7-21-09 Appellants Reply Brief

2d Civil No. B214056 IN THE COURT OF ApPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION FOUR

Alan Rosenberg, Anne-Marie Johnson, Kent McCord and Diane Ladd, Appellants and Plaintiffs,

vs.

The Screen Actors Guild, . Respondent and Defendant.

FROM THE SUPERIOR COURT FOR Los ANGELES COUNTY JAMES C. CHALFANT, JUDGE LASC CASE No. BC406900

APPELLANTS' REPLY TO RESPONDENT'S BRIEF

BROWNE WOODS GEORGE LLP Eric M. George (State Bar No. 166403) Sonia Y. Lee (State Bar No. 1JH837) 2121 Avenue of the Stars, 24 Floor Los Angeles, California 90067 (310) 274-7100 Attorneys for Plaintiffs/Appellants ALAN ROSENBERG, ANNE-MARIE JOHNSON, KENT MCCORD and DIANE LADD

2d Civil No. B214056 IN THE COURT OF ApPEAL OF THE STATE OF CALIFORNIA SECOND ApPELLATE DISTRICT DIVISION FOUR

Alan Rosenberg, Anne-Marie Johnson, Kent McCord and Diane Ladd, Appellants and Plaintiffs,

vs. The Screen Actors Guild, Respondent and Defendant.

FROM THE SUPERIOR COURT FOR Los ANGELES COUNTY JAMES C. CHALFANT, JUDGE LASC CASE No. BC406900

APPELLANTS' REPLY TO RESPONDENT'S BRIEF

BROWNE WOODS GEORGE LLP Eric M. George (State Bar No. 166403) Sonia Y. Lee (State BarNo. 1~1837) 2121 Avenue of the Stars, 241 Floor Los Angeles, California 90067 (310) 274-7100 Attorneys for Plaintiffs/Appellants ALAN ROSENBERG, ANNE-MARIE JOHNSON, KENT MCCORD and DIANE LADD

TABLE OF CONTENTS Page I.

INTRODUCTION

1

II.

ARTICLE V, § I(J)(4) OF SAG'S CONSTITUTION AND BYLAWS VIOLATES CORPORATIONS CODE SECTION 7211(B)

3

A.

B.

III.

B.

The Authorities Cited By SAG Demonstrate Section 7211(b) May Not Be Amended Or Changed By Bylaw

5

1.

The Colburn Case is inapposite

5

2.

The Treatise on Corporations Law Cited by SAG Confirms Section 7211(b) May Not be Amended or Changed by Bylaw

5

B. C. D.

9

Article V, § 1(J)(4) Directly Conflicts With Corporations Code Section 7211 (b)

10

Article V, § 1(J)(4), As Applied, Materially And Adversely Affected The Voting Rights Of SAG Members

12

SAG HAS FAILED TO IDENTIFY ANY GROUND UPON WHICH THE CHALLENGED ORDER MAYBE AFFIRMED

A.

V.

3

ARTICLE V, § 1(J)(4) VIOLATES CORPORATIONS CODE SECTION 7150

A.

IV.

SAG Has Failed To Rebut The Argument That Corporations Code Section 7211 (b) - Rather Than Section 7150 - Governs The Validity Of Article V, § 1(J)(4)

12

Public Policy Weighs In Favor OfInvalidating An Illegal Bylaw

13

Appellants' Application For Temporary Restraining . Order Was Proper

14

SAG's Alleged Prior "Written Consents" Cannot Validate An Illegal Bylaw

14

SAG's Second Request For Dismissal Of The Appeal Is Without Merit

17

CONCLUSION

22

-i-

TABLE OF AUTHORITIES Page STATE CASES:

Belle Isle Corp. v. Corcoran, 29 Del. Ch. 554 (1946) Berka v. Woodward, 125 Cal. 119 (1899) ...

d

16, 17

•••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••

City Lincoln-Mercury Co. v. Lindsey, 52 Cal.2d 267 (1959)

16 15

Colburn Biological Inst. v. Shaffer, 12 Cal.2d 168 (1938)

5,6

Columbia Engineering Co. v. Joiner, 231 Cal. App. 2d 837 (1965)

16

Cornette v. Department ofTransportation, 26 Cal.4 th 63 (2001) Gomes v. County ofMendocino, 37 Cal.AppA th 977 (1995)

8

.4

:

International Assn. ofFire Fighters v. City ofSan Leandro, 181 Cal.App.3d 179 (1986)

