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RECENT COURT DECISION Protects Directors from SLAPP-Happy Litigants
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any board decisions are made with unanimous support.
Inevitably, there are times where
reasonable board members will disagree, and, in such cases, there will be winners and losers. Usually, these decisions are simply recorded in the minutes and the board members move on to the next agenda item. Ideally, the losers will support the consensus. Sometimes, however, a split decision can create such division, contention and strife that the losing directors simply cannot move on. Such was the case in a recent published decision, where directors on the losing end of a vote, sought to have their way by taking their fellow directors to court.
In Lee v. Silveira (2016), three board members on the Friars Village Homeowner Association board (in San Diego) personally sued the remaining six board members (of a nine member board) for voting in a manner with which the plaintiffs did not agree. Te subject matter of the votes were fairly mundane – approval of roofing and other maintenance contracts, approval of the management contract, and the appointment of officer positions. In sum, the six named director defendants were sued for no basis other than the manner in which they voted on these issues. In response to the lawsuit, the director defendants filed a special motion to strike the lawsuit pursuant to California’s anti-SLAPP statute.
“SLAPP” is an acronym for “strategic lawsuits against public participation.” SLAPP suits are lawsuits that target people for making public statements in a presumed effort to intimidate or silence
them. California’s anti-SLAPP law allows the court to quickly dismiss a lawsuit and to award the defendant attorney’s fees where the lawsuit targets conduct that involves a defendant’s exercise of a constitutional right, such as a director’s participation in a vote. If a claim is based on constitutionally protected conduct then the plaintiffs must prove a likelihood of ultimately prevailing on the merits of the lawsuit or their claim will be dismissed.
In Lee v. Silviera the trial court mistakenly denied the defendants’ anti-SLAPP motion because it focused on the form of the complaint rather than the alleged conduct (i.e., the act of voting on board resolutions). Te Court of Appeal for California’s Fourth District reversed the lower court’s denial in Lee, holding that California’s anti-SLAPP law does require the court to look at the conduct that forms the basis of a claim, and it held specifically that an individual board member’s vote on significant association issues is an exercise of a constitutional right that deserves anti-SLAPP protection.
Te Court
of Appeal further found the plaintiffs’ decision to name the individual board members, rather than the association itself, was evidence that the plaintiffs were targeting the defendants’ expressive rights. It subsequently analyzed the underlying causes of action and concluded that the plaintiffs were not likely to succeed on the merits because what they sought should have been pursued against the corporation (i.e., Friars Village) and not against any individual director. Terefore, it reversed the trial court’s order, with instructions to grant the anti-SLAPP motion and to award defendants their costs.
Te appellate court also distinguished Talega Maintenance Corporation v. Standard Pacific (2014), which the plaintiffs relied upon heavily. Te holding in Talega had denied anti-SLAPP protection to developer representatives that had been appointed to serve as directors on the Talega board. More specifically, in Talega, the association sued former developer appointees for fraud, negligence and breach of fiduciary duty.
Te Talega court denied anti-
SLAPP protection to the developer defendants because the basis of the claim was their inaction (i.e., their failure to speak-up), and because the votes cast by the developer representatives were merely “incidental” to the board action. In Lee, the appellate court distinguished Talega, in largest part, because the matters voted upon by the Friars Village board were hotly debated topics of significant public concern.
In conclusion, board members have a constitutional right to participate in votes on issues important to their communities, and legal attacks against them personally based upon the manner in which they voted enjoy anti-SLAPP protection. While the holding in Lee does not prevent lawsuits against board members altogether, it imposes a significant procedural barrier which board members may be able to use to defend against such challenges.
This article was written and submitted by Frederick T. Whitney, Esq. and Constance
Trinh, Esq. of Neuland, Whitney & Michael APC
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