CATTANO v. Bragg

Present: All the Justices

JOHN P. CATTANO, ET AL.
OPINION BY
v. Record No. 110692 JUSTICE LEROY F. MILLETTE, JR.
April 20, 2012
CAROLINE D. BRAGG

FROM THE CIRCUIT COURT OF ALBEMARLE COUNTY
William R. Shelton, Judge Designate

In this appeal, we address the standing of a dissenting

minority shareholder bringing a derivative suit under Code

§ 13.1-672.1 against the majority shareholder of a two-

shareholder corporation while simultaneously seeking the

judicial dissolution of the corporation. We also address the

award of attorneys' fees and costs to the minority shareholder.

I. Background

This case arises out of a dispute between two attorneys,

John Cattano and Caroline Bragg, the only shareholders of

Cattano Law Firm, P.C. ("the Firm"). In October 2008, after

discovering that checks were written from the Firm's

escrow/trust account to Cattano's wife and children, Bragg

wrote Cattano a letter requesting that all corporate records be

made available for inspection. Cattano responded with a letter

terminating Bragg's employment. Cattano then called a special

meeting of the shareholders (himself and Bragg) to remove Bragg

as director. Bragg attended the meeting and objected. Cattano

allegedly counted only his own vote at the shareholder meeting
and continued to refuse to produce corporate documents, at

which point Bragg filed suit.

Bragg's original complaint was filed solely in an

individual capacity, seeking judicial dissolution, accounting

of assets, and division of assets. She later filed an amended

complaint adding derivative actions. Her amended complaint

included the following claims: a writ of mandamus for the

copying and inspection of corporate records pursuant to Code

§§ 13.1-773 and -773.1 (Count I, filed individually); breach of

fiduciary duty (Count II, filed derivatively); conversion

(Count III, filed derivatively); breach of contract (Count IV,

filed individually); and judicial dissolution (Count V, filed

individually).

Cattano filed a demurrer, arguing, inter alia, that Bragg

had no standing to file a derivative claim because she did not

fairly and adequately represent the interests of the

corporation as required by Code § 13.1-672.1(A)(4). The

demurrer was overruled. The standing argument was raised again

in a motion to strike, which the court also overruled.

The circuit court appointed a receiver pursuant to Code

§ 13.1-748, directing the receiver to perform a complete

accounting of books and records of the Firm, including but not

limited to the disposition of all payments, "the disposition of

approximately $234,000 representing fees payable to the Firm

2
from a certain personal injury settlement (the 'Baker Fees'),"

and a valuation of the assets of the Firm. 1 Pursuant to a court

order, Cattano produced corporate financial documents to the

receiver for review. The receiver testified before the jury

that he did question the validity of some of Cattano's expenses

and reimbursements, such as gift cards from retail stores and

his wife's cell phone bill, and noted that it was unusual to

see an attorney take disbursements from the client trust

account. The receiver ultimately opined that there did not

appear to be widespread criminal conduct or elaborate fraud,

but an ultimate evaluation of which expenses were proper

depended on the legal agreement between the parties and how

profits were shared, which was in dispute.

Cattano and the Firm requested a jury trial, and the

circuit court bifurcated the issue of attorneys' fees. Count

I, seeking a writ of mandamus, was ultimately not sent to the

jury as the court concluded that "the effect of the mandamus

has been accomplished [via the production of documents to the

1
Although the circuit court was statutorily authorized to
grant the receiver the power to bring suit on behalf of the
Firm to garner its assets, the court declined to do so in this
instance. Because the order designating the powers of the
receiver simultaneously directed the Clerk to file the amended
complaint containing claims that placed the ownership and
division of assets in front of a jury, and all necessary
parties were already joined, the amended complaint was a
sufficient alternative mechanism to allocate assets without
authorizing additional suits by the receiver.
3
receiver]." The verdict included a factual finding that Bragg

owned 27.35% of the Firm.

In addition, the jury found in Bragg's favor on Count III

(derivative conversion), awarding the Firm $234,412.18, the

exact amount of the Baker Fees. Of this amount, the jury

specified that 27.35%, or $64,111.77, should go to Bragg. The

jury also awarded Bragg $10,416.66 individually on the breach

of contract claim and $7,409.90 on the judicial dissolution

claim. The jury did not find in Bragg's favor on the allegation

of breach of fiduciary duty.

