Turner v. Victoria

IN THE SUPREME COURT OF

CALIFORNIA

DEBRA TURNER,

Plaintiff and Appellant,

v.

LAURIE VICTORIA et al.,

Defendants and Respondents.

S271054

Fourth Appellate District, Division One

D076318, D076337

San Diego County Superior Court

37-2017-00009873-PR-TR-CTL,

37-2018-00038613-CU-MC-CTL

August 3, 2023

Chief Justice Guerrero authored the opinion of the Court, in

which Justices Corrigan, Liu, Kruger, Groban, Jenkins, and

Evans concurred.

TURNER v. VICTORIA

S271504

Opinion of the Court by Guerrero, C. J.

Under Corporations Code sections 5142 and 5233,1 a

director of a nonprofit public benefit corporation may “bring an

action” to remedy a breach of the charitable trust or recover

damages for self-dealing transactions by other directors.

(§§ 5142, subd. (a), 5233, subd. (c).) Similarly, under

section 5223, the trial court may “at the suit of a director”

remove from office any director guilty of malfeasance. (§ 5223,

subd. (a).) We granted review to decide whether a director of a

charitable corporation who loses that position after instituting

a lawsuit against fellow directors under sections 5142, 5233,

and 5223 (hereinafter the director enforcement statutes) also

loses standing to maintain the lawsuit.

An examination of the statutory text, its surrounding

context, the legislative history, and the overarching purpose of

the director enforcement statutes reveals that the statutes do

not impose a continuous directorship requirement that would

require dismissal of a lawsuit brought under these statutes if

the director-plaintiff fails to retain a director position. Each

statute grants a director standing to bring a lawsuit. None

expressly requires continued service as a director as a condition

1

All further statutory references are to the Corporations

Code unless otherwise specified.

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Opinion of the Court by Guerrero, C. J.

for pursuing the lawsuit, and there is no indication that the

Legislature intended to impose such a condition.

In finding a requirement of continued service, the Court of

Appeal below analogized actions under the director enforcement

statutes to shareholder derivative lawsuits. (Turner v. Victoria

(2021) 67 Cal.App.5th 1099, 1128–1129 (Turner).) However, the

language of the governing statutes is significantly different in

the nonprofit and for-profit contexts. Furthermore, the position

adopted by the Court of Appeal would permit gamesmanship by

directors accused of wrongdoing. Directors who are sued would

be able to terminate the litigation by removing the plaintiffs

from office, refusing to reelect the individuals, or otherwise

making it more difficult for the plaintiffs to retain their

positions. Because potential plaintiffs would likely be

discouraged from filing complaints, this framework would shift

to the Attorney General the burden of initiating lawsuits aimed

at ensuring that nonprofit public benefit corporations serve

their charitable purpose. But, as we have long recognized, “the

need for adequate enforcement” of the law governing charities

cannot be “wholly fulfilled” by having the Attorney General act

as the exclusive entity empowered to institute litigation. (Holt

v. College of Osteopathic Physicians & Surgeons (1964) 61 Cal.2d

750, 755 (Holt).)

An interpretation of the statutes that does not require a

director-plaintiff to maintain a director position at a nonprofit

corporation throughout litigation is “ ‘ “the construction that

comports most closely with the apparent intent of the

lawmakers,” ’ ” and the one that we “ ‘ “[u]ltimately . . .

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Opinion of the Court by Guerrero, C. J.

choose.” ’ ” (Lee v. Hanley (2015) 61 Cal.4th 1225, 1233 (Lee).)

We therefore reverse the judgment of the Court of Appeal.2

I. FACTUAL AND PROCEDURAL BACKGROUND

“Because this case comes to us at the demurrer stage, we

take as true all properly pleaded material facts — but not

conclusions of fact or law.” (Southern California Gas Leak Cases

(2019) 7 Cal.5th 391, 395.) The plaintiff in this case is Debra

Turner; the defendants are Laurie Anne Victoria, Joseph

Gronotte, Gregory Rogers, and Anthony Cortes.3 When plaintiff

initiated the litigation, she and all four defendants were

directors of the Conrad Prebys Foundation (the Foundation), a

nonprofit public benefit corporation named for its founder.

Conrad Prebys (Prebys) was a wealthy philanthropist. In

addition to the Foundation, Prebys created an inter vivos trust,

the Conrad Prebys Trust (the Trust). Prebys funded the Trust

and directed it to make distributions to specific beneficiaries

after his death. The assets remaining after the gift distributions

were to “go to the Foundation to be used for charitable

purposes.”

Under the Foundation’s bylaws, all its directors were also

members of the Foundation, and the Foundation had no other

members. Most of the directors had a personal relationship with

2

We do not decide whether the director-plaintiff in this case

also has standing under section 5710 (the member enforcement

statute), which allows members of a nonprofit public benefit

corporation to “institute[] or maintain[]” an action on behalf of

the corporation if certain conditions are met. (§ 5710, subd. (b).)

3

By law, plaintiff also sued as nominal defendants the

nonprofit public benefit corporation itself and the Attorney

General. (See §§ 5223, subd. (a); 5233, subd. (c).)

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Opinion of the Court by Guerrero, C. J.

Prebys. For instance, Victoria was the Chief Executive Officer

of a company Prebys owned, and plaintiff was Prebys’s “life

partner, living [with Prebys] as a couple for over 16 years until

his death” in 2016.

In addition to her role at the Foundation, Victoria was the

trustee of the Trust. At the initial meeting of the Board of

Directors (Board) after Prebys’s death, Victoria and an attorney

informed the directors that Prebys’s son, Eric Prebys, might

contest the Trust.4 Although Eric was originally a beneficiary

under the Trust, Prebys eliminated the gift to Eric two years

before he died. The Board was informed that Eric had hired

counsel with the intention of challenging his disinheritance on

the grounds that his father lacked mental competence and was

unduly influenced by plaintiff.

In her role as trustee, Victoria wanted to settle Eric’s

claims, and she discussed with the Board an appropriate

settlement amount. Plaintiff was the only director who opposed

such a settlement. The Board eventually voted to authorize a

maximum settlement of $12 million plus the payment of estate

taxes. In early 2017, Victoria, on behalf of the Trust, settled

with Eric for a total sum of $15 million, paying $9 million to Eric

directly and the remainder in taxes.

On May 15, 2017, while she was still a director, officer,

and member of the Foundation, plaintiff filed a petition in

probate court against her fellow board members. (Turner,

supra, 67 Cal.App.5th at pp. 1113–1114.) The suit included

claims for breach of charitable trust, breach of the Board

4

To avoid confusion, we refer to Eric Prebys by his first

name.

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Opinion of the Court by Guerrero, C. J.

members’ duty of care, self-dealing in violation of the Board

members’ duty of loyalty, and removal of members of the Board

for dishonest acts and gross abuse of authority. (Id. at p. 1114.)

All causes of action were based on the Board’s handling of the

settlement with Eric. (Ibid.)

The director-defendants were aware of the lawsuit prior to

a board meeting held in November 2017, at which the Board

conducted an election of Foundation directors and officers. The

four director-defendants nominated and seconded one another

for reelection as directors and appointment as officers. No one

nominated plaintiff for reelection as a director or an officer,

despite plaintiff having made “clear she wanted to remain on the

Foundation’s Board.” As a result, plaintiff lost her position as

director, officer, and, consequently, member of the Foundation.

Plaintiff alleges that her loss of position was an act of retaliation

by the director-defendants in response to her lawsuit.

Subsequent to the November 2017 board election, the

probate court ordered the four causes of action discussed above

severed and transferred for resolution in a separate civil

proceeding. (Turner, supra, 67 Cal.App.5th at p. 1115.) The

court made clear that the new proceeding “would relate back to

the date of the original petition,” when plaintiff was still a

director of the Foundation. (Ibid.) Plaintiff subsequently filed

a civil complaint in the superior court, alleging causes of action

under sections 5142, 5233, 5223, and 5710. (Turner, at p. 1116.)

Defendants demurred, arguing that plaintiff no longer had

standing to maintain the lawsuit because she was no longer a

director or member of the Foundation. (Ibid.) The trial court

agreed and dismissed the claims against defendants. (Ibid.)

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Opinion of the Court by Guerrero, C. J.

The Court of Appeal affirmed. Analogizing to the standing

rules that apply in shareholder derivative actions, the court

concluded plaintiff was required to maintain a “continuous

relationship” with the Foundation to proceed with her suit.

(Turner, supra, 67 Cal.App.5th at p. 1108; see id. at pp. 1137–

1138.) The court disagreed with Summers v. Colette (2019)

34 Cal.App.5th 361 (Summers), which held that a plaintiff who

had been removed as a director of a nonprofit corporation did

not lose standing to maintain this type of action. (Turner, at

p. 1129; Summers, at p. 364.)

We granted review to resolve the conflict in authority.

II. DISCUSSION

This case involves a question of statutory construction,

which we review de novo. (See, e.g., Lee, supra, 61 Cal.4th at

p. 1232.) Our specific task is to determine whether plaintiff

maintained standing under the statutory scheme. “At its core,

standing concerns a specific party’s interest in the outcome of a

lawsuit.” (Weatherford v. City of San Rafael (2017) 2 Cal.5th

1241, 1247.) “When, as here, a cause of action is based on

statute, standing rests on the provision’s language, its

underlying purpose, and the legislative intent.” (Kim v. Reins

International California, Inc. (2020) 9 Cal.5th 73, 83 (Kim).)

