Finley v. Superior Court (Third Laguna Hills Mutual)

WARREN T. FINLEY, as Trustee, etc.,et al., Petitioners, v. SUPERIOR COURT FOR THE COUNTY OF ORANGE, Respondent; THIRD LAGUNA HILLS MUTUAL et al., Real Parties in Interest. No. E024743 (Super.Ct.No. 760598) WARREN T. FINLEY, as Trustee, etc., et al., Plaintiffs and Appellants, v. THIRD LAGUNA HILLS MUTUAL et al., Defendants and Respondents. No. E024843 California Court of Appeal Fourth Appellate District Division Two Filed May 23, 2000 CERTIFIED FOR PARTIAL PUBLICATION
        APPEAL from the Superior Court of Orange County. C. Robert Jameson, Judge. Affirmed.
        ORIGINAL PROCEEDING; petition for writ of mandate. C. Robert Jameson, Judge. Denied.
        Payne & Fears, Daniel M. Livingston, Alan G. Ross; Albert, Weiland & Golden and Marcus M. Kaufman for Plaintiffs, Appellants, and Petitioners.
        Hart, King & Coldren, William R. Hart, and Robert J. Mulvihill for Defendants, Respondents, and Real Parties in Interest Third Laguna Hills Mutual, United Laguna Hills Mutual, Golden Rain Foundation of Laguna Hills, Earl Donaldson, Jim Etter, Tom Jorde, Robert Morton, Jan Nelson, Walter Penn, Marvin Taves, Cynthia Chyba, Robert Miller, Burns Nugent, Dick Osterlind, Bert Postill, Eleanore Schwartz, Ann Snider, Thomas Blaylock, Bettye Carlsten, Kenneth Dooley, Richard Fuchs, Phyllis Fish, Eloise Kight, Thomas E. McCauley, Leo Minkin, Richard Newsome, Robert Ring, Leroy Wolever, Juel Anderson, Irving Goldberg, Bert Hack, Matthew Magidson, Rhea Saylors, Bert Black, Seymour Coblens, Harry Curtis, and Robert Payne.
        Cassidy, Warner, Lane & Winstead, B. Kent Warner and David C. Olson for Defendant, Respondent, and Real Party in Interest Charles Hellman.
        Several related homeowners associations used homeowner-paid assessments to make contributions to a political action committee to support a local Orange County ballot measure. Plaintiffs, who are members of the homeowners associations, challenge these contributions as ultra vires, illegal, and in violation of their constitutional rights to free speech and association.
        Plaintiffs have filed both a writ petition and an appeal. In the writ proceeding, we issued an alternative writ and consolidated the proceeding with the appeal. In the appeal, plaintiffs contend they were entitled to the issuance of a preliminary injunction. In the writ petition, plaintiffs contend they were entitled to entry of summary judgment in their favor; alternatively, they contend the trial court erred by bifurcating the trial of defendants' "special litigation committee" affirmative defense. We find no error. Thus, we will deny a writ and we will affirm.

I FACTUAL BACKGROUND         United Laguna Hills Mutual (United), Third Laguna Hills Mutual (Third), and another association not a party to this action are the homeowners associations for different portions of Leisure World, a senior citizens community in Laguna Hills.
        Golden Rain Foundation of Laguna Hills (Golden Rain) functions as a sort of master homeowners association. Each of the homeowners associations at Leisure World is a voting "corporation member" of Golden Rain; each of their respective homeowner members is a nonvoting "member" of Golden Rain. (We will refer to United, Third, and Golden Rain collectively as the "Associations.") The Associations are nonprofit mutual benefit corporations.
        Leisure World is near the El Toro Marine Corps Air Station. (The Thomas Guide: Orange County (1998 ed.) pp. 861, 891.) Proposals that this closed military base be converted into a commercial airport have generated considerable local controversy. Measure S, an initiative which would have impeded or prevented the airport conversion, qualified for the March 1996 Orange County ballot. "Taxpayers for Responsible Planning - Yes on Measure S" (Taxpayers) is a political action committee which - needless to say - supported Measure S.
        Between January 1995 and January 1996, the Associations contributed a total of $542,361 to Taxpayers. This money came from assessments they had collected from their homeowner members. Taxpayers used the money to support Measure S.
        After this action was filed, each of the Associations formed its own special litigation committee. Each committee was made up of three members of the board of directors who had not become members until after this action had been filed. The committees retained separate legal counsel; in person or through counsel, they interviewed witnesses and reviewed all pleadings, motions, and discovery in this action. The special litigation committees all concluded that the prosecution of this action was not in the best interests of the Associations.

II PROCEDURAL BACKGROUND         The plaintiffs in this action are Warren T. Finley, Donald H. Rez, and Donald Firestone. Each of them allegedly is a member of one or more of the Associations.
        The defendants are the Associations and certain members of their respective boards of directors who allegedly authorized the contributions (collectively, the Directors). ¹
        Plaintiffs' complaint, as subsequently amended, was asserted derivatively, on behalf of the Associations. It alleged five causes of action against the Directors: (1) for recovery of the contributions, on the grounds that they (a) violated the Davis-Stirling Common Interest Development Act (Civ. Code, § 1350 et seq.), (b) violated the Associations' governing documents, (c) breached the Directors' fiduciary duties, (d) constituted a waste of corporate assets, and (e) were ultra vires; (2) for conversion; (3) for recovery of the contributions, on the grounds that they violated the constitutional rights of dissenting members of the Associations; (4) for injunctive relief; and (5) for violation of civil rights (42 U.S.C. § 1983). ²
        Defendants answered and asserted affirmative defenses, including the business judgment rule and that the action was not in the best interest of the Associations.
        On December 30, 1998, plaintiffs filed motions for summary judgment; in the alternative, they sought summary adjudication on each cause of action and/or on defendants' business judgment rule defenses. Also on December 30, 1998, plaintiffs filed a motion for a preliminary injunction. Plaintiffs submitted the same evidence in support of, and defendants submitted the same evidence in opposition to, both motions.
        On or about December 30, 1998, defendants filed a motion to bifurcate and try first their affirmative defense that the action could not be maintained derivatively because disinterested special litigation committees had determined that it was not in the best interest of the Associations.
        On March 12, 1999, after hearing argument, the trial court denied plaintiffs' motions for summary judgment and a preliminary injunction. It granted defendants' motion to bifurcate.
        On April 7, 1999, plaintiffs appealed from the order denying their motion for a preliminary injunction.
        On April 14, 1999, plaintiffs filed a petition for writ of mandate, challenging the order denying their motions for summary judgment and the order granting defendants' motion to bifurcate.

