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Judge approves $3.86M fee award in corporate merger case

-Lawyers who won $9.4 million for an aircraft manufacturer burned in a merger deal also scored what may be a record fee award in Virginia courts.

In her last court hearing as a Fairfax County circuit judge, now-Supreme Court Justice Jane Marum Roush allowed $3,864,835 in fees and expenses for the legal team representing Airbus Americas Inc.

Roush refused to trim the attorneys’ bill despite expert testimony that the fees – at rates up to $638 per hour – were “grossly excessive.”

“I’m going to award Airbus the full amount of the attorneys’ fees it’s seeking,” Roush said at a July 30 hearing.

“I don’t find the fees excessive. … This was major litigation. It involved complicated, complex issues,” Roush said, according to a transcript.

The issue in the underlying dispute was the financial health of a company called Metron Holdings.

Airbus purchased Metron in 2011 for about $75 million. In the deal, Metron shareholders agreed to indemnify Airbus for any inaccuracies in Metron’s statements about its financial condition.

When the new acquisition failed to perform as expected after the merger, Airbus claimed it found undisclosed liabilities related to a Metron software agreement.

Teams of lawyers toiled over the ensuing litigation for two and a half years. More than one million pages of documents were exchanged and 11 people were questioned under oath in depositions, according to briefs filed in the case. Airbus sought “at least $18.1 million.”

After hearing evidence in an 11-day trial in April, Roush awarded Airbus $9,414,700 in indemnification. She wrote a 41-page decision in Airbus Americas Inc. v. Shareholder Representative Services LLC (VLW 015-8-059).

New York city rates

Airbus then submitted its lawyers’ timesheets and bills. The Herndon-based company used its New York law firm, Clifford Chance, where the partner on the case billed $638 per hour. Associates billed at $275 to $465.

The rates reflected a negotiated discount for Airbus, a regular client of Clifford Chance. Airbus argued the rates were consistent with Northern Virginia rates cited in a 2011 benchmark case, Vienna Metro LLC v. Pulte Home Corp. (VLW 011-3-683).

Local counsel for Airbus was Blankingship & Keith of Fairfax. A partner billed $385 and charged $275 for an associate.

The fee award was governed by Delaware law and by terms of the merger agreement.

Opposing Airbus’ fee motion, the Metron shareholders first claimed Airbus could have investigated the situation more quickly and avoided much of the litigation.

Shareholders’ counsel J. Chapman Petersen of Fairfax also argued Airbus’ bills should be reduced to reflect that the company only recovered a bit more than half of its original claim.

Examining the bills, Petersen said Airbus “chronically overstaffed tasks that could have been accomplished by a single attorney – or used attorneys to accomplish tasks more appropriately assigned to staff.”

In an affidavit, Fairfax attorney Timothy J. McEvoy – offered as an expert for the shareholders – said the Airbus fees were “grossly excessive due to several key factors.”

One of those factors was the “shocking amounts” charged by legal staff for administrative and clerical tasks, McEvoy said. He also faulted “nearly impenetrable” block billing entries.

McEvoy said a reasonable fee award would be $1,443,836.84.

‘Big boys and girls’

The hearing produced what appeared to be lively give-and-take between Roush and the attorneys.

Jeff E. Butler of Clifford Chance conceded his firm’s rates are higher than prevailing rates in Fairfax County.

“Not necessarily,” Roush responded.

“You wouldn’t believe some of the billing rates I have among the domestic bar. I’ve seen billing rates $900 an hour,” the judge said.

Petersen argued Airbus could have found less expensive legal help.

“When I go out and buy a car, I don’t pay a New York price. When I buy a suit, I don’t pay a New York price. And when I hire a lawyer, I don’t pay a New York price,” Petersen said.

“But what’s to prevent Airbus from going with their long-time New York lawyer?” Roush queried.

They made a choice, Petersen answered.

“[T]hey’re asking my client to pay for this choice. And there’s no case law that requires that,” Petersen said.

On the witness stand, McEvoy said the fees charged by Petersen and the other shareholder lawyers were about 30 percent of what Airbus lawyers charged.

Roush reasoned that Metron made a deal with an international company, so it should not be surprised to find the company has highly paid, big-city lawyers.

“[T]hese are big boys and girls in the international arena. I don’t know why you necessarily have to go local for that,” Roush said.

Alexandria attorney Craig C. Reilly, who prepared a 2011 Northern Virginia fee survey accepted by federal judges in fee cases, said the size of the award is not surprising for a case involving millions.

“I don’t think courts should be hesitant to look at awards of this size when the stakes are so high in commercial litigation,” Reilly said.

Reilly said the rates charged by Clifford Chance were consistent with Northern Virginia law firms, in part because Airbus negotiated a favorable rate.

“We have a savvy customer of legal services. That’s a client with market power,” Reilly said. “They were not paying New York rates.”

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