In re: SS Body Armor I Inc v.

PRECEDENTIAL

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
______

Nos. 19-2313, 19-2314, 19-2315 and 19-2316
______

In re: S.S. BODY ARMOR I INC,
f/k/a Point Blank Solutions Inc, f/k/a DHB Industries Inc., et
al., Debtors

D. David Cohen and Carter Ledyard & Milburn LLP,
Appellants
______

On Appeal from the United States District Court
for the District of Delaware
(D.C. No. 1-15-cv-00633, 1-15-cv-01154, 1-18-cv-00349 &
1-18-cv-00634)
District Judge: Honorable Maryellen Noreika
______

Argued December 10, 2019
Before: RESTREPO, ROTH and FISHER, Circuit Judges.

(Filed: June 4, 2020)

Michael Busenkell
Gellert Scali Busenkell & Brown
1201 North Orange Street, Suite 300
Wilmington, DE 19801
Gary D. Sesser [ARGUED]
Carter Ledyard & Milburn
2 Wall Street
New York, NY 10005
Counsel for Appellants

Laura D. Jones
James E. O'Neill, III
Pachulski Stang Ziehl & Jones
919 North Market Street
P.O. Box 8705, 17th Floor
Wilmington, DE 19801

Alan J. Kornfeld [ARGUED]
Elissa A. Wagner
Pachulski Stang Ziehl & Jones
10100 Santa Monica Boulevard
13th Floor
Los Angeles, CA 90067
Counsel for Appellee SS Body Armor I Inc. FKA Point
Blank Solutions Inc, FKA DHB Industries Inc

Frederick B. Rosner
The Rosner Law Group
824 North Market Street
Suite 810
Wilmington, DE 19801

James H. Hulme
Arent Fox
1717 K Street, N.W.
Washington, DC 20036

2
 Counsel for Appellees BRIAN K. RYNIKER, as
Recovery Trustee of the Recovery Trust for SS Body Armor I.,
Inc
____

OPINION OF THE COURT
____
FISHER, Circuit Judge.
Although this appeal is only the second time this case
has reached our Court, since its genesis in the mid-2000s, this
matter has traveled, in oft-unexpected ways, through
bankruptcy, trial, and appellate courts throughout three United
States jurisdictions. At this point, we are tasked with reviewing
three orders issued by the Bankruptcy Court for the District of
Delaware in 2015. The orders approve a settlement entered in
the Chapter 11 bankruptcy case of S.S. Body Armor I, Inc., and
either grant or deny related applications for attorneys’ fees and
expenses. Objector D. David Cohen and his counsel, the law
firm of Carter Ledyard & Milburn LLP, whom we refer to
jointly as “Cohen,” appealed the orders to the District Court for
the District of Delaware, which, after a lengthy stay, affirmed.
As we explain below, Cohen is entitled to attorneys’
fees and expenses for his objection to the initial settlement in
this case. Therefore, we will reverse in part the Bankruptcy
Court’s order that granted him fees on a contingent basis and
will remand for determination of the appropriate amount of the
fee award. We will, however, affirm the part of that order that
denied Cohen’s claim to attorneys’ fees and expenses under the
Bankruptcy Code. We will also affirm the Bankruptcy Court’s
order awarding fees to counsel in one of the underlying
lawsuits. And, finally, we will affirm its 2015 approval of a
settlement in this case.

3
 I.
To adequately explain our decision, we must recount the
history of this complex matter in some detail.
A. Pre-Bankruptcy-Petition Litigation and the EDNY
Settlement
In the fall of 2005, revelations surfaced that Body
Armor—a publicly traded company—was manufacturing its
body armor, which it sold to law enforcement agencies and the
U.S. military, using substandard materials. Accordingly, its
stock price plummeted, prompting shareholders to bring
numerous actions in the District Court for the Eastern District
of New York (EDNY). EDNY later consolidated the various
suits into two actions: a shareholders’ class action against Body
Armor and several of its officers and directors, and a derivative
action on behalf of Body Armor against specified officers and
directors.
In late 2006, the parties to the class and derivative
actions entered into a joint settlement (EDNY Settlement).
Under this agreement, the class action would be settled through
a combination of cash and shares of Body Armor’s common
stock, while the derivative action would be settled through
Body Armor’s adoption of various corporate governance
policies and a $300,000 payment to appointed counsel
(Derivative Counsel). The cash portions of the EDNY
Settlement (Escrow Funds) were placed in escrow with counsel
in the class action (Class Counsel).
The EDNY Settlement also contained a provision under
which Body Armor agreed to release and indemnify its
founder, and former Chairman and Chief Executive Officer,
David H. Brooks, from any liability he might incur should the
Securities and Exchange Commission (SEC) commence an
action against him under § 304 of the Sarbanes-Oxley Act, 15

4
U.S.C. § 7243 (SOX § 304). 1 Cohen, who had been Body
Armor’s General Counsel and remained a shareholder,
intervened in the derivative action and objected to the EDNY
Settlement, particularly to the SOX § 304 release and
indemnification.
Meanwhile, in early October 2007, before EDNY
approved the EDNY Settlement, Body Armor restated its
financial reports for 2003, 2004, and part of 2005. In response,
the SEC sued Brooks in the Southern District of Florida
(SDFL), seeking disgorgement of profits—allegedly
amounting to $186 million—under SOX § 304. And later that
month, Brooks was indicted in EDNY on various criminal
charges, including fraud and insider trading. The SEC’s action
was then administratively closed pending the outcome of the
criminal action against Brooks.
In July 2008, EDNY overruled Cohen’s objections,
approved the EDNY Settlement, and entered judgments in both
the class and derivative actions. In doing so, it approved the
payment of $300,000 from the settlement fund to Derivative
Counsel, which was provisionally paid in 2008. Separately, it
denied Cohen’s application for attorneys’ fees and expenses.
Cohen appealed EDNY’s judgment in the derivative
action, as well as its denial of his objection to the award of fees
to Derivative Counsel and the denial of his application for his
own attorneys’ fees, to the United States Court of Appeals for
the Second Circuit. Cohen was the only objector to appeal the

1
SOX § 304 permits the SEC to require certain officers of a
public company to repay “bonus[es] or other incentive-based
or equity-based” income, and “any profits realized from the
sale of [the company’s] securities” that were earned during a
period for which the company restates its financial reports
because of misconduct. 15 U.S.C. § 7243(a).