[This Part Is Not Certified for Publication]
III FAILURE TO SPECIFY FACTUAL ISSUES AND EVIDENCE         Plaintiffs contend the trial court failed to specify facts as to which there was a triable issue and failed to refer to the evidence which raised the supposed triable issue. As plaintiffs acknowledge, however, the trial court attempted to do so, citing facts, by number, as set forth in the parties' respective separate statements. Plaintiffs' real complaint appears to be that the trial court erred in concluding that the specified evidence raised the specified issues.
        Code of Civil Procedure section 437c, subdivision (g), ³ as relevant here, provides: "Upon the denial of a motion for summary judgment, on the ground that there is a triable issue as to one or more material facts, the court shall, by written or oral order, specify one or more material facts raised by the motion as to which the court has determined there exists a triable controversy. This determination shall specifically refer to the evidence proffered in support of and in opposition to the motion which indicates that a triable controversy exists."
        We review a ruling on a motion for summary judgment independently. "'"It is the validity of the ruling which is reviewable and not the reasons therefor."' [Citation.]" (Unisys Corp. v. California Life & Health Ins. Guarantee Assn. (1998) 63 Cal.App.4th 634, 640, quoting Ruoff v. Harbor Creek Community Assn. (1992) 10 Cal.App.4th 1624, 1628, quoting Barnett v. Delta Lines, Inc. (1982) 137 Cal.App.3d 674, 682.) Accordingly, a trial court's failure to comply with Code of Civil Procedure section 437c, subdivision (g), is virtually never so prejudicial as to require reversal. (Angell v. Superior Court (1999) 73 Cal.App.4th 691, 703 [Fourth Dist., Div. Two]; Soto v. State of California (1997) 56 Cal.App.4th 196, 199; Goldrich v. Natural Y Surgical Specialties, Inc. (1994) 25 Cal.App.4th 772, 782.)
        When this requirement was first enacted, there was a flurry of cases in which the appellate courts not only granted writs compelling compliance with it, but published their opinions, to boot. (E.g., Greater Irvine Credit Union v. Superior Court (1986) 186 Cal.App.3d 1189, 1191-1192; Beatrice Companies v. Superior Court (1986) 182 Cal.App.3d 525, 527-528; Young v. Superior Court (1986) 179 Cal.App.3d 28, 30-33; Tera Pharmaceuticals, Inc. v. Superior Court (1985) 170 Cal.App.3d 530, 532-533; Continental Ins. Co. v. Superior Court (1985) 165 Cal.App.3d 1069, 1071-1072.) Since then, however, as the requirement has become widely known to court and counsel, it has become more common to deny writ relief. (E.g., Angell v. Superior Court, supra, 73 Cal.App.4th at p. 703; Globe Indemnity Co. v. Superior Court (1992) 6 Cal.App.4th 725, 728, fn. 1; Loomis v. Superior Court (1987) 195 Cal.App.3d 1026, 1029.) Here, it is obvious that the trial court was well aware of the requirement; plaintiffs merely quibble with the sufficiency of its compliance. Accordingly, we see no need for writ relief.

IV PLAINTIFFS' FIRST CAUSE OF ACTION: ULTRA VIRES AND/OR ILLEGAL CONTRIBUTIONS         Plaintiffs contend the contributions were ultra vires under the Associations' governing documents, and illegal under the Davis-Stirling Common Interest Development Act (Civ. Code, § 1350 et seq.).

        A.        Additional Factual Background.
                1.        Golden Rain Foundation of Laguna Hills.
                        a.        Articles of Incorporation.
        Golden Rain was incorporated in 1962. Its articles of incorporation provide:
        "The purposes for which this corporation is formed are:"
        "(a) To engage primarily and specifically in sponsoring and forming California corporations whose joint purpose will be to develop a community or communities for senior citizens; and to provide services and community facilities to the occupants of the community or communities and to others."
        " . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
        "(c) To engage in any business or activity now or hereafter permitted under the General Non-Profit Corporation Law of the State of California."
        "For the purposes above specified, this corporation shall have the following powers:
        " . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
        "(c) To sell, assign, convey, exchange, lease, mortgage, encumber, transfer upon trust, or otherwise dispose of all property, real and personal.
        " . . . . . . . . . . . . . . . . . . . . . . . . . . . . ."
        "(g) To make donations for the public welfare or for charitable, scientific, or educational purposes."

                        b.        Bylaws.
        Golden Rain's bylaws provide:
        "The purposes of this corporation are:
        " . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
        "(b) to engage in any business or activity now or hereafter permitted by the Articles of Incorporation of this Corporation, these Bylaws, or by the Nonprofit Mutual Benefit Law . . . ."
        "For the purposes above specified, this Corporation has the powers:
        "(a) to take such action as is permitted by its Articles of Incorporation of this Corporation or these Bylaws;
        "(b) to do any other act now or hereafter permitted under the Nonprofit Mutual Benefit Law or other applicable law which is not in conflict with the Articles of Incorporation or these Bylaws . . . ."

                2.        United Laguna Hills Mutual.
                        a.        Articles of Incorporation.
        United was incorporated in 1975. Its articles of incorporation provide:
        "The specific and primary purpose for which the corporation is formed is . . . to provide housing on a mutual nonprofit basis . . . .
        "The general purposes for which the corporation is formed, and the business and objects to be carried on and promoted by it, are as follows:
        "(a) To construct, operate, maintain and improve, and to buy, own, sell, convey, assign, mortgage or lease any real property and any personal property necessary or incident to the provision of such housing;
        " . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
        "(d) To enter into any kind of activity, and to perform and carry out contracts of any kind necessary to, or in connection with, or incidental to the accomplishment of the nonprofit purposes of the corporation . . . ."

