On termination of the derivative proceeding the court may: (1) Order the corporation to pay the plaintiff’s reasonable expenses (including attorneys’ fees) incurred in the proceeding if it finds that the proceeding has resulted in a substantial benefit to the corporation; or (2) Order the plaintiff to pay any defendant’s reasonable expenses (including attorneys’ fees) incurred in defending the proceeding if it finds that the proceeding was commenced or maintained without reasonable cause or for an improper purpose. (Code 1981, § 14-2-746, enacted by Ga. L. 1988, p. 1070, § 1.) 214
Source: Model Act, § 7.46 (under consideration, 1987). This replaces provisions formerly found in § 14-2-123(e) & (f ). Section 14-2-746(1) is intended to be a codification of existing case law. See, e.g., Mills v. Electric Auto-Lite Co., 396 U.S. 375 (1970). It provides that the court may order the corporation to pay the plaintiff ’s reasonable expenses (including attorney’s fees) if it finds that the proceeding has resulted in a substantial benefit to the corporation. This preserves the approach of former law, § 14-2-123(e). The subsection requires that there be a ‘‘substantial’’ benefit to the corporation to prevent the plaintiff from proposing inconsequential changes in order to justify the payment of counsel fees. While the subsection does not specify the method for calculating attorneys’ fees, it does require that the expenses be reasonable, which would include taking into account the amount or character of the benefit to the corporation. A corporation would not receive a substantial benefit from a monetary judgment in a derivative proceeding if it would be obligated to make payments to directors equal to the judgment pursuant to shareholder approved indemnification under Section 14-2-856. Subsection (2) continues the approach of former § 14-2-123(f ) and provides that on termination of a proceeding the court may require the complainant to pay the defendants’ reasonable expenses, including attorneys’ fees, if it finds that the proceeding ‘‘was commenced or maintained without reasonable cause or for an improper purpose.’’ The phrase ‘‘for an improper purpose,’’ has been added to parallel Federal Rule of Civil Procedure 11 as recently amended in order to prevent proceedings which may be brought to harass the corporation or its officers. Cross-References Award of costs and attorneys’ fees in appraisal proceedings, see § 14-2-1331.