16

I

Pasadena Police Officers Assn. v. City ofPasadena, 51 Cal.3d 564 (1990)

8

People v. Gardeley, 14 Cal.4th 605 (1996)

8

Prime v. Hyne, 260 Cal. App. 2d 397 (1968)

16

STATUTES:

California Civil Code § 2313

20, 21

California Evidence Code §§ 1520 et seq

15

-ii-

TABLE OF AUTHORITIES (continued) Page

California Corporations Code § 7150 , § 7150(a) § 7150(c) § 7151 § 7151(c)(1) § 7210 § 7211 § 7211(a) § 7211(a)(1) § 7211(a)(8) § 7211(b) § 7220 § 7224 § 7512 § 7613 § 7615

:

OTHER AUTHORITIES: SAG Constitution Article V, § 1(J)(4)

2,3,9,12 3, 4,10,12 10 2, 3,10,12 10 11 5, 20, 22 6-9, 11 9 8 1-11, 15 3, 10 3, 10 3, 10 3,10 3, 10

1-4, 9-12, 14, 15,22

-iii-

I.

INTRODUCTION. How does Corporations Code Section 7211(b)1 apply to Article V,

§ I (J)(4) of Respondent Screen Actors Guild's ("SAG") Constitution and·

SAG contends the unanimity provision of Section 721 I (b) is merely "permissive," not "mandatory," and thus impotent to police any noncomplying bylaw. Yet its effort to validate Article V, § l(J)(4) and the actions it took thereunder relies on assertion, not argument, and the very authorities cited by SAG demonstrate the invalidity and unenforceability of Article V, § 1(J)(4). The law governing the present dispute is dispositive:

•

Corporations Code Section 7211 (b) - which governs both

when and how a corporation's board of directors may take action without a meeting - may not be amended or changed by article or bylaw;

I

Section 7211 (b) expressly provides:

An action required or permitted to be taken by the board may be taken WIthout a meeting, if all members

o/the board shall individually or collectively consent in writing to that action. (Emphasis added.)

2

Article V, § 1(J)(4) states: Except as provided otherwise in this Constitution, any acts shall be valid for all purposes with or without a meeting if approved by the written assent 0/ a majority o/the votes o/the Board o/Directors, or such higher percentage of the Board votes as may be required by this Constitution. (Emphasis added.)

232491JDOC

1

•

Article V, § 1(J)(4) of SAG's Constitution and Bylaws

conflicts with Section 7211 (b); and •

By contravening Section 72 11 (b), SAG's bylaw also violates

Corporations Code Sections 7150 and 7151, which permits a corporation to adopt for its management only such articles or bylaws that do not conflict with existing law. SAG's alternative arguments - that even if Article V, § 1(J)(4) contravenes Corporations Code Sections 7150, 7151 and 7211 (b), the "written assent" is valid because (i) SAG has always conducted business by majority "written assent," and (ii) the Board subsequently held a "dulynoticed meeting" to affinn the "written assent" passed pursuant to Article V, § 1(J)(4) - are equally flawed. It is axiomatic that one cannot make an illegal action legal by sheer repetition of the illegal conduct. Equally axiomatic, one cannot make an illegal action legal by "ratifying" or participating or acquiescing in the illegal action. The trial court's order denying Appellants' application for a temporary restraining order was in error and should be reversed.

23249U·DOC

2

II.

ARTICLE V, § l(J)(4) OF SAG'S CONSTITUTION AND BYLAWS VIOLATES CORPORATIONS CODE SECTION 7211(b). A.

SAG Has Failed To Rebut The Argument That Corporations Code Section 7211(b) - Rather Than Section

7150 - Governs The Validity Of Article V, § l(j)(4). Below, Appellants soughttemporarily to enjoin certain actions purportedly approved by SAG's Board pursuant to a bare majority's "written assent." Appellants submitted that Section 7211 (b)'s unanimity requirement for "written assent" actions was mandatory. Noting further that Article V, § I(J)(4) contravened Section 721 1(b), Appellants submitted the "written assent" passed pursuant to Article V, § 1(J)(4) was invalid, and that all actions taken by SAG pursuant to that "written assent" should be enjoined. SAG offered the rejoinder that Section 7150(ai, rather than Section 7211(b), governed the validity and enforceability of Article V, § 1(J)(4). Contending that Section 7211 (b) is not an expressly enumerated exception to Section 7150, SAG argued Section 721 1(b) is not a mandatory provision and SAG's Board could permissibly adopt an article or bylaw in conflict with the provision.