The issue of attorneys' fees was handled in a bench trial.

Cattano, who had interpreted the circuit court's refusal to

submit Count I to the jury as a grant of the defense's motion

to strike on the basis that the claim was moot, argued that

Bragg was not entitled to attorneys' fees on the writ of

mandamus. Cattano also argued that Bragg had failed to state

with particularity the reasons for her request to review

corporate records in her letter pursuant to Code § 13.1-771,

and thus could not recover fees under Code § 13.1-773(C).

Finally, Cattano argued that Bragg was not entitled to recover

fees under the derivative claim of conversion (Count III)

because she had rendered no substantial benefit to the

corporation as required by Code § 13.1-672.5(1).

4
 In its final judgment order, however, the circuit court

concluded that Count I had been resolved in favor of Bragg and

that the conversion claim had yielded a substantial benefit to

the corporation. Accordingly, the circuit court awarded what

it determined to be reasonable fees to Bragg in the amount of

$269,813, plus costs and expenses of $19,415.71.

Cattano now raises five assignments of error: (1) whether

the circuit court erred in failing to strike Bragg's derivative

claim for failure to fairly and adequately represent the

interests of the corporation; (2) whether the circuit court

erred in failing to instruct the jury on the issue of fair and

adequate representation; (3) whether the circuit court erred in

assigning attorneys' fees on the writ of mandamus count; (4)

whether the circuit court erred in concluding that the

proceeding substantially benefitted the corporation; and (5)

whether the circuit court abused its discretion in its award of

attorneys' fees. For the reasons stated herein, we conclude

that there was no error in the judgment of the circuit court,

and will affirm.

II. Discussion

A. Fair and Adequate Representation in Derivative Claims

Cattano raises the threshold issue of whether the circuit

court erred in failing to strike Bragg's derivative claims on

the ground that she lacked standing under Code § 13.1-672.1(A).

5
This section states that "[a] shareholder shall not commence or

maintain" a derivative proceeding unless the shareholder was a

shareholder at the time of the act complained of and "[f]airly

and adequately represents the interests of the corporation in

enforcing the right of the corporation." Id. As a mixed

question of fact and law, we review the issue de novo, with

deference to any findings of fact made by the circuit court.

Mulford v. Walnut Hill Farm Group, 282 Va. 98, 106, 712 S.E.2d

468, 473 (2011).

Cattano first argues that derivative actions are designed

to prevent a multiplicity of suits from a class and thus are

not appropriate when only a single shareholder supports the

claim. Our precedent is not consistent with such a

restriction. In Simmons v. Miller, 261 Va. 561, 573, 576, 544

S.E.2d 666, 674-75 (2001), we noted that "[t]he overwhelming

majority rule is that an action for injuries to a corporation

cannot be maintained by a shareholder on an individual basis

and must be brought derivatively," and we "decline[d] to adopt

a closely held corporation exception to the rule requiring that

suits for breach of fiduciary duty against officers and

directors must be brought derivatively on behalf of the

corporation and not as individual shareholder claims."

Other jurisdictions have acknowledged instances where the

"class" of shareholders represented in a derivative action may

6
consist of only one person. 2 See, e.g., Larson v. Dumke, 900

F.2d 1363, 1368-69 (9th Cir. 1990); Jordon v. Bowman Apple

Products Co., Inc., 728 F. Supp. 409, 412-13 (W.D. Va. 1990);

Halsted Video, Inc., v. Guttillo, 115 F.R.D. 177, 179-80 (N.D.

Ill. 1987) (finding a "legitimate class of one" where there was

no indication plaintiff was operating under "ulterior motives"

or would "not adequately enforce" the company's rights);

Brandon v. Brandon Construction Co., Inc., 776 S.W.2d 349, 353-

54 (Ark. 1989); Hall v. Tennessee Dressed Beef Co., 957 S.W.2d

536, 540 (Tenn. 1997) (holding that, given no evidence to

support a finding that the plaintiff was unable to fairly

represent the interests of the corporation while maintaining

his individual suit, the existence of both was not a per se bar

to standing); Eye Site, Inc. v. Blackburn, 796 S.W.2d 160, 161-

63 (Tex. 1990). Cf. Smith v. Ayres, 977 F.2d 946, 948 (5th

Cir. 1992) ("Only in the rarest instances may there be a

shareholder derivative action with a class of one.").

