Stein v. Blankfein, C.A. No. 2017-0354-SG (Del. Ch. Jul. 12, 2021)
This decision concerns fee applications under the “corporate benefit” doctrine for benefits achieved in derivative litigation.
An earlier decision (summarized here) had denied in part Goldman Sachs’ directors’ motions to dismiss, reasoning that plaintiffs adequately alleged that, in setting their own compensation, Goldman’s directors breached their fiduciary duty of loyalty. Shortly after that decision, the parties reached a proposed settlement, which the Court rejected as inadequate for being based solely on consideration in the form of therapeutic benefits provided by Goldman itself. The Court subsequently approved a new settlement, however, that provided for primarily (i) a reduction in compensation to be paid going-forward with a net present value of $4.6 million, and (ii) the company agreeing to continue its practice of making disclosures concerning director compensation and submitting matters to stockholder votes. Plaintiffs’ counsel sought a fee of $1.5 million for these benefits.
Applying the governing Sugarland factors, the Court considered the benefits achieved, the relative early stage of the proceedings, and the prior settlement that the Court found to be inadequate. It ruled that a percentage recovery of 12.5% was appropriate. With respect to the therapeutic benefits, the Court granted an additional $50,000, noting that Goldman largely had voluntarily implemented the benefits prior to the settlement. The Court accordingly granted a total fee award of $612,500.
A stockholder who successfully objected to the earlier un-approved settlement and unsuccessfully objected to the present, Court-approved settlement also sought fees. The Court had previously awarded him $100,000 in attorneys’ fees in connection with the original, successful objection. The Court declined his request for additional fees in light of the later settlement, reasoning that his unsuccessful opposition to the new settlement did not create any new benefits and that the Court’s earlier fee award compensated him for the benefits previously achieved.