The opinion
Filed 2/9/26 Barney v. Girn CA4/3
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION THREE
CARL BARNEY, as Trustee, etc., et
al.,
G064412
Plaintiffs and Respondents,
(Super. Ct. No. 30-2018-
v. 01006531)
RAMANDEEP GIRN et al., OPINION
Defendants and Appellants.
Appeal from a judgment of the Superior Court of Orange County,
Erick L. Larsh, Judge. Reversed and remanded.
Holmes, Athey, Cown & Mermelstein, Mark Mermelstein and
Joel M. Athey for Defendants and Appellants.
Jackson Lewis, James P. Carter, Jonathan P. Schmidt, Kelli M.
Dreger and Dylan B. Carp for Plaintiffs and Respondents.
* * *
This lawsuit involves shareholders and former officers of LePort
Educational Institute, Inc. (LEI), which previously operated Montessori
schools across the country. The primary participant on one side is Carl
Barney as an individual and as trustee of the Carl Barney Living Trust
(collectively, Barney). Barney is LEI’s largest secured creditor and is also a
shareholder. The main litigants on the other side are Dr. Peter LePort
(Dr. LePort), who is LEI’s founder and current chairperson and chief
executive officer (CEO), and Ramandeep (known as Ray) and Rebecca Girn,
who are LEI shareholders and former officers.1
Barney obtained an assignment (the assignment) purportedly
approved by LEI’s board of directors (the board), which assigned to him LEI’s
claims against various parties. Under the assignment, Barney alleged claims
on LEI’s behalf against Dr. LePort, the Girns, and other LEI shareholders
and former officers (the defendants). The Girns cross-complained against
Barney and LEI. This led to a struggle between Barney and Dr. LePort—who
was allegedly working with the Girns—to control LEI’s defense of these cross-
claims. Barney claimed authority to control LEI’s defense under the
assignment, while Dr. LePort claimed authority as LEI’s chairperson and
CEO. Barney and Dr. LePort each hired different attorneys to represent LEI,
and these attorneys began interfering with each other’s filings.
Barney moved for a preliminary injunction to prevent Dr. LePort,
the Girns, and others from interfering with any filings he made on LEI’s
behalf (the preliminary injunction motion). The Girns opposed the motion.
After briefing had finished, Louis Shoch, the attorney Dr. LePort had hired to
represent LEI, filed a declaration presenting a new argument. Shoch claimed
1 We refer to Ray and Rebecca individually by their first names to
avoid confusion, and we refer to them collectively as the Girns.
2
the assignment was invalid because it had not been properly approved by the
board under Corporations Code section 307, subdivision (a)(8).2 Specifically,
the assignment had not been approved by a majority of the directors who had
attended the meeting where it was considered. Shoch presented evidence that
four directors had attended this meeting. Two of them recused themselves
from voting on the assignment, while the other two directors voted in its
favor. Since two is not a majority of four, Shoch argued the assignment had
not been validly approved by the board under section 307, subdivision (a)(8).
The trial court rejected Shoch’s untimely argument on the merits
and issued a preliminary injunction in Barney’s favor (the preliminary
injunction order). It found that only a majority of the directors voting—not a
majority of the directors present at the meeting—was required to approve the
assignment. Since the two voting directors had both voted in favor of the
assignment, the court found it had been validly approved by the board.
On appeal, the Girns challenge the preliminary injunction order
on the same grounds as Shoch below: for the board to approve the
assignment, a majority of the directors present at the relevant board meeting
had to vote in favor of it. Since only two of the four directors voted for it, they
contend the assignment was not properly approved by the board under
section 308, subdivision (a)(8). We agree. However, since this argument was
untimely raised below, the trial court was unable to address any of Barney’s
counterarguments as to why the assignment remains valid. We cannot
resolve these many arguments on appeal because they involve issues of fact
for the trial court to resolve. Thus, we reverse the preliminary injunction
order and remand the matter for further proceedings.
2 Further undesignated references are to the Corporations Code.
3
FACTS AND PROCEDURAL HISTORY
I.
THE PARTIES AND THE ASSIGNMENT
LEI previously owned and operated several private Montessori
schools in different states. It has sold all its former schools except for one.
LEI was founded by defendant Dr. LePort in 2000, and he remains its
chairperson and CEO.
Appellants, the Girns, are LEI shareholders. Ray was previously
LEI’s CEO and a member of the board. Rebecca was previously LEI’s general
counsel and secretary. There are several other defendants—primarily LEI
shareholders and former officers—that are not involved in this appeal.
Defendant Lukas Pieter was LEI’s chief financial officer from October 2015 to
December 2016. Dr. LePort’s sister and son (collectively with Dr. LePort, the
LePorts) are also defendants and LEI shareholders.
In August 2016, the board signed a Unanimous Written Consent
(the consent agreement) to (1) enter an agreement in which respondent
Barney would loan LEI $17 million and (2) amend LEI’s articles of
incorporation and bylaws (the bylaws). Under the consent agreement, Barney
obtained the right to appoint four out of six directors on the board.3 Barney is
LEI’s largest secured creditor and is also a shareholder.
