Naquin v. Air Engineered Systems & Services, Inc.Naquin v. Air Engineered Systems & Services, Inc.
The issue presented by this appeal is whether the trial court properly awarded attorney‘s fees as a penalty against the defendants who prevented plaintiff-stockholder from exercising his statutory right to inspect corporate records.
The facts of this case are as follow:1
On December 20, 1977, defendant, Air Engineered Systems and Services, Inc. (Air Engineered), was incorporated by plaintiff, Ronald Naquin, and defendants, Keith R. Dubois and Dennis Hoffpauir, with each of them owning 100 shares of stock in the corporation. The defendant, Dubois, was President and the defendant, Hoffpauir, was the Secretary-Treasurer of Air Engineered, with plaintiff, Naquin, an employee. The plaintiff was employed mostly as a salesman for the corporation. The business of the corporation consists primarily of the design, sale and installation of air compressors for drilling rigs. Air Engineered tried to design a compressor to fit on a drilling rig, using the least amount of space and weight, computed a cost analysis, and then tried to sell the package to a drilling company. Naquin was employed by the corporation until early in November 1981, when dissatisfaction arose between the three shareholders. Dubois and Hoffpauir offered to buy Naquin‘s interest for $2,000.00 a month for ten years if he would sign a non-competition agreement. Naquin refused the offer and was fired on November 17, 1981. At about this same time, Naquin formed his own business called Air Compression Energy Systems. On November 20, 1981, Naquin made a written request for an appointment to examine the corporate records. This request was referred to Air Engineered‘s attorney. Defendants subsequently denied Naquin access to the corporate records unless he agreed to sign an indemnity and hold harmless agreement in favor of Air Engineered claiming Naquin was a competitor. On February 26, 1982, Dubois and Hoffpauir held a special shareholder‘s meeting and voted to increase the capital stock of Air engineered by issuing 15,000 new shares
Dubois and Hoffpauir testified that they refused to allow Naquin access to the records because they feared he would use the information to gain an unfair advantage over Air Engineered in the sales of air compressors. They complained that Naquin had hired away one of their former employees and attempted to hire another. They also testified that Naquin secured a contract for his own company from a customer that he had originally solicited for Air Engineered.
In order to gain access to the corporate records, Naquin filed this suit for a writ of mandamus against Air Engineered, Dubois and Hoffpauir, ordering them to allow him to examine the corporate records pursuant to
Air Engineered asserts the following specifications of error: “The trial court erroneously allowed an award of attorney‘s fees to plaintiff.” This raises two issues for resolution on appeal. First, was Air Engineered in bad faith in denying Naquin access to the corporate records. Second, if Air Engineered was in bad faith, may attorney‘s fees be awarded under
AIR ENGINEERED‘S BAD FAITH
In order for Naquin to recover the penalties provided in
The trial court found that:
“... [t]he defendant is in bad faith in this matter in trying to water down the corporation‘s stock and dragging its feet, thwarting the plaintiff‘s right of inspection.”
We agree with this finding. Not only did the corporation refuse Naquin access to the corporate records but Dubois and Hoffpauir responded to Naquin‘s written demand for inspection of the corporate records by calling a shareholders’ meeting to increase the number of outstanding shares of Air Engineered in an attempt to keep Naquin from viewing the records. As the trial court noted:
“[t]he purpose of issuing the new shares with subscription rights was to put the plaintiff in a position where he would certainly not buy new stock in the corporation and numerically at least own less than the 25 percent shares necessary to inspect the books as a competitor.....”
Air Engineered contends that it was justified in refusing to allow Naquin to inspect the corporate records as long as he refused to sign an indemnity agreement protecting Air Engineered from any damages it might suffer as a result of Naquin‘s use of the information contained in the corporate records. Dubois and Hoffpauir argue that their fear that Naquin would use the information in an unfair manner, to Air Engineered‘s detriment, is substantiated by Naquin‘s past conduct. They complain that Naquin has already hired away one of their employees, attempted to hire another, and secured a job for his own company which he originally solicited for Air Engineered. However, the burden of proving that a shareholder possesses ill motive is on the corporation seeking to deny the shareholder‘s right to inspect the records. Naquin v. Air Engineered Systems, Etc., supra; Orlando v. Reliance Homestead Ass‘n, 171 La. 1027, 132 So. 777 (La.1931). Air Engineered has failed to meet its burden of proof. The record supports Naquin‘s assertion that he wanted to examine the records so that he could determine the actual value of his interest in the corporation. The corporation‘s original stock issue was never given a dollar value. Since Dubois and Hoffpauir fired Naquin and were attempting to buy him out at a price that he felt was inadequate to fairly compensate him, it was imperative that Naquin be allowed to examine the corporate records to determine the actual value of the corporation and its financial condition, to determine the true value of his shares.