Instances of a two-shareholder corporation may be precisely the

sort of rare instance suggested in Ayres.

2
The language of Federal Rule of Civil Procedure 23.1
requires that the plaintiff fairly and adequately represent the
interests of the "shareholders or members who are similarly
situated," as opposed to the interests of the "corporation."
We have previously noted the linguistic distinction but found
the Virginia statute to be "substantially similar." Jennings
v. Kay Jennings Family Ltd. P'ship, 275 Va. 594, 601 & n.3, 659
S.E.2d 283, 288 & n.3 (2008).
7
 Cattano next argues that, under the factors adopted by

this Court in Jennings v. Kay Jennings Family Limited

Partnership, 275 Va. 594, 659 S.E.2d 283 (2008), Bragg cannot

fairly and adequately represent the Firm. In Jennings, we held

that the widely accepted Davis factors were the primary

relevant considerations in evaluating whether a person meets

the standard for fair and adequate representation:

(1) economic antagonisms between the representative
and members of the class; (2) the remedy sought by
the plaintiff in the derivative action; (3)
indications that the named plaintiff is not the
driving force behind the litigation; (4) plaintiff's
unfamiliarity with the litigation; (5) other
litigation pending between the plaintiff and
defendants; (6) the relative magnitude of
plaintiff's personal interests as compared to his
interests in the derivative action itself; (7)
plaintiff's vindictiveness toward the defendants;
and (8) the degree of support plaintiff is receiving
from the shareholders he purports to represent.

Id. at 601-02, 659 S.E.2d at 288 (citing Davis v. Comed, Inc.,

619 F.2d 588, 593-94 (6th Cir. 1980)). 3 We observed that these

factors "are not exclusive and must be considered in the

totality of the circumstances found in each case." Id. at 602,

659 S.E.2d at 288. We further explained:

3
Jennings involved a limited partnership, and we have not
yet had the opportunity to apply the Jennings factors to a
corporate derivative claim in Virginia. Yet the Davis case
itself, from which we explicitly adopted the Jennings factors,
concerned a corporate derivative action. Davis, 619 F.2d at
589. We therefore apply the same analysis to corporate
derivative claims in the Commonwealth.
8
 [I]t is frequently a combination of factors which leads
a court to conclude that the plaintiff does not [have
standing] (although often a strong showing of one way
in which the plaintiff's interests are actually
inimical to those he is supposed to represent . . .
will suffice in reaching such a conclusion).

Id. (quoting Davis, 619 F.2d at 593).

While the present case contains economic antagonism as

well as apparent animosity between the Firm's only two

shareholders, we do not find this to be a determinative factor

when evaluating a closely held corporation; nor do we find it

determinative that the sole other shareholder does not support

the derivative suit. To so hold would be to enact a de facto

bar on derivative suits in two-shareholder corporations.

Charged emotions and economic antagonism are virtually endemic

to disputes in closely held corporations. Nevertheless, a

single shareholder derivative claim is still possible, provided

that the totality of the circumstances support a finding that

the plaintiff's personal interests do not preclude the

shareholder from fairly and adequately representing the

corporation. See, e.g., Hall, 957 S.W.2d at 540. In closely

held corporations, we must look beyond the mere presence of

economic and emotional conflict, placing more emphasis on

whether the totality of the circumstances suggest that the

plaintiff will vigorously pursue the suit and that the remedy

sought is in the interest of the corporation.

9
 We hold that, applying the Jennings factors to the

specific facts of this case, the "totality of the

circumstances" combine to show that Bragg "[f]airly and

adequately represent[ed] the interests of the corporation" as

required under Code § 13.1-672.1(A). The remedy sought – the

return of funds, misappropriated by an officer, to the

corporation – is highly appropriate for a derivative claim.

There is no evidence in the record of external parties

motivating Bragg, and she is intimately familiar with the

litigation. Bragg's additional individual claims – breach of

contract and judicial dissolution – do not reflect an

inappropriate conflict of interest. Significantly, as a

portion of the funds returned would go to her upon dissolution,

Bragg's personal interests are in line with those of the

corporation, so that the return of assets to the Firm will

clearly be vigorously litigated.

