Madden v. Chase

ARNOLD, Judge. The general rule in North Carolina is that in the absence of statutory authority, attorneys’ fees are not recoverable. Hicks v. Albertson, 284 N.C. 236, 200 S.E. 2d 40 (1973). There is no statutory authority for an award of attorneys’ fees in the present case. Despite this rule, plaintiff contends that “the trial court erred in denying plaintiffs request for an opportunity to make an application to recover costs, including reasonable attorneys’ fees, where plaintiffs class action conferred a substantial benefit on all shareholders.” In support of his argument, plaintiff relies on Rider v. Lenoir County, 238 N.C. 632, 78 S.E. 2d 745 (1953), and Mills v. Electric Auto-Lite Co., 396 U.S. 375 (1970). Rider involved a suit by a taxpayer to enjoin the issuance of hospital bonds. The taxpayer prevailed and prevented the county from improperly expending tax revenues. However, the court denied the taxpayer’s request for attorneys’ fees because the action did not create or restore a common fund. There is dicta in Rider that the court may award attorneys’ fees in certain equity cases which are successfully prosecuted on behalf of a class. However, the “certain equity cases” cited in Rider consider the availability of attorneys’ fees from decedent’s estates. In other words, Rider represents the proposition that fees are at times available from court-supervised funds and municipal funds recovered in tax litigation. In Mills, the U. S. Supreme Court awarded attorneys’ fees to minority shareholders who had established a cause of action for a [291] violation of the Securities Exchange Act of 1934. The Court held that the absence of express statutory authorization under section 14(a) of the Act did not preclude such an award. The Court further held that the award of attorneys’ fees was not barred by the fact that no monetary fund was produced by the suit. The interpretation of the Securities Exchange Act of 1934 in Mills is irrelevant to the question of whether plaintiff can recover attorneys’ fees for his action to enjoin a “going private” merger in North Carolina. Neither Rider nor Mills provide authority for the recovery of attorneys’ fees in the case sub judice. In Kiddie Korner Day Schools, Inc. v. Charlotte-Mecklenburg Board of Education, 55 N.C. App. 134, 147, 285 S.E. 2d 110, 118 (1981), disc. rev. denied, 305 N.C. 300, 291 S.E. 2d 150 (1982), this Court stated: “North Carolina has applied a rule of equity exception in various classes of cases, i.e. where a litigant at his own expense has maintained a successful suit for the preservation, protection or increase of a common fund or of common property.” Ingram, Commissioner of Insurance v. Assurance Co., 34 N.C. App. 517, 524-25, 239 S.E. 2d 474, 478 (1977) citing Horner v. Chamber of Commerce, 236 N.C. 96, 72 S.E. 2d 21 (1952). See also Rider v. Lenoir County, 238 N.C. 632, 78 S.E. 2d 745 (1953); Hopkins v. Barnhardt, 223 N.C. 617, 27 S.E. 2d 644 (1943). In Kiddie Komer, plaintiffs argued that their action to stop defendant School Board from spending school funds fell within the equity exception above and entitled them to an award of attorneys’ fees. This Court found no merit in their argument and stated that plaintiffs brought the action primarily to protect their business interests, not to protect or preserve public funds or property. Plaintiff argues in this case that his action to enjoin the “going private” merger falls within the equity exception. We do not agree. Plaintiff brought this action to maintain the value of his investment, not for the primary purpose of protecting or preserving public funds or property. We hold that the trial court did not err [292] in denying plaintiffs request for an opportunity to make an application to recover costs and attorneys’ fees. We recognize the fact that “going private” mergers are novel transactions and are not expressly covered by the North Carolina Business Corporation Act. However, it is up to the legislature, and not the courts, to make any changes which would allow an award of fees in such situations. Accordingly, the judgment is Affirmed. Judges Phillips and ORR concur.