Bally (albeit belatedly) appointed a subcommittee of
independent directors to evaluate the litigation. Before that
machinery was well under way the settlement was reached
(anticipated cost of that procedure was part of the equation
giving rise to Bally's decision to settle). But had the matter
run its full course, Delaware law teaches that the trial
court's obligation is to exercise its own independent business
judgment in reviewing the committee's decision taken on behalf
of the corporation. Zapata v. Maldonado, 430 A.2d 779, 787
(Del.Sup. Ct. 1981). This Court can do no less here.
Fourth, plaintiff's counsel makes an entirely invalid
distinction between the class action and the derivative suit
in terms of this Court's function. All the needs for
protection of the unrepresented — the same considerations
already identified — have equal force in the two situations.
All that distinguishes them is the presence of a board of
directors to represent stockholder rights in the derivative
action. In real world terms the potential for sweetheart
deals*fn2 is the same in the two types of action. Essentially
the argument brings into play the principles already discussed,
in which the Court must protect the rights of those without
counsel at this point in the litigation.
Determination of the Allowable Fee
This opinion turns then to the $200,000 question. It is
apparent from the Opinion that plaintiff was no more than
marginally successful in this litigation. All the wide-ranging
claims of the Complaint save one were rejected. Those rejected
claims were variously but fatally flawed.
As this Court stated from the bench during the March 16
hearing, this case is not at all parallel to those in which a
partially successful plaintiff is entitled to the allowance of
all fees because he has prevailed substantially and it would
be inappropriate to carve out the time spent on unsuccessful
theories. Syvock v. Milwaukee Boiler Manufacturing Co.,
665 F.2d 149, 162-65 (7th Cir. 1981); Seigal v. Merrick,
619 F.2d 160, 164-65 (2d Cir. 1980). Here the only successful claim was
entirely discrete and a relatively minor part of the total
Under those circumstances the teaching of our Court of
Appeals is that a court should determine what services were
allocable to the matter on which plaintiff was the "prevailing
party." Busche v. Burkee, supra; Muscare v. Quinn,
614 F.2d 577, 580-81 (7th Cir. 1980); and see in general Syvock, supra.
It is unnecessary to posit any reductio ad absurdum to
illustrate the inappropriateness of allowing all fees under
such circumstances. This case itself demonstrates the
unfairness of requiring Bally to pay twice — once to its own
successful counsel and once to the other side's unsuccessful
counsel — for separable claims that have been rejected after
an extended and expensive litigation process.*fn4
Nor may plaintiff be viewed as the "prevailing party" on his
claims (viewed as a totality) through settlement, which under
such decisions as Harrington v. DeVito, 656 F.2d 264 (7th Cir.
1981) could justify the
allowance of all time spent by plaintiff's counsel. Any
comparison of plaintiff's many unsuccessful with its one
successful claim, viewed against the modest though not
inconsequential benefits to Bally's stockholders derived from
this litigation, must call to mind the familiar adage of the
mountain in labor that brings forth a mouse.*fn5 This is not
to depreciate the reasonableness of the ultimate settlement.
But any objective observer has to regard defendants not
plaintiff as the substantial victor both on the merits and in
Accordingly plaintiff's counsel's argument that they are
entitled to compensation for all time expended, including time
on what was really a lawsuit they lost, is unsound. That is
what this Court ruled orally at the March 16 hearing, and it
is reaffirmed in this opinion.
In response to this Court's request for an appropriate
allocation, counsel have filed affidavits and a memorandum
estimating that the time necessitated by the successful claim
(the "Klein claim") was 75-80% of the total. As a factual
matter this Court does not credit that showing. It simply
taxes credulity, and it is inconsistent with the matters known
to the Court from its rulings in the litigation and from
whatever objective facts (discovery, briefing and so on) are
Even if it were true however that so much of the time was in
fact devoted to the Klein claim, that would have been a
totally uneconomic decision — one that would never have been
made by counsel and a client were they exercising a free market
judgment. That is in essence the concept of a reasonable fee:
what time and expense would have been incurred in light of the
nature of the Klein claim and the reasonably potential
recovery. Under that standard, there is no way in which as much
as some 850 hours of lawyer time and 150 hours of law clerk and
paralegal time, aggregating at least $115,000,*fn7 could
reasonably have been devoted to that claim.
This conclusion poses three possible alternative solutions:
(1) Plaintiff's counsel could be sent back to
the drawing board to provide a more realistic
portrayal (at least in the Court's perception) of
the time allocable to the Klein claim. Because
the Court assumes plaintiff's counsel have made
their existing presentation in good faith,
however, this possibility does not seem viable.
It would require counsel to abandon their honest
beliefs and reanalyze their time against a
standard they do not share.
(2) Plaintiff's counsel's most recently
tendered bottom-line figure of $115,000 could be
viewed as the "lodestar" figure. In that event it
would have to be dimmed by a fractional, rather
than enhanced by a whole-number, multiplier to
produce a reasonable fee chargeable against Bally.
(3) This Court could assess what appears to be
a reasonable fee under all the circumstances
known to it.
Essentially approaches (2) and (3) amount to the same thing in
the world of reality.