Cattano argues that Bragg is acting solely in her own

interest because a derivative claim offers her the possibility

of an award of attorneys' fees and costs, whereas mere judicial

dissolution, which could provide the same remedy, provides no

such fee-shifting mechanism. See Gianotti v. Hamway, 239 Va.

14, 29, 387 S.E.2d 725, 734 (1990) (affirming the circuit

court's judgment ordering directors to restore funds owed to

the corporation at the dissolution stage but refusing to award

10
plaintiff minority shareholders attorneys' fees and expenses).

Yet the additional advantage of providing a limited fee-

shifting mechanism in derivative claims is a deliberate policy

choice on the part of the General Assembly, not a reason to bar

the claim. See Code § 13.1-672.5(1). The Supreme Court of the

United States explained in Mills v. Electric Auto-Lite Co., 396

U.S. 375, 391-92, 396-97 (1970), that recovery of attorneys'

fees in a derivative action is a mechanism to prevent unjust

enrichment when a substantial benefit has inured to the

shareholders of a corporation. Bragg sought to recover

misappropriated funds, an appropriate objective of a derivative

action.

Cattano also argues that Bragg cannot simultaneously act in

the Firm's interest and seek to dissolve it. This proposition

ignores the fact that, in the circumstances presented in this

case, the Firm's dissolution was essentially commenced by

Cattano in firing Bragg, and the dissolution was, by the time

the suit was brought, decidedly mutual. Bragg was not seeking

to terminate an otherwise functional corporation. The

corporation ceased to operate years ago.

Whether winding up or not, it is clearly in the interest of

the corporation to have misappropriated funds returned, and the

verdict returned tangible assets to the Firm. Judicial

dissolution is a remedial mechanism that exists in addition to,

11
rather than as a substitute for, shareholders rights. Baylor

v. Beverly Book Co., 216 Va. 22, 24, 216 S.E.2d 18, 19 (1975).

It therefore cannot act as a per se bar to a derivative claim.

Given the totality of the circumstances, we conclude that

the circuit court did not err in failing to strike the

derivative claim under Code § 13.1-672.1(A).

B. Jury Instructions

Cattano next argues that the circuit court erred in

failing to place the issue of standing in front of a jury.

This Court has never held that an issue of standing must be

placed before a jury, and we do not rule on the issue now. It

is sufficient to say that, as a predicate for submission to a

jury, a proffered instruction must concern in some way a

factual dispute appropriately adjudicated by the factfinder.

See Etheridge v. Medical Center Hospitals, 237 Va. 87, 96, 376

S.E.2d 525, 529 (1989) ("The resolution of disputed facts

continues to be a jury's sole function. The province of the

jury is to settle questions of fact, and when the facts are

ascertained the law determines the rights of the parties."

(internal quotation marks omitted)). In the case at bar, there

were no disputed facts regarding the issue of fair and adequate

representation, and the circuit court's refusal to instruct the

jury on that issue was appropriate.

12
 As previously stated, the issue of fair and adequate

representation is a mixed question of fact and law. In this

case, all facts relevant to the Jennings factors, which

represent the legal standard, were undisputed. Both parties

acknowledged their economic antagonism. Neither disputed the

remedy sought. The defendant did not allege that a third party

was the driving force behind the litigation or that Bragg was

unfamiliar with the litigation. The only pending litigation

was before the trial court at that time. Both parties

recognized that Bragg had a direct personal interest in

recovering funds due to the judicial dissolution, and that she

stood to benefit from attorneys' fees accompanying a derivative

claim. Both parties testified to a relationship that began

well but had soured, and it was clear that Cattano did not

support Bragg in the derivative suit.

As a result, the judge needed only to apply the law to the

undisputed facts. No finding of fact was required as to this

issue. We therefore hold that the circuit court did not err in

refusing to send the question of fair and adequate

representation to the jury.

C. Relief and Attorneys' Fees under Count I:
Writ of Mandamus for the Inspection of Corporate
Records Pursuant to Code §§ 13.1-773 and -773.1.

