Herald Company v. Bonfils, C-1000.
| Decision Date | 08 August 1970 |
| Docket Number | No. C-1000.,C-1000. |
| Parties | The HERALD COMPANY, a New York corporation, Plaintiff, v. Helen G. BONFILS, also known as Helen Bonfils, also known as Helen B. Davis; Palmer Hoyt; and Helen G. Bonfils, Charles R. Buxton, Stephen H. Hart, Palmer Hoyt, Warren K. Young, Joe W. Bruce, Barry Morrison, and Isadore M. Rosenblatt, as trustees of the Denver Post Employees Stock Trust; and the Denver Post, Inc., a Colorado corporation, Defendants. |
| Court | U.S. District Court — District of Colorado |
COPYRIGHT MATERIAL OMITTED
Fred E. Neef, Robert Swanson, and Allan B. Adams, Neef, Swanson & Meyer, Denver, Colo., for plaintiff.
William H. Erickson, Erickson & Littell, Denver, Colo., and Walter J. Predovich and Lester L. Ward, Predovich & Ward, Pueblo, Colo., for defendants Bonfils and Hoyt.
Jay H. Topkis, Paul Weiss, Goldberg, Rifkind, Wharton & Garrison, New York City, for defendants Trustees of the Denver Post Employees Stock Trust.
William C. McClearn and Edwin S. Kahn, Holland & Hart, Denver, Colo., for defendant Denver Post, Inc.
This is a derivative action brought by a minority stockholder of the Denver Post. Various claims, counterclaims and parties have been dismissed, but on the core issue the Court has found that defendant directors in control of the Post misused substantial corporate assets in acquiring for the corporation at an inflated "control" price a large and crucial block of "Children's Hospital Stock" and caused the Denver Post Employees Stock Trust to be organized and operated for the primary purpose of perpetuating control of the corporation in the incumbent group and their successors as determined by them.
Following the completion of the trial detailed oral findings of fact and conclusions of law were made in open court. A transcript (Volume VI of the trial transcript) was later signed and entered as the Court's written Findings of Fact and Conclusions of Law pursuant to Rule 52, F.R.Civ.P., a procedure utilized, inter alios, in United States v. Morton Salt Company, No. C 38-55 (D. Utah 1955), aff'd, 235 F.2d 573 (10th Cir. 1956) and Monsanto Chemical Co. v. Miller, No. C 195-56 (D. Utah 1956), 118 U.S.P.Q. (1958). Opportunity was afforded counsel for submission of suggestions for amendments, and various clerical and some limited amendments of substance were thereupon approved and interlined on the original transcript subscribed by the Court as aforesaid. These now constitute the considered findings of fact on the basis of which the case will be concluded at this level.
The findings are extensive and comprehensive. They are largely a summary, synthesis and organization in one place of a great body of significant background facts and circumstances developed by counsel in pretrial proceedings and ultimately accepted without substantial dispute, together with limited but crucial findings of the Court on disputed issues. These informal and contemporary reflections of the reasons for inferences and conclusions are designed to reveal without reservation or equivocation to counsel, their clients, and any reviewing court the strengths or weaknesses of the factual structure upon which my conclusions ultimately must rest.
As indicated therein, the conclusions of law announced at the close of the trial and subscribed as such (pp. 857-79 of transcript) were tentative, particularly as they related to remedy. Counsel submitted additional memoranda and proposals with respect to the conclusions as to remedy and form of judgment, a further hearing was held, supplemental conclusions of the Court announced, and revised proposals now have been submitted in view thereof. The Court also indicated it would make supplemental findings on the question of remedies and their foundations to the extent deemed proper and essential.
Now being fully advised, the Court hereby supplements, amends and modifies findings of fact and conclusions of law heretofore announced and entered in the following respects, in all others the findings and conclusions heretofore entered to remain in force and effect.
