Oak View Little League, Inc. v. Ojai Valley Baseball League CA2/5 ( 2021 )

Filed 3/9/21 Oak View Little League, Inc. v. Ojai Valley Baseball League CA2/5
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FIVE
OAK VIEW LITTLE B306353
LEAGUE, INC.,
(Los Angeles County
Plaintiff and Super. Ct. No.
Respondent, 56-2020-00540894-CU-BT-VTA)
v.
OJAI VALLEY BASEBALL
LEAGUE et al.,
Defendants and
Appellants.
APPEAL from an order of the Superior Court of Los
Angeles County, Matthew P. Guasco, Judge. Reversed.
Pettit Kohn Ingrassia & Lutz & Dolin, Andrew I.
Chung, Mihret Getabicha, for Defendants and Appellants.
Trusted Legal, Naomi Dewey, for Plaintiff and
Respondent.
__________________________
INTRODUCTION
The trial court granted a preliminary injunction
directing defendants and appellants Ojai Valley Baseball
League, Ryan Braget, and Adriana Winters (defendants) to
relinquish the assets of plaintiff and respondent Oak View
Little League (plaintiff) back to plaintiff. Because the
individuals purporting to be plaintiff’s board of directors
lacked legal authority over plaintiff, we reverse.
FACTUAL AND PROCEDURAL BACKGROUND
A. Youth baseball in Ojai Valley
Oak View is a town about five miles south of Ojai
Valley. Oak View Little League (plaintiff, the local league,
2
or the league)1 is a California nonprofit corporation2 that
has been affiliated with a national organization, Little
League Baseball, Inc. (Little League), since the early 1960s.
This case involves a dispute between two different groups of
parents, both of whom purport to be acting on behalf of the
local league.
The local league adopted a constitution in 2004, which
serves as its by-laws and governing document. Under the
constitution, the board of directors is responsible for the
1 While the local league has always been a single
corporate entity, it has been known at different times as
Oak View Little League, Ojai Valley Little League, and Ojai
Valley Baseball League. During the course of events
pertinent to this opinion, the Secretary of State received
several name change forms, changing the name of the
corporation first from Oak View Little League to Ojai
Valley Baseball League, then back to Oak View Little
League, and then back to Ojai Valley Baseball League.
2 “Under the Nonprofit Corporation Law (Corp. Code,
§ 5000 et seq.) there are three principal types of nonprofit
corporations: a public benefit corporation (Corp. Code,
§§ 5110–6910), a mutual benefit corporation (Corp. Code,
§§ 7110–8910), and a religious corporation (Corp. Code,
§§ 9110–9690).” (Gantman v. United Pacific Ins. Co. (1991)
232 Cal.App.3d 1560, 1566, fn. 4.) Nothing in the record
clarifies whether the local league is a public benefit or
mutual benefit corporation, but none of the distinctions in
the statutes applicable to those two types of nonprofit
corporations affects our analysis here.
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management of the property and affairs of the local league.
(2004 Const., Art. VI, § 1.) Different articles of the
constitution address topics like membership, meetings,
electing directors, affiliation with Little League, and
finances. The constitution reflects the close affiliation with
Little League, providing: “The Local League shall devote
its entire energies to the activities authorized by such
charter and it shall not be affiliated with any other program
or organization or operate any other program.” (2004
Const., Art. X, § 1.) Little League’s rules and regulations
are binding on the local league, and any local rules or by-
laws adopted by the board of directors cannot conflict with
Little League’s rules or the constitution. (2004 Const., Art.
X, §§ 2, 3.) While the constitution can be amended by a
majority vote at a noticed meeting, all proposed
amendments must be submitted to Little League for
approval before implementation. (2004 Const., Art. XII.)
The constitution requires the local league to apply for
a Little League charter annually, and to do all things
necessary to maintain the charter. (2004 Const., Art. X,
§ 1.) The 2019 charter agreement between the local league
and Little League (2019 charter) covers a wide variety of
topics, including data privacy, a non-discrimination clause,
and an agreement to pay an annual affiliation fee. The two
most relevant provisions concern ownership of funds and
property and dispute resolution. Under the charter
agreement, the local league agrees that “Little League is
the sole and exclusive owner of all funds, property and
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trademarks acquired by [the] organization at any time in
the name of Little League and that all of these funds and
property shall be devoted solely and exclusively to Little
League’s purposes.” If any dispute arises in connection
with the charter, the local league agrees to accept the
decision of the Charter Committee as final and binding,
although the local league may seek reconsideration and
personally present their position at a meeting with the
Charter Committee.
