Bontempo v. Lare

NAZARIAN, J. Table of Contents I. BACKGROUND......................................91 A. A Promising Start................................91 B. Growing Revenue And Growing Perks...............93 C. The Relationship Sours And Unravels...............95 D. The Aftermath...................................97 E. The Litigation....................................98 1. Pleadings ....................................98 2. The Trial Court’s Initial Findings..............101 a. Count I.................................101 b.

Count II ................................103 c. Counts III and IV........................103 d. Count V.................................104 3. The Trial Court’s Subsequent Findings Pursuant To The Parties’ Post-Trial Motions.....105 a.

The Motions To Alter Or Amend The Judgment.............................105 b. The May 8, 2012 Post-Trial Order..........106 c. The May 22, 2012 Supplemental Memorandum Opinion........................108 4. The Final Tally..............................109 II.

DISCUSSION.......................................109 A. Rights, Duties, And Litigation In Closely Held Corporations..................................112 B. The Circuit Court Did Not Abuse Its Discretion In Crafting Alternative Equitable Relief For Count I, The Dissolution Claim..................114 1. The Shareholders’ Agreement Defines The Parties’ Rights And The Range Of Appropriate Remedies............................114 2. The Circuit Court Did Not Err In Granting Summary Judgment For The Lares In Their Personal Capacity.....................124 C. The Damages Awarded Under Count III Did Not Make Quotient Whole......................126 1. The Lares Breached Duties, But Did Not Remedy The Breach........................127 ⁹⁰ 2.

The Circuit Court Did Not Err In Declining To Find Fraud Or Impose Punitive Damages ......................................130 3. On Remand, The Circuit Court Must Reconsider The Attorneys’ Fees Award.............133 D. Count Y: Mr. Bontempo’s Equal Compensation Claim........................................136 Like marriages, business relationships sometimes fail, and the process of disentanglement can be messy and painful. The relationship in this case revolves around an information technology company called Quotient, Inc. (“Quotient”) that was owned by longtime business associates Clark Lare (and his wife, Jodi) and David Bontempo. Like a new romantic relationship, the business flourished in its early stages.

Like some marriages, the relationship between Mr. Lare and Mr. Bontempo eventually became strained, then unraveled. And not unlike those marriages that end up in the courts, the parties could not agree on how to distribute their respective assets and manage the company going forward after Quotient terminated Mr. Bontempo’s employment in 2008, and Mr. Bontempo brought suit, both individually and on behalf of Quotient, in the Circuit Court for Howard County. For the reasons we explain below, we affirm the circuit court’s core liability findings in Mr. Bontempo’s favor, and we disagree with Mr. Bontempo’s contention that the court abused its discretion in declining to dissolve and dismember Quotient. We hold as well, however, that the circuit court erred in the way it allocated liability for monetary damages and attorneys’ fees arising from Mr. Bontempo’s derivative claims.

And because, similar to divorce cases, the damage and attorneys’ fees awards are inextricably intertwined, we vacate the awards for damages and attorneys’ fees and costs relating to Count III and remand for further proceedings not inconsistent with this opinion. 2 ⁹¹ I. BACKGROUND A. A Promising Start Mr. and Ms. Lare formed Quotient in 1999. At first, they operated the business out of their home and financed it with personal savings and cash advances on their credit cards. Under their initial shareholder agreement, which they executed in November 2000, Mr. Lare held forty-nine percent of the stock and Ms. Lare owned the rest. At first, Mr. Lare traveled to solicit clients for their fledgling company while Ms. Lare continued to support the couple as a pharmacist and part-owner of Watermont Pharmacy (“Watermont”).

Early on, Mr. Lare successfully converted a referral from his former co-worker, David Bontempo, into a contract to provide informational technology services to the United States Census Bureau. 3 Soon after, Mr. Lare hired Mr. Bontempo to work for Quotient and made him a minority shareholder. The parties executed an amendment to the shareholder agreement (the “Shareholder Agreement”) that gave Mr. Bontempo forty-five percent of Quotient, Mr. Lare four percent, and Ms. Lare fifty-one percent. In exchange, Mr. Bontempo executed a promissory note in the amount of $46,800. Although Mr. Lare ⁹² testified that he expected the note to be repaid, Mr. Bontempo claimed that it existed only for accounting purposes: 4 [COUNSEL FOR THE LARES:] Now, do you remember that at one point in time though, you did execute a promissory note to pay for that stock? [MR.

BONTEMPO:] Ido. * * * [COUNSEL FOR THE LARES:] [Exhibit 7] is a nonnegotiable promissory note dated effective March 21, 2001, for forty-six thousand eight hundred dollars, isn’t it? [MR. BONTEMPO:] Yes. * Hi ^ [COUNSEL FOR THE LARES:] Okay, and ah, that was for the stock that he conveyed to you, isn’t it? Wasn’t that the purpose? Hi Hi Hi [MR.

BONTEMPO:] Um, the purpose of this more was for an accounting record, that there was some value transferred to me, and that there was—Clark and I had an agreement, there was no money to be exchanged for this agreement. The parties never signed a written employment agreement, but they agreed orally that Mr. Bontempo would receive an initial salary of $20,000, and he received his first paycheck in February 2000. The Lares, on the other hand, did not draw a salary until December 2001. Mr. Bontempo contended that he and Mr. Lare reached an additional understanding that once the Lares started to draw a salary, he would draw a salary equal to the combined salaries of the Lares: [COUNSEL FOR THE LARES:] ... [I]s there a piece of paper anywhere that you have seen in this case that says that there will be equivalent salaries that I, Dave Bontempo, will receive the same amount in salary as the Lares, or ⁹³ Clark Lare, the Lares in combination, is there any such agreement that you are aware of? [MR.

