Opinion ID: 1137013
Heading Depth: 1
Heading Rank: 3

Heading: the award of full attorney's fees against moses

Text: The superior court awarded the shareholders full attorney's fees for services incurred in the litigation. Moses contends that the award of full attorney's fees is manifestly unreasonable because there was no finding of a bad faith defense or vexatious conduct. [9] We have held that the purpose of Alaska Rule of Civil Procedure 82 is to partially compensate a prevailing party. Malvo v. J.C. Penney Co., 512 P.2d 575, 588 (Alaska 1973). If full attorney's fees are to be awarded, the court must set forth a valid reason for such an exception to the general rule. [10] Aleut contends that full attorney's fees can be justified for two reasons: first, because this is a public interest lawsuit, and second, under a common benefit theory. In Anchorage v. McCabe, 568 P.2d 986, 991 (Alaska 1977), we listed three factors which indicate the presence of public interest litigation: (1) the effectuation of strong public policies; (2) the fact that numerous people received benefits from plaintiffs' litigation success; (3) the fact that only a private party could have been expected to bring this action. Quoting La Raza Unida v. Volpe, 57 F.R.D. 94, 101 (N.D.Cal. 1972), aff'd, 488 F.2d 559 (9th Cir.1973). Aleut argues that this lawsuit fits these conditions primarily because (1) there is a strong public policy in insuring fairness in corporate communications with shareholders, especially in the native corporations; (2) a substantial number of people were benefited by the litigation, i.e., the shareholders; and (3) only a private litigant could bring this suit. In certain respects, this lawsuit is analogous to the one brought in McCabe by homeowners challenging a grant to a developer of a special exception from the zoning ordinance. This court characterized that lawsuit as involving the public interest. Like that case, attorney's fees may be necessary to encourage individual shareholders to undertake risks of litigation to correct management abuses even though their personal stake in the outcome is small, [11] and the suits are generally great in size and difficulty. [12] On the other hand, it seems likely that private motivation may have outweighed the extent of the public interest involved in this case, because the litigation arose out of political disputes between individuals and factions, vying for control or influence of the Aleut Corporation. The trial court did not award full fees on the basis that this was a public interest lawsuit. We are thus not in the position of the McCabe appeal of upholding the exercise of discretion by the trial court [13] based on a public interest rationale. Here the trial court explained the award of full fees as follows: [T]he court having found that all services rendered by the attorneys were sufficiently related to the issues in this case and further having found that the complexity of the case and the fact that management so identified themselves with the corporate entity thereby rendering the case more difficult and forcing a battle of personalities and not just legal issues, it is determined that Davis v. Hallett, 587 P.2d 1170 (Alaska 1978), does not preclude the award of full attorneys' fees. We do not address whether we would affirm an award of full fees if the trial court had made a finding that this is a public interest law suit. We do note, however, that the cases discussing full fees on that basis have involved public or governmental agencies [14] and that in no case have full fees been assessed against an individual defendant on the public interest theory. [15] It is entirely justifiable for a public or governmental agency to bear the full costs of litigating a public interest question because the public benefits. In cases involving the personal liability of an individual defendant, there is no such benefit conferred on the defendant as a result of litigating a question of genuine public interest. The court's award was based on the complexity of the case and the fact that it took on aspects of a battle of personalities. We recognize that complexity may be considered in determining the amount to be awarded, but that factor alone does not justify the award of full fees. In Davis v. Hallett, 587 P.2d 1170 (Alaska 1978), the trial court similarly awarded full attorney's fees due to the complexity of the case. In reversing the award, we stated: In the absence of a bad faith defense or vexatious conduct by the losing party in the litigation, we have held it to be manifestly unreasonable to award a full attorney fee to the prevailing party. The court below made no finding of bad faith by appellant Davis, the Halletts have not alleged such bad faith, and none clearly appears in the record on appeal. We thus reverse the award of full attorney fees, and remand with the instruction that the superior court enter an order for a partially compensatory attorney fee in an amount to be determined by the superior court. 587 P.2d at 1171-72 (citation omitted) (emphasis in original). Additionally, it is contended that full fees are justified on the common benefit theory. The purpose of the common benefit theory is to have those who share in the benefits of a lawsuit share in the payment of the costs. [16] The reason the common benefit theory is inapplicable is the same as that for denial of full fees on a public interest theory. The court did not base its award on that rationale. Moreover, while the common benefit theory might be applicable to an award against the corporation, in that all the shareholders may be considered beneficiaries as a result of obtaining a fair election, [17] it is not a justification for an award requiring a single shareholder, such as Moses, to personally bear the brunt of the full costs. The distinction is made by the United States Supreme Court in Mills v. Electric Auto-Lite Co., 396 U.S. 375, 396-97, 90 S.Ct. 616, 628, 24 L.Ed.2d 593, 609 (1970) (footnotes omitted): But regardless of the relief granted, private stockholders' actions of this sort involve corporate therapeutics, and furnish a benefit to all share holders by providing an important means of enforcement of the proxy statute. To award attorneys' fees in such a suit to a plaintiff who has succeeded in establishing a cause of action is not to saddle the unsuccessful party with the expenses but to impose them on the class that has benefited from them and that would have had to pay them had it brought the suit. To require Moses to pay full fees saddles the unsuccessful party with the expenses, and does not impose those costs on the class that has benefited from the litigation. The common benefit theory thus does not justify imposition of full fees against Moses. Accordingly, we do not address the question of whether Alaska should adopt the common benefit theory as a supplement to the application of Rule 82 for award of fees. [18] Although the court initially awarded the fees against Aleut and then ordered Moses to reimburse the corporation, the basis for our upholding the order against Moses is the court's power to impose the award of costs against him directly. We conclude that it was error to award full attorney fees against Moses. [19]