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Dell Technologies Inc. (NYSE:DELL) shares are trading higher premarket Thursday. On Wednesday, the Delaware Supreme Court ruled that five law firms should receive $267 million in legal fees for securing a $1 billion settlement for Dell Technologies shareholders.
The court dismissed arguments that the payment was excessive. The recent ruling includes language that could potentially impact Tesla’s efforts to contest similar fees, reported Reuters.
In the Dell case, plaintiffs alleged that shareholders were short-changed in the $23.9 billion 2018 transaction that marked Dell’s return to the public market. The settlement, announced in November 2022, averted a trial set for the following month.
The fee in the Dell case is the second largest in Delaware and would rank fifth largest in federal securities litigation, according to data from Stanford Law School cited in Pentwater’s court filings.
A group of large investors led by Pentwater Capital Management asked Delaware’s top court to reduce the fee, proposing a federal court model where attorneys’ fees generally decrease as settlement sizes increase.
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In the 10 largest federal securities cases, fees averaged under 10% of recoveries, compared to 27% in the Dell case, according to Pentwater.
Chief Justice Collins Seitz noted that the potential for large fees incentivizes lawyers to take challenging cases despite the risk of earning nothing if they lose.
Seitz said, “It was a highly contentious litigation, spanning two and a half years, with nearly 100 lawyers entering appearances for the defense. The underlying transaction was complex, and counsel achieved an excellent settlement for the class on the eve of trial.”
A Delaware trial court is currently considering two other substantial legal fee requests in cases involving Tesla, Inc. (NASDAQ:TSLA).
Seitz warned that large fee awards might become windfalls. Tesla is fighting $230 million in legal fees involving a director pay case and $7 billion in fees for a case on CEO Elon Musk’s pay, with attorney rates of $10,690 and over $280,000 per hour, respectively. In comparison, the Dell case saw an hourly rate of $5,000, which Seitz noted was “at the high end.”
Investors can gain exposure to the stock via Affinity World Leaders Equity ETF (BATS:WLDR) and Simplify Exchange Traded Funds Simplify Next Intangible Value Index ETF (BATS:NXTV).
Price Action: DELL shares are up 2.86% at $105.89 premarket at the last check Thursday.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Photo: Shutterstock
