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Morcan, Lewis 28
ELECTRONICALLY
FILED
MORGAN, LEWIS & BOCKIUS LLP Superior Court of California,
COLIN C. WEST (SBN 184095) County of San Francisco
colin.west@morganlewis.com 08/30/2017
DAVID M. BALABANIAN (SBN 37368) Clerk of the Court
david. balabanian@morganlewis.com ee eae
LUCY WANG (SBN 257771) Pea
lucy.wang@morganlewis.com
One Market Street, Spear Tower
San Francisco, California 94105-1126
Telephone: +1.415.442.1000
Facsimile: +1,415.442.1001
Attorneys for Defendants and Cross-Complainants
EPISCOPAL SENIOR COMMUNITIES and
SENIOR RESOURCES OF THE WEST
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF SAN FRANCISCO
THE EPISCOPAL CHURCH IN THE Case No. CGC-15-547681
DIOCESE OF CALIFORNIA, a nonprofit
religious corporation, and THE EPISCOPAL MEMORANDUM OF POINTS AND
ak AUTHORITIES IN SUPPORT OF
BISHOP OF CALIFORNIA, a religious DEFENDANT SENIOR
corporation sole, RESOURCES OF THE WEST’S
4 MOTION TO AMEND THE
Plaintiffs, COURT’S JUDGMENT
Vv.
Date: September 26, 2017
EPISCOPAL SENIOR COMMUNITIES, a i a p.m.
nonprofit public health corporation; and epts
SENIOR RESOURCES OF THE WEST, Judge: Hon. A. James Robertson II
formerly known as JTM Communities, a Complaint Filed: — August 28, 2015
nonprofit public benefit corporation, Trial Date: September 29, 2016
Defendants.
And Related Cross-Complaint
DEFENDANT SENIOR RESOURCES OF THE WEST’S
MOTION TO AMEND THE COURT’S JUDGMENT
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Defendant and Cross-Complainant Senior Resources of the West (“SRW”) respectfully
submits this motion, pursuant to Code of Civil Procedure Section 663, to amend this Court August
25, 2017 Judgment.'
I. INTRODUCTION
SRW brings this motion to correct an error in this Court’s August 25, 2017 Judgment
(‘Judgment’), which conflicts with this Court’s July 20, 2017 Statement of Decision. That
Judgment suggests, contrary to this Court’s findings, and the evidence, that the Sponsorship
Agreement requires SRW to have a Bishop’s appointee on its board of directors, and that SRW is
required to have a supermajority vote in order to amend its bylaws with respect to the composition
of its board of directors. That suggestion is inconsistent with the Statement of Decision, and the
evidence.
SRW is not a party to the Sponsorship Agreement. This Court has never found otherwise,
and Plaintiffs did not argue otherwise at trial.
Nothing in the Sponsorship Agreement requires that SRW have a Bishop’s appointee on its
board of directors. This Court has never found otherwise, and Plaintiffs did not argue otherwise at
trial.
In their Complaint and at trial, Plaintiffs argued that SRW’s bylaws — not the Sponsorship
Agreement - required a Bishop’s appointee on SRW’s board of directors, and that SRW was
powerless to change those bylaws without the Bishop’s consent. This was the only argument
Plaintiffs made at trial regarding a Bishop’s appointee to SRW’s board.
This Court rejected that argument by Plaintiffs, finding that “SRW [is] free to amend its
bylaws without the consent of the Bishop”, and, further, that “[a]ny claims regarding SRW’s
change in bylaws are time-barred.”
For the Court’s convenience, SRW has submitted with this Motion all documents it has cited in this brief as
Exhibits to the Declaration of Colin West (“West Decl.”). The motion and its supporting documents (including
all exhibits) have also been prepared as a binder for the Court’s convenience. All citations to “Exhibit _” are
citations to the West Declaration, unless otherwise stated.
2 See Exhibit B (Statement of Decision) at 34.
See Exhibit B (Statement of Decision) at 41.
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Following trial, this Court found in its Statement of Decision that Section 2.3(a) of the
Sponsorship Agreement required a “new business structure”, and a supermajority vote, before
certain changes to ESC’s bylaws could occur.* However, Section 2.3(a) imposes no such
requirements on the composition of SRW’s board of directors. It instead requires only that, under
certain conditions, ESC must have a Bishop’s appointee on its board of directors. This Court has
never found otherwise, and Plaintiffs did not argue otherwise at trial.
