A federal judge approved a settlement Monday in a shareholders’ derivative suit against Schering-Plough with no damages awarded but a $9.5 million fee to plaintiffs counsel and a company pledge to reform its governance, The New Jersey Law Journal reports. Though attorney fees are usually awarded from financial recoveries, U.S. District Judge Katharine Sweeney Hayden found them justified in suit because it led the drug maker to make sweeping changes.

She said the fees were also justified by the complexity and risk of the litigation, which involved “the wholesale restructuring of a major corporation’s governance and compliance functions.” Hayden noted that a 350 percent increase in governance and compliance spending prompted by the litigation “demonstrates the complexity and breadth of the changes to Schering’s corporate governance structure attributable to the efforts of plaintiffs’ counsel.”

The changes include replacing staggered terms for the board of directors with annual elections for every seat; replacing the meeting and committee fees used to compensate board members with an annual retainer; enhancing communication between the board and management; and centralizing global compliance and audit functions.

The litigation was sparked by Schering-Plough’s announcement in 2001 that the FDA had delayed approval of Clarinex because of continued manufacturing deficiencies at plants in New Jersey and Puerto Rico despite several warning letters from the agency. Clarinex was slated to fill the void created by the imminent loss of patent protection for Claritin, the company’s blockbuster allergy drug. The plaintiffs allege that the delay caused a drop in stock prices and harmed the company’s reputation.

Schering-Plough agreed to pay the FDA $500 million and tighten quality controls under a May 2002 consent decree, but litigation over the manufacturing issues was already under way. Blaming the board’s lack of oversight, the plaintiffs sued the directors in 2001 for breach of their fiduciary duty to Schering-Plough and its shareholders.

Though no money damages were recovered, the plaintiffs accomplished the “fundamental aim of the litigation … to correct the Board’s failure of oversight, and the resulting damage to Schering,” held Hayden.

“The monetary losses and the regulatory troubles with the FDA are the fruit of the same tree, stemming directly from a breakdown in Schering’s managerial structure. Thus, the most important motivation for maintaining this action was to prevent future losses of this ilk by changing how the corporation’s directors oversee the running of the corporation.”