Court Opinion

ID: 9911215
Source: CourtListenerOpinion
Date Created: 2023-12-19 18:03:14.131972+00
Date Added: 2024-06-11T12:56:33.305589
License: Public Domain

IN THE SUPREME COURT OF THE STATE OF IDAHO

                                        Docket No. 49237

 A.C. & C.E. INVESTMENTS, INC.,                      )
 a California corporation,                           )
                                                     )         Twin Falls, August 2023 Term
      Plaintiff-Appellant-Cross Respondent,          )
                                                     )         Opinion filed: December 19, 2023
 v.                                                  )
                                                     )         Melanie Gagnepain, Clerk
 EAGLE CREEK IRRIGATION                              )
 COMPANY, an Idaho corporation,                      )
                                                     )
      Defendant-Respondent-Cross Appellant.          )

        Appeal from the District Court of the Fifth Judicial District of the State of Idaho,
        Blaine County. Ned C. Williamson, District Judge.

        The judgment of the district court is affirmed.

        Kahle Becker, Attorney at Law, Boise, for Appellant-Cross Respondent, A.C. &
        C.E. Investments, Inc. J. Kahle Becker argued.

        Lawson Laski Clark, PLLC, Ketchum, for Respondent-Cross Appellant, Eagle
        Creek Irrigation Company. Edward Lawson argued.
             _______________________________________________

MOELLER, Justice.

        This case arises out of Eagle Creek Irrigation Company’s (“Eagle Creek”) amendments to
its bylaws and articles of incorporation. Eagle Creek is a nonprofit mutual irrigation corporation
that owns a water right. It delivers water to its shareholders who own land within its service area
on a pro rata basis based on the number of shares each shareholder owns. A.C. & C.E. Investments,
Inc. (“AC&CE”), is a shareholder of Eagle Creek, owning 15 capital shares.
        Eagle Creek’s original governing documents limited the total number of capital shares it
could issue and provided that Eagle Creek would hold all the water rights it acquired “in trust” for
the benefit of its shareholders. By majority vote of the shareholders, Eagle Creek amended and
restated its governing documents in 2015. The updated governing documents included an increase

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in the number of capital shares the corporation was authorized to issue but did not include the
former trust language.
         After Eagle Creek shareholders voted to approve the amendments, AC&CE brought suit
challenging the shareholders’ actions. Before the district court, AC&CE argued that Eagle Creek
breached its fiduciary duty and sought a judgment declaring that the proposed amendments were
void. Additionally, AC&CE requested that the district court reinstate the trust and decree that
Eagle Creek is still the trustee. The district court ultimately granted summary judgment to Eagle
Creek, concluding that (1) the complaint did not properly plead a derivative action, (2) AC&CE
lacked standing to bring a direct claim because it had not suffered harm distinct from other
shareholders, and (3) the amendments were validly adopted by a majority shareholder vote. Eagle
Creek was awarded its costs, but the court denied its request for attorney fees.
         AC&CE appealed the district court’s decision granting summary judgment. Eagle Creek
cross-appealed on the court’s denial of its requested attorney fees. For the reasons stated below,
we affirm the district court’s result.
                           I. FACTUAL AND PROCEDURAL BACKGROUND
         Eagle Creek is a nonprofit mutual irrigation corporation organized pursuant to the Idaho
Nonprofit Corporation Act. I.C. §§ 30-30-101 to -1204. Eagle Creek owns Water Right No. 37-
863E, by which it provides irrigation water to the shareholder landowners in its service area,
known as the Eagle Creek Subdivision, in Blaine County, Idaho. AC&CE is a California
corporation owning 15 acres of property within the Eagle Creek service area. It holds 15 shares of
capital stock in Eagle Creek, which amounts to roughly 7.46 percent of Eagle Creek’s total issued
stock.
         This is the second lawsuit between Eagle Creek and AC&CE to find its way to this Court.
See Eagle Creek Irrigation Co. v. A.C. & C.E. Invs., Inc., 165 Idaho 467, 447 P.3d 915 (2019)
(“Eagle Creek I”). In the first action, the dispute centered on whether AC&CE’s real property
interest, which was obtained through a foreclosure sale, included the 15 shares of stock in Eagle
Creek as appurtenant to the land. Eagle Creek I, 165 Idaho at 469, 447 P.3d at 917. After a
comprehensive review of the “[h]istorical and legal background on water-delivery organizations
and the Carey Act,” id. at 474–76, 447 P.3d at 922–24, we concluded that “to determine the
appurtenancy of a share in a mutual irrigation company, the [trial] court must consider the
company’s governing documents and how it acquired the water rights.” Eagle Creek I, 165 Idaho

                                                 2
at 478, 447 P.3d at 926. Therefore, in Eagle Creek I, we ultimately concluded that “the district
court erred in granting summary judgment to [AC&CE] because the district court did not look to
Eagle Creek’s governing documents.” Eagle Creek I, 165 Idaho 482, 447 P.3d at 930. Accordingly,
we vacated “the portion of the district court’s final judgment which states that the 15 shares of the
Eagle Creek stock were appurtenant to the Property.” Id.
         In December 2015, during the litigation that precipitated Eagle Creek I, but four years prior
to this Court’s decision, Eagle Creek amended its bylaws and articles of incorporation through a
majority vote at a shareholder meeting. The amendments passed by a vote of 142 to 10—well over
the majority vote required in the original articles of incorporation. 1
         The amendments changed the governing documents in two ways relevant to this appeal.
First, the amendments doubled the number of authorized shares of capital stock from 207 to 414.2
Second, the amendments eliminated a provision from the articles of incorporation that stated Eagle
Creek would “hold all water rights acquired in Trust[.]” After Eagle Creek amended its governing
documents, AC&CE moved to amend its complaint in the original action that precipitated Eagle
Creek I. However, the district court did not permit AC&CE to add such claims at that stage in the
litigation. Thus, AC&CE pursued its claims by filing a separate action.
         In the complaint precipitating this appeal, AC&CE alleged that Eagle Creek breached its
fiduciary duties to the shareholders by amending the bylaws in a way that terminated the trust.
AC&CE also claimed that the way Eagle Creek amended the articles of incorporation and bylaws
violated the terms of the trust. AC&CE sought a declaratory judgment, an injunction, appointment
of a receiver, and “at least” $10,000 in damages. AC&CE later amended its complaint and removed
the demand for monetary damages. AC&CE also sought to enjoin Eagle Creek’s board of directors

