Fifth District Finds that Corporations Code Section 800 Is a Bond/Security Statute, Not Fee Liability Statute.
The Fifth District, in West Hills Farms, Inc. v. RCO Ag Credit, Inc., Case No. F054748 (5th Dist. Jan. 26, 2009) (certified for partial publication), found that a prevailing defendant in a shareholder derivative action is limited to recovering under any bond posted by the plaintiff under Corporations Code section 800 (even though the bond cannot exceed $50,000). Defendant moved to recover fees and costs of more than $350,000, rather than the $50,000 bond posted by plaintiff under section 800. Both the lower and appellate courts limited defendant to the bond amount, finding that section 800 was a “bond or security” statute rather than “an open-ended attorney fee liability” statute. The appellate panel relied on Freeman v. Goldberg, 55 Cal.2d 622 (1961) and Alcott v. M.E.V. Corp., 193 Cal.App.3d 797 (1987) in support of its conclusion.
However, in a footnote, the West Hills Farms court did note that the defendant could look to legal or statutory authority independent of section 800 to recover fees and costs beyond the amount of the bond. (Slip Opn., at p. 10 n. 11, citing Brusso v. Running Springs Country Club, Inc., 228 Cal.App.3d 92, 107 (1991).)