In April 2018, LEI and Barney entered an agreement, in which
LEI assigned Barney “all rights, interests, claims, demands, and remedies” it
had or may have against the Girns and the LePorts (defined above as the
assignment). The assignment allowed Barney to “prosecute the Claims in his
individual name or on behalf of LEI and in its name in his sole discretion.” It
3 Barney initially sat on the board but resigned in December
2017.
4
further specified that Barney would “indemnify, defend and hold harmless
LEI and its current officers, attorneys and directors, excluding [Dr. LePort],”
from any lawsuits, claims, attorney’s fees, or awards.4
The assignment was purportedly approved by the board at a
meeting on April 24, 2018 (the April 24, 2018 meeting). When LEI entered
into the assignment, the board’s six directors were Dr. LePort, Jim Brown,
Art Astorino, Lenny Esmond, Rony Miller, and Eric Juhlin.
II.
THE COMPLAINT AND CROSS-COMPLAINT
Barney filed this lawsuit in July 2018 solely against Pieter. He
then filed a first amended complaint on behalf of himself and LEI, which
added the LePorts as defendants. His second amended complaint added
defendants the Girns and Higher Ground Education, Inc. (Higher Ground), a
competitor of LEI that was allegedly owned and controlled by the Girns.
Finally, in August 2021, Barney filed the operative third amended complaint
(the complaint) on behalf of himself and LEI against Pieter, the LePorts, the
Girns, and Higher Ground (defined above as the defendants).
Since this appeal only involves the Girns, we focus on the claims
against them. The complaint alleged that the Girns had unlawfully conspired
to form Higher Ground while still employed by LEI and had improperly
solicited LEI employees to join Higher Ground. The complaint also asserted
that the Girns had misappropriated LEI’s trade secrets and proprietary
4 A few months prior, LEI and Barney had executed a similar
agreement, in which LEI had assigned to Barney its claims against Pieter.
This agreement also specified that Barney could prosecute any such claims
individually or on LEI’s behalf.
5
information. Based on these allegations, the complaint set forth various tort,
contract, and statutory claims against the Girns.
The Girns filed a cross-complaint, which they amended several
times. In July 2023, they filed the operative cross-complaint (the cross-
complaint), which alleged both direct and derivative claims on LEI’s behalf
against LEI, Barney, Juhlin, Esmond, and Miller. Of relevance here, the
Girns alleged several claims for indemnity against Barney based on the
assignment.5
III.
THE STRUGGLE TO CONTROL LEI’S DEFENSE
After the cross-complaint’s filing, a struggle arose between
Barney and Dr. LePort to control LEI’s defense of the Girns’ cross-claims. In
September 2023, Barney and LEI jointly filed a motion to strike portions of
the cross-complaint (the motion to strike). They also filed a joint demurrer a
few days later (the demurrer). Both filings specified that LEI was acting “by
and through [Barney], its assignee.” The motion to strike sought to strike
allegations concerning the Girns’ indemnity claims against Barney, while the
demurrer argued the Girns’ indemnity claims against him were meritless.
In the above filings, Barney was represented by Jackson Lewis
P.C., and LEI was represented by Robinson & Robinson, LLP (the Robinson
5 Specifically, the Girns alleged that the assignment required
Barney “to indemnify LEI against any demands, lawsuits, proceedings,
claims, costs, expenses, attorney’s fees, awards or judgments filed or
submitted to LEI by the former LEI employees . . . including the Girns.” The
Girns further claimed that LEI had agreed to indemnify them for fees and
costs arising from this lawsuit. And, in furtherance of this agreement, LEI
had allegedly assigned the Girns its right to indemnification from Barney
under the assignment.
6
firm). The Robinson firm had filed a notice of appearance on LEI’s behalf a
day before filing the motion to strike.
About two weeks after the Robinson firm appeared in this
lawsuit, the Girns sent a letter demanding that the Robinson firm withdraw
the demurrer on LEI’s behalf and cease representing LEI. The letter claimed
that “there is no legal meaning to your statement that you are making your
appearance ‘by and through’ Carl Barney as LEI’s assignee.” While the letter
acknowledged the assignment, it asserted, “we are unclear as to why you
believe you can purport to represent the assignor [(i.e., LEI)] as a cross-
defendant. . . . [Y]our purported representation of LEI does not actually
involve any agreement with LEI wherein LEI has agreed to be represented
by your firm. In short, we understand . . . your purported representation of
LEI is not authorized by LEI.” The letter also claimed that the Robinson firm
was “taking positions in this litigation that directly contradict the desires of
LEI as articulated by . . . its Chairman and CEO Dr. Peter LePort.”
The Robinson firm refused the above requests, stating it
“represent[ed] LEI, through its assignee Carl Barney,” and “Barney’s
authority to assert claims derives from the assignment, . . . not [Dr. LePort].”
