COURT OF CHANCERY OF THE SAM GLASSCOCK III STATE OF DELAWARE COURT OF CHANCERY COURTHOUSE VICE CHANCELLOR 34 THE CIRCLE GEORGETOWN, DELAWARE 19947
Date Submitted: July 22, 2019 Date Decided: July 23, 2019
Brian E. Farnan, Esquire Kevin G. Abrams, Esquire Michael J. Farnan, Esquire J. Peter Shindel, Jr., Esquire Rosemary J. Piergiovanni, Esquire Matthew L. Miller, Esquire Farnan LLP Abrams & Bayliss LLP 919 North Market Street, 12th Floor 20 Monthchanin Road, Suite 200 Wilmington, DE 19801 Wilmington, DE 19807
Anthony A. Rickey, Esquire Kevin M. Gallagher, Esquire Margrave Law LLC Robert L. Burns, Esquire 8 West Laurel Street, Suite 2 Richards, Layton & Finger, P.A. Georgetown, DE 19947 One Rodney Square 920 North King Street Jeremy D. Eicher, Esquire Wilmington, DE 19801 Eicher Law LLC 1007 N. Orange Street, 4th Floor Wilmington, DE 19801
Re: Shiva Stein v. Lloyd C. Blankfein, et al., C.A. No. 2017-0354-SG
Dear Counsel:
I have the Objector’s Application for Certification of an Interlocutory Appeal
as well as the Director-Defendants’ Response. I must consider a request for
certification in light of Supreme Court Rule 42. As many decisions of our courts
have made clear, the purpose of Rule 42 is to prevent wasteful piecemeal litigation
from overwhelming the docket of the Supreme Court. Accordingly, “[n]o
interlocutory appeal will be certified by the trial court or accepted by [the Supreme Court] unless the order of the trial court decides a substantial issue of material
importance that merits appellate review before a final judgment.” 1 To the extent this
is considered as a truly interlocutory appeal, I find that adherence to Rule 42
precludes certification. To the extent this appeal is subject to the Collateral Order
Doctrine, such analysis is outside the purview of the trial court review mandated by
Rule 42.
I. INTERLOCUTORY APPEAL
The decision subject to the request for certification here involves an award for
attorneys’ fees under the corporate benefit doctrine. The case involved direct and
derivative claims brought by a stockholder of Goldman Sachs, with respect to which
the parties had reached a settlement agreement. Settlement of these claims required
approval by this Court. Under the proposed settlement, derivative claims, which
belong to the corporation, would be released in return for the corporation—for
whose benefit the Plaintiff was purportedly acting—adopting some minor hygienic
practices. The Objector appeared at the Settlement Hearing and opposed the
settlement. I found the objection helpful, but independently concluded that the
settlement was not fair to the corporation or its stockholders. Accordingly, I denied
the settlement. The matter then proceeded on a motion to dismiss, which I granted
1 Supr. Ct. R. 42(b). 2 in part and denied in part. The remaining issue involves an allegation of self-dealing
on the part of the Director-Defendants.
As I expressed in my Letter Order of July 1, 2019 regarding the Objector’s
fee request, the objection was helpful to me. The rationale of my decision to deny
the motion to approve the settlement was, however, my own. Nonetheless, for the
reasons stated in the Letter Order, I found that the Objector had worked a substantial
benefit on the corporation.
In evaluating the appropriate fee under the corporate benefit doctrine, I
applied the factors delineated by our Supreme Court in Sugarland Industries, Inc. v.
Thomas.2 Applying those factors to the facts at hand, I found an attorneys’ fee award
to the objector, exclusive of costs, in the amount of $100,000.00 to be appropriate.
It is this decision that is subject to this request for an interlocutory appeal.
Rule 42(b)(2) sets out the criteria I must consider upon a motion for certification.3 I
address, in turn, the criteria identified by the Objector as applicable:
(A) Does the interlocutory order involve a question of law resolved for the first time
in Delaware?
According to the Objector, this factor is satisfied. However, I see the issue
differently. The Objector, I found, worked a benefit on the corporation. In such
2 420 A.2d 142 (Del. 1980). 3 Supr. Ct. R. 42(b)(2)(iii). 3 a case, it is appropriate (and settled law provides) that the cost of producing such
benefit not fall solely on the party. Instead, it should be borne by the corporation
and secondarily, by its owners, the stockholders. Fees for producing such
benefit have been addressed by this Court many, many times. Our Supreme
Court has provided the criteria under which the court should exercise its
discretion; those factors are set out in the Sugarland case. 4 Therefore, I do not
find that a question of law is resolved here for the first time.
(B) Are the decisions of the trial courts conflicting upon the question of law?
Again, the question of law is whether granting a fee application is appropriate
under the corporate benefit doctrine. It is settled law that such a question is
answered in the affirmative once the trial court determines that a substantial
benefit has been worked for the entity. The Objector points out that the
application of the trial court’s discretion to the particular benefit produced
results in fee awards that vary from case to case, and that, therefore, the trial
courts are in conflict. While the predicate is correct, the conclusion is
unwarranted. The law itself is well-settled.
(C) Will review of the interlocutory order serve considerations of justice?