1
  The vote of 142 to 10 reflects a majority of over 93 percent. We note that due to the previous dispute between
AC&CE and Eagle Creek as to whether AC&CE’s shares were appurtenant to the land, it appears that AC&CE did
not participate in the vote. As part of the settlement agreement entered in the previous litigation, AC&CE was issued
15 shares which were to be dated as if they had been issued in 2011. Thus, even if arguendo we assume that AC&CE
would have voted against the proposal with its 15 shares, the resolution still would have passed by a 142 to 25 vote,
or roughly 85 percent of the vote.
2
  The original articles of incorporation state that the “authorized capital stock of this corporation shall be Two Hundred
Thirty (230) shares . . . .” However, as we recognized in Eagle Creek I, “Article VI(3) of the articles states that there
are 230 inches of water for distribution, whereas Article II of the Bylaws has the number 230 crossed out and ‘207’
handwritten above the crossed-out 230 . . . .” 165 Idaho at 470 n.1, 447 P.3d at 918 n.1. Resolution of the number of
authorized shares was not needed in Eagle Creek I. Thus, we simply recognized that “[u]nder the Articles and Bylaws,
Eagle Creek would issue either 207 or 230 shares on a one-share-per-irrigable-acre basis.” Eagle Creek I, 165 Idaho
at 470, 447 P.3d at 918. AC&CE and the district court both characterize the initial authorization of capital shares as
207 shares. While we use 207 here, we express no opinion on any possible ambiguity or its resolution since resolution
of this question is not needed to resolve the issues presented on appeal.
                                                            3
from further acts that might violate the terms of the trust. The litigation was hotly contested and
featured four successive motions for summary judgment, resulting in four memorandum decisions
and orders from the district court.
       In November 2019, the district court issued a memorandum decision and order (“MDO I”)
granting partial summary judgment in favor of AC&CE. The district court concluded that “the
undisputed record establishes that the Original Articles expressly form a trust, that AC&CE is a
beneficiary of that trust and that Water Right 37-863E is the corpus of the trust.” Accordingly, the
district court granted AC&CE’s motion for partial summary judgment.
       After months of additional discovery, in June 2020, Eagle Creek moved for summary
judgment again, this time alleging that AC&CE “lacked standing” to pursue derivative claims
because it failed to comply with the pleading requirements. Additionally, Eagle Creek asserted
that AC&CE’s claims—based on alleged diminution in property value due to the termination of
the trust—failed as direct claims because the alleged diminution in property value affected all
shareholders; therefore, it must be addressed in a derivative action. The district court issued a
second memorandum decision (“MDO II”) on Eagle Creek’s motion for summary judgment and
AC&CE’s motion to continue, granting the motion to continue because AC&CE had difficulty
conducting depositions due to the COVID-19 pandemic. Accordingly, the district court deferred
ruling on Eagle Creek’s motion for summary judgment.
       Shortly thereafter, the parties stipulated to allow AC&CE to file an amended complaint. In
December 2020, AC&CE filed its first amended complaint, which did not include either a separate
derivative claim against Eagle Creek or any amendments that would have made the existing claims
compliant with Idaho Rule of Civil Procedure 78, which governs derivative actions. After Eagle
Creek again filed a motion for summary judgment, the district court issued its third memorandum
decision and order (“MDO III”) in January 2021, where it concluded:
       [T]he original Articles of Incorporation were properly amended to eliminate a trust
       provision and to increase the number of authorized shares and [ ] the Board of
       Directors of [Eagle Creek] did not breach any fiduciary duty when it recommended
       amendment of those portions of the original Articles of Incorporation. However,
       the Court [found] there is a genuine dispute of material fact whether the elimination
       of language in the original Articles of Incorporation allowing for delivery of all or
       part of Water Right 37-863E outside of [Eagle Creek’s] service area creates a
       reasonable rule or regulation and whether the board of directors’ recommendation
       to eliminate such language is consistent with the applicable fiduciary standards for
       directors, thereby precluding summary judgment.
                                                 4
The district court also addressed Eagle Creek’s argument that AC&CE’s claims must be dismissed
for lack of standing because its claims are derivative in nature, and the claims do not comply with
the pleading requirements laid out in Rule 78 of the Idaho Rules of Civil Procedure or Idaho Code
section 30-30-411. The district court agreed; however, the district court noted that notwithstanding
AC&CE’s assertion that it was not pursuing a derivative claim, there remained “a genuine dispute
of material fact whether AC&CE [was] pursuing a direct action.”
         A few months later, AC&CE again moved for summary judgment, this time seeking,
among other relief, a judgment in its favor on its claims and a declaration that the “Stevens[es’]
Mitigation Agreement” was “ultra vires and void.” The latter request concerned an agreement by
Robert and Carol Stevens to mitigate their personal water use when they applied for a permit from
the Idaho Department of Water Resources (“IDWR”). 3 When IDWR later granted the Stevenses a
license, it included a requirement that the Stevenses’ portion of water remain in Eagle Creek.
         Thereafter, the district court issued its fourth memorandum decision and order (“MDO
IV”), concluding that (1) “[n]either the Original Articles [of Incorporation] nor the Amended
Articles allow for delivery of water outside of the service area or permissible place of use of Water
Right 37-863E[]”; (2) the amended articles did not violate Idaho law governing the distribution of
water furnished among shareholders; (3) the Stevenses’ Agreement did not allow for delivery
outside of Eagle Creek’s service area; (4) AC&CE’s claim for breach of fiduciary duty failed
because it had not alleged or proven that it has been damaged or is entitled to an equitable remedy;
and (5) AC&CE did not have standing to bring a direct claim because it has not suffered a distinct
harm from the other shareholders in Eagle Creek.

3
 The district court explained the basis for this permit in more detail:
         “In 2013, Robert and Carol Stevens applied for a permit from the Idaho Department of Water
         Resources (‘IDWR’) proposing to use a ground water right in lieu of the Stevenses’ proportionate
         share of their surface water right from part of Water Right 37-863E represented by their 14 shares
         in [Eagle Creek].” Ex. 52. The application specifically sought to divert 0.26 cfs/38.7 acre-feet for
         12.9 acres. Id. The Stevenses requested the permit because the ditch delivering the Stevenses’ water
         (the “High Ditch”) was blocked by the construction of a house. Id. As mitigation for the ground
         water right, the Stevenses proposed not diverting their proportionate share of Water Right 37-863E
         represented by their 14 shares of [Eagle Creek], which was calculated to be a diversion of 0.41 cfs.
         Id. Instead, the Stevenses proposed to allocate 0.08 cfs of Water Right 37-863E to the High Ditch
         for the purpose of “wetting” the ditch and covering any conveyance loss in the High Ditch. Id. The
         Stevenses also proposed that the remainder of the diversion be allocated to non-use in Eagle Creek.
         Id. On July 14, 2014, IDWR granted the Stevenses’ application for a permit (Permit No. 37-22779)
         allowing a ground water diversion of 0.26 cfs for 12.9 acres, mitigated by placing 0.08 cfs in the
         High Ditch to account for conveyance loss and a non-diversion of 0.26 cfs which was to remain in
         Eagle Creek.”
(Citations omitted).
                                                          5
       After the dismissal, Eagle Creek sought an award of attorney fees and costs under Idaho
Code sections 12-120 and 12-121. AC&CE objected, asserting that Eagle Creek had only prevailed
on some of its claims and that its fees were both “excessive” and “unrelated to this litigation.” The
district court denied Eagle Creek’s request for statutory attorney fees, finding that each party
prevailed in part. In the district court’s view, AC&CE prevailed because MDO I concluded that
the original articles of incorporation formed a trust, and that AC&CE was a beneficiary of that
trust. However, Eagle Creek prevailed on its motion for summary judgment when the district court
found that Eagle Creek properly amended the bylaws and articles of incorporation. Accordingly,
the district court awarded Eagle Creek costs as a matter of right under I.R.C.P. 54(d)(1)(C) and
discretionary costs under I.R.C.P. 54(d)(1)(D), totaling $17,036.72. AC&CE timely appealed.
Eagle Creek timely cross-appealed the denial of its attorney fees.
                                    II. STANDARDS OF REVIEW
       This Court reviews a grant of summary judgment de novo and employs the same standard
of review used by the trial court in ruling on the motion for summary judgment. United Heritage
Prop. & Cas. Co. v. Zech, 170 Idaho 764, 770, 516 P.3d 1035, 1041 (2022) (quoting AED, Inc. v.
KDC Invs., LLC, 155 Idaho 159, 163, 307 P.3d 176, 180 (2013)). Accordingly, “[s]ummary
judgment is appropriate ‘if the movant shows that there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of law.’ ” Summerfield v. St. Luke’s McCall,
Ltd., 169 Idaho 221, 228, 494 P.3d 769, 776 (2021) (quoting I.R.C.P. 56(a)). “The moving party
carries the burden of proving the absence of a genuine issue of material fact.” Banner Life Ins. Co.
v. Mark Wallace Dixson Irrevocable Tr., 147 Idaho 117, 123, 206 P.3d 481, 487 (2009). “All
disputed facts are to be construed liberally in favor of the nonmoving party, and all reasonable
inferences that can be drawn from the record are to be drawn in favor of the nonmoving party.”
Foster v. Traul, 145 Idaho 24, 28, 175 P.3d 186, 190 (2007). “This Court applies a de novo
standard of review to questions of law.” Ware v. City of Kendrick, 168 Idaho 795, 798, 487 P.3d
730, 733 (2021) (quoting Siercke v. Siercke, 167 Idaho 709, 713, 476 P.3d 376, 380 (2020)).
        Issues related to justiciability, such as mootness and standing, “are questions of law, over
which this Court exercises free review.” Berglund v. Dix, 170 Idaho 378, 384, 511 P.3d 260, 266
(2022) (citing Frantz v. Osborn, 167 Idaho 176, 179, 468 P.3d 306, 309 (2020)). Likewise, “the
justiciability issues of ripeness and mootness may be freely reviewed.” State v. Manley, 142 Idaho