However, this Court’s August 25, 2017 Judgment suggests that the Sponsorship Agreement
requires a “new business structure”, and a supermajority vote, before SRW can change its bylaws to
eliminate a provision in SRW’s bylaws that there be a Bishop’s appointee on SRW’s board. See
Exhibit C (Judgment), at page 4, Section 2.a, 2.c. However, as discussed, Plaintiffs never argued
this at trial, no witness ever testified to that effect, this Court never found, and it is not the case, that
the Sponsorship Agreement requires SRW to have a Bishop’s appointee on its board, under any
circumstances.
This Court should, accordingly, use its authority under Code of Civil Procedure Section 663,
which permits a court to correct judgments in situations like this, to amend the judgment to make
clear that the Sponsorship Agreement imposes no requirement that SRW have a Bishop’s appointee
on its board.
I. BACKGROUND
A. The Sponsorship Agreement Does Not Require SRW to Have A Bishop’s
Appointee on its Board of Directors.
SRW is not a party to, and is not bound by, the Sponsorship Agreement. See Exhibit E
(Sponsorship Agreement), page 8, Signatures. The Sponsorship Agreement does refer to a
“Related Company”, namely, a company that may eventually become a parent organization to ESC.
See Exhibit E (Sponsorship Agreement), page 3, Section 2.3(a) 3. This Court determined that SRW
became ESC’s “Related Company” in 2007. See Exhibit B (Statement of Decision) at 51.
However, the Sponsorship Agreement does not require that the “Related Company” have a
Bishop’s appointee on its board. Rather, it requires only that ESC, under certain circumstances,
7 See Exhibit B (Statement of Decision) at 1, 26.
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have a Bishop’s appointee on its Board. See Exhibit E (Sponsorship Agreement), at page 3, Section
2.3(a).
The only requirement in the Sponsorship Agreement that implicates the governance
structure of the “Related Company” is found in Section 2.3(b) of that Agreement. Section 2.3(b)
provides that if a “Related Company has the right to appoint the members of the board of directors
of [ESC]” then “the bylaws of Related Company will provide that [ESC] will be given the right to
appoint at least one member of any Nominating Committee of Related Company that is used to
identify candidates for the [ESC] board.” See Exhibit E (Sponsorship Agreement), pages 3-4,
Section 2.3(b) (emphasis added). Section 2.3(b) further provides that “where such a Nominating
Committee exists”, ESC’s bylaws will require that ESC’s Bishop’s representative will serve on that
nominating committee. See Exhibit E (Sponsorship Agreement), pages 3-4, Section 2.3(b).
By its express terms, Section 2.3(b) does not require that there be a Bishop’s appointee on
SRW’s — the Related Company’s - board. It speaks only to the composition of a “Nominating
Committee” of the Related Company, assuming that the Related Company has such a committee.
Section 2.3(b) does not require that any such Nominating Committee exist — it specifically
contemplates that it might not — referring to “where such a Nominating Committee exists.” See
Exhibit E (Sponsorship Agreement), page 3-4, Section 2.3(b). And, here, no such Nominating
Committee exists. SRW’s bylaws that were effective on April 30, 2007 provide for a nominating
committee, but only to select members of SRW’s board, not ESC’s. See Exhibit F (2007 SRW
Bylaws), page 2, Section 4. SRW’s Amended Bylaws adopted on June 23, 2015 provide for no
Nominating Committee at all. See Exhibit G (2015 SRW Bylaws). Thus, Section 2.3(b) does not
even apply here, let alone support a claim that the Bishop has the right to appoint a director to
SRW’s board of directors.
B. This Court Rejected the Only Argument Plaintiffs Made at Trial Regarding
the Composition of SRW’s Board of Directors.
No witness ever testified at trial, and there is no evidence, that the Sponsorship Agreement
required a Bishop’s appointee on SRW’s board of directors. Plaintiffs never argued at trial that the
Sponsorship Agreement required a Bishop’s appointee on SRW’s board. And, this Court rejected
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the only argument Plaintiffs made at trial regarding the supposed requirement of a Bishop’s
appointee on SRW’s board.
