United States District Court, D. Delaware
BRIAN SCOTT, Individually and on Behalf of All Others Similarly Situated, Plaintiff,
DST SYSTEMS, INC., STEPHEN C. HOOLEY, GARY D. FORSEE, CHARLES EDGAR HALDEMAN, SAMUEL G. LISS, JEROME H. BAILEY, JOSEPH C. ANTONELLIS, LOWELL L. BRYAN, and LYNN DORSEY BLEIL, Defendants. JAMES D. WILLIAMS, Plaintiff,
DST SYSTEMS, INC., STEPHEN C. HOOLEY, CHARLES E. HALDEMAN, SAMUEL G. LISS, LOWELL L. BRYAN, LYNN D. BLIEL, JEROME H. BAILEY, JOSEPH C. ANTONELLIS, and GARY D. FORSEE, Defendants.
ANDREWS, U.S. DISTRICT JUDGE:
before me are Plaintiff Brian Scott's Motion for Attorney
(C.A. 18-286, D.I. 19) and Plaintiff James Williams's
Motion for Attorney Fees (C.A. 18-322, D.I. 7). The Parties
have briefed the motions (C.A. 18-286, D.I. 20, 25, 28; C.A.
18-322, D.I 8, 16, 19) and submitted supplemental briefing at
my request (C.A. 18-286, D.I. 32, 33; C.A. 18-322, D.I. 23,
26). Scott seeks $115, 000. (C.A. 18-286, D.I. 20 at 1).
Williams seeks $100, 000. (C.A. 18-322, D.I. 8 at 24). For
the reasons discussed more fully below, I will deny
cases stem from the March 28, 2018 merger of DST Systems,
Inc. ("DST") with SS&C Technologies, Inc.
("SS&C"). (D.I. 20 at 1-3). The DST Board
initiated the transaction on January 11, 2018 when it entered
into an agreement and plan of merger with SS&C.
(Id. at 1). SS&C was to acquire DST for $84.00
per share of common stock. (Id.). The merger was
valued at $5.4 billion. (D.I. 1 at ¶ 25). Defendants
issued a preliminary proxy statement describing the details
of the transaction on February 7, 2018. (D.I. 25 at 1). Three
lawsuits, two in this court and another in Missouri, were
filed within weeks. (Id.). The lawsuits alleged that
the preliminary proxy statement omitted material information
in violation of Sections 14(a) and 20(a) of the Securities
Exchange Act of 1934. (Id.; see also D.I. 1). DST
filed its definitive proxy statement ("Proxy") with
the SEC on February 27, 2018. (D.I. 25 at 5). Two weeks later
DST voluntarily issued a supplemental disclosure
("Supplement") to moot the pending lawsuits.
(Id.). The Plaintiffs agreed that the supplemental
disclosures mooted their lawsuits and began pursuit of
attorneys' fees. (Id. at 6). These motions
Claims Under Section 14(a)
14(a) of the Securities Exchange Act of 1934 renders it
unlawful to seek proxies in violation of "such rules and
regulations as the [SEC] may prescribe as necessary or
appropriate in the public interest or for the protection of
investors." 15 U.S.C. § 78n(a)(1). Rule 14-a9,
promulgated by the SEC pursuant to Section 14(a), provides:
No solicitation subject to this regulation shall be made by
means of any proxy statement. . . which, at the time and in
the light of the circumstances under which it is made, is
false or misleading with respect to any material fact, or
which omits to state any material fact necessary in order to
make the statements therein not false or misleading or
necessary to correct any statement in any earlier
communication with respect to the solicitation of a proxy for
the same meeting or subject matter which has become false or
17 C.F.R. § 240.14a-9. There is a private cause of
action under Section 14(a). J. I. Case Co. v. Borak,
377 U.S. 426, 431 (1964). In the Third Circuit, to prevail in
such an action a plaintiff must prove:
(1) a proxy statement contained a material misrepresentation
or omission which (2) caused the plaintiff injury and (3)
that the proxy solicitation itself, rather than the
particular defect in the solicitation materials, was an
essential link in the accomplishment of the transaction.
Gen. Elec. Co. by Levit v. Cathcart, 980 F.2d 927,
932 (3d Cir. 1992) (quotation marks omitted).
An omitted fact is material if there is a substantial
likelihood that a reasonable shareholder would consider it
important in deciding how to vote. This standard is fully
consistent with Mills general description of
materiality as a requirement that "the defect have a
significant propensity to affect the voting
process." It does not require proof of a substantial
likelihood that disclosure of the omitted fact would have
caused the reasonable investor to change his vote. What the
standard does contemplate is a showing of a substantial
likelihood that, under all the circumstances, the omitted
fact would have assumed actual significance in the
deliberations of the reasonable shareholder. Put another way,
there must be a substantial likelihood that the disclosure of
the omitted fact would have been viewed by the reasonable
investor as having significantly altered the "total
mix" of information made available.
TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438,
449 (1976) (emphasis in original).
"determination of materiality concerns a mixed question
of law and fact, involving as it does the application of a
legal standard to a particular set of facts." Gen.
Elec. Co., 980 F.2d at 932 (internal quotation marks
omitted). "[M]ateriality depends on the significance the
reasonable investor would place on the withheld or
misrepresented information." Basic Inc. v.
Levinson, 485 U.S. 224, 240 (1988). Thus, whether
information is material in "any particular case . ..
depends on the facts." Id. at 239. "Only
if the established omissions are so obviously important to an
investor, that reasonable minds cannot differ on the question
of materiality is the ultimate issue of materiality
appropriately resolved as a matter of law. . .." TSC
Indus., Inc., 426 U.S. at 450 (quotation marks omitted).
traditional American rule disfavors the award of
attorney's fees in the absence of statutory or
contractual authorization." Polonski v. Trump Taj
Mahal Assocs.,137 F.3d 139, 145 (3d Cir. 1998). A court
may, however, exercise its equitable powers to award
attorneys' fees to a litigant who "successfully
maintained a suit, usually on behalf of a class, that
benefits a group of others in the same manner as
himself." Mills v. Elec. Auto-Lite Co., 396
U.S. 375, 392 (1970). "This well recognized exception,
known as the 'common benefit' or 'common
fund' equitable doctrine, is premised upon the rationale
that it would be unfair to require one party to bear the
entire expense which results in the benefit to a large class
of persons." Cooperstock v. Pennwalt Corp., 820
F.Supp. 921, 923 (E.D. Pa. 1993). This doctrine applies when
three elements are satisfied: "(1) the plaintiff must
confer a substantial benefit; (2) to members of an
ascertainable class; and (3) the court must ensure that the
costs are proportionally spread among that class."
Polonski, 137 F.3d at 145. Moreover, when a suit is