Court Opinion

ID: 7583314
Source: CourtListenerOpinion
Date Created: 2022-07-29 06:32:26.765866+00
Date Added: 2024-06-11T16:24:32.904150
License: Public Domain

PER CURIAM.
These cases involve a dispute between the minority and majority stockholders of Greene Group, Inc., a corporate holding company that controls the Greene County greyhound racing track known as “Greene-track.” This Court first heard the dispute over the manner in which the majority stockholders, who are also corporate officers-directors, obtained a contract to manage a newly formed greyhound racing track in Macon County for their wholly-owned entity Pari-Mutuel Management (“PMM”), in Banks v. Bryant, 497 So.2d 460 (Ala.1986). We held in Banks v. Bryant that the majority stockholders had impermissibly acted in their individual capacities in contracting for the Macon County greyhound track. We ordered an accounting and directed the circuit court to impress a constructive trust in favor of Greene Group, Inc., consistent with the results of the accounting.
The named plaintiffs are minority stockholders and they collectively own 19% of the stock of Greene Group, Inc., a holding company owning all of the stock of its subsidiary, Greene County Greyhound Park, Inc.1 The defendants, Paul W. Bryant, Jr., Sam M. Phelps, and Dr. A. Wayne May, are the majority stockholders and they collectively own 81% of the outstanding stock. In addition, Bryant is president and chief executive officer of both corporations, Phelps is secretary and general counsel of both corporations, and May is a director and an officer and veterinarian for Greenetrack.
On December 12, 1985, while Banks v. Bryant was on appeal, the minority stockholders filed a second stockholders’ derivative action in Greene County, Alabama, styled Brown v. Bryant, against Bryant, Phelps, and May and their newly formed Iowa corporation, Alabama Iowa Management, Inc. (“AIM, Inc.”). The minority asserted in this suit that the defendants had obtained for themselves another contract to manage a newly formed dog track in Council Bluffs, Iowa, and that they had again utilized for their own advantage the corporate facilities, expertise, assets, and resources of Greene Group, Inc.
The minority stockholders also sued the law firm of Phelps, Owens, Jenkins, Gibson & Fowler (“the Phelps firm”), alleging a conflict of interest in that the firm had represented both Greene Group, Inc., and Bryant, Phelps, and May individually, in Banks v. Bryant, and that there was a direct conflict of interests between Greene Group, Inc., and the individual defendants. The minority shareholders sought a recov*487ery of $279,362.64 in fees and expenses charged to and paid by Greene Group, Inc., for representing the corporation through trial. The minority alleged that, because of the conflict of interests, the Phelps firm had forfeited its right to compensation from Greene Group, Inc.
An amended complaint was subsequently filed in Brown v. Bryant alleging that the majority stockholders were attempting to “squeeze out” the minority stockholders. As an alternative to direct relief for the minority stockholders claimed from the "squeeze out,” the amended complaint sought the appointment of a custodian-special master-conservator to prevent stockholder abuse and for the purpose of fixing fair and reasonable salaries and fair and reasonable dividends for the stockholders. The majority stockholders filed an answer denying that the plaintiffs are entitled to relief. However, the defendants conceded the Iowa opportunity and repaid some of the AIM, Inc., fees to Greene Group, Inc., in connection with the repayment of the Macon venture.2 The loan fees paid to Bryant, Phelps, and May are a subject of dispute.
The trial judge in Banks v. Bryant consolidated Banks v. Bryant and Brown v. Bryant over the objection of the minority stockholders. The issues in dispute in these consolidated cases were tried in the fall and winter of 1987, concluding on December 16, 1987. The trial judge entered a final judgment on May 25, 1988, which was subsequently withdrawn and replaced by a final judgment dated September 21, 1988, from which the minority stockholders appeal.
The minority stockholders also have filed a petition for a writ of mandamus to compel the trial judge to enter an order consistent with this Court’s holding in Banks v. Bryant. This Court authorized the parties to address the petitions for writ of mandamus and the appeals in one set of briefs.
I.
