Procedural Posture

In a suit for breach of fiduciary duty, breach of contract, and declaratory relief brought by plaintiff doctor against defendant medical corporations, the Ventura County Superior Court, California, entered judgment for the doctor. The corporations appealed the judgment and the denial of its costs and attorney fees. The doctor cross-appealed regarding valuation of her corporate shares and her liability for not paying pension plan contributions.

Table of Contents

Overview

The doctor, along with four other physicians, created a business to provide emergency care in hospitals. The business consisted of two corporations. The doctor was the chief financial officer and assumed responsibility for oversight of patient billing. A majority of directors and shareholders voted to remove the doctor as an officer and director and to redeem her shares for contracting with a billing company without prior shareholder approval. Regarding the corporations’ claim that the doctor breached a shareholders’ agreement and her fiduciary duties, the instant court concluded that the trial court properly decided that the doctor’s acts and omissions were protected by the business judgment rule. The corporations were not a prevailing party in the litigation for costs and attorney’s fees, but the trial court erred by denying the corporations postoffer attorney’s fees under Cal. Code Civ. Proc. § 998. The trial court did not err by finding that the doctor breached the shareholders’ agreement or by calculating the value of her shares. Sufficient evidence also supported the finding that the doctor was negligent for failing to pay pension plan contributions timely. The parties were counseled by their respective small business lawyer in California.

Outcome

The order denying the corporations’ postoffer attorney’s fees was reversed, and the matter was remanded. In all other respects, the judgment and order were affirmed.

Plaintiff homeowners filed suit against appellant real estate developer for construction defects. The developer cross-complained for breach of contract and indemnity against the respondent subcontractors. All claims were settled except for the developer’s right to recover attorney fees from the subcontractors. The Superior Court of Orange County (California) dismissed the cross-complaint. The developer appealed.

Overview

The parties were counseled by their respective small business lawyer in California. The developer’s attorney fees and expenses were paid by the developer’s insurer and, later, by the subcontractors’ insurance carriers. All claims were settled except for those relating to the reimbursement of defense fees and costs incurred on behalf of the developer during the course of the litigation. As to that claim, the trial court denied one subcontractor’s motion for judgment on the pleadings, but granted another subcontractor’s motion to dismiss the cross-complaint. On appeal, the court affirmed the dismissal. The developer was not entitled to fees and costs under Cal. Code Civ. Proc. § 1032, because it was not a prevailing party in the cross-complaint against the subcontractors. The collateral source rule did not apply, because the action sounded in contract, not in tort. Moreover, the developer demonstrated no damages, because the attorney fees were borne by the insurer and the subcontractors’ carriers. The developer was also not entitled to fees on behalf of its insurer, because the insurer would not have been entitled to equitable subrogation.