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AOU
SUPERIOR COURT OF CALIFORNIA
COUNTY OF SAN FRANCISCO
Document Scanning Lead Sheet
May-02-2012 11:47 am
Case Number: CGC-10-501168
Filing Date: May-02-2012 11:46
Filed by: WESLEY G. RAMIREZ
Juke Box: 001 Image: 03599016
GENERIC CIVIL FILING (NO FEE)
JOHNA PECOT et al VS. SAN FRANCISCO DEPUTY SHERIFF'S ASSOCIATION,
Aet al
001C03599016
Instructions:
Please place this sheet on top of the document to be scanned.LAWRENCE D. MURRAY (SBN 77536)
MURRAY & ASSOCIATES
1781 Union Street
San Francisco, CA 94123
Tel: (415) 673-0555
Fax: (415) 928-4084
Attorney for Defendants: DAVID WONG,
MICHAEL ZEHNER, BRIAN SAVAGE
and SHEDRICK McDANIELS
FILED.
MAY 22 2012
CLERK QF THE COURT
wa
SUPERIOR COURT OF CALIFORNIA
COUNTY OF SAN FRANCISCO
JOHNA PECOT, THOMAS ARATA, RICH
OWYANG, STEPHEN TILTON, JOSEPH
LEAKE, and OSCAR TAYLOR, Individually
and on behalf of all other similarly situated,
Plaintiffs,
v.
SAN FRANCISCO DEPUTY SHERIFF’S
ASSOCIATION, a California Nonprofit
Corporation, SAN FRANCISCO DEPUTY
SHERIFF’S FOUNDATION, a California
Nonprofit Corporation, DAVID WONG, an
individual, MICHAEL ZEHNER, an
individual, BRIAN SAVAGE, an individual,
SHEDRICK McDANIELS, an individual, and
DOES 1-100,
Defendants.
Case No. CGC — 10 -501168
DEFENDANT WONG, ZEHNER, SAVAGE AND
McDANIELS’ SUPPLEMENTAL OPPOSITION
TO MOTION FOR RECONSIDERATION OF
ORDER ON SPECIAL MOTION TO STRIKE
CAUSES OF ACTION IN THE COMPLAINT
(CCP § 1008)
Date: May 11, 2012
Time: 8:30 a.m.
Dept: 26
Pecot, et al. vs. SFDSA, et al.; San Francisco Superior Court No: CGC — 10 ~ 501168
Page i
SUPPLEMENTAL Points and Authorities In Opposition to Motion To ReconsiderMEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF SUPPLEMENTAL
OPPOSITION TO MOTION FOR RECONSIDERATION OF ORDER ON SLAPP MOTION
L. SUPPLEMENTAL INTRODUCTION
This supplemental opposition to reconsideration of the granting of the SLAPP motion follows
the court’s continuance of the matter and is submitted to properly frame the remaining issue of standing.
These individual defendants, three of which work without compensation, have previously
submitted declarations and opposition on the point that Plaintiffs lack standing to sue as they have
never secured permission under Code of Civil Procedure Section 415.15 to sue the officers of a
nonprofit. Statutorily, they lack standing to sue as never having complied with the statute in the first
instance. Plaintiffs cannot now claim that they have the ability to prove their burden which has shifted
to them under the SLAPP burden shifting analysis. Hence, they are not likely to succeed on the merits.
In addition to all that was stated before, there is the other issue of standing, the issue which was
compelling in federal court, that is that plaintiffs lack standing to sue in any capacity when they wish to
overturn the elections, rulings and judgment of the union membership and the union management. The
entire suit is to challenge every election and every action taken by the board and membership since
2003, and then have the court change or penalize the union and the members because these members
wanted a different result of the various votes and a different set of actions taken after that.
2002 Members Election for Union Dues Increase: The first election, and largest cause of the
complaints, was to increase dues in 2002. (Complaint { 2, 19-23) He and the union are sued claiming
the statements constituted a contract and were part of a “scheme to defraud” to pay his salary.
2002 Board Decision to Lease or Purchase of A Building: In 2002 the board decided to lease
a building so that the organization would have an office. Their vote to do so is challenged in this suit.
2003 Board Authorization for President’s Salary: Based on the membership voted increasing
dues, and with the funds available, in 2003 the Board of Directors voted to pay the president’s salary.
2003 — 2006 Board Decision Political Contributions To Candidates For State & Local
Elections: The complaint lists 41 checks from 2003 to 2006 to support political races by the union.
