All rise. One county superior court is now in session. Thank you. Good afternoon. Be seated, please. All right. Good afternoon. We are here in the matter of Farm to Market LLC versus East Sound Water Reserves Association, constant for 23 -2 -05153 -28.
We are here on cross motions for some re -judgment. And I have some folks in the courtroom and some folks appearing remotely, which is fine. So I believe we have plaintiffs in the courtroom. Let’s go ahead and identify plaintiffs and then I’ll hear where defendant representatives are.
Good afternoon, your owner, Carla Higginson for plaintiff. And present with the council table is Mike Parnell, who is the managing member of Farm to Market LLC, the plaintiff in this case. Okay. Thank you, Ms.
Higginson. Good afternoon, your owner, Rochelle Doie on behalf of the defendant, East Sound Water Reserves Association. And I believe on the Zoom call, we’ve got several members of the association. Okay.
Great. Thank you. All right. So we are here on cross motions. We have essentially as much time as we need. My hope is that we can limit it to two hours. I think that’s plenty of time to get through if we need to get through.
But I don’t have another matter set this afternoon. Are there any preliminary or procedural matters that we need to address before we take procurement? Just with regard to timing, Your Honor, since it’s cross -motions, I’m assuming that I would be speaking first, but do you want us, are you allocating a certain amount of time for each of us for our opening remarks, or should we preserve some time for rebuttal,
or how would you like to proceed? Well, because I don’t feel like we have time constraints, I’d rather not time you. I can. If parties think they need that level of direction. My preference, usually in cross -motions, is that each party can go twice, and so you each get a chance to respond to each other, and that way I would hear from Ms.
Higgins first, because I think that motion was filed first, but you would each get to go twice, and so you can decide to what extent you want to sort of pre -empt the other argument, it’s really up to you.
But that way, I think, usually by arguing twice, everyone gets to say everything they want to say. Do you have any concern with that approach, Ms. Higgins? No, that’s fine, Your Honor. I was anticipating you might do that, but I wanted to be sure so that…
Sure. Ms. Joey, what are your thoughts, any concerns about that process? No, Your Honor, that makes fine sense to me. Okay. So, again, you know, if I think we’re really taking more time than is reasonable, I’ll insert myself, but I’d rather not set limits just so everybody gets to have their chance and say what they want to say.
And I do have some questions, which I’m sure will take some time, so I don’t want to limit you based on that. Anything else to address? Not from plaintiff, Your Honor. And not from defense. Thank you.
Okay. All right. Thanks, Van. Ms. Higginson, go ahead. Thank you, Your Honor. The last time this matter was before the court, it was on a motion for a temporary restraining order brought by plaintiff in connection with their complaint filed last November to stop the thought election from proceeding.
The court denied that motion and allowed the case, of course, to remain alive, meant voting in its oral ruling that there did not seem to be sufficient basis to join the election from proceeding, but that the case could – a plaintiff would have a remedy afterwards to address to the court.
The court’s ruling makes that quite plain. That ruling did not dispose of the case, as Your Honor notes. That court – that ruling did not address the complaint. It simply addressed the temporary restraining order.
After that, plaintiff had intended to file a motion for a preliminary injunction. They had to paint a court date. And then, when the results of the election were announced, there was no reason to proceed.
And so they – I was on council record at that time, but it’s my understanding that they then struck the – or released the hearing date and did not file their motion for a preliminary injunction. The case remained alive since that time.
After that point in time, time. There was no request formally made for dismissal. There was no settlement agreement reached. There was, to my understanding, not even any settlement discussions. The case was alive, sitting on the court docket, and after a few months had passed, this motion was filed.
This motion was refiled after it came to my attention that, initially, plaintiffs had not, or excuse me, defense had not been served formally with the summons of the complaint. They had it. They responded to the temporary restraining order request, and as part of that, they had the summons of the complaint, but they had not accepted service, did not accept service, and therefore, I arranged for service too,
but we had on accept water insurance association pursuant to statute. And because of that timing and requirement for us to wait 45 days after service before we could file a motion for some judgment. which is dispositive, then we had to refile a motion for summary judgment.
That’s why, in case, the pointer gets filed twice. So that took a bit of time, that 45 -day waiting period. But it was procedurally required because a defendant would not accept service to counsel. So, though an argument was made by the defense that somehow not moving for summary judgment or otherwise activating the case constitutes some kind of a waiver or a stop of some sort, there’s no authority cited in their materials to explain why that would be,
I point out before I make sure that because the defendants chose to proceed not only with the election, they could have stopped, even though the court said, I’m not going to join it or restrain it. Nevertheless, they had the authority to say, oh, we’ve got two seats which are on the ballot.
There really should have been three. We acknowledge there should have been three. We will, on our own, decide that it’s better to fix this problem now. They could have done that. It would have been a matter of an easy fix at that time back in November to let all the members know, don’t send your ballots in, and if you have, we’re not counting them.
Here’s a new set of ballots. Here’s a new set of instructions. Vote for three people instead of two. And the list already was there for the ballots to be sent to. So the ballots had been prepared. You could easily add a third name or a third checkbox for who to vote for and so forth.
That was not done. This group of people chose instead to proceed with the election to announce the results knowing at the time that it was a flawed process. They knew at the time that there were really two seats that were on the ballot, but there should have been three.
They only knew that because this lawsuit had been filed by McClellan, but also they knew because the third seat that was up for election was that of a gentleman named Clyde Duke, who had been appointed the prior January to fill in an expired term of another director.
He himself knew, or presumably should have known, that his seat was up for election in November at the annual election. He personally had that knowledge, I am fairly confident, and he was on the board when the election was being undertaken, yet it does not appear that he came forth and said, wait, we’ve done this wrong.
My seat’s missing, and that seat should be here for people to vote on. So although there are materials in some of the materials of the defense, there are comments that really it’s not their fault because my client waited until two days before the election to file his complaint.
and he waited. He could have brought it to their attention center. It’s not a member’s obligation to call the call to the attention of the governing body an error that they’ve made when it’s within the governing body’s own knowledge and purview to undertake a proper running of an election.
So I hope that that would be an argument that would not carry any weight to court. It does seem quite clear that they knew that there were three seats that should have been elected, even indeed the person whose seat was on the court at the time, and yet they proceeded to hold that election, did not cancel it, announced the results, and then chose to fill that third seat, but not by redoing an election,
not even holding another special election, though I would argue that that would not have been proper anyway, because there’s a big difference between having announced to the membership that there are three positions open that might have engendered for interest instead of four candidates that might have five or six, or who knows exactly, I can only speculate that it might have resulted in somebody saying,
well, I have a better chance of getting elected if there’s three seats open instead of two, so I’m going to throw my name in that. We don’t know that. We’ll never know that because that’s not what happened.
But instead of doing something to remedy this flawed election, so that my class rights were not denied, because as a member of this member -owned cooperative, he has a legal right under the bylaws and a pistachio to vote for his elected representatives, who he wishes to choose to govern his organization.
He was denied that right because the board then said, well, we’ve got this third seat, oops, we missed it, gosh, gee whiz, let’s just appoint the person that got the third highest votes to that seat.
