Monday, April 28, 2014
C.A. Upholds Charity’s Right to Remove Director
By a MetNews Staff Writer
The Court of Appeal for this district Friday upheld the removal of a Los Angeles attorney from the board of a major Southern California charitable foundation, rejecting his claim that the board was barred by statute from ousting him without good cause.
Div. Four affirmed Los Angeles Superior Court Judge Elizabeth White’s dismissal of James M. Donovan’s suit against the Dan Murphy Foundation.
Donovan claimed that a majority of his fellow directors wrongfully voted him off the board in 2009, following a number of disputes. Donovan alleged that assets were mismanaged, that fellow directors refused to provide him with information about investments, that other directors had conflicts of interest, that the compensation of officers had been illegally increased without a vote of the board, and that the board had improperly approved significant unsecured loans.
He filed suit in August 2010. Los Angeles Superior Court Judge Mary Ann Murphy granted the foundation’s anti-SLAPP motion, but Div. Four reversed and sent the case back to the trial court two years ago.
The court held in Donovan v. Dan Murphy Foundation (2012) 204 Cal.App.4th 1500 that the suit was not covered by Code of Civil Procedure Sec. 425.16 because the claims did not implicate free speech or petition activity. Meetings of boards of nonprofit charitable organizations are not “official proceeding[s]” within the meaning of the statute, the court said, and the activities of the Dan Murphy Foundation were not of such widespread public interest that the conflicts among its directors rose to the level of a public issue.
On remand, however, White addressed the merits and concluded that Corporations Code §5222, part of the Nonprofit Public Benefit Corporation Law, gives the board of a public benefit corporation with no members the absolute right to remove a director by majority vote.
Justice Nora Manella, in an unpublished opinion for the Court of Appeal Friday, agreed, writing:
“In sum, as a nonemployee director of a nonprofit public benefit corporation who was voted off the Board by a majority of the directors, appellant has stated no viable cause of action for wrongful removal.”
She also rejected Donovan’s claim that he was entitled to notice.
Donovan, the justice said, cited no statute, case, or bylaw requiring notice, and in any event was present and allowed to speak and to vote on his removal.
Donovan was represented on appeal by Michael J. Glenn of the Law Offices of James M. Donovan and by Horvitz & Levy’s Jeremy B. Rosen. Andrew J. Waxler and Christopher L. Wong of Waxler, Carner, Brodsky and J. Michael Hennigan, Lauren A. Smith, and Peter J. Most of McKool Smith Hennigan represented the defendants.
The case is Donovan v. Dan Murphy Foundation, B246735.
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