Cattano assigns error to the circuit court's award of

relief and attorneys' fees pursuant to Code § 13.1-773, which

13
affords redress for a corporation's failure to permit a

shareholder to inspect documents in accordance with Code

§ 13.1-771. Cattano alleges that he had reasonable grounds for

denying Bragg access to the documents because Bragg failed to

comply with the statutory requirements of Code § 13.1-771(D), 4

which provides that "[a] shareholder may inspect and copy the

records identified in subsection C only if: . . . [t]he

shareholder describes with reasonable particularity the

shareholder's purpose."

Count I, as articulated in Bragg's first amended

complaint, repeatedly invoked not only Code § 13.1-773, but

also Code § 13.1-773.1, which states:

A. A director of a corporation is entitled to inspect
and copy the books, records and documents of the
corporation at any reasonable time to the extent
reasonably related to the performance of the director's
duties as a director, including duties as a member of a
committee, but not for any other purpose in any manner
that would violate any duty to the corporation.

B. The circuit court . . . may order inspection and
copying of the books, records and documents upon
application of a director who has been refused such
inspection rights, unless the corporation establishes that
the director is not entitled to such inspection rights.

4
At the time of trial, the language currently set out in
subsection (D) of Code § 13.1-771 was contained in subsection
(C) of the statute. The amendment by 2010 Acts ch.782 rewrote
the statute, in part by redesignating former subsection (C) as
current subsection (D) and updating the reference in that
subsection to "records identified in subsection B" to read
"records identified in subsection C." The 2010 amendments have
no other impact on this appeal.
14
 The court shall dispose of an application under this
subsection on an expedited basis.

C. If an order is issued, the court may . . . order the
corporation to reimburse the director's reasonable costs,
including reasonable counsel fees, incurred in connection
with the application if the director proves that the
corporation refused inspection without a reasonable basis
for doubt about the director's right to inspect the
records demanded.

Although Cattano originally denied that Bragg was a

director of the corporation, Bragg was explicitly found by the

circuit court in its final order to be a director of the

corporation, a finding acknowledged by Cattano's own admission.

Accordingly, Bragg had the authority as a director to review

documents under Code § 13.1-773.1, which does not have a

reasonable particularity requirement. As there was a

sufficient alternative ground for the circuit court's award

based on its unchallenged factual finding, regardless of

whether Bragg articulated the reasons for her request, the

circuit court did not err in awarding fees to redress the

corporation's refusal to permit her to inspect documents.

D. Substantial Benefit Doctrine

Cattano additionally argues that the circuit court erred

in concluding that Bragg rendered a substantial benefit to the

firm. This mixed question of fact and law is reviewed de novo,

with deference to the factual findings of the circuit court.

Mulford, 282 Va. at 106, 712 S.E.2d at 473.

15
 Code § 13.1-672.5(1) provides that:

On termination of a derivative proceeding, the court
shall:

1. Order the corporation to pay the plaintiff's reasonable
expenses (including counsel fees) incurred in the
proceeding if it finds that the proceeding has resulted
in a substantial benefit to the corporation . . . .

No Virginia court has had occasion to interpret the relevant

portion of this Code section. The key term "substantial

benefit," however, was invoked and interpreted by the Supreme

Court of the United States:

"[A] substantial benefit must be something more
than technical in its consequence and be one that
accomplishes a result which corrects or prevents
an abuse which would be prejudicial to the rights
and interests of the corporation or affect the
enjoyment or protection of an essential right to
the stockholder's interest."

Mills, 396 U.S. at 396 (alteration in original)(quoting with

approval Bosch v. Meeker Cooperative Light & Power Ass'n, 101

N.W.2d 423, 426-27 (Minn. 1960)).

Bragg successfully brought a derivative suit for

conversion against a director of the Firm, resulting in a jury

award returning over $234,000 to the Firm. Based on this

outcome, the circuit court concluded that a substantial benefit

was conveyed to the Firm. Particularly in light of the fact

that this made up approximately one quarter of the Firm's

annual gross income, this was a reasonable conclusion. We

therefore conclude that the circuit court did not err in

16
finding that Bragg rendered a substantial benefit to the

corporation.