5
approval of the EDNY Settlement. He argued on appeal that
the settling parties could not indemnify Brooks against SOX §
304 liability. The SEC filed an amicus brief in support of his
objection to the SOX § 304 indemnification.
In 2010, several events took place in rapid succession,
altering the course of the various litigation streams. First, in
April 2010, Body Armor petitioned for Chapter 11 bankruptcy
protection in the Bankruptcy Court for the District of
Delaware.
Later that year, in September 2010, following a
tumultuous eight-month trial in EDNY, a jury convicted
Brooks of an array of financial crimes. He was later sentenced
to seventeen years in prison and ordered to pay restitution to
Body Armor and his investor victims. 2 Brooks appealed his
convictions and the restitution orders.
Also in September 2010, the Second Circuit vacated and
remanded EDNY’s judgment in the derivative action,
holding—in a significant precedential opinion that agreed with
Cohen’s objections—that the settlement impermissibly
released and indemnified Brooks against liability under SOX §
304. Cohen v. Viray, 622 F.3d 188, 195–96 (2d Cir. 2010). 3
The court expressly declined to address Cohen’s claim for fees

2
EDNY issued the criminal restitution awards pursuant to the
Mandatory Victim’s Restitution Act. Brooks was ordered to
pay $53,912,545.62 to Body Armor and $37,584,301.30 to his
investor victims.
3
Specifically, the Second Circuit held that SOX § 304 does not
create a private cause of action, Cohen, 622 F.3d at 193, and
that the EDNY Settlement’s “release and indemnification
provisions attempt[ed] an end-run around § 304 that vitiate[d]
the SEC’s role and [was] inconsistent with the law,” id. at 195.

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and his objection to Derivative Counsel’s fees, directing
EDNY to “reexamine those issues . . . in the context of a
revised settlement or the outcome of further litigation.” Id. at
196.
Finally, in October 2010, the Government commenced
a civil forfeiture proceeding and ultimately restrained roughly
$168 million of Brooks-related assets. Body Armor and Class
Plaintiffs petitioned the Department of Justice (DOJ) to use the
assets to compensate them for losses they suffered as a result
of Brooks’s misconduct. 4 The proceeding was then stayed—
like the SEC’s action in SDFL—pending Brooks’s criminal
trial and appeals.
B. Post-Bankruptcy-Petition Proceedings and the 2015
Settlement
After Body Armor filed its Chapter 11 petition,
litigation in the class and derivative actions migrated, in large
measure, to the Bankruptcy Court, which would need to
approve any revised settlement.
1. The 2015 Settlement
After the Second Circuit vacated the judgment
approving the EDNY Settlement in the derivative action, the
parties to the class and derivative actions engaged in renewed
negotiations, ultimately agreeing to a new settlement (2015
Settlement).
4
The U.S. Attorney General may use forfeited assets “as
restoration to any victim.” 18 U.S.C. § 981(e)(6); Justice
Manual, 9-121.000-Remission, Mitigation, and Restoration of
Forfeited Properties, U.S. Dep’t of Just.,
https://www.justice.gov/jm/jm-9-121000-remission-
mitigation-and-restoration-forfeited-properties (last updated
Oct. 2010).

7
 The 2015 Settlement, which was supported by Body
Armor’s unsecured creditors and equity holders, shared some
of the features of the EDNY Settlement. For example, it
provided that the class and derivative actions would be
dismissed, that Derivative Counsel would retain their $300,000
fee, and that the Escrow Funds—which, as noted above, had
been placed in escrow with Class Counsel under the EDNY
Settlement—would be released to Class Plaintiffs. It also
included some new features. For instance, of the Escrow Funds
released to Class Plaintiffs, $20 million would be loaned to
Body Armor on an interest-free, non-recourse basis to fund its
Chapter 11 plan of liquidation and permit it to exit Chapter 11. 5
And of that $20 million loan, $1.5 million would cover Class
Counsel’s fees and expenses. The 2015 Settlement also
provided that Brooks’s criminal restitution awards would be
allocated between Body Armor and Class Plaintiffs.
In July 2015, the Bankruptcy Court issued an order
approving the agreement, overruling Cohen’s objections to
several terms. Cohen appealed the Bankruptcy Court’s
approval of the 2015 Settlement to the District Court for the
District of Delaware. Although Cohen’s appeal remained
pending, certain pieces of the 2015 Settlement, including
Class Plaintiffs’ loan to Body Armor, became effective and
occurred in November 2015 when the Bankruptcy Court
confirmed Body Armor’s Chapter 11 plan.
2. Fee Disputes Related to the 2015 Settlement
When it approved the 2015 Settlement, the Bankruptcy
Court set a separate deadline for related fee applications.

5
Although Chapter 11 cases are typically reorganization
bankruptcies, Body Armor took the unusual step of proposing
a plan of liquidation under Chapter 11.