In January 2024, Shoch filed a notice of appearance on LEI’s
behalf. LEI’s retention of Shoch was authorized by Dr. LePort as its CEO and
chairperson. Shoch then filed a notice withdrawing the demurrer and motion
to strike on LEI’s behalf, but he did not file an answer. As explained below,
Barney believed Shoch’s failure to file an answer was an attempt by Dr.
LePort to cause LEI to default on the Girns’ cross-claims.
A few days later, the Robinson firm, also purporting to act on
LEI’s behalf, filed a notice that LEI had not withdrawn the demurrer and
motion to strike. The Robinson firm also objected to Shoch’s notice of
7
appearance, explaining that Shoch was neither its cocounsel in this case, nor
did he have authority to substitute the Robinson firm out of the case. Barney
filed a notice of joinder to LEI’s notice of nonwithdrawal and also objected to
Shoch’s appearance.
Around this time, Dr. LePort sent the Robinson firm a letter
stating that the Robinson firm only represented Barney and not LEI. The
letter claimed that LEI had retained Shoch. Thus, Dr. LePort demanded that
the Robinson firm “immediately cease and desist from making any further
representations to the Court and counsel claiming that your firm represents
LEI.”
The Girns filed an opposition to LEI’s “UNAUTHORIZED
DEMURRER TO THIRD AMENDED CROSS—COMPLAINT FILED BY
ROBINSON & ROBINSON, LLP.” (Boldface omitted.) They made substantive
arguments but also claimed the demurrer should not be heard as to LEI
because its true counsel” had withdrawn it. They likewise claimed the
Robinson firm had “filed the Demurrer against LEI’s wishes” (underlining &
italics omitted), and that Barney was “hijacking LEI’s right to counsel . . . to
evade his indemnification obligations.” The Girns later filed a “Notice of
Withdrawal of Opposition to Withdrawn Demurrer of [LEI].” (Boldface
omitted.) They requested the court take the demurrer off calendar as to LEI
and only review their demurrer opposition as to Barney.
It is unclear whether the Girns filed an opposition to the motion
to strike.
IV.
THE PRELIMINARY INJUNCTION MOTION
Due to the above struggle, Barney filed the preliminary
injunction motion. He sought to prevent the LePorts and Girns “from
8
interfering with the defense of the crossclaims asserted against LEI in this
action, and preventing them from withdrawing, tampering with, or
interfering with any filing made by LEI, by and through [Barney] as its
assignee, whether through [the Robinson firm] or any other counsel.” Barney
argued the assignment authorized him to prosecute all of LEI’s claims
against the defendants and to control LEI’s defense of the Girns’ cross-claims.
He claimed Dr. LePort’s retention of Shoch was interfering with these rights.
He also alleged that Dr. LePort and the Girns had colluded to have LEI
default on the Girns’ cross-claims for indemnification after attempting to
withdraw LEI’s demurrer and motion to strike. The Robinson firm filed a
notice of joinder on LEI’s behalf.
The Girns opposed the preliminary injunction motion.
Significantly, they did not contest the assignment’s validity. Rather, they
argued Barney was asserting rights outside the assignment’s scope. In
particular, they claimed the assignment did not grant Barney the unilateral
right to retain and direct counsel on LEI’s behalf.
After briefing had finished, the court issued a tentative ruling
continuing the hearing on the preliminary injunction motion so it could be
heard with the demurrer and the motion to strike. The tentative ruling
stated that the preliminary injunction motion “largely turn[ed] on the
interpretation” of the assignment. “The court’s understanding is that [the
Girns] do not dispute the validity of [the assignment], but do dispute its
scope, particularly as to the extent to which Barney is authorized to hire
counsel on behalf of LEI and/or direct its defense.” (Italics added.) To aid its
interpretation, the court ordered “the parties to provide copies of any
corporate minutes authorizing [the] assignment.” It also allowed them to file
declarations concerning “the circumstances giving rise to the assignments,
9
and/or any nonprivileged discussions leading to execution of the
assignments.” But it specified that “[n]o further briefing is permitted.”
Both sides submitted to the tentative ruling, and it was entered
as the court’s final ruling (the continuation order).
V.
DECLARATIONS SUBMITTED BY SHOCH
Two days before the trial court’s deadline to submit the above
documents, Shoch submitted declarations from himself (the Shoch
declaration) and Dr. LePort. Despite the continuation order’s prohibition on
further briefing, Shoch used his declaration to argue—for the first time—that
the assignment was invalid.
The Shoch declaration stated that on April 18, 2018, director
Juhlin invited the five other directors to a special meeting to discuss approval
of the assignment. The invitation to the meeting included a draft of the
assignment. Four directors attended the meeting the next day: Dr. LePort,
Juhlin, Brown, and Esmond. Absent from the meeting were directors
Astorino and Miller. No vote was held on the assignment.
On April 23, 2018, Juhlin circulated an e-mail to all the directors,
recommending their immediate approval of the assignment by e-mail vote.