We’re not going to take like, any applicants for this vacancy, we’re not going to consider an alternative that might allow my client to maintain his rights as a member to vote for his elected representatives.
We are just going to put this third person in. We’re going to, quote, consider them elected, unquote. Considering him elected, however, did not mean he was treated the same as the other two people who were, in fact, elected.
Terri Nickretto and Carol Anderson and I, and we see that Zadimson is attending the hearing today. So what happened after that, Bronner, as you’ve probably seen? So, Ms. Hickman, I have a question before you keep going.
So was that decision to appoint the third highest vote -getter, was that formalized by minutes for otherwise? Not to my understanding or knowledge. In fact, the declaration of Carol Anderson states quite clearly that there were no minutes taken of that meeting.
She also states that there were no minutes she had offered some. They were never adopted, and her declaration then also says that the minutes were rejected, and that other minutes were substituted by one of the employees of East End Water, but that nothing was ever placed of record to show that the appointment or the selection of Jim Cook to the third seat was ever done, was ever done.
So there was a notice published of the result, but no minutes confirming the decision? That’s correct. And I believe her declaration, I believe she called it an affidavit, states that it was done in a closed session, which again would not have been proper under Robert’s Rules of Order, and I don’t know if Robert’s Rules of Order was being applied by this body of people because the Bylaws briefly say that you only apply Robert’s Rules of Order if the President says you’re applying Robert’s Rules of Order,
kind of an interesting approach to Rules of Procedure. But that’s what their Bylaws say. There’s nothing to show that the President said, oh, we’re applying Robert’s Rules of Order now, now we’re going to go into executive session, can’t call it a closed session under Robert’s Rules of Order, but it’s an executive session for very limited purposes.
And as your Honor Pope knows, once you come out of executive session, you then take action. Discussion can be held in executive session for very limited purposes. But I don’t think selecting a candidate, voting on a candidate, or even discussing who that candidate should be for that third seat would probably be the subject of a closed session since it deprives the members of giving them opportunity to hear the discussion or comment on who that person might be.
And then apparently, because there’s no minutes, we don’t know what action was taken, but we can infer because there are no minutes that it was taken in the closed session, and I think that’s what Ms.
Anderson’s declaration also says. So that seems problematic in and of itself. Then to compound that, or the deliberate failure as it may be, Mr. Cook, who was appointed to the third seat, was not allowed to take his position until some time had gone by.
According to Chris Anderson’s declaration, the announcement that was attached to one of the declarations in this case, the appointment took place sometime in December. We don’t know exactly when. And that appointment did not become effective until in January after the board had met and taken several actions, including appointing somebody to a newly created vacancy for a fourth position where the resignation had occurred on election day.
That’s not part of our motion because we don’t expect that anyone could have known that that would happen at that time. Our motion only focuses on the fact that there should have been three positions and not two open for election.
So because even if we want to say for some reason, the bylaws allowed the board to appoint this third position, and I believe that’s not proper, because as you’ve probably seen in the materials, the bylaws say that the board is allowed to appoint, even if a director misses three consecutive meetings or is unable to serve for any reason, it does not occur that was the situation here with this third seat.
The term had simply expired. So there was a vacancy in and of itself. It had nothing to do with somebody missing three consecutive meetings. It had nothing to do with somebody being unable to serve. There was nobody in that position.
The bylaws do not allow an appointment where they don’t specify that there should be an appointment when there’s a vacancy because a term has ended and that position is missed and not put on ballot for members to vote on.
So let’s just say it was all right for them to put Mr. Cook in as the third position. It should have been treated him as the other two people who were elected and seated him immediately and allowed to start performing his duties on behalf of the members, but they did not.
They let it ride for quite some time until after this fourth seat, that felt like at least Leith Hemplin was appointed. He was not allowed to vote or participate in the discussion. And after that, suddenly he was welcome to vote.
So Ms. Segan said, how are those more recent allegations before the court when they all happened after the complaint and certainly aren’t in the complaint? What exactly is before the court in the action and in the motion?
What’s before the court is that it was a fraud election and should be set aside and the actions of the board taken after the fraud election was written. on and up until the court’s ruling, whatever that may be, if it’s in our favor, should be set aside as well because the board was not properly constituted.
But I bring up what happened with Mr. Quick because the argument in response by defense is that when we substantially complied, quote unquote, with the bylaws, we had two out of three on the election ballot being, yeah, we know that we missed the third one.
But really it was okay because we had substantial compliance by putting Mr. Quick in by appointment. And so I’m addressing their argument with what I bring to the court’s attention, only to show that it was not a substantial compliance when they did not seat him immediately upon him being appointed, even should the court for some reason find that that was an appropriate thing to do with the bylaws,
which we absolutely do not think it was. Does that help or should I? Well, it does help, of course, you know, that the looming question is, does the court even get to weigh in on this? Who has the right to weigh in on this kind of an issue?
Does a member get to bring any alleged procedural failure before a court, right? That’s the looming question that I know defense is raising. Well, absolutely. And I am fully prepared to respond to that, and we did in our materials, but it does seem to me that in looking over their materials, their position is, yeah, we know the election was flawed.
The announcement said there were only two going to be elected. The instructions for the ballot said there were only two going to be elected. It said if you voted for more than two, the ballot was invalidated, and that there were only two positions, and these other people would be remaining on the board after the election was concluded.
All of those are attachments to various declarations. There’s no dispute then, and they acknowledge that three should have been there, but only two were there. They don’t have anything to say about the flawed instructions or the announcements, but they pretty much speak for themselves.
So to the point of the summary judgment, there should be no genuine issue of material fact created by what happened. No, it was a flawed election, for the reasons we’ve stated. The question is that it is the plaintiff’s impediment to judgment, it’s a matter of law.
However, getting to the point that you just raised, defense then says, well, we know that the election was flawed, but plaintiff can’t suit or enforce his right to vote because there’s no law since he can.
And in support of that, they cite 2403A150, which is the one that says that you can’t take actions against a corporation or an association when it has to do with challenging something that they didn’t have the authority to do, versus that whole ultra -virus argument.
And the statute specifically says the validity of a corporate action may not be challenged on the ground that the non -profit corporation lacks or lacked power to act, and then they talk about whether action is being brought into materials.
But the plaintiff has a derivative action, as the court notes, a derivative action is when an individual is suing, allegedly, on behalf of an organization, suing the association half of the organization.
That’s not what’s happening here. It’s pretty clear that my client is suing his individual capacity, well, his entity, individual capacity, saying that my entity’s right to vote was denied me. He also says in his materials, before I go any further, that one of the flaws in the election was he had three memberships in East Sound Water, but he was only given two votes.
And that’s it. And his… declaration that was held in the court in November. So that is another flaw. We did allege in our materials that there were more flaws than just voting for two instead of three.
I know that defense said we didn’t really argue that in our motion for summary judgment of your brains to musicians, but we didn’t argue them. But we didn’t hate to argue them as far as I was concerned, runner.
It speaks for itself that the instructions were flawed, the ballot was flawed, the process was flawed, and my client’s declaration said I was only given two votes instead of three. So I believe that that goes quite along with the fact that the argument was otherwise made about the election flood.