8
Cohen, still eager to earn fees for his efforts in objecting to the
EDNY Settlement of the derivative action, sought $1.86
million in attorneys’ fees and expenses.6 The Bankruptcy
Court granted Cohen’s request but specified that he would earn
a fee only if Body Armor later received funds on account of the
SOX § 304 claim.7 It also denied Cohen’s separate claim for
fees and expenses for making a “substantial contribution”
under the Bankruptcy Code.
Separately, Cohen objected to the $300,000 payment to
Derivative Counsel. As recounted above, the EDNY
Settlement had granted Derivative Counsel $300,000 in fees
and expenses—an award that EDNY initially approved over
Cohen’s objection and which was provisionally paid in 2008.
The Bankruptcy Court rejected Cohen’s objections and
permitted Derivative Counsel to retain the award.
Cohen appealed both fee orders to the District Court for
the District of Delaware. However, his appeal of the fee orders
and his appeal of the approval of the 2015 Settlement were
stayed for several years. The District Court lifted the stay in
May 2018. As we explain in more detail below, these orders
are at the center of the present appeal.
C. Brooks’s Death and the Global Settlement
In October 2016, as proceedings continued in
Bankruptcy Court, Brooks died unexpectedly. The Second
Circuit held that his death abated his criminal convictions and
the criminal restitution awards ordered against him. Because

6
Cohen’s requested amount—$1.86 million—was one percent
of the purported value of the SEC’s SOX § 304 claim.
7
At the time, the SEC’s action remained administratively
closed in SDFL pending the outcome of Brooks’s criminal
appeals.

9
the 2015 Settlement was predicated, in part, upon Brooks’s
criminal restitution awards, the abatement of those recoveries,
once again, changed the course of the litigation.
The SEC’s action—which had been stayed pending
Brooks’s criminal trial and appeals—was reopened in SDFL.
The civil forfeiture proceeding was also reopened, and in mid-
2018, DOJ granted Body Armor’s and Class Plaintiffs’ earlier
requests that it use the restrained assets to compensate them for
losses they suffered as a result of Brooks’s misconduct. 8
In the meantime, the parties to the 2015 Settlement
worked to renegotiate a revised agreement because part of the
2015 Settlement had been funded by Brooks’s criminal
restitution awards, which were abated by his death. As a
replacement source of funds, the parties turned to the assets
seized in the civil forfeiture proceeding and the DOJ letters
distributing those assets. Their term sheet for a new settlement
(Global Settlement) provided that they would agree to the
forfeiture of the Brooks-related assets, which would pay the
United States for costs incurred in the forfeiture proceeding
and Brooks’s criminal case, with the remainder distributed pro
rata to Body Armor and Class Plaintiffs.
Around the same time, the SEC and Brooks’s estate
entered into a consent judgment to resolve the SEC’s action,
which was approved by SDFL. The judgment provided that the
SOX § 304 claim would be deemed satisfied by the distribution
of assets in the civil forfeiture proceeding, as provided in the
Global Settlement.

8
Body Armor’s request was approved in the rough amount of
$78.8 million and that of Class Plaintiffs was approved in the
approximate amount of $81.5 million.

10
D. 2015 Fee Order Appeals
Our review concerns the Bankruptcy Court’s
conditional grant of Cohen’s attorneys’ fees and expenses,
award of fees to Derivative Counsel, and approval of the 2015
Settlement. Cohen appealed these rulings to the District Court
for the District of Delaware. But the appeals were stayed
pending the fallout from Brooks’s death and the renegotiation
of a settlement. The District Court lifted the stay in May 2018
after Body Armor informed it that the Global Settlement was
nearly finalized. In June 2019, the Court affirmed the
Bankruptcy Court in all respects. Cohen appeals.
II.
The District Court had jurisdiction to hear Cohen’s
appeals from the Bankruptcy Court under 28 U.S.C. §
158(a)(1). We have jurisdiction pursuant to 28 U.S.C. §§
158(d)(1) and 1291. We “exercise the same standard of review
as the District Court [did] when it reviewed the original appeal
from the Bankruptcy Court.” Binder & Binder, P.C. v. Handel
(In re Handel), 570 F.3d 140, 141 (3d Cir. 2009). Therefore,
our “review of the [D]istrict [C]ourt effectively amounts to
review of the [B]ankruptcy [C]ourt’s [orders] in the first
instance.” In re Sharon Steel Corp., 871 F.2d 1217, 1222 (3d
Cir. 1989).
A. Award of Fees to Cohen
Cohen primarily challenges the Bankruptcy Court’s
2015 order regarding his fee application. As outlined above,
after the Bankruptcy Court approved the 2015 Settlement, it
granted Cohen’s application for attorneys’ fees and expenses
in part and denied it in part. First, the Court “awarded [Cohen]
a fee for [his] efforts in preserving the SOX [§] 304 Claim,”
but it stated that the amount would “be determined” later and
would be “paid solely from funds received by [Body Armor]

11
or [its] successors-in-interest on account of the SOX [§] 304
Claim, if any.” J.A. 8–9. “For avoidance of doubt,” the Court
emphasized, “if [Body Armor does] not receive any funds on
account of the SOX [§] 304 Claim, no fee shall be payable.”
J.A. 9. Second, the Court also denied Cohen’s separate claim
of substantial contribution under the Bankruptcy Code. J.A. 9.
The District Court affirmed.
Cohen argues that the Bankruptcy Court erred in
granting his request for fees and expenses on a contingent basis
and in denying his substantial-contribution claim. We address
each challenge in turn.
1. Objectors’ Attorneys’ Fees and Expenses
We review a bankruptcy court’s fee award “for an abuse
of discretion.” Zolfo, Cooper & Co. v. Sunbeam-Oster Co., 50
F.3d 253, 257 (3d Cir. 1995). An abuse of discretion occurs “if
the judge fails to apply the proper legal standard or to follow
proper procedures[,] . . . or bases an award upon findings of
fact that are clearly erroneous.” Id. (citation omitted).
i. Legal Standard
Although “the general American rule is that attorneys’
fees are not ordinarily recoverable as costs, both the courts and
Congress have developed exceptions to this rule for situations
in which overriding considerations indicate the need for such a
recovery.” Mills v. Elec. Auto-Lite Co., 396 U.S. 375, 391–92
(1970).
For example, courts have recognized that lead counsel
in both class-action and derivative suits may recover fees and
expenses for their efforts. Lead class-action counsel are
typically compensated pursuant to the “common fund
doctrine,” which provides that “a private plaintiff, or plaintiff’s
attorney, whose efforts create, discover, increase, or preserve
a fund to which others also have a claim, is entitled to recover

