SANTA CLARA — A plaintiff must pay almost $2 million in attorney fees to the defendant over the absence of fee entitlement in a stock purchase agreement.
Now that the breach of contract and fraud claims against plaintiffs Mordechay Beck and Luca Bovio Ferassa are certain, defendant and owner of NoBug Consulting Inc., Moshe Shalev, has been awarded $1.79 million based on a stock purchase arrangement fee clause. In an opinion delivered March 20 by Sixth Appellate District Associate Justices Eugene M. Premo, Frankline D. Elia and Nathan D. Mihara, the court modified a judgment to remove a fee reward as a matter of law because Beck’s recovery was based on an oral agreement that does not mandate fee provisions for stock acquisition.
The argument dates back to 1999 when NoBug was incorporated by Shalev, who then brought on Ferassa and then Beck to help establish the company in Romania. An engineer with little business experience, Shalev asked Beck for assistance in attaining three Romanian engineers to help build the company overseas. Because Beck couldn’t raise any cash assistance, he offered management and finance advice and eventually became NoBug chairman of the board of directors in 2000.
Simultaneously, Shalev served as CEO and president and agreed Beck could purchase 10 percent of NoBug’s 5 million outstanding shares. Hiring counsel Einat Meisel to write the agreement, Beck understood he had to purchase the stocks to be part owner. According to the opinion, Beck “expressed the belief” in his deposition that he forwarded a check for the stock purchase around the end of 2000 or start of 2001, however he could not show proof that he did.
Beck claimed that all parties assumed he had stock until Shalev told him he did not in 2007. That is when Beck claimed to have obtained a copy of the agreement from Ferassa that was signed and sent to Shalev along with check for 500,000 shares. NoBug claims it has no record of said agreement or check.
Beck was NoBug's chairman of the of board chairman until 2008, when he and Ferassa charged breach of contract and fraud among other actions against Shalev. Shalev said it was Beck who committed breach of oral contract and fraud when he failed help build up NoBug in Romania.
Beck wanted compensation of the attorney fees he had spent in his capacity as board chairpman in defending himself and Ferassa from complaints against NoBug, but he didn't get it. On the contrary, the court ruled Beck and Ferassa must "pay [the] defendants’ costs and fees" of approximately $1.7 million.