West Hills Farms, Inc. v. RCO AG CREDIT, INC.

In this derivative action, defendant RCO Ag Credit, Inc., was sued by two of its shareholders, plaintiffs West Hills Farms, Inc., and California Pistachio, LLC, based on allegedly unnecessary fees paid by defendant to a related corporate entity. Defendant made a motion under Corporations Code section 800 to require plaintiffs to furnish a bond in the amount of $50,000 as security for defendant’s anticipated litigation expenses to defend the action. The motion was granted and plaintiffs furnished the required bond. Defendant ultimately prevailed in the action and, following entry of judgment, moved for an award of all of its attorney fees and costs incurred, totaling over $350,000. The trial court’s order limited the award of attorney fees and costs to $50,000, the amount of the bond. Defendant appeals from that order, contending that under section 800 it was entitled to recover all of its attorney fees and costs, regardless of the amount of the bond. We disagree. As we will explain, we conclude that section 800 simply allows a prevailing defendant to recover its attorney fees and costs out of the bond, if one is posted. Accordingly, we affirm the trial court’s…