TITLE 14 CORPORATIONS, PARTNERSHIPS, AND ASSOCIATIONS

Section 2. Business Corporations, 14-2-101 through 14-2-1703.

ARTICLE 13 DISSENTERS' RIGHTS

14-2-1331. Court costs and counsel fees.

The court in an appraisal proceeding commenced under Code Section 14-2-1330 shall determine all costs of the proceeding, including the reasonable compensation and expenses of appraisers appointed by the court, but not including fees and expenses of attorneys and experts for the respective parties. The court shall assess the costs against the corporation, except that the court may assess the costs against all or some of the dissenters, in amounts the court finds equitable, to the extent the court finds the dissenters acted arbitrarily, vexatiously, or not in good faith in demanding payment under Code Section 14-2-1327.
The court may also assess the fees and expenses of attorneys and experts for the respective parties, in amounts the court finds equitable:
1. Against the corporation and in favor of any or all dissenters if the court finds the corporation did not substantially comply with the requirements of Code Sections 14-2-1320 through 14-2-1327; or
2. Against either the corporation or a dissenter, in favor of any other party, if the court finds that the party against whom the fees and expenses are assessed acted arbitrarily, vexatiously, or not in good faith with respect to the rights provided by this article.
If the court finds that the services of attorneys for any dissenter were of substantial benefit to other dissenters similarly situated, and that the fees for those services should not be assessed against the corporation, the court may award to these attorneys reasonable fees to be paid out of the amounts awarded the dissenters who were benefited.

(Code 1981, §14-2-1331, enacted by Ga. L. 1988, p. 1070, § 1.)

COMMENT

Source: Model Act, § 13.31. This replaces former § 14-2-251(g)(7).

Subsection (a) provides that generally the costs of the appraisal proceeding should be assessed against the corporation. But the court is authorized to assess these costs, in whole or in part, against the dissenters if it concludes they acted arbitrarily, vexatiously, or not in good faith in making the Section14-2-1327 demand for additional payment. Attorneys' fees and the costs of experts employed by the parties have been excluded from these assessments. This preserves the approach of former law, § 14-2-251(g)(7).

Similarly, subsection (b) provides that counsel fees and fees of experts may be charged against the corporation or against dissenters upon a finding of a failure to comply in good faith with the requirements of this article. Further, subsection (b)(1) permits the court to assess these fees against a corporation that has substantially failed to comply with this article, without a finding that the corporation has acted arbitrarily, vexatiously, or not in good faith. While this approach is similar to that of former law, § 14-2-251(g)(7) contained specific criteria for assessing these expenses. Under Section14-2-1330(a) if the corporation fails to begin the proceeding, it is liable for the amount demanded by each dissenter whose claim remains unsettled, in addition to assessments made under this section.

Under subsection (c), individual dissenters, in turn, can be called upon to pay counsel fees for other dissenters if the court finds that the services were of substantial benefit to the other dissenters.

The purpose of all these grants of discretion with respect to costs and counsel fees is to increase the incentives of both sides to proceed in good faith under this article to attempt to resolve their disagreement without the need of a formal judicial appraisal of the value of shares.

Cross-References Appraisers, see § 14-2-1330. "Dissenter" defined, see § 14-2-1301. "Proceeding" defined, see § 14-2-140.

JUDICIAL DECISIONS

Editor's notes.

- In light of the similarity of the statutory provisions, decisions under former Code Section 14-2-251, are included in the annotations for this Code section.

Constitutionality.

- Federal district court's determination that a dissenting shareholder's refusal to accept a stock tender offer was "arbitrary, vexatious, or otherwise not in good faith" did not violate the shareholder's Seventh Amendment right to have a jury decide whether the dissenter had acted arbitrarily. Columbus Mills, Inc. v. Freeland, 918 F.2d 1575 (11th Cir. 1990) (decided under former § 14-2-251).

Fees and expenses not allowable.

- Because the action was not brought under O.C.G.A. §§ 14-2-1330 and14-2-1331 were not applicable and the court erred in awarding attorney fees, attorney expenses, expert witness fees and expenses to the dissenter. VSI Enters., Inc. v. Edwards, 238 Ga. App. 369, 518 S.E.2d 765 (1999).

RESEARCH REFERENCES

ALR.

- Attorneys' fees and other expenses incident to controversy respecting internal affairs of corporation as charge against the corporation, 39 A.L.R.2d 580.

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