Consistent with this approach, in part II.A., post, we provide an

overview of the director enforcement statutes. We subsequently

analyze the provisions’ text (part II.B.), context (part II.C.), and

purpose (part II.D.). After concluding that these indicia of

intent do not support a continuous directorship requirement, we

consider and reject defendants’ remaining arguments in favor of

such a requirement (part II.E.).

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Opinion of the Court by Guerrero, C. J.

A. The Relevant Statutes

The provisions at issue — sections 5142, 5233, and

5223 — are part of the Nonprofit Corporation Law (§ 5000 et

seq.). Enacted in 1978 and effective in 1980 (Stats. 1978,

ch. 567), the legislation was the result of years-long study and

collaboration between the Assembly Select Committee on the

Revision of the Nonprofit Corporations Code and the State Bar’s

Committee on Nonprofit Corporations. (See Assemblyman John

T. Knox, letter to Governor Edmund G. Brown, Jr. (1977–1978

Reg. Sess.) Aug. 29, 1978, Governor’s chaptered bill files,

ch. 567.) When signed into law, the Nonprofit Corporation Law

provided “a new, comprehensive,” standalone set of statutes to

guide the conduct of charities that had been regulated in a

piecemeal fashion under the General Corporation Law (GCL)

(§ 100 et seq.). (Legis. Counsel’s Dig., Assem. Bill No. 2180

(1977–78 Reg. Sess.) Stats. 1978, ch. 567, Summary Dig., p. 141

(Summary Digest).)

One type of charity covered by the Nonprofit Corporation

Law is the nonprofit public benefit corporation, an entity formed

for “any public or charitable purposes.” (§ 5111.) Such a

corporation is subject to rules designed to ensure that the entity

serves the public or charitable purpose for which it was created.

For example, unlike a for-profit company that may regularly

distribute dividends to its shareholders, a nonprofit public

benefit corporation is prohibited from making distributions.

(§ 5410.) Similarly, the majority of persons serving on the board

of a nonprofit public benefit corporation may not be “interested

persons,” in other words, individuals receiving compensation

from the corporation, or relatives of such individuals (except

that a director may be paid “reasonable compensation . . . as

director”). (§ 5227, subds. (a) & (b)(1).) Directors and officers of

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Opinion of the Court by Guerrero, C. J.

a nonprofit public benefit corporation also are charged with a

duty of care and must refrain from self-dealing transactions.

(See §§ 5231, subd. (a), 5233.)

As relevant here, the Nonprofit Corporation Law specifies

who may sue to enforce its provisions. Section 5142 addresses

breaches of a charitable trust and declares that “any of the

following may bring an action to enjoin, correct, obtain damages

for or to otherwise remedy a breach of a charitable trust: [¶]

(1) The corporation, or a member in the name of the corporation

pursuant to Section 5710.[5] [¶] (2) An officer of the corporation.

[¶] (3) A director of the corporation. [¶] (4) A person with a

reversionary, contractual, or property interest in the assets

subject to such charitable trust. [¶] (5) The Attorney General,

or any person granted relator status by the Attorney General.”

(§ 5142, subd. (a).)

Section 5233 similarly specifies four categories of persons,

in addition to the Attorney General, who are authorized to

“bring an action” in the face of self-dealing transactions by

interested directors. (§ 5233, subd. (c).) This provision states,

“The Attorney General or, if the Attorney General is joined as

an indispensable party, any of the following may bring an action

in the superior court of the proper county for the remedies

specified in subdivision (h) [governing self-dealing

transactions]: [¶] (1) The corporation, or a member asserting

the right in the name of the corporation pursuant to

5

Although a nonprofit public benefit corporation may

“admit persons to membership,” it may also have no members.

(§ 5310, subd. (a).) The rights and obligations of members, as

well as other guidelines for this class of persons, are specified in

sections 5310 et seq.

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Opinion of the Court by Guerrero, C. J.

Section 5710. [¶] (2) A director of the corporation. [¶] (3) An

officer of the corporation. [¶] (4) Any person granted relator

status by the Attorney General.” (Ibid.)6

Section 5223, meanwhile, delineates circumstances in

which a court may remove a director of a nonprofit public benefit

corporation. It reads, “The superior court of the proper county

may, at the suit of a director, or twice the authorized number

(Section 5036) of members or 20 members, whichever is less,

remove from office any director in case of fraudulent or

dishonest acts or gross abuse of authority or discretion with

reference to the corporation or breach of any duty arising under

Article 3 (commencing with Section 5230) of this chapter, and

may bar from reelection any director so removed for a period

prescribed by the court.” (§ 5223, subd. (a).) Section 5223 also

permits the Attorney General to “bring an action” or “intervene

in such an action brought by any other party.” (Id., subd. (b).)

Plaintiff asserts standing under all the above provisions,

as well as section 5710. Like the director enforcement statutes,

section 5710 was enacted as part of the Nonprofit Corporation

Law in 1978. (Stats. 1978, ch. 567, § 5, pp. 1787–1788.) Unlike

the director enforcement statutes, section 5710 focuses

exclusively on the ability of members of a nonprofit public

benefit corporation to bring derivative actions, or actions

asserting a right belonging to the corporation. (See Grosset v.

Wenaas (2008) 42 Cal.4th 1100, 1108 (Grosset) [“An action is

6

Although section 5233 has been amended since it was

initially enacted in 1978, “[t]he relevant portions of the statute

involving who may bring an action for self-dealing” remain

unchanged. (Turner, supra, 67 Cal.App.5th at p. 1123, fn. 9.)

We therefore do not distinguish between section 5233 as it was

enacted and the provision in its present form.

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Opinion of the Court by Guerrero, C. J.

deemed derivative ‘ “if the gravamen of the complaint is injury

to the corporation, or to the whole body of its stock and property

without any severance or distribution among individual holders,

or it seeks to recover assets for the corporation or to prevent the

dissipation of its assets” ’ ”]; Black’s Law Dict. (11th ed. 2019)

p. 558, col. 1 [defining “derivative action” as “[a] lawsuit arising

from an injury to another person” and within the context of

corporations, as “[a] suit by a beneficiary of a fiduciary to enforce

a right belonging to the fiduciary; esp., a suit asserted by a

shareholder on the corporation’s behalf against a third party

(usu. a corporate officer) because of the corporation’s failure to

take some action against the third party”].) Phrased in

prohibitory terms, the provision states, “No action may be

instituted or maintained in the right of any corporation by any

member of such corporation” unless two conditions are met, one

of which is that “[t]he plaintiff alleges in the complaint that

plaintiff was a member at the time of the transaction or any part

thereof of which plaintiff complains.” (§ 5710, subd. (b).) The

other condition requires that the plaintiff allege having made a

demand on the corporation’s board or state reasons for not

having made such a demand. (See id., subd. (b)(2).)

B. Text

We begin our analysis by reviewing the statutory

language, read in context. (See, e.g., Lee, supra, 61 Cal.4th at

p. 1232.) We recognize that, particularly when viewed against

the backdrop of our case law (discussed post), the language of

the director enforcement statutes is susceptible to more than

one interpretation. At the same time, the statutes read in their

broader statutory context “seem[] to point” to an absence of a

continuous directorship requirement. (Grosset, supra,

42 Cal.4th at p. 1113.)

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Opinion of the Court by Guerrero, C. J.

Sections 5142 and 5233 employ the same wording,

allowing a director of a nonprofit public benefit corporation to

“bring an action.” (§§ 5142, subd. (a), 5233, subd. (c).) Merriam-

Webster defines to “bring” as “to cause to exist or occur in any of

a number of ways,” including to “institute” “legal action” or

“complaint.” (Webster’s 3d New Internat. Dict. (1981) p. 278,

col. 3, capitalization omitted; accord, Lee, supra, 61 Cal.4th at

pp. 1232–1233 [in interpreting the words of a statute, we give

them their “usual and ordinary meaning”].) Black’s Law

Dictionary likewise equates the phrase “bring an action” with

“[t]o sue” or to “institute legal proceedings.” (Black’s Law Dict.

(8th ed. 2004) p. 205, col. 1; see also Webster’s 3d New Internat.

Dict., at p. 1171 [defining “to institute” as “to originate and get

established”]; Black’s Law Dict. (5th ed. 1979) p. 174, col. 1 [in

defining “bring suit,” stating, “To ‘bring’ an action or suit has a

settled customary meaning at law, and refers to the initiation of

legal proceedings in a suit. [Citation.] A suit is ‘brought’ at the

time it is commenced”].)

Here, plaintiff “sue[d],” “institute[d] [a] legal

proceeding[],” and “cause[d]” an action “to exist” by filing a

petition in the probate court (and a subsequent civil complaint

that relates back to the probate filing date). (Accord, Code Civ.

Proc., § 350 [“An action is commenced, within the meaning of

this title, when the complaint is filed”].) Plaintiff was a director

when she did so. As such, plaintiff appears to have fulfilled the

requirements of Corporations Code sections 5142 and 5233 that

a person must be a director in order to “bring an action.” (Corp.

Code, §§ 5142, subd. (a), 5233, subd. (c).)

Similarly, section 5223 describes remedies obtainable “at

the suit of a director.” (§ 5223, subd. (a).) No party argues we

should interpret this statute differently from sections 5142 and

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Opinion of the Court by Guerrero, C. J.

