Delaware’s Supreme Court Monday reaffirmed the Court of Chancery’s decision to award $2 billion to Southern Copper Corp for overpaying its corporate parent Grupo Mexico during its acquisition of Minera Mexico. The court also affirmed a $304 million fee for the attorneys representing Southern Copper.

In 2005 Southern Copper, then Southern Peru Copper Corporation purchased Minera Mexico from Grupo Mexico, which also controlled Southern Peru Copper and Americas Mining Corporation (AMC).

Southern Peru operates mining, smelting and refining facilities in Peru, producing copper and molybdenum as well as silver. Grupo Mexico is controlled by the Larrea family. At the time of the merger, Grupo Mexico CEO German Larrea was also the CEO of Southern Peru. Minera was engaged in mining and processing in Mexico.

The Court of Chancery found that Grupo Mexico, acting through AMC, “extracted a deal that was far better than market” from Southern Peru “due to the ineffective operation of a special committee.”

In February 2004 Grupo Mexico proposed that Southern Peru buy its 99.15% stake in Minera Mexico. At the time Grupo was Southern Peru’s majority shareholder.

The Delaware high court said, “Because of Grupo Mexico’s self-interest in the merger proposal, Southern Peru formed a special committee of disinterested directors to evaluate the transaction with Grupo Mexico. The Special Committee spent eight months in an awkward back and forth with Grupo Mexico over the terms of the deal before approving Southern Peru’s acquisition of 99.15% of Minera’s stock in exchange for 67.2 million newly issues share of Southern Peru stock on October 21, 2004.”

When the merger was closed, the value of 67.2 million shares of Southern Peru had grown to $3.75 billion. Grupo Mexico had assumed that Minera’s equity was worth $3.05 billion. However, the Delaware courts ruled that since Minera was almost wholly owned by Grupo Mexico, its shares had no market-tested value.

A lawsuit was then bought against the Grupo Mexico subsidiary that owned Minera, the Group Mexico-affiliated directors of Southern Peru, and the members of the Special Committee, claiming that the merger was “entirely unfair to Southern Peru and its minority shareholders.”

The crux of their argument was that Grupo Mexico received more than $3 billion worth of Southern Peru stock in exchange for something that was not worth nearly that much, Minera.

Grupo Mexico and its affiliated directors on the Southern Peru board asserted Southern Peru and Minera were similar companies and were properly valued on a relative basis.

The lawsuit moved very slowly through the courts until June 30, 2010, when the plaintiffs moved for summary judgment, prompting the defendants to also file a motion for summary judgment. A June 20, 2011 trial date was set.

Chancery Court Judge Leo Strine rule in October 2011 ruled that Southern Copper had overpaid by $1.263 billion and ordered Grupo Mexico to replay the difference with interest. He also awarded the largest attorneys’ fees ever awarded by Delaware Court of Chancery at a rate of $35,000 per hour for a total of $304 million.