That sole claim regarding the composition of SRW’s board was Plaintiffs’ assertion that
SRW’s original bylaws — not the Sponsorship Agreement - required a Bishop’s appointee on that
entity’s board of directors, and that those bylaws could not be changed without the Bishop’s
consent and that of the Standing Committee. See generally, Exhibit D (Complaint), para. 64; see
also Exhibit H (Plaintiffs’ Post Trial Brief) at pages 18-19.
This Court found that Plaintiffs were wrong. This Court found that SRW’s original bylaws
required the Bishop’s and the Standing Committee’s consent to change the requirement of a
Bishop’s appointee on SRW’s board only so long as SRW was “approved” and “certified by
Convention” as a Diocesan Institution. Exhibit B (Statement of Decision) at 33. This Court found
that when, on April 30, 2007, SRW amended its bylaws, to no longer require the Bishop’s consent
to change its bylaws regarding a Bishop’s appointee, “SRW was not ‘certified by Convention’” as a
Diocesan Institution. Exhibit B (Statement of Decision) at 33. Thus, this Court found, “SRW no
longer required the consent of the Bishop and/or Standing Committee for an amendment to those
bylaws that provided for a Bishop’s appointee” to SRW’s board. Exhibit B (Statement of Decision)
at 33. at 41. Accordingly, this Court found, “by the terms of its own bylaws, SRW was free to
amend its bylaws without the consent of the Bishop.” Exhibit B (Statement of Decision) at 33.
This Court further found that “any claims regarding SRW’s bylaws are time-barred” and “barred by
equitable estoppel, consent, waiver and laches.” Exhibit B (Statement of Decision) at 41.
This Court rejected the only argument Plaintiffs made at trial regarding the supposed
requirement of a Bishop’s appointee to SRW’s board.
Cc. This Court Never Found that the Sponsorship Agreement Required SRW to
Have a Bishop’s Appointee on its Board of Directors.
This Court never found that the Sponsorship Agreement required SRW to have a Bishop’s
appointee on its Board of Directors, under any circumstances.
This Court found that Section 2.3 (a) of the Sponsorship Agreement required ESC to have a
Bishop’ s appointee on its Board of Directors, under certain circumstances. See generally, Exhibit
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B (Statement of Decision) at 36. But Section 2.3(a) does not state, or even suggest, that it imposes
a similar requirement on SRW’s board. See Exhibit E (Sponsorship Agreement), pages 3-4, section
2.3 (a). It speaks only to the Bishop’s and Standing Committee’s “right to appoint at least one
director to the EHF board.” Exhibit E (Sponsorship Agreement), page 3, section 2.3(a) (emphasis
added).
This Court found that the Sponsorship Agreement requirement of a Bishop appointee on
ESC’s board could, under certain circumstances, be changed by supermajority vote. Specifically,
the Court found that, under Section 2.3(a), and Exhibit 2, of the Sponsorship Agreement, the
requirement of a Bishop’s appointee on ESC’s board could be changed by a supermajority vote of
the board of “Related Company” — SRW — and a majority vote of ESC’s board. Exhibit B
(Statement of Decision) at 26. As this Court found, on June 23, 2015, SRW voted to (i) amend its
own bylaws eliminating the requirement of a Bishop’s appointee on SRW’s board, and (ii)
approved ESC’s amended bylaws (a) eliminating the requirement of a Bishop’s appointee on
ESC’s board, and (b) eliminating the requirement that ESC’s board be majority Episcopalian), all
such amendments to become effective on the close of the potential affiliation with Northern
California Presbyterian Homes and Services (“NCPHS”). Exhibit B (Statement of Decision). at 31.
As this Court also found, on June 25, 2015, ESC’s board also voted to adopt amendments to its
bylaws eliminating those same requirements, as to ESC’s board, also becoming effective only upon
the close of the NCPHS affiliation. Exhibit B (Statement of Decision) at 31.
This Court found that “the Supermajority votes of [SRW’s board] on June 23, 2015 and
[ESC’s Board] on June 25, 2015 did not eliminate the Church Entities’ Governance Prerogatives
because those votes to eliminate Governance prerogative were not preceded with a vote by these
boards on a ‘new business structure’ as required by the next to last sentence (penultimate sentence)
of Section 2.3(a).” Exhibit B (Statement of Decision) at 48 (emphasis added). Section 2.3(a) does
not purport to limit SRW’s right to determine the composition of its board. Section 2.3(a), again,
speaks only to the composition of ESC’s board. Exhibit E (Sponsorship Agreement), page 3,
section 2.3(a).
