FirstEnergy’s $180 Million Derivative Settlement Gets Appeal Nod

FirstEnergy Corp.‘s $180 million recovery from a shareholders derivative suit settlement—one of the largest such accords ever, plaintiffs said in their settlement proposal—has been upheld by a US appellate court.

The US Court of Appeals for the Sixth Circuit on Friday rejected shareholder Todd Augenbaum’s objections to the trial court’s approval of the accord, which came without an OK from the judge presiding over a concurrent suit involving alleged misrepresentations by FirstEnergy’s leadership.

Augenbaum had argued that the US District Court for the Northern District of Ohio needed to weigh in because it was the first venue where shareholders brought derivative claims against the power company’s executives and directors, related to the firm’s admission that it had conspired with public officials to pay millions of dollars in bribes tied to nuclear subsidies.

He also raised other issues with the settlement including inadequate notice for shareholders and excessive attorney’s fees.

Circuit Judge Jane Branstetter Stranch said in an unpublished opinion, however, that Auguenbaum forfeited each of his arguments by raising them for the first time in his appeal, and that FirstEnergy was pursuing recoupment of damages through the settlement, not public interests that might have been fulfilled through more extensive discovery.

The deal’s approval was within Southern District of Ohio Judge Algenon L. Marbley,, and Augenbaum failed to show that the existence of another similar suit elsewhere undermined the validity of the deal, according to the panel’s ruling.

Joining in the opinion were judges Alice Moore Batchelder and Stephanie Dawkins Davis.

Abraham, Fruchter & Twersky and Markovits, Stock & DeMarco represent Augenbaum.

Debevoise & Plimpton LLP and Giffen & Kaminski LLC represent FirstEnergy.

The case is Empl Ret Sys of the City of St. Louis v. Jones, 6th Cir., No. 23-03512, 2/16/24.