                        b.        Bylaws.
        United's bylaws provide:
        "The purposes of the Corporation are:
        "(a) To provide housing at Rossmoor Leisure World, Laguna Hills, California to its Members on a mutual nonprofit basis . . . .
        "(b) To engage in any business or activity now or hereafter permitted under the California Nonprofit Mutual Benefit Law."
        "For the purposes above specified, this Corporation has the following powers:
        "(a) To take such action as is permitted by its Articles of Incorporation and these Bylaws; and
        "(b) To do any other act now or hereafter permitted under the Nonprofit Mutual Benefit Law which is not in conflict with the Articles of Incorporation or these Bylaws."

                2.        Third Laguna Hills Mutual.
                        a.        Articles of Incorporation.
        Third was incorporated in 1970. Its articles of incorporation provide:
        "The specific and primary purposes for which this corporation is formed are . . . to manage, operate and maintain condominium housing projects at Rossmoor Leisure World, Laguna Hills, California.
        "In order to accomplish the foregoing purposes and for no other purpose or purposes, this corporation shall have the power to:
        " . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
        "(e) Convey, exchange, lease, mortgage, encumber, transfer upon trust, or otherwise dispose of all property, real or personal;
        " . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
        "(g) Enter into any contract or take any action necessary to, in connection with or incidental to the accomplishment of the purposes of this corporation."

                        b.        Bylaws.
        Third's bylaws provide:
        "The purposes of the Corporation are:
        " . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
        "(b) To manage, operate and maintain condominium housing . . . as set forth in the Articles of Incorporation . . . ."
        "For the purposes above specified, this Corporation has the following powers:
        "(a) To take such action as is permitted by its Articles of Incorporation [and] these Bylaws . . . ; and
        "(b) To do any other act now or hereafter permitted under the Articles of Incorporation, these Bylaws, or the Restrictions which is not in conflict with the Nonprofit Mutual Benefit Law [or] the Common Interest Development Law . . . ."

        B.        The Associations' Governing Documents.
        "When disputes arise between the homeowners and the homeowners association, the courts will look to the governing instruments for guidance in determining whether the association has acted within its authority. [Citation.]." (MaJor v. Miraverde Homeowners Assn. (1992) 7 Cal.App.4th 618, 627.) "Where the association exceeds its scope of authority, any rule or decision resulting from such an ultra vires act is invalid . . . ." (Id., at p. 628.)

                1.        The Associations' Powers.
        In 1978, the Nonprofit Mutual Benefit Corporation Law (Corp. Code, § 7110 et seq.) was enacted, effective January 1, 1980. (Stats. 1978, ch. 567, § 6.) Among its provisions is Corporations Code section 7140 (section 7140), which provides: "Subject to any limitations contained in the articles or bylaws . . . , a corporation, in carrying out its activities, shall have all of the powers of a natural person, including, without limitation, the power to:
        " . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
        "(h) Make donations for the public welfare or for community funds, hospital, charitable, educational, scientific, civic, religious or similar purposes." (Italics added.)
        Under the transitional provisions of the Nonprofit Mutual Benefit Corporation Law: ". . . Section 7140 . . . applies to subject corporations[ ⁴] . . . ; but any statement in the articles of such corporations prior to an amendment thereof pursuant to Section 9913, relating to the powers of the corporation shall not be construed as a limitation unless it is expressly stated as such." (Corp. Code, § 9914, italics added.)
        Each of the Associations was incorporated before the enactment of the Nonprofit Mutual Benefit Corporation Law. There is no evidence that their articles of incorporation have been amended at any time since January 1, 1980. Accordingly, section 7140 applies to them. Admittedly, section 7140 is expressly made subject to any limitations in the corporation's articles. No statement in the articles, however, may be construed as a limitation unless it is expressly stated to be such. We find no such express statement.
        The Associations' bylaws in no way limit their powers. To the contrary, the bylaws broadly permit them to do any act not prohibited by their articles or by applicable law.
        We conclude the Associations have all the powers of a natural person. This includes the power to make a contribution for "the public welfare." Moreover, a natural person can make a contribution even if it is not for the public welfare. Thus, the Associations had the power to make the challenged contributions.

                2.        The Associations' Purposes.
        The Associations' purposes were variously defined as providing housing, providing services to the occupants of a senior citizens community, and managing, operating, and maintaining condominium housing projects. Plaintiffs argue the contributions were not incidental to these purposes.
        In Marsili v. Pacific Gas & Elec. Co. (1975) 51 Cal.App.3d 313, the defendant corporation contributed $10,000 to oppose a local ballot initiative which would have required voter approval for construction of any building more than 72 feet high. (Id., at pp. 316-317.) The plaintiff stockholders contended the contribution was ultra vires. (Id., at p. 317.)
        The appellate court began by noting that, under the Corporations Code as it then stood, a corporation had the power to do any act incidental to its purposes. (Marsili v. Pacific Gas & Elec. Co., supra, 51 Cal.App.3d at pp. 322-323.) It therefore defined the issue as "whether a contribution toward the defeat of a local ballot proposition can ever be said to be convenient or expedient to the achievement of legitimate corporate purposes." (Id., at p. 323.) Members of the corporation's board had determined that the initiative would adversely affect the corporation by raising taxes and by interfering with its present and future building plans. (Id., at p. 325.) The court concluded: "Their judgment was not arbitrary or capricious but was based upon pertinent business considerations that were of direct and immediate concern to the corporation." (Ibid.) It therefore held that " . . . where, as here, the board of directors reasonably concludes that the adoption of a ballot proposition would have a direct, adverse effect upon the business of the corporation, the board of directors has abundant statutory and charter authority to oppose it." (Id., at p. 324.)
        Here, the Associations made the contributions because they believed Measure S was "necessary to preserve the current lifestyle of the Leisure World . . . community." Leisure World would be in the airport's flight pattern. Thus, it would be "heavily impacted" by the airport conversion, which "would have profound adverse effects on the quality of life and property values at Leisure World, through air and noise pollution, vibration and traffic congestion . . . ." A carefully designed professional survey revealed that 91.3 percent of Leisure World residents opposed the airport conversion; only 3.3 percent supported it. Although this survey was conducted after this action had already been filed, it demonstrated that defendants shared the members' perception of the Associations' best interests. Defendants concluded that, if Measure S failed to pass and the airport conversion proceeded, there would be a direct, adverse effect on housing at Leisure World. This conclusion was not arbitrary or capricious. On this record, the contributions furthered the Associations' purposes.
        Plaintiffs rely on Spitser v. Kentwood Home Guardians (1972) 24 Cal.App.3d 215. There, a homeowners association sued the City of Los Angeles, seeking an injunction to abate airport noise. It also imposed an assessment on the homeowners to finance the suit. (Id., at p. 217.) Under the applicable conditions, covenants, and restrictions (CC&R's), the homeowners association had been formed to enforce the CC&R's, and it was authorized to expend assessments to enforce the CC&R's. (Id., at pp. 217-218.) The appellate court held the assessment was unauthorized. It reasoned that the only relevant provision of the CC&R's prohibited "noxious or offensive" activities, annoyances, and nuisances on the property; there was no provision regarding nuisances emanating from outside. (Id., at 218-219.) Here, the purpose of the Associations was not limited to enforcement of the CC&R's. Spitser is completely inapplicable. ⁵
        We conclude that the contributions did not violate the governing documents of the Associations.