E. Abuse of Discretion

Finally, Cattano argues that the circuit court abused its

discretion in its award of $289,228.71 in attorneys' fees and

costs, which included fees and costs associated with the

receiver and the derivative suit. The record shows that the

circuit court reviewed an extensive accounting of fees and

costs. In its final order, the circuit court explicitly

evaluated the rates paid to experts and lead counsel in this

case and found them to be reasonable "in this particular case."

We see no reason for this Court to substitute its judgment for

that of the circuit court that oversaw these complicated

proceedings, which commenced in 2008 and did not see a final

judgment order until 2011. We therefore hold that the circuit

court did not abuse its discretion.

III. Conclusion

For the aforementioned reasons, we will affirm the

judgment of the circuit court.

Affirmed.

JUSTICE McCLANAHAN, dissenting.

I dissent from the opinion of the Court because I do not

believe Bragg had standing to pursue the derivative claims on

17
behalf of the corporation pursuant to Code § 13.1-672.1, nor do

I believe she was entitled to attorneys' fees and costs under

Code § 13.1-773.1(C).

I. Standing Under Code § 13.1-672.1

Considering the "totality of the circumstances found in

[this] case," Jennings v. Kay Jennings Family Ltd. P'ship, 275

Va. 594, 602, 659 S.E.2d 283, 288 (2008), I cannot agree that

Bragg could "[f]airly and adequately represent[] the interests

of the corporation in enforcing the right of the corporation."

Code § 13.1-672.1(A)(4). * Because Bragg was seeking to recover

damages for breach of contract against the Firm as well as

seeking judicial dissolution of the Firm, her interests were

antagonistic to the interests of the Firm. In Count IV of her

*
Since the Firm consisted of only two shareholders, not all of
the factors discussed in Jennings are relevant, such as whether
Bragg is the driving force behind and familiar with the litigation.
Furthermore, "the degree of support [Bragg] is receiving from the
shareholders [she] purports to represent" should not be
determinative in this case since Cattano was the only other
shareholder. Jennings, 275 Va. at 602, 659 S.E.2d at 288. As the
majority correctly observes, placing too much emphasis on this
factor would hinder the ability of a shareholder to bring a
derivative suit on behalf of the corporation in two-shareholder
corporations. Rather, as we recognized in Jennings, we should focus
on the factors that bear on whether "the plaintiff's interests are
actually inimical to those [she] is supposed to represent." Id.
(internal quotation marks and citation omitted). Thus, while I
agree the factors discussed in Jennings should not be applied so as
to preclude a shareholder in a closely held corporation from
pursuing a derivative claim on behalf of the corporation, by the
same token, the plaintiff shareholder's antagonistic interests
should not be ignored simply because the corporation only consists
of two shareholders.
amended complaint, Bragg alleged that the Firm and Cattano

breached their agreement with her in failing to pay Bragg her

monthly draw after she requested copies of the corporate books.

In Count V, Bragg asked the court to judicially dissolve the

Firm and enjoin both the Firm and Cattano from disbursing the

Baker Fees or paying any money to Cattano in excess of his

monthly draws. In my opinion, Bragg could not fairly and

adequately represent the interests of the Firm while

simultaneously pursuing her individual breach of contract claim

against the Firm and termination of the Firm's existence since

her interests were "actually inimical" to the Firm's interests.

Jennings, 275 Va. at 602, 659 S.E.2d at 288.

In fact, the addition of Bragg's derivative claims did not

advance the interests of the Firm but provided a benefit to her

alone. When Bragg filed her initial complaint, she sought

judicial dissolution of the Firm under Code § 13.1-

747(A)(1)(b), providing for dissolution when "[t]he directors

or those in control of the corporation have acted, are acting,

or will act in a manner that is illegal, oppressive, or

fraudulent," and Code § 13.1-747(A)(1)(d), providing for

dissolution when "[t]he corporate assets are being misapplied

or wasted." Bragg asserted that Cattano's "waste, self-

dealing, self-interest and breach of fiduciary duty" caused the

Firm's assets "to be looted, misapplied and wasted." Bragg
requested that the court "enjoin and restrain Cattano, pursuant

to Virginia Code § 13.1-747(E), from further self-dealing and

committing waste," and appoint "a receiver, pursuant to

Virginia Code § 13.1-748, to perform an accounting and

determine the amounts improperly paid by Cattano to himself and

his adult children and the amounts properly due Bragg." Her

complaint specifically included an accounting of the Baker

Fees. Additionally, Bragg asked that the receiver be empowered

to sue and recover all payments improperly made to Cattano and

his children.

