For the golf fan curious about the finances and back-office maneuvering of “Big Golf,” nothing has been better than the LIV Golf-PGA Tour throwdown played out in dueling press conferences, snippy tweets, and Saudi-funded party jets. The folks fighting over the production of corporate records at Myers Park Country Club in Charlotte have done their best to keep up, providing a rare look at the finances and management of high-end clubs and how lawyers wage battles for and against them.
When we last checked in, the country club was being rebuffed by the Business Court for failing to adequately respond to a shareholder’s request to inspect corporate records that arose in connection with an intended remodeling project linked to the club’s 100th anniversary. Now, in Erwin v. Myers Park Country Club, Inc., 2022 NCBC Order 32, the Court’s focus turned to the law firms that fronted the records scuffle as it considered dueling applications for costs. The order is a fascinating look at how the Business Court views law firm fee requests, staffing and case handling, and the costs of hotly contested commercial litigation.
By statute, a court shall award a shareholder’s costs (including reasonable attorneys’ fees) “incurred to obtain the [inspection] order unless the corporation establishes that it refused inspection in good faith” because:
- “The corporation had a reasonable basis for doubt about the right of the shareholder to inspect the records demanded”; or
- “The corporation required reasonable restrictions on the confidentiality, use, or distribution of the records demanded to which the demanding qualified shareholder had been unwilling to agree.”
Id. ¶ 4 (quoting N.C.G.S. § 55-16-04(c)(1),(2)). Judge Robinson’s order reached the straight-forward conclusion that shareholder Mark Erwin “acted in good faith, that he was entitled to the production of documents as requested and ordered by the Court, and that Myers Park has not proven that it refused inspection in good faith” to qualify for the statutory safe harbors for refusing to produce. Order 32, ¶ 6.
Things got interesting when the Court sliced and diced the fee request of the prevailing party’s lawyer and reduced it by more than 70 percent in exercise of its discretion to reduce requested fees “to make the award reasonable in relation to the plaintiff’s overall success.” Id. ¶¶ 15, 23.
On the one hand, the Court praised counsel’s efforts and tenacity against the headwinds coming from Myers Park. “The Court is confident that the record before it discloses conduct by Myers Park of failing to produce in a timely fashion relevant and directly responsive documents that should have been obvious to Myers Park.” Id. ¶ 17.
Moreover, the Court observed that Erwin’s lawyers faced and prevailed against other notable obstacles. They opposed and defeated Myers Park’s novel legal argument that the business judgment rule allowed it to withhold otherwise responsive documents. “[O]nly through Erwin’s counsel’s [discovery] efforts,” the Court also noted, did it discover through a Rule 30(b)(6) deposition that “Myers Park had within its possession documents that had not been produced which the Court believes were clearly responsive to Erwin’s requests.” Further, the court concluded that “but for the tenacity and thorough review by Erwin’s counsel, full production would not have been obtained” in the face of “over-redaction by Myers Park of its production.” Id. ¶¶ 18-20.
Yet, in spite of these plaudits and its approval of the hourly rates charged, the Court conducted a line-by-line review of the submitted time entries of Erwin’s counsel (included as a public exhibit to its order) and identified “duplication of efforts and investment of time by Erwin’s three attorneys that the Court, in its discretion, believes must be removed or reduced[.]” Moreover, Judge Robinson reduced “time spent drafting and revising documents such as the one-count complaint . . . and communication with the client” that “while arguably necessary from an ethical standpoint,” were “either excessive or not reasonable under the circumstances.” Id. ¶¶ 21-22.
The Court’s very substantial write-downs of prevailing counsel’s fees are a cautionary tale for Business Court litigators. In a case that featured spirited jousting among the parties, novel legal issues, and in which the Court acknowledged the fine work of prevailing counsel in the face of defendant’s recalcitrance in producing records for inspection, the Court found that just over $35,000 – based on only 76 hours (out of 275) that survived its review – was recoverable as a reasonable fee.
- A hard-earned win, against significant obstacles, may not easily lead to a significant fee award when the Business Court probes whether it’s “reasonable under the circumstances.”
Brad Risinger is a partner in the Raleigh office of Fox Rothschild LLP.