Grant & Eisenhofer attorney Michael Barry argued before an Appellate Division, First Department panel last week that he and his colleagues who represented investors in a suit against Goldman Sachs over executive bonuses are entitled to fees, even though the investors quickly dropped their suit.
Barry urged the panel, which consisted of Justices Richard Andrias (See Profile), David Friedman (See Profile), Rolando Acosta (See Profile), Helen Freedman (See Profile) and Darcel Clark (See Profile), to overturn a 2011 ruling by Manhattan Supreme Court Justice Bernard Fried (See Profile), who ruled that the attorneys should not be awarded fees because the plaintiffs lacked standing to bring their suit in the first place.
The suit, Central Laborers v. Blankfein, 600036/10, alleged that Goldman harmed shareholders by paying excessive compensation, especially executive bonuses, in the wake of the financial collapse. Soon after the suit was filed, Goldman reduced the bonuses. The plaintiffs dropped the suit, but Grant & Eisenhofer sought an award of fees.
Fried found that the plaintiffs lacked standing because they had not demanded that Goldman’s board of directors file suit, or pleaded that such a demand would be futile. Barry argued before the First Department on Feb. 14 that whether or not the plaintiffs had standing, or could have survived a motion to dismiss, was irrelevant because the suit had benefited the shareholders.
He said that to address the plaintiffs’ standing would be to "decide a hypothetical issue in a moot case."
David Rein of Sullivan & Cromwell, counsel for the defendants, countered that awarding fees would create a perverse incentive to bring frivolous suits to extract concessions. He pointed out that if the plaintiffs had made a demand on the board of directors, the board might have filed suit, or the company might have agreed to lower compensation without a suit.
"This case lasted a month. It’s been going on nearly three years just on the attorney fee issue," Rein said, urging the panel to affirm Fried’s decision and put the case to rest.