The ruling is the latest in recent years in which Wall Street bankers have been hit with judgments or had to pay millions of dollars in settlements due to undisclosed conflicts in mergers and acquisitions.

Delaware Court of Chancery Vice Chancellor Travis Laster found that the value of Rural/Metro shares were $21.42 at the time of the sale, above the $17.25 per share paid by private equity firm Warburg Pincus. The difference was $4.17 per share, which was the damage to shareholders, Laster determined in his 95-page opinion published on Friday.

Laster reduced the damage award by 17 percent to account for settlements worth $11.6 million that shareholders reached with directors and Moelis & Co, which advised the company on its sale.

Earlier this year Laster found that bankers at RBC Capital Markets were so eager to collect higher fees that they convinced Rural/Metro directors to sell the company in June 2011 at an unreasonably low price.

The former shareholders had sought about $172 million from Toronto-based RBC, according to published reports.

Kevin Foster, a spokesman for RBC, as well as shareholder attorneys Randall Baron and Joel Friedlander, did not immediately respond to requests for comment.

In February 2011, Laster delayed a shareholder vote on the buyout of Del Monte Foods Co by a consortium led by KKR & Co after finding that Barclays Capital had a conflict of interest by advising Del Monte while also providing financing for the buyers.

Del Monte and Barclays later paid $89.4 million to settle that case.

Goldman Sachs Group Inc gave up a $20 million advisory fee from its work on the sale of pipeline company El Paso Corp to Kinder Morgan after a Delaware judge questioned its conflicts. Goldman owed a 19 percent stake in Kinder Morgan while advising El Paso.

Founded in 1948, Rural/Metro provides ambulance and fire protection services in about 700 cities and towns in 21 U.S. states.

The Scottsdale, Arizona-based company filed for bankruptcy protection in August 2013 after struggling with accounting and billing problems.

The case is In re: Rural Metro Corp Stockholders Litigation, Delaware Chancery Court, No. CA-6350.

(Reporting by Tom Hals in Wilmington, Delaware; Editing by Ken Wills)

By Tom Hals