                                                 6
338, 342, 127 P.3d 954, 958 (2005) (citing Lake v. Newcomb, 140 Idaho 190, 193, 90 P.3d 1272,
1275 (Ct. App. 2004)).
       “This Court reviews a trial court’s decision to award attorney fees and costs under an abuse
of discretion standard.” Geringer Cap. v. Taunton Props., LLC, 172 Idaho 95, 100, 529 P.3d 760,
765 (2023) (citing In re Est. of Hirning, 167 Idaho 669, 675, 475 P.3d 1191, 1197 (2020)). When
reviewing a discretionary decision for an abuse of discretion, this Court determines whether the
trial court: “(1) correctly perceived the issue as one of discretion; (2) acted within the outer
boundaries of its discretion; (3) acted consistently with the legal standards applicable to the
specific choices available to it; and (4) reached its decision by the exercise of reason.” Lunneborg
v. My Fun Life, 163 Idaho 856, 863, 421 P.3d 187, 194 (2018).
                                           III. ANALYSIS
       AC&CE’s amended complaint included two counts: one seeking a declaratory judgment
and the other alleging breach of fiduciary duty. The district court ultimately granted summary
judgment to Eagle Creek on both counts. Pivotal to this appeal is the district court’s conclusion
that AC&CE had not properly pleaded a derivative action and had no standing to bring a direct
action. Since the district court concluded there was a lack of standing, this appeal presents a
question of justiciability. Also implicating justiciability on appeal is Eagle Creek’s challenge to
the district court’s conclusion that this case presents a ripe controversy.
       In addition to the threshold questions of justiciability, there is a separate question of
whether this action was properly pleaded in the first instance. Idaho Code section 30-30-411 and
Rule 78 of the Idaho Rules of Civil Procedure contain specific pleading requirements for derivative
suits. The failure of a plaintiff to comply with these pleading requirements is grounds for dismissal.
See Kugler v. Nelson, 160 Idaho 408, 414–15, 374 P.3d 571, 577–78 (2016) (applying the
predecessor rule and statute); Kerner v. Johnson, 99 Idaho 433, 445, 583 P.2d 360, 372 (1978)
(applying the predecessor rule and statute) (affirming that the plaintiff could not maintain either a
derivative action or a class action). Thus, before reaching the merits, we must determine whether
the issues presented on appeal are justiciable and properly pleaded under the Idaho Rules of Civil
Procedure.
   A. AC&CE’s claims regarding the amendment to increase the number of authorized
      capital shares issued is not ripe for adjudication because no such shares have been
      issued.

                                                  7
       In this appeal, AC&CE argues that there are essentially three actions by Eagle Creek that
were improper: (1) removing the trust language from the articles of incorporation, (2) entering into
a mitigation agreement with a shareholder and board member of Eagle Creek, and (3) increasing
the number of authorized shares. We must first address whether these issues are ripe for
adjudication. For the reasons explained here, we conclude that while the first two issues
enumerated above present controversies ripe for adjudication, the third issue, concerning the
increase in the number of authorized capital shares, is not ripe for adjudication based on the record
before us.
       “The doctrine of justiciability can be divided into several subcategories, including that of
standing and ripeness. Ripeness is that part of justiciability that ‘asks whether there is any need for
court action at the present time.’ ” Davidson v. Wright, 143 Idaho 616, 620, 151 P.3d 812, 816
(2006) (internal citations omitted) (first citing Weldon v. Bonner County Tax Coalition, 124 Idaho
31, 36, 855 P.2d 868, 873 (1993); then quoting Gibbons v. Cenarrusa, 140 Idaho 316, 317, 92
P.3d 1063, 1064 (2002)). In other words, “[t]he ripeness doctrine concerns the timing of a suit and
asks whether a case is brought too early.
       “The purpose of the ripeness requirement is to prevent courts from entangling themselves
in purely abstract disagreements.” State v. Manley, 142 Idaho 338, 342, 127 P.3d 954, 958 (2005)
(emphasis added) (citing Abbott Labs. v. Gardner, 387 U.S. 136, 148 (1967)). In determining
ripeness, “[t]he traditional ripeness doctrine requires a petitioner or plaintiff to prove that (1) the
case presents definite and concrete issues, (2) a real and substantial controversy exists, and (3)
there is a present need for adjudication.” Noh v. Cenarrusa, 137 Idaho 798, 801, 53 P.3d 1217,
1220 (2002) (citing Boundary Backpackers v. Boundary Cnty., 128 Idaho 371, 376, 913 P.2d 1141,
1146 (1996)). Thus, “[i]n order for there to be a justiciable controversy there must be more than a
difference or dispute of a hypothetical or abstract character.” ABC Agra, LLC v. Critical Access
Grp., Inc., 156 Idaho 781, 784, 331 P.3d 523, 526 (2014) (citing Davidson, 143 Idaho at 620, 151
P.3d at 816). “Accordingly, ‘a litigant . . . must demonstrate that an actual controversy exists and
that the requested relief will provide actual relief, not merely potential relief.’ ” Id. (emphasis
added) (quoting Bettwieser v. N.Y. Irrigation Dist., 154 Idaho 317, 326–27, 297 P.3d 1134, 1143–
44 (2013)).
       Looking to the first cause of action, we conclude that AC&CE’s assertion that it was
impermissible for the shareholders to remove the trust language from the original bylaws and
                                                  8
articles was ripe for the district court’s adjudication. It posed more than a theoretical or potential
controversy. Further, there was a present need to resolve whether the shareholders had
impermissibly removed the trust language in order to evaluate the remaining claims. Therefore,
the matter was ripe for adjudication.
        As for the second cause of action, the allegations regarding the Stevenses’ Mitigation
Agreement, it was also ripe for adjudication. Eagle Creek’s governing documents, both the original
and the amended versions, limit the delivery of water to a designated service area. AC&CE alleges
that the Stevenses’ Mitigation Agreement violated this provision and requires delivery of water
outside its service area. As mentioned above, the mitigation undertaken by the Stevenses was
essentially to leave their share of the water in Eagle Creek. This proposal was made a condition of
the license later issued by IDWR. Thus, the second cause of action also presents definite and
concrete issues concerning a real and substantial controversy with a present need for adjudication.
Accordingly, we conclude that the issues concerning the trust and the mitigation agreement are
both ripe for declaratory relief.
        However, this is not the case when it comes to the third cause of action: whether the
amendment to increase the authorized shares of capital stock in Eagle Creek was a breach of its
fiduciary duty to its shareholders. Notably, this claim was not raised in the context of a request for
declaratory relief but as a separate cause of action for breach of fiduciary duty. Although the
district court concluded this claim was ripe for adjudication, for the reasons discussed below we
disagree. On appeal, AC&CE appears to only challenge Eagle Creek’s ability to issue additional
stock. However, the record reveals that no additional shares of stock have been issued. The
shareholders currently own the same number of shares as they did prior to the alleged improper
action by the board of directors. By approving the amendments, Eagle Creek shareholders have
only increased the number of shares of capital stock that Eagle Creek is authorized to issue.
        Capital stock is defined as “[t]he total number of shares of stock that a corporation may
issue under its charter or articles of incorporation, including both common stock and preferred
stock.” Stock: Capital Stock, Black’s Law Dictionary (11th ed. 2019) (emphasis added). Since
capital stock includes the total number of shares an entity may issue, capital stock includes both
“issued stock” and “unissued stock.” Issued stock is “[c]apital stock that has been authorized and
sold to subscribers, but may be reacquired, such as treasury stock.” Stock: Issued Stock, Black’s
Law Dictionary (11th ed. 2019) (emphasis added). Whereas unissued stock is “[s]tock that is
                                                  9
authorized by the corporate charter but not yet distributed.” Stock: Unissued Stock, Black’s Law
Dictionary (11th ed. 2019). Thus, Eagle Creek has not issued any additional shares of stock.
         AC&CE frames its argument concerning the increase in capital stock in terms of dilution;
i.e., it maintains that Eagle Creek cannot dilute its existing shareholders’ water rights.4
Specifically, AC&CE argues that: “[b]y the same reasoning, [Eagle Creek] cannot dilute its current
shareholders’ beneficial interests by issuing additional shares to third parties . . . .” However, there
is no evidence that any shares have been diluted. While the capital stock the company is authorized
to distribute has been increased, there has been no additional stock issued. Therefore, any claim of
dilution is “a difference or dispute of a hypothetical or abstract character.” ABC Agra, LLC, 156
Idaho at 784, 331 P.3d at 526 (citing Davidson, 143 Idaho at 620, 151 P.3d at 816).
         Even AC&CE seems to recognize that this has yet to occur, theorizing in its brief that “[i]t
is not difficult to contemplate a scenario whereby certain wealthy [Eagle Creek] shareholders
desire to increase their proportionate share of water . . . and then set out to dilute AC&CE’s
proportionate share of water by purchasing a disproportionate amount of newly issued shares.”
(Emphasis added). AC&CE suggests that “a single shareholder could conceivably set out to
purchase a majority stake in [Eagle Creek] and entirely control its operations.” (Emphasis added).
Importantly, at oral argument, AC&CE’s counsel even conceded that “at this stage my clients have
not per se lost a drop of water.”
         As mentioned above, “[i]n order for there to be a justiciable controversy there must be
more than a difference or dispute of a hypothetical or abstract character.” ABC Agra, LLC, 156
Idaho at 784, 331 P.3d at 526 (citing Davidson, 143 Idaho at 620, 151 P.3d at 816). Such a
controversy is missing in this case. Just because the company has the ability to dilute its shares,
does not mean that it will.

