Title: Crandon Capital Partners v. Shelk

State: oregon

Issuer: Oregon Supreme Court

Document:

FILED: April 12, 2007
IN THE SUPREME COURT OF THE STATE OF OREGON
CRANDON CAPITAL PARTNERS,
derivatively on behalf of Willamette Industries,
a nominal defendant,
Petitioner on Review,
v.
STUART J. SHELK, JR.;
PAUL N. MCCRACKEN; MICHAEL G. THORNE;
GERARD K. DRUMMOND; KENNETH W. HERGENHAN;
ROBERT M. SMELICK; BENJAMIN R. WHITELEY;
WINSLOW H. BUXTON; G. JOSEPH PRENDERGAST;
WILLIAM SWINDELLS; and DUANE C. MCDOUGALL
Defendants,
and
WILLAMETTE INDUSTRIES, INC.
Respondent on Review.
RAE ANN BROWN,
derivatively on behalf of Willamette Industries,
a nominal defendant,
Petitioner on Review,
v.
WILLAMETTE INDUSTRIES, INC.,
Respondent on Review,
and
WILLIAM SWINDELLS;
DUANE C. MCDOUGALL; GERARD K. DRUMMOND;
PAUL N. MCCRACKEN; STUART J. SHELK, JR.;
MICHAEL G. THORNE; KENNETH W. HERGENHAN;
ROBERT M. SMELICK; BENJAMIN R. WHITELY;
WINSLOW H. BUXTON; and G. JOSEPH PRENDERGAST,
Defendants.
(TC No. 0011-11691, 0011-11695; CA A123575 (Control), A123576; SC S53170)
On review from the Court of Appeals.*
Argued and submitted September 11, 2006.
Scott A. Shorr, Stoll Stoll Berne Lokting & Shlachter P.C., Portland, argued the
cause and filed the brief for petitioners on review.  With him on the brief were Gary M.
Berne and Steve C. Berman, Stoll Stoll Berne Lokting & Shlachter, P.C.; Edwin A.
Harnden, Barran Liebman LLP, Portland; and Justine Fischer, Portland.
John F. Neupert, Miller Nash, LLP, Portland argued the cause and filed the brief
for respondent on review.  With him on the brief was Bruce L. Campbell.
Before De Muniz, Chief Justice, and Carson, Gillette, Durham, and Balmer,
Justices.**
BALMER, J.
The decision of the Court of Appeals is reversed, and the case is remanded to the
Court of Appeals for further proceedings.
*Appeal from Multnomah County Circuit Court, Janice R. Wilson, Judge. 202 Or App 537, 123 P3d 385 (2005).
** Carson, J., retired December 31, 2006, and did not participate in the decision of
this case.  Riggs, J., retired September 30, 2006, and did not participate in the
consideration or decision of this case.  Kistler, Walters, and Linder, JJ., did not participate
in the consideration or decision of this case.
BALMER, J.
This shareholder derivative action requires us to decide whether plaintiffs'
claim for attorney fees remains justiciable after defendants took actions that rendered the
underlying substantive claims moot.  For the reasons that follow, we answer that question
in the affirmative.
Plaintiffs were shareholders of Willamette Industries, Inc.  They filed
separate actions against certain of Willamette's officers and directors seeking to remove
corporate takeover defenses that Willamette had adopted and to force defendants to
negotiate with Weyerhaeuser Co., which had made an offer to acquire Willamette. 
Before the trial court entered any judgment on the merits, defendants removed the
defenses, and Willamette agreed to be (and was) acquired by Weyerhaeuser.  Plaintiffs
then filed an amended complaint seeking only attorney fees.  The trial court ultimately
rejected plaintiffs' claim for fees on the ground that it would be inequitable to require
Willamette's corporate successor, Weyerhaeuser, to pay those fees.  On plaintiffs' appeal,
the Court of Appeals vacated the trial court judgment and remanded with instructions to
dismiss the case as moot.  Crandon Capital Partners v. Shelk, 202 Or App 537, 123 P3d
385 (2005).  We allowed plaintiffs' petition for review and, for the reasons that follow,
reverse the decision of the Court of Appeals and remand the case to that court for further
proceedings.
