defendant corporation was the actual and not merely a nominal defendant. The action purported to be representative in that it was brought by plaintiff in his own right and on behalf of all other stockholders, and whether it was "representative" in any particular sense is a matter of definition of that term. The fact remains that under the original plan for granting the options there was little, if any, consideration to be received by the defendant from the proposed grantees, although such options undoubtedly had value, and that the plaintiff's action was therefore successful in restraining the corporation from disposing of valuable assets without consideration. To rule that a shareholder who recovers back for his corporation property wrongfully disposed of is entitled to recover his expenses and counsel fees, but that one who prevents such wrongful disposition originally is not so entitled, would establish a distinction tending to discourage a prompt, expeditious and comparatively simple method of restraining corporate abuses in favor of actions, often difficult and costly, to remedy such abuses. With respect to the necessity of a "fund", there appears to be equally little reason to distinguish between property wrongfully disposed of by a corporation and recovered by means of a shareholder's suit, and property which would have been wrongfully disposed of by the corporation but for a shareholder's suit.
The instant case is not one, as contended by defendant, in which the plaintiff's action resulted in merely an injunction against an ultra vires act which would be neither fraudulent nor harmful to the corporation. With respect to such actions, as pointed out by Professor Hornstein in his article referred to above, at page 801: "The complainant cannot be awarded compensation if the suit is neither derivative nor representative; he has done nothing beneficial either to the corporation or to his fellow-stockholders, and no compensation is awarded where the suit results merely in an injunction against an ultra vires act which would be neither fraudulent nor harmful, but is enjoined simply because it is a violation of the implied contract between the stockholders."
The present situation is rather one in which the plaintiff's action restrained a waste of corporate property by disposition of valuable options for a consideration which at best bore no reasonable relation to their value. As to such actions, Professor Hornstein in his article said at page 800: "The authorities are not entirely uniform as to whether the complainant is also to be awarded compensation if the suit is considered non-derivative, but is representative and benefits all the stockholders. This problem arises where the suit results in an injunction to restrain a fraud or other action harmful to the corporation."
For the reasons indicated above, I am of the opinion that the present case is one in which the plaintiff's action did result in benefit to the corporation, and that plaintiff is entitled to allowance of his expenses and a reasonable counsel fee. After careful consideration of the petitions filed by the plaintiff and the intervening plaintiff, I award to plaintiff a counsel fee of $5,000 and reimbursement of his expenses of $1,171.35, plus $179.92, and to the intervening plaintiff a counsel fee of $1,000 and reimbursement of his expenses of $383.79.
An order may be submitted.
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