BONTEMPO:] No, there is not, on paper, written down. But, we did have an oral agreement. The Lares disputed that such an agreement ever existed: [COUNSEL FOR THE LARES:] Ah, did you have discussions during the period of 2000 to 2003 about, ah, whether your salaries should be equal to, or commensurate with Mr. Bontempo? [MR. LARE:] No, no.

From April 2004 through August 2008, Mr. Bontempo’s salary was comparable, and sometimes equal, to the salary received by the Lares. At all other times, however, their salaries differed significantly. Mr. Lare’s and Mr. Bontempo’s respective responsibilities for running Quotient also evolved over time. 5 At first, they both focused on soliciting clients and building new business. Later on, Mr. Lare focused more on management and operations, while Mr. Bontempo pursued new business and built and maintained client relationships.

Later, on March 20, 2004, the three shareholders entered an Amended and Restated Stockholders’ Agreement (the “ARSA”). The ARSA restated (and did not alter) the parties’ stock ownership and set forth the events that would trigger a compulsory stock sale to the other shareholders, including “[t]ermination of a Shareholder’s employment ... for good cause.” B. Growing Revenue And Growing Perks Quotient ultimately qualified for a General Services Administration (“GSA”) schedule, which meant that the company could submit bids as a prime contractor for federal government contracts, and it quickly secured contracts with a num ⁹⁴ ber of large public and private organizations. 6 With revenue growing, Quotient moved into office space in Columbia, Maryland in 2001, and has moved several times since to accommodate its continued growth. In addition to the salaries Quotient paid to Messrs. Lare and Bontempo, the company covered cell phone expenses for both the Bontempos and the Lares.

Quotient purchased automobiles for Mr. Bontempo’s wife and for Ms. Lare. The Bontempos were issued company credit cards that they used for gas, meals, and entertainment. And Quotient paid for Mr. Lare and other Quotient employees to train with a corporate fitness training company, and for the Lares’ personal trainers. In 2006, the Lares also began paying household employees from Quotient’s payroll account, 7 using Quotient funds for personal legal fees, and advancing interest-free loans to Watermont and Broadway Equities, LLC (“Broadway”), a company Mr. Lare formed with his brother to own a beach house in New Jersey.

In December 2007, Mr, Lare borrowed $205,586 from Quotient to fund renovations to the Lares’ home. This loan originally was to be repaid by March 1, 2009, but on February 1, 2009, Mr. Lare executed a new note in the amount of $497,267.00, with the balance due on January 1, 2016. 8 The Lares eventually agreed that many of these ⁹⁵ expenses should have been treated as additional income, and they filed amended tax returns both for themselves and Quotient for tax years 2006 through 2009. C. The Relationship Sours And Unravels The once-fruitful partnership between Mr. Lare and Mr. Bontempo eventually began to spoil. Mr. Lare’s personal use of Quotient funds fueled a growing friction between him and Mr. Bontempo, and their mutual animosity became apparent to other employees.

Mr. Bontempo blamed the discord on a series of unilateral decisions Mr. Lare made regarding distributions and salaries: Bontempo alleges that, in 2007, Lare took a $100,000.00 distribution and asked Bontempo to wait until the end of the year to take his distribution, but then [Lare’s] distribution was converted to a loan which obviated the need to make a similar distribution to Bontempo. According to Bontempo, this also happened in 2008. Another source of conflict was the disparity in Bontempo and Lare’s salaries in 2008. Bontempo’s salary increased to $244,791.73 that year, and Lare’s increased to $323,958.46.

Bontempo believed that the difference in salary was supposed to be made up to him, but it never was. Bontempo alleges that in 2009, Lare took a distribution without telling Bontempo, and that Bontempo never received his proportionate distribution. Mr. Lare, on the other hand, attributed the strained relationship to his view that Mr. Bontempo’s job performance had lagged: Lare began to doubt Bontempo’s commitment to Quotient in 2007, when Lare’s own workload increased. Lare felt that as Quotient grew, more and more work fell on his shoulders and he needed more support from Bontempo, but was not receiving it.

He felt that Bontempo was pursuing outside interests, such as his interest in jazz music and other ⁹⁶ commercial ventures with his brother, to the detriment of Quotient. To “light a fire under” Mr. Bontempo, Mr. Lare lowered his salary by ten percent in June 2009. 9 This was not well received. Another source of tension arose in September 2009, when Mr. Lare rejected Mr. Bontempo’s suggestion that Quotient hire John O’Leary, a technology professional with whom Mr. Bontempo was familiar. Mr. Lare contended that Quotient did not have the funds to hire an additional business development employee, although it turns out that he was simultaneously directing Quotient to advance funds to Watermont and Broadway.

Mr. Bontempo disagreed with this decision even before learning about Mr. Lare’s investment of Quotient funds into the other companies, and the tension grew. The two men aired their grievances in November 2009. Mr. Lare expressed his concerns about Mr. Bontempo’s performance and Mr. Bontempo raised his concerns about Mr. Lare’s financial decisions (although he felt that his concerns were “brushed off’). They met again in January 2010 to discuss salaries and distributions.

According to Mr. Bontempo, after he asked Mr. Lare about his 2009 distribution, Mr. Lare responded that “[t]here is no distribution.” In response, Mr. Bontempo told Mr. Lare that they needed to work out an exit strategy, and proposed that they split the company. Mr. Lare refused, and instead told Mr. Bontempo to sell back his stock: “You need to sell your stock, Dave. You need to sell it. We need to come up with a price.

