Negligence CACI

In an action alleging company mismanagement, appellant stockholders challenged a decision of the Superior Court of San Francisco County (California), which approved a settlement and negotiated attorney fee award between respondents, other shareholders and the former board of directors. The trial court dismissed the action with prejudice.

Appellants contended that the attorney fees were too high, but the trial court ruled against them. The trial court analyzed the situation as if it were awarding fees under the substantial benefit doctrine. Based on the trial court’s calculations, the trial court concluded that the $ 5 million to which the parties agreed was a fair amount. On appeal negligence CACI, the court reversed. The trial court had an obligation to review an agreement to pay attorney fees negotiated as part of the settlement of a shareholder derivative action, but the trial court’s task was to determine if the negotiated fee was fair. This task required the trial court to review the settlement as a whole, including the fee award, to ensure that it was fairly negotiated. The trial court calculated what would have been a reasonable attorney fee under the substantial benefit doctrine, approving the settlement only after deciding that the negotiated fee approximated that amount. While this approach was within the trial court’s discretion, the trial court used factors unsupported by the record. Because the trial court’s analysis was flawed, it did not support the conclusion that the fee represented a fair fee award.

The court reversed the order approving the settlement of attorney fees. The matter was remanded for further proceedings.

Plaintiffs, corporations and individuals, and defendant water district, sought review of judgments of the Superior Court of Imperial County and the court of appeal, in the California Supreme Court, which transferred the cause to the appellate court for reconsideration, following the lower courts’ decision and award of damages in favor of plaintiffs on their complaint alleging taking, nuisance, and negligence in the flooding of their property.

Defendant water district, in its management of water diverted from the Colorado River for irrigation purposes within its boundaries, allowed the flooding of surrounding land, homes and businesses of plaintiffs, corporations and individuals. Plaintiffs consequently filed a complaint against defendant on theories of inverse condemnation, negligence, nuisance, and trespass. The jury found flooding was caused by defendant’s negligence and constituted a nuisance and taking of property. Both parties appealed, defendant contending that its agreements with plaintiffs contained exculpatory clauses shielding it from any liability, and plaintiffs asserting that the trial court erred in denying its request for injunctive relief in the way of clean-up of the flooded properties. On appeal, the court affirmed the judgments of the trial court, and remanded the cause for a redetermination of costs and attorney fees that had been granted to plaintiffs. The court found the exculpatory agreements ambiguous, as well as violative of public policy, and found that plaintiffs had no right to an injunction because they had been fully compensated for the damaged properties.

The court affirmed the judgment of the trial court awarding damages to plaintiff corporations and individuals, and remanded for a redetermination of attorney fees and costs, finding that the trial court properly denied plaintiffs’ motion for permanent injunction requiring defendant water district to remove the flood water from plaintiffs’ property, because they were fully compensated for the flooding of the property.

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