Juhlin sent a follow-up e-mail later that day stating that four of the six
directors had approved the assignment (Juhlin, Brown, Esmond, and Miller),
but the remaining directors (Astorino and Dr. LePort) would presumably vote
against it. LEI’s counsel then advised the directors that the assignment was
valid only if approved at a board meeting or by unanimous written consent.
Since unanimous written consent was not obtained over e-mail,
Juhlin e-mailed the entire board the next day at 7:44 a.m. He stated that
“[w]e need to have a meeting to verbally vote on the [assignment],” and
10
suggested meeting later that day. At 2:00 p.m. that same day, the board held
a meeting to vote on the assignment. Four of LEI’s six directors attended:
Esmond, Juhlin, Brown, and Miller. Neither Astorino nor Dr. LePort were
present.
The Shoch declaration noted that according to the minutes for the
April 24, 2018 meeting, “‘[f]our of the six Directors of the Board of Directors
were present at the meeting and therefore, a quorum existed.’” However,
“LEI directors Lenny Esmond and Rony Miller recused themselves from
voting on the [the assignment]. The two remaining directors present at the
April 24, 2018 meeting, Eric Juhlin and Jim Brown, then held a vote and
approved the [assignment].” The assignment was then executed on LEI’s
behalf by Esmond and Miller.
After giving this factual summary, the Shoch declaration
asserted that under the bylaws and section 307, subdivision (a)(8), “a
majority of the directors who constituted the required quorum for any Board
of Directors meeting to take place must vote to approve any action on LEI’s
behalf.” It continued, “LEI had six authorized Board members in April 2018.
A majority of the authorized number of Board members (in this case four)
was sufficient to constitute the required quorum to allow the April 24, 2018
meeting to take place. But if any of those four Board members who
constituted the required quorum for that meeting recused themselves from a
vote, then a majority of the original four Board members who constituted the
required quorum for that meeting (rather than a majority of the members
who voted on a resolution) had to approve any action for it to be a valid and
enforceable act by LEI.”
The Shoch declaration then opined that the assignment was
invalid because it “was approved by only two members of the four-member
11
quorum required to hold the April 24, 2018 meeting, which is not a majority
of that quorum.” Because “the [assignment] was not properly approved by
LEI’s Board,” it “was not a valid act taken by LEI” under the bylaws or
section 307, subdivision (a)(8).
Dr. LePort’s declaration provided additional testimony and
documents supporting Shoch’s opinion that the assignment had not been
properly approved by the board.
VI.
THE PRELIMINARY INJUNCTION ORDER
At the preliminary injunction hearing, Barney emphasized that
the assignment’s validity had not previously been questioned by any party.
He likewise noted that the Girns were suing him for indemnity based on the
assignment. Barney asked the trial court to allow further briefing on the
assignment’s validity, if needed, “because we are being blindsided with this
after over two years of litigating this issue.”
The trial court partially granted the preliminary injunction
motion. In the preliminary injunction order, it issued an injunction
preventing the LePorts, the Girns, “and anyone acting on their behalf, from
withdrawing, tampering with, or interfering with any filing made by LEI, by
and through Mr. Barney as its assignee, whether through [the Robinson firm]
or any other counsel.”6 In particular, the court found the assignment
authorized Barney to hire counsel for LEI to prosecute claims against the
6 The portion of the preliminary injunction motion that was
denied is immaterial to this appeal, so we do not discuss it. We also note that
the injunction became effective upon the posting of a $10,000 bond.
12
LePorts and Girns and to defend against any claims they brought against
LEI.
Though Shoch’s argument about the assignment’s invalidity was
untimely, the court rejected it on the merits. It explained, “To the extent that
the supplemental declarations provided by LePort and Schoch contend that
the 4-24-18 Assignment was invalid [which appears to the court to be the
first time this contention has been raised in this action], they provide no
evidence that Board members Esmond and Miller withdrew from the Board
meeting; nor any authority that abstention from a specific vote amounts to
withdrawal from a Board meeting.”
The trial court continued, “Under California Corporations Code
Section 307(a)(8), if a quorum of four is present and two members recuse
themselves from voting, the remaining two members can still constitute a
majority vote if they both agree on the matter being voted. This
interpretation is supported by the general principle in corporate law that
once a meeting is validly convened with a quorum, business can be
transacted as long as the quorum is maintained, and any decisions made by
the majority of those voting at the meeting are valid. Therefore, if four
members constitute a quorum and two recuse themselves, the remaining two
members can validly make decisions if they unanimously agree.”
The trial court then analogized to the “CA Parliamentary
Procedures.” It explained that under these procedural rules, “when a member
abstains from voting, they are still counted for purposes of determining
whether there is a quorum, but their abstention votes on the motion are
treated as if they do not exist (CA Parliamentary Procedures, App. G)[1] [sic].
This means that while the abstaining member is considered present for the
purpose of establishing a quorum, their non-vote does not count towards the
13
majority needed to pass a motion.” It made a similar analogy to “the
regulation from 17 CCR § 60006.”
