Corporations

Corp. Code 5142 and 5223 provide that a director of a nonprofit corporation may sue to enjoin a breach of the charitable trust and/or to remove another director  fraudulent or dishonest acts, gross abuse of authority, or breach of duty.  This decision holds that since the two statutes do not use the instituted or maintained" language used in Corp. Code… Read More

Postal Instant Press, Inc. v. Kaswa Corp. (2008) 162 Cal.App.4th 1510 rejected outside third party reverse piercing of the corporate veil to make the corporation liable for one of the shareholder's personal debts out of concern for the corporation's other shareholders and creditors.  This case was distinguishable as it involved a suit by one member of an LLC against the… Read More

Appeal of an order interpreting a nonprofit corporation's by-laws governing annual election of its directors was not moot though several elections occurred after the suit was filed because the judgment had a continuing effect on the corporation's elections and was subject to repetition but evading review. Read More

Plaintiff homeowners association is a nonprofit corporation.  It held a recall election at which a majority of the votes cast, but not a majority of eligible votes, were in favor of the recall.  The corporation's articles required a majority of eligible voters to recall board members, but that provision is invalidated by Corp. Code 5034, 7222(a)(2), 7151(e), allowing a majority… Read More

This decision affirms an order disqualifying plaintiff's attorney in a case arising from a dispute among the three principals of a closely held corporation.  Plaintiff sued the other two principals as one of those defendants' wives.  Using the corporation's computers, plaintiff accessed emails the wife sent her husband over the corporation's email server.  The decision holds that the trial court… Read More

Though designated a person most qualified in response to a deposition subpoena on a corporation, the corporate representative is an ordinary lay witness whose testimony is admissible at trial only if based on her personal knowledge.  Here, a PMQ offered a declaration in support of defendant's summary judgment motion full of statements about defendant's practices decades before the witness was… Read More

Corp. Code 1604 provides for an award of reasonable attorney fees to a shareholder if the corporation refuses "without justification" his demand to inspect corporate records.as required under Corp. Code 1601.  This decision holds that "without justification" means at least not well grounded in fact and law.  Here, the trial court did not abuse its discretion in denying the shareholder… Read More

In this case, ZF sued TAT claiming that the director TAT appointed to ZF's predecessor, ZF Micro Devices, intentionally destroyed that corporation by disparaging its management and working behind the scenes to undermine its efforts to obtain funding.  This decision holds that ZF's claim is legal and must (at ZF's demand) be tried to a jury.  A director's duty to… Read More

The alter ego doctrine can be applied to municipal corporations if the factors allowing the doctrine's application to private corporations are satisfied.  Here, plaintiff alleged sufficient facts to show it would be inequitable to recognize the Reclamation Authority's separate existence since that City formed the Authority specifically to avoid liability for remedying the environmental pollution on the site the City… Read More

Owner of a 1% interest in an LLC sued to dissolve the LLC.  Holders of less than 50% of the LLC intervened and moved for a mandatory buyout of the plaintiff's interest under Corp. Code 17707.03. By then owners of a majority of shares (including plaintiff) voted to dissolve the LLC under Corp. Code 17707.01.  This decision holds that the… Read More

Plaintiff recovered a $157,000 judgment against defendant's corporation, then brought this independent suit against defendant claiming he was the corporation's alter ego and liable for the judgment against it.  On the first appeal from judgment on the pleadings against plaintiff, the court held that a plaintiff may pursue an independent action against the alter ego based on the judgment against… Read More

A Delaware corporation's bylaw requiring any shareholder derivative suit be brought in Delaware Chancery Court is enforceable.  Such a forum selection clause does not offend any federal statute or public policy. Read More

To maintain a derivative action on behalf of a limited liability company under Corp. Code 17709.02, just as required for a shareholder to bring a derivative action on a corporation's behalf under Corp. Code 800, the plaintiff must maintain continuous membership in the limited liability company from the time of the alleged wrongful acts through completion of the derivative action. … Read More

Defendant, a Delaware corporation with headquarters in California, had a federal forum provision in its articles of incorporation which provided that any claims against it under the federal Securities Act of 1933 had to be brought in federal, not state, court.  This decision affirms an order dismissing without prejudice a Securities Act suit that one of the corporation's shareholders brought… Read More