Southern Copper’s $2 bln Judgment Affirmed by Delaware Supreme Court

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On Monday, the Delaware Supreme Court affirmed the $2 billion judgment awarded by a lower court to Southern Copper Corp which found the company had overpaid for an acquisition made from its controlling shareholder. The Delaware Supreme Court also affirmed a $304 million attorney fees award approved by the Court of Chancery to lawyers representing the plaintiffs.

The case sprung from the acquisition of Minera mexico from Grupo Mexico, which also controlled Southern Copper. In last October, Chancery Court Judge Leo Strine had found Southern Copper had overpaid $1.263 billion in the deal and ordered Grupo Mexico to repay the amount to Southern Copper. The Chancery Court also added interest to the damages, bringing the total to about $2 billion.

Grupo Mexico challenged the decision.

  

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The Supreme Court rejected the argument of Grupo Mexico that the Chancery Court had overstepped its limits by refusing to modify the trial and accommodate a witness from Goldman Sachs Group, who had advised Southern Copper during the disputed deal.

The matter also drew criticism as it included the largest award of attorneys’ fee ever awarded by Delaware’s Court of Chancery, and made only a few months after Strine became the court’s first new chief judge in 14 years. The defendants criticized that the fee award amounted to $35000 an hour, which is more than 30 times of the rate in similar cases.

However, in its 110-page opinion, the Supreme Court observed that in determining a fee award the greatest importance should be placed on the value of the judgment and not upon other factors. However, Justice Carolyn Berger dissented on the part of the fee award and wrote that Strine had failed to apply the court’s “Sugarland” factors which take into account other variables such as actual time spent on a case and the complexity of the litigation.

In dissent on the attorney fees, Berger wrote, “In sum, the trial court said that the fundamental test for reasonableness is whether the fee is setting a good incentive, and that the only basis for reducing the fee would be envy … That is not a decision based on Sugarland.”