Nature of the Case
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Facts
In January 1973. Sugarland Industries, Inc. (D) controlled by the Kempner family owned 7,500 acres of land in Texas south of Houston which it was attempting to sell. Mr. and Mrs. Thomas (P) who are members of the Kempner family and shareholders in D corp. were concerned about a proposed sale of the part of the property (5,900 acres) to White and Hill, a partnership, for $23,800,000. Ps considered the price inadequate and retained Barntly Harris, an attorney and a partner in the firm of Prappas, Caldwell & Moncure, to represent their interests in the proposed sale. Shortly thereafter, a syndicate known as R-S-C was formed and it offered $27,000,000 for the same land. Ignoring that offer, D's directors announced a special meeting of stockholders to discuss White and Hill's offer. Prappas' firm concerned that the D directors had excluded the possibility of selling the property to others, consulted a special counsel about litigation to block the sale. They also suggested to R-S-C that it would be helpful if they, advanced $10,000 as a retainer for special counsel consulted already. Under this plan, Ps would pay the excess of $10,000. On March 6, Ps filed a stockholders' derivative action in the Court of Chancery to enjoin the proposed sale. The court held that the agreement entered into by the Ps' lawyers did not preclude their application to the court for attorney's fees on a basis other than hourly rate. Chancellor ruled that D Corp. should be enjoined. Another bidder Hines bough both tracks (the whole property) for $44,000,000. After Hines had contracted to buy both tracks, the Prappas firm wrote to Ps releasing them from the fee agreement. Meanwhile, on April 30, a second action on behalf of the same Ps by the same attorney against the same Ds had been filed, thereby beginning the damage controversy. This action was essentially a claim for damages against D's directors. On November 10, 1977, the settlement on this second action was approved. After the settlement had been approved, Ps' attorney filed an application in the Court of Chancery seeking a combined fee of approximately $6 million for their services as to both litigations. The United States National Bank of Galveston, Trustee (intervenor) owns some 47,5000 shares (about 23% of D's stock. It entered the litigation as an objector to the fee application. On January 26, 1979, the Chancellor awarded Ps counsel a fee of $3,500,000. D and intervenor appeal.
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