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Kaufman v. Shoenberg

Court of Chancery of Delaware, New Castle County

November 13, 1952

KAUFMAN
v.
SHOENBERG et al.

Stanley L. Kaufman (of Kaufman, Imberman & Taylor) and Joshua Peterfreund, New York City, and William Marvel (of Morford, Bennethum, Marvel & Cooch), Wilmington, for plaintiff.

Albert R. Connelly and Edward C. Perkins (of Cravath, Swaine & Moore), New York City, and Caleb S. Layton and Henry M. Canby (of Richards, Layton & Finger), Wilmington, for defendants.

SEITZ, Chancellor.

Plaintiff seeks an attorney's fee for services rendered in connection with the so-called Eleventh cause of action.

I ruled that since the Corporation complied with the demand made in connection with the Eleventh cause of action within a reasonable time thereafter, the Eleventh cause should be dismissed. See Kaufman v. Shoenberg, Del.Ch., 91 A.2d 786. The question therefore is whether, as a matter of law, a stockholder is entitled to his reasonable investigation fees if his demand produces some real benefit to the Corporation without the necessity for litigation I conclude that he is so entitled if he is able to substantiate his contention factually. I reach this conclusion because I believe substantially the same benefit accrues to the Corporation whether it be as the result of the demand or of successful litigation. To grant a fee based upon ligitimate investigation expenses in connection with a successful demand is to discourage litigation and yet encourage stockholder vigilance without unduly prejudicing the general corporate welfare. See 60 Harvard Law Review 835.

I leave it to the parties to decide whether or not they desire a hearing on plaintiff's right to, and the amount of such investigation fees. The parties may also comment on whether the fee, if any, [33 Del.Ch. 283] is properly within the scope of ...


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