Goodrich v. E.F. Hutton Group, Inc.

681 A.2d 1039 (1996)

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Nature of the Case

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Facts

P commenced this action on behalf of a class of customers of E.F. Hutton (D) who had received funds from D. The funds were received during the period since July 1, 1980. The funds were paid by means of checks drawn on accounts maintained in banks located more than 500 miles from the E.F. Hutton office in which the customer transacted business. The complaint charged D with a wrongful scheme to delay or withhold funds from its customers in order to gain the interest-free use of the money during the period of delayed payment. This conduct was alleged to have violated common law doctrines of fraud and agency; the Delaware Consumer Fraud Act; and to have constituted conversion, breach of contract, and a breach of fiduciary duty to the customers. The parties submitted a Stipulation of Settlement where D agreed to pay $3.3 million into an interest-bearing escrow account. The escrow account would be drawn upon to pay attorney's fees for the class, the costs of notice to the class, and the costs of settlement administration not to exceed $600,000, up to a combined limit of $1.1 million. The Settlement provided for payment to class members, in amounts dependent upon (i) the face value of checks received from D, (ii) the subclass of which the claimant was a member, and (iii) the prevailing interest rate during the year in which the check(s) were drawn. If claims by class members exceeded the funds available in the escrow account, each claimant would receive payment of a fraction of those funds equal to the ratio of the value of his claim to the total value of the claims submitted. To the extent class members did not claim funds available in the escrow account, the Settlement established that such remaining funds were to be 'returned to D or its designee.' The Court of Chancery decided to award to Goodrich's attorneys a fee of 331/3% of the total amount actually paid out to class members, up to a limit of $515,000. It noted at the settlement hearing, 'if anything like the entire amount gets disbursed, long before that happens, the attorneys will get the $515,000 that they seek.' Specifically, if class members submitted claims amounting to only $1,545,000 of the $2.2 million potentially distributable, counsel for the class would receive $515,000 in fees. P's sole contention is that $515,000 in attorney's fees should have been awarded unconditionally and paid immediately and not prorata.