        C.        The Davis-Stirling Common Interest Development Act.
        The Davis-Stirling Common Interest Development Act (the Act) provides: "[T]he association shall prepare . . . : [¶] (a) A pro forma operating budget, which shall include . . . : [¶] (1) The estimated revenue and expenses . . . ." (Civ. Code, § 1365, subd. (a)(1).) "[T]he association shall levy regular and special assessments sufficient to perform its obligations under the governing documents and this title." (Civ. Code, § 1366, subd. (a).) "An association shall not impose or collect an assessment or fee that exceeds the amount necessary to defray the costs for which it is levied." (Civ. Code, § 1366.1.)
        As we have already held in part IV.B, ante, the contributions were not ultra vires. Thus, they were a legitimate expense of the Associations for which assessments could be lawfully levied. Plaintiffs argue that " . . . none of the funds used here was originally collected for the purpose of making a political donation . . . ." We do not read the Act, however, as requiring an association to itemize in advance each and every cost for which assessments will ultimately be used.
        Plaintiffs also point out that the Act places certain limitations on the expenditure of "funds designated as reserve funds." (Civ. Code, § 1365.5, subd. (c)(1).) There is no evidence, however, that any of the contributions were made out of reserves. Thus, we perceive no violation of the Act.
        Given our resolution of these issues, it follows that the trial court correctly denied plaintiffs' motion for summary adjudication on the first cause of action. Plaintiffs also contend the trial court erred by denying summary adjudication on their second cause of action, for conversion. This cause of action, however, was premised on the allegations of the first cause of action. Thus, the trial court also correctly denied the motion for summary adjudication on the second cause of action. It also follows that, to the extent that plaintiffs sought a preliminary injunction based on these causes of action, the trial court properly denied a preliminary injunction based on the lack of probability of success on the merits. (Teachers Ins. & Annuity Assn. v. Furlotti (1999) 70 Cal.App.4th 1487, 1498.)
[End of Part Not Certified for Publication] V THE BUSINESS JUDGMENT RULE DEFENSE         Plaintiffs contend they were entitled to summary adjudication on defendants' business judgment rule defense.
        Under the business judgment rule, a director cannot be held liable for actions taken in good faith which he or she believes, based on a reasonable investigation, to be in the best interests of the corporation. (Corp. Code, §§ 309 [General Corporation Law], 7231 [Nonprofit Mutual Benefit Corporation Law]; Barnes v. State Farm Mut. Auto. Ins. Co. (1993) 16 Cal.App.4th 365, 378-379; Gaillard v. Natomas Co. (1989) 208 Cal.App.3d 1250, 1263.)
        Plaintiffs argue the business judgment rule does not apply to actions which are ultra vires or illegal. In part IV, ante, however, we held that, on this record, the contributions were neither ultra vires nor illegal. Accordingly, even assuming, for purposes of argument, plaintiffs have correctly stated the law, they were not entitled to summary adjudication on this defense.