4
  Notably, AC&CE did not include an issues on appeal section in its brief as required by Rule 35 of the Idaho Rules
of Appellate Procedure. Thus, this Court is left to ascertain the scope of its challenge here on appeal—and whether it
is challenging the ability to issue or the act of authorizing the increase in the capital stock—from the remainder of
AC&CE’s brief. From the briefing and argument raised at oral argument, we construe its argument as challenging the
ability of Eagle Creek to issue its stock. However, even if it challenged the authorization to increase the capital stock,
there is still no standing here, because AC&CE has not established a concrete and particularized injury in fact by Eagle
Creek. Instead, AC&CE only relies on conjectural or hypothetical scenarios of possible stock distribution. See Reclaim
Idaho v. Denney, 169 Idaho 406, 422, 497 P.3d 160, 176 (2021) (“To satisfy the requirement of an injury in fact, one
must allege or demonstrate’ an injury that is concrete and particularized and actual or imminent, not conjectural or
hypothetical.”) (internal quotations omitted).
                                                           10
         Dilution is a reality of business practice and often a necessary mechanism to raise needed
capital. While the Idaho Business Corporation Act expressly provides for the election of
preemption rights, it makes clear that “shareholders of a corporation do not have a preemptive
right to acquire the corporation’s unissued shares except to the extent the articles of incorporation
so provide.” I.C. § 30-29-630(a). We recognize that Idaho statutes concerning nonprofit
corporations do not have a similar analogue; however, it seems the statutory authority for
admission of new members is even broader.5 The Idaho Nonprofit Corporation Act provides that
“[e]xcept as provided in its articles or bylaws, a corporation may admit members for no
consideration or for such consideration as is determined by the board, or by the articles of
incorporation.” I.C. § 30-30-402. Importantly, there is nothing in the Idaho Nonprofit Corporation
Act which limits a nonprofit organization’s ability to take on new members, absent such a
provision in the articles or bylaws. See I.C. §§ 30-30-401, 30-30-202, 30-30-206, 30-30-302.
         Should Eagle Creek’s shareholders be concerned about such an event, the shareholders are
free to add such protections to the company’s governing documents. See I.C. §§ 30-30-202, 30-
30-206, 30-30-302. Here, the governing documents contain no such protections. Instead, AC&CE
took title subject to the governing documents freely entered into by its predecessors in interest;
governing documents that do not foreclose the possibility of dilution. As we have said, “[f]reedom
of contract is a fundamental concept underlying the law of contracts.” Jesse v. Lindsley, 149 Idaho
70, 75, 233 P.3d 1, 6 (2008) (citing Rawlings v. Layne & Bowler Pump Co., 93 Idaho 496, 499,
465 P.2d 107, 110 (1970)).
         While it is unclear whether dilution alone can give rise to a claim, it must be stressed that
no dilution has occurred here. Although AC&CE’s dilution claim contains an embedded argument
invoking Idaho constitutional protections involving continued use of water in this context, AC&CE
proffers these constitutional protections without yet having its interest diluted or otherwise having
its continued use of the water adversely affected. As AC&CE observes in its opening brief: while
a single shareholder “could conceivably set out to purchase a majority stake in [Eagle Creek] and
entirely control its operations,” including the conceptual possibility of controlling water deliveries,