2008 Election to Affiliate (Secure Services) From A Different Union: The board and
members voted to change union affiliations for services provided by the other union.
2008 Members Election To Change Membership In The Union: Under the bylaws, in 2008
the members voted to remove the top department managers (Chiefs and Captains) from the union.
Investigations and findings reaffirm each of these board decisions. (Murray Dec Ex A)
Pecot, et al. vs. SFDSA, et al.; San Francisco Superior Court No: CGC ~ 10 — 501168 Page 1
SUPPLEMENTAL Points and Authorities In Opposition to Motion To Reconsider27
28
H.__ POINTS & AUTHORITIES
A. Having Shifted The Burden To Require Plaintiffs Prove A Likelihood Of Success,
Plaintiffs Can Not Now Succeed When They Lack Standing To Overturn Board And
Membership Votes And Election Results
Each of the decisions and expenditures complained about and set out in the Complaint are decisions
which are the exclusive providence of those that voted, be they the union members or the board
member. Plaintiffs seek to overturn and penalize those who followed the board decisions which is
contrary to the notion of corporate governance. It would be like a suit to overturn the governor’s race or
the decision on a ballot proposition where one group did not like the result. It is not up to the plaintiffs
or the courts to second guess the wisdom of the union member or the board of directors’ decision, but
that is exactly what the plaintiffs seek here. Lamden v. La Jolla Shores Clubdominium Homeowners
Assn. (1999) 21 Cal.4th 249
The plaintiffs here acknowledge the election decisions, and the expenditures made pursuant to those
decisions, but then challenge one election and board decision after another and expenditures made
pursuant to those elections as “fraud” and false information to induce wrongful votes and a conspiracy
to do so (e.g. Complaint {§ 77-80) or a host of other labels.
Plaintiffs have no standing to sue because the decisional authority is exclusively in the hands of the
board of directors, not in disgruntled plaintiffs, some of whom are no longer union members according
to the very Complaint that they sue on, claiming false statements and fraud. (e.g. Johna Pecot, Thomas
Arata; see Complaint § 80-86 )
Even if the original decision was not in the hands of the board and members, the board of directors
in the form of a special litigation committee, reaffirmed their prior votes and that it was not in the
union’s best interest to file suit because the claims raised by the plaintiffs lacked merit and there was
nothing to be gained. (Murray Dec [11 Ex A, Pollioni Declaration and exhibits) This is the third time
the union has passed on the questions raised by the plaintiffs, specifically in the original elections, then
in the “investigation” of charges by plaintiffs, which found no wrongdoing, and then in the “Special
Litigation Committee” findings that there was no wrongdoing and no merit to the various claims of
plaintiff. Undeterred by these findings, on all three occasions, the plaintiffs sue on the very same basis,
even though this was the basis that they stipulated to dismissal of the charges by then “with prejudice”
against these defendants.
/it
Pecot, et al. vs. SFDSA, et al.; San Francisco Superior Court No: CGC — 10 — 501168 Page 2
SUPPLEMENTAL Points and Authorities In Opposition to Motion To Reconsider27
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B. Plaintiffs Attempt To Overturn The Board’s Power Is In Contradiction to California Law
The power to manage the affairs of a corporation is vested in the board of directors. Scott v. Los
Angeles Mountain Park Co. 92 Cal.App. 258, 264 “[C]onduct of directors in the management of the
affairs of a corporation is not subject to attack by minority stockholders where such acts are discretiot
and are performed in good faith, reasonably believing them to be for the best interest of the corporation.”
Findley v. Garrett (1952) 109 Cal.App.2d 166 Though Plaintiffs disagree with the votes of the board
and the membership, it is not the right of the plaintiffs or the court to overturn such decisions.
Neither the Court nor disgruntled member can substitute their judgment for that of the
corporation ‘where its board has acted in good faith and used its best business judgment in behalf of the
corporation.' (Olson v. Basin Oil Co. (1955) 136 Cal.App.2d 543, 559-560; Findley v. Garrett 109
Cal.App.2d 166, (1952); Marsili v. Pacific Gas And Electric Company 51 Cal.App.3d 313, 320 (1975))
As recited in the findings, and the Declaration of Marcia Pollioni, (see {| 2-14) the attorney for the
Special Litigation Committee, Exhibit 2, the Committee investigated each of the prior 12 allegations.
In most of the claims it finds “the Committee Believes there has been no wrongdoing or behalf of any
member, including the SFDSA President [Wong]. This lawsuit should be dismissed.” See Murray Dec,
4 11, Exhibit A, Pollioni Dec, Exhibit 2.
