Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca3-19-02314/USCOURTS-ca3-19-02314-0/pdf.json

Nature of Suit Code: 422
Nature of Suit: Bankruptcy Appeals Rule 28 USC 158
Cause of Action: 

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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

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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

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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.

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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 

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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).

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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-remissionmitigation-and-restoration-forfeited-properties (last updated 

Oct. 2010).

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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.

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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.

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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 mid2018, 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.

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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]

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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 

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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 

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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 classaction 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.”).

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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. 

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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 

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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 nonmonetary 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, “isin 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 

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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 

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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 

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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 

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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.

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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 

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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 

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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-ofrecovery method is “[g]enerally used in common fund cases.” 

Id. at 773.

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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.

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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 postpetition, 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 

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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.

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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 

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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. 

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