February 12, 2024

Mootness Fee Award: Del. Chancery Says “This is the Business You’ve Chosen”

I went to see Barbie with my wife last summer, and one moment that provoked a smile of both amusement and self-awareness was when one of the Kens was baited into “mansplaining” The Godfather to one of the Barbies. Okay, I’m guilty as charged, but I’m also a shameless recidivist, so Barbie’s “barb” isn’t going to deter me from saying that Vice Chancellor Glasscock channeled his inner Hyman Roth in a recent opinion denying plaintiffs’ counsel’s motion for a mootness fee award in In re Oracle Corporation Derivative Litigation, (Del. Ch.; 2/24).

The plaintiffs’ motion came at the conclusion of multi-year derivative litigation challenging Oracle’s 2016 acquisition of NetSuite.  To the plaintiffs’ credit, their breach of fiduciary duty claims survived multiple motions to dismiss, and they accomplished the rare feat of persuading a special litigation committee to allow the plaintiffs to pursue a derivative action against Oracle’s founder, Larry Ellison. Ultimately, however, Vice Chancellor Glasscock ruled in favor of the defendants at trial.

Plaintiffs’ counsel responded to this setback by seeking a consolation prize in the form of a $5 million mootness fee award.  In support of this effort, they pointed to additions to Oracle’s board of directors made after the lawsuit was initially filed.  The Vice Chancellor was unpersuaded, and – like Hyman Roth in The Godfather II – pointed out that ending up with nothing for their considerable efforts was a consequence of the business they’ve chosen:

I feel sympathy for Plaintiffs’ counsel here, who proceeded derivatively, in good faith and with great skill and vigor, at great cost and effort to themselves. Moreover, the SLC—acting for the Company—decided that the litigation was in the best interests of Oracle, and recommended the derivative action go forward to determine whether damages were available. Nonetheless, this is counsels’ business model: sue derivatively, on a contingency basis, accept the freight in a losing case, while seeking a multiple of a lodestar in a successful one. The fact that this case consumed monumental effort on the part of some of the best in the plaintiffs’ bar, like the fact of my sympathy, does not change that.

John Jenkins