In amending her complaint to add the derivative claims to

the already pending claim for judicial dissolution, Bragg

simply reiterated her request for determination and recovery of

funds or assets improperly misappropriated by Cattano,

including the Baker Fees. In Count II of her amended

complaint, Bragg alleged Cattano breached his fiduciary duties

to the firm by misappropriating the Baker Fees and other

assets. In Count III of her amended complaint, Bragg alleged

Cattano improperly exercised or assumed control over the Baker

Fees and other assets of the Firm. Thus, Bragg added the

derivative claims for breach of fiduciary duty and conversion

despite the fact that she was already seeking the same

determinations and relief in her claim for judicial

dissolution. Her derivative claims served no purpose except to
provide a mechanism for recovery of attorneys' fees and costs

not available under her claim for judicial dissolution and

appointment of the receiver. See Gianotti v. Hamway, 239 Va.

14, 29, 387 S.E.2d 725, 734 (1990) (attorneys' fees and costs

not authorized under dissolution statute) (decided under former

Code § 13.1-94, now in substance, § 13.1-747)). In pursuing

these claims, Bragg was not representing the interests of the

Firm, but rather her own personal interest in obtaining

attorneys' fees and costs.

In sum, when considering "the remedy sought by [Bragg] in

the derivative action," "other litigation pending between

[Bragg] and defendants," and "the relative magnitude of

[Bragg's] personal interests as compared to [her] interests in

the derivative action itself," I am of the opinion that Bragg

does not satisfy "the representational requirements" of Code

§ 13.1-672.1(A). Jennings, 275 Va. at 601-02, 659 S.E.2d at

288. Therefore, I would hold the circuit court erred in

failing to strike the derivative claims based on Bragg's lack

of standing. Accordingly, I would reverse the judgment

rendered under Count III of Bragg's amended complaint and the

award of attorneys' fees and costs attributable to this claim.

II. Attorneys' Fees and Costs under Code § 13.1-773.1

I would further hold the circuit court erred in awarding

attorneys' fees and costs attributable to Bragg's claim in
Count I seeking a writ of mandamus for the inspection and

copying of corporate records.

Although in her amended complaint, Bragg set forth a claim

under Code §§ 13.1-773 and -773.1 asking the court to "enter an

[o]rder on an expedited basis" permitting Bragg to inspect and

copy the Firm's corporate records, Bragg did not pursue this

claim, and the circuit court did not enter such an order.

Shortly after Bragg filed her initial complaint, she moved for

appointment of a receiver pursuant to Code § 13.1-748 to

perform an accounting to determine amounts improperly paid by

Cattano to himself and his children as well as amounts properly

due to Bragg for the reasons set forth in her complaint. At

the hearing in which the court considered Bragg's motion for

leave to file an amended complaint, the court granted Bragg's

motion for appointment of a receiver. The court entered an

order requiring Cattano and the Firm to provide the receiver

with access to the financial data and records for the purposes

of performing his accounting. The order also directed counsel

to meet and confer to resolve defendants' specific objections

to discovery requests propounded after the initial complaint

was filed. The order appointing the receiver, requiring access

by the receiver to corporate records, and directing counsel to

meet and resolve discovery disputes was entered in response to

Bragg's motion for a preliminary injunction and to compel
discovery filed before Bragg moved to amend her complaint to

add the statutory claim for inspection and copying. And after

the amended complaint was filed adding the statutory claim for

inspection and copying, Bragg did not seek to obtain an order

under either Code §§ 13.1-773 or -773.1.

While the majority states that Code §§ 13.1-773 and -773.1

afford redress for a corporation's failure to permit a

shareholder or director to inspect documents, those statutes

only permit an award of attorneys' fees and costs if an order

is entered pursuant to one of those statutes. See Code

§§ 13.1-773(C) and -773.1(C). Because no such order was

entered, or even pursued, there was no basis for an award of

attorneys' fees and costs under either statute. Therefore, I

would reverse the circuit court's judgment awarding attorneys'

fees and costs attributable to the claim under Count I.