Bringing this action on behalf of a “class” of all current and former members, (Complaint §§ 131
et seq) does not change any of the rules that the power to make decisions is with the members and the
board.
C. The Power To Make Decisions and Decide To Dismiss A Claim Is With The Union
Electorate and The Special Litigation Committee
Under California law, even if a majority of directors is charged with wrongdoing in proposed or
pending action, the board may delegate to a disinterested "special litigation committee" the authority to
consider the demand or to dismiss the suit. If the committee decides that refusing the demand or
dismissing the action is in best interest of corporation, the defendant may move to dismiss or for
summary judgment on that basis. Country National Bank v. Mayer 788 F. Supp. 1136 (1992); Will v.
Engebretson & Co., 213 Cal.App.3d 1033, 1040-41 (1989)
Here the Board and members in the first instance made a number of decisions, all as set out in the}
Complaint. (Complaint §§ 26, 37, 38, 46) Later, plaintiffs issued a charge against such actions, which
was rejected, as set out in the Complaint. (Complaint J 62, 63, Then the Special Litigation Committee
Pecot, et al. vs. SFDSA, et al.; San Francisco Superior Court No: CGC — 10 — 501168 Page 3
SUPPLEMENTAL Points and Authorities In Opposition to Motion To Reconsider27
28
of the Board of Directors reviewed all of the charges which form the basis of the federal suit and this suit
and again determined that there is no merit and or that it is not in the union’s interest to continue with
litigation. See Murray Dec, 11, Exhibit A, Pollioni Dec, Exhibit 2.
D. The Power To Make Decisions and To Decide Dismissal Applies To Non Profit Mutual
Benefit Corporations
And this is true nonprofit mutual benefit corporation in California, such as this entity. “Plaintiffs
argue there is no reported case in which the special litigation committee defense has been used by a
[nonprofit mutual benefit committee] .... Here, each of the Associations was incorporated as a nonprofit
mutual benefit corporation. Thus, basic principles of corporate law apply to them. Such principles
specifically include the business judgment rule (Corp. Code § 309, 7231) as well as the principle that the
directors may delegate their authority to a committee.” Finley v. Superior Court (2002) 80 Cal.App.4th
1152, 1161
Where board of directors, in refusing to commence action to redress alleged wrong against
corporation, acts in good faith within scope of discretionary power and reasonably believes refusal to
commence action is good business judgment in best interest of corporation, stockholder is not authorized|
to interfere. Findley v. Garrett (1952) 109 Cal.App.2d 166, 240 P.2d 421 Just as the corporate business,
judgment rule, which is a rule of judicial deference to good faith management decisions of corporate
boards, is a defense (see Finley v. Superior Court, (2000) 70 Cal.App.4" 1151, 1157.
Common law business judgment rule has two components, one which immunizes corporate
directors from personal liability and another which insulates from court intervention those management
decisions which are made by directors in good faith in what the directors believe is the organization's
best interest. Lamden v. La Jolla Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249. A
court will not substitute its judgment for that of the corporation's board of directors. Lamden v. La Jolla
Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249
Here, the original decisions of the association members and the board of directors, as well as
later investigations and the investigations of the Special Litigation Committee should not be thrown
away. There is nothing that would support ignoring the determination of all three in reaching the
conclusion that their votes should stand. This SLAPP order should stand and judgment enter for all
individual defendants against these plaintiffs.
MI
Pecot, et al. vs. SFDSA, et al.; San Francisco Superior Court No: CGC ~ 10 — 501168 Page 4
SUPPLEMENTAL Points and Authorities In Opposition to Motion To Reconsider27
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E. Entry Of A Judgment Of Dismissal Is Warranted Based On The Decision of the
Independent Litigation Committee, and Approved By The Members, That The Complaint
Lacks Merit and Dismissal Is In The Best Interest Of The Union
Under the guidance and direction of an independent attorney secured specially for the purposes
of this report by the Special Litigation Committee, substantial efforts were made to identify the work
that needed to be done and the method and means of doing such work, including maintaining
independents. These instructions were given to the committee. (See Murray Dec, § 11, Exhibit A,
Pollioni Dec, Exhibit 1) They went into detail on the allegations contained in the Second Amended
Complaint, breaking them out for individual analysis. (See Murray Dec, § 11, Exhibit A Pollioni Dec,
Exhibit 1) As a result of the meetings with their attorney, their investigation, analysis and conclusion,
the committee determined “The best way the SFDSA can pursue its best interest is by the rule of the
vote. .... This lawsuit against the SFDSA is counter-productive to the union’s best interest.” It was the
committee’s desire to have this report addressed to Judge Breyer, which it is. (See Murray Dec, § 11,
Exhibit A Polliani Dec par 12, and attached thereto as Exhibit 2, page 1, first paragraph.)