We first address the petitions for writ of mandamus. We have previously held that a petition to this Court for a writ of mandamus is the proper method for bringing before us the question of whether a trial judge, after remand, has complied with our mandate:
"We have also held, however, that a petition to this Court for a writ of mandamus constitutes a proper method for reviewing the question of whether a trial judge, after remand, has complied with our mandate. Town of Daphne v. City of Fairhope, 284 Ala. 556, 226 So.2d 383 (1969); Ex parte Utility Service Corp. of Huntsville, 435 So.2d 1259 (Ala.1983). In fact, this Court, on at least two occasions, has granted writs of mandamus to compel a trial judge to enter an order in conformity with a prior decision of this Court. Ex parte Utility Service Corp. of Huntsville; Ex parte Jim Walter Corp., 283 Ala. 295, 216 So.2d 183 (1968).”
Ex parte Ins. Co. of North America, 523 So.2d 1064, 1068-69 (Ala.1988).
The minority stockholders contend that the trial court did not follow the mandates of this court in Banks v. Bryant and that a writ of mandamus should issue. They state that they seek to compel the trial court’s compliance with Banks v. Bryant as follows:
“(i) Impose the constructive trust in favor of Greene Group, Inc. (and not a company known as Greene Resources, Inc.).
*488“(ii) Impose a constructive trust over the defendants Bryant’s, Phelps’ and May’s shares of stock in Pari-Mutuel Management, Inc. (and AIM, Inc., as controlled by the opinion of this Court in Banks v. Bryant).
“(iii) Strike that portion of the trial court’s Order that rewards and profits the defendants Bryant, Phelps and May for their wrongdoing, and direct the trial court to restore to Greene Group, Inc., the full ‘net value of the proceeds earned by ... ’ Bryant, Phelps and May from the Macon venture and the Iowa venture.”
(Minority shareholders’ petition, page 6.)
This Court held in Banks v. .Bryant as follows:
“We hold, therefore, under the undisputed facts of this case, that the majority stockholders impermissibly acted in their individual capacities in contracting with the Macon County group for the construction and operation of the Macon County track. Consequently, the judgment is reversed and this cause is remanded for further proceedings to include an accounting with respect to Defendants Bryant’s Phelp’s and May’s shares of stock in Pari-Mutuel Management, Inc. and the net value of the proceeds earned by these Defendants from the Macon County venture, including salaries, dividends, or other distribution of profits earned as officers of the operating corporation. The court is further directed to impress a constructive trust in favor of Greene Group, Inc. consistent with the results of the accounting. As a condition for the imposition of a constructive trust, as herein ordered, the trial court in its discretion may direct these Plaintiffs, or the corporation for whose benefit they seek relief, to assume certain obligations commensurate with the relief granted, as equitable principles and good conscience may require.”
497 So.2d 460 at 465. Accordingly, the judgment was reversed and the case was remanded to the trial court with instructions.
We must determine, from the evidence presented, whether the trial court has followed the mandates of this Court on remand. To do so, we must consider our holding stated above against the trial judge’s order of September 21, 1988, which reads in pertinent part:
“1. ISSUE OF CONSTRUCTIVE TRUST:
“The Supreme Court ordered imposition of a constructive trust consistent with the results of the accounting made to the trial court. The Court finds that Greene Resources, Inc. is a wholly-owned subsidiary of Greene Group, Inc. For business and corporate planning reasons, defendants have requested that the constructive trust be imposed so that funds flow to Greene Resources, Inc. This Court is of the opinion that imposition of a constructive trust in favor of Greene Resources, Inc. will enable plaintiffs to receive the same benefits of the constructive trust which the plaintiffs would receive if the trust were imposed in favor of Greene Group, Inc., and the defendants’ request that the trust be imposed for the benefit of Greene Resources, Inc. is a reasonable request. Therefore, a constructive trust is hereby imposed in favor of and for the benefit of Greene Resources, Inc. upon the following:
“(1) The management agreement dated the 28th day of September 1983 by and between Pari-Mutuel Management, Inc. (hereinafter PMM, Inc.) and Macon County Greyhound Park, Inc. and any renewal or renegotiated contract between these parties, which said management agreement shall inure in favor of and to the benefit of Greene Resources, Inc.
“(2) The management agreement dated the 11th day of December, 1984 and the amendment thereto dated November 15, 1986 by and between AIM, Inc., and Iowa West Racing Association, a nonprofit corporation, and any renewal or renegotiated contract between these parties, which said management agreement shall inure in favor of and to the benefit of Greene Resources, Inc.
“(3) All of the profits of PMM, Inc. and any assets acquired with such profits *489of AIM, Inc., less and except loan closing and loan enhancement fees.”
