Stephen J. Choi is the Bernard Petrie Professor of Law and Business and Director of the Pollack Center at New York University School of Law, Jessica M. Erickson is the George E. Allen Chair in Law and Director of the Richmond Law & Business Forum at the University of Richmond School of Law, and A.C. Pritchard is the Frances and George Skestos Professor of Law at the University of Michigan Law School. This post is based on their recent paper, and is part of the Delaware law series; links to other posts in the series are available here.
Attorneys’ fees drive Delaware’s system of stockholder litigation. Delaware courts use fee awards to manage the incentives of its private enforcement regime. In recent years, however, several eye-catching awards—such as the $266.7 million fee in Dell Technologies and the $345 million fee in Tornetta v. Musk—have sparked renewed scrutiny, raising concerns from Delaware legislators that Delaware’s fee awards do not align with shareholder interests.
In our new article, Is Delaware Different? Stockholder Lawyering in the Court of Chancery, we ask: Are Delaware’s fee awards different—and if so, why?
We assemble a comprehensive dataset that includes all derivative and class actions involving public companies filed in the Delaware Court of Chancery between 2017 and 2022. We coded outcomes, recovery types, fees, lodestars, and granular characteristics of the allegations and procedural posture. We compare these Delaware cases to a large dataset of federal securities class actions that we collected covering more than 2,400 cases.
One finding stands out: a “Delaware premium.” Delaware awards significantly higher fees—especially higher multipliers—than comparable federal cases, even though the underlying litigation risk looks quite similar. We also find no evidence that Delaware’s fee awards systematically account for the risks attorneys bear or the results they achieve.
Delaware and Federal Cases Share Similar Litigation Profiles
Delaware courts have long resisted comparisons to federal securities class actions. When justifying high fee awards, the Court of Chancery has emphasized several features that purportedly distinguish Delaware stockholder cases, including the ability to identify high-quality cases, higher dismissal rates, and lower settlement prospects.
Our data suggest otherwise. READ MORE »