5233. Indeed, the three provisions appear to be in accord: “the

suit of a director” existed when plaintiff, as a director,

commenced her action by filing the petition. (§ 5223, subd. (a).)

The director enforcement statutes clearly indicate they require

an individual who brings a lawsuit to be a director when that

person institutes the action. They do not, however, contain any

express requirement of continuous directorship.

Notably, the language of the director enforcement statutes

differs from the language of section 800, the provision governing

derivative shareholder suits in the context of for-profit

organizations. In contrast to sections 5142, subdivision (a)’s and

5233, subdivision (c)’s use of the phrase “may bring an action,”

section 800, subdivision (b) refers to an action that “may be

instituted or maintained” (italics added). (See, e.g., People ex

rel. Lockyer v. R.J. Reynolds Tobacco Co. (2005) 37 Cal.4th 707,

717 [“ ‘When the Legislature uses materially different language

in statutory provisions addressing the same subject or related

subjects, the normal inference is that the Legislature intended

a difference in meaning’ ”].)

We addressed the meaning of this latter phrase — “may

be instituted or maintained” (§ 800, subd. (b)) — in Grosset.

There, we confronted the question of whether a shareholder-

plaintiff “lacks standing to continue litigating [a] derivative

action” brought on behalf of a for-profit corporation “because he

no longer owns stock in [the corporation].” (Grosset, supra,

42 Cal.4th at p. 1104.) We were required to construe

section 800, which states, “No action may be instituted or

maintained in right of any domestic or foreign corporation by

any holder of shares or of voting trust certificates of the

corporation” unless certain conditions exist. (§ 800, subd. (b).)

We reasoned that “[t]he phrase ‘instituted or maintained’ (italics

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Opinion of the Court by Guerrero, C. J.

added) appears on its face to be more restrictive than the sole

term ‘instituted’ . . . [citation], and it seems to imply that only a

shareholder may initiate or maintain a derivative action.”

(Grosset, at p. 1111.) In other words, section 800 appears to

contain a continuous ownership requirement, such that a

shareholder who no longer owns shares in a corporation may not

maintain a suit brought pursuant to the provision. (See Grosset,

at pp. 1113–1114 [stating that although “the ‘instituted or

maintained’ language does not clearly impose it,” the language

“seems to point to a continuous ownership requirement”].)

The statutes before us lack language similar to

section 800. As the Summers court observed, “[T]he absence of

something comparable to the phrase ‘or maintained’ in

sections 5233 and 5142 points away from a continuous

directorship requirement in the same way that phrase’s

presence in section 800 ‘point[s] to’ (Grosset, supra, 42 Cal.4th

at p. 1113) a continuous stock ownership requirement.”

(Summers, supra, 34 Cal.App.5th at p. 370.)

Construing the statutory language as requiring director

status only at the time an action is brought is also consistent

with other instances outside of the Corporations Code in which

the concept of bringing an action is equated with litigation being

commenced — not maintained. For example, various statutes

of limitations specify that no action may “be brought” beyond a

prescribed timeframe. (See, e.g., Code Civ. Proc., § 337,

subd. (a) [the time in which certain mortgage-related action

“may be brought shall not extend beyond three months after the

time of sale under such deed of trust or mortgage”]; id., § 337.1,

subd. (a) [“no action shall be brought to recover damages from

any person performing . . . construction of an improvement to

real property more than four years after the substantial

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Opinion of the Court by Guerrero, C. J.

completion of such improvement”]; id. § 337.15, subd. (a) [“No

action may be brought to recover damages from any

person . . . who develops real property . . . more than 10 years

after the substantial completion of the development”]; id.,

§ 337.2 [“Where a lease of real property is in writing, no action

shall be brought under Section 1951.2 of the Civil Code more

than four years after the breach of the lease”]; id., § 339.5

[“Where a lease of real property is not in writing, no action shall

be brought under Section 1951.2 of the Civil Code more than two

years after the breach of the lease”]; id., § 340.7, subd. (a) [“a

civil action brought by, or on behalf of, a Dalkon Shield [a brand

of contraceptive] victim against the Dalkon Shield Claimants’

Trust . . . shall be brought within 15 years of the date on which

the victim’s injury occurred”]; id., § 349.1 [changes to the

borders of cities, counties, and the like “shall not be contested in

any action unless such action shall have been brought within six

months” of the change]; id., § 349.2, subds. (1)–(3) [various suits

relating to the offerings of public bonds must be “brought within

six months”]; see also, e.g., Straley v. Gamble (2013)

217 Cal.App.4th 533, 537, 538 [in interpreting a limitations

period which specifies that “ ‘[n]o person . . . may bring an action

to contest the trust more than 120 days from the date [on which

the person is served],’ ” stating “we believe that the statutory

phrase ‘bring an action’ is clear: Appellant brought the action

when he filed his petition”].) These limitations provisions

indicate that bringing an action is, at least in certain contexts,

naturally understood as instituting or commencing it.

We draw further support from federal law. In construing

a federal statute penalizing insider trading, the United States

Supreme Court relied on the dictionary meaning of the term

“institute,” explaining that “the word ‘institute’ is commonly

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Opinion of the Court by Guerrero, C. J.

understood to mean ‘inaugurate or commence; as to institute an

action.’ ” (Gollust v. Mendell (1991) 501 U.S. 115, 124 (Gollust).)

Thus, a provision’s language declaring that actions targeting

insider trading “may be instituted at law or in equity . . . by the

issuer, or by the owner of any security of the issuer” (15 U.S.C.

§ 78p(b)) on its face prescribed only “conditions existing at the

time an action is begun.” (Gollust, at p. 124; but cf. id. at

pp. 125, 126 [concluding that a plaintiff must “have some

continuing financial interest in the outcome of the litigation . . .

for the sake of furthering the statute’s remedial purposes . . .

and to avoid the serious constitutional question” raised by

Article III’s imposition of a “case-or-controversy limitation on

federal court jurisdiction”].) The high court’s reading of this text

supports our reading of the director enforcement statutes as

requiring that a plaintiff be a director only “at the time an action

is begun.” (Id. at p. 124.)

In sum, nothing in the wording of the statutes indicates

that they impose a continuous directorship requirement. We

acknowledge, however, that the phrase “bring an action” can

mean different things in different circumstances. We therefore

proceed to consider the statutes’ historical context and purpose.

(See, e.g., Kim, supra, 9 Cal.5th at p. 83; Lee, supra, 61 Cal.4th

at p. 1233.) We find that these additional indicia of legislative

intent reinforce our understanding that the director

enforcement statutes do not require continuity in service as a

condition for maintaining standing.7

7

We have no occasion to determine how the words “bring

an action” (or similar phrasing) may operate in different

statutory contexts not here considered.

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Opinion of the Court by Guerrero, C. J.

C. Historical Context

As mentioned, the statutes at issue here were enacted as

part of the Nonprofit Corporation Law. That legislation was

itself a substantial undertaking that yielded “a new,

comprehensive” set of regulations to “govern [charitable

corporations] to the exclusion of the General Corporation Law,”

which had previously guided the conduct of such organizations.

(Summary Digest, supra, at p. 141.) Perhaps because the

director enforcement statutes (and specifically the subdivisions

concerning standing) were only a small part of the

“comprehensive” Nonprofit Corporation Law, they did not

receive much attention in the available legislative history

materials. (Ibid.) Nonetheless, we can draw insight from the

history of the director enforcement statutes by comparing them

with provisions that were superseded by the new Nonprofit

Corporation Law.

Comparing section 5142 to provisions which preceded it

reveals the Legislature’s intent to afford standing to a wider

group of individuals. Section 5142 is traceable to Corporations

Code former section 9505 (added by Stats. 1947, ch. 1038) and

Civil Code former section 605c (added by Stats. 1931, ch. 871,

§ 1). (Derivation Notes, Deering’s Ann. Corp. Code (2021 ed.)

foll. § 5142.) Both provisions restricted the ability to bring suit

to just one entity: the Attorney General.8 In contrast, as

8

Former section 9505 of the Corporations Code specified

that “[a] nonprofit corporation which holds property subject to

any public or charitable trust is subject at all times to

examination by the Attorney General, on behalf of the State, to

ascertain the condition of its affairs and to what extent, if at all,

it may fail to comply with trusts which it has assumed or may

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previously explained, section 5142 authorizes five categories of

persons to seek redress in addition to the Attorney General: the

corporation, or a member of the corporation suing derivatively;

“[a] person with a reversionary, contractual, or property interest

in the assets subject to such charitable trust”; “any person

granted relator status by the Attorney General”; and an officer

or director of the corporation. (§ 5142, subd. (a).)

The same expansion of standing appears in section 5223.9

The court below described section 5223 as being “similar to the

language of section 304 [of the GCL] involving an action to

remove a director” of a for-profit corporation. (Turner, supra,

67 Cal.App.5th at p. 1121.) We view the statutes differently.

Although sections 5223 and 304 share certain drafting

similarities, they are different in substance. Section 304

specifies that “[t]he superior court of the proper county may, at

the suit of shareholders holding at least 10 percent of the

depart from the general purposes for which it is formed. In case

of any such failure or departure the Attorney General shall

institute, in the name of the State, the proceedings necessary to

correct the noncompliance or departure.” Former section 605c

of the Civil Code likewise provided that “[a] nonprofit

corporation which holds property subject to any public or

charitable trust shall be subject at all times to examination on

behalf of the state . . . . Such right of examination shall pertain

ex officio to the attorney general. In case of any such failure or

departure the attorney general shall institute, in the name of

the state, the proceedings necessary to correct the same.”