While we acknowledge that our mandate was not as specific as it might have been, the trial court’s order on its face shows that the trial judge did not follow the mandate of this Court. We directed that a constructive trust be impressed in favor of Greene Group, Inc. The trial judge, at the request of the defendants, imposed a constructive trust so that funds flowed to Greene Resources, Inc., not Greene Group, Inc., and did this over the objection of the minority shareholders and without hearing any evidence. There is no evidence in the record to sustain the trial judge’s actions as being “for business and corporate planning reasons.” Greene Resources, Inc., is not a party to these proceedings; Greene Group, Inc., is the corporation in which the minority owns stock and for whose benefit the suit was brought.
We therefore reverse the judgment of the trial court and remand the case for a constructive trust to be imposed in favor of Greene Group, Inc., unless the majority shareholders can demonstrate that the imposition of the trust in favor of Greene Resources, Inc., is identical to what we ordered.
II.
There is also the question of the salaries, dividends, or other distribution of profit over which this Court required an accounting in Banks v. Bryant The directive to the trial court was “to impress a constructive trust in favor of Greene Group, Inc., consistent with the results of the accounting." Bryant, Phelps, and May repaid the PMM loan fees and portions of the AIM, Inc., fees as required by this Court, representing that the PMM and AIM, Inc., management fees were $13,398,000. However, the trial court did not require that they pay the loan fees.
On December 21, 1984, Bryant, Phelps, and May (sole directors of AIM, Inc.) voted unanimously to pay the loan fees directly to themselves. The fees were paid to them on January 2, 1985, in direct proportion to their stock ownership in AIM, Inc.3 In addition, Bryant, Phelps, and May collectively received $200,000 as a 5% loan fee in connection with $4 million in additional financing. Again, this amount was divided in direct proportion to their stock ownership in AIM, Inc.4 The minority claims that the loan fees are disguised dividends to Bryant, Phelps, and May. They argue that it is not just happenstance that the loan fees were paid to them in direct proportion to their stock ownership.
The trial judge refused to impose a constructive trust over the AIM, Inc., loan fees, because Bryant, Phelps, and May gave their personal guaranties in connection with the financing of the Iowa venture. He held as follows:
“Under the accounting as held by the Court, it is determined by the Court that the loan closing fees, loan enhancement fees, and fees for other personal guarantees of Greene Group, Inc. obligations paid or to be paid to the defendants, Bryant, Phelps and May or the entities upon which a constructive trust has been imposed are the property of Bryant, Phelps and May and are not due to be paid to Greene Group, Inc. The court finds that the guarantees of the three (3) individual defendants, Bryant, Phelps and May were required of them individually, and not in their capacity as officers or directors of Greene Group, Inc., and that such fees are not income from a corporate opportunity.”
*490Order of September 21, 1988, at page 9 (C.R. 562).
Bryant, Phelps, and May contend that their personal guaranties were required to secure the loans. They presented the testimony of two bankers involved in processing these loans. Carl Albright of the First National Bank of Tuscaloosa testified as follows:
“A. My understanding of your question is why we required Mr. Bryant and Mr. Phelps and Mr. May to endorse this note or guarantee this debt.
“Q. And that is what I am asking from the bank’s standpoint.
“A. The bank goes into the loan transaction with the primary objective of not losing any money and it hopes to make a little profit for its shareholders in transactions of this type. The nature of this business is so volatile, the political environment is so intense, the economics of it are so massive, that it is essential that the persons who direct the day-to-day management of this corporation pledge their personal assets and their personal credit to it, and that’s why we required it.” (R. 1478-1479.)
Because these loans were tied to the individual effort of Bryant, Phelps, and May and would not have been secured without their personal endorsement, we affirm the trial court’s judgment as to the AIM, Inc., loan fees.
The trial judge ordered retroactive salaries for Bryant, Phelps, and May in the amount of $1,990,000. The claim for the retroactive salaries was made within a matter of days of their repayment of the constructive trust funds. The additional retroactive salaries claimed for the years 1984 through 1986 equaled $3,382,500, which is $2,782,500 in excess of the amounts actually paid to them.5 This is despite the fact that Phelps is an attorney in private practice who represents Greene Group, Inc., for a fee, and Dr. May is a full-time veterinarian who, for a fee, performs services for the various tracks.
