Hu v. BAKER

Background

These two federal shareholder derivative actions were related to a separate securities action involving Ginkgo Bioworks Holdings, Inc. The plaintiffs asserted claims under the Securities Exchange Act of 1934, Delaware fiduciary-duty law, and related Delaware shareholder law. The claims concerned alleged material misstatements and omissions about Ginkgo’s revenue and revenue sources, as well as alleged misconduct connected to the merger that formed Ginkgo. The defendants included directors, officers, and controlling shareholders of Ginkgo and its predecessor, Soaring Eagle, a special purpose acquisition corporation.

A related derivative action was pending in the Delaware Court of Chancery. The three cases were resolved through a global settlement in the Northern District of California. The settlement required the individual defendants to pay $4.125 million to Ginkgo, terminate certain contracts, and implement governance reforms and enhanced oversight. Subject to court approval, Ginkgo would pay $2,750,000 in attorneys’ fees and costs. The agreement also provided for $8,000 in service awards, with $2,000 each for Weining Hu, Eric Bowers, Dylan Newman, and Shlomo Moskowitz, paid from the attorneys’ fee award.

The court had preliminarily approved the settlement, provisionally certified a settlement class for settlement purposes, approved a notice plan, and appointed Hu and Bowers as lead plaintiffs. After notice was provided, no shareholder objected to the settlement, including institutional investors holding substantial amounts of Ginkgo stock. The court held a fairness hearing on December 18, 2025.

Legal standard

Federal Rule of Civil Procedure 23.1 requires court approval of a derivative-action settlement. The court applied the standards governing class-action settlements and considered whether the settlement was fair, reasonable, and adequate. Relevant factors included the strength of the plaintiffs’ case; the risks, expense, complexity, and likely duration of further litigation; the amount offered; the stage of the proceedings and discovery; counsel’s experience and views; and shareholder reactions.

For attorneys’ fees in a settlement that creates a common fund or provides a substantial corporate benefit, the Ninth Circuit generally uses a benchmark of 25 percent of the common fund, subject to adjustment. The court also considered the results achieved, the risks taken by counsel, the noncash corporate-governance benefits, counsel’s work and expenses, market rates, and the absence of objections.

Court’s analysis and ruling

The court found that the parties followed the previously approved notice plan. The plan required Ginkgo to post the settlement documents on its investor-relations webpage, publish notice through a wire service, and file a Form 8-K with the Securities and Exchange Commission. Because the notice plan was followed and no objections were received, the court found that notice was sufficient.

The court had already found the settlement fair, adequate, and reasonable at the preliminary-approval stage. After considering the lack of shareholder objections and the other required factors, the court found no reason to change that conclusion and granted final approval of the settlement.

The court approved $2,750,000 in attorneys’ fees and costs. Although the amount exceeded the 25-percent benchmark, the court found that the settlement’s corporate-governance reforms provided Ginkgo with a substantial financial benefit and justified departing from the benchmark. The court also approved four $2,000 service awards, totaling $8,000, for Hu, Bowers, Newman, and Moskowitz, to be paid from the attorneys’ fee award.

The court retained jurisdiction to supervise implementation of the settlement and to construe, enforce, and administer the settlement agreement. The Clerk was directed to close the cases, and the court stated that separate judgment would be entered. The plaintiffs’ motion for final approval of the derivative settlement was granted.