The trial court concluded, “in a corporation board member vote, if
a member recuses themselves from the vote, their presence is still counted
toward establishing a quorum, but not toward the majority vote needed to
pass a decision. Therefore, this Court finds that the two votes of the Board
Members constituted a majority vote (2 of the 2 voting) when a quorum
existed.”
The trial court also ruled on the demurrer and the motion to
strike the cross-complaint. While these rulings are not germane to this
appeal, the court sustained the demurrer without leave to amend and
granted the motion to strike in part and denied it in part.
On appeal, the Girns claim that the trial court wrongly issued a
preliminary injunction in Barney’s favor because the assignment is invalid
for two reasons. First, they claim there was inadequate notice for the April
24, 2018 meeting, where the board voted on the assignment. Second,
repeating Shoch’s argument below, they contend there were insufficient votes
at the April 24, 2018 meeting for the board to approve the assignment. We
will generally refer to first contention as the inadequate notice argument and
the second as the insufficient votes argument.
DISCUSSION
I.
WAIVER OF THE GIRNS’ ARGUMENTS
Barney contends the Girns have waived both of the contentions
they make on appeal. He claims the inadequate notice argument was not
made below while the insufficient votes argument was untimely. We agree
the former argument has been waived, but disagree on the latter.
14
A. The Inadequate Notice Argument
“‘As a general rule, theories not raised in the trial court cannot be
asserted for the first time on appeal; appealing parties must adhere to the
theory (or theories) on which their cases were tried. This rule is based on
fairness—it would be unfair, both to the trial court and the opposing
litigants, to permit a change of theory on appeal . . . .’” (Nellie Gail Ranch
Owners Assn. v. McMullin (2016) 4 Cal.App.5th 982, 997.) “‘“Appellate courts
are loath to reverse a judgment on grounds that the opposing party did not
have an opportunity to argue and the trial court did not have an opportunity
to consider. . . . Bait and switch on appeal not only subjects the parties to
avoidable expense, but also wreaks havoc on a judicial system too burdened
to retry cases on theories that could have been raised earlier.”’” (Ibid.)
Nothing in the record shows the Girns, or any party, argued
below that the assignment was invalid because there was inadequate notice
for the April 24, 2018 meeting. While the Shoch declaration contained
testimony about the communications leading up to the April 24, 2018
meeting, it never argued the meeting was held on inadequate notice. Rather,
Shoch only claimed the assignment was ineffective because it “was not validly
approved by LEI because it was not approved by a majority of the directors
who were required to constitute a quorum in order to hold the April 24, 2018
Board meeting.”
Appellate courts have discretion to consider new legal arguments
on appeal. (Daneshmand v. City of San Juan Capistrano (2021) 60
Cal.App.5th 923, 937.) But the inadequate notice argument raises factual
questions as to when notice of the April 24, 2018 meeting was given. And it is
unclear whether the relevant facts are undisputed since Barney was not
given the chance to present any evidence or argument on this issue below.
15
Besides, even if the facts were undisputed, we are under no obligation to
consider this argument. (Ramirez v. Department of Motor Vehicles (2023) 88
Cal.App.5th 1313, 1335.) The Girns have not explained why they failed to
make it below or why it should be considered now. (See Nellie Gail Ranch
Owners Assn. v. McMullin, supra, 4 Cal.App.5th at p. 997.) Thus, even if this
argument involved undisputed facts, we would not exercise our discretion to
consider it.
B. The Insufficient Votes Argument
Similarly, Barney claims the Girns have waived the insufficient
votes argument by failing to timely raise it below. While we agree the
argument was untimely, we find it has not been waived because the trial
court directly addressed it in the preliminary injunction order.
The insufficient votes argument was untimely made. As detailed
above, the continuation order stated that the parties did “not dispute the
validity of [the] assignment” and that “[n]o further briefing is permitted.”
Despite this, the Shoch declaration presented a new argument that the
assignment was invalid because it had not been approved by the required
majority of the directors at the April 24, 2018 meeting. This violated the
court’s order barring further briefing.
That said, we cannot ignore that the trial court directly
addressed the insufficient votes argument in the preliminary injunction
order. It found the board’s approval of the assignment complied with section
307, subdivision (a)(8). Specifically, it ruled “that the two votes of the Board
Members constituted a majority vote (2 of the 2 voting) when a quorum
existed.”
Trial courts have discretion to consider late arguments. (See
Juarez v. Wash Depot Holdings, Inc. (2018) 24 Cal.App.5th 1197, 1201–1202;
16
Alliant Ins. Services, Inc. v. Gaddy (2008) 159 Cal.App.4th 1292, 1307–1308.)
Here, the lower court unquestionably exercised its discretion to consider the
insufficient votes argument by expressly rejecting it in the preliminary
injunction order. Thus, we find the argument has not been waived for
purposes of this appeal.
II.
