Although Unsuccessful, Former President/CEO’s Arguments On Appeal Were Not Objectively Without Merit So As To Rise To The Level Of Frivolity Justifying Sanctions, And Plaintiffs Forfeited Their Claim To § 1021.5 Private Attorney General Fees By Not Making It Before The Trial Court.
In A&B Market Plus, Inc. v. Arabo, Case No. D073850 (4th Dist., Div. 1 March 25, 2021) (unpublished), members or former members of a non-profit benefit corporation/trade association for independent retail convenience stores (Association) filed a derivative action against Association, its former President and CEO, and its treasurer and secretary. Plaintiffs sought removal of former President/CEO and treasurer/secretary from Association’s board of directors, disgorgement of at least $463,322.63 obtained through alleged misdeeds, and other damages for tax evasion and lost business opportunities. The trial court returned a defense judgment for treasurer/secretary, but concluded, among other things, that former President/CEO had breached his fiduciary duty and had to return to Association a $210,000 bonus paid to him based on former President/CEO’s false representation concerning his involvement in a real estate deal for Association.
Former President/CEO unsuccessfully appealed the trial court’s ruling concerning the $210,000 bonus. However, in a cross-appeal, plaintiffs sought sanctions against former President/CEO for pursuing a frivolous appeal and, alternatively, sought to recover attorney’s fees under Code Civ. Proc. § 1021.5.
The 4/1 DCA denied both requests. Former President/CEO’s appeal did not rise to the level of frivolity so as to warrant sanctions under Code Civ. Proc., § 907 or under Cal. Rules of Court, Rule 8.276(a)(1). Although the panel determined former President/CEO’s arguments on appeal lacked merit, those arguments were not objectively devoid of any merit. As to the § 1021.5 fees request, plaintiffs forfeited this claim by not making it before the trial court.
Finally, pursuant to Cal. Rules of Court, Rule 8.276(a)(3), former President/CEO sought monetary sanctions against plaintiffs and their appellate counsel for filing plaintiffs’ sanctions motion. However, because he made the request in an opposition brief instead of properly serving and filing a separate motion, the request was denied.
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