The independent litigation committee has conducted their investigation, review, analysis and
issued a thorough complete and accurate report on the claims of plaintiff herein. (See Murray Dec, § 11,
Exhibit A Polliani Dec, and see attached thereto as Exhibit 2.) Each of the claims has been considered
and subject to scrutiny and analysis. Each has been found to not be in the best interest of the union to
pursue. Based on the strength of these cases, the careful investigation, analysis and conclusion of the
committee, the prior order should be upheld and judgment enter dismissing all claims.
H. Conclusion: Request for Entry of Judgment of Dismissal of Individual Defendants
Therefore this motion respectfully requests this Court’s order deny the motion to reconsider for
all the reasons previously stated and on the basis that the Board had the authority to make the decisions
which it did. These defendants pray judgment enter of dismissing with prejudice for Defendants David
Wong, Michael Zehner, Brian Savage and Shedrick McDaniels, pursuant to the finds of the specially
appointed disinterested “litigation committee” of the San Francisco Deputy Sheriffs Association
(“SFDSA”), consistent with Finley v. Superior Court (2002) 80 Cal.App.4th 1152. The dismissal of
these defendants is in the best interest of the union. A proposed form of judgment is included.
Mit
Mit
Mil
Pecot, et al. vs. SFDSA, et al.; San Francisco Superior Court No: CGC — 10 — 501168 Page 5
SUPPLEMENTAL Points and Authorities In Opposition to Motion To Reconsider27
28
Respectfully submitted,
MURRAY & ASSOCIATES
DATED: May 1, 2012
DAVID WONG, MICHAEL ZEHNE
BRIAN SAVAGE, and SHEDRICK McDANIELS
Pecot, et al. vs. SFDSA, et al.; San Francisco Superior Court No: CGC — 10 — 501168
SUPPLEMENTAL Points and Authorities In Opposition to Motion To Reconsider
Page 6PROOF OF SERVICE
Iam employed in the City and County of San Francisco, State of California. I am over the age of|
18 and not a party to the within action. My business address is 1781 Union Street, San Francisco,
California 94123; (415) 673-0555.
On this date, I served the following document(s): DEFENDANT WONG, ZEHNER,
SAVAGE AND McDANIELS’ SUPPLEMENTAL OPPOSITION TO MOTION FOR
RECONSIDERATION OF ORDER ON SPECIAL MOTION TO STRIKE CAUSES OF
ACTION IN THE COMPLAINT on the interested parties in this action as follows:
Attorney for Plaintiffs: Attorney for Defendant
Paul L. Kranz San Francisco Deputy Sheriffs’ Association
Law Office of Paul L. Kranz Harry S. Stern
2560 Ninth Street, Suite 213 Lara Cullinanae-Smith
Berkeley, CA 94710 Rains Lucia Stern, PC
Tel: (510) 549 5900 2300 Contra Costa Blvd., Suite 500
Fax: (510) 549 5901 Pleasant Hill, CA 94523
Tel: (925) 609-1699
Attorney for Defendant San Francisco Deputy = Fax: ~— (925) 609-1690
Sheriffs’ Foundation Ismith@rlslawyers.com
David R. Ongaro
Ongaro Burtt & Louderback LLP
650 California Street, Fifth Floor
San Francisco, CA 94108
Tel: (415) 433-3900
Fax: (415) 433-3950
[XX] [BY MAIL] _ I caused envelope(s) with postage thereon fully prepaid to be placed in the United|
States mail at San Francisco, California, addressed as shown above by agreement with Lara Smith.
[XX] [BY PERSONAL SERVICE] _ I caused such envelope(s) to be delivered by hand to the above
address(es), specifically Ongaro Burtt & Louderback LLP and Law Office of Paul L. Kranz.
[ ] [BY FAX] _ I caused the above entitled document(s) to be personally served on the above
shown parties by facsimile transmission on the date shown below by confirming the fax phone number
with the law office shown above then (a) transmitting it via the fax machine within this office, and (b)
receiving a receipt from the machine within this office confirming all documents sent were in fact
properly received.