THE PRELIMINARY INJUNCTION ORDER
A. Standard of Review
“The usual standard of review for the granting or denial of a
preliminary injunction is the abuse of discretion standard of review.” (Upland
Police Officers Assn. v. City Of Upland (2003) 111 Cal.App.4th 1294, 1300.)
Here, however, our review centers on the court’s interpretation of section 307,
subdivision (a)(8) and the bylaws. “[W]hen review of a preliminary injunction
involves purely a question of law or statutory interpretation, the standard of
review is de novo.” (Millennium Rock Mortgage, Inc. v. T.D. Service Co. (2009)
179 Cal.App.4th 804, 808–809.) Likewise, questions concerning the
interpretation of an entity’s bylaws are reviewed de novo. (Concord Christian
Center v. Open Bible Standard Churches (2005) 132 Cal.App.4th 1396, 1407–
1408.)
B. The Board’s Approval of the Assignment
The Girns argue the assignment is invalid because it was not
properly approved by the board under the bylaws or section 307, subdivision
(a)(8). Specifically, they contend the assignment had to be approved by either
(1) a majority of the directors present at the April 24, 2018 meeting, or (2) if
any directors withdrew from the meeting, a majority of the required quorum
for the meeting. Under either scenario, the Girns claim at least three
directors had to vote in favor of the assignment. Since only two directors
17
voted for it, the Girns contend the assignment was not properly approved by
the board and is invalid. We agree there were insufficient votes for the board
to approve the assignment.
1. The bylaws and applicable law
The bylaws authorize six directors for the board and specify that
LEI’s “business and affairs . . . shall be managed and all corporate powers
shall be exercised by or under the direction of the [board].” Under the bylaws,
“A majority of the authorized number of directors constitutes a quorum of the
[board] for the transaction of business . . . . Every act or decision done or
made by a majority of the directors present at a duly held meeting at which a
quorum is present will be regarded as the act of the [board], subject to the
provisions of Section 310, 311 and 317( e) of the California Corporations Code
. . . .” (Italics added.) “A meeting at which a quorum is initially present may
continue to transact business, notwithstanding the withdrawal of directors, if
any action taken is approved by at least a majority of the required quorum for
that meeting or by such greater number, if any, required by the California
General Corporation Law . . . .” (Italics added.)
The above bylaws use the same language as section 307,
subdivision (a)(7) and (8). The former subdivision states that “[a] majority of
the authorized number of directors constitutes a quorum of the board for the
transaction of business.” (§ 307, subd. (a)(7).) Section 307, subdivision (a)(8)
then provides, “An act or decision done or made by a majority of the directors
present at a meeting duly held at which a quorum is present is the act of the
board . . . . A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for that
meeting.” (Italics added.)
18
Since these bylaws contain the same language as section 307,
subdivision (a)(7) and (8) and expressly reference the Corporations Code, we
can reasonably infer that they are intended to mirror the standards
contained in this subdivision. (See Civ. Code, § 1636.) We also note that
neither party disputes that the bylaws were intended to incorporate the text
of section 307, subdivision (a)(7) and (8). As such, we will base our analysis on
this statutory subdivision.
The goal of statutory interpretation “‘is to ascertain the intent of
the lawmakers so as to effectuate the purpose of the statute.’ [Citation.] We
begin as always with the statute’s actual words, the ‘most reliable indicator’
of legislative intent, ‘assigning them their usual and ordinary meanings, and
construing them in context. If the words themselves are not ambiguous, we
presume the Legislature meant what it said, and the statute’s plain meaning
governs. On the other hand, if the language allows more than one reasonable
construction, we may look to such aids as the legislative history of the
measure and maxims of statutory construction.’” (Even Zohar Construction &
Remodeling, Inc. v. Bellaire Townhouses, LLC (2015) 61 Cal.4th 830, 837–
838.)
2. Applying section 307, subdivision (a)(8)
It is undisputed that the April 24, 2018 meeting began with a
quorum of four directors before Esmond and Miller recused themselves from
voting on the assignment. There is some dispute as to whether their recusal
broke quorum. If all four directors were still “present” for the vote, the
assignment would need to be approved by a majority of the directors present.
(§ 307, subd. (a)(8).) However, if Esmond and Miller’s recusal was a
“withdrawal” from the April 24, 2018 meeting, the assignment would need to
be approved by a majority of the required quorum for the meeting. (§ 307,
19
subd. (a)(8.)) We need not determine which scenario applies, because the
result is the same either way.
As to the first scenario, the statute provides that “[a]n act or
decision done or made by a majority of the directors present at a meeting . . .
is the act of the board . . . .” (§ 307, subd. (a)(8), italics added.) Four directors
attended the April 24, 2018 meeting. If all four directors remained “present”
for the vote, then a majority of them, i.e., three directors, had to vote in favor
of the assignment to obtain the board’s approval. (Cambridge Dict. Online
(2025) <https://dictionary.cambridge.org/dictionary/english/majority> [as of
Dec. 9, 2025], archived at https://perma.cc/MNH5-LGY6 [a “majority” means
“more than half of a total number or amount”]; see, e.g., People v. Walker
(2024) 16 Cal.5th 1024, 1035 [dictionaries can be used to determine a word’s
meaning in the absence of a statutory definition].)
