Appeal from judgment of the Superior Court of Orange County, Gail Andrea Andler, Judge. Affirmed. (Super. Ct. No. 07CC01306).
The opinion of the court was delivered by: Aronson, J.
CERTIFIED FOR PUBLICATION
A shareholder in a publicly traded company sought substantial attorney fees on the equitable theory of substantial benefit for causing the company to slightly revise a 166-page proxy statement in connection with a proposed acquisition. The shareholder initially sought to enjoin the acquisition, but dropped the lawsuit when the company made some changes to the final proxy statement. The shareholder filed this appeal after the trial court declined to award attorney fees.
We follow the decisions in Graham v. DaimlerChrysler Corp. (2004) 34 Cal.4th 553 (Graham) and Abouab v. City and County of San Francisco (2006) 141 Cal.App.4th 643 (Abouab), and hold that the shareholder cannot claim unjust enrichment on a catalyst theory where it failed to provide presuit notification to the company. In suing first and asking for changes later, the shareholder failed to comply with an elemental equitable precept: that one who seeks equity must do equity. The attorney fee claim also fails because the shareholder failed to establish an abuse of discretion by showing that the additional language in the proxy statement had an actual and concrete impact on the acquisition vote.
I. Factual and Procedural Background
Defendant Oakley, Inc., (Oakley) manufactures sport performance sunglasses. In 2007, Oakley announced a proposed sale of Oakley to Luxottica Group (Luxottica), a worldwide eyewear company, at a sizeable premium above Oakley's average trading price.
Plaintiff is an Oakley shareholder. Less than a week after the announcement, plaintiff filed a stockholder class action lawsuit to enjoin the acquisition as "unlawful and unenforceable." Plaintiff alleged that the directors breached their fiduciary duty by failing to take "all reasonable steps to maximize shareholder value" and by failing to disclose "all material facts concerning the Proposed Acquisition." The trial court sustained Oakley's demurrer to the complaint with leave to amend.
On September 7, 2007, Oakley filed a preliminary proxy statement with the Securities and Exchange Commission (SEC). One week later, on September 14, 2007, plaintiff filed an amended complaint. The amended complaint alleged that the preliminary proxy statement "misstates certain material facts and altogether omits others." It cited the preliminary proxy statement's failure to provide information regarding the following: (1) any actual or potential conflicts between Oakley's board of directors and its financial advisors; (2) Oakley's immediate and future financial prospects; (3) whether there were any other potential bidders; (4) the impact of synergies arising from a combination with Luxottica; and (5) the analysis conducted by Goldman Sachs in connection with the fairness opinion it delivered to the board of directors. Plaintiff continued to seek to enjoin the proposed acquisition.
Oakley demurred to the amended complaint. Oakley argued that the new allegations regarding the "omissions" in the preliminary proxy statement involved a "litany of trivial information that, if included, would . . . serve only to increase the length of an already detailed Proxy."
On October 10, 2007, plaintiff's counsel sent Oakley's board of directors a letter identifying certain information it believed Oakley should include in the proxy. Plaintiff explained that it took this step rather than seek injunctive relief. Oakley agreed to include some of the identified items in "an effort simply to moot Plaintiff's unmeritorious claims" and proceed with the acquisition. Oakley filed its final proxy statement with the SEC on October 17.
Plaintiff never opposed Oakley's demurrer to the first amended complaint, nor did it pursue the litigation or seek to block the acquisition. Oakley's shareholders approved the acquisition on November 7, 2007.
In January 2008, plaintiff instead filed a motion for attorney fees in the range of $325,000 to $375,000 because it "produced a substantial benefit to Oakley shareholders in the form of the disclosure of additional material information related to the Acquisition." Plaintiff contended it was entitled to a treble multiplier because of this "novel and complex action."
In opposition, Oakley argued that it only made a "few innocuous changes" to its preliminary proxy "as a tactical matter . . . ." Oakley characterized plaintiff's two complaints as "cookie-cutter" pleadings "containing allegations literally copied from previous complaints filed in similar lawsuits . . . ."*fn1 To refute plaintiff's claims of "novel" and "difficult" issues, Oakley attached a chart comparing identical "rote allegations" in the amended complaint with identical allegations in other complaints filed by the same attorneys. According to Oakley, "it is hard to dispute the wisdom of choosing not to aggressively pursue a case that should not have been filed in the first instance . . . ."
The court denied the attorney fee motion. At plaintiff's request, the court entered a judgment of dismissal, from which ...