Trial Court Needed To Provide More Reasoning For Its Reduction In The Request.
Under Corporations Code section 17704.10(g), if a trial court “finds the failure of the limited liability company to comply with the requirements of this section is without justification, the court may award an amount sufficient to reimburse the person bringing the action for the reasonable expenses incurred by that person, including attorney’s fees, in connection with the action or proceeding.”
That discretionary section, for fee award purposes, was under consideration in Perry v. Stuart, Case Nos. H051093 et al. (6th Dist. May 27, 2025) (published). What happened in that case was that plaintiffs did obtain partial grants of a petition for an LLC to produce certain LLC documents for inspection, with the appellate court affirming the redaction of membership information as a trade secret and reversing/remanding the production order as to the scope of certain audited financial information. Plaintiffs then moved to recover $181,327.50 in attorney’s fees under section 17704.10(g). After determining that plaintiffs did prevail partially, the lower court awarded plaintiffs $65,000 in fees, with both sides prevailing.
On the cross-appeal by the defense, the reviewing panel determined that the “without justification” requirement was met given a record which showed some failures to disclose along the way satisfied the element of fee entitlement. This turned things to whether there was an abuse of discretion as to the amount of the fee award with respect to plaintiffs’ appeal. That resulted in a reversal and a remand. Although acknowledging that a lodestar analysis was employed by the lower court, the appellate court needed more reasoning to justify the “haircut” in the matter, even though it agreed plaintiffs only partially prevailed and that their pleadings were lengthy/convoluted in nature.