In his testimony in Brown v. Bryant, Bryant stated:
“The basis for the claim [retroactive salaries] is that I was doing very substantial services and worked for PariMutuel and AIM during '84 and ’85 and ’86. I thought I was receiving compensation for them because I thought I owned them. We had done the accounting the end of December of ’86 and paid all of the revenue from those efforts into Greene Group and I think I should be compensated.” (R. 1254.)
The trial judge awarded Bryant, Phelps, and May retroactive salaries in his final order of September 21, 1988, and set the 1987 salaries.6
*491We remand the question of retroactive salaries to the trial court. Retroactive salaries should not be awarded unless there is an affirmative showing of actual services rendered to the corporation that would justify the award of such salaries.
III.
A further issue arises as to the amount of interest due to Greene Group, Inc., on the $13,398,000 principal constructive trust funds repaid to Greene Group by Bryant, Phelps, and May on December 30, 1986, pursuant to our order in Banks v. Bryant. It is undisputed that only principal has been paid.
The majority stockholders contend that interest should be computed at 6% simple interest and that no interest is due except from the date the funds were received by them personally as opposed to the date that the management fees were actually received by PMM and AIM, Inc. They calculate the interest due and owing as $422,-328.57.
The minority stockholders contend that-the appropriate rate is that actually earned by the investment of the funds by Bryant, Phelps, and May while the trust funds were in their control. They present four possible methods for calculating the interest, one of which uses a straight 6% interest calculation. Using three of the methods, which are based on return on the investments, they calculate the interest due and owing as $1,489,944; $1,417,511; or $1,318,428. Using the 6% interest method, compounding interest annually, and adding excess profits, they calculate the interest as $1,248,176.
The majority stockholders presented the testimony of Steve Roy, a certified public accountant. Roy testified that he calculated the interest due at 6%. He admitted that he charged interest only from the date that Bryant, Phelps, and May individually received the funds, as distinguished from the date the funds were actually paid. Roy also testified that he did not calculate any interest on those amounts that Bryant, Phelps, and May allegedly paid as income tax owed as a result of their receipt of trust funds. Although the amounts allegedly paid as income tax total $2,254,240 allegedly paid by Bryant, $814,123 allegedly paid by Phelps, and $452,416 allegedly paid by May, Roy could not testify that these amounts were actually paid. (R. 1032-1033.)
The minority shareholders presented their expert, James L. Hart, also a certified public accountant. He presented his own study of interest computed at the rate of 6%, which, when compounded, totalled $731,276. With adjustments for the excess profits of the defendants, Hart reached a total interest due of $1,248,176. (C.R. 442.)
We hold that the interest due and owing should be calculated using a 6% rate of interest, compounded annually from the date Bryant, Phelps, and May received the funds. Ala.Code 1975, § 8-8-1.
IV.
We next address the question of whether the majority stockholders have, by their actions, impermissibly squeezed out the minority stockholders.
In Burt v. Burt Boiler Works, Inc., 360 So.2d 327 (Ala.1978), this Court stated as follows:
“It is no longer seriously debated that majority stockholders owe a duty to at least act fairly to the minority interests, and the majority cannot avoid that duty merely because the action taken is legally authorized. O’Neal, Close Corporations, § 8.07 says:
“ ‘In the past, some courts have permitted majority shareholders to exercise, without any restriction other than good faith, whatever powers they had as controlling shareholders under the statutes and the corporation’s charter and bylaws; and further, they have treated the fiduciary duties of the di*492rectors as running only in favor of the corporation, not to the minority shareholders. This view that the controlling shareholders and the directors do not owe fiduciary duties to minority shareholders appears outmoded, at least as applied to ... attempts to eliminate minority shareholders or to deprive them of their proportionate rights and powers without a just equivalent.... But this does not mean that the directors or the majority shareholders should be permitted to exercise their powers arbitrarily or without regard to the legitimate expectations of the minority shareholders; and many of the older decisions and practically all of the recent ones indicate that controlling shareholders, in some circumstances at least, owe fiduciary duties to minority shareholders, and that the courts will require them (whether they act in their capacity as shareholders or through directors or officers whom they control) to observe accepted standards of business ethics in transactions affecting rights of minority shareholders ... ”’
360 So.2d 327, 331-32.
In Galbreath v. Scott, 433 So.2d 454 (Ala.1983), this Court discussed the opportunities that majority shareholders in a closely held corporation have to “squeeze out” the minority’s voice in the operation of the business:
“When majority stockholders personally assume the multiple roles of owners, board of directors, and managing officers, they can not only deprive minority shareholders of a voice in the operation of the business, but they can also siphon off corporate income and deprive minority owners of income from their interest in the business. Minority shareholders can find themselves holding stock which pays no dividends and which cannot, as a practical matter, be sold. Majority shareholders can ‘squeezeout’ minority shareholders.