On October 17, 2019, the local league membership
elected nine individuals3 to serve on the Board of Directors.
In December 2019, Little League purported to appoint a
new eleven-member interim board4 for the local league,
after a dispute arose concerning whether the local league
should affiliate with a youth baseball program other than
3The nine individuals are Paul Barnard, Gina Braget,
Ryan Braget, Wade Bentivolio, Adam Dutter, Jordan
Larson, Leah Larson, Greg Miller, and Adriana Winters.
Ryan Braget and Adriana Winters are named as individual
defendants in this case.
4 Little League appointed the following individuals:
Nicole Kennedy (League President), Laura Loes (League
Player Agent), Brian Aikens (League Treasurer), Tom
Marcus (League Baseball Vice President), Justine Cleak
(League Officer), Gary Culver (League Officer), Barbara
Kennedy (League Safety Officer), Delaney Loes (League
Secretary), Karisa Melendez (League Officer), Jeff Mendoza
(League Umpire-in-Chief), and Mark Vanderwyk (League
Officer).
5
Little League. For the sake of clarity, we will refer to the
board elected on October 17, 2019 as Board A, and to the
interim board appointed by Little League in December 2019
as Board B.
B. The local league proposes changes
In the fall of 2019, before Board A was elected, certain
members of the prior board, including defendants Ryan
Braget and Adriana Winters, proposed various changes to
the local league’s structure and constitution, including
changing the league’s name to Ojai Valley Baseball League,
and potentially changing the local league’s affiliation from
Little League to PONY Baseball, Inc. (PONY League). On
November 13, 2019, Board A sought membership approval
to amend the local league’s constitution, change the league’s
name, and whether to charter with Little League or PONY
League. According to one board member’s declaration, the
local league’s membership voted to approve the proposed
changes, including to affiliate with PONY League.
At some point, the names on the league’s bank
accounts were changed to Ojai Valley Baseball League, and
some of the league’s other assets, such as its social media
accounts, a post office box, and equipment, were being used
by a group purporting to operate the local league as Ojai
Valley Baseball League.
6
C. Little League responds
On November 18, 2019, Little League’s West Region
Director sent an e-mail to Board A, acknowledging that the
board and community members had expressed interest in
affiliating with a competing organization. The e-mail
reminded the directors that upon dissolution of the local
league, any property remaining after debts and claims were
satisfied must be transferred to an “entity which maintains
the same objectives as set forth” in the league constitution,
pointing specifically to Article II, which states “the Local
League will provide a supervised program under the Rules
and Regulations of Little [L]eague Baseball, Incorporated.”
While the precise timing and mechanism is unclear
from the record, at some point “Little League found that
[Board A] violated their fiduciary duties under the
operative Little League Charter.” Daniel Velte, Little
League’s Senior Director of League Development and
Affiliation, explained in a declaration that (1) any changes
to the 2004 constitution required approval from Little
League; (2) the local league’s board of directors had
authority to adopt further bylaws, so long as the bylaws did
not conflict with Little League’s rules or the constitution;
(3) it was his understanding that the local league did not
adopt any further bylaws; (4) under both the constitution
and the 2019 Little League charter agreement, local league
funds could only be used for Little League activities; (5)
dissolving or renaming the local league was not permitted
7
under the 2019 charter, but required advance notice to
league members and a vote at a general or special
membership meeting.
On December 4, 2019, Velte sent a letter to Board A,
notifying Board A that use of local league assets for
activities not affiliated with Little League was
impermissible. The letter identified league assets as
including member and donor lists, equipment, facility and
gate keys, bank accounts, websites and social media
accounts, and property acquisition documents. The letter
stated: “[Board A] is without power to dissolve or otherwise
disband [the local league] and any such attempt must be
put to a vote of the Members at a General (or Special)
Membership Meeting. Such a meeting requires advance
notice, which you did not provide. The Board and its
Officers cannot vote to remove the assets of the entity (and
Members) to which they owe a fiduciary duty and move
those assets to a new entity. You cannot simply state that
‘Ojai Valley Little Leagues have become Ojai Valley
Baseball League’ and it is so. The Members must vote on
such an action.” The letter purported to quote from Little
League’s Operating Manual,5 regarding conflicts of interest,
5 While the December 4, 2019 and January 10, 2020
letters purport to quote from “Little League’s Operating
Manual,” the manual itself, or photocopies of the relevant
pages, were not included in the trial court’s record. The
excerpts of the Little League Rulebook that are part of the
8
and advising Board A that any board member violating
Little League’s policies was subject to “disciplinary action
including but not restricted to removal or suspension, for
any act, conduct or involvement contrary to the Rules,
Regulations and Policies of the Corporation . . . .” The letter
concluded by directing Board A to “cease and desist in your
use of Little League assets . . . for any purpose other than
for the direct benefit of the Little League program.” An
identical letter was also sent on January 10, 2020. There is
no evidence in the record that Board A ever responded to
either letter.
