Joseph M. McLaughlin and Shannon K. McGovern. Courtesy photos
In recent years, courts in Delaware and elsewhere have scrutinized attorney fees sought in connection with shareholder challenges to proposed mergers where the relief to a putative class of shareholders is limited to additional disclosures in the proxy statement of the terms, financials, or circumstances of the transaction. Federal district courts, in particular, are increasingly skeptical of so-called “mootness fees” sought by plaintiffs’ counsel when, prior to a motion to dismiss, the defendant addresses alleged misrepresentations or omissions in its proxy by providing additional disclosures.
A recent pair of decisions in federal court—House v. Akorn, 385 F. Supp. 3d 616 (N.D. Ill. 2019), and Scott v. DST Systems, Inc., 2019 WL 3997097 (D. Del. Aug. 23, 2019)—highlight courts’ willingness to probe supplemental disclosures to ascertain whether shareholders received a material benefit warranting an award of attorney fees, as part of a settlement or otherwise.
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