I
The facts necessary to decide the single legal issue before us are not in
dispute, and we take them from the record and the Court of Appeals opinion.  On
November 6, 2000, Weyerhaeuser communicated to Willamette's management an offer to
purchase all outstanding shares of Willamette for $48 per share, a premium over the share
price at the close of the prior trading day.  Weyerhaeuser publicly announced the offer on
November 13, 2000.  On November 15, Willamette's board of directors announced that it
had rejected the offer.  A 14-month struggle for control of Willamette followed, during
which Weyerhaeuser announced a tender offer and engaged in a proxy fight for control of
Willamette.  Willamette's board of directors also instituted various corporate takeover
defenses.  Those defenses included new severance agreements for Willamette's senior
management and a shareholder rights plan. (1)  In December 2001, Willamette's board
of directors began discussions with Georgia-Pacific Corporation (GP) to purchase GP's
building products division.  Weyerhaeuser indicated that it would withdraw its tender
offer if Willamette consummated its purchase of GP's building products division. (2)
Plaintiffs Crandon Capital Partners and Rae Ann Brown began this
litigation on November 14, 2000, when they filed separate shareholder derivative actions
on behalf of Willamette against Willamette, as a nominal defendant, and the directors of
Willamette.  Their complaints alleged breaches of fiduciary duty, (3) abuse of control,
and waste.  The two actions were consolidated on December 20, 2000, and amended
complaints in the consolidated action were filed on January 4, 2001, and December 18,
2001.  The complaints in the consolidated action, like the initial complaints filed in the
two separate cases, did not include separate claims for attorney fees, but they did include
requests for attorney fees in the prayers for relief.  Plaintiffs sought, in general, to remove
Willamette's takeover defenses, alleging that they were unlawful measures to entrench
existing management, and to force Willamette's directors to engage in negotiations with
Weyerhaeuser.  Plaintiffs and Wyser-Pratte Management Company -- which had filed a
similar action and which is not a party to this appeal -- also sought to prevent Willamette's
purchase of GP's buildings products division.  
In January 2002, prior to the entry of any judgment, Willamette abandoned
the proposed purchase of GP's building products division, removed its takeover defenses,
and accepted Weyerhaeuser's tender offer, which Weyerhaeuser by then had increased to
$55.50 per share.  The parties signed a definitive merger agreement in late January. 
Weyerhaeuser then paid a total of about $6.1 billion in cash for all Willamette's
outstanding shares, and Weyerhaeuser caused Willamette to be merged formally into a
wholly owned subsidiary of Weyerhaeuser on March 14, 2002.  Those actions rendered
moot the substantive claims in plaintiffs' complaint.
On March 21, 2002, plaintiffs filed a motion for an award of attorney fees
on the basis of the request that they had included in the prayer for relief in their second
amended complaint.  The trial court denied plaintiffs' motion, concluding that the second
amended complaint did not adequately state a basis on which the derivative plaintiffs
could recover attorney fees and therefore did not comply with ORCP 68.  Crandon, 202
Or App at 543.  
Plaintiffs then moved to amend their complaint to assert an independent
claim for attorney fees, and the trial court, over defendants' objections, granted the
motion.  On October 21, 2002, plaintiffs filed a third amended complaint seeking attorney
fees of $24.25 million and asserting that their conduct in filing their shareholder
derivative actions had benefitted Willamette and its shareholders by causing the
Willamette board to remove the takeover defenses and to agree to sell the company to
Weyerhaeuser at a favorable price.  Plaintiffs included in their claim for fees an amount
representing their time and expenses in preparing the attorney fee claim.