Air Engineered‘s argument that Naquin was actually seeking to gain an unfair competitive advantage is not supported by the facts of the case. Since Naquin was a major stockholder of Air Engineered and a salesman for six years, he already knew who Air Engineered‘s customers were and he could gain no unfair advantage from inspecting the financial records.
ATTORNEY‘S FEES UNDER LSA-R.S. 12:172
The issue of whether
Due to our previous decision on this issue, we are now constrained by the law of the case doctrine in reviewing the propriety of the trial judge‘s award of attorney‘s fees. The Louisiana Supreme Court explained the applicability and the purpose of the doctrine as follows:
“The law of the case principle relates to ... the rule that an appellate court will ordinarily not reconsider its own rulings of law on a subsequent appeal in the same case. Among reasons assigned for application of the policy are: the avoidance of indefinite relitigation of the same issue; the desirability of consistency of
the result in the same litigation; and the efficiency, and the essential fairness to both sides, of affording a single opportunity for the argument and decision of the matter at issue. “Nevertheless, the law of the case principle is applied merely as a discretionary guide: Argument is barred where there is merely doubt as to the correctness of the former ruling, but not in cases of palpable former error or so mechanically as to accomplish manifest injustice.” Petition of Sewerage & Water Board of New Orleans, 278 So.2d 81, 83 (La.1973).
See also, Bowles & Edens v. H & H Sewer Systems, Inc., 346 So.2d 1283 (La.App.3rd Cir.1977).
After examining the merits of this case, we hold that the previous decision approving the award of attorney‘s fees was not palpably erroneous nor did it create manifest injustice. The issue of whether
Air Engineered argues that the statute‘s provision for “costs and expenses” and “for any other damages actually sustained” by a shareholder seeking to enforce such inspection rights cannot be construed as to allow an award of attorney‘s fees. In support of this, Air Engineered cites the well-established principle of law that attorney‘s fees are not recoverable unless they are particularly authorized by law or by a contract between the parties. See Williams v. Peacock, 441 So.2d 57 (La.App. 3rd Cir.1983); Gewin v. Willamette Industries, Inc., 406 So.2d 730 (La.App. 3rd Cir. 1981). Further, Air Engineered argues that we must follow the Louisiana Supreme Court‘s limited interpretation of the word “expenses” in the case of United Gas Pipeline Co. v. Louisiana Pub. Serv. Com‘n, 279 So.2d 195 (La.1973).
In United Gas Pipeline Co., supra, the Louisiana Supreme Court held that the Louisiana Public Service Commission was not entitled to recover attorney‘s fees for its expenses in retaining a special counsel in its investigation to determine the proper rates for the United Gas Pipeline Company under a statute,
The United Gas Pipeline Co. case and the present case are distinguishable. The Supreme Court, in the United Gas case, held that the import of that statute was to exclude attorney‘s fees for traditional legal work. In the present case it is clear that
Finally, Air Engineered argues that, since Naquin entered into a contingency fee contract with his attorney, that the attorney‘s fees have not actually been incurred by Naquin and the court is bound by this agreement in assessing Naquin‘s attorney‘s fees. We disagree. In awarding punitive attorney‘s fees, the court is not bound by any agreements between the parties but on the court‘s conclusion as to the services the attorneys performed for Naquin. The amount of attorney‘s fees rests largely within the discretion of the trier of fact. Factors to consider include the amount involved, the skill of the attorney, and the amount of work necessarily undertaken by the attorney. Dowden v. Commonwealth Life Ins. Co., 407 So.2d 1355 (La.App. 3rd Cir.1981);
The trial judge awarded Naquin $7,179.00 in attorney‘s fees. The court arrived at this amount by multiplying $100.00 (hourly rate for senior attorney‘s time) times 71.25 (amount of hours spent on the case), and adding $54.00 for travel expenses.2 At the time the trial judge assessed the attorney‘s fees, this case had been twice before the district court, once before our court, and once before the Louisiana Supreme Court where Air Engineered‘s application for writs was denied. After a close review of the entire record, we cannot say the trial judge abused his discretion in awarding $7,179.00 in attorney‘s fees.
For the foregoing reasons, the judgment of the trial court is affirmed. Costs of this appeal are to be borne by defendant-appellant.
AFFIRMED.
DOMENGEAUX, J., concurs and assigns reasons.
DOMENGEAUX, Judge, concurring.
As a general rule attorney‘s fees are not allowable in Louisiana except if authorized by law or by agreement. Hence, I have some reservations about the propriety of assessing attorney‘s fees in this case. However, I feel clearly bound to agree to attorney‘s fees in this instance due to the law of the case doctrine and this Court‘s previous ruling in this case at 423 So.2d 713 (La.App. 3rd Cir.1982), writ denied, 429 So.2d 156 (La.1983).