In re Pike Corp. Shareholder Litigation (Lawyers Weekly No. 15-15-0997, 16 pp.) (James Gale, C.J.) 2015 NCBC 90
Holding: After the settlement of a consolidated class action and based on the recent ruling in Ehrenhaus v. Baker (Ehrenhaus II), Nos. COA14-1201, COA14-1083 (N.C. App. Sept. 15, 2015) (Lawyers Weekly No. 15-07-0884) and a reasonableness review, the court awards plaintiffs’ counsel expenses and attorneys’ fees in the total amount of $550,000.
Under Ehrenhaus II, the court does not need explicit statutory authority to award attorneys’ fees where the parties have agreed to a fee-shifting provision in a voluntary settlement.
Ehrenhaus II did not explicitly address whether the court’s authority to award fees under a voluntary settlement is limited to only the amount that a defendant has agreed not to contest. The court reads Ehrenhaus v. Baker (Ehrenhaus I), 216 N.C. App. 59, 717 S.E.2d 9 (2011), and Ehrenhaus II collectively to indicate that the court’s authority to award fees requires only that that the parties’ voluntary settlement agreement provides for fee shifting and does not require parties to agree to a specific amount of the fees to be awarded. When the parties agree to fee shifting but do not agree on the amount of fees to be awarded, the court may award the amount that it determines to be fair and reasonable, potentially subject to an agreed-to floor or cap.
Here, the parties have agreed to a fee-shifting provision and a floor, but they have not agreed on the specific amount that the court should award. Thus, the court must determine the amount of fees that would be both fair and reasonable under the circumstances.
A review of the record shows that the requested fees are reasonable within the meaning of N.C. R. Prof’l Conduct 1.5(a)(1)-(8).
Here, the settlement benefit was limited to defendants making supplemental disclosures about their corporate merger. Nonetheless, the court is persuaded that a significant fee award is justified in light of the particular supplemental disclosures obtained, together with the fact that the release does not preclude the appraisal remedy that North Carolina favors when a shareholder challenges the price of a transaction.
While it is difficult to place a monetary value on supplemental disclosures, defendants agree that the supplemental disclosures in this case were material and constituted valid consideration. Some of those supplemental disclosures were clearly required to correct prior material disclosures that erroneously described circumstances related to negotiations between the corporation, its CEO, and its suitor.
In sum, the court finds that there were sufficient supplemental disclosures of a value adequate to support the requested award.
Plaintiffs are entitled to an award of $550,000.