Shareholders' counsel awarded $15M in fees.

Byline: Virginia Lawyers Weekly

Where certain of Altria Group Inc.'s directors and officers reached a settlement with shareholders who alleged they breached their fiduciary duties, the shareholders' counsel was awarded $15 million in attorney's fees. Although counsel sought $17.5 million in fees, the amount was reduced because substantial involvement by the court was required to ensure that the settlement agreement amounted to something more than a paper tiger.

Background

This case is a shareholder derivative action arising out of Altria Group Inc.'s 2018 investment in Juul Labs Inc., or JLI. On behalf of Altria shareholders, plaintiffs allege that certain Altria directors and officers breached their fiduciary duties to the company by consciously disregarding the legal, regulatory, reputational and financial risks associated with the JLI investment. Plaintiffs bring additional claims against the Altria defendants for breach of fiduciary duty and waste of corporate assets.

The parties reached a settlement agreement in the spring of 2022. However the court found this initial agreement lacking. Armed with the court's suggestions as to how to improve the settlement, and with the assistance of a magistrate judge, the parties reached a revised settlement. The court preliminarily approved a revised settlement on Oct. 26, 2022.

After four Altria shareholders filed a joint objection to the proposed settlement, the parties once again amended the proposed settlement. The objectors then informed the court that the proposed settlement "adequately addresse[d]" their concerns, thus resolving the sustained objection. The court therefore granted final approval of the settlement.

Plaintiffs now move for a fee and expense award of $17.5 million. Such an award would represent a 1.5x multiple on plaintiffs' counsel's lodestar, which plaintiffs calculate at approximately $11,664,544.50. Plaintiffs' counsel also incurred $220,614.44 in expenses in litigating the instant suit, though plaintiffs do not seek a separate expense award. Finally, plaintiffs' counsel requests the court's approval of a $15,000 service award to each of the five named plaintiffs.

Analysis

Though the settlement agreement constitutes a victory for Altria shareholders, the court cannot find that the result obtained fully supports plaintiffs' counsel's $17.5 million fee request. Rather, plaintiffs' counsel's performance, though capable, necessitated substantial involvement by the court to...