But in any way, 150 we don’t think is applicable to this particular situation. And the reason for that is it can be found, but it can always be 2403A 962 and 966. So 2403A 962, as your honor probably knows, says that a corporate action means, among other things, the election or the selection of directors or officers of a corporation.
So that’s something that 962 defines as an action. And 966 says that a politician of a person whose status as or from rights or duties as a member of a corporation are or may be affected by any corporate action.
If that allegation of a violation of rights is brought to the court’s attention, the court may hear and determine the validity of the court’s reaction. And the court may make orders in any case as maybe just and proper.
And the court has the power to pretty much do anything at once under 966. That, coupled, of course, with the section in the Nonprofit Corporation Act, which is 2403 .045, that says that unless displaced by particular provisions of this chapter, the principle is a law and equity supplement this chapter, which gets into the argument that plaintiff is made, that there is a contract between he as a member,
his LLC as a member, and the association. And we’ve cited several cases in that regard, saying that articles of incorporation and bylaws are contracts between a member and their association. And we’ve also quoted the membership agreement, which states that it is a contract between a member and the association, and the bylaws and their definitions.
This is taken since the weather under. 0 .966 or under a contract theory that you’re asserting as an overlay based on 045, what’s the standard the court applies? So that section 2 of 0 .966 says the court may make such orders in any case as may be adjusted proper.
There’s nothing that suggests what standard the court should apply or what remedy might be appropriate. And I think the assumption here by plan is that the remedy is to, throughout the election, invalidate everything that’s happened and start over.
But there’s nothing that suggests that’s the remedy that the court would impose. So how would I determine what standard and what to impose under 966? I think the court first asked to determine whether there was a violation of McLean’s right to vote for his elected representatives.
And if you find that there was a violation of that right and that you find that there was not substantial compliance with the right to vote, which we don’t see how it can be, either you give somebody the right to vote or you don’t.
The presidential election, as to use a federal example, you can’t say, well, I had two of the three candidates on the ballot, that’s good enough. That simply wouldn’t fly. Now, I know we’re talking about federal election law, but the theory is still the same.
The rule of law applies in this country to ensure that people’s rights as members of an association, especially one that they own, it’s a member of a cooperative, that their rights are followed by that organization of which they are a member.
So assuming the court finds that his rights were violated, but he had a right to vote, he was denied that right to vote, that the board was not properly constituted as a result. Therefore, his rights as a member are now being impinged upon because, as we argued, he no longer has a board that is functioning as it should under their bylaws.
What is the remedy, Your Honor? You can’t really say, well, let’s just give you a thousand dollars for your trouble and go away. You can’t say, well, we’ll pay you for your attorney’s fees regarding to brought this.
And yes, you were right, we’re really no harm, no fail. There’s no way to fix this except for a redo. And that’s what we asked for back in November. The court felt that there was no reason to restrain the election at that time, but did leave the case open, as would have been proper, to bring and address this issue to the court later, which we’re doing now.
There’s no other way to fix this. So I think the court just takes a look at its actual power and says, what do I do? Do I do? I can’t. You can’t find that it’s rights were violated and then say, but I can’t do anything about that, because the court has that power to do that.
And it looks to me like under 966, the court has pretty much broad discretion to fashion a remedy as it seems appropriate. And certainly, it’s clear from 2403A, oh, 4505, I think it was, that. The court has principles of law and equity do not supplant or not supplanted by this chapter.
So when we look at contract law, for example, what is a remedy for future contract? There’s various remedies. But you could look at contract remedies. You’ve fixed the problem. You’ve done something wrong.
The court can overdo that and be fixed. If we’re asking that this be fixed, it simply can’t be done any other way than a new election. There is no way to restore my client’s right to vote. Except half the election.
So under the argument of substantial compliance, how would the court analyze that? Does that require an evidentiary hearing, a trial? Are you suggesting that the court can consider that argument if appropriate, just on the pleadings that have been submitted?
Yes, I am suggesting that, Your Honor. The case law about substantial compliance seems to give guidance to the court in the Bat -Girder versus Hat Island Community Association case, which was cited by defense and also addressed in our materials in our response to their motion for summary judgment, since all these are kind of irrevocable.
The court stated very plainly at page 190 that when a covenant grounds the Homeowners Association of broad discretion in a particular area of the discretion, this be exercised reasonably and in good faith, discretion is not reasonably exercised when the procedures laid out, the governing documents, and relevant statutes are not followed.
And they continue on to say that the court will not substitute their judgment for that of the association absent of trying to fraud, dishonesty, or incompetence, i .e. failure to exercise proper care, skill, or diligence.
And reasonable care is required. So I think the court does not, under that standard, if the court doesn’t have an evidentiary hearing, it’s evident in looking at. the materials, and in fact it’s acknowledged by the defendants that they only put two people in that ballot instead of three.
That’s not disputed. Because that’s not disputed, then the court can reasonably conclude, based on what you see in front of you, that procedures laid out in the governing documents, which are the bylaws, and the relevant statutes, by the way, Your Honor, which allow an mandate that a member is allowed to vote for directors 24 -03 -A -450.
Directors of a membership corporation are elected by plurality of the votes cast by the members and pedal to vote in the election at a meeting. Of course, there are some provisions allowing for electronic voting, too.
Generally speaking, they have the right to cast their ballot and the plurality of who is voted for is elected at 24 -03 -A -510. says the members of a membership corporation show like the directors, at the annual meeting or meetings of the members of the theoreticals or fellows who had some other time or method of election.
So we’ve got two statutory provisions not let alone the bylaws which say members get to vote for their directors, which say you get to vote for your directors. So I don’t think the court needs an evidentiary hearing to determine whether my client was allowed to vote for that third director.
Clearly he was not. So Ms. England, what would have happened if the association or board I should say decided to hold a special election for the third seat after seating the two people who were elected pursuant to the existing election?
Then what would be the claim? I would argue that that was that is not uh compliance with the with the statutory requirement and the bylaws requirement that my client be allowed to vote. And the reason for that is yes he could vote for that third seat.
But right now that third person is already on the board. There was a fourth seat that or fourth candidate who did not get uh was the least highest vote hitter. But the problem is your honor that we don’t know as I said earlier we don’t know how many people might have might have filed for this these positions if they’d known there were three seats instead of two.
We don’t know who might have changed their votes if they’d known that there was a different set of people up for election. We at this point we don’t know anything and so if we just said okay well we’re going to take we’re going to leave the two that were there and we’re going to just take the other two who weren’t voted in and we’re going to have like some kind of a second little special election for those two.
Is that really is that really allowing my client an opportunity to vote? I don’t think it is. There’s this should election should have included all three seats. The whole dynamic from the announcement to finally get the candidates.
instructions, the voting, that would have been different. And that still wouldn’t cure the fact that my client don’t give him two votes instead of three, as he said it is material. So as he said, has that actually been proven?
The assertion and response is that he misunderstood what was listed on the ballot, and then in fact his vote was counted for the number of shares he has. That’s just an assertion. We have no proof of that.
He says he was only given two votes. How does he know that? Because when he looked, he only received two ballots, and I think his declaration says that he received two ballots. And that’s one of the irregularities that we were talking about with the flawed election.
