Justia Non-Profit Corporations Opinion Summaries

A nonprofit organization challenged the validity of the City of La Habra’s February 2023 revision to its housing element, arguing that the modifications were adopted by the City Manager rather than the City Council and without additional public hearings. The housing element, part of the city’s general plan, is subject to periodic revision and state review. In this instance, after several public meetings and hearings on earlier drafts, the City Council adopted the housing element in September 2022 and authorized the City Manager to make further technical or clerical changes necessary for state certification. The City Manager subsequently approved additional revisions in February 2023, which were submitted to and certified by the Department of Housing and Community Development.In the Superior Court of Orange County, the nonprofit filed a petition for writ of mandate, seeking to prohibit the City from treating the February 2023 version as validly adopted. The court denied the petition, finding that the City had met public participation requirements through hearings on prior drafts and online posting of the revised element. The trial court also ruled that the City Council validly delegated authority to the City Manager for minor revisions and determined that any procedural errors were harmless, as required by Government Code section 65010, subdivision (b).The California Court of Appeal, Fourth Appellate District, Division Three, affirmed the judgment. The court held that additional public hearings were not required for the February 2023 modifications since they constituted part of the ongoing revision and certification process, rather than a distinct amendment. It further held that the City Council’s delegation of authority to the City Manager was valid and consistent with local law. Finally, the court found no prejudicial error or substantial harm resulted from the process used, upholding the presumption of validity following state certification. The judgment was affirmed. View "Californians for Homeownership v. City of La Habra" on Justia Law

Three individuals enrolled in a six-month, residential substance abuse rehabilitation program operated by a nonprofit organization in California. During their participation, they performed full-time work in the organization’s warehouses and thrift stores, which the nonprofit termed “work therapy.” In exchange, they received room, board, limited gratuities, and rehabilitation services, but no formal wages. The organization controlled their work schedules and prohibited outside employment. The participants asserted that they often worked over 40 hours weekly and performed tasks similar to paid employees. They disputed the nonprofit’s claim that work therapy was primarily rehabilitative, alleging instead that the arrangement benefitted the nonprofit by reducing costs and replacing paid staff.The Superior Court of the City and County of San Francisco reviewed cross-motions for summary adjudication focused on whether the plaintiffs were employees entitled to minimum wage and overtime under California law. The trial court ruled that the wage laws did not apply because the participants were volunteers, not employees, emphasizing that a key threshold for employee status was an express or implied agreement for compensation. Because the plaintiffs voluntarily participated without such an agreement, the court granted summary judgment in favor of the nonprofit and entered judgment accordingly.The Court of Appeal of the State of California, First Appellate District, Division Five, reviewed the case de novo. The appellate court held that although volunteers for nonprofit organizations may fall outside wage law coverage, the trial court erred by applying an overly narrow standard focused solely on the existence of an agreement for compensation. Instead, the Court of Appeal established a two-part test: nonprofits must show (1) that individuals freely agreed to volunteer for personal benefit rather than compensation, and (2) that the use of volunteer labor is not a subterfuge to evade wage laws. The appellate court vacated the judgment and remanded for further proceedings under this standard. View "Spilman v. The Salvation Army" on Justia Law

The plaintiff was an employee who brought claims for wrongful termination, Labor Code violations, and breach of contract against two defendants: the Los Angeles County Metropolitan Transportation Authority (MTA) and the Public Transportation Services Corporation (PTSC). MTA had created PTSC, a nonprofit public benefit corporation, to provide retirement and employment benefits to certain workers and to manage employees who support MTA’s transportation functions. The plaintiff did not file a prelitigation claim under the Government Claims Act (GCA) before suing these entities.The Superior Court of Los Angeles County first granted a motion for judgment on the pleadings in favor of both defendants, finding that the plaintiff had not alleged compliance with the GCA’s claim presentation requirements. The plaintiff was given leave to amend but continued to argue that PTSC was not a public entity subject to the GCA, and that even if it was, the claims presentation requirement should not apply because PTSC had not registered as required by statute. The trial court sustained a demurrer without leave to amend, finding both defendants to be public entities and that PTSC was not required to register separately from MTA. The court entered judgment for both defendants.On appeal to the California Court of Appeal, Second Appellate District, Division One, the plaintiff did not challenge the judgment in favor of MTA but contested the ruling as to PTSC. The appellate court held that PTSC qualifies as a public entity for purposes of the GCA’s claims presentation requirement, given its creation and control by MTA. However, the court found that if PTSC failed to register properly on the Registry of Public Agencies—including with county clerks where it maintains offices—this would excuse the plaintiff’s noncompliance with the GCA. The judgment for MTA was affirmed, but the judgment for PTSC was reversed and remanded to allow the plaintiff to amend his complaint. View "Black v. L.A. County Metropolitan Transp. Authority" on Justia Law

