In Seinfeld v. Robinson, 246 AD2d 291, 676 NYS2d 579 [1st Dept 1998], the Appellate Division explained that the "substantial benefit" rule has been articulated primarily by the federal courts as an extension of the common fund doctrine.
Thus, in a shareholder litigation, the plaintiff shareholders are entitled to an award of attorneys' fees if they confer a substantial benefit on the corporation or the other shareholders (246 AD2d at 295).
The benefit need not have a "readily ascertainable monetary value" (id). For example, where minority shareholders successfully establish that a proxy solicitation for an upcoming merger is materially misleading, they have conferred a substantial benefit on the corporation (id.)
Because of "the importance of fair and informed corporate suffrage," the shareholders "rendered a substantial service to the corporation and its shareholders" (id.)
Where the shareholder confers a benefit of this nature, an award of attorneys' fees is permissible in order to avoid unjust enrichment (id.).
"To allow others to obtain full benefit from the plaintiff's efforts without contributing equally to the litigation expenses would be to enrich the others unjustly at the plaintiff's expense" (id.)
Counsel fees may be awarded based on benefits resulting from litigation efforts even where there had been a settlement and adjudication on the merits had not been reached (id. at 296).
While many cases use the term "substantial benefit," the overriding concern in awarding attorneys' fees is equitable considerations (id at 297).