VI THE "SPECIAL LITIGATION COMMITTEE" DEFENSE         Plaintiffs contend the trial court erred by bifurcating defendants' "special litigation committee" defense. They also contend - albeit tersely - it erred by failing to grant summary adjudication on this defense.
        Plaintiffs' primary argument is that a "special litigation committee" defense has not been recognized, and should not be recognized, in California. Plaintiffs waived this contention by failing to raise it below. As an alternative ground, however, and because this issue seems likely to loom large on remand, we hold that the special litigation committee defense is legally valid in California. ⁶
        A number of other states (or federal courts applying the law of other states) have recognized a "special litigation committee" defense. This defense arises out of the interplay between the business judgment rule and the requirement in a stockholder's derivative action that the plaintiff must have made a demand on the board of directors to have the corporation pursue the action. (See Corp. Code, § 800, subd. (b)(2).) Thus, it has been held that, once a duly appointed committee of disinterested directors reasonably determines that it is not in the best interests of the corporation to pursue the claims asserted in the derivative action, that decision is protected by the business judgment rule. The trial court must determine, as a matter of fact, whether the committee members were disinterested and whether they conducted an adequate investigation. If it answers yes to both questions, however, it must dismiss the derivative action. (Roberts v. Alabama Power Company (Ala. 1981) 404 So.2d 629, 631-636; Hirsch v. Jones Intercable, Inc. (Colo. 1999) 984 P.2d 629, 636-638; De Moya v. Fernandez (Fla.Dist.Ct.App. 1990) 559 So.2d 644, 645-646; Millsap v. American Family Corporation (1993) 208 Ga.App. 230 [430 S.E.2d 385]; Allied Ready Mix Company, Inc. ex rel. Mattingly v. Allen (Ky.Ct.App. 1998) 994 S.W.2d 4, 8-10; Auerbach v. Bennett (1979) 47 N.Y.2d 619, 630-631 [393 N.E.2d 994, 419 N.Y.S.2d 920]; Miller v. Bargaheiser (1990) 70 Ohio App.3d 702, 705-708 [591 N.E.2d 1339]; Cuker v. Mikalauskas (1997) 547 Pa. 600, 611-614 [692 A.2d 1042].) ⁷
        A minority of states have recognized a modified version of the special litigation committee defense. These states require the trial court to scrutinize the committee's decision independently; they vary as to the precise degree of scrutiny required. (Joy v. North (2d Cir. 1982) 692 F.2d 880, 887-891 [applying Connecticut law] [trial court is to weigh likely recovery, discounted by the probability of liability, against the costs to the corporation of continuing the action], cert. den. sub nom. Citytrust v. Joy (1983) 460 U.S. 1051 [103 S.Ct. 1498, 75 L.Ed.2d 930]); ⁸ Zapata Corp. v. Maldonado (Del. 1981) 430 A.2d 779, 787-789 [trial court is to apply its own "independent business judgment"]; Houle v. Low (1990) 407 Mass. 810, 814-826 [556 N.E.2d 51] [trial court must determine whether committee's decision was "reasonable and principled"]; In re PSE&G Shareholder Lit. (1998) 315 N.J.Super. 323, 335-336 [718 A.2d 254] [trial court must determine whether committee's decision was "reasonable and principle[d]"]; Alford v. Shaw (1987) 320 N.C. 465, 468-474 [358 S.E.2d 323] [trial court must consider totality of circumstances, including committee's report, in deciding whether directors' action was "just and reasonable"]; Lewis v. Boyd (Tenn.Ct.App. 1992) 838 S.W.2d 215, 222-226 [trial court must determine whether committee's decision was "reasonable and principled"].)
        Iowa recognizes the defense but holds that, if the board has a majority of interested directors, it cannot make a valid delegation to a special litigation committee. In that event, the trial court may appoint a "'special panel,'" which may determine whether the derivative action is in the best interest of the corporation. (Miller v. Register and Tribune Syndicate, Inc. (Iowa 1983) 336 N.W.2d 709, 718.) As far as we are aware, there is no court which has refused to recognize the defense at all.
        A considerable number of states have codified the special litigation committee defense. (Alaska Stat. Ann. § 10.06.435, subd. (f) [independent scrutiny standard]; Ariz. Rev. Stat. Ann. § 10-3634; Conn. Gen. Stat. Ann. § 33-724; Fla. Stat. Ann. § 607.07401, subd. (3); Ga. Code Ann. §§ 14-2-744, 14-3-744; Idaho Code Ann. § 30-1-744; Me. Rev. Stat. Ann. tit. 13-A, § 632; Minn. Stat. Ann. § 302A.241; see also Drilling v. Berman (Minn.Ct.App. 1999) 589 N.W.2d 503, 506-507 [construing Minn. Stat. § 302A.241]; Miss. Code Ann. § 79-4-7.44; Mont. Code Ann. §§ 35-1-545, 35-2-1304; Neb. Rev. Stat. Ann. § 21-2074; N.H. Stat. Ann. § 293-A:7.44; N.C. Stat. Ann. § 55-7-44; Tex. Bus. Code Ann. art. 5.14, subds. F, H; Va. Code Ann. § 13.1-672.4; Wis. Stat. Ann. §§ 180.0744, 181.0744.) ⁹ Of these, all but the Alaska and Minnesota statutes are based on section 7.44 of the American Bar Association's 1984 Model Business Corporations Act, which adopts the original, unmodified version of the defense.
        Plaintiffs claim the validity of the special litigation committee defense is an open question in California. The Ninth Circuit, however, has twice held that the California Supreme Court would recognize the defense. (Gaines v. Haughton (9th Cir. 1981) 645 F.2d 761, 770-772, cert. den. (1982) 454 U.S. 1145 [102 S.Ct. 1006, 71 L.Ed.2d 297]; Lewis v. Anderson (9th Cir. 1979) 615 F.2d 778, 782-783, cert. den. (1980) 449 U.S. 869 [101 S.Ct. 206, 66 L.Ed.2d 89].) Decisions of the federal courts interpreting California law, although not binding on us, are persuasive. (Mesler v. Bragg Management Co. (1985) 39 Cal.3d 290, 299.)
        The only California decision concerning the defense is Will v. Engebretson & Co. (1989) 213 Cal.App.3d 1033. In Will, a stockholder's derivative action, the corporation filed a motion for summary judgment, asserting the special litigation committee defense. (Id., at p. 1037.) The trial court ruled that there was triable issues of fact "'as to the adequacy of the investigation [and] as to the good faith and the independence of the committee.'" (Ibid.) It proceeded, however, to treat the motion as a "'hybrid dismissal' motion"; it held a "'good faith' hearing," determined that the committee was independent and acted in good faith, and dismissed the action. (Id., at p. 1038.)
        The appellate court began by noting: "The business judgment rule has been held, among other things, to permit a corporation to appoint a special litigation committee to decide whether the maintenance of a shareholder's derivative suit is in the corporation's best interests. [Citation.] The committee may decide that the suit should be dismissed and, if it does, the corporation may make a motion in the trial court to dismiss the suit. It may demur, move for judgment on the pleadings, or seek summary judgment." (Will v. Engebretson & Co., supra, 213 Cal.App.3d at pp. 1040-1041, fn. omitted, citing Lewis v. Anderson, supra, 615 F.2d at p. 783.) "However, courts which have considered the issue have concluded that judicial review of the independence, good faith, and investigative techniques of a special litigation committee is governed by traditional summary judgment standards." (Id., at p. 1041.) The court concluded the trial court erred by holding a good faith hearing. Once the trial court denied the motion for summary judgment, the plaintiff was entitled to "a trial on the merits as opposed to a 'limited review' of the merits regarding the issue of the good faith and independence of the committee." (Id., at p. 1043.)
