Special Fee Shifting Statutes: Partnership Buyout Fee Shifting Provision Is Discretionary, Involves Disjunctive Elements, And Requires Objective Lack Of Merit/Subjective Bad Faith Pursuit, Or Both

Defendants Properly Denied Fees Under Corporations Code Section 16701.

            Corporations Code section 16701, which applies to partnership buyout disputes involving a disassociated partner, authorizes an equitable award of attorney and expert fees “against a party that the court finds acted arbitrarily, vexatiously, or not in good faith.” (§ 16701, subd. (i).) The trial court in Jones v. Goodman, Case No. D075907 (4^th Dist., Div. 1 Nov. 17, 2020) (published) denied the fee request by prevailing defendants based on a determination that the suit was not brought in bad faith and based on it being untimely (although the lower court went ahead and decided it on the merits anyway).  The 4/1 DCA affirmed, clarifying that section 16701 fee-shifting provision is (1) discretionary, (2) disjunctive as far as the components which can trigger fee exposure, and (3) invoked only when a plaintiff’s claims objectively lack merit or were subjectively pursued in bad faith (or both).