Section 7150(a) states, in pertinent part, "[e]xcept as provided in subdivision (c) and Sections 7151, 7220, 7224, 7512, 7613, and 7615, bylaws may be adopted, amended or repealed by the board...." 3

232491JDOC

3

As analyzed in Appellants' Opening Brief, however, Section 7l50(a) merely states the general proposition that, subject to certain exceptions, a board of directors may adopt, amend or repeal articles or bylaws governing the management ofthe corporation. Section 7211 (b), on the other hand, sets forth the specific manner and method by which a board of directors may act by "written assent" in lieu of a meeting - the very subject of Article V, § 1(J)(4) and the issue presented here. Thus, under well-established rules of statutory construction, it matters not that Section 7211 (b) is not specifically identified; that section nevertheless constitutes an exception to Section 7l50(a) and applies to Article V, § 1(J)(4). See, e.g., Gomes v.

County ofMendocino, 37 Cal. App. 4th 977, 988 (1995) (a specific statute relating to a particular subject will govern as to that subject as against a more general statute); Appellants' Opening Brief, at pp. 24-26. SAG's Respondent's Brief speaks volumes in its silence on this point. SAG has made no effort to address or challenge Appellants' argument. Having proffered no contrary authority, SAG necessarily concedes that the specific "written assent" procedures set forth Section 721 1(b) constitute an exception to the general provision of Section 7l50(a) and control the issues now presented on appeal. Indisputably, then, Appellants submit the only issue remaining before this Court is whether Section 7211 (b) may be amended or changed by a corporation's articles or

23249U.DOC

4

bylaws. As confirmed by the very authorities cited by SAG, it is clear that it may not. B.

The Authorities Cited By SAG Demonstrate Section 72ll(b) May Not Be Amended Or Changed By Bylaw. 1.

The Colburn Case is inapposite.

SAG looks to Colburn Biological Inst. v. Shaffer, 12 Ca1.2d 168, 169 (1938) as authority that Section 721 1(b) may be amended or changed by a corporation's articles or bylaws. This effort fails because Colburn had nothing whatsoever to do with the validity or effectiveness of an action taken by less than unanimous "written consent" of a corporation's board of directors. Decided in 1938, decades before the enactment of Section 7211 (or its for-profit counterpart, Section 307), Colburn necessarily has no bearing on whether a corporate bylaw can amend the mandatory

requirements set forth in Section 72ll(b). SAG's assertion that Colburn somehow controls - or even applies - is generous at best, a misstatement at worse. 2.

The Treatise on Corporations Law Cited by SAG Confirms Section 72ll(b) May Not be Amended or Changed by Bylaw.

The general "explanations" of corporate law set forth in Ballantine and Sterling California Corporation Laws, also relied upon by SAG, do no more to support SAG's contention than does Colburn. In point of fact, the

23249U.DOC

5

treatise supports Appellants' contention that Section 7211 (b) may not by amended or modified by a corporation's bylaws. The Respondent's Brief cites and relies upon the treatise, as follows: The Public Benefit Corporations Law and mutual Benefit Corporations Law respectively provide relatively detailed statutory rules respecting the conduct of directors' meetings, but with relatively few exceptions these can be changed by the articles or bylaws. (Respondent's Brief, at p. 14, citing, AA, Tab. 8, p. 00400; emphasis supplied by SAG.) Scratching below the surface of this quotation, it becomes clear this "explanation" applies only to Section 721 1(a) governing how and when board· of directors meetings are called and how such meetings are conducted. Section 405.02 (from which the quote is taken) is expressly titled "Directors' Meetings" and the footnote immediately following the quote - notably omitted by SAG - specifically cites Corporations Code Section 721 1(a). That subsection sets forth the "default" provisions to be included in a corporation's bylaws regarding, inter alia, who may call a meeting of the Board of Directors, how the meeting may be noticed, how a meeting may be adjourned, where the meeting may be held, and whether members may participate in the meeting through video or telephone conferencing. SAG's citation to the treatise is thus entirely unremarkable because Appellants agree that Section 721 1(a) - and, as noted by the treatise,