12
from the fund the costs of his litigation, including attorneys’
fees.” In re Cendant Corp. Sec. Litig., 404 F.3d 173, 187 (3d
Cir. 2005) (emphasis added) (quoting In re Gen. Motors Corp.
Pick-Up Truck Fuel Tank Prods. Liab. Litig., 55 F.3d 768, 820
n.39 (3d Cir. 1995)). On the other hand, “plaintiffs in a
shareholders’ derivative action may . . . recover their expenses,
including attorneys’ fees, from the corporation on whose
behalf their action is taken if the corporation derives a benefit,
which may be monetary or nonmonetary, from their successful
prosecution or settlement of the case.” Shlensky v. Dorsey, 574
F.2d 131, 149 (3d Cir. 1978) (emphasis added).
In addition, courts, including our own, have said that
objectors to settlements of class-action and derivative lawsuits
may be entitled to attorneys’ fees and expenses when they
improve the settlement. See Welch & Forbes, Inc. v. Cendant
Corp. (In re Cendant Corp. PRIDES Litig.), 243 F.3d 722, 743
(3d Cir. 2001) (citing White v. Auerbach, 500 F.2d 822, 828
(2d Cir. 1974)). Federal procedural rules dictate that such
settlements must be approved by a judge and notice of the
agreement must be provided to certain persons and entities. See
Fed. R. Civ. P. 23(e), 23.1(c); Fed. R. Bankr. P. 9019(a). “One
of the purposes of the dual [approval and notice] requirement
. . . is to prevent the unrighteous compromise of just . . .
actions.” White, 500 F.2d at 828 (internal quotation marks and
citations omitted). Objectors, like these procedural safeguards
provided for in the rules, “have a valuable and important role
to perform in preventing collusive or otherwise unfavorable
settlements.” Id. Therefore, they “are entitled to . . . attorneys’
fees and expenses where a proper showing has been made that
the settlement was improved as a result of their efforts.” Id. 9

9
A judge decides two inquiries: “whether, and in what
amount,” fees should be awarded. White, 500 F.2d at 828. We

13
 Although courts agree on the general contours of the
standard set out in White, it is often unclear how judges are to
determine whether “the settlement was improved as a result of
[an objector’s] efforts.” Id. Some courts meld this objector
standard with a version of the common fund doctrine, requiring
that the objector create, preserve, or somehow contribute to a
monetary recovery to be entitled to a fee. See, e.g., Levitt v. Sw.
Airlines Co. (In re Sw. Airlines Voucher Litig.), 898 F.3d 740,
744–46 (7th Cir. 2018) (awarding fees to objector to class-
action settlement under common fund doctrine); Vizcaino v.
Microsoft Corp., 290 F.3d 1043, 1051–52 (9th Cir. 2002)
(denying fees for objectors to class-action settlement because
they “did not increase the fund or otherwise substantially
benefit the class members”). Other courts award fees when the
objector merely transformed the litigation into a more balanced
proceeding or otherwise influenced the court’s decision to
approve or deny a settlement. See, e.g., In re Metlife
Demutualization Litig., 689 F. Supp. 2d 297, 367–68
(E.D.N.Y. 2010) (objections “served to clarify the proposed
Settlement and [the corporation’s] positions regarding
implementation of the Settlement”); Great Neck Capital
Appreciation Inv. P’ship, L.P. v. PricewaterhouseCoopers,
L.L.P., 212 F.R.D. 400, 412–13 (E.D. Wis. 2002) (objector
preserved class members’ claims, convinced parties to modify
settlement term, and “aided the court and enhanced the
adversarial process”); Howes v. Atkins, 668 F. Supp. 1021,
1027 (E.D. Ky. 1987) (objector “ably performed the role of
devil’s advocate . . . even though the settlement [terms were]

are at the first step—that is, we are tasked with reviewing
whether Cohen is entitled to a fee. See Appellants’ Reply Br.
10 n.6 (“The amount of [Cohen’s] fee award has not been yet
litigated and is not presently before this Court.”).

14
not improved”); Frankenstein v. McCrory Corp., 425 F. Supp.
762, 767 (S.D.N.Y. 1977) (objections, although ultimately
overruled, “transformed the settlement hearing into a truly
adversary proceeding” and “cast in sharp focus the question of
the fairness and adequacy of the settlement”).
We have not had much occasion to consider fee awards
to settlement objectors. When we have, our statements have
suggested that, at least in the class-action context, an objector
may need to improve a settlement monetarily. In Cendant
PRIDES, we remanded for the district court to reconsider its
denial of an objector’s fee application. We first quoted White
and stated that objectors are entitled to compensation when
“the settlement was improved as a result of their efforts.” In re
Cendant Corp. PRIDES Litig., 243 F.3d at 743 (quoting White,
500 F.2d at 828). We then noted that the objector “called our
attention to the many [problematic] aspects of [class counsel’s]
fee award . . . which we . . . found require[d] reconsideration,”
and we remanded for the district court to “evaluate the value of
the benefit of the [objector’s] contribution to the ultimate fee
. . . and to compensate the [objector] to that extent.” Id. at 744.
We later elaborated on this holding in a related case, stating
that:
[A] court can usually determine whether an
objector has improved the class’s recovery, and
can often measure the amount of that
improvement. If the objection is meritorious, it
will usually lead to an increase in the settlement,
a reallocation of the award among different
plaintiffs, or a decrease in the fees paid to lead
counsel. The court will thus be able to measure
the dollar value of the objector’s contribution to
the class’s net recovery.