9

Section 5233 was a “new provision[] that did not have a

direct correlation to the GCL.” (Turner, supra, 67 Cal.App.5th

at p. 1122.) Nonetheless, section 5233 is like section 5142 in

that it, too, allows various persons other than the Attorney

General to bring suit. (Compare § 5142, subd. (a), with § 5233,

subd. (c).)

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number of outstanding shares of any class, remove from office

any director in case of fraudulent or dishonest acts.” In contrast,

section 5223 allows the court to remove any director “at the suit

of a director, or twice the authorized number (Section 5036) of

members or 20 members, whichever is less.” (§ 5223, subd. (a).)

Accordingly, section 5223 of the Nonprofit Corporation Law

enables one more class of persons — directors — to bring suit to

remove a board member than does section 304 of the GCL.10

In enacting the Nonprofit Corporation Law, the

Legislature thus broadened standing, allowing more persons to

bring suit than was previously possible. Although nothing in

the legislative history speaks directly to the issue, declining to

read a continuity requirement into sections 5142, 5233, and

5223 is consistent with the Legislature’s intent to expand

standing as a means to remedy abuses committed against a

charitable corporation.

In advancing a different interpretation of the statutes

involved here, the Court of Appeal pointed to language from the

legislative history of the Nonprofit Corporation Law suggesting

the Legislature intended for the new law to mirror the old GCL.

(See Turner, supra, 67 Cal.App.5th at p. 1121.) The court

acknowledged that the Nonprofit Corporation Law did include

some innovations as compared to the old GCL. (See Turner,

supra, 67 Cal.App.5th at p. 1122.) The court nevertheless

concluded that “[t]he legislative history for this statutory

10

The “authorized number . . . of members” referred to in

section 5223 also does not correspond strictly to the 10 percent

required under section 304. (See § 5036 [specifying the

“ ‘authorized number’ ” as 5, 2.5, or 1/20 percent “of the voting

power” depending on the “total number of votes entitled to be

cast for a director”].)

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Opinion of the Court by Guerrero, C. J.

scheme indicates . . . a clear intention to hew as closely to the

law used for general corporations as possible.” (Id. at p. 1123.)

The inference from the court’s logic is that we should construe

sections 5142, 5233, and 5223 of the Nonprofit Corporation Law

to contain a continuous directorship requirement, just as we

construed section 800 of the GCL to require continuous

ownership of shares.

The drafters of the Nonprofit Corporation Law indeed

conveyed that the legislation “follows GCL format and language

except where substantive differences otherwise require.”

(Assem. Select Com. on Revision of the Nonprofit Corp. Code,

Summary of Assem. Bill Nos. 2180 and 2181 (1977–1978 Reg.

Sess.) Apr. 21, 1978, p. 2.) “This means,” said the drafters, “not

only that the proposed law follows the GCL in general

organization, but further, individual sections employ the GCL

language whenever the same substantive results are intended.”

(Ibid.; see also Recommendation Relating to Nonprofit

Corporation Law (Nov. 1976) 13 Cal. Law Revision Com. Rep.

(1976) pp. 2227–2228.)

As discussed previously, however, the individual sections

at issue here employ language different from that found in the

GCL. The provisions of the Nonprofit Corporation Law

broadened standing, extending it to directors of nonprofit public

benefit corporations. In light of the material changes made and,

as discussed below, the purpose underlying the director

enforcement statutes, we are not persuaded that the Legislature

intended “the same substantive results” to obtain between

section 800 and the director enforcement statutes. (Assem.

Select Com. on Revision of the Nonprofit Corp. Code, Summary

of Assem. Bill Nos. 2180 and 2181 (1977–1978 Reg. Sess.)

Apr. 21, 1978, p. 2.)

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D. Purpose

“Standing rules for statutes must be viewed in light of the

intent of the Legislature and the purpose of the enactment.”

(White v. Square, Inc. (2019) 7 Cal.5th 1019, 1024; see also, e.g.,

Kim, supra, 9 Cal.5th at p. 83.) In enacting the director

enforcement statutes, the Legislature intended to provide

safeguards against “breach[es] of a charitable trust” (§ 5142,

subd. (a)), self-dealing by interested directors (see § 5233),

“fraudulent” or “dishonest acts,” and “gross abuse of authority”

by directors of a charitable corporation (§ 5223, subd. (a)).

Moreover, it is undisputed that the Legislature intended

directors of a charity to have standing to sue to enforce these

provisions. In light of that intent, we ask whether construing

the statutes to include a continuous directorship requirement

would “ ‘ “promot[e]” ’ ” or “ ‘ “defeat[]” ’ ” the law’s purpose.

(Lee, supra, 61 Cal.4th at p. 1233.)

A continuous directorship requirement would necessarily

mean that when director-plaintiffs lose their positions at

nonprofit public benefit corporations, they also lose the ability

to continue litigating the lawsuits they had instituted. Knowing

this, directors who are accused of wrongdoing could make it

difficult for director-plaintiffs to retain their positions —

whether by calling elections to remove them (see, e.g., Summers,

supra, 34 Cal.App.5th at pp. 364–365; Workman v. Verde

Wellness Ctr., Inc. (Ariz.Ct.App. 2016) 382 P.3d 812, 815

(Workman)); refusing to reelect directors when their terms

expire; or otherwise erecting barriers to the directors’ reelection

(see, e.g., Tenney v. Rosenthal (N.Y. 1959) 160 N.E.2d 463, 467

(Tenney) [“reduc[ing] the membership of the board” so as to

“ma[k]e it mathematically more difficult for the plaintiff to be

re-elected”]). If successful, these types of actions would

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Opinion of the Court by Guerrero, C. J.

effectively quash the litigation initiated by the director-

plaintiffs. A continuous directorship requirement would

therefore give directors, “themselves charged with fraud,

misconduct or neglect,” the incentive — and power — “to

terminate the suit by effecting the ouster of the director-

plaintiff.” (Id. at p. 466.)

Conversely, a director-plaintiff would have little incentive

to initiate a lawsuit, knowing it could lead to the loss of the

plaintiff’s directorship, and then end the lawsuit itself.

Construing the director enforcement statutes in such a way

would “ ‘ “defeat[]” ’ ” rather than “ ‘ “promote[]” ’ ” the purpose

of the statutes: to empower charitable corporate insiders to seek

judicial redress. (Lee, supra, 61 Cal.4th at p. 1233.)

Long ago, we explained the need for corporate insiders to

“supplement[] the Attorney General’s power of enforcement.”

(Holt, supra, 61 Cal.2d at p. 755.) In Holt, a case decided before

the enactment of the director enforcement statutes, we

confronted the question of whether “minority trustees of a

charitable corporation[] can sue the majority trustees to enjoin

their allegedly wrongful diversion of corporate assets.” (Id. at

p. 752.) The Attorney General there had not granted relator

status to the plaintiffs or otherwise consented to their bringing

the action, and he had also decided not to bring his own

enforcement action. (Id. at p. 752.) Before us, the defendants

asserted that only the Attorney General can bring such a suit.

(Id. at p. 753.) We rejected the argument, reasoning that

exclusive standing by the Attorney General cannot “wholly”

solve the problem of “providing adequate supervision and

enforcement of charitable trusts.” (Id. at pp. 754, fn. omitted, &

755.) “The Attorney General,” we said, “may not be in a position

to become aware of wrongful conduct or to be sufficiently

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Opinion of the Court by Guerrero, C. J.

familiar with the situation to appreciate its impact, and the

various responsibilities of his office may also tend to make it

burdensome for him to institute legal actions except in

situations of serious public detriment.” (Id. at p. 755.) Although

we recognized that charities should be protected “from

harassing litigation,” this consideration did not dissuade us

from allowing trustees to sue because they “ ‘are both few in

number and charged with the duty of managing the charity’s

affairs.’ ” (Ibid.) Furthermore, we emphasized the

informational advantages held by insiders like a trustee. A

trustee, we declared, is “ ‘in the best position to learn about

breaches of trust and to bring the relevant facts to a court’s

attention.’ ” (Id. at p. 756.) Balancing the various policy

considerations, we held that trustees of a charitable corporation

have standing to sue their fellow trustees. (Id. at p. 757.)

Although we were not interpreting the same statutory

scheme in Holt that is now before us, some of the same

considerations apply. As the Attorney General, appearing here

as amicus curiae, acknowledges, he cannot “work alone” to

enforce the law governing charities. Currently, there are more

than 110,000 charitable organizations registered in California,

holding assets of over $850 billion. (Charitable Trusts Section,

Cal. Dept. of Justice, Attorney General’s Guide for Charities

(June 2021) p. 1, at

<https://www.oag.ca.gov/system/files/media/Guide%20for%20C

harities.pdf> [as of Aug. 3, 2023] (Attorney General’s Guide).)11

The Attorney General stresses that he “cannot have the kind of

11

All Internet citations in this opinion are archived by year,

docket number, and case name at

<http://www.courts.ca.gov/38324.htm>.

