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‘Creative’ fee request shocks court’s conscience

A Richmond federal court has rejected a “simply shocking” request for nearly $1 million in attorney’s fees sought by two shareholders who sued to halt the sale of Massey Energy Company to Alpha Natural Resources Inc.

U.S. District Judge John A. Gibney Jr. could not see what the plaintiffs, Benjamin Mostaed and William Perkins, had done to deserve a $900,000 fee, not to mention the $2000 incentive award each claimed. They filed a complaint, an amended complaint, then dropped the suit.

“In essence, they came to the battlefield, pitched their tents, and then retreated to safety. For these efforts, they seek nearly one million dollars in fees,” the judge said.

“Ignoring the fact that they failed to stop the acquisition,” the plaintiffs tried to justify the fee by recasting their lawsuit as a request for information in the proxy statement.

The plaintiff shareholders wanted to use the “corporate benefit doctrine” under the controlling Delaware law, arguing their actions conferred a general benefit because additional information was inserted into the proxy statement.

No, and again, no, the court said.

The request for fees is “fundamentally flawed: it is excessive, it lacks any independent evidence of its reasonableness, it lumps together requests for non-compensable items with those that are arguably compensable, and its allocation of hours worked relative to tasks completed is clearly incorrect,” Gibney wrote.

The corporate benefit doctrine did not help the plaintiffs, the court said, because the extra information was “redundant,” resulted from independent forces or failed to meet the “materiality” standard necessary for an award, the court said in its Sept. 10 opinion in Moestad v. Crawford.

Gibney said he encourages “creative advocacy,” but the fee request was “outlandish, excessive, and inequitable.”

By Deborah Elkins

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