A group of dentists, who are both members of a nonprofit mutual benefit corporation and parties to provider agreements with that corporation, challenged the corporation’s decision to unilaterally amend its fee schedules and related rules. The provider agreements allowed the corporation to set the fees paid to dentists for services rendered to plan enrollees, and the agreements, as amended by a 2018 settlement, expressly permitted the corporation to make unilateral changes to the fee structure with 120 days’ notice, during which dentists could terminate their agreements if they did not accept the new terms. In 2022, the corporation announced further amendments that, according to the dentists, reduced fees and altered the fee determination process. The dentists alleged that these changes breached the implied covenant of good faith and fair dealing in their provider agreements and that certain directors breached fiduciary duties owed to them as members.The Superior Court of San Francisco City and County sustained demurrers by all defendants without leave to amend. The court found that the corporation could not breach the implied covenant by exercising rights expressly granted in the agreements, and that the directors owed no fiduciary duty to the dentists in connection with the corporation’s exercise of its contractual rights to amend fee schedules.The California Court of Appeal, First Appellate District, Division One, affirmed the trial court’s judgment. The court held that the implied covenant of good faith and fair dealing cannot be used to override or limit a party’s express contractual right to unilaterally amend fee schedules, provided the contract is supported by consideration and the changes are prospective, with adequate notice and an opportunity to terminate. The court also held that directors of a nonprofit mutual benefit corporation owe fiduciary duties to the corporation itself, not to individual members in their capacity as contracting parties. View "California Dental Assn. v. Delta Dental of California" on Justia Law

The case involves two charitable organizations, Catholic Medical Mission Board, Inc. (CMMB) and Food for the Poor, Inc. (FFP), which were issued cease and desist orders and civil penalties by the Attorney General of California for allegedly making false or misleading statements in their charitable solicitations. The Attorney General found that both organizations overvalued in-kind donations and misrepresented their program efficiency ratios, leading to misleading donor solicitations.The Superior Court of Los Angeles County reviewed the case and found that the challenged statutory provisions, sections 12591.1(b) and 12599.6(f)(2) of the Government Code, were unconstitutional under the First Amendment as they constituted prior restraints on speech. The court vacated the civil penalties and issued permanent injunctions against the Attorney General, preventing the enforcement of these provisions. The court also reformed section 12591.1(b) to exclude violations of section 12599.6 from the Attorney General’s cease and desist authority.The California Court of Appeal, Second Appellate District, reviewed the case. The court affirmed the trial court’s constitutional rulings but vacated the permanent injunctions, stating that the trial court abused its discretion by granting them without requiring the plaintiffs to plead and prove entitlement to such relief. The appellate court remanded the case to allow the plaintiffs to amend their complaints to seek injunctive relief and to prove they are entitled to it. The court also affirmed the trial court’s reformation of section 12591.1(b) and vacated the postjudgment orders awarding attorney fees, directing the trial court to reconsider the fees in light of the appellate court’s rulings. View "Catholic Medical Mission Board, Inc. v. Bonta" on Justia Law

The case involves two charitable organizations, Catholic Medical Mission Board, Inc. (CMMB) and Food for the Poor, Inc. (FFP), which were issued cease and desist orders and civil penalties by the California Attorney General for allegedly overvaluing in-kind donations and making misleading statements in their solicitations. The Attorney General found that both organizations used inflated domestic market prices for donated medicines, which could not be distributed within the U.S., and misrepresented their program efficiency ratios to donors.The Superior Court of Los Angeles County reviewed the case and found that the challenged statutory provisions, sections 12591.1(b) and 12599.6(f)(2) of the Government Code, were unconstitutional as they constituted prior restraints on speech. The court vacated the civil penalties and issued permanent injunctions against the Attorney General, preventing the enforcement of these provisions. The court also reformed section 12591.1(b) by adding language to exclude violations of section 12599.6 from the Attorney General's cease and desist authority.The California Court of Appeal, Second Appellate District, reviewed the case and concluded that the trial court abused its discretion by granting the permanent injunctions without requiring the plaintiffs to plead and prove their entitlement to such relief. The appellate court vacated the injunctions and remanded the case to allow the plaintiffs to amend their complaints and prove their entitlement to injunctive relief. The appellate court affirmed the trial court's reformation of section 12591.1(b), allowing the Attorney General to issue cease and desist orders for violations unrelated to speech. The appellate court also vacated the postjudgment orders awarding attorney fees and directed the trial court to reconsider the fees in light of the remand. View "Catholic Medical Mission Board v. Bonta" on Justia Law

