DealLawyers.com Blog

Here’s news from this WSJ article:

A Delaware judge awarded $25 million to plaintiffs’ lawyers who successfully sued investment bank RBC Capital Markets LLC over buyout advice it gave a client, but he declined to assess the fees on top of the payout to shareholders. The ruling by Vice Chancellor J. Travis Laster came during a court hearing Thursday, according to people involved in both sides of the case. A written order wasn’t immediately available.

Mr. Laster in October ordered the bank, part of Royal Bank of Canada, to pay about $76 million to former shareholders of Rural/Metro Corp., finding that the bank’s desire to win fees on both sides of the transaction–as an adviser to the company and a lender to the private-equity firm that bought it–tainted its boardroom advice and wasn’t adequately disclosed to the company or its shareholders.

Plaintiffs’ lawyers had sought fees over and above that amount–an unusual request, as attorneys fees are typically taken out of damages awards, not added on top. They argued RBC bankers had “lied repeatedly” during the trial, and that the bank’s court papers included statements it knew were false. Delaware judges can impose legal fees on top of client awards if they find a party acted in bad faith. Mr. Laster on Thursday said RBC made representations that were “problematic,” but said they didn’t merit imposing legal fees on top of the damages award, according to the people. The ruling saves RBC tens of millions of dollars.

With interest, the bank owes about $93 million as of Thursday, the people said. RBC has defended its actions and is expected to appeal. The ruling was the first in Delaware to hold a bank liable for merger advice, and is seen as opening the door to other such cases. Currently several Wall Street banks are facing suits over their roles on recent transactions.

As Canadian banks have expanded into the U.S. they have met their share of regulatory actions and litigation. RBC in December was ordered to pay a $35 million penalty for allegedly engaging in illegal futures trading with itself over a three-year period. The case, one of the biggest of its kind, was brought by the Commodity Futures Trading Commission. RBC had earlier denied the allegations and didn’t admit or deny them as part of the settlement.