Colorado Court Gives Nod to Attorney Award in US West Settlement

July 19, 2007 ( - The Colorado Court of Appeals said the $15 million award paid to an attorney representing US West retirees after a $50 million settlement agreement between his clients and Qwest Communications was not an abuse of discretion.

The case arose from the decisions surrounding the merger between US West, Inc. and Qwest Communications in June 2000. Adele Brody argued on behalf of a class of US West shareholders alleging breach of fiduciary duty and breach of contract to pay a promised dividend valued at $270 million.

US West announced on June 5, 2000 that its board had declared a regular dividend for the second quarter of 2000, payable on August 1, 2000, to shareholders of record as of June 30, 2000. The next day, Qwest CEO Joseph Nacchio demanded the company rescind its dividend, or set a record date of July 10, 2000 or later – to which US West agreed.  

The merger between Qwest and US West closed on June 30, 2000 and the promised dividend was never paid to US West shareholders.

Brody filed a class action suit on behalf of US West shareholders against US West directors, alleging breach of fiduciary duty for failure to pay the dividend, but later amended the complaint to include Qwest and Nacchio.

The defendants argued they had no obligation to pay the dividend because the merger was after July 10, at which point there were no US West shareholders on record. The defendants further argued that if they were held liable, the damages were far less than $270 million.

In 2005, the two parties settled on a $50 million fund to be created. Brody requested$15 million in attorney fees, or 30% of the settlement fund, and approximately $1.3 million in costs.

The Colorado appeals court ruled thatthe $15 million, or roughly 30% contingency fee the Denver trial court awarded Brody was appropriate, reasonable, and did not “shock the conscience.”

It went on to note that the trial court found that Brody, as lead counsel in the case on a contingency fee basis, “face[d] an extremely high degree of risk and expended an extraordinary effort in pursuing the action and the facts and legal theories were very complicated.”

The full opinion in Brody v. Hellman , Colo. Ct. App., No. 05CA2017, 7/12/07 is here .