George Bundy Smith: A great man—my co-author, former law partner and friend—passed away on Aug. 5, 2017. A man of incredible conviction and moral character, he served as a role model and mentor to so many. His actions and example left the world a far better place. He will be sorely missed.
When a plaintiff shareholder is successful in a derivative lawsuit brought on behalf of a corporation, New York Business Corporation Law §626(e) provides courts with the discretion to award reasonable expenses, including attorney fees, as reimbursement for those incurred in bringing the action on the corporation’s behalf. Success in such an action is measured by whether plaintiff achieved a “substantial benefit” for the corporation or its shareholders, but a substantial benefit alone will not entitle a plaintiff to reimbursement. Section 626 imposes other requirements that must be met to recover attorney fees, including that the plaintiff be a shareholder both at the time of the issue as well as commencement of the suit, and that such plaintiff make and plead with particularity a pre-suit demand upon the corporation or the circumstances why such a demand would have been futile.