After extensive briefing, the trial court granted defendants' motion for
partial summary judgment, dismissing plaintiffs' claim for attorney fees incurred pursuing
the attorney fee claim itself.  The court also granted the individual defendant directors'
motion for summary judgment, which plaintiffs did not oppose, on the ground that the
individual directors had no personal liability for the plaintiffs' attorney fees.  At that point,
only Willamette, representing its successor, Weyerhaeuser, remained as a defendant.  
Following an additional hearing, the trial court denied plaintiffs' claim for
attorney fees and entered judgment for Willamette.  The trial court rejected plaintiffs'
claim for two primary reasons.  First, as noted, plaintiffs' claim was based on the benefit
that their litigation allegedly had conferred on Willamette shareholders and on Willamette
itself.  However, by the time that plaintiffs filed their claim for fees, Willamette had
ceased to exist as an independent corporation and its former shareholders all had received
cash from Weyerhaeuser in exchange for their shares.  The trial court noted that, in
contrast to the actions of shareholder-plaintiffs in a number of similar cases in Delaware,
plaintiffs had not asked the court to order that some part of the takeover proceeds be held
back to be available to pay a later attorney fee award.  According to the trial court,
because all the takeover proceeds already had been distributed to Willamette's
shareholders, there was no mechanism by which to spread the cost of the litigation to the
shareholders who allegedly had benefitted from the litigation.  Second, the trial court
noted that the only potential source for an award of attorney fees was Willamette's
corporate successor, Weyerhaeuser.  The court held that it would be inequitable to require
Weyerhaeuser (and its shareholders), rather than Willamette (or its shareholders) -- the
persons on whose behalf plaintiffs had filed their actions -- to pay plaintiffs' attorney fees,
assuming that such fees otherwise were appropriate.
Plaintiffs appealed, assigning error to the trial court orders denying their
claim for attorney fees and denying their claim for fees incurred in preparing the fee
petition.  Defendant cross-assigned as error four of the trial court's rulings, including the
trial court's ruling that the consummation of the merger had not rendered the case moot. 
The Court of Appeals agreed with defendant's mootness argument, concluding that
"plaintiffs' claims became moot when Weyerhaeuser acquired Willamette" and that "[t]he
trial court lacked jurisdiction to adjudicate plaintiffs' request for attorney fees."  Crandon,
202 Or App at 548, 550.  The Court of Appeals first noted that the takeover defenses that
plaintiffs had sought to remove had been removed, that the business transaction that
plaintiffs had sought to facilitate -- the merger -- had been completed, and that plaintiffs
did not seek to enjoin any future actions.  The court then characterized the case as one
"where the parties' adverse interests simply ceased to exist[,]" id. at 548, and held that the
case therefore had become moot.
II
We begin by describing the basis for plaintiffs' claim for fees, because an
understanding of the legal grounds upon which plaintiffs seek attorney fees is central to
the mootness issue.  We then turn to the parties' arguments as to whether, given the basis
for plaintiffs' fee claim, the mootness of the substantive claims that plaintiffs raised also
renders their fee claim moot.
On review, plaintiffs argue that the third amended complaint presents a
justiciable controversy -- an independent equitable claim for attorney fees -- and,
therefore, that the case did not become moot when Willamette dropped its takeover
defenses and agreed to be acquired by Weyerhaeuser.  Plaintiffs' claim for attorney fees is
based on the theory that a court has the equitable power to award fees to a shareholder
who brings litigation that confers a benefit on a corporation or on all of the corporation's
shareholders.  This court has recognized such a power.  In Krause v. Mason, 272 Or 351,
537 P2d 105 (1975), the court held that a shareholder who brought a shareholder
derivative action on behalf of a corporation could recover its attorney fees from the
corporation because "the corporation realized substantial benefits as a result of the
litigation."  272 Or at 358 (emphasis added). (4)  In support of a trial court's equitable
power to award fees where a party, through litigation, has conferred a common benefit on
others, the court in Krause cited Gilbert v. Hoisting & Port. Engrs., 237 Or 130, 384 P2d
136, 390 P2d 320 (1963), cert den, 376 US 963 (1964), a case in which this court
affirmed an award of attorney fees to certain members of a union who had sued on behalf
of all the members of the union to correct abuses of the democratic process in their union. 