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Opinion of the Court by Guerrero, C. J.

intimate knowledge about the use (or misuse) of charitable

assets that directors of charities enjoy,” and he cannot police

such a large and diverse group of charitable organizations by

himself. Notably, the Legislature did not intend that the

Attorney General do so. Instead, the Legislature intended for

directors of charitable organizations to sue to enforce the law

governing such organizations. We best “ ‘ “promot[e]” ’ ” that

intent by not reading the director enforcement statutes as

operating to strip director-plaintiffs of their standing as soon as

they lose their position at the charity. (Lee, supra, 61 Cal.4th at

p. 1233.)

The cases cited by defendants do not support a continuous

directorship requirement. Defendants rely on Cal. S. R. R. Co.

v. S. P. R. R. Co. (1884) 65 Cal. 394 to support their claim that

bringing an action refers to more than just filing a complaint.

The corporate defendant in that eminent domain case sought to

change the place of trial from San Diego, the situs of the

condemned land, to San Francisco, its corporate residence. (Id.

at p. 394.) The trial court refused, and we affirmed. (Id. at

pp. 394–395.) In rejecting the defendant’s argument, we

concluded that language within former section 1243 of the Code

of Civil Procedure providing “all proceedings under the title in

regard to eminent domain, [are] to be brought in the Superior

Court of the county in which the property is situated” indicated

that the trial should not be transferred from the Superior Court

of San Diego. (Cal. S. R. R. Co., at p. 395, italics added.) We

reasoned that “[t]his language means something more than that

the proceeding must be commenced in such Superior Court.”

(Ibid.) Practical considerations specific to the eminent domain

context led us to read “something more” into that provision.

(Ibid.) Specifically, we were concerned about witness

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Opinion of the Court by Guerrero, C. J.

availability. We said: “There are strong reasons why such

proceeding [relating to eminent domain] should be had in the

county where the land sought to be condemned is situated. The

compensation for the land sought to be taken is to be determined

upon testimony, and the witnesses most competent to speak

upon this subject will usually be found in the county referred

to.” (Ibid.) Absent similar policy considerations, our holding in

this nearly 140-year-old precedent provides little reason to

conclude that, in this particular case, “to be brought” should

mean “something more than . . . commenced.” (Ibid.)

More recently, we declined to “adopt a technical reading of

the word ‘brought,’ ” appearing in an agreement, “as referring

only to the initiation of a lawsuit.” (Mountain Air Enterprises,

LLC v. Sundowner Towers, LLC (2017) 3 Cal.5th 744, 755.) The

relevant contractual provision in that case stated, “ ‘If any legal

action or any other proceeding, including arbitration or an

action for declaratory relief[,] is brought for the enforcement of

this Agreement . . . , the prevailing party shall be entitled to

recover reasonable attorney fees . . . .’ ” (Id. at p. 752, italics

omitted.) We determined that an assertion of the agreement as

an affirmative defense in a breach of contract action did not

trigger the attorney fees provision. (Id. at pp. 747, 752–754.) In

rejecting the defendants’ argument that our interpretation

conveyed that the contractual term “brought” referred only to

the initiation of a lawsuit, we explained we refused to adopt such

a “technical reading” of the term because, as used in the

contract, the word “ ‘brought’ simply supplies further context to

the relevant phrase ‘brought for the enforcement of this

Agreement or because of an alleged dispute.’ ” (Id. at p. 755.)

Because a provision that reads, “If any legal action . . . is

brought for the enforcement of this Agreement” is not

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Opinion of the Court by Guerrero, C. J.

substantively different from one reading “If any legal

action . . . is for the enforcement of this Agreement,” we did not

adopt a cabined view of the word “brought.”

The interpretive issue before us is materially different

from the situation in Mountain Air Enterprises. Whereas the

context surrounding the word “brought” in that case counseled

against a narrow interpretation of that term, here there is no

comparable contextual clue that justifies a similarly broad

construction of the relevant “bring an action” phrasing within

sections 5142 and 5233. To the contrary, the language within

these sections declaring that a person must be a director to

“bring an action” may reasonably be interpreted as requiring

only that a director initiate a lawsuit, and the purpose

underlying the statutes strongly supports that more limited

reading.

Curtis v. County of Los Angeles (1985) 172 Cal.App.3d

1243 is similarly distinguishable. The court in that case

examined Code of Civil Procedure section 1038, subdivision (a),

which requires the fact finder to “determine whether or not the

plaintiff . . . brought the proceeding with reasonable cause.” In

evaluating an argument that this provision allows an award of

costs only when an action was brought in bad faith, not when it

was maintained in bad faith, the court cited an analysis

prepared for the Senate Committee on the Judiciary that

expressly stated the purpose of the statute: “ ‘[T]o allow public

entities to recover the cost of defending frivolous lawsuits

brought against them.’ ” (Curtis, at p. 1250.) The court

reasoned that “[i]f a frivolous lawsuit was only filed or

commenced but not maintained or prosecuted, clearly there

would be little or no cost involved in defending against it.”

(Ibid.) The court therefore concluded that “the Legislature

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Opinion of the Court by Guerrero, C. J.

intended the word ‘brought’ to include continuing the action in

bad faith.” (Ibid.) But there is no comparable legislative history

or statutory purpose that favors the same conclusion in this

case.

The authorities cited by defendants simply reveal that

phrases like “bring an action” may take on different meanings

in different contexts. That is unsurprising. Here, the text of the

statutes, read in light of their background and especially their

purpose, conveys that the Legislature did not intend to

incorporate a continuous directorship requirement when it

enacted sections 5142, 5233, and 5223.

E. Other Counterarguments

We also reject as unpersuasive other reasons the Court of

Appeal and defendants have provided for adopting a continuous

directorship requirement.

1. “Ordinary” Standing Requirement

The Court of Appeal viewed the continuous directorship

requirement as a “generally applicable standing principle[]” and

concluded that “nothing suggests the Legislature intended to

depart” from that principle. (Turner, supra, 67 Cal.App.5th at

p. 1123; see also id. at pp. 1108, 1130, 1134.) To support its

position that a continuous directorship requirement operates as

an “ordinary standing requirement” (id. at p. 1130), the court

cited Californians for Disability Rights v. Mervyn’s, LLC (2006)

39 Cal.4th 223, 232–233 (Mervyn’s), which states, “For a lawsuit

properly to be allowed to continue, standing must exist at all

times until judgment is entered and not just on the date the

complaint is filed.” We agree with the Attorney General,

however, that Mervyn’s simply affirms that “the requirements

of any standing statute must be met throughout the litigation.”

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Opinion of the Court by Guerrero, C. J.

It does not necessarily shed light on the specific requirements of

any particular standing statute, including the statutes we

interpret here.

In Mervyn’s, we were confronted with a unique situation

in which the applicable statutory standing requirements were

amended during the pendency of the litigation. Although the

plaintiff in the case satisfied the initially applicable standing

requirements, the plaintiff did not meet the standing

requirements as amended. (Mervyn’s, supra, 39 Cal.4th at

pp. 227–228.) It made sense in that context to explain that

“standing must exist at all times” in order for a lawsuit “to be

allowed to continue.” (Id. at pp. 232–233.) No comparable

circumstances exist here, where the standing requirement has

been the same throughout the litigation: the plaintiff must have

been a director of the charitable organization at the time the

lawsuit commenced. Since plaintiff has satisfied this

requirement “at all times” during the litigation, she has

standing to pursue her claims, consistent with Mervyn’s. (Id. at

p. 233.)

We recently employed a similar approach to ascertain

standing — in which we considered the statutory language and

other indicia of legislative intent — in Kim. There, we

addressed the issue of whether “employees lose standing to

pursue a claim under the Labor Code Private Attorneys General

Act . . . if they settle and dismiss their individual claims.” (Kim,

supra, 9 Cal.5th at p. 80, fn. omitted.) To answer that question,

we examined the statutory language, purpose, context, and

history of the relevant standing statute (id. at pp. 83–91) and

concluded that the employees did not lose standing to pursue

Private Attorneys General Act claims when “they settle[d] and

dismiss[ed] their individual claims” (Kim, at p. 80). Applying a

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Opinion of the Court by Guerrero, C. J.

comparable analysis here, we conclude that the statutes before

us do not impose a continuous directorship requirement.

2. Reliance on Grosset

The Court of Appeal relied heavily on the reasoning of

Grosset. (See Turner, supra, 67 Cal.App.5th at pp. 1125–1129.)

It is true that in Grosset we held that section 800 — the for-

profit counterpart to section 5710 — contains a continuous

ownership requirement. (Grosset, supra, 42 Cal.4th at p. 1119.)

But we find the circumstances here to be distinguishable.

Consistent with our ordinary principles of statutory

interpretation, we began our analysis in Grosset with the text of

the relevant statute. (Grosset, supra, 42 Cal.4th at pp. 1111–

1113.) Section 800 speaks in terms of actions that “ ‘may be

instituted or maintained.’ ” (Grosset, at p. 1111.) As previously

discussed, that language is absent from the director

enforcement statutes governing nonprofit corporations, and its

absence “points away from a continuous directorship

requirement.” (Summers, supra, 34 Cal.App.5th at p. 370.)

