Court Opinion

ID: 9587022
Source: CourtListenerOpinion
Date Created: 2023-08-21 23:17:24.493977+00
Date Added: 2024-06-11T17:32:59.469813
License: Public Domain

Judge ARNOLD
concurring.
I concur in the majority’s decision to affirm the order of the trial court denying plaintiffs request for attorneys’ fees. How*44ever, believing this to have been a derivative action, I rest my decision on the fact that plaintiff has failed to show an abuse of discretion by the trial court. G.S. 55-55(d) provides that “If the action on behalf of the corporation is successful, in whole or part, whether by means of a compromise and settlement or by a judgment, the court may award the plaintiff the reasonable expenses of maintaining the action, including reasonable attorney’s fees. . . .” For plaintiff to be entitled to attorneys’ fees under this statute, then, it must be found first that this action is a shareholder’s derivative action brought on behalf of the corporation and, second, that the trial court abused its discretion in denying plaintiffs request.
A stockholder may maintain an action in behalf of a corporation against the corporate officers for acting against the interest of the corporation only where he alleges that he has exhausted reasonable efforts to obtain relief within the corporate management or where it appears that efforts to obtain such relief would be to no avail. Hill v. Erwin Mills, Inc., 239 N.C. 437, 80 S.E. 2d 358 (1954). See 3 Strong’s N.C. Index 3d, Corporations § 6 (1976).
In the case at bar, plaintiff alleged in his complaint that he was unable to obtain relief from defendants, despite his persistent efforts. Moreover, he specifically asked for relief for the Ruth’s corporations. It is clear that the corporations were injured by the acts of defendants. Therefore, although the judgment awarding damages does appear to resemble an individual recovery in some respects, the totality of the evidence indicates that this action is in fact a derivative action, brought on behalf of the corporation. G.S. 55-55(d) is, therefore, applicable.
The provision in G.S. 55-55(d) that “the court may award” reasonable attorneys’ fees clearly leaves that decision to the discretion of the trial judge. A finding that the judge erred in denying a request for attorneys’ fees would, therefore, require the complaining party to show an abuse of that discretion. After a careful examination of the record on appeal, it cannot be found that the trial court abused its discretion in denying plaintiffs motion.
In its order directing defendants to purchase plaintiffs interest in the Ruth’s corporations, the court found the following instances of bad faith on the part of defendants: 1) payment of *45B & H Foods’ expenses by Ruth’s; 2) registration of Ruth’s trademark in the name of B & H Foods as owner; 3) transferral of Ruth’s employees to other corporations in which defendants owned stock; 4) transferral of Ruth’s income, customers, and existing business opportunities to a brokerage company owned by defendants; 5) alteration of a written distributorship agreement between Ruth’s and B & H Foods so as to impose additional expenses on Ruth’s; 6) cancellation of the distributorship agreement, with the effect being that total control of Ruth’s was left in the hands of defendants; 7) adjustment of Ruth’s income so as to reduce its profits; and 8) putting the aforementioned brokerage firm in control of Ruth’s business activities to its detriment. These acts were found by the court to have rendered the Ruth’s corporations “substantially unprofitable.” Plaintiff maintains that by making these findings the court was, in effect, required to go an additional step and award attorneys’ fees as well. This is not correct.
Although there is no hard and fast rule as to what constitutes an abuse of discretion, the view is generally taken that any party seeking such a finding has a substantial hurdle to overcome. The general rule in this state is that “the action of the trial court as to matters within its judicial discretion will not be disturbed unless there is a clear abuse thereof; or, as it is frequently stated, the appellate court will not review the discretion of the trial court.” Meiselman v. Meiselman, 58 N.C. App. 758, 768-69, 295 S.E. 2d 249, 256 (1982). In the case at bar, the order of the court denying attorneys’ fees states “[t]hat the Motion by the plaintiffs for the allowance of attorney’s fees to the plaintiff is in the discretion of the court denied.” Although the trial judge did not detail his reasons for denying plaintiff s request for attorneys’ fees, the record suggests several possibilities.
Plaintiff contends that defendants were uncooperative during discovery, causing delay and added expense. The record shows, however, that plaintiff himself may have contributed to any delay which occurred, particularly by filing a petition for cancellation of the Ruth’s trademark with the Trademark Office Trial and Appeals Board. The action remained with that board for some three years before it was ultimately decided that plaintiff lacked standing for such an appeal.
*46More importantly, plaintiff received a substantial recovery. In assigning a value to plaintiffs stocks the referee chose the date of the filing of the complaint rather than the date of judgment. By basing the valuation on the prior date, where, as the referee reported, “due to drastic changes and numerous economic and business factors unrelated to specific acts of mismanagement,” the stock had a much greater value, plaintiff received the maximum economic benefit allowable. The trial court did not abuse its discretion in refusing to add to plaintiffs recovery by the award of attorneys’ fees. Moreover, this Court should not substitute its discretion and allow the attorney fees simply because in our opinion plaintiff might very well have deserved the attorney fees.