15
In re Cendant Corp., 404 F.3d at 201 n.17.
Nevertheless, in neither of these opinions, nor in any
other case, have we held that a trial court is required to consider
only an objector’s monetary improvement to a settlement in
deciding whether to award fees. In addition, we have never
held that a settlement objector will only improve a settlement
if he creates, preserves, or contributes to a common fund.
Indeed, we used equivocal language in In re Cendant Corp.,
saying: “a court can usually determine” if the objection
enhances the class’s recovery; the court “can often measure the
amount of that improvement”; and a successful objection “will
usually” augment the settlement. Id. (emphases added).
Furthermore, certain district courts within our Circuit have
noted that objectors’ fees may be awarded for non-pecuniary
contributions. See, e.g., Dewey v. Volkswagen of Am., 909 F.
Supp. 2d 373, 395 (D.N.J. 2012) (“[O]bjectors must have
economically benefitted the class or, at the very least, shown
that a court adopted their objection.”). We now clarify that, in
both class and derivative actions, trial courts may, in their
discretion, consider non-monetary factors in determining
whether an objector’s participation improved a settlement.
Most of the cases addressing objectors’ fees, including
the Cendant litigation, have involved objectors to class-action
settlements. As a logical matter, however, non-pecuniary
improvements to settlements are even more relevant in the
derivative-action context than in the class-action context. The
purpose of a class action is to vindicate direct harm to the
class—typically financial. So, whether the objector created or
enhanced a monetary recovery for class members will often be
an adequate measurement of whether the objector improved
the settlement. When shareholders bring claims on behalf of a
corporation, however, such improvements may be less
susceptible to straightforward financial evaluation. Thus, the

16
clarification we announce today will likely apply with
particular force when it comes to evaluating settlements of
derivative actions.
Our conclusion—that courts may consider non-
monetary improvements to settlements when assessing
whether to award attorneys’ fees and expenses to settlement
objectors—leads us to another observation: despite the
uncertainty surrounding what it means to improve a settlement,
courts universally acknowledge that a trial court exercises
“broad discretion” in determining “whether” to award fees.
White, 500 F.2d at 828. As noted above, settlements must be
approved by a judge. See Fed. R. Civ. P. 23(e), 23.1(c); Fed.
R. Bankr. P. 9019(a). The value an objector provides is
assisting the court in determining whether to approve the
settlement, and, therefore, the court can easily assess whether
the objector improved the settlement or otherwise enhanced its
review.
Accordingly, a bankruptcy or district court has broad
discretion in evaluating whether a settlement objector
improved the settlement because that court, in the ordinary
case, presides over both the settlement and the corresponding
fee applications. The court can therefore “easily evaluate not
only the quality of the objector’s work but also the impact it
had on the court’s ultimate decision.” In re Cendant Corp., 404
F.3d at 201 n.17. The trial court, in short, “is in the best position
to determine whether the participation of objectors assisted the
court and enhanced the recovery.” White, 500 F.2d at 828; see
also Goldberger v. Integrated Res., 209 F.3d 43, 47 (2d Cir.
2000) (noting that the deferential abuse of discretion standard
“takes on special significance when reviewing fee decisions”).
Nevertheless, unusual situations may arise in which
such significant discretion should be cabined. In White, for
example, the Second Circuit reversed the district court’s denial

17
of fees to settlement objectors and remanded for the court to
determine “to what extent, if any, [the judge who presided over
the settlement but died before considering fee applications]
may have been influenced by [the] objectors’ contentions.” 500
F.2d at 823 n.1, 828–29; see also Dubbin v. Union Bank of
Switz. (In re Holocaust Victim Assets Litig.), 424 F.3d 150, 158
(2d Cir. 2005) (finding White inapposite because same judge
“presided over both the settlement and the fee application, and
his assessments of [the objector’s] contributions should
therefore be accorded deference”).
In sum, a settlement objector is entitled to attorneys’
fees and expenses when he improves the settlement. The
objector is not invariably required to create, preserve, or
contribute to a common fund, and the court may consider both
(or either) pecuniary and non-pecuniary factors in determining
whether the objector is entitled to fees. We typically accord
significant deference to the trial court’s determination because
it is usually in the best position to determine whether the
settlement was improved as a result of the objector’s efforts.
Such discretion may be narrowed, however, in the unusual case
in which the judge reviewing fee applications was not in the
best position to assess the objector’s contribution.
ii. Cohen Is Entitled to Attorneys’ Fees and
Expenses
The Bankruptcy Court erred in awarding Cohen a
conditional fee. First, this case presents the unusual situation
in which the judge reviewing the fee application did not preside
over the settlement, and we will cabin the Bankruptcy Court’s
expansive discretion accordingly. Second, Cohen’s objection
improved the settlement of the derivative action. Thus, he is
entitled to attorneys’ fees and expenses for his efforts related
to that objection.
To start, this case is unusual because Bankruptcy Judge

18
Sontchi, who granted Cohen’s fees on a contingent basis, did
not preside over the EDNY Settlement, to which Cohen
objected in 2006, and which Cohen then successfully appealed
to the Second Circuit. Indeed, this case presents an even more
extreme version of the unusual situation presented in White. By
the time Judge Sontchi passed on Cohen’s fee application in
late 2015, nearly a decade had elapsed since Cohen lodged his
objection with EDNY and approximately five years had passed
since the Second Circuit vindicated his objection to that
settlement’s release and indemnification. Judge Sontchi
considered Cohen’s fee application in the context of the
renegotiated 2015 Settlement, which did not include the illegal
provisions. Thus, Judge Sontchi was not in the best position to
assess Cohen’s contribution to the EDNY Settlement and its
progression into the 2015 Settlement because he entered the
litigation midstream and in an entirely different context.
Such a conclusion is strengthened by our consideration
of Judge Sontchi’s statements regarding the Bankruptcy
Court’s specific role in 2015. When he approved the 2015
Settlement, he emphasized: “My focus is on the debtor and the
debtors’ estates, and its creditors as they’re affected by the
estate” and “what I’m tasked with . . . under the code[,] . . . is
to figure out whether this settlement makes sense for the
debtors’ estates.” J.A. 637–39. Judge Sontchi’s notion of what
it meant for Cohen, as an objector, to improve the settlement
was heavily, and understandably, influenced by the
circumstances of Body Armor’s bankruptcy proceedings.
Rather than considering how Cohen’s objection to the EDNY
Settlement led to the favorable 2015 Settlement by, for
example, eliminating illegal provisions and avoiding a
potential indemnification obligation, the Bankruptcy Court
was singularly focused on the real-time monetary benefit to
Body Armor’s estate. Accordingly, we will narrow the broad

