Attorneys' Fee Awards in Delaware: A Normative and Empirical Analysis

Fee awards that the Delaware Court of Chancery has granted to plaintiffs' counsel in class actions and derivative suits are a recent focus of controversy. Specifically, critics claim that fees are too high a multiple of "lodestar"-hours lawyers work times their hourly rate. That criticism, however, is based solely on a handful of cases. To remedy the ad hoc basis of this criticism, we have collected and analyzed data on all fee awards granted over the past ten years. In short, we find no basis for the criticism. Specifically, we find that mean and median fee awards are well within a reasonable range, and that the fee awards on which the Court's critics rely are extreme outliers. Among cases settled or tried, they amount to one percent of our sample. We further find that fee awards are consistent with the percentage-of-the-benefit approach laid out by the Delaware Supreme Court, under which the percentage increases for cases that settle late in the litigation process and cases that progress to trial. That approach is consistent with economic analyses of optimal fee regimes. The outliers that the Court's critics have found are inevitable results of this approach.