Little League approved an interim board of directors
for the local league in December 2019, and at the time of
the hearing on the preliminary injunction Little League
recognized Board B as the local league’s board. However,
the members of Board B were unable to move forward with
league activities because the names of the entity controlling
the local league’s assets, such as the league’s bank accounts
and post office box had already been changed to Ojai Valley
Baseball League.
D. Lawsuit and Preliminary Injunction
On March 12, 2020, plaintiff—the local league under
the direction of Board B—filed an ex parte application for a
record do not contain any language giving Little League
authority to remove or replace any members of a local
league’s board of directors.
9
temporary restraining order (TRO) against three
defendants: (1) Ojai Valley Baseball League, identified as
an unknown entity, but presumably under the direction of
Board A; (2) Ryan Braget; and (3) Adriana Winters.
Plaintiff’s complaint alleged that defendants had
improperly converted the local league’s assets by amending
the Constitution, changing the name, and continuing to use
the league’s bank accounts, taxpayer identification number
(tax ID), non-profit status, and other assets. The trial court
partially granted the requested TRO, freezing the league’s
bank accounts.
Defendants opposed issuance of a preliminary
injunction, arguing that there was no probability of success
on the merits because Board B lacked standing to bring
suit, and they could not prevail on their claims of breach of
fiduciary duty, interference with contract, and conversion.
On April 16, 2020, the court extended the TRO to
restrain defendants from engaging in 13 enumerated
activities, including using the local league’s tax ID, bank
accounts, fields, equipment, post office box, website, or
social media accounts. The TRO prohibited defendants
from representing that they were the successors in interest
to plaintiff’s rights and duties, or that plaintiff’s assets had
been transferred to defendants; it also restrained
defendants from filing with the California Secretary of
State or any governmental agency any document
representing that defendants have authority to act on
behalf of plaintiff.
10
On May 14, 2020, the court held a hearing on
plaintiff’s preliminary injunction request. Plaintiff’s
attorney acknowledged that there was nothing in the local
league charter or constitution that gave Little League
express authority to appoint an interim board, but argued
that Little League had implicit authority to do so, based on
the Little League Baseball Rule Book, the local constitution
and charter.
Relying on the declarations and documents submitted
by the parties, the trial court granted a preliminary
injunction, directing defendants to relinquish the local
league’s assets to plaintiff. The trial court reasoned that
the lawsuit was not a derivative action, but one brought by
the local league, because Little League “had the legal
authority to appoint [Board B] the interim board which
authorized this action, thus conferring standing on [the
local league] to bring this action.” The trial court found
that plaintiff had shown it would suffer irreparable harm if
defendants’ actions (operating the local league using
plaintiff’s tax ID, bank accounts, etc.) were not enjoined
pending trial.
Defendants filed a notice of appeal on June 15, 2020.
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DISCUSSION
A. Standard of review
Before issuing a preliminary injunction, a trial court
must “‘evaluate two interrelated factors: (i) the likelihood
that the party seeking the injunction will ultimately prevail
on the merits of his [or her] claim, and (ii) the balance of
harm presented, i.e., the comparative consequences of the
issuance and nonissuance of the injunction. [Citations.]’
[Citation.]” (Law School Admission Council, Inc. v. State of
California (2014) 222 Cal.App.4th 1265, 1280.) “[T]o the
extent that the determination on the likelihood of a party’s
success rests on an issue of pure law not presenting factual
issues to be resolved at trial, we review the determination de
novo. [Citation.]” (14859 Moorpark Homeowner’s Assn. v.