I declare under penalty of perjury under the laws of the State of California that the above is true
and correct. Executed in San Francisco, © Preece
Pecot, et al. vs. SFDSA, et al.; San Francisco Superior Court No: CGC — 10 — 501168 age 7
SUPPLEMENTAL Points and Authorities In Opposition to Motion To Reconsider
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AOU SUPERIOR COURT OF CALIFORNIA COUNTY OF SAN FRANCISCO Document Scanning Lead Sheet May-02-2012 11:47 am Case Number: CGC-10-501168 Filing Date: May-02-2012 11:46 Filed by: WESLEY G. RAMIREZ Juke Box: 001 Image: 03599016 GENERIC CIVIL FILING (NO FEE) JOHNA PECOT et al VS. SAN FRANCISCO DEPUTY SHERIFF'S ASSOCIATION, Aet al 001C03599016 Instructions: Please place this sheet on top of the document to be scanned.LAWRENCE D. MURRAY (SBN 77536) MURRAY & ASSOCIATES 1781 Union Street San Francisco, CA 94123 Tel: (415) 673-0555 Fax: (415) 928-4084 Attorney for Defendants: DAVID WONG, MICHAEL ZEHNER, BRIAN SAVAGE and SHEDRICK McDANIELS FILED. MAY 22 2012 CLERK QF THE COURT wa SUPERIOR COURT OF CALIFORNIA COUNTY OF SAN FRANCISCO JOHNA PECOT, THOMAS ARATA, RICH OWYANG, STEPHEN TILTON, JOSEPH LEAKE, and OSCAR TAYLOR, Individually and on behalf of all other similarly situated, Plaintiffs, v. SAN FRANCISCO DEPUTY SHERIFF’S ASSOCIATION, a California Nonprofit Corporation, SAN FRANCISCO DEPUTY SHERIFF’S FOUNDATION, a California Nonprofit Corporation, DAVID WONG, an individual, MICHAEL ZEHNER, an individual, BRIAN SAVAGE, an individual, SHEDRICK McDANIELS, an individual, and DOES 1-100, Defendants. Case No. CGC — 10 -501168 DEFENDANT WONG, ZEHNER, SAVAGE AND McDANIELS’ SUPPLEMENTAL OPPOSITION TO MOTION FOR RECONSIDERATION OF ORDER ON SPECIAL MOTION TO STRIKE CAUSES OF ACTION IN THE COMPLAINT (CCP § 1008) Date: May 11, 2012 Time: 8:30 a.m. Dept: 26 Pecot, et al. vs. SFDSA, et al.; San Francisco Superior Court No: CGC — 10 ~ 501168 Page i SUPPLEMENTAL Points and Authorities In Opposition to Motion To ReconsiderMEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF SUPPLEMENTAL OPPOSITION TO MOTION FOR RECONSIDERATION OF ORDER ON SLAPP MOTION L. SUPPLEMENTAL INTRODUCTION This supplemental opposition to reconsideration of the granting of the SLAPP motion follows the court’s continuance of the matter and is submitted to properly frame the remaining issue of standing. These individual defendants, three of which work without compensation, have previously submitted declarations and opposition on the point that Plaintiffs lack standing to sue as they have never secured permission under Code of Civil Procedure Section 415.15 to sue the officers of a nonprofit. Statutorily, they lack standing to sue as never having complied with the statute in the first instance. Plaintiffs cannot now claim that they have the ability to prove their burden which has shifted to them under the SLAPP burden shifting analysis. Hence, they are not likely to succeed on the merits. In addition to all that was stated before, there is the other issue of standing, the issue which was compelling in federal court, that is that plaintiffs lack standing to sue in any capacity when they wish to overturn the elections, rulings and judgment of the union membership and the union management. The entire suit is to challenge every election and every action taken by the board and membership since 2003, and then have the court change or penalize the union and the members because these members wanted a different result of the various votes and a different set of actions taken after that. 2002 Members Election for Union Dues Increase: The first election, and largest cause of the complaints, was to increase dues in 2002. (Complaint { 2, 19-23) He and the union are sued claiming the statements constituted a contract and were part of a “scheme to defraud” to pay his salary. 2002 Board Decision to Lease or Purchase of A Building: In 2002 the board decided to lease a building so that the organization would have an office. Their vote to do so is challenged in this suit. 2003 Board Authorization for President’s Salary: Based on the membership voted increasing dues, and with the funds available, in 2003 the Board of Directors voted to pay the president’s salary. 2003 — 2006 Board Decision Political Contributions To Candidates For State & Local Elections: The complaint lists 41 checks from 2003 to 2006 to support political races by the union. 2008 Election to Affiliate (Secure Services) From A Different Union: The board and members voted to change union affiliations for services provided by the other union. 