Fourth District, Division Three Reverses Trial Court Denial of Fees Under CCP Section 1021.5 in Orange County Superior Court Action.
“The Great Park”—the plan to develop the former El Toro Marine property into a park—has drawn widespread publicity given charges that Larry Agran and other Irvine City Council members have dominated the Orange County Great Park Corporation. Two plaintiffs, minority directors of the Corporation, successfully sued to obtain documents relating to the search for a CEO of the Corporation—wanting to insure the search was objective in nature and the candidate was not controlled by others. They then moved for attorney’s fees, but were denied an award of attorney’s fees under either Code of Civil Procedure section 1021.5 (the private attorney general statute) or Corporations Code section 6337 (fee shifting statute allowing recovery of fees to a director of a nonprofit corporation successful in obtaining inspection of corporate books). Well, you know that this politically charged dispute caught the attention of our local appellate court. It did, and here is the result.
In Choi v. Orange County Great Park Corp., Case No. G040823 (4th Dist., Div. 3 June 30, 2009) (certified for publication), the Fourth District, Division 3—in a 3-0 opinion authored by Acting Presiding Justice Rylaarsdam—reversed and remanded with directions that plaintiffs be awarded section 1021.5 fees as the trial court determines to be reasonable in nature. (Given the 1021.5 ruling, there was no need to address an award of fees under the Corporations Code.)
The Court of Appeal determined that plaintiffs did indeed prevail—Corporation agreed to produce the documents, albeit under certain conditions, pursuant to a settlement stipulation. The trial court argued that it did not know who prevailed given the overall compromise, but the appellate panel observed that “a party may prevail even where there is settlement” under section 1021.5 (Slip Opn., at p. 7.) Defendant’s “complete change of position” in producing documents was a definite “win” for plaintiffs, in the reviewing court’s opinion.
Also, the appellate panel disagreed with the lower court determination that there was no significant public benefit. Because plaintiffs were directors with a fiduciary duty to the nonprofit corporation, their actions insured proper governance and made sure that the CEO search was proper—actions designed to “maintain the integrity of the process itself, a significant benefit to the public, protecting its interest.” (Slip Opn., at p. 9.) Because even a conceptual or doctrinal benefit suffices under section 1021.5, see Braude v. Automobile Club of So. Cal., 178 Cal.App.3d 994, 1011 (1986), the integrity-motivated basis alone was compelling, especially when defendant controlled more than $400 million in public funds the CEO was entrusted to manage with respect to the “Great Park.”
BLOG UNDERVIEW. City Attorney Phil Kohn reported to the Irvine City Council in closed session as reflected in March 11, 2008 minutes, on “1 item of significant exposure to litigation pertaining to Steven Choi and Christina Shea v. Orange County Great Park Corporation, Orange County Superior Court Case No. 00100131.”