        The plaintiff had argued the trial court should have used the modified version of the defense, under which the trial court is required to apply its own "independent business judgment." (Will v. Engebretson & Co., supra, 213 Cal.App.3d at p. 1042, fn. 5, citing Zapata Corp. v. Maldonado, supra, 430 A.2d 779.) Because the appellate court reversed on procedural grounds, it specifically declined to decide whether it should follow the "two-step approach in Zapata." (Will, supra, at pp. 1039, 1042, fn. 5.)
        Plaintiffs read Will as declining to decide whether the special litigation committee defense is valid. We disagree. Will cited Lewis as holding that the defense is valid. It then held that the procedural vehicles for asserting the defense include a motion for summary judgment or a full trial, but not a good faith hearing. This implicitly but necessarily means the defense may in fact be asserted. What the Will court did decline to decide was which version of the defense may be asserted - the majority (and Model Act) "one-step" version, in which the court decides only whether the committee was disinterested, acted in good faith, and investigated adequately, or the minority "two-step" version, in which the court must additionally apply its own business judgment. Under Will, however, the special litigation committee defense, in some form, is valid in California.
        Plaintiffs argue there is no reported case in which the special litigation committee defense has been used by a homeowners association. They fail to explain, however, why it could not be. Here, each of the Associations was incorporated as a nonprofit mutual benefit corporation. Thus, basic principles of corporate law apply to them. Such principles specifically include the business judgment rule (Corp. Code, §§ 309, 7231) as well as the principle that the directors may delegate their authority to a committee (Corp. Code, §§ 300, subd. (a), 311, 7210, 7212, subd. (a)).
        Plaintiffs also assert that the special litigation committee defense "cannot be . . . used to exculpate directors from liability for ultra vires, illegal or unconstitutional acts." As we have already held, plaintiffs were not entitled to summary adjudication of their claim that the contributions were ultra vires or illegal. But more to the point, plaintiffs appear to be confusing two distinct exercises of business judgment. First, defendants invoke the business judgment rule to protect their decision to make the contributions. We may assume, without deciding, the business judgment rule would not apply to this decision if the contributions were ultra vires or illegal. Second, defendants invoke the business judgment rule to protect the special litigation committees' decision that this derivative action is not in the best interest of the Associations. Even assuming the underlying contributions were ultra vires or illegal, the decision not to pursue a derivative action regarding them was not ultra vires, illegal, or unconstitutional; thus, this decision was entitled to the protection of the business judgment rule. (Abbey v. Control Data Corp. (8th Cir. 1979) 603 F.2d 724, 730, cert. den. (1980) 444 U.S. 1017 [100 S.Ct. 670, 62 L.Ed.2d 647]; Gall v. Exxon Corp. (S.D.N.Y. 1976) 418 F.Supp. 508, 518.)
        Next, plaintiffs argue the special litigation committee defense did not meet the prerequisites of Code of Civil Procedure section 597. This section permits bifurcation of a "defense not involving the merits of the plaintiff's cause of action but constituting a bar or ground of abatement to the prosecution thereof . . . ." Plaintiffs therefore argue the special litigation defense "involv[es] the merits" of their causes of action and is not a mere "bar or ground of abatement."
        Code of Civil Procedure section 597, however, is not the only statute which permits bifurcation. Under Code of Civil Procedure section 1048, subdivision (b), "[t]he court, in furtherance of convenience or to avoid prejudice, or when separate trials will be conducive to expedition and economy, may order a separate trial . . . of any separate issue . . . ." (Italics added.) Moreover, the trial court's discretion to regulate the order of proof (Evid. Code, § 320) affords sufficient authority to order the separate trial of an affirmative defense. (Donovan v. Security-First Nat. Bk. (1945) 67 Cal.App.2d 845, 852, disapproved on other grounds in Rader v. Thrasher (1962) 57 Cal.2d 244, 251-252; see also Cohn v. Bugas (1974) 42 Cal.App.3d 381, 389, fn. 7.)
        Here, defendants filed their own motion for summary judgment based on the special litigation committee defense, but it was denied. Plaintiffs therefore argue the defense can be raised only by way of a pretrial motion, and, once such a motion has been denied, the defense cannot be raised again at trial. Indeed, they characterize it as a "procedural mechanism" and not really a "'defense'" at all. We know of no case holding the defense cannot be raised at trial; certainly plaintiffs cite none. Will, the controlling California case, reversed specifically because the plaintiff was entitled to litigate the defense at "a trial on the merits." (Will v. Engebretson & Co., supra, 213 Cal.App.3d at p. 1043.)
        The premise of plaintiffs' argument is that the "sole purpose" of the defense "is to dispose of meritless shareholder 'strike suits' without the need for a full trial." The defense, however, has consistently been viewed as a confluence of the business judgment rule and the demand requirement. As such, its main purpose, like theirs, is to further the fundamental principle that those best suited to make decisions for a corporation - including the decision to file suit on its behalf - are its directors, not its stockholders or the courts. (See Roberts v. Alabama Power Company, supra, 404 So.2d at p. 632; Hirsch v. Jones Intercable, Inc., supra, 984 P.2d 634; Allied Ready Mix Company, Inc. ex rel. Mattingly v. Allen, supra, 994 S.W.2d at p. 8; Auerbach v. Bennett, supra, 47 N.Y.2d at pp. 630-631; Miller v. Bargaheiser, supra, 70 Ohio App.3d at p. 706; Cuker v. Mikalauskas, supra, 547 Pa. at pp. 606-611; Lewis v. Boyd, supra, 838 S.W.2d at pp. 220-221.) To serve this purpose, the defense must be allowed whenever a committee of disinterested directors acting in good faith has determined a derivative action is not in the best interests of the corporation - if possible, on motion, but if necessary, in a full trial.
        Finally, plaintiffs argue bifurcation would complicate, rather than streamline, the proceedings. They assert that the trial on this defense will require substantial additional discovery. This is equally true, however, if the defense is tried together with all other issues. "'It is within the discretion of the court to order a severance and separate trials . . . [citations], and the exercise of such discretion will not be interfered with on appeal except when there has been a manifest abuse thereof. [Citation.]' [Citation.]" (Omaha Indemnity Co. v. Superior Court (1989) 209 Cal.App.3d 1266, 1271, quoting McLellan v. McLellan (1972) 23 Cal.App.3d 343, 353.) We perceive no abuse of discretion. Moreover, even where the trial court has in fact abused its discretion, the petitioner is not necessarily entitled to writ relief. (Id., at pp. 1271-1275.) For all these reasons, we decline to issue the requested writ.

