By Erin Geiger Smith 

Theodore Frank, who often seeks to knock down high attorneys fees in class action settlements, has now entered the fray in a shareholder derivative lawsuit. Frank, on behalf of a Johnson & Johnson shareholder, is asking a federal court in New Jersey to dismiss an entire action brought against the company's board members and executives, arguing that the settlement, in which the plaintiffs' attorneys could receive $10 million, provides no benefit for shareholders and should have never been filed.

In July of this year, Johnson & Johnson, represented by attorneys at Sidley Austin, and members of its board and other company leaders, represented by Patterson Belknap Webb & Tyler, agreed to settle multiple derivative actions filed in 2010 and 2011. The plaintiffs alleged that the individual defendants breached their fiduciary duties and caused the company regulatory and legal problems relating to drug marketing and medical product and device quality control. The proposed settlement agreement, submitted to U.S. District Judge Freda Wolfson in Trenton, New Jersey, requires the defendants to adopt certain governance reforms, to spend the funds necessary to carry out the reforms, and to maintain the provisions of the agreement for five years from the effective date.

The settlement agreement states that the company has agreed to pay plaintiffs' attorneys, led by Carella, Byrne, Cecchi, Olstein, Brody & Agnello and Bernstein Litowitz Berger & Grossman, "not more than $10,0000,000 for their fees and $450,000 for their expenses, subject to court approval."

The agreement did not sit well with longtime shareholder Mark Petri, a former partner at Foley & Lardner, who approached Frank for help. Petri moved to dismiss the suit under Federal Rule of Civil Procedure 23.1, which says that a derivative action cannot be maintained if "it appears that the plaintiff does not fairly and adequately represent" shareholder interests. The motion argued that plaintiffs are not adequately representing shareholders because they have "permitted their attorneys to negotiate worthless relief" that benefits only the attorneys themselves.

The corporate governance changes the settlement calls for, the motion said, are nothing more than "cosmetic changes" to pre-existing company policies and governmental requirements. Petri asked that, should the court not dismiss the suits entirely, the attorneys' fee award be knocked down substantially.

James Cecchi of Carella, Byrne was in a mediation and unavailable to talk, but told us via email that the plaintiffs' response to the filing will "expose the utter frivolous nature of his motion."

Wolfson granted the plaintiffs' motion for preliminary approval of the settlement on July 16, and she set a settlement hearing for Sept. 28. In their motion in support of that preliminary approval request, the plaintiffs spent 29 pages laying out their argument for the settlement's fairness, including extensive discussions of their experts' work with the company to develop the corporate governance strategies. (The experts included former Securities and Exchange Commission chair Harvey Pitt.)

Sidley Austin's Walter Carlson declined to comment. Erik Haas of Patterson Belknap did not immediately respond to a request for comment.

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