Krause also cited several treatises on corporation law before concluding,
"The general rule is that attorney fees may be recovered when a derivative suit results in a
gain or benefit to the corporation."  Krause, 272 Or at 358-59.  The basis for the award of
fees in such circumstances is that, when a shareholder undertakes derivative litigation at
its own expense and the corporation realizes "substantial benefits" as a result of the
litigation, id. at 358, it is equitable to spread the costs of the litigation among those who
have benefitted. (5) 
Defendant argues that this court's cases hold that, regardless of the legal
basis for plaintiffs' fee request, a claim for attorney fees becomes moot if the underlying
claims in the litigation become moot.  In so arguing, defendant, like the Court of Appeals,
relies principally on Kay v. David Douglas Sch. Dist. No. 40, 303 Or 574, 738 P2d 1389
(1987), cert den, 484 US 1032 (1988), where this court held that an action for declaratory
and injunctive relief against inclusion of a formal prayer at a 1984 public high school
graduation ceremony was moot as soon as the graduation ceremony was completed.  303
Or at 579.  Because the action in Kay became moot after that graduation ceremony had
been held, and the trial court had not entered any order or judgment on the merits by that
time, this court held that the trial court had no jurisdiction to enter a judgment on the
merits or to make an award of attorney fees, but had jurisdiction to only dismiss the action
as moot.  See id. at 579 ("The circuit court should have dismissed the proceedings after
the commencement exercises were over.").
Defendant, like the Court of Appeals, reads Kay to mean that, if the merits
of a case become moot before a judgment is entered, any dispute over attorney fees also is
moot.  Plaintiffs, however, argue that Kay does not foreclose their claim for fees because
the legal grounds for the fee request in Kay required that the plaintiffs obtain a judgment
in their favor on the merits, while the basis for plaintiffs' fee claim here -- the substantial
benefit theory -- includes no such requirement.   Plaintiffs note that the fee request in Kay
was based on (1) a court's equitable authority to award fees when a plaintiff has
vindicated important constitutional rights on behalf of the public, as this court articulated
in Deras v. Myers, 272 Or 47, 535 P2d 541 (1975), and (2) 42 USC section 1988, which
authorizes the award of fees to a plaintiff who brings a successful civil rights claim under
42 USC section 1983.  Kay, 303 Or at 578 n 2 (describing those two grounds for
plaintiffs' fee request).  Plaintiffs assert that a party may recover fees under those two
theories only if the party obtains a favorable judgment on the merits.  In contrast,
plaintiffs argue, because their litigation allegedly conferred a substantial benefit on
Willamette and its shareholders, they may proceed with their attorney fee claim, even in
the absence of a judgment on the merits in their favor.  Indeed, under plaintiffs' theory,
the very actions of Willamette management that caused plaintiffs' substantive claims to
become moot -- the removal of the takeover defenses and the agreement to be acquired by
Weyerhaeuser -- provide the basis for their attorney fee claim. 
For plaintiffs here to avoid dismissal of their attorney fee claim on mootness
grounds, they must be correct that, in contrast to fee claims under Deras or under statutory
provisions requiring that the plaintiff be a "prevailing party," their attorney fee claim based
on conferring a substantial "gain or benefit" on those on whose behalf they sued survives
even when the substantive claims in their complaint become moot.  Both parties recognize
that this is an issue of first impression for this court.  
Plaintiffs note that, in Krause, this court stated that fees could be awarded in
a shareholder derivative case "when a derivative suit results in a gain or benefit to the
corporation," Krause, 272 Or at 359, without suggesting that the "result," i.e., the gain or
benefit, had to be accomplished by means of a judgment.  Plaintiffs acknowledge that the
plaintiffs in Krause had obtained a judgment.  They argue, however, that the logic of the
rule that attorney fees may be awarded in a shareholder derivative case also supports the
awarding of such fees even in the absence of a favorable judgment on the merits.  They
emphasize that it would be inequitable to deny fees to a shareholder-plaintiff on mootness
grounds when the same conduct of the defendant that mooted the plaintiff's substantive
claims was the conduct that conferred the benefit on the corporation and its shareholders. 
