$149,500 Was The Amount Of The Fee Award Affirmed On Appeal.
Although not formally intervening in a securities fraud action brought by the Commissioner of the Department of Business Oversight (DBO) against a real estate investment company and its promoters, respondents on appeal made a special appearance and obtained relief by which their individual civil actions were not stayed and they made challenges to a tentative settlement between DBO and company/promoters by which promoters were divested of management and a special master appointed instead. The trial judge awarded respondents $149,500 in private attorney general fees, prompting an appeal by both DBO and the company/promoters.
The fee award was affirmed in People v. Investco Mgt. & Development LLC, Case Nos. A143307/A143406 (1st Dist., Div. 4 Apr. 18, 2018) (published).
Respondents were successful, with there being no requirement that they formally intervene, with the special appearance in this situation being equivalent to intervention. They won by beating back a stay of the civil action and getting promoters out of a management position.
DBO argued that it was not an opposing party, but the appellate court disagreed based on the particular circumstances of record. Although initially aligned with all investors, DBO did become adverse by joining defense efforts to stay respondents’ civil actions.
With respect to the enforcement of important public right prong of section 1021.5, vindication of securities law’s goals to prevent/punish fraudulent investment schemes was indeed an important public right promoted by respondents’ actions.
On the significant benefit to the general public/large class requirement, respondents’ efforts in getting promoters out of management positions benefited all investors, who/which were numerous.
The necessity of private enforcement element was satisfied because respondents did not believe DBO was protecting all investors through the tentative settlement terms which were modified as a result of respondents’ special appearance in the action.
The financial burden of private enforcement cost/benefit requirement (the Whitley analysis) was satisfied even though respondents obtained no monetary award and were indirectly protecting their interests in the civil lawsuits. Simply taking efforts to protect a potential recovery and avoid delay in prosecuting the civil lawsuits was found too indirect and speculative of a financial interest as opposed to more direct efforts to avoid a loss in value of real estate/assets.