19
deference we traditionally accord to that Court’s
determinations.
The Bankruptcy Court erred in concluding that Cohen
was entitled only to a contingent fee. Although the Court did
not state what standard it applied, the order essentially requires
Cohen to demonstrate that he created or contributed to a
common fund. See J.A. 9 (“[I]f the Debtors do not receive any
funds on account of the SOX [§] 304 Claim, no fee shall be
payable.”). Rather than viewing the creation of a common fund
as one factor to consider, the Bankruptcy Court believed that
the creation of, or monetary contribution to, a common fund
was a prerequisite to awarding any fee. To be sure, at the
hearing on Cohen’s fee application, the Bankruptcy Court
asked: “What’s the non-pecuniary benefit?” J.A. 1704.
However, it went on to stress that “no funds have been received
by the debtor[] in connection” with the SOX § 304 claim. J.A.
1712. And it stated: “[T]he debtor hasn’t seen [one dime][,
t]here hasn’t been one benefit to this debtor, not one benefit to
this debtor as a result of [Cohen’s] work.” J.A. 1705. 10

10
The District Court held that the Bankruptcy Court’s
conditional fee award is appropriate because it does not
preclude Cohen from potentially recovering fees under the
2018 Global Settlement. See Cohen v. SS Body Armor I, Inc.
(In re SS Body Armor I, Inc.), Nos. 15-633, 15-1154, 18-349,
18-634, 2019 WL 2344038, at *12 (D. Del. June 3, 2019)
(finding that the Bankruptcy Court’s order “does not require
that [Cohen] create a common fund solely from the outcome of
the SOX § 304 Claim or use any language that would foreclose
relief under the circumstances of the Global Settlement”). It is
true that the order does not require that Cohen create a common
fund standing alone. But it does dictate that Body Armor must
receive some funds “on account of” the SOX § 304 claim. As

20
 The Bankruptcy Court erred in taking such a narrow
view of Cohen’s contribution. Cohen did more than just
preserve the possibility of the $186 million recovery for Body
Armor under SOX § 304—although that benefit was certainly
significant. 11 His objection to and successful appeal of the
EDNY Settlement also stripped the agreement of a potential
$186 million indemnification obligation to Brooks, which
would have negated any SOX § 304 recovery. The
indemnification was, according to Brooks’s counsel, an
“essential” and “key” term of the EDNY Settlement, which
was “negotiated” and “fought over” and “was one of the most
important things . . . Brooks got” in exchange for his payment
to the settlement. J.A. 1366; see also J.A. 1356–59. In addition,
in eliminating the indemnification obligation, Cohen also
ensured that the settlement would not be vulnerable to attack
for containing an illegal provision as one of its “essential” and
“key” terms.
Furthermore, those involved in this case uniformly
recognize that the latter settlements were better for Body
Armor—and other claimants—than the EDNY Settlement.

we have explained, this is not the appropriate standard. Also,
the District Court’s repeated emphasis on the fact that Cohen
may still recover fees under the Global Settlement ignores the
issue on appeal—whether the Bankruptcy Court erred in
awarding a contingent fee in the first place.
11
Cohen also argues that his preservation of the SOX § 304
claim provided a “backstop,” which would ensure Body Armor
and Brooks’s victims would recover if his criminal convictions
were overturned or abated. This became even more important
after Brooks died in prison and the criminal restitution orders
were in fact abated.

21
After Body Armor petitioned for bankruptcy protection and
while Cohen’s appeal was pending in the Second Circuit, Body
Armor admitted that the EDNY Settlement was not a favorable
agreement and moved to reject it “for a list of reasons . . . .
[f]irst, and . . . foremost” of which was that “the settlement . . .
of the derivative action ha[d] a release of . . . Brooks.” J.A.
1387–88. Body Armor also admitted that the EDNY
Settlement did not become effective “[d]ue to the pendency of
[Cohen’s] appeal.” Bankr. Ct. Docket No. 589, at 9.
The fact that the EDNY Settlement did not become
effective due to Cohen’s appeal also meant that the Escrow
Funds were not distributed pursuant to that agreement. Thus,
Cohen’s objection helped to preserve the money which later
funded (in part) the 2015 Settlement and Body Armor’s plan to
exit Chapter 11. As explained above, under the 2015
Settlement, Class Plaintiffs agreed to loan $20 million of the
funds they received as part of the settlement to Body Armor on
an interest-free, non-recourse basis. Body Armor’s Chief
Restructuring Officer testified that this loan was “extremely
important.” J.A. 335. He stated that if Body Armor had been
required to seek outside financing, it would have cost over $15
million and “would [have] eliminate[d] any recovery to [Body
Armor’s] equity holders and [would have] significantly
impair[ed] the recovery to [Body Armor’s] unsecured
creditors.” J.A. 447.
While Body Armor recognized in 2010 that the EDNY
Settlement was not a favorable agreement, its counsel now
describes the ultimate result reached in this case as a “home
run.” Oral Arg. at 22:54–23:02. Similarly, the Bankruptcy
Court has repeatedly emphasized that the 2015 Settlement was
“a good settlement” and “a very good result for the estate.” J.A.
1714; see also J.A. 637–38 (“There is no question at all that
this is a good deal for the debtor. . . . I [also] find it highly