2008 Members Election To Change Membership In The Union: Under the bylaws, in 2008 the members voted to remove the top department managers (Chiefs and Captains) from the union. Investigations and findings reaffirm each of these board decisions. (Murray Dec Ex A) Pecot, et al. vs. SFDSA, et al.; San Francisco Superior Court No: CGC ~ 10 — 501168 Page 1 SUPPLEMENTAL Points and Authorities In Opposition to Motion To Reconsider27 28 H.__ POINTS & AUTHORITIES A. Having Shifted The Burden To Require Plaintiffs Prove A Likelihood Of Success, Plaintiffs Can Not Now Succeed When They Lack Standing To Overturn Board And Membership Votes And Election Results Each of the decisions and expenditures complained about and set out in the Complaint are decisions which are the exclusive providence of those that voted, be they the union members or the board member. Plaintiffs seek to overturn and penalize those who followed the board decisions which is contrary to the notion of corporate governance. It would be like a suit to overturn the governor’s race or the decision on a ballot proposition where one group did not like the result. It is not up to the plaintiffs or the courts to second guess the wisdom of the union member or the board of directors’ decision, but that is exactly what the plaintiffs seek here. Lamden v. La Jolla Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249 The plaintiffs here acknowledge the election decisions, and the expenditures made pursuant to those decisions, but then challenge one election and board decision after another and expenditures made pursuant to those elections as “fraud” and false information to induce wrongful votes and a conspiracy to do so (e.g. Complaint {§ 77-80) or a host of other labels. Plaintiffs have no standing to sue because the decisional authority is exclusively in the hands of the board of directors, not in disgruntled plaintiffs, some of whom are no longer union members according to the very Complaint that they sue on, claiming false statements and fraud. (e.g. Johna Pecot, Thomas Arata; see Complaint § 80-86 ) Even if the original decision was not in the hands of the board and members, the board of directors in the form of a special litigation committee, reaffirmed their prior votes and that it was not in the union’s best interest to file suit because the claims raised by the plaintiffs lacked merit and there was nothing to be gained. (Murray Dec [11 Ex A, Pollioni Declaration and exhibits) This is the third time the union has passed on the questions raised by the plaintiffs, specifically in the original elections, then in the “investigation” of charges by plaintiffs, which found no wrongdoing, and then in the “Special Litigation Committee” findings that there was no wrongdoing and no merit to the various claims of plaintiff. Undeterred by these findings, on all three occasions, the plaintiffs sue on the very same basis, even though this was the basis that they stipulated to dismissal of the charges by then “with prejudice” against these defendants. /it Pecot, et al. vs. SFDSA, et al.; San Francisco Superior Court No: CGC — 10 — 501168 Page 2 SUPPLEMENTAL Points and Authorities In Opposition to Motion To Reconsider27 28 B. Plaintiffs Attempt To Overturn The Board’s Power Is In Contradiction to California Law The power to manage the affairs of a corporation is vested in the board of directors. Scott v. Los Angeles Mountain Park Co. 92 Cal.App. 258, 264 “[C]onduct of directors in the management of the affairs of a corporation is not subject to attack by minority stockholders where such acts are discretiot and are performed in good faith, reasonably believing them to be for the best interest of the corporation.” Findley v. Garrett (1952) 109 Cal.App.2d 166 Though Plaintiffs disagree with the votes of the board and the membership, it is not the right of the plaintiffs or the court to overturn such decisions. Neither the Court nor disgruntled member can substitute their judgment for that of the corporation ‘where its board has acted in good faith and used its best business judgment in behalf of the corporation.' (Olson v. Basin Oil Co. (1955) 136 Cal.App.2d 543, 559-560; Findley v. Garrett 109 Cal.App.2d 166, (1952); Marsili v. Pacific Gas And Electric Company 51 Cal.App.3d 313, 320 (1975)) As recited in the findings, and the Declaration of Marcia Pollioni, (see {| 2-14) the attorney for the Special Litigation Committee, Exhibit 2, the Committee investigated each of the prior 12 allegations. In most of the claims it finds “the Committee Believes there has been no wrongdoing or behalf of any member, including the SFDSA President [Wong]. This lawsuit should be dismissed.” See Murray Dec, 4 11, Exhibit A, Pollioni Dec, Exhibit 2. Bringing this action on behalf of a “class” of all current and former members, (Complaint §§ 131 