There was nothing on the ballots which allowed you to state your account number or the tax personal number of the property which holds the membership in East Town Water. So he got two, he voted two, he should have gone three.
He can’t cure that by having a special election for the third seat that was missed. So let’s say that That has been proven beyond dispute, I don’t know that it has, but let’s say that’s been proven beyond dispute that he only voted two shares and he should have been able to vote three.
When you look at the spread of the number of votes that each candidate got, nobody was as close as one as one vote. They were all further apart than one vote. So what’s the injury to the plaintiff by one not being counted if that couldn’t have possibly changed the result?
Well, I suspect, Your Honor, that he wasn’t the only one who had these errors. We don’t know that right now. Discovery is ongoing and it’s been rather difficult in motions, depending on the court’s ruling today.
Motions, I’m sure, were felt by, certainly by us, but possibly by the other side, too, for it to compel discovery. I very much suspect that the flaws were not unique to my client. But as to him, so we can’t just say, well, if he had been able to, if he’d had that third vote, he would have tipped the election.
But really, even though he is here on his own behalf, there’s a lot of other people out there that we can’t discount that we don’t know the scope of what might have happened if this election had been handled properly.
It just wasn’t. All it took was the defense to say, whoops, we fouled up, let’s do this right. But instead, they’ve chosen to fight this case tooth and nail, spending a lot of money, complaining publicly about it, and so forth, and then saying, well, it didn’t really matter anyway because we substantially complied with the election.
We let you vote for two out of three. But I don’t think having a special election for that third seat at this point is going to fix the problem. And we still have the issue of whether the board’s been constituted, and so then we have the issue about members, my client being denied his rights that flow from the flawed election, of having a board properly constituted to make decisions that affect him.
On that point, that gets back to the ultra virus argument and defense argues that even if the entire action isn’t about or isn’t asserting that actions of the board are ultra -viaries, that at least the assertion that since the election took place in 2023, all actions until now should be deemed invalidated, as you’re saying, because the board wasn’t properly constituted, but it’s not really an argument that they lacked the authority,
which would be ultra -viaries. Now, we’re not saying that they lacked the authority. We’re saying that they exercised that they exercised their authority improperly. They could meet, they could, you know, nobody’s saying that the board wasn’t there and trying to conduct business, but we’re saying, and which would be, if I was arguing ultra -virus, that they were lacked authority to make decisions.
because they should have met, for example. We’re not saying that. What we’re saying is this point was supposed to have three people elected, and only two were elected. And the third person that was supposedly sort of elected by appointment wasn’t allowed to take a seat for quite some time afterwards.
That, therefore, calls into question everything that the court did. If the court were to say, well, you really arguing that ultra virus and there’s no remedy, I don’t think that’s what you’re saying.
But we do have a fiduciary obligation that should be exercised by the directors to the members of this organization. Contrary to what was being said at some point here, I don’t recall, and it may not have been in any of the materials in this case, there’s been a suggestion that those two declarations from the two sitting directors reached their fiduciary date to the other directors.
There isn’t such an. They have a fiduciary obligation, and it do be as do the other directors, to the members of this association. And so if your honor is to say, well, I know you should have had three people, and you only had two, then you had a third one who really shouldn’t have been there.
But I guess that’s just the way it goes. That would not be fair to my client, and certainly we’re not here for the other members. That’s not fair to them as well. You would leave them without a remedy, and I think that’s exactly why RCW 2403966 exists.
The court has the ability to look at all of that. So under 0 .966, if that section’s being applied, the petitioner has to provide notice to every other person who they know or should reasonably know would be affected by the proceeding.
How has that happened here? Because if plaintiff gets what they want, the entire election would be overturned, and that would affect every single member. of the organization? Well, first of all, Your Honor, the other people who are directly involved are the directors.
And they’re well aware of what’s been going on, because they’ve been participating, I imagine. And from what I understand, through counsel, they all know what’s happening here, because their directors of the association has been sued.
But secondly, Your Honor, I don’t see anything in here that says that an aggrieved member has to track down and serve personally or by process server every other member of a nonprofit association. There’s about 1 ,100 members here.
What if this was somebody that had 40 ,000 or 50 ,000 members? We would take a year or two just to find everybody and serve them. If they’re out of state, we have a 68 notice period. If we can’t find them, we are publishing and waiting 90 days.
That does not seem to me to be part of what the legislature had in mind when they said this. However, to the extent that your honor would be concerned about the members having us, we can thank the defense for having done that for us.
This group tends to publish in the Orkasonian an online newspaper sort of thing. Sorry I don’t mean that to make that sound but denigrating it’s not, I’m just not that familiar with what the Orkasonian is but it seems to me, an online forum slash newspaper and the court may even have seen in the declarations that we felt that the notices of the ballots or the voting was published in the Orkasonian.
The announcement that Jim Cook had been appointed to the board as an Orkasonian. The Orkasonian seems to be the place where things are pulled to the members and we have to say, I’m not afraid it’s not in materials, particularly your honor, but the Orkasonian, the people are well aware of this proceeding, in fact an announcement was sent out in encouraging people to attend the hearing today.
So to the extent that we need notice, it’s been given. But you’re not saying that plaintiff has specifically published notice of the proceeding as that would be required under the law? He has not, I don’t think it’s required that he publish notice of notice.
He has sent an article in to the Orkasonian about this process. But there’s no specific requirement as IRB 966 that a formal notice of publication as if when you’re doing a quiet title action and you’re trying to give notes to people.
I don’t see that anywhere in the statute. There has been very many things noted in the Orkasonian about this case. My Claire reminds me of the Island Saddle, so. Okay. I know I’ve taken you off track, Ms.
Higginson. That’s quite a right runner. Actually, Ms. Higginson, I do have one more question. I just wanted to make sure I understand your argument about contract. So I understand you’re saying that contract is essentially, I think, an overlay under Section 045, but how does that intersect with the provision under Section 340 that specifically says members have only the rights, privileges, powers,
or obligations specifically given are assigned in the articles, bylaws, or by statute. Well, the bylaws say that the membership agreement is a contract between the parties, between the certain parties, between a member of which my client is, the plaintiff, and the association.
So I think it intersects very nicely. You can find that section, if the court would like. I believe it was in our original motion for summary judgment, with some discussion at length as well. But essentially, then you’re saying, Ms.
Higginson, as I understand it, that because the bylaws provide some language about contract, then a member has the right to specifically enforce any individual section of the bylaws, even if there’s not some process or cause of action provided for by the bylaws.
That would be what I’m saying, Your Honor. And the reason I say that is that the principles, the statute, the statutory scheme set forth by the Nonprofit Corporation Act very specifically says that the principles of law and equity are not superseded or supplanted by this chapter.
That chapter, the Nonprofit Corporation Act, does not cover everything that could possibly happen. And that’s impossible. The most carefully crafted legislation doesn’t do that. And the legislatures did what they did, but they very specifically included what I would call a savings clause.
Great body of law about contracts. There’s a great body of law about prior Nonprofit Corporation. This is not the first iteration of the Nonprofit Corporation Act or some version of that. And the legislature, I think, parent to my way of reading this, they were trying to be sure that they were not limiting members’ rights to just what’s here.