22
significant that both committees, class counsel and the debtors,
all support the settlement.”).
Beyond the understanding that the latter settlements
achieved in this case were superior to the EDNY Settlement,
there is also widespread recognition that Cohen’s objection
contributed to that evolution. For example, Body Armor’s
counsel have said that Cohen made “a contribution, and we’ve
acknowledged that . . . repeatedly.” J.A. 1682. The Bankruptcy
Court has stated: “I think it’s a good settlement. And . . . I think
one of the reasons we’re here today are the efforts of Mr.
Cohen and his counsel.” J.A. 1714–15. And we have also
recognized Cohen’s contribution. See S.S. Body Armor I., Inc.
v. Carter Ledyard & Milburn LLP, 927 F.3d 763, 775 (3d Cir.
2019) (affirming denial of emergency stay but noting Cohen
“showed tremendous skill and expended substantial time in
preserving a highly valuable claim”).
Moreover, both Class Counsel and Body Armor’s
counsel have acknowledged that Cohen should earn a fee for
his efforts. Class Counsel stated: “I don’t have a problem with
[Cohen] arguing as to why his fees should be paid in
connection with his appeal. I don’t have a problem with that. I
don’t think anyone can dispute it.” J.A. 1372–73. And at oral
argument, Body Armor’s counsel admitted that Cohen
provided a benefit to the bankruptcy estate and conceded Body
Armor’s willingness to pay him fees. Oral Arg. at 22:24–22:38.
Finally, we note that our holding today accords with our
Court’s interest in “[a]ssuring fair and adequate settlements.”
Bell Atl. Corp. v. Bolger, 2 F.3d 1304, 1310 (3d Cir. 1993).
Meritorious objectors, of course, “play an important role” in
advancing that interest “by giving courts access to information
on the settlement’s merits” in situations in which “judges no
longer have the full benefit of the adversarial process.” Id.
In sum, under the unique facts of this case, Cohen is

23
entitled to an award of fees and expenses for his efforts in
objecting to the EDNY Settlement. 12 We conclude only that he
earns a fee without any contingency. We do not rule on the
appropriate amount of the fee or how it should be calculated. 13
Nor do we rule on the method by which it will be paid.
2. Substantial Contribution
Cohen also challenges the Bankruptcy Court’s denial of
his substantial-contribution claim. In reviewing the
determination of whether there has been a substantial
contribution under the Bankruptcy Code, “[w]e exercise
plenary review over the district court’s decision, as well as over
the legal determinations of the bankruptcy court.” Lebron v.

12
Cohen notes that he has “emphatically raised” whether
“vindication of the public interest” alone is a sufficient basis to
support an award of attorneys’ fees to an objector. Appellants’
Reply Br. 6. Because we hold that Cohen improved the
settlement in other, more direct ways, we need not reach this
question. We note, however, that the standard for awarding
fees to objectors—whether the objector improved the
settlement—is tied to the settlement reached in the respective
case.
13
Our Court recognizes two methods for making such
calculation—the lodestar and the percentage-of-recovery. See
S.S. Body Armor I., 927 F.3d at 773. The lodestar approach is
often used in statutory fee-shifting cases but may be used in
other circumstances, “where ‘the nature of the settlement
evades the precise evaluation needed for the percentage[-]of[-
]recovery method.’” Id. at 774 (alteration in original) (quoting
In re Gen. Motors Corp., 55 F.3d at 821). The percentage-of-
recovery method is “[g]enerally used in common fund cases.”
Id. at 773.

24
Mechem Fin. Inc., 27 F.3d 937, 942 (3d Cir. 1994). “[W]e
review the bankruptcy court’s factual findings for clear error.”
Id.
The Bankruptcy Code permits the payment of
“administrative expenses,” including the “reasonable
compensation for professional services rendered by an
attorney” of “an equity security holder . . . in making a
substantial contribution in a case under chapter . . . 11.” 11
U.S.C. § 503(b)(3)(D), (b)(4) (emphasis added). There has
been a substantial contribution when “the efforts of the
applicant resulted in an actual and demonstrable benefit to the
debtor’s estate and the creditors.” Lebron, 27 F.3d at 944
(quoting Haskins v. United States (In re Lister), 846 F.2d 55,
57 (10th Cir. 1988)).
Cohen argues that he provided a substantial contribution
to Body Armor’s estate.14 However, even if he did make a
substantial contribution, he did not do so “in a case under
chapter . . . 11.” 11 U.S.C. § 503(b)(3)(D). Rather, the expenses
he incurred in making a substantial contribution accrued
months and years before Body Armor petitioned for
bankruptcy. To be sure, there is “no across-the-board bar” to
recovery of pre-bankruptcy-petition expenses that benefit the
estate. Lebron, 27 F.3d at 945. But here, even if Cohen would
not have undertaken his efforts “absent an expectation of
reimbursement,” he certainly did not undertake those efforts
under Chapter 11 or with “an expectation of reimbursement
from [Body Armor’s Bankruptcy E]state.” Id. at 944; see also

14
Cohen’s substantial-contribution claim “admittedly is a
backup argument.” J.A. 1667–68. He emphasizes that any
substantial-contribution award would “reduce, and not replace,
the legal fee to which [he is] entitled” as a settlement objector.
Appellants’ Br. 36 n.12.

25
In re Lister, 846 F.2d at 57 (denying substantial-contribution
claim for pre-petition efforts because creditor was “unaware of
the pendency of bankruptcy proceedings until after the petition
had been filed [so a]ny benefit accruing to the bankruptcy
estate as a result of these efforts was only incidental”).
B. Award of Fees to Derivative Counsel
Cohen argues that the Bankruptcy Court abused its
discretion in issuing an order that approved the provision of the
2015 Settlement that permitted Derivative Counsel to retain
$300,000 in fees. As explained above, the EDNY Settlement
provided for a $300,000 payment to Derivative Counsel for
their efforts in securing various corporate governance reforms.
These fees were provisionally paid when EDNY approved the
EDNY Settlement, and the 2015 Settlement permitted
Derivative Counsel to retain the fees. The Bankruptcy Court,
overruling Cohen’s objection, approved this provision. The
Court explained: “[T]here can be no question that there was a
benefit to the debtor, at least pre-petition, and arguably post-
petition, that resulted from the actions of [D]erivative
[C]ounsel, holding aside the [SOX § 304] indemnification
issue.” J.A. 1713.
“A plaintiff should not receive a fee in derivative
litigation unless the corporation . . . receives some of the
benefit sought in the litigation or obtains relief on a significant
claim in the litigation.” Zucker v. Westinghouse Elec. Corp.,
265 F.3d 171, 176 (3d Cir. 2001). This benefit “may be
monetary or nonmonetary.” Shlensky, 574 F.2d at 149. We
review both the Bankruptcy Court’s approval of a settlement
and its fee determinations for abuse of discretion. Zolfo,
Cooper & Co., 50 F.3d at 257.
Cohen argues that Derivative Counsel should not be
entitled to keep these fees because they were awarded based on
short-lived corporate governance reforms in the EDNY

