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E-MailMichael Hanrahan is a Director at Prickett, Jones & Elliott, P.A. This post is based on his recent statement and is part of the Delaware law series; links to other posts in the series are available here.
Professors Adam C. Pritchard and Jessica M. Erickson recently posted Opening Delaware’s Black Box of Attorneys’ Fees (“Black Box”) [2], stating that fee awards in the Delaware courts are based on “judges’ intuition [that] creates a black box that only the judges themselves can understand.” [3] My forty-seven years of experience in corporate litigation in the Delaware courts, including arguing for and sometimes against fee requests, causes me to disagree with the professors. [4]
A. Delaware’s Fee Decisions Are Not Based on Judges’ Intuition
From Sugarland through Dell and Tesla [5], the reasoning underlying Delaware decisions awarding fees is explained in transcript rulings, orders and written opinions by the Court of Chancery and Delaware Supreme Court. There is black ink, not a black box. These decisions are rendered by judges on the Chancery and Supreme Courts with experience evaluating fee requests. Many of these jurists also had experience litigating contested fee requests.
Delaware fee decisions are easily understood by corporate practitioners. They are based on a multi-factor analysis that includes the benefits conferred by the litigation, the stage of litigation, the time and effort of counsel, the complexity of the litigation and other case specific factors [6], not judges’ “intuition.” Indeed, factors the professors claim should be considered are already part of the Delaware fee analysis. [7]
Pritchard and Erickson criticize Delaware judges for relying on precedent fee awards, claiming “that is a recipe for replicating mistakes.” [8] The underlying assumption is that Delaware fee awards are “mistakes.” They accuse “plaintiffs’ firms” of cherry-picking “outlier examples” that are not “representative samples.” [9] Precedent cases are not, however, “[i]solated numbers.” [10] They are selected because the type of case and result are similar to the present case. Defendants and objectors also select (and sometimes cherry-pick) precedents they contend are like the case before the Court. Reliance on precedent is fundamental to American jurisprudence. The professors think the Delaware courts should consider not the most relevant precedents, but instead set fee awards from “database[s]” they concoct and interpret. [11]
The professors’ bald statement that Delaware “fee awards are not the product of an adversarial process” [12] is simply wrong. First, in derivative cases and class actions where the corporation is to pay the fee awarded, the corporation is adversarial, both in negotiations and often by objection. The premise that “Defendants typically agree not to contest fee awards” [13] ignores that they only agree after their lawyers have engaged in adversarial negotiations over the amount, form and timing of the fee.
Second, the Court of Chancery, in exercising its equitable power to award fees, makes an independent judgment and not infrequently trims the requested fee significantly even when defendants have agreed to a fee request and there are no objectors. Third, perhaps objections by stockholders are “rare” because stockholders generally find the fee levels sought and approved in Delaware appropriate. Fourth, defendants and sometimes objectors do present “well-developed arguments as to why a requested fee is too high.” [14]
B. Delaware’s Multi-Factored Approach Is Superior to the Texas Lodestar Cap
The professors ask: “Texas caps fees at four times lodestar, but how does Delaware practice compare?” [15] Perhaps the better question is: how does the arbitrary and untested Texas cap compare with the far more sophisticated and nuanced analysis of Delaware’s experienced judges? The tables in Appendix A compare fees under Delaware’s percentage of the benefit/stage of litigation approach to the Texas 4x lodestar cap.
At low levels of recovery, the Texas cap yields absurdly high fees, particularly at higher lodestar levels. It is unclear how Texas will determine fees at those levels. As recoveries increase, the Texas cap quickly produces single digit fee percentages, especially at lower lodestars. The Texas cap is really just a blunt instrument version of the declining percentage method. It provides no incentive to press for larger recoveries when the lodestar is small or moderate. Efficiency and reasonable rates are punished, not rewarded. The Texas cap instead creates a strong incentive to run up large lodestars. It also will encourage defendants to seek discovery to challenge hours and rates because reducing the lodestar will reduce the fee.
C. Senate Concurrent Resolution 17
Senate Concurrent Resolution 17 (“SCR 17”) is not, as Pritchard and Erickson suggest, “a second set of pending reforms” following Senate Bill 21 (“SB 21”), which was enacted on March 25, 2025. [16] SCR 17 only asks for a report and proposal from the Delaware Corporation Law Council (“CLC”). There is no “set of pending reforms,” though language in SCR 17 and in a paper its primary sponsor directed be sent to the CLC [17] tips off that the fix is probably in for the CLC to propose a lodestar multiplier fee cap. [18]
Citing SCR 17, Pritchard and Erickson say that “Delaware has recognized that determining fee awards is ‘a difficult policy issue.”‘ [19] Actually, the undisclosed drafters of the resolution (probably the same crew who drafted SB 21) decided to elevate fee awards to “a difficult policy issue” in order to justify a statute overruling forty-five years of Delaware law and transferring determination of fee awards in fiduciary cases from Chancery’s equity jurisdiction based on equitable principles to the legislature based on political pressure. The goal of these professors and the proponents of SCR 17 is to replace Delaware’s multiple factor fee standard with the type of formulaic and mechanical method the Delaware courts have repeatedly and wisely rejected. I would suggest the CLC support the Delaware judiciary, rather than attacking it once again.
