Judge Chalfant Denies TRO in Action Against LACBA

Wednesday, May 17, 2017

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Judge Chalfant Denies TRO in Action Against LACBA

By a MetNews Staff Writer

War continues to rage over whether a second election of 2017-18 Los Angeles County Bar Association officers and trustees is to continue, or is pointless because a valid election has already been completed, with a judge yesterday giving a victory in the first skirmish to the faction favoring a new election by denying a temporary restraining order.

Los Angeles Superior Court Judge James Chalfant denied the TRO in Booth v. LACBA on the ground that no election has yet been competed because LACBA’s chief executive officer did not announce the outcome of the initial election process.

Art. VII, §4 of the bylaws sets forth that “[i]f the number of candidates for each position to be filled at the annual election is equal to the number of positions to be filled”—that is, if no one has become a challenger to a Nominating Committee candidate by filing a timely petition with 100 or more signatures of members—“then the President shall instruct the Chief Executive Officer to cast a ballot for those nominated on the next business day after the deadline for filing additional nominations pursuant to Section 3 of this Article, thus unanimously electing all candidates.”

None of the Nominating Committee’s candidates for the three officer positions and nine trustee spots was challenged by the 5 p.m. deadline on March 22 but, under Chalfant’s ruling, the failure to observe Art. VII, §4 meant that no election took place.

Whether LACBA President Margaret P. Stevens can now be compelled to so instruct one of the co-acting chief executive officers to cast a ballot for the Nominating Committee candidates, and that person can be compelled to comply, was unclear yesterday, as was the prospect of President-Elect Michael E. Meyer proceeding to perform the duty if Stevens declines to do so.

Stevens Comments

Stevens said, in a statement yesterday:

“It is a sad day when Officers and Trustees resort to a lawsuit to resolve our differences, rather than setting the example on how we resolve this challenging situation. The Court was not persuaded by the Plaintiffs’ claims of urgency or harm, and found no reason to interfere with the Board’s decision to reconvene the Nominating Committee. This ruling is consistent with the non-recused Board of 11 Trustees finding that the nomination process was severely compromised, and decided the most fair and reasonable response would be to re-convene the process. I stand behind the integrity with which the Board acted to correct a tainted process, which was no reflection on the merits of the candidates.

“I understand that some may disagree with this result and have requested to see the attorney-client privileged report, which I have not seen either. My hope is that the plaintiffs will consider what is in the best interest of LACBA, and work with me, the non-recused Board and outside counsel going forward.”

Former LACBA President Charles E. Michaels commented:

“It was a strange ruling because the power to declare the election completed was in the hands of the LACBA president and CEO who failed to follow the mandated LACBA process.”

Michaels added:

“While we lost on the TRO, this fight is far from over....We regret having this fight, but the principles and values involved in this fight are worth fighting for.”

Corporations Code Section

The decisive battle may be yet to come. The complaint, filed Monday, seeks a confirmation, pursuant to Corporations Code §7616, that the Nominating Committee’s slate of candidates were elected.

That section, applicable to nonprofit mutual benefit corporations, such as LACBA, in ¶(a) declares:

“Upon the filing of an action therefor by any director or member or by any person who had the right to vote in the election at issue, the superior court of the proper county shall determine the validity of any election or appointment of any director of any corporation.”

It says in ¶(c):

“Upon the filing of the complaint, and before any further proceedings are had, the court shall enter an order fixing a date for the hearing, which shall be within five days unless for good cause shown a later date is fixed….”

No hearing has been slated on the validity of the election which the plaintiffs contend occurred, but a hearing on an application for a preliminary injunction is set for June 13.

A newly constituted nominating committee was slated to meet Monday night, but the meeting was cancelled, in apparent reaction to the filing of the lawsuit that afternoon. A meeting was previously scheduled for tomorrow night, and it is not known if it will proceed.

Under the schedule for the second election, if there are contested seats, the election will conclude on June 30, one day before officers and trustees are to take office. No installation dinner is planned.

Reason for Action

The election results were nullified based on the conclusion that there were breaches of confidentiality in connection with the election. On March 1, the MetNews told of Immediate Past President Paul Kiesel’s ill-fated effort to persuade Nominating Committee members to choose Michael Lindsey for the post of president-elect—which he lost last year in a contested election—and spurn incoming President Michael E. Meyer’s call for the nomination of Brian Kabateck.

That article appeared two days after the Nominating Committee concluded its work. (The information was reported in the Daily Journal on March 3.)

As recited in a statement on the LACBA website:

“At the March 22, 2017, Board Meeting, LACBA President Margaret P. Stevens informed the Board of Trustees that there had been a breach of confidentiality on the Nominating Committee, which had been reported in the Metropolitan News, and that she had received a number of calls from Nominating Committee members, Trustees, members, and other stakeholders questioning the integrity of the process. Members of the Nominating Committee and one other Trustee voluntarily recused themselves at the March 22 meeting.”

