paid a higher price for its stock. We find this contention to be unpersuasive.
The very purpose of organizing a business corporation is to do business and to make a profit therefrom for the benefit of the owners of that business -- the shareholders -- and thereby to increase the value of their investment. The success or failure of a business corporation, therefore, largely is measured by the extent to which it has fulfilled its profit-making mission or is likely to do so. Corporate profit is reflected, inter alia, in dividends declared and in the appreciation of the market value of the shares of the stock held by the corporation's owners -- its shareholders. It is reasonable to conclude, therefore, that an action benefits a corporation if that action enables the corporation better to do that for which it was created and has existence -- to generate profit for its owners. If that profit comes from an appreciation in the market value of the corporate stock, then it seems fair to say that that which caused this appreciation conferred a benefit not only on the shareholders who have the opportunity to reap the immediate financial rewards but also upon the corporation itself by assisting it to fulfill its mission. Therefore, we need look no further for a direct benefit to Joy, the corporate entity, than to the combined actions of Pullman and the intervenor, which induced the Joy management to neutralize the anti-takeover measures it had adopted and to open the door to the competitive bidding for the company's stock which resulted in the dramatic increase in the value of the owners' interest in their corporation which occurred between December 1 and December 18-22, 1986.
The Mills "therapeutic effect" concept provides yet another reason to conclude that the action of Berger conferred a benefit on the corporation. Berger's proposed intervention provided an effective vehicle for a judicial determination of the validity of the anti-takeover measures adopted by the Joy board of directors. The officers and board of Joy never had given the shareholders an opportunity to vote up or down on either of the defensive measures adopted by the board. The board, thus, preempted the most fundamental prerogative of the shareholders -- the right to decide for themselves whether and at what price to sell their shares and the company. In Koppel v. Wien, 743 F.2d at 134-135, the court citing Mills, supra, stated that, "It is well established that non-monetary benefits, such as promoting fair and informed corporate suffrage . . . may support a fee award."
Moreover, as indicated supra, it is difficult to see how the pension parachute, at least, if placed into effect possibly could benefit anyone other than the pensioners, by a substantial windfall, and the board, by discouraging hostile buyers. If triggered, the pension plan would divert corporate assets from the pension fund into the hands of a selected few. Pullman in its counterclaim estimates this to be 85 million based on Joy's 1985 Annual Report, see Pullman Answer and Counterclaim, p. 42, para. 181. These assets otherwise would be available for general corporate purposes, see Intervenor's Appendix of Exhibits, Exhibit J at Appendix p. 0045. While, as the court in the CTS Corp. case, supra, pointed out, there may be legitimate reasons for corporate management to obstruct some takeover attempts, management does not have carte blanche in choosing the means to do this. Preventing an unfavored acquirer from using the assets of the corporation to finance its purchase may in concept and under some circumstances be proper. But, it seems to us that the pension parachute in this case was designed to prevent this "misuse" of corporate funds by permitting a preemptive misuse by management.
We believe, therefore, that it was a therapeutic benefit to the corporation as contemplated by the Court in Mills, supra, to subject both poison pills to objective judicial scrutiny. This could be accomplished in an adversary context only by the intervenor since Pullman lacked standing to do so.
Finally, we believe that in principle there is little need under the facts of this case to define or identify specific benefits which enured to the corporation as distinguished from its shareholders as a prerequisite to the assessment of attorneys' fees against the corporation. Here, we have a situation where all of the shareholders of the Joy Manufacturing Company opted to accept a tender offer of $ 35.00 a share for the Joy stock which they held on December 18-22, 1986. That stock which had closed on December 1, 1986, at $ 25.50 a share appreciated $ 9.50 in less than three weeks, a 37 1/4% increase which was a substantial benefit to the shareholders by any standard. If attorneys' fees were earned at all for conferring this benefit, and we firmly believe that they were, then they were earned as of the moment the benefit was conferred. This was on the day that the option to accept the $ 35.00 per share tender offer became available to the shareholders.
As of that date, the obligation to pay the attorneys' fees accrued, and as of that date the beneficiaries constituted 100% of the shareholders of Joy. Therefore, whether the attorneys' fees are taken directly from the shareholders or from an asset, the corporation, which they owned in direct proportion to the shares of stock which they held, should make little difference. In either event the cost will be passed through to them.
As we previously have pointed out, the fact that Pullman and Joy settled the case before it became necessary for the court to rule on the substantive issues shifted the burden to Joy to demonstrate that the Berger intervention was not a causal factor in the resolution of the disputes and the sale of Joy. Barton v. Drummond Co., supra. Joy has failed to discharge this burden in the view of the court. Against the chronology outlined above, Joy submitted affidavits and accompanying documents, which consist of the affidavits of officers and directors of Joy and of the Managing Director of Mergers and Acquisitions, First Boston Corporation, that the presence of Berger in this case or, indeed, the Pullman-Berger actions were not the cause of the marketing of Joy. The chronology and past and recent history of Joy and inferences drawn therefrom, as set forth in this opinion, supra, weigh heavily to the contrary and outweigh those affidavits. See Koppel v. Wien, 743 F.2d at 132.
That the case settled before the court formally ruled that Berger could intervene does not preclude an award of attorneys' fees. See Kahan v. Rosenstiel, 424 F.2d at p. 167 n. 7. Although the court had not yet ruled, it had decided to permit the intervention because it had become clear to the court that Berger was not a mere opportunistic intermeddler but rather had a legitimate and significant role to play in this litigation. In addition, it was apparent to the court that Berger and the derivative class were well-represented. As it was, the court did permit Berger to intervene in all but name, and she did participate fully in the discovery and oral arguments and hearings that were had from the moment she petitioned to intervene in the case.
Accordingly, the court will enter an order awarding attorneys' fees and costs to petitioner, Cynthia Berger, and against Joy Manufacturing Corporation.
Petitioner's counsel have submitted a detailed fee petition which includes a brief and the affidavits of attorney Michael P. Malakoff and attorney Paul M. Bernstein substantiating the hours and expenses claimed. The court is prepared to make a specific fee award based on this petition. However, counsel for Joy requested at a conference on August 7, 1989, that it be given the opportunity to conduct some discovery in the event the court concluded that the fee petition should be granted. The court will permit discovery for a period of twenty days from the date of the order which will accompany this opinion. Joy will have ten days after the twenty-day discovery period to file a response and brief as to the amount of the fees and costs claimed by petitioner and petitioner will have ten days thereafter to reply. In the meantime, if counsel can agree on this amount, reserving to Joy the right to appeal from the court's decision to make the award, they are urged and encouraged to do so.
An appropriate order will follow.
ORDER OF COURT
AND NOW, this 1st day of December, 1989, for the reasons stated in the opinion filed this day, IT IS ORDERED that intervenor's petition for attorneys' fees be, and the same hereby is, granted; and,
IT IS FURTHER ORDERED that plaintiff shall have twenty days from the date of this order to complete discovery with respect to the attorneys' fees and within ten days after the completion of discovery to file a reply to this aspect of the petition and a brief; and,
IT IS FURTHER ORDERED that petitioner shall have ten days thereafter to file a response and brief.