests of the plaintiff class, which do not necessarily align with
those of the individual plaintiffs and the defendants in the matter before me. In such
a situation, while it is inaccurate to refer to the Court as a true fiduciary for the class,
the Court must surely act in the interest of the class in evaluating a settlement, and
its actions therefore are reminiscent of those of a fiduciary. In that light, the
relationship of the Court with the stockholder class is unlike that with ordinary
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litigants, who are entitled only to an impartial and thoughtful application of the law
from the Court; in assessing a proposed settlement, the Court must act on behalf of
the class. The class, therefore, has an interest in, and may be benefitted by,
submissions that aid the Court in this function, in a way that is fundamentally
different from the interest of an individual litigant in the aid provided to the Court
by an amicus, for example, no matter how helpful the Court may find such
assistance. In other words, the effect of an amicus submission is to assist the Court
in reaching the correct legal result, whereas the effect of an objector’s submission in
this context, if it is helpful to the Court, is to benefit the class itself. For this reason,
I conclude, a departure from the American Rule3 may be warranted, and equity may
support a fee award to an objector, where the efforts of the objector better enabled
the Court to act in the interests of the class, even where the suggestions of the
objector were not adopted by the Court. Our case law supports this reasoning.4
A second premise is important here: a perverse incentive to object could be
created if counsel fees are granted in such a situation too liberally or with too much
regularity. In fact, it should be a rare occurrence indeed where an objector receives
a fee award for proposing, unsuccessfully, that a settlement of a class action be
3
Under the American Rule, followed by the Delaware courts, each litigant is responsible for its
own attorney fees. Kaung v. Cole Nat. Corp., 884 A.2d 500, 506 (Del. 2005) (citation omitted).
4
See In re Amsted Indus. Inc. Litig., 1988 WL 92736, at *12 (Del. Ch. Aug. 24, 1988), aff’d sub
nom, Barkan v. Amsted Indus., Inc., 567 A.2d 1279 (Del. 1989).
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rejected.
I apply these premises to the following factual scenario: the parties proposed
a settlement of merger litigation in which the Plaintiff, on behalf of the stockholder
class, proposed to settle for disclosures to the stockholders—already made—in
return for a broad release of merger-related claims, known and unknown, where the
factual investigation done indicated that potential breach-of-duty litigation was
unlikely to be fruitful. The disclosures were of marginal materiality. The proposed
settlement, in other words, appeared to be an exchange of little for little. The
proposed settlement, moreover, was in line with settlements routinely approved by
this Court in the past, but came at a time when the Court’s treatment of such
settlements was in flux, partly in recognition of the inability of the Court to
understand fully what potential claims might exist only to be extinguished by the
usual broad release.5 The presentation of the Objector limned the general problem
inherent in this scenario but also advocated against the settlement based upon the
specific terms proposed and the investigation undertaken, in a way I explicitly found
persuasive.6 In light of the nature of the proposed settlement, then, and at this
particular time of re-examination of the utility to the class of disclosure-only
5
See generally In re Susser Holdings Corp. S’holder Litig., C.A. No. 9613-VCG (Del. Ch. Sept.
15, 2015) (TRANSCRIPT); Acevedo v. Aeroflex Holding Corp., C.A. No. 9730-VCL (Del. Ch.
Jul. 8, 2015) (TRANSCRIPT); In re Intermune, Inc., S’holder Litig., C.A. No. 10086-VCN (Del.
Ch. Jul. 8, 2015) (TRANSCRIPT).
6
See In re Riverbed, 2015 WL 5458041, at *6.
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settlements in return for broad releases of liability, I found the Objector’s elucidation
of issues helpful in reaching a decision. This is true despite the fact that I found that
the proposed settlement was appropriate, a finding made in light of the specific
circumstances described here, including that the settlement was entered in accord
with what had been standard practice and that facts specific to this case convinced
me that harm to the class from the proposed release was particularly unlikely. Since
my determinations were made on behalf of the stockholders, and since the
presentation of the Objector was helpful in those determinations, the Objector
conveyed a benefit to the class, and some fee award is therefore appropriate.
The Objector seeks fees but has not suggested an appropriate amount. Any
fee here must be made in light of the factors set out by our Supreme Court in
Sugarland.7 These factors include:
(i) the amount of time and effort applied to the case by counsel for the
plaintiffs; (ii) the relative complexities of the litigation; (iii) the
standing and ability of petitioning counsel; (iv) the contingent nature of
the litigation; (v) the stage at which the litigation ended; (vi) whether
the plaintiff can rightly receive all the credit for the benefit conferred
or only a portion thereof; and (vii) the size of the benefit conferred.8
The most important factor is the benefit conferred. Here, the Objector points to the
elucidation of the issues that he argued supported the rejection of the settlement,
7
Sugarland Indus., Inc. v. Thomas, 420 A.2d 142 (Del. 1980).
8
In re Plains Res. Inc., 2005 WL 332811, at *3 (Del. Ch. Feb. 4, 2005) (citing Sugarland, 420
A.2d at 149–50).
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which I have found above to have been beneficial to the class. The Objector also
suggests that his opposition to the award of an attorney fee to the Plaintiffs worked
a benefit on the class. I found a Plaintiffs’ fee award warranted, but in an amount
less than the Plaintiffs sought. The calculation of such a fee award is a matter with
which I was already familiar, however, and the Objector’s argument was not helpful
in that regard. Thus the benefit to the class was limited to the Objector’s arguments
in opposition to the settlement itself.
In producing what I must view—in light of my decision to approve the
settlement—as a modest benefit to the class, counsel for the Objector necessarily
reviewed the record closely, reviewed the proposed settlement and the case law, and
drafted briefing in opposition to the settlement. He also presented oral argument.
Counsel for the Objector states candidly that he applied more time here than would
have been the case had this not been the first such objection for which he advocated,
and that the effort expended is not, therefore, a persuasive factor.9 While the issues
underlying the settlement were not novel or difficult, as stated above the framework
under which the Court examines such settlements was in something of a state of flux
and was ripe for re-examination. Taking these factors, together with the other
Sugarland factors, into account, a modest fee to the Objector’s counsel is called for
9
The Objector’s counsel reported that he worked 244 hours on this matter between his retention
in May 2015 and the oral argument regarding the settlement held on July 27, 2015. Application
for Objector’s Attorney’s Fees and Expenses, at 14.
7
in equity. The Objector is awarded $10,000 in way of his counsel’s fee, and in
addition, his costs in the amount of $837.
To the extent the foregoing requires an Order to take effect, IT IS SO
ORDERED.
Sincerely,
/s/ Sam Glasscock III
Sam Glasscock III
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