VRT Corp. (1998) 63 Cal.App.4th 1396, 1403; see also Brown
v. Pacifica Foundation, Inc. (2019) 34 Cal.App.5th 915, 925.)
B. Standing/Likelihood of prevailing
Defendants contend that plaintiff cannot establish a
likelihood of success on the merits, first because Board B
lacks standing to sue, and second because Board B did not
meet the requirements for a derivative action. Plaintiff
contends that because defendants had violated the local
league’s constitution and charter, Little League had
authority to remove Board A and fill the resulting vacancies
12
with Board B. Plaintiff further contends that because the
corporation—not Board B as individuals—has filed suit, it is
not necessary to meet the requirements for a derivative
action.6
The question before us is neither whether Board B has
standing nor whether Board B met the requirements for a
derivative action. Rather, the question is whether Board
B—the board that directed plaintiff to file this lawsuit—had
any authority to control the league’s actions, including the
decision to sue defendants. (Corp. Code, §§ 5210 [a
corporation’s activities and affairs are to be conducted under
the direction of the board], 7210 [same].)7 If Board B lacked
6 The reason a corporation is named a nominal
defendant in a derivative action is its refusal to join the
action as a plaintiff. (Patrick v. Alacer Corp. (2008) 167
Cal.App.4th 995, 1004.) “An action is deemed derivative ‘“if
the gravamen of the complaint is injury to the corporation,
or to the whole body of its stock and property without any
severance or distribution among individual holders, or it
seeks to recover assets for the corporation or to prevent the
dissipation of its assets.”’ [Citation.] When a derivative
action is successful, the corporation is the only party that
benefits from any recovery; the shareholders derive no
benefit ‘“except the indirect benefit resulting from a
realization upon the corporation’s assets.”’ [Citation.]”
(Grosset v. Wenaas (2008) 42 Cal.4th 1100, 1108,
fn. omitted.)
7All further statutory references are to the
Corporations Code unless otherwise indicated.
13
such authority, plaintiff’s suit was unauthorized and it
cannot proceed as a matter of law.
This case presents a scenario where two different
boards of directors each contend they have the authority to
act for the local league. Given that there is no dispute that
Board A was duly elected and their terms of office had not
expired at the time Board B sought a preliminary injunction,
Board B can only have corporate authority if Board A was
legally removed and Board B was legally seated. As we
explain below, neither of these requirements were met in the
case before us, and therefore the trial court erred in finding
that plaintiff could prevail on its claims against defendants.
The named plaintiff—the nonprofit corporation Oak
View Little League—is the correct party to pursue claims
against officers, directors, or third parties that have harmed
the organization. (Paclink Communications Internat., Inc. v.
Superior Court (2001) 90 Cal.App.4th 958, 965 [a corporation
may bring an action against its officers or directors, as an
alternative to a derivative suit].) A corporation’s board of
directors has “authority to commence, defend, and control
actions on behalf of the corporation.” (Grosset v. Wenaas,
supra, 42 Cal.4th at p. 1108.) While the lawsuit could also
be commenced as a derivative action, the current lawsuit
does not purport to comply with the statutory requirements
for bringing a derivative action, nor does plaintiff argue that
it is a derivative action. (§§ 5420, 5710, 7420, 7710; 1
Advising Cal. Nonprofit Corporations (Cont.Ed.Bar 3d ed.
2020) § 9.122.)
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A director may only be removed from office before
expiration of the director’s term as expressly provided in the
Corporations Code or the corporation’s by-laws. (1 Advising
Cal. Nonprofit Corporations (Cont.Ed.Bar 3d ed. 2020) § 9.47
et seq.) A director may be removed with or without cause by
a majority vote of the membership. (§§ 5222, 7222.) Under
certain circumstances demonstrating “cause,” a director may
be removed by a vote of the other directors. (§§ 5221, 7221.)
Malfeasance and breach of fiduciary duty are not on the list
of actions constituting cause for removal by directors;
however, a director may be removed from office by court
action, where the superior court finds the director guilty of
fraudulent or dishonest acts or of gross abuse of authority or
discretion with reference to the corporation. (§§ 5223, subd.
(a), 7223, subd. (a).) The Attorney General may initiate or
intervene in an action initiated by another party. (§§ 5223,
subd. (b), 7223, subd. (c).) The Corporations Code specifies
the minimum number of members required to initiate such a
court action, if it is not initiated by a director or the attorney
General. (§§ 5223, subd. (b) [the lesser of 20 members or
twice the number of members authorized under section
5036], 7223, subd. (c) [20 members].)
