What Has the TransPerfect Case Taught Us? Legal Fees for Chancery Cronies Remain out of Control
$129 Million Sought By Delaware’s Lawyer and Chancery Court Elites
Look at this story below, folks. While not nearly as egregious as the infamous and historical TransPerfect Global case, we seem to have more Delaware law firms pillaging a large tech company. In this case, it’s Facebook, with exorbitant legal fees. Whereas in the TransPerect case, it was Potter Anderson, Skadden Arps and others, who in my view, were swindling a king’s ransom from that successful company. In the Facebook case, legal firms Grant & Eisenhofer and Prickett, Jones & Elliott are looking, in my opinion, not unlike the TransPerfect case, while attempting to ransack and loot, a big-time tech-giant and its shareholders. This is yet another example of why legislative reform aimed at curbing the judiciary’s powers are necessary to stem and reverse Delaware’s economic collapse.
The law firms cited in the Facebook story below are looking for an amazing $129 million in attorney fees, while Facebook is saying this is outrageously high. Quite the gap, and it’s quite glaring to see how much certain Delaware law firms have again possibly over-billed! If this fee is granted, it will allow Grant & Eisenhofer to buy another private jet….how else will Bouchard’s children get around when his Bentley is in the shop?!
After the debacle known as the TransPerfect case and the subsequent beating Delaware took in the Chamber of Commerce’s national rankings going from number 1 to 11, will the Delaware judiciary have learned its lesson? See the “Delaware dethroned” article which backs up my concerns:
In the TransPerfect case, the attorneys were billing and gauging at extraordinary rates, contributing to an estimated total of $300 million in legal, custodial and other fees. An outrageous sum that Corporate America has taken note of and clearly indicated to all Delawareans by our plummeting rankings in all aspects of the efficiency and objective balance of Delaware’s judiciary.
Sad to say that this Facebook case is shameful for Delaware, just like the TransPerfect case has been!! My opinion was and still is that Delaware continues to lose national credibility with all of this bad press stemming from Delaware’s Chancery Court.
Unfortunately, I am not optimistic. In my observations, greed overrules justice when it comes to the Delaware Bar, who by seeking to enrich themselves in Bouchard’s Chancery Court, will not only destroy their golden goose, but the Delaware economy as well. Remember Bernie Madoff lived a good life for many years, until it all came crashing down.
I believe that the Delaware Bar Association members know that Bouchard is their guy and as the Chief Chancellor of this court, could he be ready to line their pockets again? This is Bouchard’s court, he runs the show and they all seem to get what they want? We will see how it eventually shakes out.
Recently a Manhattan Supreme Court Justice said he was “troubled, almost haunted by the idea of awarding almost half-a-million dollars to attorneys who simply prevailed upon a court to dismiss an untimely proceeding.” He went on to say he viewed the fee request of $464,164 as “highway-robbery without the six-gun,” and called on attorneys and fellow judges to cut down on astronomical awards. (In the Facebook case they are asking for a whopping $129 million).
Will Chief Chancellor Bouchard, Chancellor Laster and their cronies at the Delaware Bar listen? Or will they continue to try to line their pockets at the expense of the Delaware economy? In this Facebook case, seemingly greedy attorneys in America’s First State look to be triple-dipping, seemingly assuming Facebook’s deep-pockets will soon line their own pockets.
If you’ve been reading my coverage of the Chancery Court cases in Delaware, including the recent CBS vs. Viacom case, where Bouchard said he’d “never seen anything like this before,” just like the TransPerfect case, you can be certain that Bouchard has seen billing like this before… in the TransPefect Global case and likely many others!
Folks, I’m looking out for Delaware and our business-reputation, and will continue to do so. Please read the story below for what I believe, according to the news, is the latest corporate gauging by attorneys in Delaware; it shows that Delaware is anything but business-friendly:
Attorneys defend $129M Fee in Suit Over Facebook Stock Plan
ALM Media July 24, 2018
Three law firms are pressing their case for $129 million in attorney fees in a shareholder suit over Facebook Inc.’s since-abandoned plan to reform its stock structure in a way that would have given founder Mark Zuckerberg more control over the company.
Attorneys from Wilmington plaintiffs’ firms Grant & Eisenhofer and Prickett, Jones & Elliott and Radnor, Pennsylvania-based Kessler Topaz Meltzer & Check defended the request in a court filing on Monday, saying Facebook’s eleventh-hour decision last year to scrap the reclassification plan had secured the full relief their clients had sought in the two-year-old lawsuit.
Counsel for Facebook, however, has said the proposed award was the second-highest ever requested in the Delaware’s Chancery Court and would “dwarf” fees in comparable cases.
Instead, the company said any fee award should not exceed $19.8 million.
The dispute hinges on the question of how to quantify the value of the plaintiff’s victory last year, which came just three days before a planned trial that aimed to put Zuckerberg on the stand. The share restructuring would have allowed Zuckerberg to retain his 60 percent voting power at Facebook, even as he made good on his promise to sell off his shares to charity. There was no dollar amount attached to the agreement, and both sides at the time refused to call what transpired a “settlement.”
Plaintiffs’ attorneys argued Monday that the move would allow shareholders to eventually take control of the Menlo Park, California-based social media giant, a benefit they said was worth $1.29 billion based on the company’s present value. “The real issue in dispute on this fee application is how does one value control of a $500 billion company,” the attorneys wrote in a brief in support of their motion. “Facebook cannot now retreat from Zuckerberg’s many uncontradicted public statements. Nor can it credibly claim that control of a $588 billion company does not have a multibillion dollar value.”
Facebook, which is represented by Ross Aronstam & Moritz, said in court papers last month that Zuckerberg has no intention of relinquishing control of the company for the foreseeable future, and there was no way to accurately determine the value of the termination.
Given the uncertainty, the company said, attorneys should be compensated based on the time spent working on the case. “Plaintiffs’ counsel now seek the second highest fee award in the history of this Court, and (by an order of magnitude) the highest fee award in any case not involving a certain and quantifiable monetary benefit,” Facebook’s lawyers wrote in a brief. “Under these circumstances, quantum meruit is the proper method for determining an appropriate fee.”
Facebook’s board approved the reclassification in 2016 as a mechanism to allow Zuckerberg to maintain control of the company after he had announced that he would donate 99 percent of his Facebook holdings to the Chan Zuckerberg Initiative, a philanthropic investment company run by Zuckerberg’s wife, Priscilla Chan. But investors quickly lined up to oppose the plan, arguing that it would grant Zuckerberg lifetime control of Facebook, while forcibly converting two-thirds of Class A stockholders’ equity interest to nonvoting Class C shares and depriving them of any influence over the company. In a complaint filed in May 2016, class attorneys called the plan a “fait accompli” for Zuckerberg and argued that it was a self-interested scheme approved by a conflicted board of directors.
With trial just days away, the company announced on Sept. 22 that its board had unanimously agreed to withdraw the reclassification plan.
In a post to his Facebook account, Zuckerberg said that the proposal to add a new class of company stock was “complicated” and that it “wasn’t the perfect solution.” However, he said that Facebook’s recent success would allow him and his wife to fully fund his philanthropy and maintain voting control for at least the next 20 years. And he announced that he planned to sell 35 million to 75 million shares in the next 18 months to fund contributions in the areas of education and science. “This path offers a way to do all of this, and I’m looking forward to making more progress together,” Zuckerberg said.
Briefing the plaintiffs fee request is now complete, leaving the issue to Vice Chancellor J. Travis Laster to decide. There was no word Tuesday on when the judge might rule.
The case is captioned In Re: Facebook Class C Reclassification Litigation.