“There is a trend among courts to adopt attitudes toward close corporations which reflect the realities of the situation and which recognize a distinction between closely and widely held corporations. In Burt v. Burt Boiler Works, Inc., 360 So.2d 327 (Ala.1978), this court ruled that ‘majority stockholders owe a duty to at least act fairly to minority interests_’ 360 So.2d at 331. We recognized a cause of action where majority shareholders, ‘acting through the board and corporate officers, which they control, deprive the minority stockholders of their just share of the corporate gains....’ 360 So.2d [at] 332.”
433 So.2d at 457.
O’Neal’s Oppression of Minority Shareholders, § 3.02, describes squeeze out techniques as follows:
“§ 3.02. Squeeze techniques in general ... [HJolders of a majority of the voting shares in a corporation, through their ability to elect and control a majority of the directors and to determine the outcome of shareholders’ votes on other matters, have tremendous power to use a great variety of devices or modes of operation to benefit themselves at the expense of minority shareholders.
“Here are a few illustrations. The squeezers may refuse to declare dividends; they may drain off the corporation’s earnings by exorbitant salaries and bonuses to the majority shareholder-officers and perhaps to their relatives, by high rental agreements for property the corporation leases from majority shareholders, or by unreasonable payments under contracts between the corporation and majority shareholders; they may deprive minority shareholders of corporate offices and of employment by the company; they may cause the corporation to sell its assets at an inadequate price to the majority shareholders or to companies in which the majority are interested; they may organize a new company in which the minority will have no interest, transfer the corporation’s assets or business to it, and perhaps then dissolve the old corporation; or they may bring about the merger or consolidation of the corporation under a plan unfair to the minority. As indicated, the techniques listed here merely illustrate the techniques *493which resourceful squeezers may utilize.”
F.H. O’Neal and R. Thompson, O’Neal’s Oppression of Minority Shareholders § 3:02 (2d ed.1985).
The minority stockholders make a number of factual claims that they assert show the majority’s attempt to squeeze out the minority. The majority stockholders contend there has been no “squeeze out” and that the minority wants to substitute its business judgment for that of the majority. They argue that they have met the “reasonable expectations” for the minority stockholders by the increase in the value of the stock. Each minority shareholder paid $25.00 per share of stock in Greene Group, Inc., when it was formed in 1977. The corporation purchased stock from some of the minority shareholders in December 1986, for an average price of $4,583 per share. Using this price,7 the majority calculates the original $5,000 investment of plaintiff Bradley Brown as being worth $916,600 on December 31, 1986, and far more now.8 The majority’s contention seems to be that the minority has no cause to complain of a “squeeze out,” and should not care whether there are dividends, since the stock has increased so greatly in value. The fact, however, that the stock has increased in value is no answer to the charge of systematic squeeze out of the minority.
An examination of the record shows that the majority stockholders have systematically moved to squeeze out the minority stockholders, in that the majority stockholders have removed all minority stockholders from all positions as officers and directors;9 have eliminated cumulative voting; voted a raise for Bryant, Phelps, and May in 1987 which was a marked increase from previous years;10 have sought for themselves individually corporate opportunities in Macon County, Alabama, and in Iowa; have paid inadequate dividends or failed to pay dividends; have cancelled the *494minority stockholders' right to use the recreational farm, Thisildu, in Greene County; and have cancelled the preemptive rights of shareholders.11
The minority has made an affirmative showing that the majority has systematically sought to squeeze out the minority. The failure to pay adequate dividends when so much income is being made by the corporation and the salaries for Bryant, Phelps, and May are being raised is prima facie evidence of a squeeze out. The board of directors of a corporation, acting through the officers, is entitled to conduct the business of the corporation for the mutual profit of all of the stockholders. The minority is not entitled to any special privilege, but it is entitled to fair treatment in the corporate decision-making process. We direct the trial court on remand to determine whether the majority has acted in the best interest of all the stockholders or whether its decisions were made for the purpose of squeezing out the minority, as the bare facts seem to suggest. If the trial judge determines that the rights and interests of the minority stockholders have been prejudiced by the actions of the majority stockholders, he shall determine and fix an amount necessary to compensate the minority for this breach of duty owed them by the majority. F.H. O’Neal and R. Thompson, Close Corporations § 9:30 (3rd ed.).
