Shiva Stein v. Lloyd C. Blankfein ( 2021 )

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.
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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).
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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.
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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.
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