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: June 10, 2019
Date Decided: July 1, 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 Montchanin Road, Suite 200
Wilmington, DE 19801 Wilmington, DE 19807
Anthony A. Rickey, Esquire Gregory V. Varallo, Esquire
Margrave Law LLC Kevin M. Gallagher, Esquire
8 West Laurel Street, Suite 2 Robert L. Burns, Esquire
Georgetown, DE 19947 Richards, Layton & Finger, P.A.
One Rodney Square
Jeremy D. Eicher, Esquire 920 North King Street
Eicher Law LLC Wilmington, Delaware 19801
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:
This matter is before me on a request for attorneys’ fees under the corporate
benefit doctrine. The underlying action involved direct and derivative claims filed
against certain directors (the “Director-Defendants”) of The Goldman Sachs Group,
Inc. (“Goldman”) by a stockholder, Shiva Stein.1 The parties reached a settlement
1
As mentioned below and as explained in my Memorandum Opinion of May 31, 2019, I have
granted in part and denied in part the Defendants’ Motion to Dismiss (filed by the Director-
that required this Court’s approval before taking effect.2 In connection with the
settlement hearing, another stockholder, Sean Griffith (the “Objector”), filed an
objection. 3 His counsel filed briefs and appeared at the settlement hearing to oppose
the settlement. Ultimately, I rejected the settlement, 4 and the matter proceeded on
the Defendants’ Motion to Dismiss, which I granted in part and denied in part.5 The
remaining claim involves an allegation of self-dealing by the Director-Defendants
regarding their compensation.6 The Objector now seeks an award for attorneys’ fees
and expenses under the corporate benefit doctrine.
Our case law regarding fees is well established. Under the default American
rule, each party bears her own fees. There are exceptions. Pertinent here is the
corporate benefit doctrine, a subspecies of the common benefit doctrine. Briefly,
where an individual creates a common benefit for a group or entity, those sharing
the benefit should share also a proportion of the expense required to create the
benefit.7 Our Supreme Court has laid out the factors pertinent to setting such a fee
Defendants and joined by Goldman), and dismissed all but one count brought by the Plaintiff
derivatively against the Defendants. See Stein v. Blankfein, 2019 WL 2323790 (Del. Ch. May 31,
2019).
2
D.I. 27.
3
D.I. 36.
4
Stein v. Blankfein, 2018 WL 5279358 (Del. Ch. Oct. 23, 2018).
5
Stein v. Blankfein, 2019 WL 2323790 (Del. Ch. May 31, 2019).
6
Id. at *8.
7
See, e.g., United Vanguard Fund, Inc. v. TakeCare, Inc., 693 A.2d 1076, 1079 (Del. 1997).
2
in Sugarland Industries, Inc. v. Thomas. 8 Most important to my analysis here is the
benefit created by the Objector.
The Objector considered the litigation, and the proposed settlement, as
valueless to Goldman. He opposed the release of claims as well as the legal fee
sought by the Plaintiff (also under the corporate benefit doctrine) as unjustified,
given the “get” by Goldman, which, again, the Objector saw as valueless. I do not
mean to oversimplify the Objector’s argument, which was ably briefed and argued
in response to a proposed settlement compromising a confusing blend of direct and
derivative claims involving not only corporate law, but federal securities and federal
tax law as well. I found the Objector’s written and oral advocacy helpful in the
context of the settlement hearing, although my conclusions were not entirely
congruent with the Objector’s.
I ultimately denied the settlement because I could not be sure that the very
modest corporate actions promised by the Defendants, balanced against the claims
given up by Goldman, presented a fair outcome. In this context, I find that the
Objector’s actions contributed to several benefits for Goldman. It avoided a
8
420 A.2d 142 (Del. 1980). The Sugarland factors are: “1) the results achieved; 2) the time and
effort of counsel; 3) the complexity of the issues; 4) whether counsel were working on a contingent
fee basis; and 5) counsel’s standing and ability.” Loral Space & Commc’ns, Inc. v. Highland
Crusader Offshore Partners, L.P., 977 A.2d 867, 870 (Del. 2009); see also EMAK Worldwide,
Inc. v. Kurz, 50 A.3d 429, 433 n.22 (Del. 2012).
3
$575,0009 fee request the Plaintiff sought in connection with the settlement. 10 The
objection also aided the survival of the compensation claim against the Director-
Defendants, which, if entirely successful, could return approximately $8 million to
Goldman; obviously, the value of that claim remains to be litigated and its present
value is—substantially—less.
With respect to the first amount, if I attribute the entire avoided fee request to
the Objector’s actions and consider a one-third contingency fee, that would imply,
at most, a fee of $192,000. That would be the outer limit of the equitable fee in that
regard. If I credit the Objector with half of that fee avoidance, which I find
reasonable, that maximum amount drops somewhat below $100,000. The value of
the compensation claim, which the Objector fortuitously helped preserve, is harder
to calculate, but must be accounted for as well. Finally, because the proposed release
was broader than the claims actually asserted, there may have been unknown claims
preserved, and thus additional benefits worked by the Objector, in avoiding that
release.11 In generating these benefits, Objector’s counsel proceeded on a
contingent-fee basis, and invested around 313.7 hours of time, as of the time
9
D.I. 27, ¶ 14.
10
Of course, ultimately the Plaintiff here may also be entitled to a fee, but that will be in the context
of a successful derivative damages claim, if one exists.
11
I note that the parties to the settlement agreed to narrow the release after the Objector lodged his
objection. See D.I. 45, Ex.B.
4
following the settlement hearing, and incurred cost of around $1,900. 12 This
provides a useful check on any award.
As far as the other Sugarland factors, the issues here concerning the interplay
of direct and derivative claims in the context of the settlement request were complex,
and to some extent, novel. The issue of the value of the claims compromised in the
proposed settlement was complicated as well. The Objector’s litigation aided the
Court in both sets of issues. I note that counsel for the Objector and for the litigants
are well-respected and competent. Because I found the objection helpful, and
because I find both tangible and potential benefits of the objection to Goldman, a
substantial fee is warranted.
Taking into account all these factors, I find an award of $100,000 to
Objector’s counsel to be equitable. In addition, I allow $1,923.30 for costs.
To the extent the foregoing requires an Order to take effect, IT IS SO
ORDERED.
Sincerely,
/s/ Sam Glasscock III
Sam Glasscock III
12
D.I. 78, ¶ 20.
5
Shiva Stein v. Lloyd C. Blankfein
Combined Opinion