23249U·DOC

6

subdivisions of Section 7211(a) (AA, Tab 8, p. 00401, § 405.02[1]) - may be changed by a corporation's articles or bylaws. The issue presented here, however, is whether Section 7211 (b) may be amended by a corporation's articles or bylaws: the answer is found in the very next section of the treatise, which SAG's briefaltogetherfails to

cite or otherwise acknowledge. Section 405.03 of Ballantine and Sterling California Corporation Laws, which is titled "Actions Without Meetings," directly addresses and explains Section 721 I (b), stating, in no uncertain terms that, "[a]ny action required or permitted to be taken by the board may be taken without a meeting if all members ofthe board individually or collectively consent in writing to the action." (Appendix of Non-California Authorities, Tab I,at p. 10-11, § 405.03; emphasis added.) In stark contrast to Section 405.02, in which the authors expressly explain that the requirements of Section 7211 (a) may be amended or changed, at no point in Section 405.03 do the authors remotely suggest that any portion of Section 721 1(b) may be amended or changed by the corporation's articles or bylaws. To the contrary, they reiterate the requirement of the statute that actions taken without a board meeting must be unanimous. (Id.) The plain language of Section 721 1(b) permits no other "explanation." Unlike Section 72ll(a)'s provision that the default provisions set forth therein applies "{uJnless otherwise provided in the

articles or in the bylaws," subsection (b) contains no such language. It is

23249U·DOC

7

thus mandatory. People v. Gardeley, 14 Ca1.4 th 605, 621-22 (1996), citing

Pasadena Police Officers Assn. v. City ofPasadena, 51 Ca1.3d 564, 576 (1990) ("[w]hen the Legislature has used a term or phrase in one part of a statute but excluded it from another, courts do not imply the missing term of phrase in the part of the statute from which the Legislature has excluded it"); see, also, Cornette v. Department ofTransportation, 26 Cal.4 th 63, 7374 (2001) (when one part of a statute contains a term or provision, the omission ofthat term or provision from another part of the statute indicates the Legislature intended to convey a different meaning). SAG contends that had the Legislature intended to prohibit corporations from amending the requirements of Section 721 I(b) through its articles or bylaws, it would have done so by including specific "prohibitory" language in the provision. (Respondent's Brief, at p. 18.) In support thereof, SAG points to Section 721 1(a)(8), which states, "[tIhe

articles or bylaws may not provide that a lesser vote than a majority of the directors present at a meeting is the act of the board." (Emphasis added.) SAG argues that the absence of such "prohibitory" language from Section 7211 (b) evidences an intent to allow corporations to amend or change the requirements of Section 72ll(b). SAG has it backwards. Such "prohibitory" language is contained in Section 7211 (a)(8) precisely because subsection (a) affirmatively states that each of the subdivisions set forth therein may be amended by the articles or the bylaws of the corporation.

23249tJDOC

8

Corp. Code §72ll(a)(l) ("[u]nless otherwise provided in the articles or in the bylaws, all of the following apply..."). No such prefatory language permitting amendment or change is included in Section 7211 (b). As analyzed in detail in Appellants' Opening Brief, the absence of such "permissive" language in Section 72ll(b) - when such language appears in Section 721 1(a) - manifestly evidences a legislative intent not to permit amendment or change to the requirements of Section 72ll(b). Having thus made clear that the provisions of Section 7211 (b) may not be amended or changed, there would be no reason to include such redundant "prohibitory" language in the provision. 4 The foregoing analysis, Appellants submit, in itself compels reversal of the trial court's order denying Appellants' application for a temporary restraining order.

III.

ARTICLE V,

§

1(J)(4) VIOLATES CORPORATIONS CODE

SECTION 7150. Even should this Court apply Corporations Code Section 7150 to this case, Article V, § 1(J)(4) would likewise be invalid.

Because subsection (b) is a mandatory provision, SAG's argument that Section 72ll(b) is simply a "default" provision is equally unsupported.

4

23249U·DOC

9

A.

Article V, § l(J)(4) Directly Conflicts With Corporations Code Section 72ll(b).

Corporations Code Section 7150(a) states, in pertinent part: Except as provided in subdivision (c) and Sections 7151, 7220,7224,7512,7613, and 7615, bylaws may be adopted, amended or repealed by the board. . .. (Emphasis added.) Section 7151, in tum, provides, among other things, that: (c) The bylaws may contain any provision, not in conflict with law or the articles, for the management of the activities and for the conduct of the affairs of the corporation, including but not limited to .... (2) The time, place and manner of calling, conducting and giving notice of members', directors' and committee meetings, or ofconducting mail ballots. (Cal. Corp. Code§7151(c)(1); emphasis added.) Section 7211 (b), which may not be amended or changed by articles