[This Part Is Not Certified for Publication]
VII PLAINTIFFS' THIRD AND FIFTH CAUSES OF ACTION: VIOLATION OF CONSTITUTIONAL RIGHTS         Plaintiffs contend they were entitled to summary adjudication and/or an injunction on their causes of action for violation of constitutional rights.

        A.        Denial of Summary Adjudication.
        Plaintiffs rely on a well-known series of cases holding that the First Amendment is violated when certain organizations compel their dissenting members to pay dues to support political or ideological causes not germane to their purposes. Organizations that have been held to be subject to this prohibition include labor unions (Abood v. Detroit Board of Education (1977) 431 U.S. 209 [97 S.Ct. 1782, 52 L.Ed.2d 261]), the State Bar (Keller v. State Bar of California (1990) 496 U.S. 1 [110 S.Ct. 2228, 110 L.Ed.2d 1]), and the student body of a state university (Smith v. Regents of University of California (1993) 4 Cal.4th 843, cert. den. 510 U.S. 863 [114 S.Ct. 181, 126 L.Ed.2d 140]).
        Defendants predictably respond that they are not subject to this constitutional prohibition because their collection of dues does not constitute state action. Alternatively, defendants respond that plaintiffs were not entitled to summary adjudication because there were triable issue of fact with respect to damages. We agree with the second point. We therefore do not reach the state action question.
        "A party may move for summary adjudication as to one or more causes of action within an action, one or more affirmative defenses, one or more claims for damages, or one or more issues of duty, if that party contends that the cause of action has no merit or that there is no affirmative defense thereto, or that there is no merit to an affirmative defense as to any cause of action, or both, or that there is no merit to a claim for damages, as specified in Section 3294 of the Civil Code, or that one or more defendants either owed or did not owe a duty to the plaintiff or plaintiffs. A motion for summary adjudication shall be granted only if it completely disposes of a cause of action, an affirmative defense, a claim for damages, or an issue of duty." (Code Civ. Proc., § 437c, subd. (f)(1), italics added.) "A plaintiff or cross-complainant has met his or her burden of showing that there is no defense to a cause of action if that party has proved each element of the cause of action entitling the party to judgment on that cause of action. . . . " (Code Civ. Proc., § 437c, subd. (o)(1), italics added.)
        In light of these provisions, a motion for summary adjudication cannot be granted solely as to liability. If issues remain to be determined regarding the calculation of damages, it is inappropriate to grant summary adjudication. (Department of Industrial Relations v. UI Video Stores, Inc. (1997) 55 Cal.App.4th 1084, 1097; 3 Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 1999) ¶ 10:52.2, p. 10-27.) ¹⁰
        Under the cases on which plaintiffs rely, once a constitutional violation is shown, the damages recoverable are equal to that portion of plaintiffs' dues which went to support the inappropriate political or ideological cause. (Abood v. Detroit Board of Education, supra, 431 U.S. at pp. 238-241; Smith v. Regents of University of California, supra, 4 Cal.4th at p. 863.) Here, there was no evidence from which the trial court could determine plaintiffs' pro rata share of the contributions.
        Plaintiffs argue that, because the contributions were not germane to the Associations' purposes, the entire amount of the contributions can be recovered. Under the cases on which plaintiffs rely, however, an organization is free to support even ideological causes which are not germane to its purposes; it simply cannot do so with dissenting members' dues. Thus, it would be inappropriate to award the total contributions.
        Alternatively, plaintiffs argue the appropriate remedy would be "a judgment requiring the . . . Associations to notify all members whose dues were misappropriated . . . of their right to receive a rebate." Plaintiffs offer no authority for this suggestion. Admittedly, similar remedies have been approved with respect to future dues. (Keller v. State Bar of California, supra, 496 U.S. at pp. 16-17; Smith v. Regents of University of California, supra, 4 Cal.4th at pp. 862-863.) They are inappropriate, however, with respect to dues already collected in the past. (Railway Clerks v. Allen (1963) 373 U.S. 113, 118-119 [83 S.Ct. 1158, 10 L.Ed.2d 235]; International Machinists v. Street (1961) 367 U.S. 740, 774 [81 S.Ct. 1784, 6 L.Ed.2d 1141] ["Any remedies . . . would properly be granted only to employees who have made known . . . that they do not desire their funds to be used for political causes to which they object. . . . [D]issent is not to be presumed - it must affirmatively be made known . . . by the dissenting employee."].) Such a remedy would be particularly inappropriate here because, as to any dissenting members other than plaintiffs, the one-year statute of limitations (see City of Huntington Park v. Superior Court (1995) 34 Cal.App.4th 1293, 1297) presumably has run.
        This brings us to a more fundamental problem with plaintiffs' constitutional claims. In this appeal, plaintiffs repeatedly assert that they brought these claims individually, not derivatively. This is belied, however, by their complaint, in which each and every cause of action was pleaded as a derivative claim. Thus, in support of their causes of action for violation of constitutional rights, plaintiffs alleged that the use of assessments to make the contributions violated not only their own constitutional rights but those of other dissenting members. They alleged that the Associations had been damaged; they sought damages, on behalf of the Associations, from the Directors. They did not seek any damages (other than attorney's fees) on their own behalf, nor did they seek any damages from the Associations.
        These were not appropriate derivative claims. "A shareholder's derivative suit seeks to recover for the benefit of the corporation and its whole body of shareholders when injury is caused to the corporation that may not otherwise be redressed because of failure of the corporation to act. Thus, 'the action is derivative, i.e., in the corporate right, 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.' [Citations.] ' . . . [A]lthough the corporation is made a defendant in a derivative suit, the corporation nevertheless is the real plaintiff and it alone benefits from the decree; the stockholders derive no benefit therefrom except the indirect benefit resulting from a realization upon the corporation's assets. The stockholder's individual suit, on the other hand, is a suit to enforce a right against the corporation which the stockholder possesses as an individual.' [Citation.]" (Jones v. H.F. Ahmanson & Co. (1969) 1 Cal.3d 93, 106-107, quoting Gagnon Co., Inc. v. Nevada Desert Inn (1955) 45 Cal.2d 448, 453.)
        Plaintiffs did not allege, and could not allege, any violation of the Associations' constitutional rights. Moreover, the alleged violation did not affect all members of the Associations equally; it affected only dissenting members, i.e., those (evidently a minority) who opposed Measure S. Thus, plaintiffs' constitutional claims could be alleged only as individual, and not as derivative, causes of action.
        The trial court could properly have denied summary adjudication on this ground alone. Certainly, given this pleading deficiency, plaintiffs are not entitled to a writ of mandate compelling the trial court to grant summary adjudication. If plaintiffs attempted to amend their complaint so as to frame the constitutional causes of action as individual claims, a number of additional issues would arise. For example, it is not at all clear that plaintiffs could properly join both individual and derivative claims in a single complaint. (See Shenberg v. DeGarmo (1943) 61 Cal.App.2d 326, 331; but see Code Civ. Proc., § 427.10, subd. (a); see also 1 Friedman, Cal. Practice Guide: Corporations (The Rutter Group 1999) ¶ 6:620.1, pp. 6-135-6-136.) Thus, we are not in a position to ignore this pleading deficiency.
We conclude the trial court did not err by denying summary adjudication on plaintiffs' constitutional causes of action.

