Co-op non-profits
Q: I live in a shareholder owned, non profit, stock cooperative. When the board of directors chose to meet in executive session to consider litigation against a shareholder and did NOT vote in front of the membership to pursue it, is there any case or lawsuit you can refer me to where a decision by the court has been reached regarding the legality of such a meeting? The board of directors did not mention how many board members were present, who voted, how they voted and no mention is recorded in the minutes of the corporation
A: As a general rule, open meeting laws (such as the most commonly-applied, the Brown Act, which governs the public’s access to meetings of local agencies), only apply to government agencies. The only private entity subject to the Brown Act is a “board, commission, committee or other multimember body that governs a private corporation or entity that either” (A) was created by a governmental agency to exercise authority that may lawfully be deleted by the agency or (B) receives funds from a local agency and at least one member of the corporation’s governing body is a member of the governing elected body of the local agency (i.e., a city council member).
If either condition applies, the board of even a private entity must follow all of the provisions of the Brown Act, including the requirements of Government Code section 54957.1. That section provides as follows:
54957.1. (a) The legislative body of any local agency shall publicly report any action taken in closed session and the vote or abstention of every member present thereon, as follows:
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(2) Approval given to its legal counsel to defend, or seek or refrain from seeking appellate review or relief, or to enter as an amicus curiae in any form of litigation as the result of a consultation under Section 54956.9 shall be reported in open session at the public meeting during which the closed session is held. The report shall identify, if known, the adverse party or parties and the substance of the litigation. In the case of approval given to initiate or intervene in an action, the announcement need not identify the action, the defendants, or other particulars, but shall specify that the direction to initiate or intervene in an action has been given and that the action, the defendants, and the other particulars shall, once formally commenced, be disclosed to any person upon inquiry, unless to do so would jeopardize the agency’s ability to effectuate service of process on one or more unserved parties, or that to do so would jeopardize its ability to conclude existing settlement negotiations to its advantage.
To the extent your cooperative is not an entity that would be covered by the Brown Act, this provision would not apply. In that case, the rules governing board of director meetings would likely be found in the cooperative bylaws or some other similar document. If you have not already reviewed these documents, you may want to do so.