et seq) does not change any of the rules that the power to make decisions is with the members and the board. C. The Power To Make Decisions and Decide To Dismiss A Claim Is With The Union Electorate and The Special Litigation Committee Under California law, even if a majority of directors is charged with wrongdoing in proposed or pending action, the board may delegate to a disinterested "special litigation committee" the authority to consider the demand or to dismiss the suit. If the committee decides that refusing the demand or dismissing the action is in best interest of corporation, the defendant may move to dismiss or for summary judgment on that basis. Country National Bank v. Mayer 788 F. Supp. 1136 (1992); Will v. Engebretson & Co., 213 Cal.App.3d 1033, 1040-41 (1989) Here the Board and members in the first instance made a number of decisions, all as set out in the} Complaint. (Complaint §§ 26, 37, 38, 46) Later, plaintiffs issued a charge against such actions, which was rejected, as set out in the Complaint. (Complaint J 62, 63, Then the Special Litigation Committee Pecot, et al. vs. SFDSA, et al.; San Francisco Superior Court No: CGC — 10 — 501168 Page 3 SUPPLEMENTAL Points and Authorities In Opposition to Motion To Reconsider27 28 of the Board of Directors reviewed all of the charges which form the basis of the federal suit and this suit and again determined that there is no merit and or that it is not in the union’s interest to continue with litigation. See Murray Dec, 11, Exhibit A, Pollioni Dec, Exhibit 2. D. The Power To Make Decisions and To Decide Dismissal Applies To Non Profit Mutual Benefit Corporations And this is true nonprofit mutual benefit corporation in California, such as this entity. “Plaintiffs argue there is no reported case in which the special litigation committee defense has been used by a [nonprofit mutual benefit committee] .... Here, each of the Associations was incorporated as a nonprofit mutual benefit corporation. Thus, basic principles of corporate law apply to them. Such principles specifically include the business judgment rule (Corp. Code § 309, 7231) as well as the principle that the directors may delegate their authority to a committee.” Finley v. Superior Court (2002) 80 Cal.App.4th 1152, 1161 Where board of directors, in refusing to commence action to redress alleged wrong against corporation, acts in good faith within scope of discretionary power and reasonably believes refusal to commence action is good business judgment in best interest of corporation, stockholder is not authorized| to interfere. Findley v. Garrett (1952) 109 Cal.App.2d 166, 240 P.2d 421 Just as the corporate business, judgment rule, which is a rule of judicial deference to good faith management decisions of corporate boards, is a defense (see Finley v. Superior Court, (2000) 70 Cal.App.4" 1151, 1157. Common law business judgment rule has two components, one which immunizes corporate directors from personal liability and another which insulates from court intervention those management decisions which are made by directors in good faith in what the directors believe is the organization's best interest. Lamden v. La Jolla Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249. A court will not substitute its judgment for that of the corporation's board of directors. Lamden v. La Jolla Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249 Here, the original decisions of the association members and the board of directors, as well as later investigations and the investigations of the Special Litigation Committee should not be thrown away. There is nothing that would support ignoring the determination of all three in reaching the conclusion that their votes should stand. This SLAPP order should stand and judgment enter for all individual defendants against these plaintiffs. MI Pecot, et al. vs. SFDSA, et al.; San Francisco Superior Court No: CGC ~ 10 — 501168 Page 4 SUPPLEMENTAL Points and Authorities In Opposition to Motion To Reconsider27 28 E. Entry Of A Judgment Of Dismissal Is Warranted Based On The Decision of the Independent Litigation Committee, and Approved By The Members, That The Complaint Lacks Merit and Dismissal Is In The Best Interest Of The Union Under the guidance and direction of an independent attorney secured specially for the purposes of this report by the Special Litigation Committee, substantial efforts were made to identify the work that needed to be done and the method and means of doing such work, including maintaining independents. These instructions were given to the committee. (See Murray Dec, § 11, Exhibit A, Pollioni Dec, Exhibit 1) They went into detail on the allegations contained