They were trying to say, still have other rights. And there has been no, to my knowledge, case that says a contract right granted by the bylaws is limited only to certain things. Contracts are contracts.
The members have a right under the contract that they have with the association to vote for the directors. And I just want to remind the board, for I’m sorry, too far away from this. We’re here because we think that it’s a flawed election and it should be set aside to no election at work.
And that’s really, really clear. Bylaws say he has a right to vote as a contract. The two statutory sections I mentioned say that a member has a right to elect their directors. So even if the court were to consider well, there’s augmentation under the section we were just discussing, that is clearly considered and allowed by 5 -10 and I think it’s 460.
So we’re right in there. Statutes says they have the right to vote for their directors. Bylaws say they have the right to vote for their directors. We’re arguing just that besides the statutory scheme, there’s also a contractual right because the Bylaws say that the membership agreement is a contract.
And there is a great body of law that says articles, Bylaws, et cetera, are contracts between a member and association. I know that the chancellor said, well, some of your cases, as you said, are for a social club.
It doesn’t really matter. In my opinion, a nonprofit is a nonprofit. And it’s still a book, as the general rule, it’s been eliminated by our court, that says those documents constitute a contract between an association and its members.
Whatever those things say, that’s a contract. Contracts can be enforced. So I don’t think, to really circle back to your question, I don’t think there is any conflict at all between the statutory provision you ask about and the Bylaws.
Anything else you want to address right now, Ms. Higginson? Oh, sorry. Anything else you want to address right now on your first go -round? I would simply like to point out that if we look back to what we’re really looking at here, just to highlight, we’re here on a motion for summary judgment as the court knows.
Court knows that if there’s no genuine issue of material fact at or entitled to judgment, and the moving that the court should then grant summary judgment, the moving party, which is us. It does bear the initial burden of showing the absence of a genuine issue of material fact.
And I believe we’ve done that, at least in terms of the flawed election. There’s an acknowledgment the election was flawed. So I don’t know that we need to go any further on that. And then the burden shifts to the party with the burden of proof, which would be the defense, to make us show a submission to establish the existence of an essential element to their case.
They haven’t shown that there’s no genuine issue of material fact. What they’ve done is to throw in, well, you really shouldn’t be able to be here because of Section 150 of the Nonprofit Corporation Act.
And even if you should be here, we substantially comply because we let you have two out of three and be appointed a third person. And really, you should have prosecuted this case a lot sooner than you did.
And frankly, it’s probably your fault that we didn’t find out sooner that there was an issue with the election because you only saw your complaint 48 hours before, or a little bit before. The election, so all of the other arguments that I’ve made are going to point out that those allegations and alleged offenses do not rise to showing that there’s any genuine issue of material fact created.
And the court then is simply left with the citing, is my client entitled the judge, does it matter? And if you believe that he was only allowed to vote for two out of three people, if you believe that he had a right to vote for two out of three people under the statute, under the BioQuest, and under his membership agreement, and if you believe that those rights were in fact violated as a result of being unable to vote for the three people,
then I think you would find that he is entitled to the judge, does it matter? If you also believe that he has standing to bring this lawsuit, which I think he does, both under contract, I do assert that a member has a right to alleged breach of contract on anything contained in the bylaws because the bylaws are part of the contract between a member and the association.
And if you believe that under 966 he has a right to address this issue to the court, then I think the court is left with no alternative but to conclude that he’s entitled to the judgment as a matter of law.
To wind up at this moment, it will just tell the court that our proposed order said that we believe that summary judgment should be granted to us tonight to be the site that I did provide for an adventure in some kind of a hearing to conclude, for the court to consider what should the remedy look like in terms of how the elections help.
I think that that would be the appropriate time to possibly argue, should there be a special election? Should there just be a redo of the election? My position on my client’s behalf that there should be a redo of the whole election.
But we recognize that the court might have some questions about that and want to take a look at what that remedy of an election might look like. fine to then have another hearing to really get into the new degrees of that with testimony from the appropriate individuals.
So we’re not asking the court if you’re not comfortable to just say, today, new election, here’s start all over again and now it’s for new candidates, et cetera, et cetera. But if you’re not comfortable doing that, I think another hearing would be appropriate to really craft that remedy.
And I think the court would have that authority at 966. Thank you, Ms. Hickenson. Thanks, Your Honor. Ms. Doriegg? Thank you, Your Honor. So I think some of your questions in this case really do get to the heart of the dispute and both of these motions, which is, it’s undisputed an error occurred in the election process.
But the fundamental question is, who has discretion to decide how to fix that error when either bylaws nor the statute provide a specific remedy? And what is clear from the act and from the bylaws themselves is that discretion is supposed to be with the board.
These are the elected officials representing the association. We’re supposed to make their best judgment call on how to fix the error in the process. And we respectfully disagree with plaintiff’s assertion that it should be him as an individual member that gets to determine on behalf of the entire association that an election should be discarded entirely and rerun because of an issue on the ballot.
And as opposing counsel has correctly pointed out, most of the issues in this case are not in factual dispute. There was the error in the ballots that there were two seats posted rather than three. It essentially instructed voters to vote for two candidates of the floor that were listed rather than three.
It is also undisputed that the board was not aware of this error until nearly the close of the election itself. It didn’t receive notice of the error in the ballot until we received notice of the lawsuit on November 8th in the evening.
So it was less than 48 hours before voting was to be complete on November 10th. A set forth in the declarations is not as easy as counsel has represented it to be to rerun the election at that point.
Most of the votes had already been cast. Hundreds of hours had been spent by the staff to put the ballots together. It was not possible to correct that issue before the close of the election. Nor would it have been possible to reissue all of those ballots to get the election code we did before the set November 15th election.
Now shortly after that lawsuit was filed the motion for temporary restraining order was denied by this court and the election proceeded for the two seats and those were properly set according to the election results.
The board then discussed what was the most efficient and fair way to resolve the problem? We can’t go back in time and just magically have the third seat appear on the ballot. So what is the best way to fix this problem?
The bylaws don’t tell us how to fix this problem. I believe even in the declaration of Steve Smith submitted in connection with the plaintiff’s materials, they acknowledged that there’s nothing in the bylaws that allow for a mid -year election.
Nor is there any requirement to run a new election to correct a procedural issue. So what to do? Now, certainly the board could have decided to rerun the election at that time. Extreme cost to the entire membership and extreme risk that many voters would not participate this time thinking that they got another ballot in error and not understanding what this was.
A significant risk of disenfranchising most of the other voters involved. So what is the remedy? Now. We believe that the proper remedy was chosen by the board using the appointment power to seat the third seat according to the election results.
Now the board didn’t just choose a random candidate, they used the election results and picked the overwhelming leader among those four candidates to be seated. Now because their appointment powers only allow them to appoint for one year, that’s precisely what they did.
They appointed the vacated seat for one year until the next annual election could be held. Now this remedy was announced to the membership and no objection was taken at that time. So on that point Mr.
A, are there minutes confirming that decision of the board? So what I understand to have occurred is that the board in an executive session discussed who might be appointed to fill that seat and it was decided that they would choose to appoint Mr.