5
  As one example, the statue contemplates that a nonprofit corporation may “issue shares of stock instead of
memberships pursuant to its articles of incorporation. . . .” I.C. § 30-30-202. The statute also explains that any reference
to “members” must include “stockholder or shareholder, wherever and whenever those terms are used in [the Idaho
Nonprofit Corporation Act]. . . .” I.C. § 30-30-103. Further, Idaho Code section 30-30-401 provides that the “articles
or bylaws may establish criteria or procedures for admission of members.” Thus, read together, the articles or bylaws
may establish criteria or procedures for admission of stockholders or shareholders.
                                                            11
such an event has yet to occur. (Emphasis added). For these reasons, we express no opinion on the
legitimacy of its embedded constitutional argument.
        In sum, where no additional stock has been issued, nor additional shareholders added,
AC&CE has not demonstrated “an actual controversy exists and that the requested relief will
provide actual relief, not merely potential relief.” ABC Agra, LLC, 156 Idaho at 784, 331 P.3d at
526 (emphasis added) (citing Bettwieser, 154 Idaho at 326–27, 297 P.3d at 1143–44). A breach of
fiduciary duty claim based on the possibility of dilution in the future is not ripe for adjudication.
        Although we have concluded that the district court erred in determining that this issue was
ripe for adjudication, the court ultimately dismissed the claim on different grounds. Inasmuch as
we reach the same result, albeit for different reasons, the outcome of the case was unaffected by
this error. Thus, we affirm the district court’s result.
    B. AC&CE’s remaining claims fail both as derivative claims and as direct claims.
        We now turn to AC&CE’s remaining claims. This case involves two entities, one of which
is a shareholder of the other. The shareholder, AC&CE, is challenging the validity of certain
corporate actions made by Eagle Creek. Review of such challenges raises a question concerning
the type of action brought by the shareholder: whether AC&CE’s claims are brought as a derivative
action or a direct action.
        At the outset, we note that we are fully aware that AC&CE argues that it is only bringing
a direct claim. In doing so, AC&CE seeks to invoke “[a] well-recognized exception to the rule that
a shareholder must bring a derivative action.” Kugler v. Nelson, 160 Idaho 408, 413, 374 P.3d 571,
576–77 (2016) (quoting McCann v. McCann, 152 Idaho 809, 814, 275 P.3d 824, 829
(2012) [hereinafter McCann II ]). However, the district court concluded that AC&CE’s claims
failed as both a derivative action and as a direct action, evaluating the claims first under the
derivative pleading requirements and then later under the exception which permits a shareholder
to bring direct claims in certain circumstances. While AC&CE strongly asserts that it is not
bringing a derivative claim, it nevertheless argues in this appeal that the district court erred in
concluding that it did not satisfy the pleading requirements for derivative actions set forth in the
Idaho Rules of Civil Procedure. Thus, to fully address the issues raised by AC&CE, we must
address the propriety of AC&CE’s claims as both a derivative action and a direct action.
        Importantly, the district court found that because AC&CE’s claims were derivative in
nature, they were not properly pleaded under Rule 78 of the Idaho Rules of Civil Procedure, which

                                                   12
sets forth the pleading requirements for a derivative action. The district court further concluded
that AC&CE also failed to satisfy the requirements for bringing a direct action; therefore, it did
not have standing to bring a direct claim.
       While we typically address issues of standing at the starting gate, the question of standing
has an embedded question concerning the type of action AC&CE is pursuing. At its most basic
level, standing is “[a] party’s right to make a legal claim or seek judicial enforcement of a duty or
right.” Standing, Black’s Law Dictionary (11th ed. 2019). In evaluating whether AC&CE has a
right to make the legal claim it is asserting, we must first address the type of action which AC&CE
brings. The right to make a claim is often dependent on the type of action being brought. Here, if
the action satisfies the prerequisites and requirements set forth in the Idaho Rules of Civil
Procedure for bringing a derivative action, AC&CE would have standing. However, if the action
failed to meet the requirements for a derivative action, AC&CE would only have standing if its
action falls within the narrow exception which permits certain direct claims. Accordingly, to fully
address the issue of standing, we must address whether these are properly pleaded derivative
claims. If this action fails as a derivative action, we must then proceed to address whether there is
standing to bring a separate, direct action.
       1. AC&CE’s remaining claims are derivative and have not been properly pleaded.
        As we have previously noted, “[a] derivative action is distinguishable from an individual
action.” Kugler v. Nelson, 160 Idaho 408, 413, 374 P.3d 571, 576 (2016). This distinction is
necessary due to the unique circumstances presented when a shareholder sues a corporation:
       A stockholder’s derivative action is an action brought by one or more stockholders
       of a corporation to enforce a corporate right or remedy a wrong to the corporation
       in cases where the corporation, because it is controlled by the wrongdoers or for
       other reasons fails and refuses to take appropriate action for its own protection.
Id. (emphasis omitted) (quoting McCann II, 152 Idaho at 814, 275 P.3d at 829). Idaho Rule of
Civil Procedure 78 establishes the prerequisites and pleading requirements for bringing a
derivative action:
       (a) Prerequisites. This rule applies when one or more shareholders or members
       of a corporation or an unincorporated association bring a derivative action to
       enforce a right that the corporation or association may properly assert but has failed
       to enforce. The derivative action may not be maintained if it appears that the
       plaintiff does not fairly and adequately represent the interests of shareholders or
       members who are similarly situated in enforcing the right of the corporation or
       association.

                                                 13
        (b) Pleading Requirements. The complaint must be verified and must:
        (1) allege that the plaintiff was a shareholder or member at the time of the
        transaction complained of, or that the plaintiff’s share or membership later
        devolved on it by operation of law;
        (2) allege that the action is not a collusive one to confer jurisdiction that the court
        would otherwise lack; and
        (3) state with particularity:
                (A) any effort by the plaintiff to obtain the desired action from the directors
                or comparable authority and, if necessary, from the shareholders or
                members; and
                (B) the reasons for not obtaining the action or not making the effort.
I.R.C.P. 78(a), (b).
        The district court noted that “AC&CE candidly concedes that its action is not a derivative
action.” Yet, AC&CE still asserted that its amended complaint complies with Rule 78 of the Idaho
Rules of Civil Procedure. The district court disagreed and concluded that AC&CE’s amended
complaint failed to meet the requirements of the rule:
        AC&CE contends that Paragraphs 24-30 and 46 of the First Amended Complaint
        satisfy the requirements of I.R.C.P. 78(b)(2). The [c]ourt disagrees. Those
        paragraphs certainly allege a number of complaints but they do not state with
        particularity any effort by AC&CE to obtain reformation of the Amended Articles
        from the Board of Directors or the [Eagle Creek] shareholders or the reasons for
        not obtaining the action or not making the effort. As such, even if it believed its
        actions were derivative, AC&CE would not be able to maintain derivative claims.
(Citations omitted). Although AC&CE’s consistent position is that its claims are not derivative, it
never directly challenges the district court’s conclusion that its claims fail because it is a derivative
claim. In its brief, AC&CE states: “Though it was not required to do so and because this is not a
derivative action, AC&CE’s original Complaint and First Amended Complaint satisfy the pleading
requirements found in IRCP 78(b) to the extent it has any applicability to the claims plead.”
(Emphasis added; citations omitted). AC&CE maintains its position in its reply brief: “[t]his is not
a derivative action.” AC&CE suggests that Eagle Creek “prefers to treat this case as a derivative
shareholder action because the body of corporate law it relies upon is extremely deferential to the
actions of the favored group of shareholders who hold a majority stake in [Eagle Creek].” For the
reasons set forth below, we disagree.
        When an entity acts “beyond the scope of power allowed or granted by a corporate charter
or by law . . . [,] it is said to act ultra vires.” Ultra Vires, Black’s Law Dictionary (11th ed. 2019).
                                                   14
Throughout both its opening brief and reply brief, AC&CE asserts that the mitigation agreement
issue was based on “an ultra vires action” by Eagle Creek. While AC&CE does not expressly
articulate the issues related to restating the government documents to “eliminate the trust” as an
ultra vires action, AC&CE argues that “the district court erred in determining that the original
articles of incorporation of [Eagle Creek] were properly amended to eliminate trust provisions and
increase the number of authorized shares.” By asserting that the articles of incorporation were
improperly amended, AC&CE is asserting that Eagle Creek acted beyond the scope of power
allowed by law. In other words, even though it does not expressly frame its argument as such,
AC&CE is asserting that Eagle Creek acted ultra vires. Thus, we conclude that AC&CE’s
remaining claims rest on the ultra vires doctrine.
        Importantly, while Idaho Code permits a shareholder to challenge the validity of a
corporate action, the action must be pursued through a derivative proceeding:

       ULTRA VIRES. (1) Except as provided in subsection (2) of this section, the validity
       of corporate action may not be challenged on the ground that the corporation lacks
       or lacked power to act.
       (2) A corporation’s power to act may be challenged in a proceeding against the
       corporation to enjoin an act where a third party has not acquired rights. The
       proceeding may be brought by a director, or by a member or members in a
       derivative proceeding.
I.C. § 30-30-304 (emphasis added). Thus, to challenge Eagle Creek’s corporate actions before the
district court, AC&CE was required to (1) bring its claim as a derivative action and (2) comply
with the requirements of Rule 78. We conclude that AC&CE did not comply with either
requirement.
       To ensure that a derivative action adequately represents the interest of other shareholders,
Rule 78(a) states that the “derivative action may not be maintained if it appears that the plaintiff
does not fairly and adequately represent the interests of shareholders or members who are similarly
situated in enforcing the right of the corporation or association.” I.R.C.P. 78(a). Here, the record
demonstrates that Eagle Creek organized a committee to investigate the claims asserted by
AC&CE. A report issued by the Special Litigation Committee of Eagle Creek Irrigation Company
determined that no other shareholder supported AC&CE’s claims. The district court noted the
following undisputed facts in its MDO IV:
       23. On May 11, 2016, the [Eagle Creek] Board formed a Special Litigation
       Committee by Action by Unanimous Consent in Writing of the Board of Directors
                                                15
       in Lieu of a Meeting. The [Eagle Creek] Board took such action to: Treat the
       proposed amended counterclaim as a demand to rectify the Derivative Claims and
       to form a Special Litigation Committee of the Board (“Special Litigation
       Committee”) to investigate and evaluate the Derivative Claims and allegations
       asserted in the Lawsuit and to make a determination as to how the Corporation
       should proceed with respect to the Lawsuit and the Derivative claims and
       allegations asserted therein and to prepare a report, and take such other actions as
       the Special Litigation Committee deems appropriate.
       ....
       25. On August 30, 2016, the Special Litigation Committee issued a Report of The
       Special Litigation Committee of Eagle Creek Irrigation Company (“Committee
       Report”).
(Capitalization in original; internal record citations omitted). The district court also noted that the
special litigation committee’s report concluded that “[n]o other shareholder supports Claimant’s
Derivative Claims or desires to have the Amendments revoked[]” and that it was “not in the best
interests of the Company to pursue its Derivative Claims.”
       AC&CE takes exception to the Special Litigation Committee’s report. It argues that both
the committee and its report “were window dressing to seek forgiveness for an otherwise unlawful
act.” However, beyond pointing to a deposition where one of the committee members indicates
she familiarized herself with the conclusion only by reading the report, AC&CE does not point to
anything in the record to undermine two important conclusions from the committee’s report: (1)
that “[n]o other shareholder supports Claimant’s Derivative Claims or desires to have the
Amendments revoked” and (2) it was the prevailing view, if not unanimous, of the other
shareholders that it was “not in the best interests of the Company to pursue its Derivative Claims.”
(Capitalization in original). Therefore, based on the record in this appeal, AC&CE’s amended
complaint does not satisfy Rule 78(a)’s requirement that the derivative action adequately represent
the interests of the other shareholders.
       Ultimately, AC&CE’s amended complaint also fails to comply with the pleading
requirements in Rule 78(b). First, AC&CE never expressly alleges that it was a shareholder at the
time of the complained of transaction. Instead, it notes that a judgment in a previous action required
the issuance of stock to AC&CE dated September 8, 2011. However, in the subsequent line, instead
of alleging that it was a shareholder, AC&CE alleged that “[e]ver since September 8, 2011,
AC&CE has been Beneficiary of the Trust and entitled to the performance of fiduciary duties by
[Eagle Creek] as Trustee, including, but not limited to, good faith, fair dealing, and full disclosure.”

                                                  16
(Emphasis added). Later allegations include that “[i]n November and December 2015, [Eagle
Creek] did not recognize AC&CE as Beneficiary under the Trust or as shareholder. AC&CE has
never given consent or approved the actions of [Eagle Creek] or the termination of the Trust.”
While much of the amended complaint focuses on trust allegations, the amended complaint never
alleges that AC&CE was “a shareholder or member at the time of the transaction complained of.”
Thus, the amended complaint failed. I.R.C.P. Rule 78(b)(1).
       Moreover, the amended complaint does not contain an allegation that the action “is not a
collusive one to confer jurisdiction that the court would otherwise lack . . . .” I.R.C.P. 78(b)(2).
Absent such an allegation, the amended complaint fails. I.R.C.P. Rule 78(b)(2). Likewise, the
amended complaint does not detail either (1) the efforts by AC&CE “to obtain the desired action
from the directors or comparable authority and, if necessary, from the shareholders or members[,]”
or (2) the reasons for AC&CE not obtaining the action or not making the effort. The absence of
any such allegations begets a wholesale failure to comply with Rule 78(b)(3). For these reasons,
we conclude that the district court did not err in determining that the amended complaint failed to
comply with the requirements of Rule 78.
       2. AC&CE’s claims do not survive as direct claims because AC&CE does not have
          standing to bring the claims raised in its complaint.
       While we have fully explained how AC&CE’s claims fail to comply with Rule 78 as
derivative claims, AC&CE has consistently maintained that its claims are direct claims. Although
Idaho recognizes an exception to the derivative action requirement in closely held corporations, in
such an instance a plaintiff must demonstrate a distinct harm or a breach of a special duty. See
Kugler v. Nelson, 160 Idaho 408, 413–14, 374 P.3d 571, 576–77 (2016). For the reasons explained
below, we conclude that AC&CE has demonstrated neither a distinct harm nor a breach of a special
duty. Absent such a showing, we agree with the district court’s conclusion that AC&CE does not
have standing to bring its claim as a direct action.
       When reviewing issues of standing, “Idaho has adopted the constitutionally based federal
justiciability standard.” ABC Agra, LLC, 156 Idaho at 783, 331 P.3d at 525 (citing Davidson, 143
Idaho at 620, 151 P.3d at 816). “Under the traditional standing analysis, the plaintiff must show
(1) an injury in fact, (2) a sufficient causal connection between the injury and the conduct
complained of, and (3) a like[lihood] that the injury will be redressed by a favorable decision.”