You need to name a price, and sell it.” Mr. Bontempo refused. Shortly thereafter, Mr. Lare presented Mr. Bontempo with a proposal for Mr. Bontempo’s departure from Quotient. Mr. Bontempo again refused. Mr. Lare and Mr. Bontempo held another meeting on March 26, 2010.

Mr. Lare handed Mr. Bontempo a separation agreement that Mr. Bontempo refused to sign, then informed ⁹⁷ Mr. Bontempo that his employment was being terminated. Neither Mr. Bontempo nor Quotient’s employees were informed that Mr. Bontempo was terminated “for cause,” but at trial, Quotient contended, through the testimony of Mr. Lare, that Mr. Bontempo’s firing resulted from his poor job performance. D. The Aftermath After termination, Mr. Bontempo remained an officer and director of Quotient. On March 29, 2010, while still in those roles, Mr. Bontempo revoked his personal guarantee of Quotient’s credit facility with Branch Banking & Trust (“BB & T”).

He claimed that he did this to limit the risk that he and his family would face if Quotient failed and because he thought that Mr. Lare “would just flat-out take [his] distributions.” Shortly thereafter, BB & T notified Quotient that its loan was in default as a result of multiple violations of the terms of the loan documents, including Mr. Bontempo’s revocation, the filing of this lawsuit, and Quotient’s loans to Watermont. Quotient had difficulty obtaining alternative financing, but ultimately entered a new credit facility with Wells Fargo Business Credit on less favorable terms than the original agreement with BB & T; the difference cost the company $85,000 in additional finance charges. On August 23, 2010, six months after his termination, Mr. Bontempo voluntarily resigned as an officer and director of Quotient. However, he remained (and remains to this day, so far as the record reflects) a shareholder, and he continued to receive distributions totaling $466,044 in 2009, $252,665 in 2010, and $465,000 in 2011.

After his resignation as an officer and director, Mr. and Mrs. Bontempo started a new business, Siloquent LLC. Although Mr. Bontempo met with contacts he developed through Quotient and informed them that he was starting a new business, he claimed that he had no intention of soliciting business during those meetings. Because Siloquent did not have a GSA schedule, it struggled to compete with Quotient. ⁹⁸ E. The Litigation 1. Pleadings On April 2, 2010, Mr. Bontempo filed his initial complaint against Quotient and the Lares in the Circuit Court for Howard County, which sought relief pursuant to Maryland’s corporate dissolution statute, Md.Code (1975, 2007 Repl.

Vol), Section 3—413(b)(2) of the Corporations and Associations Article (“CA”). 10 On August 12, 2010, he amended the complaint to add counts of constructive trust, breach of fiduciary duty, and constructive fraud, and Quotient filed a counterclaim requesting a declaration that Mr. Bontempo was fired for cause, an order that he was accordingly required to sell his stock, and a finding that he breached fiduciary duties he owed to Quotient. 11 Mr. Bontempo amended his complaint again on December 21, 2010, and the trial court’s overview of this second amended complaint (which remains the operative complaint and to which we will refer from here on as the “Complaint”) provides a helpful framework for the disputes before us: Count I of [the Complaint] seeks relief pursuant to [CA §] 3-418.... Bontempo requests the following relief: 1) Prompt appointment of a receiver or trustee to take charge of the assets and operate the business of the corporation, as necessary and proper to preserve Quotient’s assets, pending a final determination as to potential judicial dissolution of Quotient; 2) An Order reinstating Bontempo as an employee of Quotient and appointing him as an officer of the Court to assist in preservation of Quotient’s assets and customer relationships; ⁹⁹ 3) An Order requiring dissolution of Quotient at a specified future date, to become effective in the event that the stockholders fail to resolve their differences; 4) An Order requiring the Lares to promptly and fully account to Quotient and Bontempo for any and all uses or transfers of Quotient assets to the Lares for their direct or indirect personal benefit; 5) An Injunction to prohibit continuing acts of oppressive conduct and to cease or reduce salary and distribution payments to the Lares; 6) An Order dividing Quotient’s assets, including customer accounts, and awarding Bontempo 45% of Quotient’s assets to manage independently of the Lares; 7) Damages to Bontempo as compensation for the Lares’ illegal, oppressive, and fraudulent conduct; 8) Attorney’s fees, including expert’s fees, interest, and costs; and 9) Further relief as may be just and appropriate. In Count II of the [Complaint], Bontempo alleges Constructive Trust against the Lares on behalf of Quotient. First, Bontempo requests that a constructive trust be established for any and all monies or property obtained for the benefit of the Lares outside of the auspices of Quotient, that the Lares convey to Quotient any such monies or property, and that Bontempo be awarded expenses for prosecuting this complaint on behalf of Quotient.

In Counts III and IV of the [Complaint], Bontempo alleges Breach of Fiduciary Duty and Constructive Fraud against the Lares on behalf of Quotient. Bontempo requests the same relief for both Counts—that the Lares be directed to pay compensatory damages to Quotient, punitive damages, and Bontempo’s expenses for prosecuting the complaint on behalf of Quotient. Bontempo alleges Breach of Contract in Count V, based on the alleged agreement that his salary would be equivalent to the combined salaries of the Lares and an alleged failure to ¹⁰⁰ receive his proportionate share of stockholder distributions. Bontempo seeks compensatory damages in the among of $528,000.00 for unpaid salary and $118,000.00 for distributions, as well as punitive damages and attorney’s fees.