26
Settlement, which never went into effect. Furthermore, he
argues that fees should be denied because rather than
protecting Body Armor’s shareholders, Derivative Counsel
participated in and promoted a settlement that included an
illegal indemnification. He essentially claims that it is
inequitable for Derivative Counsel to reap rewards for their
contributions to the EDNY Settlement when that settlement
included illegal provisions, while he might receive nothing for
providing far more substantial benefits to Body Armor.
Cohen’s arguments, which are notably short on
supporting authority, do not provide a basis to hold that the
Bankruptcy Court abused its discretion in concluding that
Body Armor received a benefit due to the efforts of Derivative
Counsel. That is particularly so when the Bankruptcy Court
took into account the SOX § 304 “indemnification issue.”
C. Approval of the 2015 Settlement
Finally, Cohen argues that the Bankruptcy Court abused
its discretion in approving the 2015 Settlement. He does not
challenge the agreement’s underlying merits; rather, he takes
issue with its provision for payment to Class Counsel. 15 The
2015 Settlement provided that Class Plaintiffs would loan
Body Armor $20 million on an interest-free, non-recourse
basis to permit it to exit Chapter 11. Of this $20 million loan,
$1.5 million would be paid to Class Counsel as an
administrative expense. The Bankruptcy Court approved the

15
As mentioned above, although the 2015 Settlement was
based, in part, on Brooks’s criminal restitution awards, which
were abated by his death, other elements of the 2015
Settlement, including Class Plaintiffs’ loan, became effective
and occurred in November 2015, coinciding with the
Bankruptcy Court’s confirmation of Body Armor’s plan.

27
2015 Settlement, over Cohen’s objections, under Federal Rule
of Bankruptcy Procedure 9019, concluding that the settlement
was “reasonable, fair and in the best interests of the Debtors,
their estates and their stakeholders.” J.A. 1. The Court
referenced the payment to Class Counsel when explaining its
approval of the 2015 Settlement, stating: “I don’t believe in this
circumstance the Court need go through a substantial
contribution analysis. But were I to do that I believe that the
evidence in front of the Court certainly would support a finding
here of substantial contribution of this estate.” J.A. 641–42.
Settlements are preferred in bankruptcy. Myers v.
Martin (In re Martin), 91 F.3d 389, 393 (3d Cir. 1996).
Although approval of a settlement is “within the sound
discretion of the bankruptcy court,” the agreement must be
“fair, reasonable, and in the best interest of the estate.” In re
Key3Media Grp., Inc., 336 B.R. 87, 92 (Bankr. D. Del. 2005).
We review a bankruptcy court’s approval of a settlement for
abuse of discretion. Will v. Nw. Univ. (In re Nutraquest, Inc.),
434 F.3d 639, 644 (3d Cir. 2006).
Cohen argues that because Class Counsel failed to
submit records as required under Delaware Local Rules and
our Circuit’s precedent, it was “impossible” for the Bankruptcy
Court to approve the fee award and, accordingly, the 2015
Settlement. Appellants’ Br. 37. However, the Bankruptcy
Court considered the payment to Class Counsel as part of its
approval of the 2015 Settlement negotiated between Body
Armor and various claimants. Indeed, the cases Cohen cites in
support of his argument that comprehensive records were
required involved independent applications for fees, rather
than fees negotiated as part of a settlement. See Appellants’ Br.
36–37 (citing In re Busy Beaver Bldg. Ctrs., Inc., 19 F.3d 833,
844 n.11 (3d Cir. 1994), then citing In re Meade Land & Dev.
Co., 527 F.2d 280, 283 (3d Cir. 1975), superseded by statute

28
on other grounds, Bankruptcy Reform Act of 1978, Pub. L. No.
103-394, 107 Stat. 4106, as recognized in In re Busy Beaver,
19 F.3d at 849 n.20).
Furthermore, we agree with the District Court that there
is “no authority to establish that a fee application was required
under the very unique circumstances of this case”—that is,
“where [the] debtor’s litigation opponent”—Class Plaintiffs—
“financed the debtor’s chapter 11 exit with a loan made on
terms extremely favorable to the debtor and all of its
constituencies, with the full support of all of the debtor’s
constituencies.” In re SS Body Armor I, Inc., 2019 WL
2344038, at *9. Class Counsel’s fee, as explained above, was
paid out of Class Plaintiffs’ loan to Body Armor. The
Bankruptcy Court emphasized that the agreement was a “good
deal” for Body Armor, and that it “avoid[ed] significant” and
costly future litigation by settling several outstanding claims.
J.A. 639. Thus, the Court did not abuse its discretion in
approving the 2015 Settlement or the payment to Class
Counsel.
III.
For the foregoing reasons, we will reverse the
Bankruptcy Court’s December 3, 2015, order regarding
Cohen’s fees insofar as it awards Cohen a fee contingent on
Body Armor’s recovery under SOX § 304 and remand for
further proceedings consistent with this Opinion. We will
affirm the order insofar as it denies Cohen’s claim of
substantial contribution. We will also affirm the Bankruptcy
Court’s December 3, 2015, order approving the award of fees
to Derivative Counsel. And, finally, we will affirm the
Bankruptcy Court’s July 9, 2015, order approving the 2015
Settlement.

29