A recent New York Law Journal story, “Attempt to Win Fees for Withdrawn Suit Against Goldman is Rejected” reports that attorneys for investors who sued Goldman Sachs over bonuses the bank planned to distribute after it received government bailouts, and then dropped the suit when the bonuses were reduced, have been rebuffed in their attempts to win attorney fees for their role in the litigation.  In Central Laborers Pension Fund v. Lloyd C. Blankfein (pdf), Manhattan Supreme Court Justice Bernard J. Fried ruled that even if the investors had not agreed to dismiss their suit, it should have been dismissed anyway.  As a result, the investors could not claim credit of Goldman’s change in policy, and thus, their counsel, including Grant & Eisenhofer, could not claim attorney’s fees.

The plaintiffs claimed the officers and board breached their fiduciary duty for their adherence to a wasteful policy of paying about 50 percent of net revenues as employee compensation.  The suit sought to halt Goldman’s 2009 planned compensation payments.  In 2010, Goldman announced it had reduced its employee compensation.  The plaintiffs then moved to drop the suit and said that they were directly responsible for Goldman’s change in policy and moved for attorney’s fees under the state’s Business Corporation Law.  The defendants countered that the derivative suit was meritless, saying that plaintiffs never had standing because they did not make a pre-suit demand of the board, and therefore could not collect attorney’s fees.

Justice Fried agreed with the defendants that the investors lacked standing. It “simply cannot be” that a party could be awarded fees for a lawsuit that it never had standing to bring, the judge said.  “Any other rule would permit, even encourage, the filing of baseless claims, the sole objective of which is to collect an award of attorney’s fees,” he said.