The statement tells of the recusal of Nominating Committee members, the appointment of a task force to probe breaches of confidentiality, and consideration of the findings at the April 26 Board of Trustees meeting by the non-recused trustees, in executive session. It has been learned that the vote was 6-5 in favor of staging a new election.

(An account of the process by Treasurer Duncan Crabtree-Ireland, which appeared as a letter-to-the-editor in the Daily Journal on Monday and was distributed by email to LACBA members late that afternoon, appears below, along with a critique of it by Trustee Bradley Pauley, chair of the Appellate Courts Section.)

Shift in Judges

Upon the filing of the action on Monday, the case was assigned to Department 82, presided over by Judge Mary Strobel. Yesterday, she recused herself and the matter was shifted to Judge Joanne O’Donnell in Department 86.

LACBA disqualified her pursuant to Code of Civil Procedure §170.6, and the attorneys were then sent to Chalfant, in Department 85.

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POINT AND COUNTERPOINT

Safeguarding Integrity of the Election Process

By Duncan Crabtree-Ireland

(The writer is treasurer of the Los Angeles County Bar Association. His statement appeared Monday in the Daily Journal as a “letter to the editor” and was then disseminated by email to LACBA members.)

Much has been reported and discussed within the Los Angeles legal community concerning the Los Angeles County Bar Association’s decision to redo the selection process of its 2017-2018 leadership positions. On behalf of LACBA, I believe it is necessary to set the record straight and provide the facts.

First and foremost, LACBA has a 140-year history within the Los Angeles legal community of adhering to the highest ethical standards. So when evidence surfaced that confidentiality was breached in LACBA’s leadership selection process—which was explicitly designed to be a confidential process and indeed involved written confidentiality agreements by the participants—the organization acted responsibly and swiftly.

LACBA immediately established a neutral three-member investigatory task force and retained outside counsel, Matthew Umhofer of Spertus Landes & Umhofer LLP. After lawyers from O’Melveny & Myers joined the team pro bono, the task force and outside counsel spent over 100 hours looking at documents and interviewing members to determine whether and to what extent confidentiality was breached in the leadership selection process. When the Board reviewed the task force’s findings, a non-involved Trustee moved that those involved in the nominating process be recused, and that motion passed.

The evidence considered by the Board persuasively convinced them that the confidentiality of the leadership selection process was indeed compromised in several different ways, and written confidentiality agreements were breached. This evidence led the Board to decide to start over with a new nomination process featuring additional protections. This decision in no way reflects any judgment on the slate selected by the nominating committee, nor on any of the potential candidates. Rather, it reflects the Board’s commitment to the integrity of the process by which LACBA’s leadership is selected.

The Los Angeles legal community can be proud that its professional non-profit association acted swiftly and decisively to protect the integrity and reputation of its election process. Unfortunately, some have drawn conclusions that are not accurate nor based on actual facts. In the interest of the integrity of LACBA’s elections and the confidence of its membership, LACBA will move forward with its nomination process to determine a slate of Officers and Trustees for the next bar year of 2017-2018.

While it has always been LACBA’s philosophy to maintain a level of decorum within our organization—avoiding media engagement regarding association business – we made the decision to take a more proactive role to correct misinformation as the organization moves forward with its nomination process to determine a slate of Officers and Trustees for the next bar year of 2017-2018. As you know, integrity is the backbone of our profession and essential for instilling public and member confidence, which is why LACBA will continue to work diligently to protect the integrity of the organization’s election process.

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Crabtree-Ireland Creates Misleading Impressions

By Bradley S. Pauley

(The writer is a partner in Horvitz & Levy, LLP. He was elected last year as a LACBA trustee on the reform slate. As chair of the Appellate Courts Section, he is active in the Council of Sections which sponsored the reform ticket.)

This is a response to Los Angeles County Bar Association Treasurer Duncan Crabtree-Ireland’s article in the Daily Journal on May 15, 2017, in which he purports to “set the record straight and provide the facts” regarding the Board of Trustees’ decisions to invalidate the Association’s recent election and to re-start the nomination and election process for 2017-2018 leadership positions. As a Trustee, there is much I cannot discuss about the process because it involved LACBA’s outside counsel and has been declared privileged and confidential. But based on what I can share, Mr. Crabtree-Ireland’s account of recent events warrants a response because it gives a misleading impression of open, transparent, proper, and deliberative corporate governance. Perhaps most disturbingly, LACBA management has directed the trustees, myself included, not to discuss any of this with anyone. In their view, it seems, only Mr. Crabtree-Ireland is permitted to “set the record straight and provide the facts.” Well, I dissent.