Cook and that during the regular session on January 17th it was announced to the membership that that’s who they would be appointing. Now I will concede that they did not follow the perfect process for coming out of executive session and voting during the regular session but this is a board comprised of volunteer numbers who were devoting their spare time to serve on this volunteer board and what I do believe is that they substantially complied with that process by announcing the results during the official regular session and that is reported in the minutes.
And I know Ms. Higginson’s alleged that there were other errors in the ballots but I we have not seen evidence submitted to confirm that and what I can say is to follow the market’s allegation that they only got to vote for two rather than three of their properties they are misunderstanding the ballot.
They received two ballots because there were two seats, and they were permitted, as it said on the instructions, that their votes would count multiple times according to the number of memberships. And ESUN water easily could see how many memberships farm the market had and allocate its votes that way.
But at least at this summary judgment stage, we have not seen any evidence that there was any other error in the election aside from the fact that the ballots posted two rather than three seats. So, sorry, just to belabor the point, so you said there was January 17th regular session and the board’s decision to fill that third seat was announced, and that’s recorded in the minutes.
Are those in their record for me? I don’t believe so because I didn’t understand that to be part of the issue before the court today. As I understand the issue before the court today, the issue has to do with the process with the election.
So if needed, we can certainly supplement the record. But as I understand it, that’s not the basis for plaintiff’s challenge to the actions by the board. That the basis is really just the lack of the three seats posted on the ballot.
So, it wasn’t until about March 2024, after plaintiff filed this subject motion for summary judgment, that the association learned that Hughes now that it’s banning that the entire election be set aside, effectively vacate all three of those seats, force the association to conduct an entirely new and very expensive election in the middle of the year with just a couple months before its next annual election,
and attempting to invalidate all of its decisions since November as an ultra vigorous action. And this is an extreme result that is not compelled by the statute or by the bylaws. This is farmer markets own preference on a remedy.
And as we set forth in our motion, this type of complaint is improper and should be dismissed for four fundamental reasons. Number one is that the Nonprofit Preparation Act does not allow this type of private lawsuit against the association to comply with its bylaws.
Now, this was recognized in the Lumber, the Coleman case that we’ve cited in our papers, where the court very clearly recognized that this act grants very specific rights and carefully delineates those types of cases that can be brought either on behalf of the corporation, brought by a member specifically, or those that need to be brought by the attorney general’s office.
Now, in that very case, when the court rejected the plaintiff’s contention that they had their own right to bring a personal, I’m sorry, bring a derivative action in their personal capacity, and that the court should infer cause of action under the statute, the court said, no, if…
You are limited to the remedies that are set forth in the statute, and I believe that the court responded, quote, if one board believes that the remedies set forth by a legislature are insufficient or inappropriate, then she must take a case to the legislature.
In that case, the court was very clear that there are only a few narrow lanes for judicial relief that are appropriate against a nonprofit. But Ms. King, what about Section 966? And I will tell you, I couldn’t easily figure out how to look at the former version of the statute, so I don’t know if there was an equivalent to 966 in the former version.
No, and I could not tell either, Your Honor, although I will take from one board that the case still stands that there are only certain delineated rights and avenues for judicial relief. But specifically, looking at 966.
This allows a member to bring a petition to challenge a decision that affects their individual rights as a member, and I would interpret that and understand that to mean that if the association either revoked his membership or revoked his ability to vote in any election, that would be the type of decision that a court could review and provide a tailored remedy for.
But this type of action where the plaintiff is asking not just to issue a decision related to his membership status, he’s asking to invalidate an election on behalf of the entire association. That is more of a ultra -virus type of action that is made to be brought as a derivative action under subsection 150.
Moreover, as the court pointed out, the plaintiff did not follow the process to bring a petition to determine this right that he is alleging. It does require notice to the entire membership, and the statute does provide a definition of the notice process that is required, and that is under subsection 015, and it requires notice either in person or by delivery through mail and publication.
And this should have been done before the lawsuit was filed, because what on the market is seeking affects the entire membership, and he should have allowed others the opportunity to intervene and state, we don’t want this.
And I suspect that if you were to pull much of the membership, no one wants to rerun an election that is most likely to end up resulting in the exact same composition of the board. It is extremely expensive, it will be confusing, and frankly this remedy that he is proposing does not seem appropriate in the slightest.
to only relate to an individual’s interest rather than their interest that might also affect other person’s interest. Where is that in the plain language or other interpretation of that section? Well, I speak of the other folks’ interest in relation to the notice portion of the section.
Do I understand that? Yes. But I interpret this section as requiring or allowing a petition related to their status or their rights and duties that may be affected by a corporate action does seem to…it relates to that member of themselves and for this to be read in connection with the ultra -virus statute, it would need to be limited to the member’s own rights and privileges.
Otherwise, you risk opening the door to any other type of effectively ultra -virus. If this were to be read as broadly as the plaintiff is suggesting, essentially any type of claim could come in under 966 and you would immediately remove all of the protection that’s built into the statute that’s supposed to protect the association in exercising its own discretion.
All of that said, however, even if the court were to find that 966 were an appropriate mechanism and were to find that the plaintiff complied with the notice requirement, which I believe is undisputed that they did not.
We do think that, number one, the second part of the relief that the plaintiff is asking for is clearly a barred ultra -virus claim. To invalidate all the decisions after November is plainly ultra -virus.
The basis for invalidating those decisions by the plaintiff’s own characterization is because the board lacked the authority to do so because it wasn’t properly composed as a result of the defect in the election.
We think that that piece is pretty clear. As to the other relief to redo the election itself, we believe that that would violate the bylaws. The bylaws are very clear in stating that substantial compliance with the process would be a bar to any type of challenge to the action taken by the association.
The bylaws are very interesting in that they really do recognize that they want to give the association considerable discretion to exercise the judgment on behalf of the association. A few quotes from the bylaws itself says that the association is disinclined to waste its time and energy rehashing the past and laying blame on those who have been ruled from the board to that end, a set of presumptions,
limitations, and protections are established so that blame laying is reserved for those rare instances in which past actions have actually caused a substantial impact on the association accounts. and members.
And with that in mind, it goes on to limit challenges where the voice substantial compliance with the procedural requirement is deemed to have been complied with the procedural requirement as long as the actions were taken, oh, sorry, the actions taken served to give the effective purpose of that procedural requirement is intended to advance.
And the person challenging the action has not shown that the failure distributed here to the applicable procedure has been adversely impacted. And here, the board took the very reasonable decision that rather than rerun the entire election to allow the two members who were properly elected to take their seats and then to appoint the third place.
And I say this is substantially complied with because effectively it achieved the same result. Every member had the right to exercise their right to vote. during the election. No one was denied the right to vote during an election.
All three of these seats were set according to the results of the election, and the only deviation is that this third seat was not expressly posted. Now, the plaintiff has said that they had been harmed because it may have been that another candidate would have thrown their hat in the ring, more people would have voted differently if they had three rather than two votes, but as the plaintiff’s counsel acknowledged,
that’s pure speculation. I believe those were the very words that were used. That’s speculation. We don’t know how it would have changed had there been three candidates rather than two, but logically it seems more likely that we’d have the same result even if we could go back in time and run for all three.