Y.
We now consider the question of attorney fees for both majority and minority counsel.
The record reflects that the Phelps firm was paid $279,362.64 as attorney fees and expenses by Greene Group, Inc. This payment was authorized by the majority stockholders of Greene Group, Inc. We first look at the question of the attorney fees paid to the Phelps firm. The minority stockholders contend that the dual representation of both Greene Group, Inc., and the named defendants by the Phelps firm was a glaring conflict of interests and that the firm has therefore forfeited any right to attorney fees. The minority argues that this law firm’s efforts have always been and continue to be directed toward the best interests of Bryant, Phelps, and May and adverse to the best interests of Greene Group, Inc., and that the majority shareholders should pay the fees. Therefore, they contest the trial judge’s order allowing payment of one-half of the attorney fees as being inequitable as well.
The Phelps firm argues that “[t]o the extent that claims against Greene Group, Inc. were asserted in either Banks v. Bryant or Brown v. Bryant, the corporation was and is entitled to defend itself.” The majority stockholders argue that they are entitled to make reasonable business judgments and to have the corporation defend the judgments they make. They cite us to Code 1975, § 10-2A-21, and contend that this Code section provides that an award of attorney fees may be made in cases exactly like this.
Section 10-2A-21, Code 1975, reads as follows:
“(a) A corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed claim, action, suit or proceeding, whether civil, criminal, administrative or investigative, including appeals (other than an action by or in the right of the corporation), by reason of the fact that he is or was a director, officer, employee or agent of the corporation, ... against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such claim, action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best *495interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his conduct was unlawful.... ”
The trial court on the re-trial of the case provided that the fees be split equally between Greene Group, Inc., and Bryant, Phelps, and May. In light of Alabama statutes under which a corporation may indemnify its officers, we affirm the judgment of the trial court as to the attorney fees for counsel for the majority.
The second question before us is the question of reasonable attorney fees for counsel for the minority stockholders. The trial judge’s order of September 21, 1988, set attorney fees for minority counsel and stated in pertinent part:
“3. ISSUE OP ATTORNEY’S FEES:
“Attorney’s fees paid to defendants’ counsel for the first trial of this case and the appeal of same until such time as the Supreme Court issued its opinion, if not paid, shall be paid by Greene Group, Inc.
“Attorney’s fees paid to counsel for the defendants on the retrial of issues in this Court, as required by the Supreme Court, shall be allowed as paid or claimed, with one-half of the fee to be paid by Greene Group, Inc. and one-half to be paid by the individual defendants, Bryant, Phelps, and May, in proportion to the respective ownership of such individuals in Greene Group, Inc.
“Counsel for plaintiff is awarded an attorney’s fee of Nine Hundred Five Thousand, Six Hundred Three ($905,-603.00) Dollars. This sum is comprised of the Fifty-Five Thousand, Six Hundred Three ($55,603.00) Dollars previously paid to plaintiffs’ counsel by past or present plaintiffs and an award of Eight Hundred Fifty Thousand ($850,000.00) Dollars. Additionally, plaintiffs’ counsel is awarded actual expenses incurred by his firm through the date of this decree in the amount of Sixty-One Thousand, Seven Hundred Nineteen and 31/100 ($61,719.31) Dollars. This fee and the expenses are to be paid by Greene Group, Inc.”