As to the second scenario, if Esmond and Miller’s recusals were
“withdrawal[s]” from the April 24, 2018 meeting, the assignment had to be
“approved by at least a majority of the required quorum for that meeting.”
(§ 307, subd. (a)(8), italics added.) The bylaws authorized six directors, and
all six positions were filled in April 2018. Thus, four directors were required
to form a quorum for the April 24, 2018 meeting. (§ 307, subd. (a)(7) [“[a]
majority of the authorized number of directors”].) Thus, for the assignment to
obtain the board’s approval, a majority of the required quorum needed to vote
in favor of it, i.e., three out of four directors. (§ 307, subd. (a)(8).)
In sum, under either scenario, three directors at the April 24,
2018 meeting had to vote in favor of the assignment. Since only two directors
voted for it, the assignment was not validly approved by the board under
section 307, subdivision (a)(8).
20
The trial court reasoned that under section 307, subdivision
(a)(8), “if a quorum of four is present and two members recuse themselves
from voting, the remaining two members can still constitute a majority vote if
they both agree on the matter being voted. This interpretation is supported
by the general principle in corporate law that once a meeting is validly
convened with a quorum, business can be transacted as long as the quorum is
maintained, and any decisions made by the majority of those voting at the
meeting are valid.” (Italics added.)
The trial court provided no citation for its statement that a
decision made by the majority of those voting is valid. Nor have the parties
provided any authority to this effect. As explained above, section 307,
subdivision (a)(8) states that board actions require approval by (1) “a majority
of the directors present at a meeting” or (2) “a majority of the required
quorum for that meeting” if directors withdraw from it. It is silent as to
recusals or abstentions.
In construing a statute, “we may not broaden or narrow the scope
of the provision by reading into it language that does not appear in it or
reading out of it language that does. . . . ‘“‘[A] court . . . may not rewrite the
statute to conform to an assumed intention which does not appear from its
language.’”’” (Doe v. City of Los Angeles (2007) 42 Cal.4th 531, 545.) Section
307, subdivision (a)(8) does not state that board decisions can be approved by
a majority of those voting on a measure if there are recusals or abstentions.
Nor can we reasonably derive such a rule from the statute’s text, which is
entirely silent on this issue. Simply put, we cannot insert language into the
statute that the Legislature did not include. (Ibid.)
The trial court cited the “CA Parliamentary Procedures” for the
proposition that “when a member abstains from voting, they are still counted
21
for purposes of determining whether there is a quorum, but their abstention
votes on the motion are treated as if they do not exist . . . . This means that
while the abstaining member is considered present for the purpose of
establishing a quorum, their non-vote does not count towards the majority
needed to pass a motion.”
The above citation to the “CA Parliamentary Procedures” appears
to reference appendix G of the California Rules of Court, which contains
parliamentary procedures for the Judicial Council of California (the Judicial
Council rules). “These parliamentary procedures are a set of rules for
conducting business at Judicial Council meetings.” (Cal. Rules of Court,
appen. G, ¶ I.) The Judicial Council rules explain that “[m]embers sometimes
prefer to abstain from voting. Members who abstain are counted for purposes
of determining whether there is a quorum, but the abstention votes on the
motion are treated as if they do not exist. In other words, an abstention is not
treated as either a ‘yes’ vote or a ‘no’ vote.” (Cal. Rules of Court,
appen. G, ¶ VII.B.)
To begin, the Judicial Council rules are unpersuasive. They are
expressly intended to govern Judicial Council meetings. Neither party has
explained why they should influence our interpretation of section 307,
subdivision (a)(8), whose text is unambiguous.
Besides, even if we considered the Judicial Council rules, they do
not support the trial court’s interpretation of section 307, subdivision (a)(8).
The Judicial Council rules state that “[w]hen a majority vote is needed to
pass a motion, one vote more than 50 percent of those voting is required.”
(Cal. Rules of Court, appen. G, ¶ VII.A.) They then provide the following
example: “Assume that 18 members are present and voting on a procedural
motion that requires only a majority vote to pass . . . . If the vote is 10 to 8,
22
the motion passes. If the vote is 9 to 9, the motion fails. If the vote is 9 to 8
with 1 abstention, the motion fails because 10 votes are required for the
motion to pass (one vote more than 50 percent). Once again, the abstention
vote is counted only for the purpose of determining quorum, but on the actual
vote on the motion, it is as if the abstention vote did not occur.” (Cal. Rules of
Court, appen. G, ¶ VII.C, italics added.)
Thus, under the Judicial Council rules, abstaining members do
not reduce the number of votes needed for a majority. The required majority
is still based on the number of members present at the meeting, not the
number of members voting. If 18 members are present at a meeting and one
member abstains from voting, a measure still needs to be approved by a
majority of the 18 members present, i.e., 10 members. Put differently, if one
member abstains, the required majority is not based on the 17 members that
vote, which would only require nine affirmative votes to pass a motion.
