Trial Court Did Abuse Discretion By Reducing Discounted Fee Request By Another Half.
Corporations Code section 1604 provides that if a corporation fails without justification to comply with a shareholder demand for inspection of documents, the corporation can be assessed with attorney’s fees to reimburse the shareholder in connection with litigation involving the inspection demand.
In Geller v. Consultants for Pathology and Laboratory Medicine, Case Nos. B238213 et al. (2d Dist., Div. 3 Nov. 18, 2013) (unpublished), a lower court found that defendant corporation had unreasonably delayed compliance with a shareholder inspection even though the shareholder had little shareholder status left due to a termination stripping him of shareholder status (he was a shareholder for 3.5 hours, but made the request timely). However, given the corporation’s inaction and noncompliance, the trial court found fees were properly awarded to shareholder in the amount of $31,134.50, which was a 50% reduction in the $71,711.50 request after deducting some "pre-litigation" fees and six particular billing requests.
The appellate court found the fee award was correct (including the decision not to award "pre-litigation" fees and in rejecting six time entries), but found it was an abuse of discretion to reduce the deducted base amount by half—after all, the basis for the reduction (partial success) was not argued below and shareholder was entirely successful on the issue actually litigated of whether documents needed to be produced.