4 Sugarland, 420 A.2d 142.; see also Loral Space & Commc’ns, Inc. v. Highland Crusader Offshore Partners, L.P., 977 A.2d 867, 870 (Del. 2009). 4 The Objector argues strenuously that, in setting the fee as I did, I have created a
perverse incentive that will prevent beneficial objections to settlements in the
future. Therefore, a review is in the interest of justice. I find that this factor
supports interlocutory review, but is of slight weight.
The remaining factors set out in Rule 42(b)(iii) are inapplicable here.
Essentially, the Objector seeks appellate review of an exercise of discretion
under long-established principles and precedents. On balance, after review of the
interests of justice and in particular, the factors set forward in Rule 42(b)(iii), I do
not find that the likely benefits of interlocutory review outweigh the probable costs
such that the interlocutory review is in the interest of justice.5
II. COLLATERAL ORDER DOCTRINE
The Objector submits that the matter of his fee award is collateral to the
substantive issues in the case itself, and argues that interlocutory appellate review is
appropriate because his interest has been finally adjudicated. The Objector, in other
words, invokes the Collateral Order Doctrine.6 The Objector is correct that the
matter of his fee award is both collateral to the substantive issues in this matter and
final. However, the applicability of the Collateral Order Doctrine is not among the
matters directed to the trial court under Rule 42, and thus it must be addressed
5 Supr. Ct. R. 42(b)(2)(iii). 6 See Evans v. Justice of the Peace Ct. No.
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COURT OF CHANCERY OF THE SAM GLASSCOCK III STATE OF DELAWARE COURT OF CHANCERY COURTHOUSE VICE CHANCELLOR 34 THE CIRCLE GEORGETOWN, DELAWARE 19947
Date Submitted: July 22, 2019 Date Decided: July 23, 2019
Brian E. Farnan, Esquire Kevin G. Abrams, Esquire Michael J. Farnan, Esquire J. Peter Shindel, Jr., Esquire Rosemary J. Piergiovanni, Esquire Matthew L. Miller, Esquire Farnan LLP Abrams & Bayliss LLP 919 North Market Street, 12th Floor 20 Monthchanin Road, Suite 200 Wilmington, DE 19801 Wilmington, DE 19807
Anthony A. Rickey, Esquire Kevin M. Gallagher, Esquire Margrave Law LLC Robert L. Burns, Esquire 8 West Laurel Street, Suite 2 Richards, Layton & Finger, P.A. Georgetown, DE 19947 One Rodney Square 920 North King Street Jeremy D. Eicher, Esquire Wilmington, DE 19801 Eicher Law LLC 1007 N. Orange Street, 4th Floor Wilmington, DE 19801
Re: Shiva Stein v. Lloyd C. Blankfein, et al., C.A. No. 2017-0354-SG
Dear Counsel:
I have the Objector’s Application for Certification of an Interlocutory Appeal
as well as the Director-Defendants’ Response. I must consider a request for
certification in light of Supreme Court Rule 42. As many decisions of our courts
have made clear, the purpose of Rule 42 is to prevent wasteful piecemeal litigation
from overwhelming the docket of the Supreme Court. Accordingly, “[n]o
interlocutory appeal will be certified by the trial court or accepted by [the Supreme Court] unless the order of the trial court decides a substantial issue of material
importance that merits appellate review before a final judgment.” 1 To the extent this
is considered as a truly interlocutory appeal, I find that adherence to Rule 42
precludes certification. To the extent this appeal is subject to the Collateral Order
Doctrine, such analysis is outside the purview of the trial court review mandated by
Rule 42.
I. INTERLOCUTORY APPEAL
The decision subject to the request for certification here involves an award for
attorneys’ fees under the corporate benefit doctrine. The case involved direct and
derivative claims brought by a stockholder of Goldman Sachs, with respect to which
the parties had reached a settlement agreement. Settlement of these claims required
approval by this Court. Under the proposed settlement, derivative claims, which
belong to the corporation, would be released in return for the corporation—for
whose benefit the Plaintiff was purportedly acting—adopting some minor hygienic
practices. The Objector appeared at the Settlement Hearing and opposed the
settlement. I found the objection helpful, but independently concluded that the
settlement was not fair to the corporation or its stockholders. Accordingly, I denied
the settlement. The matter then proceeded on a motion to dismiss, which I granted
1 Supr. Ct. R. 42(b). 2 in part and denied in part. The remaining issue involves an allegation of self-dealing
on the part of the Director-Defendants.
As I expressed in my Letter Order of July 1, 2019 regarding the Objector’s
fee request, the objection was helpful to me. The rationale of my decision to deny
the motion to approve the settlement was, however, my own. Nonetheless, for the
reasons stated in the Letter Order, I found that the Objector had worked a substantial
benefit on the corporation.
In evaluating the appropriate fee under the corporate benefit doctrine, I
applied the factors delineated by our Supreme Court in Sugarland Industries, Inc. v.
Thomas.2 Applying those factors to the facts at hand, I found an attorneys’ fee award
to the objector, exclusive of costs, in the amount of $100,000.00 to be appropriate.
