Fletcher v. A.J. Industries, Inc.
California Court of Appeal
72 Cal. Rptr. 146, 266 Cal. App. 2d 313 (1968)
Shareholders (plaintiffs) brought a derivative action against A.J. Industries (AJ) and its directors (defendants), alleging that director Ver Halen dominated management and harmed the company and that director Malone was overpaid; they sought over a million dollars in damages plus equitable relief. The parties settled, agreeing to amend Ver Halen's contract, limit his voting power, remove Malone, add four new directors, and hire a new operations officer, with no money changing hands. The trial court nonetheless awarded the plaintiffs' attorneys tens of thousands of dollars in fees and costs, finding the suit was brought in good faith, the company could afford the fees, and AJ received substantial benefits from the settlement; the fee award was appealed.
Whether a successful plaintiff in a shareholder's derivative action may be awarded attorneys' fees if the company derived no pecuniary benefit from the suit.