Corporations Code sections 5220 and 7220 contain
provisions regarding the terms of office, election,
designation, and selection of directors of nonprofit
corporations. Unless the bylaws specify otherwise, a
director’s term of office is for one year. (§§ 5220, subd. (a),
7220, subd. (a).) Directors may only be selected by
15
designation if the articles of incorporation or bylaws specify
a person or entity with the power to designate a director.
(§§ 5220, subd. (d), 7220, subd. (d).) According to the league
constitution, directors are selected by a vote of the
membership. (2004 Const., Art. V, § 6, subd. (b), Art. VI, § 2;
see also § 5056, subd. (a).) The local league holds an annual
meeting at which the members decide the number of
directors to be elected—not less than six—and elects that
number of directors. (2004 Const., Art. V, § 6, subd. (b).) A
vacancy may be filled by a majority vote of the remaining
directors. (2004 Const., Art. VI, § 3.) Nothing in the league
constitution gives Little League authority to designate a
director.
The gravamen of plaintiff’s complaint against
defendants is that defendants diverted local league assets,
violating the league’s constitution and the 2019 charter.
Even assuming those allegations were adequate for a court
action to remove the offending board members, the
prerequisites for such an action were not met because the
case was not initiated by the Attorney General, validly
elected board member, or the minimum number of required
members.8 (§§ 5223, 7223; 1 Advising Cal. Nonprofit
Corporations (Cont.Ed.Bar 3d ed. 2020) § 9.53.) Logically,
8 Plaintiff has not argued that the case was filed by
the members of Board B as individuals, and so we need not
determine whether the minimum number of members, as
set forth in section 5223, subdivision (a), or section 7223 (b),
was met.
16
then, if Board A was not legally removed, Board B lacks
authority to direct the league’s actions.
The only analogous case we have been able to find
involves disputes over church governance. (See, e.g., Classis
of Central California v. Miraloma Community Church (2009)
177 Cal.App.4th 750, 763–768 (Classis).) Applying neutral
principles of law, if the governing documents of a
hierarchical religious organization give a superior religious
body authority to remove and replace members of a
subordinate church’s board of directors, the Corporations
Code does not prevent it from doing so. (Ibid.) There is
evidence in the record here to support the conclusion that
Little League operates as a hierarchical organization, with
Little League at the top of the hierarchy, districts at the
intermediate level, and local leagues operating as
subordinate entities akin to a local church in a hierarchical
religious organization. But, in contrast to the governing
documents in Classis, the governing documents appearing in
the record of this case—namely the league constitution, the
2019 charter, and four pages of the Baseball Rulebook—do
not include a grant of authority to Little League to remove
and replace a board of directors of a local league when the
directors take action in violation of the charter.9
9 We also note that in Classis, the case was filed by
the intermediate organization—the Classis—in the church
hierarchy. Because neither Little League, nor individual
members of the local league, filed this case as a plaintiff, we
17
The trial court erred when it determined that Little
League had legal authority to remove Board A and appoint
Board B. Nothing in the local league’s constitution or the
Corporations Code gives Little League authority to remove
directors before the end of their term of office. Even if
Little League had authority to remove or suspend a board
member, there is nothing in the by-laws or the Corporations
Code empowering it to appoint an interim board. Because
the governing board of directors did not direct the filing of
plaintiff’s lawsuit, plaintiff cannot demonstrate a
probability of success, and so it was error for the court to
issue the preliminary injunction.
In reaching this conclusion, we make no
determination of whether Board A’s actions violated the
local league’s constitution or the 2019 charter, or whether
members of Board A breached their fiduciary duty. Instead,
our decision to reverse the preliminary injunction rests
solely on the fact that at the time of the filing of the
lawsuit, Board A had not been removed, and nothing in the
Corporations Code, the constitution, or the 2019 charter
authorized Little League to appoint Board B. Therefore,
Board B lacked authority to initiate this lawsuit, or indeed
to act in any other respect, on behalf of the local league.
do not address whether they would, as plaintiffs, have
standing to seek to remove and replace board members
through litigation.
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DISPOSITION
The preliminary injunction is reversed. Each party to
bear their own costs on appeal.
MOOR, J.
We concur:
RUBIN, P. J.
KIM, J.
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