A recent Law 360 story by Leslie Pappas, “Chancery Awards $900K Fee For Biopharma Co. Settlement” reports that a shareholder who negotiated a settlement with Sage Therapeutics Inc. after suing in Delaware Chancery Court over alleged "grossly excessive" director pay was awarded $900,000 for his efforts, nearly three times what the company wanted but shy of the $1.25 million he sought.

In a bench ruling at the end of a virtual hearing, Delaware Chancellor Kathaleen St. J. McCormick approved the settlement that ended investor John Solak's derivative suit, but found that the benefits he achieved for the company were worth about $8.5 million, not the $9.5 million to $13.1 million his expert estimated.

Sage and the eight company directors who were named as defendants in Solak's suit identified enough problems with his expert's analysis to "merit some reduction" in the fee award, but arriving at a final number was "actually quite hard" because of the interplay of many different elements in the calculation, the Chancellor said.  "So I'm just going to administer some rough justice" and cut the fee award by 25%, she said.

The Massachusetts-based clinical-stage biopharmaceutical company, which develops treatments for brain disorders, had argued that the benefits to the company ranged from $2.4 million to $3.2 million and that Solak deserved an attorney fee award of no more than $350,000.

The plaintiff's analysis includes flaws that make the final number "wholly unreliable," such as using 2019 compensation figures instead of more recent ones, the company's attorney, Megan Barriger of WilmerHale, argued.  "You need to use the right set of data," she added.

Solak's attorney, Jeffrey M. Norton of Newman Ferrara LLP, told the court that the expert used standard forms of analysis and the plaintiff had spent nearly 600 hours prosecuting the case.  The settlement's unique solutions could be used as a template in future cases, he said.

Solak sued Sage in August 2020, alleging that the average pay for its non-employee directors far outpaced that of larger and more profitable companies. He accused the company's directors and others of unjust enrichment, fiduciary duty failures and corporate waste, and sought corporate governance reforms.

In her bench ruling, Chancellor McCormick concluded that Solak, represented by Cooch and Taylor PA, Newman Ferrara LLP and Kranenburg, deserved 10% of the $8.5 million estimated benefit he achieved for the company.  She bumped the total award to $900,000 to account for the fact that the settlement also secured the possibility of a stockholder vote on the new pay scheme.