D. The Professors’ Smallest Possible Fee Standard
The professors claim an “economic insight” that “plaintiffs’ attorneys” should be awarded “not a dollar more than it takes to incentivize plaintiffs’ attorneys to bring meritorious cases.” [20] They propose the Delaware fee standard should be:
What is the smallest award that a court can order in a particular case that will still incentivize plaintiffs’ attorneys to file meritorious cases in the future? [21]
They want the Delaware courts to base a fee award, not on the result of the particular case, but on after-the-fact speculation about the lowest fee the lawyers in that case should get that would “still incentivize plaintiffs’ attorneys” to file different “meritorious cases in the future.” [22] Having litigated many contingent corporate cases, the professors’ standard would incentivize me to retire, not bring future cases.
The two academics assume that “plaintiffs’ attorneys” are all the same and should be paid the minimum that would convince the least among them to bring a contingent case. Citing Tesla, they claim their “economic insight is consistent with Delaware jurisprudence” because:
When corporate boards pay more to officers than necessary to secure their services, courts say that the directors breached their fiduciary duty to the stockholders. [23]
There is no Delaware case holding that a board cannot pay the CEO a dollar more than the minimum necessary to secure her services.
When it comes to compensation, corporate CEOs are like the children of Lake Wobegon: they are all above average. Was Musk’s $56 billion compensation not a dollar more than it took to incentivize him to be Tesla’s part-time CEO? He is running DOGE for free. Every dollar for the CEO is also “one less dollar for the stockholders.” [24] Should CEOs be held to “the same standard” [25] the professors want applied to plaintiff’s lawyers: not one dollar more than it would take to convince the least among them to take the job? Do corporations pay their high-priced lawyers not a dollar more than it would take to convince any other defense firm to take on the case?
E. Litigating Contingent Cases Is Not Any Other Business
Pritchard and Erickson not only presume to tell the Delaware courts how to award fees, they also opine on how “a plaintiffs’ law firm” should analyze “their potential return in a particular case.” [26] According to the professors, all you need to do is (i) compare the money and time the case will require with (ii) the firm’s probable fee if there is a recovery and (iii) the risk of non-recovery. [27] However, the three factors identified are inherently unknowable. The time and money a case will take depends on numerous variables, including the defendants’ strategy. Some defendants take a measured approach, but many adopt scorched-earth tactics, fighting every discovery request, filing numerous motions, delaying whenever possible and pursuing appeals. Few cases settle within a year and whether a case lasts two or four or six years often depends on defendants’ chosen approach. The outcome of litigation is always uncertain and even more so in contingent corporate litigation. Speculating on a “probable fee” is basically throwing darts blindfolded. Whether there will be any recovery to support a fee and what that recovery will be turns on so many variables and developments that even for experienced litigators it is, at best, a poorly informed guess.
The professors erroneously postulate that ‘plaintiffs’ law firms are no different from other businesses” in making investment decisions under uncertainty. [28] Stockholder litigation, however, is different than other litigation. In most commercial litigation, both sides were there when the deal went down and have roughly the same information. In corporate litigation, the stockholder plaintiff was not involved in the negotiations and was not in the board room when the transaction was discussed and approved. Stockholders generally only know what the corporate actors choose or are forced to disclose, usually in lawyer-drafted documents presenting a slanted version of events. The recent amendments to 8 Del. C. § 220 basically ensure that stockholders will get little more than sanitized board minutes drafted by lawyers, so the information deficit will be even more severe in the future.
F. The Professors’ Proposal
Pritchard and Erickson say that Delaware fee awards should be controlled by “hard data.” [29] They complain that “Delaware judges” dismissed their studies of “substantial datasets” from securities class actions because Chancery litigation is different from federal securities litigation. [30] Their solution is to have the CLC recommend “the creation of a comprehensive database of Delaware fiduciary litigation” by requiring “[e]very lawyer filing a stockholder suit” in Chancery to file a form including three types of information:
(a) the judge, plaintiffs, plaintiffs’ law firms, referring firms and (i) “whether specified allegations that make recovery more or less likely have been included in the complaint,” and (ii) whether any of the few documents still available under revised Section 220 were utilized;
(b) “information about the case’s resolution,” including the stages of litigation and any monetary or other consideration; and
(c) in “all cases,” including cases that were dismissed, information (i) “about the work of the plaintiffs’ attorneys,” including firm names, hours, lodestar and expenses, “all broken down by stage of litigation,” and (ii) “requested and awarded attorneys’ fees, expenses, and any incentive awards paid to the representative plaintiff’ and (iii) the amount of any mootness fee and “the consideration for the mootness fee.” [31]
Having “collected substantial datasets” on federal securities cases, Professors Pritchard and Erickson want to require lawyers for stockholders to prepare and publicly file detailed forms so the professors can collect “systemic data” that the Delaware Court of Chancery would be required to maintain. [32] Of course, as with time and expenses in seeking a fee award, plaintiffs’ attorneys would not be compensated for completing these forms and the Court would pay the cost of maintaining the database. [33] Based on their federal securities databases, Pritchard and Erickson have argued for reduced fees in federal cases. [34] They now seek to enlist the CLC, which consists largely of corporate transactional and defense lawyers, to support requiring stockholders’ lawyers and the Court of Chancery to assemble a Chancery database. I believe the CLC should reject that invitation.
