Johnson v. Tago, Inc.

The issue presented is whether Corporations Code section 600 authorizes the award of expenses and attorneys’ fees to shareholders who are in the process of waging a corporate proxy fight. We hold that it does not.

Background and Procedural Sequence

Tago, Inc. is in the business of developing and marketing pharmaceutical products. Founded by Helga and Robert Johnson as a partnership in 1971, it was incorporated two years later in accordance with the laws of California. Tago’s shares are publicly traded. Prior to June 1984 Helga Johnson was one of Tago’s five directors, as well as its president and technical director. Robert Johnson was chief executive officer and also a director. Together the Johnsons owned approximately 41 percent of Tago’s outstanding stock.

The following events occurred in 1984:

On June 28th Tago’s board of directors convened a special board meeting. Presented with a demand that they resign their positions as officers, the Johnsons refused. The three other members of the board, Charles Antell, Harvey Orzech, and Thomas C. Thompson, outvoted the Johnsons and adopted a resolution removing the Johnsons as officers of Tago. The Johnsons were directed to…