As applied here, if Esmond and Miller’s recusals were
tantamount to abstentions, a majority of the four directors present at the
April 24, 2018 meeting still needed to vote in favor of the assignment to
obtain the board’s approval. Only two voted for it. Since the assignment was
not approved by a majority of the directors present at the meeting, it was not
validly approved by the board. (§ 307, subd. (a)(8); cf. Cal. Rules of Court,
appen. G, ¶ VII.C.)
The trial court also cited Code of Regulations, title 17, section
60006, which is a regulation governing the Air Resources Board. This
regulation states, “The presence of a majority of the total appointed voting
members of the state board shall constitute a quorum, and formal decisions
shall be by vote of a majority of the quorum. No formal decision on any item
shall be made in the absence of a quorum.” (Cal. Code Regs., tit. 17, § 60006.)
23
This citation is also unpersuasive. It is unclear how a regulation
governing the Air Resources Board has any bearing on our interpretation of
section 307, subdivision (a)(8), which governs corporate board meetings.
Further, nothing in this regulation addresses abstentions or recusals from
voting. It only states that formal decisions require a “vote of a majority of the
quorum.” Here, only two of the four directors comprising the quorum voted in
favor of the assignment. This was not a majority. Thus, even if this
regulation is considered, it does not support the trial court’s conclusion that
the votes of the two directors were sufficient to obtain the board’s approval.
In response, Barney makes several arguments that are either
unpersuasive or cannot be addressed in this appeal. First, he contends the
court did not abuse its discretion in weighing (1) the likelihood that Barney
will prevail, and (2) the balance of harm between Barney and the Girns. (See
Hunter v. City of Whittier (1989) 209 Cal.App.3d 588, 595 [discussing
preliminary injunction standard].) But this argument ignores that the
assignment’s validity is fundamental to the preliminary injunction motion.
Barney’s alleged right to control LEI’s defense of the Girns’ cross-claims is
rooted in the assignment. If it is invalid, Barney has no apparent right to
control LEI’s defense.
Next, Barney claims that even if the board did not properly
approve the assignment at the April 24, 2018 meeting, it is still valid for a
variety of other reasons, including that the Girns 1) lacked standing to
challenge the assignment’s enforceability; 2) judicially admitted the
assignment is enforceable; 3) did not show that LEI had not ratified the
assignment; 4) did not show that Esmond or Miller lacked actual or
24
ostensible authority to bind LEI to the assignment; and 5) did not show the
assignment falls outside section 313.7
An appellate court “may affirm on any ground supported by the
record [citation], including grounds not raised by the respondent, and even if
the respondent does not file a brief [citations]. ‘Thus, respondent can assert a
new theory on appeal in order to establish that the judgment was correct on
that theory unless doing so would unfairly prejudice appellant by depriving
appellant of the opportunity to litigate an issue of fact.’” (J.R. v. Electronic
Arts Inc. (2024) 98 Cal.App.5th 1107, 1115, fn. 2, italics omitted.)
The assignment may still be valid even if it was not properly
approved by the board at the April 24, 2018 meeting. However, Barney’s
arguments involve factual issues that we cannot resolve under the current
record. Since the insufficient votes argument was untimely made below, the
parties were unable to provide evidence or brief any of Barney’s
counterarguments. Thus, we remand this case so the trial court can resolve
these factual issues and decide whether the assignment remains valid despite
not being properly approved by the board at the April 24, 2018 meeting. (See,
e.g., Farley v. Cory (1978) 78 Cal.App.3d 583, 591 [“The record has not been
developed to a point which permits the [appellate] court to fix the appropriate
7 Section 313 provides that “[a]ny . . . contract . . . or other
instrument in writing, and any assignment or endorsement thereof, executed
or entered into between any corporation and any other person, when signed
by the chairperson of the board, the president or any vice president and the
secretary, any assistant secretary, the chief financial officer or any assistant
treasurer of such corporation, is not invalidated as to the corporation by any
lack of authority of the signing officers in the absence of actual knowledge on
the part of the other person that the signing officers had no authority to
execute the same.”
25
relief. It is the trial court, before whom the facts will be developed, which
must rule in the first instance”].)
Likewise, the parties argue whether directors with a conflict of
interest are counted in determining a quorum. (See § 310, subd. (c).) We will
not address this argument. It was not raised below, and additional facts are
needed to determine whether any portion of section 310 applies here. The
trial court can address any arguments under this statute on remand.
DISPOSITION
The preliminary injunction order is reversed. On remand, the
trial court shall address Barney’s arguments concerning the assignment’s
validity that were not examined in this appeal. We leave it in the court’s
discretion to determine the permissible scope of briefing and evidence on
remand. The Girns are entitled to their costs on this appeal.
MOORE, ACTING P. J.
WE CONCUR:
GOODING, J.
SCOTT, J.
26