LACBA Says Bylaws Were Validly Amended in Closed Session

Friday, June 2, 2017

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LACBA Says Bylaws Were Validly Amended in Closed Session

By a MetNews Staff Writer

The Los Angeles County Bar Association is taking the stance that six members of its 28-member Board of Trustees had the power to amend the bylaws on-the-spot, in a closed session, to permit a restaging of the 2017 election of officers and trustees.

LACBA’s filing of its opposition to a preliminary injunction—to be heard June 13—is the latest round in litigation to determine if the Nominating Committee’s Feb. 27 slate, which drew no opposition by the March 22 deadline for creating candidacies through nominating petitions, was validly elected, as the plaintiffs in Booth v. LACBA contend. The new election was called for, on a vote of 6-5, based on alleged breaches of confidentiality on the part of members of the Nominating Committee.

Most of the trustees, including all members of the Nominating Committee, had been recused, some forcibly, resulting in what two sections have labeled a “rump board” acting on April 26.

Los Angeles Superior Court Judge James Chalfant on May 16 denied a temporary restraining order, one basis being that the election process was not completed because LACBA President Margaret Stevens failed to order one of the co-interim chief executive officers to cast a certifying ballot, on March 23, for the unopposed slate, as required by a bylaw. An amended complaint seeks an order to Stevens to perform that duty.

Outgoing LACBA General Counsel Clark Brown told Chalfant at the May 16 hearing that the bylaws, which specify dates for the various steps in the election process, had been amended on April 26 to permit a new timetable. The amendment does not appear in the bylaws on LACBA’s website, and a May 18 declaration from Trustee Brad S. Pauley, who was present at the April 26 executive session, said that no such action was taken.

Chesler’s Declaration

However, declarations attached to LACBA’s opposition to a preliminary injunction, filed Wednesday, say it was. Trustee Natasha R. Chesler, who was at the session, said in a declaration:

“I recall various Trustees stating that we could not just pass a resolution with new dates for the relevant events, but that we also needed to amend the Bylaws. One Trustee proposed that we pass a resolution similar in wording to: ‘The Bylaws shall be amended to the extent necessary to accomplish the goal of re-convening the Nominating Committee and allowing for a contested election, should that be necessary.’ Another Trustee objected that this proposed resolution was not specific enough. There was discussion that we were not substantively amending the Bylaws but only adjusting the dates specified in the Bylaws. Based on the discussions, including disagreements about how to accomplish the goal, a motion was made to ‘redo’ the nomination process, including to amend the dates in the Bylaws…”

Art. XII, §1 of the bylaws provides:

“Any twenty-five (25) members or any five (5) Trustees of the Association may file with the Chief Executive Officer a written proposal for amendment of these Bylaws or any Bylaw of the Association. The Chief Executive Officer shall promptly submit a copy of each such written proposal for amendment of these Bylaws or any Bylaw to each Trustee. Except as provided in Sections 2 and 3 of this Article, at any meeting thereafter the Board of Trustees by majority vote of the quorum present may adopt or reject such proposed amendment of these Bylaws or any Bylaw or may amend the proposal and adopt or reject it as thus amended.”

No Exclusive Procedure

However, the opposition declares, that is not the exclusive means of effecting a bylaw change. It says:

“Here, plaintiffs have not alleged that Article XII’s formal amendment process is the exclusive means of revising the Bylaws. Section 9 of the same Article empowers the Board to ‘adopt by resolution such procedures as may be necessary to implement the provisions of Article XII.’…Similarly, Article 1, Section 4 provides that ‘the Association is intended to have all power and authority necessary or incidental to achieving the purposes of the Association.’…Given the decision to put in place a new nomination and election process that would conclude by July 1, these Bylaw provisions empowered the Board to revise the Bylaws by majority vote.”

The opposition—prepared by lawyers at Irell & Manella, who have substituted in for Brown, whose last day at LACBA is today—went on to say:

“Second, assuming arguendo the Board’s resolution revising the Bylaws was not in full compliance with corporate formalities, the Board’s action was nevertheless sufficient to allow the second election process to proceed. An alleged failure to comply with formal requirements in a corporation’s bylaws does not, on its own, constitute the fraud, bad faith, or overreaching necessary to rebut the business judgment rule’s application.”

The opposition argues that actions taken were taken in good faith at the April 26 executive session and that the actions “even if mistaken, are still entitled to the protections of the business judgment rule.”

The opposition does not put forth any legal justification for Stevens declining to take the action on March 23 that is prescribed by Art. VII, §4 of the bylaws. It provides that if no nominating petitions are filed by the deadline, the following day, “the President shall instruct the Chief Executive Officer to cast a ballot” for the Nominating Committee’s nominees, “thus unanimously electing all candidates.”

In a declaration, Stevens did not point to any authority for her omission. She said:

“Because of the breaches of confidentiality during the nomination process. I did not certify the nominees as winners of the election with either of LACBA’s acting Co-Interim CEOs Clark Brown and/or Bruce Berra.”

In explaining her concerns, she said:

“On February 28. 2017. LACBA publicly announced the nominees chosen by the Nominating Committee for the 2017-2018 term. Immediately after this announcement, one nominee and deliberations about him were printed in the Metropolitan News. I also began receiving calls and emails from concerned members, asking why the process was not confidential this year. Some of these emails revealed that the names of the nominees and the substance of the Committee’s deliberations were known outside of the Nominations Committee.”

The opposition did say that the plaintiffs—LACBA’s senior vice president, vice president, a former president, two trustees, and a candidate for trustee—are not entitled to an order to Stevens to direct that the Feb. 27 nominees be elected because Chalfant would lack jurisdiction to issue such an order. While alluding to a court’s power to issue a writ to a corporation or corporate officer, the opposition says, the plaintiffs have not filed a writ petition.

The plaintiffs’ counsel, Joel A. Goldman of Clark and Trevithick, did not respond to an email querying if a writ petition will be filed.

The opposition points out that a second nominating committee was formed and that it nominated the Feb. 27 slate, and noted the prospect that the candidates will, again, not be challenged.

It argues:

“LACBA will suffer substantial and immediate harm if enjoined. To order LACBA to now declare the prior nominees the winners of a process that it considers tainted without finishing the processes approved by the Board and currently underway would: (1) undermine the integrity of LACBA and its election rules, including the Confidentiality Agreement signed by all the Nominating Committee members; (2) harm the public and LACBA members’ confidence that LACBA elections proceed untainted and free of outside influence; (3) condone the conduct that resulted in the non-recused Board’s decision; (4) unnecessarily cast aspersions on the outside investigation and LACBA leadership; and (5) potentially impede the ability of the incoming officers to fulfill their duties. Given these circumstances, it would be beneficial for the new slate to come into office in the ordinary course rather than be imposed by the Court.”