Cox Communications, Inc. Shareholders Litigation, In re
Delaware Court of Chancery
879 A.2d 604 (2005)
The Cox family, holders of 74 percent of the stock of Cox Communications, Inc. (Cox) (defendant), decided to take the company private in 2004. On August 2, 2004, Cox announced a proposal to purchase the remaining shares at $32 per share. The board set up a special committee to consider the proposal and negotiate on behalf of minority shareholders. At the same time, numerous lawsuits were filed on behalf of minority shareholders (plaintiffs), alleging that the price was unfair and that the Cox family was trying to extract all the profit from the enterprise for itself. The special committee retained counsel, and after a lengthy period of negotiation ultimately accepted a bid from Cox for $34.75 per share, on the condition that a majority of the minority shareholders approve the deal. While the special committee’s work was ongoing, the Cox family was also negotiating with the plaintiff-shareholders’ attorneys. At various times the plaintiffs’ attorneys demanded a price of $37 per share and a condition that a majority of the minority shareholders approve the transaction. After the special committee obtained its deal, the attorney for the Cox family told the plaintiffs’ attorneys that $34.75 per share with a majority of the minority approval condition was the final offer. The attorneys accepted the deal and agreed to settle the litigation. The Cox family signed the merger agreement on in October 2004. In the final stipulation of settlement of the litigation, the Cox family agreed not to oppose attorney’s fees for the plaintiffs’ attorneys of $5 million. No one filed objections to the merger settlement, but several parties filed objections to the attorney’s fees. They argued that since the special committee handled the negotiation, the lawsuits served virtually no purpose other than to generate attorney’s fees.
Rule of Law
Holding and Reasoning (Strine, J.)