Shiva Stein v. Lloyd C. Blankfein

• Court: Court of Chancery of Delaware
• Decided: July 12, 2021
• Docket: CA No. 2017-0354-SG
• Status: Published

Opinion

COURT OF CHANCERY OF THE SAM GLASSCOCK III VICE CHANCELLOR STATE OF DELAWARE COURT OF CHANCERY COURTHOUSE 34 THE CIRCLE GEORGETOWN, DELAWARE 19947

Date Submitted: April 26, 2021 Date Decided: July 12, 2021

Brian E. Farnan, Esq. Kevin M. Gallagher, Esq. Michael J. Farnan, Esq. Robert L. Burns, Esq. Rosemary J. Piergiovanni, Esq. Richards, Layton & Finger, P.A. Farnan LLP One Rodney Square 919 North Market Street, 12th Fl. 920 N. King Street Wilmington, DE 19801 Wilmington, DE 19801

Kevin G. Abrams, Esq. Anthony A. Rickey, Esq. J. Peter Shindel, Jr., Esq. Margrave Law LLC Matthew L. Miller, Esq. 3411 Silverside Road Abrams & Bayliss LLP Baynard Building, Suite 104 20 Montchanin Road, Suite 200 Wilmington, DE 19810 Wilmington, Delaware 19807 Jeremy D. Eicher, Esq. 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 write briefly to resolve the Plaintiff’s and the settlement objector’s motions

for fees. This matter involved, inter alia, a challenge to the compensation paid by

the Goldman Sachs Group, Inc. (“Goldman”) to its directors. The parties had fully

briefed a motion to dismiss when they reached a settlement (the “2018 Settlement”). I held a settlement hearing on September 21, 2018,1 and, by order of October 23, I

rejected the 2018 Settlement. 2 To grossly oversimplify, I determined that the

settlement, which required the company, Goldman, to commit to corporate hygiene

measures in return for the release of breach-of-duty claims against the corporate

fiduciaries themselves, was unfair to the stockholder class. Accordingly, I declined

to approve the 2018 Settlement and scheduled oral argument on the fully briefed

Motion to Dismiss. 3 Following argument, I denied the motion in a May 31, 2019

memorandum opinion with respect to the director compensation claim.4 The

remainder of the claims were dismissed.

Sean Griffith (the “Objector”), a Goldman stockholder, had appeared and

objected to the 2018 Settlement, including by participating in pre-hearing briefing

and oral argument. I found parts of the objection helpful in reaching a conclusion

and awarded the objector $100,000 in legal fees.5 Griffith thought this amount

deficient, so much so that he sought an immediate appeal. 6 I found my award to be

a collateral final order, permitting appeal, 7 but the Supreme Court disagreed, finding

the matter interlocutory. 8 In any event, I considered the $100,000 award to be an

1 Judicial Action Form for Settlement Hr’g held 09.21.18, Dkt. No. 70. 2 Letter Op. and Order, Dkt. No. 72. 3 Letter to Counsel confirming oral arg. on pending Mot. to Dismiss, Dkt. No 74. 4 Stein v. Blankfein, 2019 WL 2323790 (Del. Ch. May 31, 2019). 5 Letter Order, Dkt. No. 96. 6 Objector’s Appl. for Certification of Interlocutory Appeal, Dkt. No 97. 7 Letter Op. and Order, Dkt. No. 103. 8 Griffith v. Stein on behalf of Goldman Sachs Grp., Inc., 214 A.3d 943 (Del. 2019) (TABLE). 2 award in full compensation of the amount reasonable in equity to compensate

Griffith and his counsel for the corporate benefit they had created by their advocacy.

In March 2020, the parties again settled, this time including a reduction in

compensation of Goldman directors going forward with a then-present value in the

range of $4.6 million, 9 accompanied by therapeutic benefits.10 The latter include

Goldman’s agreement to continue its practice of review of director compensation

and related disclosures by proxy, to be followed by a stockholder vote. 11 Again, a

hearing was held, and again Griffith appeared and objected. 12 This time, I rejected

the objection and approved the settlement. 13 At the settlement hearing, the Plaintiffs

sought a fee award of $1,500,000, including $925,000 for the salary reduction

component and the balance for the hygienic improvements of the corporate

9 See Tr. of 8-18-2020 Settlement Hr’g, at 44, 47–48, 57, 62, 65, Dkt. No. 137 [hereinafter “Settlement Hr’g Tr.”]. In briefing on fees, the Objector has argued that various occurrences since the hearing—including an expansion of the board—have reduced the actual value of the reduction, while the Plaintiff argues—oddly, in my view—that there is effectively no time value of money, so that a salary reduction that will occur years in the future has the same value as money in hand. Settlement Hr’g Tr. 47–48. For purposes of this Letter Order, I give the salary reduction the present value I suggested was appropriate as of the time of the hearing—$4.6 million. Settlement Hr’g Tr. 44. I note that the Defendant agreed with this as the then-value of the salary reduction, Settlement Hr’g Tr. 57, and that the Plaintiff’s suggested discount rate—0 to 2 percent—was not reasonable. Settlement Hr’g Tr. 48–49. In other words, neither party has suggested a legitimate alternative present value. 10 Stipulation and Agreement of Compromise, Settlement, and Release, Dkt. No 118 [hereinafter “Settlement Stip.”]. 11 Settlement Stip. 23. 12 Sean J. Griffith’s Objection to Proposed Settlement and Appl. for an Award of Att’ys’ Fees and Expenses, Dkt. No 129; Judicial Action Form, Dkt. No 131. 13 Settlement Hr’g Tr. 41–45. 3 function.14 After the settlement, the Objector moved for a fee award as well, for

corporate benefits rendered. 15 The parties opposed this, 16 and the matter has been

briefed. 17 Both the Plaintiff’s and the Objector’s fees are resolved herein.

