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Goldman Sachs Board Pay Deal Rejected by Delaware High Court (1)

Aug. 16, 2022, 7:45 PMUpdated: Aug. 16, 2022, 8:28 PM

A $4.6 million settlement of claims that Goldman Sachs Group Inc. overpaid its board included too broad a liability release, Delaware’s top court ruled Tuesday, rejecting the deal over provisions that would have blocked separate challenges to future director compensation.

The state’s justices reversed a decision by Vice Chancellor Sam Glasscock III, who approved the agreement after rejecting a previous noncash version. The initial settlement extracted little more from Goldman than a pledge to keep in place certain reform measures it had already adopted.

Chief Justice Collins J. Seitz Jr., writing for a unanimous court, said the release went too far in waiving the right of any Goldman investor to challenge pay awards under an incentive plan that was part of the settlement itself. That’s different from simply barring repeat litigation over the same facts, he said.

“We recognize that the Court of Chancery and the parties have worked diligent to bring this long-running dispute to a close,” Seitz wrote. “Nevertheless, we reverse.”

READ MORE: Goldman Settlement of Investor’s Board-Pay Claims Rejected (2)

Issue of First Impression

The state supreme court turned down two other arguments against the settlement raised by Sean Griffith, a Fordham University law professor who objects to settlements—sometimes with significant results—when he thinks they’re too generous to plaintiffs’ lawyers, at the expense of class members.

First, confronting an issue of first impression, the court rejected the idea that Glasscock acted improperly by approving the settlement without analyzing whether the lead plaintiff—a frequent filer of stockholder lawsuits—was an adequate representative in the derivative litigation context.

Although there’s a “long implied” policy that derivative plaintiffs should satisfy similar adequacy requirements as those bringing class actions, the rule is an unwritten one, and “we are reluctant to imply such a requirement” before a derivative settlement can be approved, Seitz said.

He also noted that Griffith’s dogged involvement in the case, and close supervision of the settlement terms by Glasscock, protected Goldman and its stockholders in much the same way an adequacy requirement would have.

“We recommend, however, that the Court of Chancery Rules Committee consider amendments” to the rules covering derivative litigation, the chief justice wrote.

‘Considerable Discretion’

The court also rejected Griffith’s attack on Glasscock’s decision reducing his objector’s fee. Glasscock found at the time that a full fee award wasn’t warranted because he would have rejected the initial noncash settlement anyway.

Although Griffith’s arguments have some precedent behind them, the judge “did not place undue weight on this issue,” Seitz wrote. “The court did not abuse its considerable discretion.”

Griffith is represented by Margrave Law LLC and Wright Close & Barger LLP. Lead plaintiff Shiva Stein is represented by Farnan LLP and Barrack, Rodos & Bacine.

Goldman is represented by Richards, Layton & Finger PA. Current and former members of its board are represented by Abrams & Bayliss LLP and Sullivan & Cromwell LLP.

The case is Griffith v. Stein, Del., No. 264, 2021, 8/16/22.

- With assistance from Jef Feeley

(Updates with additional reporting starting at paragraph five)

To contact the reporter on this story: Mike Leonard in Washington at

To contact the editors responsible for this story: Rob Tricchinelli at; Carmen Castro-Pagán at