In Reynolds v. First Alabama Bank of Montgomery, N.A., 471 So.2d 1238 (Ala.1985), this court spoke to the issue of attorney fees. We noted that Alabama follows the “American rule”:
“ ‘In Alabama, attorney’s fees are recoverable only where authorized by statute, when provided in a contract, or by special equity, such as in a proceeding where the efforts of an attorney create a fund out of which fees may be made. Shelby County Commission v. Smith, 372 So.2d 1092 (Ala.1979); State ex rel. Payne v. Empire Life Ins. Co., 351 So.2d 538 (Ala.1977).’ ”
471 So.2d at 1241, quoting Eagerton v. Williams, 433 So.2d 436, 450 (Ala.1983). We said further that Alabama recognizes exceptions to the American rule where fraud, willful negligence, or malice has been practiced. Reynolds, at 1243. There is also a well-recognized exception to the American rule in stockholder’s derivative actions. See Mills v. Electric Auto-Lite Co., 396 U.S. 375 at 394, 90 S.Ct. 616 at 626, 24 L.Ed.2d 593 (1970). The United States Supreme Court has recognized that a litigant or lawyer who recovers a common fund for the benefit of persons other than himself or his client is entitled to a reasonable fee from the fund as a whole. Boeing Co. v. Van Gemert, 444 U.S. 472, 100 S.Ct. 745, 62 L.Ed.2d 676 (1980). See also Sprague v. Ticonic National Bank, 307 U.S. 161, 59 S.Ct. 777, 83 L.Ed. 1184 (1939).
The case of Peebles v. Miley, 439 So.2d 137 (Ala.1983), involved “the sensitive issue of how reasonable attorney’s fees are determined.” Id. at 138. In Peebles we set forth the yardsticks to be used by our courts in determining reasonable attorney fees. The first six factors cited were set forth by Justice Somerville over 77 years ago:
“ ‘The general principle is everywhere established that an attorney is in such a case entitled to reasonable compensation for his services, appropriate to his employment, rendered by him to his client. —Humes v. Decatur, etc., Co., 98 Ala. 461, 470, 13 South. 368 [1893], In the estimation of their value many elements *496may be material for consideration, among which are the nature and value of the subject-matter of the employment; the learning, skill and labor requisite to its proper discharge; the time consumed; the professional experience and reputation of the attorney; the weight of his responsibility; and the measure of success achieved.’ ”
Peebles, 439 So.2d at 140, quoting Faulk & Co. v. Hobbie Grocery Co., 178 Ala. 254, 59 So. 450 (1912). Forty years later, Justice Simpson added as an additional factor “that in determining a reasonable attorney’s fee, the trial judge should take into consideration the reasonable expenses incurred by the attorney.” Id. See King v. Keith, 257 Ala. 463, 60 So.2d 47 (1952).
Peebles adopted an additional five factors from the American Bar Association’s Model Code of Professional Responsibility, DR 2-106(B) (1982):
“1. Whether a fee is fixed or contingent.
“2. The nature and length of a professional relationship.
“3. The fee customarily charged in the locality for similar legal services....
"4. The likelihood that a particular employment may preclude other employment.
“5. The time limitations imposed by the client or by the circumstances.”
439 So.2d at 141. The 11 factors set out in Peebles are the factors to consider in determining a reasonable attorney fee.
Reynolds involved a 7-figure fee, and this Court studied 21 cases, which were included in an appendix to the opinion in that case, as a means to determine a reasonable attorney fee by comparison with fees customarily charged in various jurisdictions for similar legal services. We said as follows:
“The cases that we have considered have taught us that generally, even with the fine tuning of assessing the factors in Peebles, courts in complex six-figure and seven-figure judgments have assessed fees from 20% to 25% of the recovery. This has generally worked out to be the rule in our own State, as evidenced by the Appendix, but this is not to say that there have not been courts that have assessed one-third, or even higher fees which we, after reading the decisions, also conclude were reasonable.”
471 So.2d 1238, 1245.
Counsel for the minority stockholders contend that their attorney fees should be based upon a percentage (20%) of the successful “common fund” recovery achieved for Greene Group, Inc., as a result of this shareholders’ derivative litigation. The majority argues that the trial court’s total award of $967,322.31 in attorney fees and expenses is not unreasonable and inadequate as a matter of law and should be affirmed.
In support of their position, counsel for the minority offered the testimony of Frank M. Bainbridge, lead attorney for the minority, and four other attorneys. Each of these witnesses testified that a reasonable fee for the minority’s counsel would be 20% of the common fund recovery to date and 20% of any future common fund recovery, as and when paid.
In support of their position, counsel for the majority presented five attorneys. All testified that the fee award should be based upon the time expended and some multiplier of hourly rate, which is known as the “lodestar” approach.