or bylaws, explicitly provides the manner and method by which such mail ballots may be conducted in lieu of a meeting. Thus, as argued in Appellants' Opening Brief, Article V, § 1(J)(4) is valid under Sections 7150 and 7151 only so long as it does not conflict with Section 7211 (b). Respondent's Brief proffers the novel, albeit circular, argument that Article V, § 1(1)(4) does not conflict with Section 7211(b) because Section 7211(b) "only applies to acts for which a board meeting is required." (Respondent's Brief, at p. 16; emphasis added.) Since Article V, § 1(J)(4) is a procedure for which "a board meeting is not required," SAG contends Section 72ll(b) does not apply to the bylaw. (1d.; emphasis in original.)

23249U·DOC

10

As an initial matter, SAG misstates the law. Section 7211(b) applies , . not only to "acts for which a board meeting is required, but also to acts for ,j

which"a board meeting is permitted." SAG's argument is also inherently, logically inconsistent. It is undisputed that a nonprofit corporation - as with all corporations - is required to have a board of directors, charged with the duty of the management ofthe corporation. See, e.g., Cal. Corp. Code § 7210 et seq,; Appendix of non-California Authority, Tab I, at p. 02-03, § 405.01[A]. This duty is discharged through decisions made, and matters voted upon, at meetings of the board. Id. California's Corporations Code sets forth specific requirements on how such meetings are called, noticed and conducted. Cal. Corp. Code § 7211 (a). Because the authority to conduct business by way of a "written assent" in lieu of a meeting is provided by statute in Section 7211 (b), SAG's power to act by "written assent" without a meeting under Article V, § I(J)(4) is derived directly from the authority granted under Section 7211 (b). But for Section 7211 (b), SAG's Board may not take any action pertaining to the guild's management without a meeting. To claim that Section 7211 (b) is inapplicable to actions taken under Article V, § I(J)(4) is thus meritless. In sum, Section 7211(b)'s unanimity requirement for actions taken by "written assent" stands in direct contravention of Article V, § 1(1)(4), which permits "written assent" by a majority vote of the Board.· Article V,

23249U,DOC

11

§ 1(J)(4) is thus in "conflict with the!aw" and runs afoul of Sections 7150 and 7151.

B.

Article V,

§

10(4), As Applied, Materially And Adversely

Affected The Voting Rights Of SAG Members. SAG also concedes - by not addressing the point in its Respondent's Brief- that Corporations Code Section 7150 prohibits the adoption, amendment or repeal of bylaws that would materially and adversely affect the rights of members as to, inter alia, voting. Cal. Corp. Code § 7l50(a). SAG, its by implementation of Article V, § 1(J)(4), deprived a substantial segment ofthe SAG membership from exercising their voting rights through their duly-elected Board members. (Appellants' Opening Brief, at pp.28-29.) In so doing, it selectively chose Board members who would vote on issues germane and critical to the management and governance of the corporation, thereby conceding the impropriety of SAG's implementation and application of its bylaws.

IV.

SAG HAS FAILED TO IDENTIFY ANY GROUND UPON WHICH THE CHALLENGED ORDER MAY BE AFFIRMED. SAG's remaining efforts to defend the challenged order are equally

unavailing.

232491JDOC

12

A.

Public Policy Weighs In Favor Of Invalidating An Illegal Bylaw.

SAG accuses Appellants, by their application for injunction and this appeal, of asking this Court to substitute its judgment for that of the SAG Board. SAG elaborates that the Court "should abstain from wholesale interference in a corporation's chosen manner of self-governance" because the "competence of the court does not equal that of the organization." (See Respondent's Brief, at p. 15 and 21-24.) SAG's contentions are dramatically overstated. Of course abstention is proper, but only where the corporation's "chosen manner of selfgovernance" complies with all applicable laws. Where a corporation chooses to govern itself in disregard of the law, however, the Court should and must step in. Appellants neither seek to have the Court "substitute" its judgment for that of SAG, nor to have this Court interpret any of SAG's corporate documents, nor to have this Court determine how to properly manage the organization. To mischaracterize this appeal as implicating anything other than a legal challenge to the legality and validity of a bylaw which by its very terms conflicts with the laws of this State, is to illuminate the merits - or lack therof - of SAG's position.

232491JDOC

13

B.

Appellants' Application For Temporary Restraining Order Was Proper.