Grosset is distinguishable in other respects as well. We

noted in Grosset that section 800 “identif[ies] what a plaintiff

must allege in a complaint to establish standing in a

shareholder’s derivative action.” (Grosset, supra, 42 Cal.4th at

p. 1113.)12 “Given this circumstance,” we said, “the failure to

12

Section 800, subdivision (b) provides: “No action may be

instituted or maintained in right of any domestic or foreign

corporation by any holder of shares or of voting trust certificates

of the corporation unless both of the following conditions exist:

[¶] (1) The plaintiff alleges in the complaint that plaintiff was

a shareholder, of record or beneficially, or the holder of voting

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Opinion of the Court by Guerrero, C. J.

explicitly address an issue that might later arise during the

pendency of an action, such as the loss of the plaintiff’s stock, is

hardly surprising.” (Grosset, at p. 1113.) Again, this

circumstance does not exist in the present case. The director

enforcement statutes do not merely specify “what a plaintiff

must allege in a complaint to establish standing.” (Ibid.) The

statutes here are distinguishable on their face from the

provision examined in Grosset. And indeed the statutory text,

historical context, and legislative purpose underlying the

statutes all suggest that the Legislature, by specifying who may

“bring an action” (§§ 5142, subd. (a), 5233, subd. (c)) and

referring to “the suit of” such persons (§ 5223, subd. (a)), did

intend to permit former directors to continue litigating cases

that they commenced when they held their board seats.

Beyond the statutory text, in Grosset we cited two

considerations that led us to hold that section 800 incorporates

a continuous ownership requirement. We first focused on the

fact that any lawsuit brought by a shareholder on a corporation’s

behalf is necessarily derivative. (See Grosset, supra, 42 Cal.4th

at p. 1114.) As we observed, “Because a derivative claim does

not belong to the stockholder asserting it, standing to maintain

such a claim is justified only by the stockholder relationship and

the indirect benefits made possible thereby, which furnish the

stockholder with an interest and incentive to seek redress for

injury to the corporation.” (Ibid.) A stockholder who stops

owning shares in the corporation “ ‘no longer has a financial

trust certificates at the time of the transaction . . . . [¶] (2) The

plaintiff alleges in the complaint with particularity plaintiff’s

efforts to secure from the board such action as plaintiff desires,

or the reasons for not making such effort.”

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Opinion of the Court by Guerrero, C. J.

interest in any recovery pursued for the benefit of the

corporation.’ ” (Ibid.) The loss of this interest divests the

stockholder of standing. (Ibid.) In other words, we determined

that a shareholder could not “retain standing despite the loss of

stock ownership [because that] would produce ‘the anomalous

result that a plaintiff with absolutely no “dog in the hunt” is

permitted to pursue a right of action that belongs solely to the

corporation.’ ” (Ibid.)

This analysis does not carry over to the nonprofit context

because a director of a charitable organization is materially

different than a shareholder of a for-profit corporation. Unlike

shareholders who stand to benefit financially from pursuing

derivative actions on behalf of a for-profit corporation (most

obviously, through an increase in the value of their shares),13

directors have little to no financial interest in the charitable

corporations. Although the law permits directors of a nonprofit

public benefit corporation to be paid “reasonable compensation”

(§ 5227, subd. (b)(1)), in reality, “[m]ost directors serve as

volunteers and are not paid for their service as directors.”

(Attorney General’s Guide, supra, at p. 52.) They likely join the

board of a charitable corporation because they have a personal

connection to the individual responsible for the creation of the

13

See, e.g., Workman, supra, 382 P.3d at p. 819 (“the

derivative plaintiff essentially stands in the shoes of the

corporation to enforce the rights of the corporation, and the

primary interest the shareholder has in doing so is by virtue of

the related interest in protecting his or her shares”).

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Opinion of the Court by Guerrero, C. J.

charity,14 affinity with the causes the charity serves,15 or both.

As such, their connection to the charity and interest in its well-

being are not solely tied to their formal status as directors.

When directors lose their position at the charitable corporation,

it cannot be said that they become “ ‘plaintiff[s] with absolutely

no “dog in the hunt,” ’ ” who therefore should be stripped of

standing to maintain an action they instituted when they were

directors. (Grosset, supra, 42 Cal.4th at p. 1114.)

Furthermore, unlike for-profit corporations, charitable

organizations do not have shareholders with ownership

interests in the charity. This means that, as pointed out by the

Attorney General, the responsibility of directors “to assure the

integrity of the charity’s activities” is heightened. This

heightened responsibility would be impeded if we adopted a rule

that prohibited directors from pursuing actions aimed at

protecting the charities after losing their directorship status. In

short, as we previously recognized, “The differences between

private and charitable corporations make the consideration of

such an analogy [between the two settings] valueless.” (Holt,

14

In this case, plaintiff was Prebys’s “life partner.” (Turner,

supra, 67 Cal.App.5th at p. 1109.) Other directors were close

enough to Prebys to have received gifts from his trust.

15

A survey of over 900 directors of nonprofit organizations

found that the vast majority (86 percent) of directors joined the

boards out of a desire to “serve the organization and contribute

to its success.” (See Larcker et al., 2015 Survey on Board of

Directors of Nonprofit Organizations (Apr. 2016) pp. 1, 7,

Stanford Graduate School of Business and the Rock Center for

Corporate Governance in collaboration with BoardSource and

GuideStar, at

<https://www.gsb.stanford.edu/sites/default/files/publication-

pdf/cgri-survey-nonprofit-board-directors-2015.pdf> [as of

Aug. 3, 2023].)

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supra, 61 Cal.2d at p. 755, fn. 4; see also Tenney, supra,

160 N.E.2d at p. 466 [although “there may be many similarities

between the derivative action brought by a shareholder and one

brought by a director — in both cases the action is prosecuted in

the right and for the benefit of the corporation — there are

important reasons why the rule of automatic disqualification

upon loss of status should not be extended to the director’s

action”].)

We were also persuaded in Grosset by the fact that “the

vast majority of other jurisdictions that have considered the

issue require continuous stock ownership for standing to

maintain a derivative lawsuit.” (Grosset, supra, 42 Cal.4th at

p. 1114, fn. omitted.) We see no comparable consensus among

our sister courts concerning a continuous directorship

requirement, in part because it seems few other jurisdictions

“have considered the issue.” (Ibid.) Decisions from New York

and Arizona, the only two states that have directly addressed

the question of whether there is a continuous directorship

requirement, have held that a director of a charitable

corporation may continue to prosecute an action even after

losing reelection for office. (See Tenney, supra, 160 N.E.2d at

p. 465; Workman, supra, 382 P.3d at pp. 819–820.) At the same

time, decisions from Tennessee and another New York court

hold that members (not directors) of a charitable corporation

must “retain membership for the duration of the lawsuit.”

(United Supreme Council AASR SJ v. McWilliams

(Tenn.Ct.App. 2019) 586 S.W.3d 373, 385 (United Supreme

Council); see also Pall v McKenzie Homeowners’ Assn.,

Inc. (App.Div. 2014) 995 N.Y.S.2d 400, 401–402 (Pall).)

These out-of-state authorities are not uniformly helpful to

our analysis here, as they interpret statutory language different

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Opinion of the Court by Guerrero, C. J.

from that contained in sections 5142, 5233, and 5223. And,

unsurprisingly, our sister courts were often persuaded by the

specific text, legislative history material, or surrounding context

in reaching their conclusions. (See, e.g., Pall, supra,

995 N.Y.S.2d at p. 402 [“Because the N-PCL specifically

eliminated the ability of less than five percent of shareholders

to continue an action by posting security for expenses, we

conclude that the ownership requirement of N-PCL 623(a) must

continue throughout the action in order to maintain standing”];

Workman, supra, 382 P.3d at p. 819.)16

Insofar as an expert consensus exists, it is to be found in

the Model Nonprofit Corporation Act and the Restatement of the

Law, Charitable Nonprofit Organizations (Restatement). The

Model Nonprofit Corporation Act, drafted by the American Bar

Association, has consistently taken the view that a director-

plaintiff in a derivative proceeding must hold the position “at

the time of bringing the proceeding.” (1987 Revised Model

Nonprofit Corporation Act, § 6.30 (ABA 1987) [specifying that

“[a] proceeding may be brought in the right of a domestic or

foreign corporation” by “any director” and that “[i]n any such

proceeding, each complainant shall be a . . . director at the time

of bringing the proceeding”]; Model Nonprofit Corporation Act,

3d ed. § 13.02 (ABA 2008) [likewise specifying that “[t]he

plaintiff in a derivative proceeding must be a . . . director . . . at

the time of bringing the proceeding”]; Model Nonprofit

16

The case most helpful to defendants — because it offers an

extensive treatment of the issue and comes out in favor of a

continuous membership requirement — relies heavily on

Grosset. (See United Supreme Council, supra, 586 S.W.3d at

pp. 384–385.) As discussed, however, Grosset is distinguishable

from the present case.

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TURNER v. VICTORIA

Opinion of the Court by Guerrero, C. J.

Corporation Act, 4th ed. § 502 (ABA 2022) [“the plaintiff in a

derivative proceeding must be a . . . director . . . at the time of

bringing the proceeding”].) A reasonable inference is that the

plaintiff does not need to maintain the position beyond the

commencement of the action.

The Restatement likewise adopts an expansive approach

to director standing in this context. Under the Restatement,

among those that have standing “to bring a derivative action on

behalf of a charity” are “a current member of the board of the

charity” as well as “a former member of the board of the charity

who is no longer a member for reasons related to that member’s

attempt to address the alleged harm to the charity.” (Rest.,

§ 6.02(b).) The amicus curiae brief submitted by the Reporter

for the Restatement offers contextual details supporting this

rule, noting that “[c]haritable-nonprofit boards are typically

self-perpetuating” and “quite limited in size.” Given the

insularity of these boards and the fact that “some portion of the

board will be defendants” in cases alleging breach of charitable

trusts or fiduciary duties, “it is typical for a member of the board

who brings a derivative suit to lose her position on the board.”

