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James M. Donovan v. Dan Murphy Foundation et al

April 18, 2012

JAMES M. DONOVAN, PLAINTIFF AND APPELLANT,
v.
DAN MURPHY FOUNDATION ET AL., DEFENDANTS AND RESPONDENTS.



(Los Angeles County Super. Ct. No. BC 444662) APPEAL from an order of the Superior Court of Los Angeles County, Mary Ann Murphy, Judge.

The opinion of the court was delivered by: Manella, J.

CERTIFIED FOR PUBLICATION0

Reversed.

INTRODUCTION

James M. Donovan appeals from an order of the superior court granting respondents' special motion to strike his complaint under Code of Civil Procedure section 425.16 (the anti-SLAPP statute).*fn1 He contends the trial court erred in granting the motion because (1) respondents' conduct does not fall within the scope of the anti-SLAPP statute; and (2) his complaint had merit. Because we conclude that the conduct giving rise to the complaint falls outside the purview of the anti-SLAPP statute, we reverse.

FACTUAL AND PROCEDURAL HISTORY

On August 30, 2010, Donovan filed a complaint for declaratory relief and wrongful removal against respondents Dan Murphy Foundation (Foundation), and its current directors, Edward Landry, Richard A. Grant, Jr., Maria O. Grant, Monsignor Jeremiah Murphy, Julia Donohue Schwartz, Frederick Roupp, and Jon Rewinski.*fn2 In his complaint, Donovan alleged he was wrongfully removed as a director of the Foundation after he raised concerns about the Foundation's financial oversight and governance. Donovan sought a declaration that his removal from the Board was illegal. He requested that the court issue an order enjoining respondents from removing him as a director without proper cause, that an independent counsel be appointed on "such additional terms and conditions as the Court deems necessary," that a monitor be appointed to review and oversee the activities of the Foundation and the Board, and that he be awarded compensatory damages and costs.

According to the complaint, Donovan first began expressing his concerns in 2008, after the Foundation's assets had dropped approximately $65 million in value from its previous valuation of $250 million. Donovan's concerns were shared by two of the seven directors at that time, Julia Schwartz and Rosemary E. Donohue, but were rejected by three other directors, Edward Landry, Richard Grant, and Maria Grant.

The complaint detailed Donovan's disputes with his fellow directors. First, during a proposed transfer of management of the Foundation's assets, Donovan sought a review of the transfer by the full Board. Landry and Richard Grant opposed Donovan's request, and the management of the Foundation's asset was transferred without a review by the Board. Second, Donovan "demanded" that the Board exercise its responsibilities under the Probate Code to oversee the management of the Foundation's assets. Although not stated in the complaint, it can be inferred that the full Board did not agree with his demands. Third, Donovan requested information and documentation regarding the Foundation's investments, but Landry and Richard Grant did not provide Donovan with the requested information, "except for the delivery of unresponsive, meaningless, and disorganized raw account data." Fourth, Donovan advised Richard Grant, Maria Grant and Landry that the Board was composed of more than half of "interested persons," in violation of Corporations Code section 5227, but the three directors "flatly denied that the Foundation was not in compliance." Later, the three directors informed Donovan that they had terminated the compensation of Daniel J. Donohue, a director and the president of the Foundation, which meant that Mr. Donohue and his sister, Rosemary Donohue, were no longer "interested." Fifth, Donovan raised questions about the compensation of Mr. Donohue, of Richard Grant, who was the Foundation's secretary, treasurer, and chief financial officer, and of Landry, who was legal counsel for the Foundation. He contended their compensation was not approved by the Board, as required by law. The Grants and Landry "actively opposed" Donovan's efforts. Sixth, Donovan sought to remove Mr. Donohue as a director after Mr. Donohue was allegedly declared "incapable" of managing his property unassisted due to cerebral atrophy dementia. After objections by the Grants and Landry, Donovan advised them that if an agreement could not be reached with regard to a new Board member, he would go to court and apply for an appointment of a provisional director. Subsequently, Mr. Donohue was replaced by Monsignor Murphy. Seventh, Donovan objected to three loans by the Foundation to the Los Angeles Opera, which were proposed by Landry, who was also a director with the Los Angeles Opera, unless the loans were secured. The Foundation provided the loans to the Los Angeles Opera, but Donovan alleged Landry failed to secure the Foundation its second lien position on these loans. Eighth, Donovan alleged that at a meeting that included the Grants and himself, Landry stated that there were numerous internal problems and liabilities at the Foundation that were of concern to him, and that it would be best for everyone involved if these matters were kept quiet and away from public scrutiny. Donovan requested that Landry disclose the details to the full Board, but the other three directors "refused to provide any information or documents" about these internal problems and liabilities. Finally, after Monsignor Murphy became a Board member, the Board agreed on an independent investigation into the matters raised by Donovan. The next month, however, Monsignor Murphy and Maria Grant told Donovan that there would be no independent investigation. Instead, an attorney from Loeb & Loeb would be retained to investigate the issues raised by Donovan.

On December 2, 2009, allegedly without prior notice to Donovan, Monsignor Murphy, the Grants and Landry voted to remove Donovan as a director. The remaining directors, Rosemary Donohue and Julia Schwartz along with Donovan, objected and voted against the removal.

Respondents filed an answer to the complaint, generally denying the allegations. On the same day, respondents also filed a special motion to strike the complaint under the anti-SLAPP statute. In the special motion, respondents contended that both causes of action in the complaint arose from protected activity because "[t]he acts complained of were in furtherance of [the] exercise of their rights of free speech in connection with a public issue or an issue of public interest under section 425.16(e)(4)." Respondents contended that the vote to remove Donovan as a director was an exercise of free speech, that the vote was in connection with a matter of public interest because (1) the Foundation is in the public eye, (2) it is supervised by the Attorney General, and (3) its assets are held for the benefit of the public. In a footnote, respondents also asserted that their conduct fell within the scope of section 425.16, subdivision (e)(2), as "any written or oral statement or writing made in connection with an issue under consideration or review by a legislative, executive, or judicial body, or any other official proceeding authorized by law." Respondents further asserted that board of director meetings and voting by directors were authorized under the Corporations Code.

Respondents also contended that the causes of action in Donovan's complaint lacked minimal merit because, among other reasons, the Board had legal authority to remove a director at any time with or without cause, upon a vote by the majority of the Board. Respondents also noted that Donovan's causes of action were moot because his term as a director had expired.

Donovan opposed the special motion to strike, contending that the gravamen of his complaint did not involve protected free speech or petitioning activity by the Foundation or the Board. He contended he was suing for "wrongful termination," and that "[a] termination does not become an act of free speech simply because a vote is involved. The termination does not involve petitioning activity because an entity subject to state regulation is involved." He also contended that "nowhere in Defendants' motion is there any reference to any statement made by any Defendant, or any written or oral communication[] by a Defendant which forms the basis of any liability sought to be imposed by Plaintiff." He also asserted that his causes of action had merit because the Foundation did not have an unconditional right to terminate any of its members at any time, under any circumstance. In support of this contention, Donovan cited only wrongful termination cases involving employers and their employees.

On December 17, 2010, after a hearing, the superior court granted the special motion to strike the complaint. The court concluded that respondents had shown their conduct fell within the purview of the anti-SLAPP statute, and that Donovan had failed to demonstrate his complaint had ...


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