        B.        Denial of a Preliminary Injunction.
        Plaintiffs' motion for a preliminary injunction sought to enjoin defendants from making any future contributions (1) to Taxpayers, (2) to influence the use of the El Toro Air Base, or (3) to support or oppose any ballot measure. Even assuming plaintiffs' constitutional claims were meritorious, any such injunction would have been an improper remedy. "For the majority also has an interest in stating its views without being silenced by the dissenters. To attain the appropriate reconciliation between majority and dissenting interests in the area of political expression, . . . the courts . . . should select remedies which protect both interests to the maximum extent possible without undue impingement of one on the other." (International Machinists v. Street, supra, 367 U.S. at p. 773.)
        As a constitutional matter, the Associations were free to contribute to political or ideological causes; the only issue was whether they could tap into dissenters' wallets to do so. An injunction prohibiting the Associations from making the specified contributions at all "would completely silence the majority because a hypothetical minority might object." (First National Bank of Boston v. Bellotti (1978) 435 U.S. 765, 794, fn. 34 [98 S.Ct. 1407, 55 L.Ed.2d 707].) It would infringe the Associations' constitutional rights and those of their nondissenting members. It follows that the trial court did not err by denying plaintiffs' motion for a preliminary injunction.

[End of Part Not Certified for Publication]
VIII DISPOSITION         The order denying plaintiffs' motion for a preliminary injunction is affirmed.
        Plaintiffs' petition for a writ of mandate is denied. Defendants shall recover costs against plaintiffs. (Cal. Rules of Court, rules 26, 56.4(a).)

We concur:
        HOLLENHORST, Acting P.J.
        WARD, J.


Pursuant to California Rules of Court, rules 976(b) and 976.1, this opinion is certified for publication with the exception of parts III, IV, and VII.

¹         Taxpayers and its treasurer, Jerard Warner, were also named as defendants, but they, and the causes of action against them, are not involved in this appeal.
²         The fifth cause of action was essentially identical to the third cause of action, for violation of constitutional rights, with the addition of a claim for attorney's fees under 42 United States Code section 1988.
³         Plaintiffs rely on subdivision (f), as well as on subdivision (g), of Code of Civil Procedure section 437c. At one time, subdivision (f) did contain a parallel requirement applicable to motions for summary adjudication. (Stats. 1983, ch. 490, § 1, p. 1992.) That particular requirement, however, was repealed in 1990. (Stats. 1990, ch. 1561, § 2, pp. 7331-7332.)
⁴         "Subject corporation" is defined as including a nonprofit mutual benefit corporation already in existence on January 1, 1980. (Corp. Code, § 9910, subd. (f); see also Corp. Code, §§ 5003, subds. (a)(3), (a)(4), (a)(5), 9912, subd. (a)(1).)
⁵         Plaintiffs base the present contention entirely on the Associations' general purposes and powers. They never argue that, even assuming the governing documents did permit the contributions, they did not permit the imposition and/or the expenditure of assessments for this purpose. In their briefs, plaintiffs never quote or even discuss the provisions of the governing documents regarding assessments. We deem any such contention waived.
⁶         We are far from convinced that, in ruling on the motion to bifurcate, the trial court was required to consider the validity of the defense. If the defense was indeed invalid, however, it would be a waste of time and money to hold a separate trial on it. Thus, we may treat this issue as properly presented, including in the writ proceeding. (See Cedars-Sinai Medical Center v. Superior Court (1998) 18 Cal.4th 1, 6-7; Blue Cross of California v. Superior Court (1998) 67 Cal.App.4th 42, 47-48.)
⁷         The vast bulk of these cases were decided in the 1990's. Plaintiffs' assertion that the special litigation committee defense "is apparently rarely used today, as evidenced by the paucity of reported decision on the subject since the late 1980's" is simply false.
⁸         Joy v. North has since been overruled by statute. (Conn. Gen. Stat. Ann. § 33-724.)
⁹         Plaintiffs' assertion that the defense "appears to have been used only briefly in a few states" is, once again, false.
¹⁰         Plaintiffs have not argued that they were seeking summary adjudication of "an issue of duty." (Compare Linden Partners v. Wilshire Linden Associates (1998) 62 Cal.App.4th 508, 517-522 and Transamerica Ins. Co. v. Superior Court (1994) 29 Cal.App.4th 1705, 1712-1713 with Regan Roofing Co. v. Superior Court (1994) 24 Cal.App.4th 425, 432-438.) We deem any such argument waived.


Pursuant to California Rules of Court, rules 976(b) and 976.1, this opinion is certified for publication with the exception of parts III, IV, and VII. 1