Before trial, each party filed a motion for partial summary judgment and the court held a motions hearing on March 3, 2011. First, Mr. Bontempo sought summary judgment on the portion of Quotient’s counterclaim arguing that Mr. Bontempo breached his fiduciary duties to Quotient by filing this lawsuit in bad faith and by revoking his personal guarantee of Quotient’s line of credit with BB & T. The court denied this motion, finding that facts on the issue remained subject to dispute and that Mr. Bontempo was not entitled to judgment as a matter of law. Second, Quotient sought summary judgment on two remedies sought by Mr. Bontempo—his reinstatement as an officer and director of Quotient and dissolution of Quotient. The court denied this motion as well, declining, at that point, to find these remedies unavailable.

Finally, the Lares sought summary judgment on Mr. Bontempo’s request for employment-based remedies against them personally under CA § 3-413. The court granted this motion, finding employment-based damages from a shareholder impermissible under CA § 3-413 without a clear allegation of fraud on the part of that shareholder. A nine-day bench trial 12 was held between March 14 and March 31, 2011, during which the parties presented 146 exhibits and the court heard testimony from eighteen witnesses. After trial, the court issued a Memorandum Opinion and Order on September 29, 2011.

After timely post-trial motions and further hearings, the court issued three follow-up orders—a Posh-Trial Memorandum and Order dated May 8, 2012, a Supplemental Memorandum and Order dated May 22, 2012, and a Clarification Order dated June 13, 2012—that ¹⁰¹ made additional findings and altered some of its original decisions. 2. The Trial Court’s Initial Findings In the circuit court’s initial order, dated September 29, 2011, the court found in favor of Mr. Bontempo and against Quotient on Count I; in favor of Quotient and against Mr. Bontempo on Count II; in favor of Quotient and against the Lares on Count III; in favor of the Lares and against Quotient on Count IV; and in favor of Mr. Bontempo and against Quotient on Count V. a. Count I Under Count I, Mr. Bontempo requested equitable relief, including the dissolution of Quotient, pursuant to CA § 3-413(b)(2), based on the Lares’ “illegal, oppressive, and fraudulent” conduct. The court applied Edenbaum v. Schwarcz-Osztreicherne, 165 Md.App. 233 , 885 A.2d 365 (2005), in which we held that a plaintiff alleging oppressive conduct was required to prove that those in control of the corporation oppressed “the reasonable expectations of the minority shareholder”: [A] minority shareholder who reasonably expects that ownership in the corporation would entitle him to a job, a share of the corporate earnings, and a place in corporate management would be “oppressed” ... when the majority seeks to defeat those expectations and there exists no effective means of salvaging the investment.

Id. at 258 , 885 A.2d 365 (quoting Balvik v. Sylvester; 411 N.W.2d 383, 387 (N.D.1987)). The court found that Mr. Lare’s conduct, particularly his threat to fire Mr. Bontempo if he did not voluntarily resign and sell his shares, met the standard for oppressive conduct. 13 ¹⁰² It reasoned that Mr. Lare attempted to defeat Mr. Bontempo’s “reasonable expectations ... that [Quotient] would employ him, that he would participate (as a stockholder) in the company’s profit distributions and that he would not be terminated for subjective reasons,” and that Mr. Bontempo’s reasonable expectations arose from the “sweat equity” he contributed to Quotient. In finding Mr. Bontempo’s expectations—specifically, his expectations to be an owner, to be employed, and to have a role in Quotient—to be objectively reasonable, the trial court recognized that it had “an array of remedies available to it under Edenbaum , including ‘alternative equitable remedies not specifically stated in the statute.’ [Edenbaum, 165 Md. App.] at 260 [ 885 A.2d 365 ].” At the same time, the court specifically declined to dissolve Quotient: One of the remedies requested by Bontempo is dissolution of Quotient after a specified period of time if the parties are unable to resolve their differences____The [court] is of the opinion that this remedy would be inappropriate and that less drastic measures are available as remedies to address the harm caused by the oppressive conduct. (Emphasis added.) Instead, the court ordered relief designed to assess the extent of the financial harm caused by the Lares’ “oppressive conduct” and to make Mr. Bontempo whole for redressing it: 14 1.

The ordering of a full and complete accounting by the Lares ... for misappropriated funds, i.e., all funds advanced or expenses paid that were for their direct or indirect benefit and not related to Quotient’s legitimate business purpose. 2. Reimbursement of the legal fees and expenses incurred by Bontempo in the total amount of $211,267.34.... ¹⁰³ 3. Reimbursement of the expert witness fees and expenses ... incurred by Bontempo in the total amount of $81,455.50. b. Count II In Count II, Mr. Bontempo brought a derivative claim on behalf of Quotient, requesting that the court establish a constructive trust 15 and order the Lares to return all assets transferred to them from Quotient for their benefit and for the benefit of Broadway and Watermont.

Mr. Bontempo sought to collect the fees and expenses he incurred in prosecuting this claim on Quotient’s behalf. The trial court’s order found in favor of Quotient but against Mr. Bontempo on this count and declined to order a constructive trust because it had awarded damages to Mr. Bontempo and ordered an accounting in connection with Count I. c. Counts III and IY In Count III, Mr. Bontempo, again on behalf of Quotient, alleged that Mr. Lare breached his fiduciary duties to Quotient by giving interest-free loans to Broadway and Watermont in violation of its covenant with BB & T, by giving himself a significant stockholder loan, by including his household employees in Quotient’s healthcare plan, and by giving himself a $26,000 advance after Quotient had defaulted under the BB & T financing agreement. The court cited Storetrax.com, Inc. v. Gurland, 397 Md. 37 , 915 A.2d 991 (2007), which held that directors of a corporation “ ‘[ojccupy a fiduciary relation to the corporation and its stockholders,’ ” id. at 53 , 915 A.2d 991 (quoting Booth v. Robinson, 55 Md. 419, 436 (1881)), and “‘are entrusted with powers which are to be exercised for the common and general interest of the corporation, and not for their own private individual benefit.’ ” Id. at 54, 915 A.2d 991 (emphasis added) (quoting Booth , 55 Md. at ¹⁰⁴ 436-37).

