In Turner v. Victoria, the Supreme Court today holds that a director of a nonprofit public benefit corporation who sues alleging a breach of the charitable trust or self-dealing by other directors maintains standing to continue the action after the other directors remove her from the board. It’s another case of the court needing to interpret less-than-clear legislative language.
The court’s unanimous opinion by Chief Justice Patricia Guerrero finds the applicable statutes are “susceptible to more than one interpretation,” but ultimately concludes they “do not impose a continuous directorship requirement that would require dismissal of a lawsuit brought under these statutes if the director-plaintiff fails to retain a director position.” To rule otherwise, the court says, “would permit gamesmanship by directors accused of wrongdoing” and would improperly “shift to the Attorney General the [entire] burden of initiating lawsuits aimed at ensuring that nonprofit public benefit corporations serve their charitable purpose.” (The opinion notes “there are more than 110,000 charitable organizations registered in California, holding assets of over $850 billion.”) The court finds pertinent legislation to be “significantly different in the nonprofit and for-profit contexts.”
The court reverses the Fourth District, Division One, published opinion. Today’s decision is consistent with the Second District, Division Seven, decision in Summers v. Colette (2019) 34 Cal.App.5th 361, with which Division One had disagreed. There was no petition for review in Summers.