Plaintiffs urge the court to follow decisions from other jurisdictions holding that a fee
claim in a shareholder derivative action does not require a favorable judgment on the
merits.  To evaluate that part of plaintiffs' argument, we first turn to a consideration of the
equitable principles that underlie the awarding of attorney fees when a plaintiff initiates
litigation that benefits similarly situated parties.  We then briefly address cases from other
jurisdictions.
III
This court for many years has recognized an equitable exception to the
American rule that a party to an action is responsible for its own attorney fees.  That
exception allows a court to award attorney fees to a party whose legal action has conferred
a benefit on others, when it would be inequitable for that party to bear all the costs of the
litigation.  See Gilbert, 237 Or at 137 ("Equity may under some circumstances * * * award
attorneys' fees * * * where the plaintiff brings a representative suit on behalf of other
members of an organization, as for example where a stockholder brings a derivative suit
against a corporation.").  In those circumstances, the court may spread the cost of litigation
to avoid unjust enrichment to persons who have benefitted from the litigation without
shouldering any of the costs, as well as to compensate the party's attorneys for the services
that they have rendered.  
One form of that equitable doctrine is the "common fund" theory, which this
court recently discussed in Strunk v. PERB, 341 Or 175, 181, 139 P3d 956 (2006):
"Under the common fund doctrine, plaintiffs whose legal efforts
create, discover, increase, or preserve a fund of money to which others also
have a claim, may recover the costs of their litigation, including their
attorney fees, from the created or preserved fund. * * * [T]he doctrine is
primarily 'employed to realize the broadly defined purpose of recapturing
unjust enrichment.' * * * In other words, the doctrine is used to spread
litigation expenses among all beneficiaries of a preserved fund so that
litigant-beneficiaries are not required to bear the entire financial burden of
the litigation while inactive beneficiaries receive the benefits at no cost."
(Citation omitted).  A related equitable basis for the award of attorney fees when one party
initiates litigation that benefits others is the "substantial benefit" theory, which we
described above.  The substantial benefit theory originated in the idea that fees may be
awarded when the benefit that was conferred was nonpecuniary and thus provided no fund
from which to award fees.  This court expressed that view in Gilbert, rejecting the
defendants' suggestion that no fees should be awarded because the plaintiffs' litigation had
produced no pecuniary benefit: 
"Litigation which results in correcting abuses of [the union democratic]
process frequently may not give rise to an ascertainable pecuniary benefit. 
But the fact that no money or property is involved does not detract from the
importance of the litigation.  Those members of the union who in good faith
seek to preserve the internal democracy of their union should not have to
bear the expense of a successful suit." 
Gilbert, 237 Or at 138.  In a substantial benefit case (as in a common fund case), fees are
awarded not, as in a "prevailing party" case, to make the plaintiff whole by shifting all
costs to the wrongdoer, but instead to spread the costs among those on whose behalf the
case was brought and who benefitted from the plaintiff's efforts.
This court expressly adopted that equitable rationale for awarding fees in
Gilbert, and then relied upon Gilbert in holding in Krause that a plaintiff in a shareholder
derivative action could recover its fees from the corporation whose shareholders benefitted
from the litigation.  Thus, in Krause, this court affirmed an award of fees based on the
financial benefit that the plaintiffs' litigation had conferred on the corporation and its other
shareholders, even though that litigation did not result in a common fund from which those
fees could be paid.  As this court stated in Krause, the corporation had "realized
substantial benefits as a result of the litigation" and therefore "attorney fees may be
recovered * * *."  Id. at 358, 358-59.  For that proposition, this court cited not only its
earlier decision in Gilbert, but also the 1970 edition of Professor Henn's Law of
Corporations, including section 377 of that treatise.  In describing the general rule that a
"plaintiff-shareholder is entitled to be reimbursed by the corporation for his reasonable
expenses where he has been successful in his derivative action, with consequent benefit to
the corporation[,]" Henn also addressed the specific issue presented here:
"The same rules apply even though the derivative action is not pursued to
final judgment, so long as the purpose of the action is accomplished.  Thus, a
settlement which results in a benefit to the corporation is sufficient for
purposes of reimbursement.  Also, merely bringing an action and obtaining a
temporary injunction may produce the desired benefit."