The court found that Mr. Lare’s personal use of corporate funds was contrary to the best interests of Quotient, contrary to Quotient’s financial health, and constituted a breach of his fiduciary duty to Quotient. The court entered judgment in favor of Quotient and against the Lares, then found that “the damages for this breach are those previously awarded as a remedy to Lare’s oppressive conduct,” i. e., for Count I. In Count IV, Mr. Bontempo sought damages on behalf of Quotient for constructive fraud, which the court defined as “a breach of legal or equitable duty that, irrespective of the moral guilt of the fraud feasor, the law declares fraudulent because of its tendency to deceive others, to violate public or private confidence, or to injure public interests,” and recognized that “[njeither actual dishonesty of purpose nor intent to deceive is an essential element of constructive fraud.” See Scheve v. McPherson, 44 Md.App. 398, 406 , 408 A.2d 1071 (1979). Although the court found Mr. Lare to have exercised poor judgment and to have mismanaged corporate assets, it found that Mr. Bontempo had not proven that Mr. Lare’s conduct was fraudulent, and it entered judgment for the Lares and against Quotient. d. Count V Mr. Bontempo alleged two breaches of contract.

First, he alleged that he and Mr. Lare had reached an oral agreement that his salary would be equivalent to the Lares’ combined salaries, and that his actual salary was lower by $528,000. Second, he alleged that he received $118,000 less than his proportionate share of shareholder distributions. Although Mr. Bontempo presented evidence that his salary equaled that of the Lares from 2004 through 2008, the court recognized that their salaries varied significantly during the early and later years of Mr. Bontempo’s tenure with Quotient, and without written documentation to reflect the agreement or other evidence of a meeting of the minds, the court found that Mr. Bontempo failed to meet his burden of proving the existence of the salary equalization agreement. The court did ¹⁰⁵ find, however, that Mr. Bontempo was entitled to the $118,000 for unpaid distributions, and entered judgment on this portion of Count V against Quotient.

The court also ordered that Quotient pay attorneys’ fees on this count, but denied punitive damages. To sum up, then, the circuit court awarded the following to Mr. Bontempo and/or against Quotient in its initial post-trial order: 1. A full and complete accounting by the Lares (the majority in control of the corporation) for misappropriated funds, i.e., all funds advanced or expenses paid that were for their direct or indirect benefit and not related to Quotient’s legitimate business purposes. (Count I— Judgment against Quotient; Count III—Judgment against the Lares) [2.] Reimbursement of the legal fees and expenses incurred by Bontempo in the total amount of $211,267.34 (Count I—Judgment against Quotient; Count III— Judgment against the Lares) [3.] Reimbursement of the expert witness fees and expenses billed for Robert A. Garvey incurred by Bontempo in the total amount of $81,455.50.

(Count I— Judgment against Quotient; Count III—Judgment against the Lares) [4.] Judgment in the amount of $118,000 in favor of Bontempo and against Quotient. (Count V) 3. The Trial Court’s Subsequent Findings Pursuant To The Parties’ Post-Trial Motions a. The Motions To Alter Or Amend The Judgment In response to the trial court’s order, Mr. Bontempo filed a Motion to Alter or Amend the Judgment, in which he argued that the court failed to grant relief that vindicated his reasonable expectations pursuant to Edenbaum .

Mr. Bontempo asked the court to revise its order and grant additional relief that the trial court later summarized as follows: ¹⁰⁶ [1.] Appoint an Agent to supervise, and to report to the Court, concerning a Court-ordered allocation of Quotient’s accounts and other assets on a 55/45 basis, ■with the Court retaining equitable jurisdiction to grant further relief at a later date or, alternatively direct the Lares to sell their stock to Bontempo under the provisions of the [ARSA].... [2.] Establish accounting procedures. [3.] Allocate certain [Quotient] contracts to Bontempo as a subcontractor to Quotient. [4.] Award Bontempo the salary he has not received since March 2010, in an amount equal to the combined salaries of [the Lares]. [5.] Award Bontempo additional attorneys’ fees and litigation expenses. [6.] Make a finding of fraud and award Bontempo punitive damages. [7.] Require Jodi Lare (majority shareholder) to terminate Clark Lare (minority shareholder) for cause. [8.] Impose personal liability on [the Lares] for the damages the Court awarded to Bontempo under Count I of the [Complaint]. [9.] Imposition of a constructive trust. [10.] Make a finding of constructive fraud. [11.] Award other various forms of short-term relief. The Lares and Quotient also filed together a Motion to Alter or Amend seeking a clarification of the order for an accounting, modification of the judgment to avoid double-counting, and elimination of the award of litigation costs. The court held a hearing on the post-trial motions on January 4, 2012. b. The May 8, 2012 Post-Trial Order The trial court issued a Memorandum Opinion and Order addressing the parties’ posttrial motions on May 8, 2012.