                                                 17
Tucker v. State, 162 Idaho 11, 19, 394 P.3d 54, 62 (2017) (alteration in original; internal quotations
omitted) (citing State v. Philip Morris, 158 Idaho 874, 881, 354 P.3d 187, 194 (2015)).
       We have repeatedly held that it is not enough to simply allege an injury—the injury must
be a “distinct palpable injury.” Gifford v. W. Ada Joint Sch. Dist. #2, 169 Idaho 577, 584, 498 P.3d
1206, 1213 (2021); Philip Morris, Inc., 158 Idaho at 881, 354 P.3d at 194; Young v. City of
Ketchum, 137 Idaho 102, 104, 44 P.3d 1157, 1159 (2002); Miles v. Idaho Power Co., 116 Idaho
635, 641, 778 P.2d 757, 763 (1989). For an injury to be distinct and palpable, the petitioner’s injury
must be different from the injury sustained by other members of the public or group; it cannot be
a generalized grievance. See Miles, 116 Idaho at 641, 778 P.2d at 763 (quoting Warth v. Seldin,
442 U.S. 490, 499 (1975)). “To satisfy the requirement of an injury in fact, one must allege or
demonstrate an injury that is concrete and particularized and actual or imminent, not conjectural
or hypothetical.” Reclaim Idaho v. Denney, 169 Idaho 406, 422, 497 P.3d 160, 176 (2021).
(internal quotations and citation omitted).
       While a plaintiff may allege an injury, this Court has also explained that “mere allegations
are not sufficient, and the party invoking the court’s jurisdiction must demonstrate facts supporting
this allegation.” Philip Morris, Inc., 158 Idaho at 882, 354 P.3d at 195. As we held in Philip
Morris: “[the] often repeated . . . ‘allege or demonstrate’ standard. . . is an incomplete statement
of the requirements for standing. Consistent with the federal standard, Young also holds that
standing requires a showing of a distinct palpable injury and fairly traceable causal connection
between the claimed injury and the challenged conduct.” Id. at 881, 354 P.3d at 194 (emphasis in
original) (citing Young, 137 Idaho at 104, 44 P.3d at 1159).
       Injury plays a key role in this Court’s recognized exception to the general rule requiring a
shareholder to bring a derivative suit: “in a closely held corporation a minority shareholder may
bring a direct action, rather than a derivative action, if the shareholder alleges harm to himself
distinct from that suffered by other shareholders of the corporation or breach of a special duty
owed by the defendant to the shareholder.” Kugler, 160 Idaho at 413–14, 374 P.3d at 576–77
(emphasis in original) (quoting McCann II, 152 Idaho at 815, 275 P.3d at 830); see also
Schumacher v. Schumacher, 469 N.W.2d 793, 798 (N.D. 1991). This position is consistent with
our standing requirements which demand a “distinct, palpable injury.” See Reclaim Idaho, 169
Idaho at 422–23, 497 P.3d at 176–77; Young, 137 Idaho at 104, 44 P.3d at 1159; Miles, 116 Idaho
at 641, 778 P.2d at 763. Thus, we must also decide whether there has been an injury distinct from
                                                 18
other shareholders or a breach of a special duty owed to AC&CE. As explained below, we conclude
that AC&CE’s only ripe claim—breach of fiduciary duty—equally affects all shareholders.
Accordingly, we conclude that AC&CE has not suffered “harm to [itself] distinct from that
suffered by other shareholders of the corporation or breach of a special duty owed by the defendant
to the shareholder.” Kugler, 160 Idaho at 413–14, 374 P.3d at 576–77.
       AC&CE attempts to frame its interest in its share of the water right as being different from
all other shareholders. AC&CE points to the Enright Agreement, made between Eagle Creek and
AC&CE’s predecessor in interest, as giving it a “unique status” among the shareholders.
Specifically in its opening brief, AC&CE argues that “AC&CE pursued the equitable remedy of
reformation of [Eagle Creek’s] governing documents to reinstate a trust and to unwind the
Stevens[es’] Mitigation Agreement.” This is important, according to AC&CE, because it
“occupies a unique status as a shareholder entitled to 7% of Eagle Creek’s water available for
distribution due to the Enright Agreement.” (Emphasis added). We disagree. AC&CE seems to
take the position that it is contractually guaranteed seven percent of the water available for
distribution. However, when all the provisions of the Enright Agreement are read in harmony, it
is clear that the agreement only grants a pro rata distribution of water rights and does not purport
to guarantee seven percent of the water available for delivery.
       For example, Section 1 of the Enright Agreement provides:
       The Company hereby grants Enright permission to divert water from Eagle Creek
       in an amount equal to his pro rata portion of the water right held by the Company.
       The parties acknowledge and agree that Enright is the owner and holder of fifteen
       (15) shares of the capital stock of the Company, which would entitle Enright to
       divert approximately seven percent (7%) of the total water available for delivery to
       the Company.
(Emphasis added). The first sentence is the actual, operative grant, which grants permission to
divert water in amounts “equal to [its] pro rata portion of the water right held by the Company.”
The second sentence then operates as an acknowledgement of the current ownership and the
corresponding amount of water for delivery. AC&CE’s position that the second sentence
contractually guarantees seven percent would render the first sentence meaningless.
       Further supporting this position is the recital at the beginning of the agreement, which
indicates that the agreement was made pursuant to and consistent with the bylaws of Eagle Creek
and was not an attempt to bestow a unique status or special preference to an individual shareholder
in a manner not provided for in the bylaws. Specifically, the recitals indicate that:
                                               19
                  WHEREAS the Bylaws of the Company require that a shareholder obtain
           Company approval of diversion construction plans prior to commencing
           construction thereof; and
                  WHEREAS, Enright is shareholder of the Company, and has applied to the
           Company for permission to divert water from Eagle Creek at a point located on real
           property owned by Enright described in Exhibit “A” attached hereto; and
                   WHEREAS, the Company is willing to grant Enright permission for such
           diversion on the terms and conditions hereinafter set forth.
(Emphasis added). Read in harmony, it is clear that this agreement was made pursuant to the
bylaws in the manner prescribed by the bylaws. The agreement does not grant AC&CE a “unique
status” different from other shareholders; it merely confirms its right to a prorated share based on
its stock ownership. Thus, all shareholders, including AC&CE, are equally affected by the
decisions and actions of Eagle Creek, its board, and its shareholders regarding the mitigation
agreement.
           Additionally, notwithstanding the lack of a unique status among shareholders, AC&CE’s
claims are doomed on standing grounds due to the lack of any actual injury. As previously noted,
AC&CE’s attorney conceded at oral argument: “at this stage my clients have not per se lost a drop
of water.” Absent the loss of even a drop, there is no injury at all, let alone a distinct and palpable
one. Therefore, we conclude that AC&CE does not have standing to bring a direct action on its
breach of fiduciary duty claim because AC&CE has suffered neither a harm distinct from other
shareholders nor an injury. Accordingly, we affirm the district court’s grant of summary judgment
on the remaining claims.
    C. The district court did not abuse its discretion in declining to award Eagle Creek its
       attorney fees below.
           Eagle Creek has cross-appealed, maintaining that the district court erred in declining to
award it attorney fees under Idaho Code sections 12-120(3) or 12-121. We will address each statute
in turn.
           Concerning Eagle Creek’s request for attorney fees under Idaho Code section 12-120(3),
the district court denied its request because it concluded that a “commercial transaction” was not
integral to the claims in this case. Eagle Creek disputes this conclusion and argues that a
commercial transaction was “integral to [AC&CE’s] claims.”
           As we have said, “[t]here are ‘two stages of analysis to determine whether a prevailing
party could avail itself of I.C. § 12-120(3): (1) there must be a commercial transaction that is