Moreover, unlike in matters involving for-profit companies

where if a shareholder loses standing to bring a derivative suit,

“another one of the many otherwise similarly situated people

who own shares can easily step in to fill the role,” charities

cannot rely on such easy availability of directors to substitute in

as a plaintiff. In light of these considerations, the Restatement

does not prohibit board members “from maintaining a derivative

claim they had standing to file” if they subsequently failed to be

reelected. Indeed, the Restatement “goes further,” allowing

some former board members to bring a claim. (See Rest.,

§ 6.02(b)(2)(B).)

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Opinion of the Court by Guerrero, C. J.

In sum, defendants’ reliance on Grosset is misplaced, and

there is no consensus supporting a continuous directorship

requirement. If anything, the prevailing view appears to be that

a director of a nonprofit public benefit corporation has standing

even if the director-plaintiff fails to retain a director position at

the nonprofit. The Court of Appeal’s decision runs counter to

this view.

3. The Relator Process

The Court of Appeal reasoned that the relator process —

under which lawsuits may be brought in the name of the people

of California or the Attorney General — addresses any

shortcomings of a continuous directorship requirement. The

court explained that the relator process “provide[s] a mechanism

for continued protection of the public benefit corporation if

someone who was once within the defined class of individuals

entitled to litigate on its behalf loses his or her status with the

corporation and, thereby, standing.” (Turner, supra,

67 Cal.App.5th at p. 1132.) According to the Court of Appeal,

because a charitable organization “may continue to seek relief

for claims of misconduct against its directors through the

Attorney General, or through an individual to whom the

Attorney General grants relator status under sections 5142,

subdivision (a)(5) and 5233, subdivision (c)(4), even if a qualified

individual who initiated suit on behalf of the corporation loses

standing during the litigation,” the organization is “adequately

protect[ed] . . . from gamesmanship or improper attempts by the

accused directors to terminate litigation.” (Id. at pp. 1132,

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Opinion of the Court by Guerrero, C. J.

1134.) We are not persuaded that the relator process answers

the question before us.17

A relator is “[a]ny person desiring ‘leave to sue’ in the

name of the people of the State of California under any law

requiring the prior permission therefor of the Attorney

General.” (Cal. Code Regs., tit. 11, § 1; see also Blasko et al.,

Standing to Sue in the Charitable Sector (1993) 28 U.S.F. L.Rev.

37, 49 [“A relator is a party who is allowed to proceed in the

name of the people or the attorney general when the power to

sue otherwise resides wholly in that official”], fn. omitted.) A

person wishing to proceed as a relator must file an application

with the Attorney General and serve the application “upon the

proposed defendant.” (Cal. Code Regs., tit. 11, § 1.) The relator

must show “why the proposed proceeding should be brought in

the name of the people, and support[] the contention . . . that a

public office or franchise is usurped, intruded into or unlawfully

held or exercised by the proposed defendant.” (Id., § 2,

subd. (b).) The proposed defendant may object and has 15 days

“to appear and show cause” “why ‘leave to sue’ should not be

granted.” (Id., §§ 3, 2, subd. (c).) If the Attorney General grants

leave to sue, “the relator must . . . present to the Attorney

General an undertaking executed to the State of California in

the sum of $500, to the effect that the relator will pay any

17

Although our decision in Holt predated enactment of the

Nonprofit Corporation Law, it is instructive insofar as we

recognized the benefits of allowing lawsuits to proceed even

when the Attorney General concludes the suit lacks merit. (See

Holt, supra, 61 Cal.2d at pp. 752, 757.) Similarly, here, we

recognize there are instances when a lawsuit may proceed under

the director enforcement statutes — without a continuous

directorship requirement — even when the relator mechanism

overseen by the Attorney General is not invoked.

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Opinion of the Court by Guerrero, C. J.

judgment for costs or damages that may be recovered against

the plaintiff.” (Id., § 6.) The relator must also supply sureties

warranting that it “will pay . . . all costs and expenses incurred

in the prosecution of the proceeding in which such ‘leave to sue’

is granted.” (Ibid.)

In addition, a relator remains subject to the Attorney

General’s control throughout the litigation. A relator’s

complaint may be “changed or amended as the Attorney General

shall suggest or direct” and, after filing, may not be “change[d],

amend[ed] or alter[ed] . . . without the approval of the Attorney

General.” (Cal. Code Regs., tit. 11, § 7.) During proceedings, the

relator must “notify the Attorney General, without delay, of

every proceeding had, motion made, paper filed, or thing done

in the proceeding, or in relation thereto, and must send to the

Attorney General promptly a copy of every paper or document

filed by any of the parties to the proceeding.” (Id., § 9.) The

Attorney General retains ultimate control and “may at all times,

at any and every stage of the said proceeding [involving a

relator], withdraw, discontinue or dismiss the same, as the

Attorney General may seem fit and proper; or may, at the

Attorney General’s option, assume the management of said

proceeding at any stage thereof.” (Id., § 8.)

The Court of Appeal recognized that when “someone who

was once within the defined class of individuals entitled to

litigate on its behalf loses his or her status with the corporation

and, thereby, standing” because of the imposition of a

continuous directorship requirement, only two entities remain

“to seek relief for claims of misconduct against . . . directors” of

the nonprofit corporation: the Attorney General and individuals

“to whom the Attorney General grants relator status.” (Turner,

supra, 67 Cal.App.5th at p. 1132.) The Court of Appeal was also

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Opinion of the Court by Guerrero, C. J.

aware of “limitations on the resources of the Attorney General”

to supervise the numerous charitable organizations in the state.

(Ibid.) It acknowledged that in addition to “[s]taffing and

funding limitations,” “political concerns may discourage [the

Attorney General from] ‘investigation of charges against

respectable trustees and corporate officers.’ ” (Ibid.) In light of

these constraints associated with enforcement by the Attorney

General, the court below relied on the availability and

willingness of relators themselves to litigate on behalf of

charities, and concluded that “[u]nder [its] interpretation,”

nonprofit public benefit corporations would still receive

“adequate[]” protection against misconduct by its fiduciaries.

(Id. at p. 1134.)

Yet, even when relators are entitled to litigate on behalf of

a nonprofit public benefit corporation, their mere ability to do so

does not alleviate the strain on the Attorney General’s

resources.18 As the Attorney General notes, the relevant

regulations “contemplate the Attorney General’s active

involvement, or at the very least active monitoring, in all relator

18

Furthermore, relators do not appear to be a class of

individuals permitted to bring suit under section 5223. That

provision allows directors, members (of sufficient numerosity),

and the Attorney General to bring suit. (§ 5223.) It also

authorizes the Attorney General to “intervene in such an action

brought by any other party.” (Id., subd. (b).) Absent from the

provision is any indication that persons granted relator status

by the Attorney General may also prosecute actions to remove

from office directors accused of “fraudulent or dishonest acts or

gross abuse of authority or discretion with reference to the

corporation or breach of any duty.” (Id., subd. (a).)

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TURNER v. VICTORIA

Opinion of the Court by Guerrero, C. J.

suits.”19 We agree with the Attorney General that “[s]hifting

director-led suits into the relator process would place an

additional burden on” that office.

The Court of Appeal was unsympathetic to the Attorney

General’s argument, declaring that “[t]he Attorney General

should not be able to avoid its ongoing obligations to supervise

charitable organizations simply because a director begins a

lawsuit.” (Turner, supra, 67 Cal.App.5th at p. 1134.) But given

the very real resource constraints the Attorney General faces,

adding to that office’s “ongoing obligations” may also inure to

the detriment of charitable corporations. (Ibid.; see also, e.g.,

Karst, The Efficiency of the Charitable Dollar: An Unfulfilled

State Responsibility (1960) 73 Harv. L.Rev. 433, 437 [“if the

public’s interest is to be protected, someone must be assigned

the job of supervising charitable fiduciaries. Ordinarily, this

task has fallen to the attorney general, and — just as

ordinarily — supervision and enforcement have been irregular

and infrequent”], fn. omitted.)

In addition, even supposing that the Attorney General

would always grant relator status when it is in the interests of

justice to do so, there may be a dearth of willing relators. As

19

When a relator applies for leave to sue, the Attorney

General must decide whether to grant leave. (See Cal. Code

Regs., tit. 11, § 1.) Doing so may require him to wade through

conflicting materials if the proposed defendant objects to relator

status being granted. (See id., § 2, subd. (c)(3), (4).) Should the

Attorney General choose to grant the application, he must

approve of the complaint and give permission for any

subsequent alterations to that pleading. (Id., § 7.) The Attorney

General retains absolute control over the proceeding and,

presumably, bears the responsibility to exercise that control

with care. (Id., § 8.)