Harry G. Henn, Law of Corporations § 377, at 795, 796 (2d ed 1970) (footnotes omitted). 
That principle also is recognized in a number of shareholder derivative cases
from other jurisdictions.  In one of the leading Delaware cases, United Vanguard Fund v.
TakeCare, Inc., 693 A2d 1076 (Del 1997), for example, the defendant corporation signed a
letter of intent to be acquired for a particular price.  The plaintiff-shareholder brought a
derivative action to have the letter of intent set aside and the company sold through an
auction process.  The corporation's board of directors allowed the letter of intent to lapse,
proceeded with an auction, and sold the company at a substantially higher price than that
contained in the letter of intent.  693 A2d at 1078.  Those events rendered the plaintiff's
claims moot, but the Delaware Supreme Court nevertheless held that the trial court could
consider whether the plaintiff could recover its attorney fees because of the benefit that its
litigation allegedly conferred on the other shareholders.  Id. at 1079-80.
Similarly, in Fletcher v. A. J. Industries, Inc., 266 Cal App 2d 313, 72 Cal
Rptr 146 (1968), the plaintiffs brought a shareholder derivative action arguing that various
transactions entered into by the corporation's board of directors constituted breaches of
their fiduciary duty.  The corporation agreed to restructure its board and management and
to rescind some of the transactions.  When the plaintiffs requested an award of attorney
fees from the corporation, the corporation objected, claiming, inter alia, that, because the
changes had been a result of settlement rather than a litigated judgment, fees were not
available.  The California Court of Appeals rejected that argument: 
"It is not significant that the 'benefits' found were achieved by settlement
of plaintiffs' action rather than by final judgment.  The authorities
recognizing the substantial-benefit rule have permitted attorneys' fee awards
in settled cases."
266 Cal App 2d at 325, 72 Cal Rptr at 153.
A current treatise also states the general proposition that a court may award
fees to a shareholder who brings a derivative claim that benefits the corporation and its
shareholders, even if the shareholder does not obtain a judgment:
"Even without a favorable judgment, the plaintiff is entitled to
reimbursement of expenses if the result confers a substantial benefit on the
corporation.  So, a plaintiff is entitled to recover expenses whenever the
defendants settle or take action that produces the same result sought by the
derivative proceeding and confers a benefit on the corporation."
Jennifer L. Berger, Amy M. Hurwitz & Carol A. Jones, 13 Fletcher Cyclopedia of the Law
of Private Corporations § 6045.01, at 318-19 (2004 revised volume) (footnotes omitted).
In plaintiffs' view, Oregon cases such as Krause and Gilbert are consistent
with cases from other jurisdictions.  Plaintiffs argue that, although the plaintiffs in Krause
and Gilbert had obtained judgments in their favor, nothing in this court's decisions in those
cases suggests that a judgment was a necessary predicate for the award of attorney fees.
We agree with plaintiffs.  As discussed above, this court -- like courts in
many other states -- long has held that equitable principles support a claim for attorney
fees by a shareholder whose derivative litigation confers a substantial benefit on the
corporation and the other shareholders.  And, nothing in this court's decisions, in the
decisions of other state courts considering the same issue, or in the logic and analysis
underlying both, suggests that a judgment in favor of the shareholder is a prerequisite for
seeking attorney fees.  Rather, virtually every court that has considered the issue has held
that actions by the corporate defendant that moot the shareholder's substantive claims do
not necessarily moot the shareholder's equitable claim for attorney fees.  Contrary to
defendant's suggestion, the idea of awarding attorney fees in a shareholder derivative
action that becomes moot before judgment is hardly novel and, indeed, is supported by the
very authorities that this court relied upon when it awarded attorney fees in Krause. 
