Fee Clause Interpretation: Broad Fees Clause In Shareholder Agreement Justified Award Of Fees To Defense After Suit Dismissed For Failure To Amend Or Post A Bond

CCP § 1021 Was the Basis.

     A $37,369 fee award against plaintiffs and in favor of defendants was affirmed in Higuera v. La Carreta Supermarkets, Inc., Case No. G044286 (4th Dist., Div. 3 Dec. 2, 2011) (unpublished), in a 3-0 decision authored by Justice Bedsworth. Here is what happened.

     Plaintiffs instigated a hybrid shareholder derivative/tort action against defendants in a shareholder dispute involving a shareholder agreement with a broadly-worded fees clause governing disputes between the company and shareholders or among the company’s directors. A demurrer was sustained with leave as to the initial complaint, and plaintiffs ordered to post a bond under Corporations Code section 800. Plaintiff did not amend or post the bond, so the suit was dismissed. The trial court later awarded defendants attorney’s fees of $37,369.

     The fee award was affirmed, but not based on Civil Code section 1717. Code of Civil Procedure section 1021 was the basis because plaintiff would have been entitled to fees had they prevailed on the tort claims, meaning the equity favored an award to defendants also. The broadly-worded fees clause was enforced as the determinative bargain between the two sides. (Xuereb v. Marcus & Millichap, Inc., 3 Cal.App.4th 1338, 1341, 1343-1344 (1992).)

Scroll to Top