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Opinion of the Court by Guerrero, C. J.

noted, a relator must agree to pay “all costs and expenses

incurred in the prosecution of the proceeding in which such

‘leave to sue’ is granted.” (Cal. Code Regs., tit. 11, § 6.) Because

of this requirement, there is some uncertainty regarding

whether a relator can recover attorney fees, even upon obtaining

relief for the nonprofit corporation. (See Fremont-Smith,

Governing Nonprofit Organizations: Federal and State Law and

Regulation (2004) p. 325.) As Professor Karst observed in his

article, “[t]o deny the payment of these fees . . . radically

decrease[s] the incentive for bringing a suit on behalf of the

charity; for even if the plaintiff should succeed, the suit would

be costly to him.” (Karst, supra, 73 Harv. L.Rev. at p. 448.)

Based on these limitations associated with the relator

process, we conclude that “[t]he mere existence of relator

status . . . cannot eliminate all the ills” associated with a

continuous directorship requirement. (Blasko, supra, 28 U.S.F.

L.Rev. at p. 50.)

4. Availability of Equitable Exceptions and Risk of

Harassment

We are not persuaded that other considerations invoked

by defendants dictate an interpretation of the relevant statutes

different from the one we have arrived at.

Recognizing that a continuous directorship requirement

empowers accused directors to unilaterally terminate litigation

against them, some defendants in this case suggest that

equitable exceptions from the requirement may be created when

a plaintiff “alleges with particularity facts showing [the director]

was ousted in bad faith to block the litigation.” (Accord, Grosset,

supra, 42 Cal.4th at p. 1119 [noting, regarding shareholders’

derivative actions in the context of for-profit corporations, that

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TURNER v. VICTORIA

Opinion of the Court by Guerrero, C. J.

“equitable considerations may warrant an exception to the

continuous ownership requirement if the merger itself is used to

wrongfully deprive the plaintiff of standing” but declining to

“address such matters definitively in this case”]; Turner, supra,

67 Cal.App.5th at p. 1129 [attempting to distinguish Summers,

supra, 34 Cal.App.5th 361, on the ground that “the Summers

court was concerned with equitable considerations surrounding

the removal of a director”].)

We decline to adopt defendants’ proposed approach.

Plaintiffs are rarely in a position to offer direct evidence that

their removal as directors was retaliatory. An ousted director

cannot readily establish fellow board members’ motivations. An

ousted director might observe the behavior of fellow director-

defendants, but that behavior is inevitably subject to varying

interpretations, and, as such, it might often be difficult to plead

“with particularity” facts showing that one “was ousted in bad

faith.” This might in turn frequently add to the burden of

litigation by requiring a hearing to determine the motive for the

plaintiff’s removal.

Defendants further contend that standing should cease

when directors fail to retain their positions at the charities

because, once separated from the organizations, the directors no

longer owe fiduciary duties to the charities. Defendants suggest

that allowing former directors to continue litigating would

expose the nonprofit public benefit corporations to vexatious

litigation, draining their resources from their charitable

purposes. We have long been mindful of the need to

“protect[] . . . charities from harassing litigation.” (Holt, supra,

61 Cal.2d at p. 755; see also, e.g., Blasko, supra, 28 U.S.F. L.Rev.

at pp. 41–42 [explaining that a rationale for “the exclusivity of

attorney general enforcement” is the concern that “charities

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Opinion of the Court by Guerrero, C. J.

would be embroiled in ‘vexatious’ litigation, constantly harassed

by suits brought by parties with no stake in the charity” if “ ‘a

third party were permitted to sue’ ”], fn. omitted.) Several

considerations, however, lead us to conclude that allowing

individuals such as plaintiff to maintain standing would not

result in a significant increase in unmeritorious suits.

For one, “ ‘few in number’ ” are individuals who are former

directors of nonprofit public benefit corporations who have

ongoing lawsuits initiated while they sat on the board. (Holt,

supra, 61 Cal.2d at p. 755.) For another, these individuals filed

their complaints when they were directors “ ‘charged with the

duty of managing the [nonprofit’s] affairs’ ” and operating as

fiduciaries of the organization. (Ibid.) There is no reason to

believe that suits filed by fiduciaries become meritless as soon

as the plaintiffs lose their affiliations with the nonprofit

organizations, or that they are maintained thereafter purely out

of improper motives. For yet another, the derivative nature of

the enforcement actions means that any eventual recovery “will

accrue to the direct benefit of the corporation and not to the

[director] who litigated” the claims. (Grosset, supra, 42 Cal.4th

at p. 1114; see also Blasko, supra, 28 U.S.F. L.Rev. at p. 53 [“Any

damages recovered as a function of [a derivative] suit go to the

corporation, never to those who brought the suit”], fn. omitted.)

Even when, as here, a plaintiff prays for attorney fees, the

plaintiff cannot obtain such fees without prevailing.20

Accordingly, we conclude that charities are adequately

protected from harassing litigation even without the

20

We are not endorsing any specific theory for fees that

plaintiff has alleged in her complaint. Nor are we expressing an

opinion on the eligibility for fees should plaintiff prevail.

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Opinion of the Court by Guerrero, C. J.

requirement that only current directors are allowed to maintain

legal actions brought on their behalf. (See Holt, at p. 755.)

Finally, defendants raise the specter that without a

continuous directorship requirement, a director who “just quit,”

or voluntarily disassociates from a nonprofit public benefit

corporation, can continue harassing the organization through

litigation. But of course, the director-plaintiff in this case did

not simply quit. According to her allegations, which we must

treat as true (see, e.g., Southern California Gas Leak Cases,

supra, 7 Cal.5th at p. 395), plaintiff “wanted to remain on the

Foundation’s Board” and communicated as much to her fellow

board members. But because none of the directors nominated

or seconded her reelection, plaintiff lost her position.

In any event, the possibility that some directors may quit

does not persuade us that a continuous directorship

requirement should be the default rule. There appears to be no

basis in the statutes to distinguish between former directors

who were retaliated against and those who simply chose to quit.

The statutes themselves do not carve out an exception for when

a director or officer has been ousted or otherwise removed.

(Accord, Grosset, supra, 42 Cal.4th at pp. 1115–1116 [the

circumstances by which a stockholder loses his shares — and

specifically whether that loss is voluntary — does not matter

when determining whether a continuous stock ownership

requirement is appropriate].) Director-defendants can find

creative ways to affect ouster of a director-plaintiff. We decline

to adopt a rule that would incentivize director-defendants to

erect barriers to their fellow board members’ retention of their

position as a means to terminate litigation against them.

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Opinion of the Court by Guerrero, C. J.

III. CONCLUSION

We hold that a director of a nonprofit public benefit

corporation who brings a lawsuit pursuant to Corporations Code

sections 5142, 5233, and 5223 does not lose standing to continue

litigating the suit if the director subsequently loses that

position. Because the Court of Appeal reached a contrary

conclusion, we reverse the judgment below.

GUERRERO, C. J.

We Concur:

CORRIGAN, J.

LIU, J.

KRUGER, J.

GROBAN, J.

JENKINS, J.

EVANS, J.

44

See next page for addresses and telephone numbers for counsel who

argued in Supreme Court.

Name of Opinion Turner v. Victoria

__________________________________________________________

Procedural Posture (see XX below)

Original Appeal

Original Proceeding

Review Granted (published) XX 67 Cal.App.5th 1099

Review Granted (unpublished)

Rehearing Granted

__________________________________________________________

Opinion No. S271054

Date Filed: August 3, 2023

__________________________________________________________

Court: Superior

County: San Diego

Judges: Julia Craig Kelety and Kenneth J. Medel

__________________________________________________________

Counsel:

Cooley, Steven M. Strauss, Erin C. Trenda and Matt K. Nguyen for

Plaintiff and Appellant.

Xavier Becerra and Rob Bonta, Attorneys General, Tania M. Ibanez,

Assistant Attorney General, Caroline Hughes, Joseph N. Zimring,

James M. Toma and Sandra I. Barrientos, Deputy Attorneys General,

for the Attorney General of California as Amicus Curiae on behalf of

Plaintiff and Appellant.

Norton Rose Fulbright US, Jeffrey B. Margulies and Kelly Doyle

Dahan for Jill R. Horwitz, Nancy A. McLaughlin and the California

Association of Nonprofits as Amici Curiae on behalf of Plaintiff and

Appellant.

Gibson Dunn & Crutcher, Scott A. Edelman, Alexander K. Mircheff,

Megan Cooney, Jillian Nicole London and Brian Yang for Defendant

and Respondent Laurie Anne Victoria.

Henderson, Caverly, Pum & Trytten, Kristen E. Caverly, Lisa B. Roper

and Stephen D. Blea for Defendant and Respondent Joseph Gronotte.

Procopio, Cory, Hargreaves & Savitch, Richard A. Heller, J.

Christopher Jaczko and Sean Michael for Defendant and Respondent

Gregory Rogers.

Seltzer Caplan McMahon Vitek, Reginal Vitek and Scott Walter Perlin

for Defendant and Respondent Anthony Cortes.

Brownlie Hansen, Robert W. Brownlie; DLA Piper and S. Andrew

Pharies for Defendant and Respondent The Conrad Prebys

Foundation.

Counsel who argued in Supreme Court (not intended for

publication with opinion):

Steven M. Strauss

Cooley LLP

10265 Science Center Drive

San Diego, CA 92121

(858) 550-6006

Robert W. Brownlie

Brownlie Hansen LLP

10920 Via Frontera, Suite 550

San Diego, CA 92127

(858) 357-8001

Scott A. Edelman

Gibson Dunn & Crutcher LLP

2029 Century Park East, Suite 4000

Los Angeles, CA 90067

(310) 552-8500