Opinion ID: 4538956
Heading Depth: 2
Heading Rank: 2

Heading: Award of Fees to Derivative Counsel

Text: 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 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.”