Absent analysis or support, SAG next contends Appellants' underlying application for a temporary restraining order, rather than seeking to preserve the status quo, sought to "restore SAG's former leadership." (Respondent's Brief, at p. 24.) The contention amounts to specious namecalling. Appellants' application sought nothing more than maintaining the status quo of the guild and its Board by preventing action taken under the ostensible authority of the "written assent." See, AA, Tab 4, at pp. 2:7-4: I. Had SAG - rather than resort to its "written assent" secured the requisite number of votes at a duly-noticed and called meeting (or by unanimous written consent), Appellants would have had no quarrel with SAG's conduct, no matter the direction in which is took SAG.

C.

SAG's Alleged Prior "Written Consents" CannotValidate An Illegal Bylaw.

SAG's further attempt to validate Article V, § I(J)(4) - on the ground it has always been utilized to decide matters of "major importance" by "written assent" of a majority Board vote without a meeting - is bereft of both factual and legal support. As an initial matter, there is no competent evidence in the record to support SAG's contention that matters of "major importance" have ever been decided by "written assent" of a majority of the Board. The

23249U·DOC

14

declaration of Michelle Bennett submitted in support of SAG's opposition to the application for temporary restraining order (AA, No.7, at pp. 00342343) is hearsay at best. Although each "written assent" approved by a majority vote of the Board is required to be filed with SAG (Cal. Corp. Code § 7211 (b», Ms. Bennett notably fails to attach copies of any of the alkged ten "written assents" passed since June 2004. Such "written assents" are, of course, the best evidence of the actions taken by the Board and the alleged "importance" of such actions. See Cal. Evid. Code §§ 1520 et seq.

Particularly illuminating is the reason no such "written assents" are attached. As Ms. Bennett clearly states in her declaration, since June 2004, SAG has conducted "ten separate email/fax polls of the National Board of Directors... ," (AA, No.7, p. 00342:19-20, ~ 4; emphasis added) not "written assents." A "poll" is not synonymous with "written assent." Nor can a "poll" remotely be deemed a matter of "major importance," to be equated with such matters as voting and leadership. Equally significantly, even had SAG previously utilized Article V, § 1(J)(4) to act on matters with a minimum majority vote, such prior action cannot serve to make an illegal bylaw legal. "A party to an illegal contract cannot ratify it, cannot be estopped from relying on the illegality, and cannot waive his right to urge that defense." City Lincoln-Mercury Co. v. Lindsey, 52 Cal.2d 267,274 (1959); International Assn. ofFire Fighters v.

232491JDOC

15

City ofSan Leandro, 181 Cal. App. 3d 179, 182 (1986)(same); Prime v. Hyne, 260 Cal. App. 2d 397, 402-403 (1968) (same).

Under the same

principle, estoppel is never allowed or applied where it would be an instrument to enforce an act that is illegal and contrary to laW. See, Berka v. Woodward, 125 Cal. 119, 127 (1899) ("no court shall lend its aid to a man who grounds his action upon an ... illegal act"); see also, Columbia

Engineering Co. v. Joiner, 231 Cal. App. 2d 837, 855 (1965) (accord). In Columbia Engineering Co., plaintiff shareholders contested the election of the board of directors on the ground that some ofthe shares voted were issued in violation of the law, and thus were void. The trial court held that because plaintiffs actively participated in the issuance of the challenged shares and the subsequent conduct of the corporation for more than one and one-half years, their cause of action was barred under the doctrines of waiver and estoppel. Id., at 854-55. The Court of Appeal reversed, holding that "[w]here a statute prohibits or attaches a penalty to the doing of an act, that act is void," and "the defenses oflaches, waiver and estoppel may not be applied." Id., at 855 (cites omitted). In the analogous case of Belle Isle Corp. v. Corcoran, 29 Del. Ch. 554 (1946), too, the voting trustees of a corporation extended its Voting Trust Agreement, and subsequently elected a board of directors pursuant to a vote taken under that extended Agreement. The Supreme Court of Delaware held that, because the extension of the Voting Trust Agreement

23249U·DOC

16

violated Delaware's Corporation Law, both the extended Agreement and any votes taken under it were invalid. Id., at 561-62. The Court also rejected the trustees' argument that the extension "cannot be attacked by the appellees for the reasons that it was unanimously approved and that the parties acted thereunder." Id., at 562. Appellants' prior action, even if supported by credible evidence, is irrelevant.

D.

SAG's Second Request For Dismissal Of The Appeal Is Without Merit.