To begin, Mr. Crabtree-Ireland writes that “evidence surfaced that confidentiality was breached in LACBA’s leadership selection process.” This is most likely a reference to a March 1, 2017, article in the Metropolitan News-Enterprise which discussed that, in late February, a former LACBA President had unsuccessfully backed another former bar leader for the position of President-Elect, and that a different candidate was chosen. The MetNews article did not state whether the former President’s support and related statements had occurred as part of the confidential proceedings of LACBA’s Nominating Committee or elsewhere. Nor did the article disclose the source of the information. So Mr. Crabtree-Ireland’s assertion that “confidentiality was breached” was one plausible interpretation of the evidence, but it was not the only reasonable interpretation.

Mr. Crabtree-Ireland next asserts that LACBA responded “swiftly” to the assumed breach, “immediately establish[ing] a three-member task force” to look into the matter, and retaining former federal prosecutor Matthew Umhofer as outside counsel. That characterization may stretch the terms “swift” and “immediate” beyond their appropriate use. In reality, three full weeks passed between the publication of the MetNews article on March 1 and the actions Mr. Crabtree-Ireland describes, which occurred at the Board of Trustees meeting on March 22.

But the lapse of time is not the only fact that Mr. Crabtree-Ireland omits. Of far greater import is his failure to discuss the lack of notice or involvement of the Board of Trustees in this process. Between March 1 and March 22, the Board was not made aware that certain LACBA officers, such as LACBA President Margaret Stevens, were concerned about an alleged breach of confidentiality in the nomination process. Indeed, even the Board’s written agenda for the March 22 meeting, which was drawn up weeks after the MetNews article, made no mention of it. As a result, the Trustees were unnecessarily blind-sided at the March meeting by this entire controversy and by the decision of others within LACBA leadership to retain a white-collar criminal lawyer to investigate the matter. To say that this surprise call for an investigation under the aegis of a former federal prosecutor threw the Board off balance and disrupted its deliberative processes would be a gross understatement.

Next, Mr. Crabtree-Ireland discusses the conduct and outcome of the investigation conducted by outside counsel, under the supervision of the three-member task force, and the report they made to the Board of Trustees at its April 26, 2017 meeting. Mr. Crabtree-Ireland’s description of the April Board meeting paints an inaccurate picture in a couple of key respects.

He writes that “[w]hen the [B]oard reviewed the task force’s findings, a non-involved trustee moved that those involved in the nominating process be recused, and that motion passed.” This is not accurate, because it suggests the whole Board had been involved in the deliberations up until the April 26 Board meeting and were present to receive the report of the task force and outside counsel. But in reality almost all of the 16 recused Board members were recused 35 days earlier at the March 22 meeting, when this breach of confidentiality issue was first raised, and before the Board had any time to deliberate about the propriety of such recusals. Those Board members were not present for the relevant portions of the March and April meetings and certainly did not hear and consider outside counsel’s report.

Mr. Crabtree-Ireland’s description of the Board’s April meeting also gives me pause because it suggests a slow and deliberative process in which the Board had plenty of time to “review” the “findings” of the task force and outside counsel. But in fact the Board received no advance notice of those findings. No confidential written report—or even a summary of key findings—was circulated to the Board in advance of the meeting. Instead, in a hurried manner reminiscent of the March meeting, moments after the findings were presented the Board was called upon to make the momentous decision whether to invalidate LACBA’s recently completed election.

Regarding that decision, Mr. Crabtree-Ireland states that the evidence presented by outside counsel convinced “the [B]oard” that the confidentiality of the nomination and election process had been “compromised in several different ways, and written confidentiality agreements were breached.” As a result, he writes, “[t]his evidence led the Board to decide to start over with a new nomination process featuring additional protections.” I would add two important points that Mr. Crabtree-Ireland omitted. First, he does not state by whom confidentiality was found to “compromised,” and it should be noted that the decision has been made that such findings will remain privileged and confidential, at least for the time being. Second, after all of the recusals, just 12 of the 27 members of “the Board” were present and available to cast a vote on this important issue.

As a staunch advocate for responsible corporate governance at LACBA, these events cause me grave concern. I am concerned that the Board of Trustees has not been properly advised of events as they unfolded. I am concerned whether the actions of the non-recused Board members—which, in my view, were taken without due deliberation—conform to LACBA’s Bylaws or the Corporations Code, particularly where the outcome of a corporate election is at stake. I am concerned that those likely to be penalized by the decision to nullify the 2017 election are the highly qualified attorneys who volunteered time from their busy schedules to serve their colleagues, their community, and LACBA.

Perhaps most of all I am concerned by the continued prevalence of a culture at LACBA that is opposed to the free flow of information. That culture was on display recently when LACBA management would not release financial information for a long period, despite members’ demands. It was on display last year when LACBA management rather cynically directed that LACBA’s Section listserves not be used in connection with the 2016 contested election. And it is on display here in the context of the nullification of LACBA’s 2017 election, where the other trustees and I have been directed by LACBA management to make no public comments, and to defer entirely to the views of Mr. Crabtree-Ireland. Sadly, those who propagate that culture of secrecy fail to perceive the great harm it has done and continues to inflict on this historic association.