We have reviewed the evidence carefully and find that this stockholders’ derivative action is a “common fund” case. Therefore, counsel for the minority is due to recover 20% of the common fund presently due to be paid over to Greene Group, Inc., through December 1989. We remand the case to the trial judge to determine a fair and appropriate percentage amount, if any, to be awarded to minority counsel based on the future sums due to Greene Group, Inc., as a result of the minority counsel’s representation of minority stockholders. We have weighed the evidence presented to the trial court against the factors enunciated in Peebles and Reynolds, as well as Mashburn v. National Healthcare, Inc., 684 F.Supp. 679 (M.D.Ala.1988); and Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir.1974). The testimony, *497examined in light of these factors, supports the award of 20% of the common fund due through December 1989, and an award of future sums if any, as determined by the trial judge. We therefore reverse and remand as to the attorney fees for minority counsel.
88-98 WRIT GRANTED.
88-99 WRIT GRANTED.
88-120 AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.
88-121 AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.
MADDOX, JONES, SHORES, ADAMS and KENNEDY, JJ., concur.
ALMON, HOUSTON and STEAGALL, JJ., concur in part and dissent in part.

. The present minority stockholders are: Bradley Brown, Jr.; Phillip B.M. Banks; William W. Humphries; J.E. McCampbell; A.R. and Estelle Taylor; and Vesta L. Smith.

. A pre-trial conference was held on February 3, 1987, and the trial judge issued his pre-trial order on May 29, 1987, which states at page 7-8 as follows: "Counsel for defendants have represented to the Court that they consider the precedent established by the opinion of the Supreme Court of Alabama in the Banks case to be controlling upon the litigation in the Brown case. In the Brown case, counsel for defendants have further advised the Court that pursuant to the Banks precedent, all funds received by the corporate defendant, AIM, Inc., and the individual defendants, Bryant, Phelps, and May, and claimed by the plaintiffs in the Brown case, have been paid over to Greene Group, Inc. with the exception of loan enhancement fees and an origination fee to which the defendants, Bryant, Phelps, and May claim entitlement because of the nature of such fees.”

. Bryant |640,000 66.667%
Phelps $213,333 22.222%
May $106,667 11.111%
Total $960,000 100%

. Bryant $133,333 66.667%
Phelps $ 44,444 22.222%
May $ 22,223 11.111%
Total $200,000 100%

. Retroactive Salaries Sought from Greene Group, Inc.:
1984 1985 1986
Paid Sought Paid Sought Paid Sought
Bryant |200,000 $ 700,000 $200,000 $ 750,000 $200,000 $ 800,000
Phelps -0- $ 225,000 -0- $ 230,000 -0- $ 250,000
May -0- $ 135,000 -0- $ 142,500 -0- $ 150,000
Total $200,000 $1,060,000 $200,000 $1,122,500 $200,000 $1,200,000
Excess Claimed $ 860,000 $ 922,500 $1,000,000
Total Excess Salary Claimed $2,782,500

. Salaries Set by Order of September 21, 1988:
1984 1985 1986 1987
Bryant $400,000 $400,000 $625,000 $625,000
Phelps $ 80,000 $ 80,000 $175,000 $175,000
May $ 55,000 $ 55,000 $120,000 $120,000
$535,000 $535,000 $920,000 $920,000

. The minority contests the "fairness” of this price.

. Value of shares (at $4,583 per share) as of December 31, 1986:
Name No. Shares Purchase Price Value of Stock
P. Banks 200 $5,000 $916,600
Wm. Humphries 100 $2,500 $458,300
B. Brown 200 $5,000 $916,600
A. Taylor 350 $8,750 $1,604,050
E. Taylor 350 $8,750 $1,604,050
V. Smith 200 $5,000 $916,600
J.E. Campbell 80 $2,000 $366,640

. At the board of directors meeting on March 26, 1985, Banks, the only minority director, was removed, and no minority stockholder has served since that date.

.
Salaries: 1983 1984 1985 1986 1987
Bryant $200,000 $200,000 $200,000 $200,000 $800,000
Phelps -0- -0- -0- -0- $250,000
May -0- -0- -0- -0- $150,000
Windham $ 73,942 $ 96,057 $105,000 $119,652 $118,000
Bradshaw $ 45,000 $ 48,307 $ 52,500 $ 57,192 $ 46,154
Total $318,942 $344,364 $357,500 $379,728 $1,364,154

. The board of directors of Greene Group, Inc., on November 10, 1987, passed a resolution to amend Article IV of the Articles of Incorporation, as follows:
"No holder of the stock of any class of the Corporation shall have the preemptive right to purchase his proportion of the issuance of any class of shares including treasury shares of the Corporation.”