The court declined to grant the additional relief Mr. Bontempo ¹⁰⁷ sought, but granted a portion of the relief sought by Quotient and the Lares. In denying Mr. Bontempo’s motion, the court reiterated its decision not to remedy the Lares’ misconduct by micromanaging the internal affairs of a prospering company: a. The court found the compensation as proportionate to the services rendered; b. The court declined to order dissolution because the remedies it had imposed addressed the oppressive conduct Mr. Bontempo had proven; c.

The court would not reallocate Quotient’s contracts to Mr. Bontempo because doing so would go far beyond his reasonable expectations for joining the company; d. The court found no legal basis to award Mr. Bontempo, an at-will employee, employment-based damages such as back pay for a statutory oppression claim; e. The court found that any expectation of lifetime employment was unreasonable. Although the court emphasized that Mr. Bontempo had a subjective expectation of employment without termination and participation as a stockholder in the company’s distributions, the court found that he knew he was a minority shareholder and an at-will employee; f.

The court declined to direct that the majority shareholders sell their stock to Mr. Bontempo because it found no fraudulent conduct on the part of the Lares; and g. The court declined to order Ms. Lare to sell her shares of Quotient because it had found oppressive conduct only on the part of Mr. Lare. In response to the Quotient/Lare motion, the court clarified its order directing an accounting of “misappropriated funds” under Count I. And in lieu of the damages it had ordered the Lares to pay to Mr. Bontempo under Count III, the court directed that the accounted-for amount should be characterized as a distribution to the Lares and that Mr. Bontempo ¹⁰⁸ should receive a proportionate distribution under Count I. 16 The court also amended the previous equitable disbursement it had ordered under Count V and revised the unpaid distributions to $81,818.18. Finally, the court vacated the attorneys’ fee, expert witness fee, and litigation expense awards because it had not held a hearing before awarding them. c.

The May 22, 2012 Supplemental Memorandum Opinion The trial court revisited the fee awards in a Supplemental Memorandum Opinion, which it issued on May 22, 2012, after holding another hearing. Mr. Bontempo had requested a fee award totaling $426,741.18 for winning on Counts I and III, and the court declined his request. The court declined to award fees under Count I because that count was not a derivative claim, and the court found no exception to the “American rule” 17 that would support fee-shifting to Quotient on that count. The court did find that Mr. Bontempo was entitled to attorneys’ fees under Count III, the derivative claim, and that Quotient was responsible for these costs pursuant to the “common fund doctrine”: “If a derivative action is successful, in whole or in part, or if anything is received by the plaintiff as a result of a judgment, compromise, or settlement of an action or claim, the court may award the plaintiff reasonable expenses, including reasonable attorney’s fees, and shall direct him to remit to ¹⁰⁹ the [close corporation] the remainder of those proceeds received by him.” Garcia v. Foulger Pratt Dev., Inc., 155 Md.App. 634, 664 , 845 A.2d 16 (2003) (quoting CA § 10-1004).

The court examined the fees and expenses sought by Mr. Bontempo, removed charges unrelated to the successful claims, reduced the total pro rata to reflect a 16.2% average success rate in the litigation, and entered a fee and expense award totaling $109,012.76. 18 4. The Final Tally When the post-trial dust settled, Mr. Bontempo prevailed (either personally or on behalf of Quotient) on Counts I, III, and V: • Under Count I, the court ordered Quotient to pay Mr. Bontempo $167,638; 19 • Under Count III, the court ordered Quotient to treat the misappropriated funds (the same damages calculated by the accounting in Count I) as a distribution from Quotient to the Lares, from which Quotient would pay a proportionate distribution to Mr. Bontempo, and ordered Quotient to pay Mr. Bontempo attorneys’ fees totaling $109,012.76; and • Under Count V, the court directed Quotient to pay Mr. Bontempo $81,818.18 in unpaid distributions. Mr. Bontempo filed a timely notice of appeal, and Quotient filed a timely cross-appeal.

II

DISCUSSION Overall, nobody is wholly pleased with the decisions below, which in a complicated and heated case like this is usually a sign that the circuit court was on to something. Mr. Bontem ¹¹⁰ po believes that he won the case below, but that the package of remedies the circuit court awarded does not reflect the full scope of the victory he won or the harms he and Quotient suffered. He raises the following questions for our review (which we have reworked for clarity): I. Whether the circuit court erred by declining to award all of the relief sought by Mr. Bontempo under Count I, despite having found that the Lares violated Mr. Bontempo’s reasonable expectations as a minority shareholder.

II

Whether the circuit court erred by declining to award Mr. Bontempo any damages from the Lares, personally, under Count I as a result of their oppressive conduct.

III

Whether the circuit court erred in finding the Lares not liable to Quotient for constructive fraud in connection with Count IV.

IV

Whether the circuit court erred in finding that the Lares’ conduct was not “fraudulent” for purposes of justifying the imposition of punitive damages under Count IV. V. Whether the circuit court erred in finding that Mr. Bontempo had failed to carry his burden of proof on his equal compensation claims under Count V. For its part, Quotient doesn’t challenge the circuit court’s findings regarding Mr. Lare’s oppressive conduct or the core remedies the circuit court imposed, but does contest the court’s decision to award litigation fees and expenses to Mr. Bontempo under Count III. Quotient also raises an additional question bearing on the respective responsibility of the different parties (which we have renumbered to make it consecutive): 20 VI. Whether the trial court erred by requiring a corporation to pay a derivative plaintiffs litigation costs from ¹¹¹ its own funds where there was no recovery of funds for the corporation.