But most importantly, as we’ve stated in our briefing, the issue here is not whether or not there was a mistake, it’s what is the remedy, and the act and the bylaws are very clear that it is not up to individual members to determine the remedy, nor is it really up to the court to determine the remedy.
The Hat Island case very specifically recognizes that the courts do need to give these associations some room to exercise self -governance, and that is what precisely would occur here, and certainly there may be another circumstance where another case before the court would justify court intervention because the board significantly deviated from the bylaws or crafted a remedy that did not make any sense,
but that’s not the case here. This was an appropriate remedy to erode to this small procedural issue, and for that reason we believe that these claims and this cause of action that the plaintiff has brought cannot be sustained under either the bylaws or the act.
Now, I do want to speak to the breach of contract claim. that has been released. As we noted in our briefing, we don’t believe that this was a properly pled claim. The complaint very clearly states only one cause of action for violation of a statute.
But even if this were a properly pled claim, we have not seen any legal authority for the plaintiff’s assertion that they have the ability to sue under a contract theory against a nonprofit corporation.
In fact, the cases cited by the plaintiff are inapplicable, not just because they involve social clubs. But for example, if you take the Spokwini case, Spokwini versus Washington State Youth Soccer Association, that was a challenge to an individual member’s suspension from the association.
And in that case, the Bibles provided a specific judicial remedy for the suspension. It indicated an internal procedure before the member could file suit. And if the member failed to go through that, that exhaust those remedies and file suit before exhausting those remedies then they would be responsible for the association’s attorney’s fees.
And so the issue in that case was can the bylaws and the provision for attorney’s fees be enforced against the member as a contract? So a completely different procedural posture than what we are looking at here where the bylaws do not give any member the right to sue the association to enforce a specific election procedure.
Similarly in the Garvey v. Tennessee, Seattle Tennis Club case, that was another member challenge to their expulsion from the club based on a procedural error in their hearing. Again, these are bylaws that specifically set up a judicial remedy for a member who wants to challenge the decisions.
It does not give a broad right to any member who believes that the board did not follow its bylaws perfectly to then sue the association. In fact, I think adopting the plaintiff’s argument on that point would set very dangerous precedent where any member dissatisfied with how the board exercised its discretion could then sue and just try and force their own personal view of how the board should be run.
And clearly neither the bylaws nor the act contemplate that type of action. And finally, I know I have been going on for some time. I do want to briefly touch on a few of the affirmative defenses we have that we believe would also preclude affirmative summary judgment in the plaintiff’s favor.
We generally don’t think there are any question of facts that would preclude the court from dismissing these claims, but should the court find that it’s appropriate for them to go forward, we strongly believe that it is not appropriate to give affirmative summary judgment in plaintiff’s favor, given that there’s open questions as to whether the plaintiff has proper standing in this case, to seek this judicial review as we set forth in our briefing,
we have not seen any evidence of an actual injury, in fact. Everything that plaintiff has argued that they are harmed by is speculation that the results could have been different, but for an additional seat being posted on the ballot.
And similarly, we bring the review of those questions of access to the Equinblis -Stoffel and Waiter arguments, given that the plaintiff seemingly chose to wait until the eve of the election to file this lawsuit, didn’t communicate with anyone on the board prior to so that this could be addressed and potentially fixed before the election went forward, and then waited for several months after the election results were finalized,
did not object to the remedy that the board provided, and that was reported in their January 17th minutes and waited until March of 2024 to bring this. this motion and we do fear that some of that might have been tactable and we think that those are question facts that would preclude summer judgment in their favor.
Mr. Yee on the standing issue in particular you’re saying there’s a dispute of fact with regard to injury in fact but there hasn’t really been any assertion in either direction essentially as I understand plaintiff’s assertion it’s that not getting to vote for three members expressly is in and of itself an injury and as I understand the defendant’s assertion is that that’s not an injury or that he has a proven it would have been a different result what is the actual dispute of fact that I would be resolving at some future evidentiary hearing.
The plaintiff has the burden of establishing that he’s actually suffered injury as a result of this decision and we don’t believe that there’s been any evidence or even any argument other than their speculation that the results could have been different to establish that injury and they believe that if the case were to move forward then potentially evidentiary hearing would be warranted for the plaintiff to prove that they were actually injured by this decision.
So is what is injury and I understand entering the context of standing but in the context of this specific complaint what is the injury that’s needed to be proved is it just that I didn’t get to specifically cash three votes or does he have to prove there would have been a different result?
I think I think the latter your honor they he needs to prove that that he because he was deprived of the right to vote he has sustained an actual injury as a result. Now this in this case our position is that there was no injury here because even if everyone had an opportunity to cast an individual vote in all likelihood the results of this election would be exactly the same.
It would be the three top vote. receivers that would be ceded to these three seats and if the plaintiff intends to argue that but for this procedural defect they would have gotten one additional vote and that one additional vote would change the results of the election we don’t see how that is possible.
So can there not be an injury just because he didn’t get to vote three times and the board essentially supplemented or supplanted its discretion in how they appointed that third person? I mean there’s a difference between a deprivation of a right and then the resulting injury as a result of the deprivation of a right and so far all of the plaintiff is shown is an alleged deprivation of a right.
Now we don’t we actually don’t agree with that characterization we believe that the right under the bylaws and under the statute is The right is a member to cast a vote in an election. Play diff is permitted to cast their vote in this election.
The deficiency is that the ballot did not specifically list three seats, but the ultimate result is all three of these seats were set according to the election results. We don’t believe anyone was deprived any substantive right as a result of this decision.
Okay, thank you, Ms. Joye. Let me just look at my question list here to see if I have asked everything I intended. Thank you. In the Longeburg case, I understand that’s the prior version of the nonprofit corporation statute.
And I have read that case, but I wasn’t specifically focused on, did that case analyze a provision that specifically referred to ultra -virus assertions? Or was it more general about the need to have specific rights to and that thing did not have such a right?
Was there actually a reference to ultra -virus? No. In that case, what had occurred was that the plaintiff was attempting to bring a derivative lawsuit under the statute. And it wasn’t specific to an ultra -virus claim.
It was, I believe, specific to breaches of fiduciary duty by other board members. And they tried to bring that as a derivative claim. And the court ruled that an individual member cannot bring a derivative action on behalf of a nonprofit corporation and pointed out how the nonprofit act is different from the for -profit statute, which does allow members to generally sue on behalf of the board.
the corporation. So we understand that this case is not a derivative lawsuit so it is different than Rumburg in that regard. The Rumburg is instructive in that it tells us that there are limited lanes of judicial free course available against a nonprofit statute and the court’s very clear on that point.
So this is a curveball I acknowledge, but was the update to the statute in 2021, was that based on other model nonprofit statutes or was that fully Washington doing something different? I will just say that I just tried very briefly to try to look and I couldn’t figure that out.
I wouldn’t know without looking to it myself. So essentially we were not aware, no one has pointed me to any authority interpreting section 150 or interpreting 966. Certainly, there’s no Washington case law that cites either of those provisions, but we’re not aware of any other authority that the court might apply by analogy.
