MARGUERITE WINNER, APPELLANT,
v.
ROLAND N. CATALDO, APPELLEE
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Winner appeals an award of attorney's fees to Cataldo, a defendant who was dismissed from a derivative action. The court holds that Section 607.147(4), which permits fee awards in derivative suits, requires that the entire action lack reasonable cause, not merely the claim against one defendant. The court reverses the fee award and remands for consideration under Section 57.105 instead.
Section 607.147(4) requires that the entire derivative action be brought without reasonable cause to justify an award of attorney's fees. A frivolous claim against an individual defendant does not satisfy this standard. If a claim against a specific defendant is truly frivolous, Section 57.105 is the appropriate vehicle for fee recovery.
[1] A statute allowing for attorney's fees when a derivative action is brought without reasonable cause applies only if the entire action, not just the claim against a single…
[2] A statute requiring a plaintiff to pay a defendant's attorney's fees if a derivative action is brought without reasonable cause is intended to deter strike suits while pr…
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Join FLexlaw to unlock all legal intelligence“To obtain fees under this section, in other words, the entire action must have been brought without reasonable cause, not just the claim against the one defendant.”
Establishes the court's interpretation that Section 607.147(4) requires the whole action to lack reasonable cause, not merely a claim against one defendant.
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Join FLexlaw to unlock all legal intelligenceCataldo was one of several defendants in a derivative action brought by Winner but was dismissed before final judgment. The trial court awarded attorn…
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PER CURIAM.
This appeal seeks review of an award of attorney’s fees on behalf of a party named in a derivative action, purportedly pursuant to the provisions of Section 607.147(4), Florida Statutes (1985). We have previously found that there was merit in the derivative suit. Ginsberg v. Keehn, 550 So. 2d 1145 (Fla. 3d DCA 1989)
Cataldo was one of several defendants in the derivative action but was dismissed out before final judgment. The trial court awarded fees to Cataldo on the theory that there was no reasonable basis to sue him. (Parenthetically, Winner was represented by counsel at the trial level who named Cataldo as a defendant.) Cataldo moved for attorney’s fees under Sections 57.105 and 607.147(4) Florida Statutes (1985).
The trial judge did not rule on the Section 57.105 request, but instead granted attorney’s fees under § 607.147(4). The apparent problem here is that § 607.147(4) applies only “[i]f the court having jurisdiction of such action upon final judgment shall find that the action was brought without reasonable cause; such court may than require the plaintiff ... to pay the parties named as defendant the reasonable expenses, including fees of attorneys, incurred by them in the defense of such action.”
To obtain fees under this section, in other words, the entire action must have been brought without reasonable cause, not just the claim against the one defendant. Although there is no Florida authority, the commentary to the Model Business Corporation Act, on which our Act is patterned, indicates that the “action” language was purposely chosen: “The test ... that the action was brought without reasonable cause is appropriate to deter strike suits on the one hand, and on the other hand to protect plaintiffs whose suits have a reasonable foundation.” 2 Model Bus.Corp. Act Ann. § 7.40, at 720. Accord Grizzard v. Petkas, 155 Ga.App. 741, 272 S.E. 2d 583 (1980). Because the goal was to deter strike suits, but not to chill meritorious suits, the “action” terminology was chosen.
If the claim against the individual defendant is truly frivolous, § 57.105 is available, and counsel would have to pay one-half of the fee, which would be appropriate. Additionally, whether the claim was frivolous or not, once Cataldo won, the corporation was obliged to indemnify him under § 607.014(3).
Therefore, for the reasons stated above we reverse the award of fees pursuant to Section 607.147(4), Florida Statutes, (1985) without prejudice to the court to consider the aspects of the motion for fees under Section 57.105, Florida Statutes (1985), if appropriate under the circumstances.
Reversed and remanded with directions.
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