On or about May 20, 2009, SAG Filed a Motion to Dismiss Appeal as Moot on the ground that, on or about February 8, 2009, following the deI\ial of Appellants' application for a temporary restraining order, SAG's Board held a "noticed meeting" that affirmed the matters passed by the challenged "written assent." On June 5, 2009, Appellants filed their opposition to the Motion. Upon consideration of the moving and opposing papers, this Court denied the Motion on June 9, 2009. SAG now renews its motion to dismiss the appeal as moot on the same grounds already unsuccessfully asserted and on the additional ground that, since the filing of its previous Motion, the SAG members voted to approve a contract with the Association of Motion Picture and Television Producers ("AMPTP"), and that the approval of such a contract "moot[s]

232491JDOC

17

important aspects of this appeal." SAG's renewed motion is substantively and procedurally defective. First, the approval of a contract with the AMPTP in no way moots

the issues on Appeal. By the improper and illegal "written assent," the Board purported to approve the following actions: •

Terminating Doug Allen as the National Executive

Director ("NED") and Chief Negotiator for SAG; •

Appointing David White - a non-member, officer,

employee or member of the Board of SAG - as the interim NED for SAG; •

Appointing John T. McGuire as the Chief Negotiator

for all contracts; •

Suspending Guideline II of the National Committee

Guideline, which specifically provided that "[t]askforces should not be used to circumvent the committee process or supercede the authority of any committee"; •

"Disbanding" the TV/Theatrical Committee, and

rescinding its authority to "continue negotiations on the TV/Theatrical Agreement or, because of its interrelated nature, the Live Action Basic Cable Agreement," and "[i]n its place, [forming] a Taskforce ... to complete these negotiations on behalf of the Board of Directors"; and •

Prohibiting anyone other than White and McGuire

from making any statements about any issue whatsoever on behalf of SAG.

232491JDOC

18

(AA, Vol. I, Ex. 5, p. 00175-176, Rosenberg Decl., "118; AA, Vol. I, Ex. 5, p. 00231-233, January 26, 2009 Written Assent.) The contract approved by the SAG members was provided to the members for consideration after negotiation and approval by the improperly-appointed interim NED, David White, chief negotiator, John T. McGuire, and the negotiation taskforce. Thus, the AMPTP contract presented to and voted upon by the SAG members was the product ofthe illegal "written assent" procedure, which contract should never have been presented to the members in the first place. That the members voted to approve the procedurally defective contract does not void the appeal. It simply supports and proves the "irreparable harm" the trial court found Appellants would suffer if a temporary restraining orderdid not issue. Moreover, the defective approval of the AMPTP contract does not change the fact that, pursuant to the illegal "written assent," Mr. Allen was terminated as the NED (and still remains terminated), Mr. White was hired as an interim NED (and still remains in such position), Mr. McGuire was hired as the Chief Negotiator for all contracts (and still remains in such a position), Guideline II ofthe National Committee Guideline, which has the force and effect of a bylaw, was and remains suspended, the TV/Theatrical Committee was and remains disbanded, and a gag order was issued and remains in effect.

232491JDOC

19

Second, SAG's renewed motion is simply an ill-disguised motion for

reconsideration ofthe prior order of this Court denying the first Motion to Dismiss Appeal. SAG has not presented any new argument or law to justifY reconsideration. As set forth in detail in Appeallants' Opposition to SAG's Motion to Dismiss, the appeal is not moot for several separate and independent reasons: •

The February 8,2009 meeting does not "moot" the Appeal

because it simply purported to "affirm" the Board's authority under SAG's Constitution and bylaws to act by a less than unanimous "written assent." The issue of whether California Corporations Code Section 7211 prohibits a non-profit corporation's board from acting by a less than unanimous written consent must be determined by the courts, and cannot be "ratified" by the Board's Motion. In other words, the Board carmot make an illegal action legal by simply voting to make it legal. Moreover, California Civil Code Section 2313 specifically precludes the SAG Board of Directors from retroactively validating the "written assent." Section 2313 provides that, "No unauthorized act can be made valid, retroactively, to the prejudice of third persons, without their consent." Appellants, none of whom has so consented, clearly have been prejudiced by the January 26 "written assent," as the trial court found that they would be irreparably harmed absent injunctive relief. Using the February 8

23249lJDOC

20

Motion to validate the "written assent" would prejudice Appellants and is therefore prohibited by Section 2313. •