We affirm the overwhelming bulk of the circuit court’s decisions. There was ample evidence to support the circuit court’s findings that the Lares wrongfully blurred, and even ignored, the boundaries that Maryland corporate law draws between Quotient and the Lares’ personal affairs, and that they did so to the detriment of Quotient and Mr. Bontempo. But as straightforward as the foregoing sentence may seem, it is a good bit harder to translate that general conclusion into specific findings of liability and remedies, particularly since, much as they did in real life, the Lares continue to characterize their rights and interests in this litigation as fully aligned with Quotient’s. And they aren’t, as we will see when we parse through the actual claims and findings, most notably in connection with the derivative claims Mr. Bontempo brought on behalf of Quotient to redress the Lares’ overstepping.

At the same time, the record amply supports the circuit court’s conclusion that Mr. Bontempo overstated his direct injuries, and the court quite reasonably declined his invitation to remedy the Lares’ injuries to Quotient by dissolving the company and handing its customers over to him. The circuit court erred not through any errors of judgment or abuses of discretion regarding the nature or extent of the wrongs or injuries, but only in how it assigned responsibility for the damages among the parties, a tricky task given the confluence of individual and derivative claims the court faced. As a general matter, we review the circuit court’s factual findings for clear error and its legal conclusions de novo. Dynacorp Ltd. v. Aramtel Ltd., 208 Md.App. 403, 451 , 56 A.3d 631 (2012), cert. denied, 430 Md. 645 , 62 A.3d 731 (2013).

We “will not set aside the judgment of [a] trial court on the evidence unless clearly erroneous, and will give due regard to the opportunity of the trial court to judge the credibility of the witnesses,” Md. Rule 8-131(c), and “ ‘we accord no deference’ ” to the court’s legal conclusions, “ ‘which we review to determine whether they are legally correct.’ ” ¹¹² Ramlall v. MobilePro Corp., 202 Md.App. 20, 34 , 30 A.3d 1003 (2011) (quoting Cattail Assocs., Inc. v. Sass, 170 Md.App. 474, 486 , 907 A.2d 828 (2006)). We discuss more specific standards and sub-standards of review as they arise. A. Rights, Duties, And Litigation In Closely Held Corporations This case grows out of a relationship—a business relationship defined by the parties’ respective roles as directors, officers, and shareholders of Quotient. As the relationship unraveled and (d)evolved into litigation, the existence of the corporate form and the parties’ respective roles in that corporation defined their rights and obligations among each other and vis-a-vis Quotient.

Like most corporate divorces, this case involves an array of allegations, claims, and legal theories. Unlike most corporate divorces, Mr. Bontempo pursued not only the usual counts, but also asked the circuit court to dissolve Quotient or impose alternative remedies. Because his various claims are meant to serve different purposes under Maryland corporate law, it is worth pausing briefly to set the analytical stage. Quotient is a Maryland corporation.

Mr. Bontempo and the Lares are its shareholders; the Lares hold the majority of the shares. At all times, Mr. and Ms. Lare were officers; at most relevant times, Mr. Bontempo was as well. Corporations are creatures of statute that are owned by their shareholders, and “[t]he directors of a corporation stand in a fiduciary relationship to the corporation and its stockholders.” Mona v. Mona Elec. Grp., 176 Md.App. 672, 695 , 934 A.2d 450 (2007).

A director is required to act reasonably and in the corporation’s best interests: A director shall perform his duties as a director ...: (1) In good faith; (2) In a manner he reasonably believes to be in the best interests of the corporation; and (3) With the care that an ordinarily prudent person in a like position would use under similar circumstances. ¹¹³ CA § 2-405.1(a). Under the historic “business judgment rule,” now codified at CA § 2-405.1(e), directors are presumed to act in a manner consistent with these duties, and the party challenging a director’s decision(s) bears the burden of rebutting that presumption. Mona, 176 Md.App. at 696 , 934 A.2d 450 (citing Bender v. Schwartz, 172 Md.App. 648, 667 , 917 A.2d 142 (2007)); see also James J. Hanks, Jr., Maryland Corporation Law § 6.8, at 207 (2013 Supp.) (“Hanks”). Maryland corporate law anticipates the possibility that majority shareholders might misuse their authority to the detriment of the minority or the corporation itself or both: Maryland common law recognizes that minority shareholders are entitled to protection against fraudulent or illegal action of the majority.

Especially in closely held corporations, the majority shareholder owes a fiduciary duty to the minority shareholder (or shareholders) “not to exercise [their] control to the disadvantage of minority shareholders.” Ler ner v. Lerner Corp., 132 Md.App. 32, 53 [ 750 A.2d 709 ] (2000). A majority shareholder owes a fiduciary duty to minority shareholders not to use his voting power for his own benefit or for a purpose adverse to the interests of the corporation and its stockholders. Coop. Milk Serv., Inc. v. Hepner, 198 Md. 104, 114 [ 81 A.2d 219 ] (1951).

Mona, 176 Md.App. at 697 , 934 A.2d 450 . Accordingly, Maryland law recognizes three categories of options for minority shareholders aggrieved by the actions of the majority, each with a different remedial purpose. First, to the extent a minority shareholder suffers an injury personal to him, he can bring a direct action against the corporation, its officers, directors, or other shareholders and recover damages directly. Id.

(“To maintain a direct action, the shareholder must allege that he has suffered ‘an injury that is separate and distinct from any injury suffered either directly by the corporation or derivatively by the stockholder because of the injury to the corporation.’ ” (quoting Hanks § 6.8, at 183 (2005))). Second, and perhaps most commonly, a minority shareholder can bring a derivative action, “ ‘an ex ¹¹⁴ traordinary equitable device to enable shareholders to enforce a corporate right that the corporation failed to assert on its own behalf.’ ” Id. at 698, 934 A.2d 450 (quoting Werbowsky v. Collomb, 362 Md. 581, 599 , 766 A.2d 123 (2001)). Unlike a direct action, however, “[a]ny recovery in a shareholder’s derivative suit is in favor of the corporation, not the individual shareholder (or shareholders) who brought the derivative action.” Id. (emphasis added).

