Private Dispute Under the "Unclaimed Property" Law Does Not Justify an Award of Attorney Fees

In Azure Limited v. I‑Flow Corp., 2012 DJDAR 8521 (2012), the California Court of Appeal for the Fourth Appellate District decided an attorney fee claim arising under California’s Unclaimed Property Law (UPL Section 1500 et seq.) along with the interplay of Code of Civil Procedure Section 1021.5, the private attorney general doctrine. The court ruled that simply advancing the state of the law in what was otherwise a private dispute was not sufficient to justify an award of attorney fees under C.C.P. § 1021.5.

The plaintiff sued the defendant for breach of fiduciary duty arising from the alleged bad faith transfer of shares of stock to the State without adequate notice to the plaintiff. Resolution of the dispute turned into part on the interpretation of California’s Unclaimed Property Law. The procedural record in the case was lengthy and complex. The plaintiff’s pursuit of its rights eventually resulted in a California Supreme Court decision (see Azure Limited v. I‑Flow Corp., 46 Cal. 4th 1323 (2009)) that impacted the rights of property owners, whose property had been wrongfully transferred to the State.

During the litigation, the plaintiff filed several motions for attorney fees pursuant to California’s private attorney general doctrine, C.C.P. § 1021.5. The trial court denied the plaintiff’s application for fees on the ground that the plaintiff failed to show that it obtained a ruling that was of “significance to the public.” The court held that the plaintiff was motivated primarily by its own financial interests in proving the litigation.

The court of appeal affirmed the lower court decision, noting that eligibility for attorney fees under Section 1021.5 is established when the plaintiffs’ action has resulted in the enforcement of an important right “affecting the public interest.” The court noted that to justify fees, a significant benefit has been conferred on the general public.

The court of appeal noted that although the dispute between the plaintiff and the defendant raised an issue regarding a right important to the public, Section 1021.5 did not authorize an attorney fee award against the defendant because the plaintiff was primarily concerned with pursuing its own financial interests and there was no evidence that the defendant took action to impact the general public.

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