The Court further finds:
1. Subsequent to October 23, 1969, the Denver Post has paid at the instance of its directors the following additional legal fees and expenses of this action:
(a) for the Stock
Trustees $40,161.10
(b) for the Denver Post 60,832.92
___________
Total $100,994.02
2. The incumbent group throughout this proceeding has attempted to sustain what the Court has found to be an unlawful plan, namely, a plan to lock the incumbent group in control through the purchase of corporate stock with corporate funds, utilizing the Denver Post Stock Plan and the Employees Stock Trust to accomplish their plan for control. The Court has granted and is granting relief concerning the plan and concerning excessive salaries, as sought by the plaintiff. However, the Court has found against the plaintiff on the issues of interest (Second Claim), claimed wrongful use of money loaned (Fourth Claim), cumulative voting (Sixth Claim), and legal fees paid in another proceeding (Seventh Claim).
3. Considering all the facts and circumstances (including the fact that the directors and officers involved have only been partially vindicated, and even then as to matters of less significance than as to which they have been found liable for misconduct), it is reasonable and proper that the defendant directors be required to pay 80% of their own fees and expenses in defending this action.
4. The Denver Post likewise had some interest in supplying counsel to the Denver Post Employees Stock Trust Trustees. Relief was sought as to the Trustees only in relation to the Second Claim which sought the return to the corporation of all the stock transferred from the Post Treasury to the Stock Trust. The Court is ordering a retransfer to the treasury of some shares and permitting the Stock Trust to retain some, while surcharging the defendants Bonfils and Hoyt for the difference between the Post's cost of acquisition and the price at which the shares were purchased by the Stock Trust. The Stock Trust Trustees also sought to sustain authorization to continue to purchase treasury shares from the corporation at less than the Post paid for them. Under all the circumstances the Court finds a division of fees and expenses of the Stock Trustees incurred herein between the Denver Post and the individual defendants who caused the Post to pay such fees necessary. The individual defendants Bonfils and Hoyt should reimburse the corporation for 80% of the fees and expenses paid by it on behalf of the Stock Trust Trustees.
5. The Denver Post also had an interest in defending the action to some extent, particularly in connection with attempting to defeat the plaintiff's attempt to restore cumulative voting to its charter. In most other respects, however, it should have assumed an air of neutrality and appeared only nominally. But the corporation, at the instance of its three directors, two of whom are defendants herein, proceeded to vigorously defend the entire action, primarily on behalf of these individual defendants. It is found, therefore, that the individual defendants should reimburse the corporation for 80% of the fees and expenses paid by the corporation to its counsel herein.
6. Plaintiff has been represented by attorneys preliminary to and during this litigation. Considerable time and expense have been expended in this action for the benefit of the plaintiff corporation, all of which were necessary and productive in protecting and advancing the interests of the corporation.
7. The parties have agreed that the question of attorneys' fees should be decided on the basis of an affidavit now on file and all of the other facts shown of record. Considering these and in view of the amount of probable realization to the corporation, the time fairly required of counsel upon the case, the skill and diligence employed by them, the complexities and difficulties encountered, the prevailing rate of compensation generally recognized in federal courts in this area, the probable benefits accruing to the corporation from the suit beyond the recovery of monetary recompense, and all other circumstances of the case as revealed by the evidence, a reasonable fee to be awarded counsel herein is found to be the sum of $300,000.
8. In order to equitably and reasonably reimburse the corporation, and as an element of damage, the defendant directors should be required to pay interest on the excessive salary payments found herein from the time of such payments until reimbursed.
The Court concludes:
1. The applicable statute (Chap. 31, Art. 2, Sec. 1(15), 1963 C.R.S.) permits a corporation to indemnify its officers and directors as against expenses incurred by them in connection with the defense of an action to which they are made parties by reason of having been such officer or director except in relation to matters as to which they shall be adjudged in such action to be liable for negligence or misconduct in the performance of duty. The statute permits a division of fees where a director or officer is not completely vindicated.
2. The affirmative defenses of laches, acquiescence, waiver, ratification, estoppel and unclean hands on the part of a plaintiff stockholder ordinarily may not be asserted against the corporation in a stockholder's derivative suit. Similarly, where an action is brought on the right of a corporation to recover money for property wrongfully transferred from its treasury, the corporation itself has no standing to urge that plaintiff was guilty of laches.
3. It is now believed that the Court was in error in its tentative conclusion that there should be a significant limitation of relief to the corporation by reason of the failure of the minority stockholder, Newhouse, to act timely against the corporate...
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