In this case, the plaintiff, Joseph Gazal, donated over $1 million to purchase a car and a home for a destitute family. He was inspired to make this donation after hearing a homily delivered by defendant Carlos Echeverry, a deacon at his church. Gazal brought a lawsuit against Echeverry and his wife, Jessica Echeverry, as well as SOFESA, Inc., a nonprofit founded and led by Jessica Echeverry. Gazal claimed he was deceived into believing the car and house would be purchased for and titled to the destitute family, when in fact they were bought and titled to SOFESA.The defendants filed a special motion to strike the complaint under the anti-SLAPP (strategic lawsuit against public participation) statute, asserting that the homily and following conversations were protected speech. The trial court denied the motion, finding that the complaint did not rest on protected speech, but rather on private conduct and speech not directed at a wide public audience. Additionally, the court found that the causes of action arose from further communications that took place weeks after the homily.On appeal, the Court of Appeal of the State of California Second Appellate District Division Eight affirmed the trial court's decision. The court held that while the homily could be considered protected speech, the plaintiff's claims did not arise from the homily but rather from the alleged misconduct that occurred after its delivery. The court also found that the private discussions following the homily did not qualify for anti-SLAPP protection as they did not contribute to a public conversation on the issue of homelessness. Furthermore, the court denied a motion for sanctions filed by the plaintiff. View "Gazal v. Echeverry" on Justia Law

After shooting his ex-girlfriend and her boyfriend, Defendant was convicted by a jury of the following: two counts of premeditated attempted murder; two counts of assault with a deadly weapon; one count of inflicting corporal injury on a prior dating partner; and one count of being a felon in possession of a firearm. The jury also found true multiple enhancement allegations under section 12022.53. The trial court imposed the following sentence: two consecutive indeterminate terms of seven years to life for the premeditated attempted murder convictions (counts 1 & 4), plus two additional terms of 25 years to life for the respectively attached firearm enhancements under section 12022.53(d). All other enhancements attached to counts 1 and 4 were stayed under section 654. On appeal, Defendant argued the sentence should be vacated and remanded for resentencing under People v. Tirado (2022) 12 Cal.5th 688 (Tirado).     The Fifth Appellate District affirmed the trial court’s judgment but vacated Defendant’s sentence. The court remanded the case to the trial court for a resentencing hearing where further evidence and argument may be received regarding the sentence to be imposed. The court held that the trial court, in this case, made its sentencing decision in the absence of the new presumption against exceeding the middle term, and the record does not clearly indicate that the court would have imposed upper-term sentences had it been aware of the new constraint on its discretion. The court held that Gutierrez is binding and the appropriate remedy is to remand for the sentencing court to exercise its newly informed and circumscribed discretion in the first instance. View "P. v. Falcon" on Justia Law

“Breathe” was previously known as the American Lung Association of Los Angeles County, affiliated with the national organization, ALA, and the American Lung Association in California (ALAC). Breathe’s predecessor entered into annual agreements with ALAC and the ALA that provided for “income sharing” between Breathe and ALAC, except for “funds restricted in writing by the donor, not later than the date of donation, to exclude or limit sharing, such restriction not having been invited by the donee association.” ALA sued ALAC and its affiliates, including Breathe, for trademark infringement and related causes of action. Under a 2006 Consent Judgment, Breathe disaffiliated from the ALA and ALAC and was renamed. The parties agreed to a process for settling their outstanding accounts.In 2015, ALAC moved to enforce the Consent Judgment by compelling Breathe to share three bequests that were created but not distributed before the Consent Judgment. The trial court ruled in favor of the ALA, concluding the restricted funds exception of the Affiliate Agreement was ambiguous and that the bequests were shareable. The court of appeal reversed. The plain language of the bequests indicates the testators' intentions to benefit only the organization now known as Breathe. Sharing the bequests with the ALA is incompatible with those intentions and is not required under the Affiliate Agreement. View "Breathe Southern California v. American Lung Association" on Justia Law

The issue presented for the Court of Appeal's review in this case centered on whether petitioner, The Community Action Agency of Butte County (CAA), had to produce its business records pursuant to the California Public Records Act (CPRA), the Freedom of Information Act (FOIA), and/or a regulation promulgated by real party in interest, California’s Department of Community Services and Development (the Department). After considering the arguments presented (including those of amici curiae), the text and history of CPRA, and other applicable authorities, the Court concluded: (1) a nonprofit entity like CAA might be an “other local public agency” only in exceptional circumstances not present here; (2) under a four-factor test adopted based on persuasive out-of-state authority, there was not substantial evidence for the trial court’s ruling that CAA was an “other local public agency”; (3) FOIA did not apply to CAA; and (4) the Department’s regulation did not require CAA to provide public access to its records generally. Accordingly, the trial court’s order was vacated. View "Community Action Agency of Butte County v. Super. Ct." on Justia Law