in the Second Amended Complaint, breaking them out for individual analysis. (See Murray Dec, § 11, Exhibit A Pollioni Dec, Exhibit 1) As a result of the meetings with their attorney, their investigation, analysis and conclusion, the committee determined “The best way the SFDSA can pursue its best interest is by the rule of the vote. .... This lawsuit against the SFDSA is counter-productive to the union’s best interest.” It was the committee’s desire to have this report addressed to Judge Breyer, which it is. (See Murray Dec, § 11, Exhibit A Polliani Dec par 12, and attached thereto as Exhibit 2, page 1, first paragraph.) The independent litigation committee has conducted their investigation, review, analysis and issued a thorough complete and accurate report on the claims of plaintiff herein. (See Murray Dec, § 11, Exhibit A Polliani Dec, and see attached thereto as Exhibit 2.) Each of the claims has been considered and subject to scrutiny and analysis. Each has been found to not be in the best interest of the union to pursue. Based on the strength of these cases, the careful investigation, analysis and conclusion of the committee, the prior order should be upheld and judgment enter dismissing all claims. H. Conclusion: Request for Entry of Judgment of Dismissal of Individual Defendants Therefore this motion respectfully requests this Court’s order deny the motion to reconsider for all the reasons previously stated and on the basis that the Board had the authority to make the decisions which it did. These defendants pray judgment enter of dismissing with prejudice for Defendants David Wong, Michael Zehner, Brian Savage and Shedrick McDaniels, pursuant to the finds of the specially appointed disinterested “litigation committee” of the San Francisco Deputy Sheriffs Association (“SFDSA”), consistent with Finley v. Superior Court (2002) 80 Cal.App.4th 1152. The dismissal of these defendants is in the best interest of the union. A proposed form of judgment is included. Mit Mit Mil Pecot, et al. vs. SFDSA, et al.; San Francisco Superior Court No: CGC — 10 — 501168 Page 5 SUPPLEMENTAL Points and Authorities In Opposition to Motion To Reconsider27 28 Respectfully submitted, MURRAY & ASSOCIATES DATED: May 1, 2012 DAVID WONG, MICHAEL ZEHNE BRIAN SAVAGE, and SHEDRICK McDANIELS Pecot, et al. vs. SFDSA, et al.; San Francisco Superior Court No: CGC — 10 — 501168 SUPPLEMENTAL Points and Authorities In Opposition to Motion To Reconsider Page 6PROOF OF SERVICE Iam employed in the City and County of San Francisco, State of California. I am over the age of| 18 and not a party to the within action. My business address is 1781 Union Street, San Francisco, California 94123; (415) 673-0555. On this date, I served the following document(s): DEFENDANT WONG, ZEHNER, SAVAGE AND McDANIELS’ SUPPLEMENTAL OPPOSITION TO MOTION FOR RECONSIDERATION OF ORDER ON SPECIAL MOTION TO STRIKE CAUSES OF ACTION IN THE COMPLAINT on the interested parties in this action as follows: Attorney for Plaintiffs: Attorney for Defendant Paul L. Kranz San Francisco Deputy Sheriffs’ Association Law Office of Paul L. Kranz Harry S. Stern 2560 Ninth Street, Suite 213 Lara Cullinanae-Smith Berkeley, CA 94710 Rains Lucia Stern, PC Tel: (510) 549 5900 2300 Contra Costa Blvd., Suite 500 Fax: (510) 549 5901 Pleasant Hill, CA 94523 Tel: (925) 609-1699 Attorney for Defendant San Francisco Deputy = Fax: ~— (925) 609-1690 Sheriffs’ Foundation Ismith@rlslawyers.com David R. Ongaro Ongaro Burtt & Louderback LLP 650 California Street, Fifth Floor San Francisco, CA 94108 Tel: (415) 433-3900 Fax: (415) 433-3950 [XX] [BY MAIL] _ I caused envelope(s) with postage thereon fully prepaid to be placed in the United| States mail at San Francisco, California, addressed as shown above by agreement with Lara Smith. [XX] [BY PERSONAL SERVICE] _ I caused such envelope(s) to be delivered by hand to the above address(es), specifically Ongaro Burtt & Louderback LLP and Law Office of Paul L. Kranz. [ ] [BY FAX] _ I caused the above entitled document(s) to be personally served on the above shown parties by facsimile transmission on the date shown below by confirming the fax phone number with the law office shown above then (a) transmitting it via the fax machine within this office, and (b) receiving a receipt from the machine within this office confirming all documents sent were in fact properly received. I declare under penalty of perjury under the laws of the State of California that the above is true and correct. Executed in San Francisco, © Preece Pecot, et al. vs. SFDSA, et al.; San Francisco Superior Court No: CGC — 10 — 501168 age 7 SUPPLEMENTAL Points and Authorities In Opposition to Motion To Reconsider