## Facts

- Cox Communications, Inc. was publicly traded but controlled by Cox family entities holding about 74% of the voting power.
- The controller group announced a proposal to acquire the public float for $32 per share, expressly conditioned on negotiating final terms with a special committee of independent directors.
- After the announcement, minority shareholders filed class actions challenging the proposal as unfair and self-interested.
- A board special committee, advised independently, negotiated with the controller and reached a deal at $34.75 per share.
- The transaction was conditioned on approval by a majority of the minority stockholders.
- Plaintiffs’ counsel separately communicated with the controller’s counsel and ultimately agreed to settle once the committee-negotiated price and minority-approval condition were finalized.
- The settlement included a provision that the controller would not oppose an attorneys’ fee request of roughly $5 million.
- No stockholder objected to the substantive merger settlement; objectors challenged only the size of the requested fee, arguing the special committee—not the lawsuits—drove the result.

## Issues

1. Whether complaints attacking a controller’s initial, fully negotiable going-private proposal can be “meritorious when filed” under the Chrysler Corp. v. Dann standard for awarding fees based on later benefits.
2. What attorneys’ fees and expenses were reasonable given the special committee’s role in achieving the increased price and minority-protection condition.

## Decision

- The court held the complaints were not meritorious when filed because they challenged an opening, expressly negotiable proposal rather than a final transaction.
- The court approved the settlement but rejected the requested fee as excessive.
- The court awarded $1.275 million in attorneys’ fees and expenses, payable as provided in the settlement.

## Legal Principles

- A fee award for a claimed litigation-generated benefit requires showing the action was meritorious when filed, meaning it stated a colorable claim with a reasonable prospect of producing a benefit.
- Challenges to an initial, nonbinding controller proposal that is expressly subject to special committee negotiation are generally not meritorious when filed because the complained-of terms are not yet fixed.
- The court is not bound by a defendant’s agreement not to oppose a fee request; it must independently assess whether the fee is justified by benefits to the class and the risks undertaken by counsel.
- In setting fees, the court weighs the extent of any class benefit attributable to the litigation, the effort and quality of counsel’s work, and the contingency risk actually assumed.

## Conclusion

The court treated the lawsuits as premature challenges to a negotiable controller proposal, found they did not satisfy the “meritorious when filed” requirement for substantial fees, and reduced the requested multi-million-dollar award to $1.275 million because the special committee was the primary driver of the deal improvements and plaintiffs’ counsel assumed limited litigation risk.


In re Cox Communications, Inc. Shareholders Litigation, 879 A.2d 604 (Del. Ch. 2005)