Donner Management Co. v. Schaffer

139 Cal.App.4th 615, 43 Cal.Rptr. 3d 140 (2006)

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Nature of the Case

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Facts

D was a director and the chief executive officer of Asia Web. P filed a derivative against D and nominal defendant Asia Web, alleging a breach of fiduciary duty. Asia Web filed a motion for P to post a bond pursuant to section 800. Asia Web submitted a declaration from the current chairman of its board explaining that D had resigned from the corporation, and detailing reasons why the lawsuit was detrimental to the corporation. P voluntarily deposited a $50,000 cashier's check as security to satisfy the bond request. Discovery was conducted, and the matter was set for trial. Asia Web appointed a special litigation committee, composed of a newly elected board of directors, to investigate whether the lawsuit was of benefit to the corporation. The committee notified P of its conclusion that based on its business judgment it was not in the best interests of the company to continue the litigation. The committee considered 'a wide range of issues, independent of the merits of the litigation, including but not limited to the impact of this litigation on the time and resources of [company] personnel, its impact on future operations and fundraising efforts ... .' P then moved to dismiss the action without prejudice. D did not oppose the motion to dismiss but asserted that the dismissal should be with prejudice. The court dismissed the action without prejudice. D filed a motion for attorney fees and costs based on the $50,000 security posted by P under section 800. The court ruled that Schaffer was the prevailing party entitled to attorney fees. P appealed.