Exhibit (a)(1)(UUU)
[LETTERHEAD OF ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A.]
January 2, 2003
The Honorable Stephen P. Lamb
Court of Chancery
500 North King Street
Wilmington, DE 19801
RE: Dolphin Limited Partnership I, L.P., et al. v.
NCS Acquisition Corp. and Omnicare, Inc.
C.A. No. 20101-NC
Dear Vice Chancellor Lamb:
I write on behalf of plaintiffs in response to the motion by NCS
Healthcare, Inc. ("NCS"). Boake A. Sells and Richard L. Osborne (collectively,
the "NCS Defendants") to intervene in this Action to oppose plaintiffs'
application for a temporary restraining order ("TRO") setting aside $13.5
million for payment of such fees and expenses to plaintiffs' counsel as the
Court may award for their successful prosecution of In re NCS Healthcare, Inc.
Shareholder Litigation, C.A. No. 19786 (the "Shareholders Action"). Plaintiffs
do not oppose intervention. Indeed, the papers submitted by the NCS Defendants
confirm the necessity for a TRO.
In their proposed answer in intervention, the NCS Defendants concede
two undeniable master facts underlying plaintiffs' application for a TRO. The
NCS defendants admit the allegations of the fifth, sixth and seventh sentences
of Paragraph 1 of plaintiffs' amended complaint;
The Honorable Stephen P. Lamb
January 2, 2003
Page 2
As a result of the successful prosecution of the
Shareholders Action, the Genesis Merger
Agreement and two related voting agreements that
would have compelled approval of the Genesis
Merger were enjoined. Thereafter, a bidding
contest between Genesis and Omnicare ensued,
pursuant to which NCS will be acquired at $5.50
per share. The increase of approximately $3.90
(340%) per share constitutes about $102 million
in the aggregate for the stockholders of NCS.
Thus, the NCS Defendants concede that the Shareholders Action (1) was
the producing cause of the injunction blocking the Genesis merger, leading to
the happy state of affairs NCS' shareholders now enjoy, and (2) the resulting
benefit to NCS' shareholders approximates $102,000,000. The necessary
consequence of these admitted facts is that plaintiffs' counsel are entitled to
a substantial fee.
The necessity for a TRO flows from the question posed by the admitted
facts: Who is obligated to pay the fee and expenses to which plaintiffs'
attorneys are entitled? The NCS Defendants say that Omnicare, Inc. ("Omnicare")
is contractually responsible by reason the language of the merger agreement
between NCS and Omnicare and the documents disseminated to NCS' shareholders in
connection with Omnicare's tender offer for NCS stock. To date, Omnicare appears
to disagree with that interpretation of the relevant documents, and presumably
will rely on the pronouncements of this Court in cases such as Mentor Graphics
v. Quickturn Design Systems, 789 A.2d 1216, 1233 (Del. Ch. 2001)(1) and
Weinberger v.
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(1) "In cases where the fee-compensable benefit consists of the
creation of a fund, the fee is payable from the fund or, failing that, by those
persons to whom the fund was distributed."
The Honorable Stephen P. Lamb
January 2, 2003
Page 3
UOP, INC., 517 A.2d 653, 654 (Del. Ch. 1986)(2) for the proposition that the fee
and expenses awarded to plaintiffs' counsel should be paid out of the fund
available to NCS' shareholders, the beneficiaries of plaintiffs' totally
successful services. If this Court or the Delaware Supreme Court agrees with
Omnicare, then, absent an injunction setting aside a portion of the tender
offer/merger proceeds to provide the funding source for payment of the fees and
expenses which may be awarded, plaintiffs' counsel will be deprived of any
compensation whatsoever because it will be impossible to collect the amount
awarded from thousands of widely dispersed NCS shareholders. That is the
imminent, irreparable injury which plaintiffs' counsel face it a TRO is not
entered before the tender offer proceeds are disbursed shortly after January 7,
2003 when the tender offer closes.