                                                  20
integral to the claim; and (2) the commercial transaction must be the basis upon which recovery is
sought.’ ” Breckenridge Prop. Fund 2016, LLC v. Wally Enterprises, Inc., 170 Idaho 649, 663,
516 P.3d 73, 87 (2022) (emphasis in original) (citing Great Plains Equip., Inc. v. Northwest
Pipeline Corp., 136 Idaho 466, 471, 771, 36 P.3d 218, 223 (2001)).
         Here, the amended complaint included two counts. First, AC&CE sought a declaratory
judgment essentially asking the district court to declare that the trust language in the original
governing documents still existed and had not been terminated by the amendments to the articles
of incorporation. Second, AC&CE proffered a breach of fiduciary duty claim based on the alleged
violation of the purported trustee’s fiduciary duties to the purported beneficiaries—duties based
on the existence of the trust.
         Eagle Creek asserts that “the commercial transactions that were integral to [AC&CE’s]
claims against Eagle Creek were the Original Articles and Original Bylaws as well as the Amended
Articles and Amended Bylaws.” Even if we assume arguendo that this were true, it does not
establish that a commercial transaction was the basis upon which recovery was sought. See
Breckenridge Prop. Fund 2016, LLC, 170 Idaho at 663, 516 P.3d at 87. Rather, the former trust
and the fiduciary duties flowing from it were the basis upon which recovery was sought by
AC&CE. Accordingly, we affirm the district court’s conclusion there was no commercial
transaction between the parties that gave rise to this litigation and conclude that the district court
did not abuse its discretion in denying attorney fees under Idaho Code section 12-120(3) on that
basis.
         Eagle Creek also cross-appeals the district court’s denial of attorney fees under Idaho Code
section 12-121. As we have said, “[a]n award of attorney fees and costs is within the discretion of
the trial court and subject to an abuse of discretion standard of review.” Sullivan v. BitterSweet
Ranch, LLC, ___ Idaho ___, 536 P.3d 867, 872 (2023) (quoting Dickinson Frozen Foods, Inc. v.
J.R. Simplot Co., 164 Idaho 669, 676, 434 P.3d 1275, 1282 (2019)). When this Court reviews a
discretionary decision of the district court for an abuse of discretion, we determine whether the
district court: “(1) correctly perceived the issue as one of discretion; (2) acted within the outer
boundaries of its discretion; (3) acted consistently with the legal standards applicable to the
specific choices available to it; and (4) reached its decision by the exercise of reason.” Lunneborg
v. My Fun Life, 163 Idaho 856, 863, 421 P.3d 187, 194 (2018).

                                                 21
       Eagle Creek argues on appeal that the district court erred by concluding that each party had
prevailed in part. It maintains that “[a] review of the entire case, however, shows that Eagle Creek
was clearly the prevailing party.” However, the record is also clear that the district court did not
decline to award attorney fees on the basis of who prevailed. Instead, after deciding that each party
prevailed in part, the district court determined that attorney fees were not warranted under Idaho
Code section 12-121 because the claims had not been brought, pursued, or defended frivolously,
unreasonably, or without foundation. Specifically, the district court concluded:
       The [c]ourt does not find that AC&CE brought, pursued or defended frivolously,
       unreasonably or without foundation. The claims in Count I relating to the existence
       of a trust in the Original Articles of Incorporation, the identification of AC&CE as
       a beneficiary of that trust and the identification of Water Right 37-863E as the
       corpus of the trust were originally brought before the issuance of the opinion in
       Eagle Creek I. There was a need to first seek the declarations in Count I relating to
       the existence of a trust in the Original Articles of Incorporation, the identification
       of AC&CE as a beneficiary of that trust and the identification of Water Right 37-
       863E as the corpus of the trust before addressing the pivotal claim in Count I
       relating to the authority to amend the Original Articles of Incorporation.
       Considering the Court agreed with AC&CE’s claims, the Court easily finds that
       AC&CE did not bring these claims frivolously, unreasonably or without
       foundation. The remaining claims addressed in the Third and Fourth Memorandum
       Decisions involved novel issues governed by water, contract, corporate, trust and
       constitutional law. At the end of its analysis, the Court found that ECIC was
       authorized under Article VII of the Original Articles of Incorporation to amend the
       articles. Considering the parties did not provide clear on point authority involving
       the remaining claims, the Court finds that AC&CE did not bring the claims
       frivolously, unreasonably or without foundation.
       In its cross-appeal, Eagle Creek makes the conclusory assertions that “AC&CE did not
have a good faith basis for filing a lawsuit against Eagle Creek[,]” and that AC&CE was on a
fishing expedition. This is not supported by the record. As the district court noted, there was an
initial need to seek the declaratory judgment related to the alleged trust central to the claim
below—which the district court granted in AC&CE’s favor. The district court also noted that the
remaining claims presented complex legal issues for which there was no clear legal authority on
point. It also must be emphasized that this case was resolved over four memorandum decisions—
the first was granted in part in favor of AC&CE and, in the third, the district court concluded there
was still a genuine issue of material fact.
       Taken together, we conclude that Eagle Creek has not established that the district court
abused its discretion in concluding that AC&CE’s civil action was not brought “frivolously,

                                                 22
unreasonably or without foundation.” Rather, the record indicates the opposite: the district court
properly recognized and exercised its discretion, acted within the boundaries of its discretion and
consistent with legal standards. Therefore, we cannot say that the district court abused its discretion
in denying attorney fees to Eagle Creek below. Accordingly, the district court’s denial of attorney
fees under Idaho Code section 12-121 is affirmed.
   D. Eagle Creek is not entitled to attorney fees on appeal since it did not prevail in its
      cross-appeal.
       Eagle Creek seeks attorney fees on appeal pursuant to a variety of statutes, including Idaho
Code section 12-121. “Under section 12-121, we award attorney fees to the prevailing party, as a
matter of discretion, if we find an appeal was ‘pursued, defended, or brought frivolously,
unreasonably, or without foundation.’ ” Asher v. McMillan, 169 Idaho 701, 711, 503 P.3d 172,
182 (2021) (citing Idaho Military Hist. Soc’y, Inc. v. Maslen, 156 Idaho 624, 632–33, 329 P.3d
1072, 1080–81 (2014)). In exercising this discretion, “[w]e apply a ‘[ ] holistic view to examine
whether the non-prevailing party argued the issues in good faith or acted without a reasonable
basis in fact or law.’ ” Id. (second alteration in original) (citing Lola L. Cazier Revocable Tr. v.
Cazier, 167 Idaho 109, 468 P.3d 239, 253 (2020)).
       However, we have also made clear that “[w]here a party loses on its cross-appeal, it is not
a prevailing party.” Knudsen v. J.R. Simplot Co., 168 Idaho 256, 274, 483 P.3d 313, 331 (2021)
(citing Tapadeera v. Knowlton, 153 Idaho 182, 189, 280 P.3d 685, 692 (2012) (“a respondent
should carefully consider whether to file a cross-appeal because losing the cross-appeal may result
in not being able to recover attorney fees incurred in defending the appeal”)). Just as in Knudsen,
Eagle Creek “prevailed on the issues [the appellant] appealed to this Court, it did not prevail with
respect to the attorney[ ] fees issue it cross-appealed.” Id. Having concluded that Eagle Creek has
not prevailed in its cross-appeal, we must also conclude that Eagle Creek is not the prevailing
party. Accordingly, Eagle Creek is not entitled to attorney fees on appeal. See id.

                                          IV. CONCLUSION
       For the reasons stated above, we affirm the district court’s grant of summary judgment to
Eagle Creek. While the district court erred in concluding that AC&CE’s breach of fiduciary duty
claim for increasing the number of authorized capital shares was ripe for adjudication, we affirm
because we reach the same result, albeit for different reasons. Regarding Eagle Creek’s cross-

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appeal, we affirm the district court’s denial of attorney fees below. Eagle Creek’s request for costs
and attorney fees on appeal is denied.
       Chief Justice BEVAN, Justices STEGNER, ZAHN, and Justice Pro Tem SIMPSON
CONCUR.

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