In selecting lead counsel for a stockholder derivative litigation, the Court of Chancery applies the factors set forth under Hirt v. U.S. Timberland Service Co., 2002 WL 1558342 (Del. Ch. July 3, 2002). These factors are as follows:
- the “quality of the pleading that appears best able to represent the interests of the shareholder class and derivative plaintiffs;”
- the relative economic stakes of the competing litigants in the outcome of the lawsuit (to be accorded “great weight”);
- the willingness and ability of all the contestants to litigate vigorously on behalf of an entire class of shareholders;
- the absence of any conflict between larger, often institutional, stockholders and smaller stockholders;
- the enthusiasm or vigor with which the various contestants have prosecuted the lawsuit; and
- [the] competence of counsel and their access to the resources necessary to prosecute the claims at issue.
In making the selection, it is noteworthy that the Court of Chancery recently took into account which counsel initiated a books and records demand to support the allegations of its complaint, rather than relying upon publicly known information. This was an important factor in the decision of In re CytRx Corp. S’holder Deriv. Lit. II, C.A. No. 11800-VCMR (Feb. 22, 2017).
If you would like to speak to a litigator in Fox Rothschild’s Delaware office, please reach out to Sid Liebesman (302) 622-4237 or Seth Niederman (302) 622-4238.