This Court never found that the Sponsorship Agreement required SRW to have a Bishop’s
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appointee on its Board of Directors, under any circumstances. And, in fact, the Agreement has no
such requirement.
D. The Final Judgment Suggests, Contrary to the Court’s Findings, that the
Sponsorship Agreement Requires SRW to Have a Bishop’s Appointee on its
Board
The August 25, 2017 Judgment in this case suggests that the Sponsorship Agreement
requires that SRW have a Bishop’s representative on its board of directors, and that such
requirement cannot be eliminated without a supermajority vote and a “new business structure.”
Specifically, that Judgment refers to the “requirement of the Sponsorship Agreement that there be a
new business structure for there to be effective votes of the ESC board on June 25, 2015, and SRW.
board on June 23, 2015, to eliminate the Bishop’s governance prerogatives.” See Exhibit C
(Judgment), page 4, para. 2.a (emphasis added). The Judgment goes on to state that the June 23,
2015 and June 25, 2015 votes of SRW’s and ESC’s boards “were legally ineffective in eliminating
the rights on prerogatives of the Episcopal Bishop to appoint a Bishop’s Representative to each
board”. See Exhibit C (Judgment), page 4, para. 2.c (emphasis added).
However, as discussed, this Court never found that the Sponsorship Agreement imposed
any requirement on SRW to have a Bishop’s appointee on its board. See supra, Section II.C.
Plaintiffs never argued that the Sponsorship Agreement has any such requirement (see supra.,
Section II.B.), and, in fact, the Agreement has no such requirement. See supra., Section ILA.
il. THIS COURT SHOULD AMEND THE JUDGMENT PURSUANT TO CODE OF
CIVIL PROCEDURE SECTION 663.
Code of Civil Procedure Section 663 provides that “[a] judgment or decree, when based
upon a decision by the court, or the special verdict of a jury, may, upon motion of the party
aggrieved, be set aside and vacated by the same court, and another and different judgment entered”
under certain circumstances. Cal. Code Civ. Proc. 663. One such circumstance is where there is an
“erroneous legal basis for the decision, not consistent with or not supported by the facts.” /d.
That is the case here. Plaintiffs never argued at trial that the Sponsorship Agreement
required SRW to have a Bishop’s representative on its board of directors, under any circumstances.
See supra, Section I1.B. This Court never found that the Sponsorship Agreement had any such
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requirement, under any circumstances. See supra, Section I.C. And, in fact, the Sponsorship
Agreement has no such requirement, under any circumstances. See supra, Section II.A. But, the
Judgment, as discussed, suggests that the Sponsorship Agreement requires SRW to have a Bishop’s
representative on its board, which requirement can only be changed if there is a supermajority vote
and “new business structure.” See supra, Section II.D. That suggestion conflicts with this Court’s
Statement of Decision.
The Judgment should, accordingly, be amended to remove that suggestion. Specifically,
paragraph 2.a of the Judgment should be amended to add the following bolded, underlined
language:
The transaction in which SRW became the sole member of ESC in
2007 does not satisfy the requirement of the Sponsorship Agreement
that there be a new business structure for there to be effective votes
of the ESC board on June 25, 2015, and SRW board on June 23, 2015,
to eliminate the Bishop’s governance prerogatives as to ESC’s
board.
Also, paragraph 2.c of the Judgment should be amended to add the following bolded,
underlined language:
The votes taken on June 23, 2015, by the SRW Board of Directors
and on June 25, 2015, by the ESC Board of Directors were legally
ineffective in eliminating the rights and prerogatives of the Episcopal
Bishop to appoint a Bishop’s representative to ESC’s board and the
right of The Episcopal Bishop and The Episcopal Church to require
ESC to maintain an Episcopal majority on its Board of Directors.
A proposed amended judgment, which reflects these proposed amendments, is attached.
IV. CONCLUSION
SRW respectfully requests that the Court grant its motion.
Dated: August 30, 2017 Respectfully submitted,
MORGAN, LEWIS & BOCKIUS LLP
By 4/ Colin C. West
Colin C. West
Attorney for Defendant and Cross-
Complainant SENIOR
RESOURCES OF THE WEST
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