Coggins v. New England Patriots Football Club

Supreme Judicial Court of Massachusetts · Corporations

CorporationsDerivative actionsAttorneys' feesCommon fundderivative suitclass actionattorneys' feescommon fund

Facts

The parties settled the case for $584,000, which was placed in an interest-bearing account for the plaintiffs' benefit. Plaintiffs then sought to have their attorneys' fees and costs assessed against the defendants, arguing that Coggins I had reinstated their derivative corporate-waste claim and that Massachusetts law permits fee shifting in successful derivative actions. The trial judge concluded that Coggins I reinstated the derivative claim only to permit calculation of rescissory damages for the class, not to produce a separate corporate recovery. The judge denied fee shifting against defendants but awarded plaintiffs' counsel fees and expenses from the settlement fund and ordered the remainder distributed pro rata to the class.

Issue

Whether the plaintiffs were entitled to have attorneys' fees and expenses assessed against the defendants on the theory that they had prevailed on a derivative claim, or whether fees could properly be awarded only from the actual settlement fund created for the class.

Rule

Attorneys' fees may, in the judge's discretion, be awarded to a party who has successfully brought a derivative action on behalf of a corporation. But no recovery of counsel fees may be had in the very action to redress a plaintiff's own wrong, and under the common-fund doctrine fees may be paid out of an actually existing fund created, preserved, or enlarged by the litigation, not from a fictional or nonexistent fund; if no funds are due to the corporation, no allowance should be made from a supposed corporate recovery.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Boston, minority shareholders of Harbor View Robotics sued after a squeeze-out merger. The court held that a derivative allegation of diverted corporate cash could be considered only to calculate rescissory damages owed directly to the shareholder class, and the case later settled with a cash fund payable only to class members.

The shareholders then ask the court to assess all attorneys' fees against the defendants on the ground that they prevailed on a derivative claim. What is the best answer?

Explanation. Fees may be awarded, in the judge's discretion, for a successful derivative action on behalf of the corporation, but not in the very action to redress the plaintiff's own wrong. Where the shareholders recovered directly on a class claim and the derivative count was used only to help calculate rescissory damages, they did not achieve a successful derivative recovery. Under the majority's reasoning, fees may instead be paid from the actual settlement fund created for the class. (Derived from Coggins v. New England Patriots Football Club (n.d.).)