Brusso v. Running Springs Country Club, Inc

In Brusso v. Running Springs Country Club, Inc. (1991) 228 Cal.App.3d 92, the court stated the "substantial benefit doctrine" allowed the defendants to recover attorney fees from shareholders based on principles of equity. (Id. at p. 111.) The appellate court affirmed and referenced the lower court's reasoning for awarding attorney fees to the defendant: "'The question of who is liable for the attorney fees is a more difficult one. Had Plaintiffs prevailed it appears they could have recovered attorneys fees from defendants on the theory that their action provided a substantial benefit to the corporation. Conversely, when plaintiffs lose a shareholder's derivative action it seems appropriate that they, not the corporation, must bear the burden of costs and attorneys fees. After all, plaintiffs undertook the action because the corporation failed to act, and, as it turned out, for good reason. Therefore, they take the risk that they might have to pay if they are unsuccessful. Otherwise, they could prosecute frivolous lawsuits on the corporation's behalf without fear if only the corporation were liable.'" (Id. at pp. 99-100.)