In Re Marriage of Dea and Stavros P. Economou. Dea Economou

Minority shareholders (plaintiffs) sued majority shareholders, the officers and directors of a corporation (defendants), in a shareholder derivative action, alleging, among other things, breach of contract. Defendants cross-claimed against plaintiffs. After a consolidated trial, the trial court ruled for defendants on the complaint and for plaintiffs on the cross-complaint. On motions by both parties, the court awarded defendants attorneys fees pursuant to Civil Code section 1717. Plaintiffs have appealed the attorneys fees award, arguing that Corporations Code section 800, which creates the shareholders derivative right of action, exclusively governs the award of attorneys fees, with the result that plaintiffs not defendants should have been awarded fees. In our view section 1717 of the Civil Code is controlling, and we shall affirm the award of attorneys fees to defendants against plaintiffs individually.