And third, as we discuss next because Mr. Bontempo started his complaints with such a request, any shareholder (minority or otherwise) can ask a circuit court to dissolve the corporation, CA § 3-413, or to order alternative equitable relief available in Maryland under the dissolution statute- since our decision in Edenbaum, 165 Md.App. 233 , 885 A.2d 365 . This case features claims falling into the latter two categories although, as we shall see, the boundaries can get blurry. B. The Circuit Court Did Not Abuse Its Discretion In Crafting Alternative Equitable Relief For Count I, The Dissolution Claim. Mr. Bontempo alleged in Count I that the Lares engaged in “oppressive conduct,” as that term is used in CA § 3-413(b)(2), and asked the circuit court to order broad equitable relief in response.

He prevailed on the merits of this count, but challenges the relief that the circuit court awarded him, which we review for abuse of discretion. “[W]e will not reverse a ruling ... simply because we would have made a different ruling had we been sitting as trial judges,” and we will only vacate a decision if “no reasonable person would take the view adopted by the [trial] court.” Edenbaum, 165 Md.App. at 254 , 885 A.2d 365 (quotation marks and citations omitted). 1. The Shareholders’ Agreement Defines The Parties’ Rights And The Range Of Appropriate Remedies. We start, as we must, with the statute. Section 3-413(b)(2) of the Corporations and Associations Article provides that “any stockholder entitled to vote in the election of directors of ¹¹⁵ a corporation may petition a court of equity to dissolve the corporation on the grounds that ... [t]he acts of the directors or those in control of the corporation are illegal, oppressive, or fraudulent.” CA § 3—413(b)(2) (emphasis added).

The key word is stockholder: Mr. Bontempo’s standing to seek relief under § 3-413 arises from his status as a shareholder of Quotient. And although Edenbaum may not have used these precise words, his status as a shareholder of Quotient (as defined by his shareholder agreement) defines and bounds the rights he is entitled to vindicate in this count and informs the analysis of the appropriate equitable remedies. Liability is not in dispute at this point. Neither Mr. Lare nor Quotient challenges the finding that Mr. Lare committed “oppressive conduct,” a concept we defined in Edenbaum as turning on the objectively reasonable expectations of the shareholder going into the enterprise: conduct is oppressive if it “ ‘substantially defeats expectations that, objectively viewed were both reasonable under the circumstances and were central to the [minority shareholder’s] decision to join the venture.’ ” Edenbaum, 165 Md.App. at 258 , 885 A.2d 365 (quoting Matter of Kemp & Beatley, Inc., 64 N.Y.2d 63 , 484 N.Y.S.2d 799 , 473 N.E.2d 1173, 1179 (1984)).

Mr. Bontempo contended at trial that he “reasonably expected to be employed by Quotient, to share in its earnings per his agreements with the Lares, and to have a place in its day-to-day management.” And the circuit court largely agreed as a factual matter: Lare’s assertions that Bontempo’s job performance was poor and that he had “checked out” of the company strains credulity and is totally against the weight of the evidence. By all accounts, Bontempo was a responsible and dedicated employee. Bontempo’s commitment to the company (as an employee, director and stockholder) was further evidenced by his willingness to reduce his own salary in order to bring in an employee (O’Leary) who he believed would contribute to Quotient’s success. Lare told Bontempo that Quotient could not afford O’Leary’s salary during the same time he was directing that Quotient funds be diverted to Watermont ¹¹⁶ and Broadway, two entities in which the Lares had a personal financial interest.

There is no support for Lare’s position that Bontempo was well aware of—and approved— the multitude of transactions that took place. Lare’s testimony regarding his reasons for terminating Bontempo is not credible. Lare’s feeling that he and Bontempo could no longer work together was obvious to other key Quotient employees. The professional incompatibility that developed cannot be attributed to Bontempo’s job performance.

Bontempo testified that Lare threatened to fire him if he would not voluntarily resign and sell his stock. When Bontempo refused, Lare followed through on his threat. Lare testified that he never told Bontempo that he was being fired for cause under the ARSA. It is significant that there was no indication by Lare to Bontempo that he was being terminated for cause until after the threat of litigation loomed.

The Court finds that Lare’s actions were oppressive, particularly as they related to the credible testimony that Bontempo would be fired if he did not voluntarily resign and sell his shares of Quotient stock. Bontempo’s reasonable expectations were that this start-up company would employ him, that he would participate (as a stockholder) in the company’s profit distributions and that he would not be terminated for subjective reasons. Bontempo was more than a mere employee of Quotient—he was, in all respects, a founding member of the company and made significant contributions to the company’s later successes. (Emphasis added.) Mr. Lare and Quotient fought these points at trial, but neither challenges the circuit court’s conclusions now.

The harder part comes in evaluating the relief the circuit court awarded in connection with this count. Mr. Bontempo argues that despite finding oppressive conduct, the circuit court effectively gave him no relief. He argues that the court found that Mr. Lare had no cause to terminate him, but awarded no damages for his lost employment, and limited ¹¹⁷ his recovery only to an accounting and post hoc distribution that would have been required anyway. We disagree that the court abused its discretion by fashioning the relief in this manner, but it takes a few steps to explain why.

Edenbaum , which bears a strong structural resemblance to this case, frames our analysis. In that case, two