The NCS Defendants take issue with the quantum of the escrow plaintiffs
seek. Their arguments overlook the fundamental issued implicated by plaintiffs
application: The amount of the escrow should be no less than the aggregate
amount of fees and expenses which the Court may ultimately award. In other
words, this is not the time to decide what amount of compensation will be
awarded when plaintiffs' application (which has not yet been filed) is
adjudicated, but rather what amount should be set aside to ensure that the
award, when made,
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(2)"Under [the common fund] exception, where a party, acting on behalf
of a class, is successful in creating a common fund for the benefit of all class
members, attorneys' fees will be paid from the common fund or property."
The Honorable Stephen P. Lamb
January 2, 2003
Page 4
will not exceed the escrow, because plaintiffs' attorneys will be unable to
collect any such excess from NCS' shareholders, and will thereby suffer
irreparable injury.
In this context, plaintiffs submit that $13,500,000 is a reasonable sum
to set aside. It represents approximately 13% of the $102,000,000 benefit(3), a
percentage considerably less than this Court has awarded in cases, like this
one, in which the litigation was the sole producing cause; the extrapolated
hourly rate comports with the rates produced by the awards in In Re Metro Mobile
CTS, Inc. Shareholders Litig., Del. Ch., C.A. No. 12300, Berger,
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(3)The NCS Defendants are mistaken in suggesting that they (and their
co-defendants, directors Outcalt and Shaw) can free-ride on the results achieved
in the Shareholders Action without contributing to the fees and expenses of
plaintiffs' counsel. As the Delaware Supreme Court explained in Goodrich v. E.F.
Group, Inc., 681 A.2d 1039, 1044-45 n. 5 (Del. 1996):
In Delaware, there is no class action or
derivative suit prerequisite, however, to an
award of attorney's fees under the common
benefit exception. The "[i]mposition of a class
action requirement would be inconsistent with
the equitable foundations of the common benefit
exception ... The form of suit is not a deciding
factor; rather, the question to be determined is
whether a plaintiff, in bringing a suit either
individually or representatively, has conferred
a benefit on others." Tandycrafts, Inc. v.
Initio Partners, Del. Supr., 662 A.2d 1162, 1166
(1989) (quoting Reiser v. Del Monte Properties
Co., 605 F.2d 135, 1139-40 (9th Cir. 1979)).
Accord Sprague v. Ticonic National Bank, 307
U.S. 161, 167, 59 S.CT. 777, 780, 83 L.ED. 1184
(1939) (holding that "the absence of an avowed
class suit ... hardly touch[es] the power of
equity in doing justice as between a party and
the beneficiaries of his litigation").
The Honorable Stephen P. Lamb
January 2, 2003
Page 5
V.C. (Aug. 18, 1993) ($4,000 per hour) and Dagron v. Perelman, Del. Ch., C.A.
No. 15101, Chandler, C. (Aug. 29, 1997) ($3,500 per hour), but neither of those
cases called for the extensive and intensive labors which the Shareholders
Action demanded; and the escrowed sum approximates the award in In Re Digex,
Inc. Shareholder Litigation, Del. Ch., C.A. No. 18336, Chandler, V.C. (April 6,
2001) ($12,300,000 for approximately $1.4 million in "lodestar"), a notable
example of shareholder benefits which would not have been realized but for the
litigative efforts of plaintiffs' counsel.
For these reasons and the reasons set forth in plaintiffs' moving
papers, plaintiffs submit that their application for a TRO should be granted in
all respects.
Respectfully,
/s/ Joseph A. Rosenthal
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Joseph A. Rosenthal
JAR/cms
cc: Robert J. Kriner, Jr., Esquire
Edward P. Welch, Esquire
Donald J. Wolfe, Jr., Esquire
Jon E. Abramczyk, Esquire
Edward M. McNally, Esquire
Register in Chancery