Corporations Code Section 317(d) Did Sustain Large Fee Awards Against Non-prevailing Former Employer.
Parcell Steel Co., Inc. v. Sauer, Case No. G043444 (4th Dist., Div. 3 Feb. 28, 2012) (unpublished) is a situation where various defendants (former employees) were awarded substantial attorney’s fees against plaintiff former employer when employer lost confidential use of information claims after one claim was summarily adjudicated out and the rest of the claims were rejected by the jury. The hit went this way: $30,611.27 in costs and $272,109.50 in fees awarded to one group of defendants, and $14,496.46 in costs and $214,270 in fees to another group of defendants.
Unhappy plaintiff appealed.
But it did no good (and, in fact, defendants can apply for fees as winners on appeal).
The basis for the fee award was Corporations Code section 317(d), which allows indemnification of defense costs to an employee for losses arising in direct consequence of a discharge of his/her employment duties.
The fee award was correct.
First, indemnification is appropriate where the corporate agent is sued by the corporation as long as the liability arose from the agency relationship. (Wilshire-Doheny Associates, Ltd. v. Shapiro, 83 Cal.App.4th 1380, 1390 (2000); Channel Lumber Co. v. Porter Simon, 78 Cal.App.4th 1222, 1230-1231 (2000).) Plaintiff’s suit did arise from this relationship, such that the fees were subject to indemnification.
Second, the appellate panel rejected that 317 had to be pled specifically as a basis of fee recovery in pleadings. (Yassin v. Solis, 184 Cal.App.4th 524, 533 (2010).)
Third, indemnification is mandatory under section 317(d), with defendants not having to prove they took their actions in good faith.
Finally, the fee substantiation in support of the awards sufficed, because the attorneys did submit declarations as to the numbers of hours worked and billed on specific tasks. (Steiny & Co. v. California Electric Supply Co., 79 Cal.App.4th 285, 293 (2000).)
Presiding Justice O’Leary penned the opinion on behalf of a 3-0 panel.