It is this decision that is subject to this request for an interlocutory appeal.
Rule 42(b)(2) sets out the criteria I must consider upon a motion for certification.3 I
address, in turn, the criteria identified by the Objector as applicable:
(A) Does the interlocutory order involve a question of law resolved for the first time
in Delaware?
According to the Objector, this factor is satisfied. However, I see the issue
differently. The Objector, I found, worked a benefit on the corporation. In such
2 420 A.2d 142 (Del. 1980). 3 Supr. Ct. R. 42(b)(2)(iii). 3 a case, it is appropriate (and settled law provides) that the cost of producing such
benefit not fall solely on the party. Instead, it should be borne by the corporation
and secondarily, by its owners, the stockholders. Fees for producing such
benefit have been addressed by this Court many, many times. Our Supreme
Court has provided the criteria under which the court should exercise its
discretion; those factors are set out in the Sugarland case. 4 Therefore, I do not
find that a question of law is resolved here for the first time.
(B) Are the decisions of the trial courts conflicting upon the question of law?
Again, the question of law is whether granting a fee application is appropriate
under the corporate benefit doctrine. It is settled law that such a question is
answered in the affirmative once the trial court determines that a substantial
benefit has been worked for the entity. The Objector points out that the
application of the trial court’s discretion to the particular benefit produced
results in fee awards that vary from case to case, and that, therefore, the trial
courts are in conflict. While the predicate is correct, the conclusion is
unwarranted. The law itself is well-settled.
(C) Will review of the interlocutory order serve considerations of justice?
4 Sugarland, 420 A.2d 142.; see also Loral Space & Commc’ns, Inc. v. Highland Crusader Offshore Partners, L.P., 977 A.2d 867, 870 (Del. 2009). 4 The Objector argues strenuously that, in setting the fee as I did, I have created a
perverse incentive that will prevent beneficial objections to settlements in the
future. Therefore, a review is in the interest of justice. I find that this factor
supports interlocutory review, but is of slight weight.
The remaining factors set out in Rule 42(b)(iii) are inapplicable here.
Essentially, the Objector seeks appellate review of an exercise of discretion
under long-established principles and precedents. On balance, after review of the
interests of justice and in particular, the factors set forward in Rule 42(b)(iii), I do
not find that the likely benefits of interlocutory review outweigh the probable costs
such that the interlocutory review is in the interest of justice.5
II. COLLATERAL ORDER DOCTRINE
The Objector submits that the matter of his fee award is collateral to the
substantive issues in the case itself, and argues that interlocutory appellate review is
appropriate because his interest has been finally adjudicated. The Objector, in other
words, invokes the Collateral Order Doctrine.6 The Objector is correct that the
matter of his fee award is both collateral to the substantive issues in this matter and
final. However, the applicability of the Collateral Order Doctrine is not among the
matters directed to the trial court under Rule 42, and thus it must be addressed
5 Supr. Ct. R. 42(b)(2)(iii). 6 See Evans v. Justice of the Peace Ct. No. 19, 652 A.2d 574, 576–77 (Del. 1995); Gannett Co., Inc. v. State, 565 A.2d 895, 899–900 (Del. 1989); Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 545–47 (1949). 5 directly to the Supreme Court by the appellant. Any discussion of the doctrine here
would be advisory, and inappropriate.
III. CONCLUSION
For the foregoing reasons, the Objector’s application for certification of
interlocutory appeal is denied. An appropriate form of order in compliance with
Rule 42(c)(iv) is attached.
Sincerely,
/s/ Sam Glasscock III
Sam Glasscock III
6 IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE IN AND FOR SUSSEX COUNTY
SHIVA STEIN, derivatively on behalf of ) The Goldman Sachs Group, Inc., and ) individually as a Stockholder of The ) Goldman Sachs Group, Inc., ) ) Plaintiff, ) ) v. ) C.A. No. 2017-0354-SG ) LLOYD C. BLANKFEIN, M. ) MICHELE BURNS, GARY D. COHN, ) MARK A. FLAHERTY, WILLIAM W. ) GEORGE, JAMES A. JOHNSON, ) ELLEN J. KULLMAN, LAKSHMI N. ) MITTAL, ADEBAYO O. OGUNLESI, ) PETER OPPENHEIMER, DEBORA L. ) SPAR, MARK E. TUCKER, DAVID A. ) VINIAR, MARK O. WINKELMAN, and ) THE GOLDMAN SACHS GROUP, ) INC., ) ) Defendants. )
ORDER DENYING LEAVE TO APPEAL FROM INTERLOCUTORY
ORDER
This twenty-third day of July, 2019, Objector Sean J. Griffith having made
application under Rule 42 of the Supreme Court for an order certifying an appeal
from the interlocutory order of this Court, dated July 1, 2019; and the Court having
found that such order lacks a substantial issue of material importance that merits appellate review before a final judgment and that only one of the criteria of Supreme
Court Rule 42(b)(iii) apply;
IT IS ORDERED that the Court’s order of July 1, 2019, is hereby not certified
to the Supreme Court of the State of Delaware for disposition in accordance with
Rule 42 of that Court.
/s/ Sam Glasscock III Vice Chancellor