Link to the full statement can be found here.
1 Mr. Hanrahan has been a member of the Delaware bar since 1978 and is a Director of Prickett, Jones & Elliott, P.A. (go back)
2 See https://corpgov.law.harvard.edu/2025/03/19/opening-delawares-black-box-of-attorneys-fees/. (go back)
3 Black Box. See also id. (repeatedly claiming Delaware fee decisions are based on the “intuition” of judges). Pritchard and Erickson seem to believe all practices involving representation of stockholders are a “black box.” See Stephen J. Choi, Jessica M. Erickson & A.C. Pritchard, The Business of Securities Class Action Lawyering (Feb. 9, 2023) (“Securities Lawyering”), available at https://papers.ssm.com/sol3/papers.cfm?abstract_id=4350971 (repeatedly referring to “the black box of securities class action lawyering”). (go back)
4 Professors Pritchard and Erickson were among the professors who filed amicus curiae briefs in favor of the declining percentage method in In re Dell Techs. Inc. Class VS’holders Litig. (“Dell”), 300 A.3d 679, 704-715 (Del. Ch. 2023) (discussing Securities Lawyering and rejecting declining percentage method), aff’d, 326 A.3d 686 (Del. 2024). Professor Pritchard also submitted an affidavit supporting an objector to the fee request in Tornetta v. Musk, 326 A.3d 1203, 1258-1259 (Del. Ch. 2024). As Black Box acknowledges, Tornetta rejected the professors’ statistical analysis of federal securities cases. Other than these two recent objections to fees, I did not find any other participation in Delaware corporate litigation by the professors. (go back)
5 See, e.g., Sugarland Indus. Inc. v. Thomas, 420 A.2d 142 (Del. 1980); Goodrich v. E.F. Hutton Grp., Inc., 681 A.2d 1039 (Del. 1996); Ams. Mining Corp. v. Theriault, 51 A.3d 1213 (Del. 2013); Dell, 300 A.3d 679; Tornetta v. Musk, 326 A.3d 1203 (Del. Ch. 2024). (go back)
6 See id. (go back)
7 Black Box (“strength of the available allegations, the degree of difficulty posed by applicable doctrine, and how far the case proceeds before resolution”; “attorney effort”; “the stages of litigation”; “hours, lodestar, and expenses”). (go back)
8 Id. (go back)
9 Id. (go back)
10 Id. (go back)
11 Id. (go back)
12 Id. (go back)
13 Id. (go back)
14 Id. (go back)
15 Id. (go back)
16 Id. (referring to Del. S. Con. Res. 17, 153d Gen. Assem. (2025) and Del. S.B. 21, 153d Gen. Assem. (2025)). (go back)
17 Joseph A. Grundfest & Gal Dor, Raising the Federal Eyebrow: The Incidence of Multipliers of Seven or More in Federal Class Action Fee Awards, Rock Ctr. for Corp. Governance Working Paper #262 at 1 n.* (Feb. 25, 2025), available at https://papers.ssm.com/sol3/Delivery.cfm/5152397.pdf?abstractid=5152397&mirid=1&type=2. (go back)
18 The professors say the reforms are proposed by a “bipartisan group of Delaware legislators.” Black Box. The word “bipartisan” refers to Democrats and Republicans who are opponents of stockholder litigation, not to a mix of legislators with divergent views. (go back)
19 Id. (go back)
20 Id. (go back)
21 Id. (go back)
22 Id. (go back)
23 Id. (go back)
24 Id. (go back)
25 Id. (go back)
26 Id. (go back)
27 Id. (go back)
28 Id. (go back)
29 Id. (go back)
30 Id. (go back)
31 Id. Since mootness fees are awarded based on the benefit of a pre-existing event mooting a claim, there is no “consideration for the mootness fee.” (go back)
32 Id. (go back)
33 The professors would impose no obligation for defendants’ attorneys to reveal their hours, lodestar and expenses. (go back)
34 See Securities Lawyering; Stephen J. Choi, Jessica Erickson & A.C. Pritchard, Working Hard or Making Work? Plaintiffs’ Attorneys Fees in Securities Fraud Class Actions, 17 J. Empirical Legal Stud. 3, 438-65 (Aug. 28, 2020), available at https://doi.org/10.1111/jels.12262; Stephen J. Choi, Jessica M. Erickson & A.C. Pritchard, Paying for Performance? Attorneys’ Fees in Securities Fraud Class Actions (Feb. 13, 2024), available at https://papers.ssm.com/sol3/papers.cfm?abstract_id=4707763. (go back)
