Baker v. Pratt

In Baker v. Pratt, (1986) 176 Cal. App. 3d 370, the plaintiff prevailed in an action establishing that the defendant had misappropriated assets from their jointly owned corporations. But while the trial court awarded fees to the plaintiff on the theory that he had provided a substantial benefit to the corporations generally, the appellate court reversed that order. As the court explained, the only beneficiary of the lawsuit was the plaintiff himself, since there were no shareholders in the corporations other than he and the defendant. "Respondent and appellant were the only shareholders in each of the corporate entities. It is clear that respondent's 'ultimate objective was not to secure or preserve a common fund but to establish personal adverse interests therein. In such a case fees may not be awarded.' ( Gabrielson v. City of Long Beach (1961) 56 Cal. 2d 224.)" ( Baker v. Pratt, supra, 176 Cal. App. 3d 370, 379.) Thus, Baker makes clear that if corporate shareholders are seeking to advance their individual interests, rather than the interests of the corporation generally, no fees should be awarded on a common fund or substantial benefit theory.