Ellis v. Varney

19 Mass. L. Rptr. 260
CourtMassachusetts Superior Court
DecidedMarch 22, 2005
DocketNo. 9801397
StatusPublished
Cited by1 cases

This text of 19 Mass. L. Rptr. 260 (Ellis v. Varney) is published on Counsel Stack Legal Research, covering Massachusetts Superior Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Ellis v. Varney, 19 Mass. L. Rptr. 260 (Mass. Ct. App. 2005).

Opinion

Fecteau, J.

In connection with an action by the plaintiff, Jane Ellis (“Ellis”), a minority shareholder of Varney Bros. Sand & Gravel, Inc. (“Varney Bros.”), a closely-held corporation, against the corporation and its directors and officers, the plaintiff seeks attorneys [261]*261fees and costs of suit. This action involves claims, individually and derivatively, that the president of the corporation, Linda Varney, with the complicity of the directors and officers, was engaged in self-dealing in several respects, and took actions that were detrimental to the corporation and to Ellis’s interest as a shareholder. She alleged that the officers and directors breached their fiduciary duties to her as a minority shareholder, by denying her the benefits of her ownership interest and have frozen her out of the conduct of the affairs of the business. Her derivative shareholder action was brought on behalf of the corporation to recover amounts diverted because of self-interest and to recover the value of her ownership and/or the value of her proportionate share of increased profit to which she would have been entitled to receive as dividends on account of profit distributions in which she, and other shareholders should, but do not regularly receive. She also brought direct claims for conversion or unlawful interference with her right to receive shares of stock in two trusts. Ellis also sought an accounting, a rescission of the written employment agreement between the corporation and Linda, and a rescission of an amendment to the corporate by-laws regarding a restriction on the transfer of shares that gives a right of first refusal to the corporation and its other shareholders. Among other equitable orders which the plaintiff also requested were to require the corporation to establish a dividend payment policy and to have the directors replaced by persons independent of the Varney family.

This matter was tried, without jury, over the course of fifteen days between March 3, to March 25, 2003. The parties were granted leave until April 3, 2003, to prepare their final arguments and until April 15,2003, to file requests for findings of fact and rulings of law. The decision of the court was entered on January 9, 2004, finding in the plaintiffs favor with respect to a portion of the derivative claims, only [17 Mass. L. Rptr. 394].

Following receipt of the court’s decision, the parties filed various pleadings in connection with the plaintiffs prayer for attorneys fees and costs, to which the defendants are opposed for a number of reasons. The matter was considered on a non-evidentiary basis, with a hearing conducted on January 27, 2005; the matter was then taken under advisement.

DISCUSSION

A. Applicable Standards

As a “general principle,... a litigant must bear [her] own expenses, except so far as [her] burden is mitigated by a statute awarding [her] taxable costs . . . Besides a statutory exception applicable to cases originating in a Probate Court, that general principle is subject to a number of exceptions in equity practice . . . Where a litigant at his own expense has been successful in creating, preserving, protecting or increasing a fund in which others have a right to share, the court having control of that fund may order payment of counsel fees or costs as between solicitor and client out of the fund, upon the petition of the litigant or in some jurisdictions upon the petition of his attorneys, or the court may make the right of others to share in the fund conditional upon their contributing proportionately to the expenses of the litigation.” [internal citations omitted.] Commissioner of Insurance v. Massachusetts Acc. Co., 318 Mass. 238, 242 (1945). See also Bournewood Hospital, Inc. v. Massachusetts Commission against Discrimination, 371 Mass. 303, 308 (1976).

This category of case has generally been viewed to include successful minority shareholders in derivative actions.2 The reason for such inclusion is similar: “an expense incurred by one, resulting in the creation of a fund for the general benefit of many other persons, ought not to be borne entirely by the one whose action has resulted in the realization of such a fund, and that it is equitable that a part of the expense should be paid out of the fund.” Shaw v. Harding, 306 Mass. 441, 450 (1940). But it has also been noted that “the allowance of counsel fees ‘is a matter which easily may become subject to abuse. It commonly rests in sound judicial discretion.’ ” Sarnia v. Central Oil Co. of Worcester, 339 Mass. 101, 129 (1959), citing Sagalyn v. Meekins, Packard & Wheat, Inc., 290 Mass. 434, 441 (1935).

In the case of Hayden v. Hayden, 326 Mass. 587 (1950), cited by the Sarnia court as one of several references for standards appropriate for analogous cases, the court distinguished such applications from the voluntary contractual relationship, saying that when “payments are to be made out of the property of litigants to or for the benefit of counsel who may not have been employed by those whose estates are thus diminished, the standard is not the same as that applied in an action by an attorney against a client with whom he has voluntary contractual relations . .. A test commonly employed is the compensation paid to public officers for services of a similar character ... Fees in such cases are awarded on ‘strictly conservative principles.’ . . . That principle has been applied where counsel fees have been awarded by the court under G.L.c. 215, §45, and under its general equity powers, and we think it should be applicable to a case like the present where the payment of counsel fees is a forced one and is made to one with whom the [plaintiff] did not voluntarily contract. The power to award counsel fees in cases of this sort is one of great delicacy and is to be applied with caution.” Id. at 596. Although the plaintiff disagrees and suggests the court should adopt a more liberal view, in a case she cites in support of an ancillary point, the court in Robbins v. Robbins, 19 Mass.App.Ct. 538 (1985), repeated its “traditional invocation of a ‘conservative’ approach when it comes to charging counsel fees to a party who has in no way consented.” Id. at 543.

[262]*262Among factors suggested by the authorities that are to be included in a conservative approach are whether there was a likelihood of “substantial and needless duplication of effort as between the two counsel,” and whether there has been “substantial expenditure of time which could be attributed to extreme circumspection and zeal for completeness of preparation running beyond the requirements of the case.” Robbins, supra, at 541.

The court, in Robbins, supra, referred to “the factors that ought to enter into the judicial setting of counsel fees” as “numerous, complex variables” suggesting reference to cases including Cummings v. National Shawmut Bank, 284 Mass. 563 (1933). There, it was noted that “many considerations are pertinent, including the ability and reputation of the attorney, the demand for his services by others, the amount and importance of the matter involved, the time spent, the prices usually charged for similar services by other attorneys in the same neighborhood, the amount of money or the value of the properly affected by controversy, and the results secured. Neither the time spent nor any other single factor is necessarily decisive of what is to be considered as a fair and reasonable charge for such services.” Id. at 569.

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Bluebook (online)
19 Mass. L. Rptr. 260, Counsel Stack Legal Research, https://law.counselstack.com/opinion/ellis-v-varney-masssuperct-2005.