The Motion to Dismiss is defective and improper in its

entirety because it seeks to have this Court adjudicate the merits of Appellants' appeal in the guise of a motion to dismiss. As explained in Appellants' Opening Brief, the February 8 Motion did not and could not cure the defects in the January 26 "written assent" because the meeting at which such a motion passed was itself defective in a number of ways (e.g., David White did not have the authority to call a special Board meeting because he had not been validly appointed, the motion violated a number of provisions of Robert's Rules, and the President and Secretary-Treasurer were precluded from presenting their Reports). •

The February 8 Motion does not render the appeal moot

because it did not "ratifY" the matters "passed" by way of the "written assent." The February 8 Motion simply "affirmed" the Board's alleged authority to act through "written consent" by a simple majority - versus unanimous - vote. At the February 8 meeting, the Board of Directors did not, however, vote on each item set forth in the "written assent" and pass each such item by the two-thirds vote required under the SAG Constitution and Bylaws. Indeed, the vote to "affirm" the Board's authority to act by "written assent" passed only by a bare majority.

21

•

As a matter of policy, the Court should decide the merits of .

the appeal because it presents an issue of substantial and continuing interest, is likely to affect the parties' future rights, and is the type of dispute that is likely to be so short-lived as to evade appellate review. Corporations Code Section 7211 (and its counterpart for other types of California corporations) has never been interpreted and applied by an appellate court, and will affect the governance of all corporations in this State. Moreover, unless there is a determination as to the validity and effectiveness of Article V, § 1(J)(4), there will be a multiplicity oflawsuits between the parties as to any further or additional actions sought to be taken by SAG's Board under the bylaw.

V.

CONCLUSION For the foregoing reasons, Appellants respectfully request that this

Court reverse the order of the Superior Court issued on February 5, 2009, denying the February 5, 2009 ex parte application for (1) a temporary

232491JDOC

22

restraining order and (2) an order to show cause why a preliminary injunction should not be issued.

Dated: July _, 2009

BROWNE WOODS GEORGE LLP

By:

'--~.L-_-==-----""""":"='---.:=

_

Eric M. George Attorneys for Attorneys for Plaintiffs/Appellants ALAN ROSENBERG, ANNE-MARIE JOHNSON, KENT MCCORD and DIANE LANE

23249U·DOC

23

CERTIFICATE OF WORD COUNT (Cal. Rules of Court, Rules 8.204(c)(1)) The text of this brief is proportionately spaced, has a typeface of 13 points or more and contains 5,455 words, including footnotes, as counted by the Microsoft Office Word 2003 word-processing program used to generate the brief.

Dated: July _, 2009

BROWNE WOODS GEORGE LLP

By:

g~L-=

Eric M. George

Attorneys for Attorneys for Plaintiffs/Appellants ALAN ROSENBERG, ANNE-MARIE JOHNSON, KENT MCCORD and DIANE LANE

23249U·DOC

24

PROOF OF SERVICE STATE OF CALIFORNIA, COUNTY OF LOS ANGELES I am employed in the County of Los Angeles, State of California. I am over the age of 18 and not a party to the within action; my business address is 2121 Avenue of the Stars, Los Angeles, CA 90067. On July 21,2009, I served the foregoing document described as: APPELLANT'S REPLY TO RESPONDENT'S BRIEF on the parties in this action by serving: Roland Tellis, Esq. (SBN 186269) BINGHAM McCUTCHEN LLP Fourth F~oor - North Tower 1620 26 t Street Santa Monica, CA 90404-4060 Telephone: 310.907.1000 FaCSImile: 310.907.2000 Attorneys for Defendant Screen Actors Guild

Los Angeles Superior Court Dept. 85 - Judge James C. Chalfant III North Hill Street Los Angeles, CA 90012

Supreme Court of California Los Angeles Office Ronald Reagan Building 300 S. Spring Street Los Angeles, California 90013 (4 Copies) Il9 By Envelope - by placing 0 the original Il9 a true copy thereof enclosed in sealed envelopes addressed as above and delivering such envelopes: Il9 By Mail: As follows: I am "readily familiar" with this firm's practice of collection and processing correspondence for mailing. Under that practice it would be deposited with the U.S. postal service on that same day with postage thereon fully prepaid at Los Angeles, California in the ordinary course of business. I am aware that on motion of the party served, service is presumed invalid if postal cancellation date or postage meter date is more than one day after date of deposit for mailing in affidavit. Executed on July 21, 2009, at Los Angeles, California. Il9 STATE I declare under penalty of perjury under the laws of the State of California that the above is true and correct.

~~@L4V_KRISTINE DIANE DE ROSA