In addressing the appropriate Plaintiff’s fee, I have considered the factors

supplied by our Supreme Court in Sugarland Industries, Inc. v. Thomas. 18 The

instant case awards fees pursuant to the corporate benefit doctrine. The most

significant of the Sugarland factors is the size of the common fund achieved by the

Plaintiff. 19 For reasons explained above, that fund, at present value as of the time of

settlement, was around $4.6 million. Because the Plaintiff had earlier agreed to an

improvident settlement, the 2018 Settlement, and because that proposed settlement

resulted in a payment of $100,000 to the Objector, I find it appropriate to deduct this

amount from the value of the common fund. I address the appropriate fee, then,

under Sugarland.

14 Settlement Hr’g Tr. 56. 15 Objector’s Appl. for an Award of Att’ys’ Fees and Expenses, Dkt. No. 138. 16 Letter on behalf of The Director-Defs. in Opp’n to Objector’s Appl. for an Award of Att’ys’ Fees and Expenses, Dkt. No. 142; Letter regarding Pl.’s Opp’n to Objector’s Appl. for an Award of Att’ys’ Fees and Expenses, Dkt. No 143. 17 Included in this briefing were surreplies by the Objector and the Plaintiff addressing the expansion of the Goldman board and its impact on the value of the settlement. Despite the arguments of the Objector, I do not find that the expansion of the Goldman board impacts the value of the settlement achieved. 18 Sugarland Industries, Inc. v. Thomas, 420 A.2d 142 (Del. 1980). 19 The Sugarland factors include the result achieved (here, the fund and the therapeutic benefits), the time and effort counsel have expended in the matter, relative complexity of the action, contingency of the fee, and the standing and ability of counsel. E.g., Americas Mining Corp. v. Theriault, 51 A. 3d 1213, 1254 (Del. 2012).

4 The issue to be litigated following the partially successful Motion to Dismiss

was straightforward: whether in setting their own compensation, and in light of the

existing stock incentive plan, the directors of Goldman breached their duties of

loyalty. This did not present novel issues or unusual complexity. The litigation was

at an early stage, just post the initial motion to dismiss. I do not find the time

expended to be particularly relevant here, given the prior improvident settlement

agreement and the dismissed claims. All counsel are respected practitioners. I am

left, then, with a common fund in the amount of $4.5 million, together with the fact

that the fee was purely contingent on success. What is an appropriate fee for this

result? I must determine a fee that encourages wholesome contingent litigation. 20 I

find in this context, given the history of the litigation, the partially granted motion

to dismiss, the abortive 2018 Settlement, and the substantial fund created, that a fee

award of 12.5% is appropriate.

The Plaintiff also seeks a fee for a therapeutic benefit—obtaining a

commitment from Goldman to continue corporate practices that it was using but was

not bound to continue. These included implementation and disclosure of the annual

review of non-employee director compensation by Goldman’s Governance

Committee, annual engagement by that Committee of an independent compensation

consultant, annual recommendation on director compensation to the Goldman board,

20 Frechter v. Cryo-Cell Int’l, Inc., 2016 WL 5864583, at *1 (Del. Ch. Oct. 7, 2016). 5 and annual proxy disclosure of its non-employee director compensation. 21 In

addition, when asking the stockholders to approve any stock incentive plan,

Goldman agrees to identify each class of persons eligible to participate, together with

the number of eligible participants therein.22 These commitments run through

2024. 23

These therapeutic benefits, I confess, would be more impressive if they had

not been agreed to by Goldman and implemented before the current settlement. A

four-year commitment to continue these practices is not an overwhelming benefit. I

think a fair fee award for these benefits, considering all the Sugarland factors, is

$50,000. Adding the foregoing figure to the common-fund award of 12.5% of $4.5

million leads to a fee award, all in, of $612,500. I award that amount to the Plaintiff.

The Objector also seeks fees. He argues that he has worked a corporate

benefit here, by obtaining an improved notice for the settlement hearing to

stockholders, and by providing an “adversary” to improve the settlement process.24

I note that the presentation, in briefing and orally, of the Objector’s counsel was

thoughtful, scholarly, and cogent. A failed objection to a settlement I found to be

fair does not amount to a corporate benefit for which I can award a fee, however.

21 Settlement Stip. 23–24. 22 Settlement Stip. 24. 23 Settlement Stip. 23–24. 24 Objector Sean J. Griffith’s Opening Letter Mem. in Supp. of Objector’s Appl. for an Award of Att’ys’ Fees and Expenses 6–9, Dkt. No 141. 6 The Objector’s real argument is that, largely as a result of his initial objection, the

common fund was created, a benefit for which he was not adequately compensated

in the initial fee award. 25 I reject this contention. I have already found that the

Objector’s participation was helpful, but not crucial, to my rejection of the 2018

settlement.26 More to the point, I intended the initial award of fees in the amount of

$100,000 to be in full compensation for the benefit created. I continue to find that

amount appropriate. I decline, therefore, to increase it here. I understand that the

Objector forcefully disagrees with this decision and considers it inimical to his

business model as an itinerant intervenor providing an independent voice in potential

class settlements. This matter is now concluded, and he is free to seek redress on

appeal.

1) The Plaintiff is awarded, for fees and expenses, $612,500.

2) The Objector is awarded no additional fee.

IT IS SO ORDERED.

Sincerely,

/s/ Sam Glasscock III

Sam Glasscock III

cc: All counsel of record (by File & ServeXpress)

25 See id. 26 Letter Order, Dkt. No. 96. 7