Accordingly, we hold that plaintiffs' claim for attorney fees on the equitable ground that its
actions conferred a substantial benefit on Willamette and its shareholders did not become
moot simply because plaintiffs' substantive claims had become moot. (6)  Plaintiffs'
claim for attorney fees thus presents a justiciable controversy, and the Court of Appeals
erred in vacating the judgment on that ground and ordering the trial court to dismiss the
case as moot.
IV
The Court of Appeals based its decision on one of defendant's cross-assignments of error and therefore did not consider plaintiffs' assignments of error or
defendant's other cross-assignments of error.  We have reviewed, and we reverse, the
decision of the Court of Appeals on the single issue that that court addressed.  We express
no view on plaintiffs' assignments of error or defendant's remaining cross-assignments of
error, and we remand the case to the Court of Appeals for further proceedings based on
those assignments.  
The decision of the Court of Appeals is reversed, and the case is remanded
to the Court of Appeals for further proceedings.
1. Such measures sometimes are referred to as "golden parachutes" and "poison pills." 
See Crandon, 202 Or App at 541, 541 nn 2-3, for further discussion of those measures.  
2. Willamette's proposed purchase of GP's building products division, which faced
substantial asbestos-related liabilities, was labeled a "suicide pill" by plaintiffs because of
the alleged negative impact that the purchase would have had on Willamette's value.  See
Crandon, 202 Or App at 541.
3. Plaintiffs also alleged direct claims for breach of fiduciary duty against Willamette
management.  Because plaintiffs' claim for attorney fees is based on their shareholder
derivative claims, we do not discuss the direct claims further.
4. The equitable basis for plaintiffs' attorney fee claim often is described as the
"substantial benefit" test, and we use that phrase because it is consistent with the words
used by this court when it awarded attorney fees to the plaintiff-shareholder in Krause.
The parties here, and some courts, refer to that equitable theory as the "common benefit"
or "corporate benefit" theory.  Those terms, however, are less appropriate than "substantial
benefit," because the term "common benefit" is easily confused with the related but
distinct "common fund" theory for awarding attorney fees, see ___ Or at ___ n 5 (slip op at
8 n 5), while the term "corporate benefit" appears limited to proceedings involving
corporations and thus would exclude cases such as Gilbert v. Hoisting & Port. Engrs., 237
Or 130, 384 P2d 136, 390 P2d 320 (1963), cert den, 376 US 963 (1964).  For a general
discussion of the substantial benefit theory, see Jennifer L. Berger, Amy M. Hurwitz &
Carol A. Jones, 13 Fletcher Cyclopedia of the Law of Private Corporations § 6045.01, at
316-22 (2004 revised volume).
5. As that description demonstrates, the substantial benefit theory for seeking attorney fees is
similar, in some respects, to the "common fund" theory.  Under the common fund theory, which
we describe in greater detail below, "plaintiffs whose legal efforts create, discover, increase, or
preserve a fund of money to which others also have a claim, may recover the costs of their
litigation, including their attorney fees, from the created or preserved fund."  Strunk v. PERB, 341
Or 175, 181, 139 P3d 956 (2006).  Plaintiffs do not seek an award of fees under the common fund
theory.
6. We emphasize that this holding is limited to attorney fee claims under this court's
longstanding rule permitting a plaintiff in a shareholder derivative case to recover fees
when it has conferred a substantial benefit on the corporation or its shareholders.  Because
of that disposition, it is unnecessary to address the parties' arguments regarding the
"prevailing party" statute, ORS 20.077, or the requirements for seeking attorney fees under
Deras v. Myers, 272 Or 47, 535 P2d 541 (1975).