Is that fair? I wish there were, but no, I’m not aware of any other authority that would help the court interpret those statute provisions. Okay. Thank you. Anything else you want to say right now? No, you’re not.
Thank you. Okay. Thank you. Dickinson, this is your second shot. All right. Thank you. I think that the troubling tenor of the argument being made by the defendant is that this was a, quote, issue on the ballot, that it was a minor issue, that a member does not have rights unless they’re specifically mentioned in the bylaws, and that it’s up to the board to fix the mistakes that they made as they think best,
tends to suggest that the defendant does not understand that this is a member of the cooperative. My client is an owner of this organization. Owners have rights, and owners have very specific rights, especially with regard to electing their people they want to have govern their organization.
My client was denied that right. We all know that, the question that apparently that it doesn’t matter unless you can show actual harm. But the harm was the fact that his right was denied. He was guaranteed the ability to vote.
That right was taken away from him. Is that a monetary harm? We’re not here asking for monetary compensation because that will fix the problem. We’re not here asking for some other equitable remedy that doesn’t involve restoring that right to him.
I can’t think of one. He really feels very strongly that his right was not given to him, and there is no way to fix that except to redo this election. And so I don’t, we’ve had all this other argument about, well, it’s minimal.
I don’t think she was the minimist, but effectively I think the defense would have the court believe that this is a really de minimis violation and he only had one vote that he missed, but he missed that vote.
People who do not have the right to vote, that’s a pretty big deal in any context, and certainly when it’s your own organization that you want to be able to vote, if you wish to cast a ballot, and he did cast two ballots, he did get a third according to what he indicates.
So that’s if you can send in the response argument. The same argument was made that I recall from the briefing, which was that the ballot says your votes will be cast pursuant to how many shares, and I’m sure it might be the wrong term, but pursuant to how many membership interests you have.
So that argument has been made again. I don’t know if a copy of the ballot is actually in the record, I’ll have to go back and look, but again I guess I would ask to the extent that your client is still making the argument that he only got to vote two of his three shares, and that’s a separate violation.
What factual evidence do you have in the record for me to consider? Well, Your Honor, if he was supposed to vote, if his vote was going to be multiplied by three, why did he get two ballots? Clearly, it wasn’t, something was wrong.
I think it would, I think that the ballot was intended to be sent out per membership interest, and he had three membership interests. He got two ballots. If his ballot was going to be counted times three, he would have only gotten one.
Okay, I understand the argument. I don’t know that that is sufficient evidence on that, but I understand the argument. I guess all I could do is ask the court to infer from that, that if it was intended to be multiplied times three, he would have only gotten one ballot, otherwise he got to vote six times, six times instead of three times.
So, I wish I had more to say, but that’s about all I can sell, and I know it is in the record, I believe it’s attached to the declaration that I believe was filed by Joan Cronin in November, and we included that as part of our, relied on that as part of our summary judgment materials.
Okay, I can look back as you go. Okay, I can also find a 50B. The, I would, and this is a note taken earlier, Your Honor, the complaint did, in fact, mention a contract right. I addressed this in the materials.
I’m a little surprised to hear Kelsey still not agreeing that the complaint says what it says, but the argument is a bit on a legal basis to demand or to argue about contract law, because it was a plan in our motion, and that we only had one, we only had one argument, but the complaint specifically mentions the contract issue and the resulting creature.
Where does the complaint specifically mention that? On page two, lines eight to nine. we said in the definition is governed in the EWUA bylaws a membership agreement is the contractual agreement between the Association and water users.
Page 3 lines 7 through 11 said the ballot does not list a proposed nominee for the third member of the board of directors who was appointed a servant which seat must now be filled by an elected director.
This is a violation of breach of the EWUA bylaws and these provisions including the contract issue and the resulting breach were on pages 4 lines 13 through 18 where it said defendant EWUA’s ballot for the board of directors vote of 23 does not confirm to the terms of EWUA bylaws for election of directors as required by 2403a and our request for relief asked for an order directing defendant EWUA to conduct their election for the board of directors in accordance with their bylaws in RCW 24 of 3a and such other and further relief as the court may deem just fair and equitable.
So obviously the contract claim was referenced at least three times in the body of the complaint and in the request for relief as well. So the defendant had notice of the contract issue and a lot of time they considered it six months since the complaint was filed.
All they really had to do was read the whole thing instead of stopping at the caption. They’re arguing that the bylaws and the membership creator are not a contract and that if they were, we didn’t put any extra detail in our complaint and that how the contract reached should have been in there.
But such details are not required in notice of bidding. I quoted doing persons to come to school district number 10, 95 Washington appellate 18 at 23 to 24, pointing out the note of a liberal sort of procedure, pleading as her intent to give those to the court and the opponent of the general nature of the claim asserted.
Fitting is insufficient when it does not give the opposing party fair notice of what the claim is and the ground upon which it rests. And that it can claim for relief should contain a short and plain statement of the claim showing the cleaner is entitled in relief and a demand for judgment for the relief to which he deems himself entitled under CRV.
So it seems elementary, at least in my recollection of law school and years of practice, that if there’s a contract and it’s breached, the breaching party can sue. And there’s no thing we’ll need to go beyond notice to say there’s a contract.
You say then that it’s been breached and that you have a right to redress from the court. That’s all you have to say to move forward with the case, and we had that there. And as we cited in our materials, the bylaws being a contract because it says so, and there’s case law that says they’re a contract, and we’re saying that there was a breach of contract by failing to include the three required seats for a vote by the plaintiff in the election.
Then he’s in a grief party, and he’s entitled to enforce its rights, which were violated by contract, let alone the statutory provisions and the by -law provisions, which said he was supposed to be able to vote, which I don’t want to belabor since we’ve already talked about that.
Notice pleading does not require a summary judgment briefing. It just requires a short, plain statement showing that figures are entitled to a brief and a demand for judgment, to which they’re entitled.
Those elements are in our complaint, so I don’t think it would be appropriate to dismiss on the basis that it wasn’t entered in the complaint. It was absolutely there. There also is some discussion to the extent that there was injury.
that it wasn’t happening because it was just a missed opportunity to vote. I don’t think we have to show injury under the statute or any other theory. We just have to show that the right was denied. Sometimes you can’t want to show what those are.
However, to the extent that the court would want to consider that, the fact that Jim Cook was appointed to a seat, but then not treated like the other elected directors and not allowed to participate in the discussion of and vote on the selection of Lee’s Templin to the fourth vacant seat, is documented in the materials.
The affidavit of Carol Anderson says in her exhibit C that talking about the candidates, and it says, as you’re being offered candidates, this was regarding that fourth position. The vote was three for Lee’s Templin and two for Elizabeth Britt.
Jim was not allowed to vote. No, Jim Cook, to my understanding, was not allowed to vote. So she documents here that he was not allowed to vote. And then right after that vote, suddenly he was allowed to take his position on the court.
So the court, the defendant makes a big deal about the fact that, oh, well, we didn’t know about the missing seat and oh, gosh, it was, you know, we don’t want the court to set aside this election and make us have a new one because it’ll be so expensive, but there’s nothing in reference to what that would cost.
And as our understanding, it would not be nearly as expensive as the allegation is that it would be. And there, and we don’t want to have to have a new board vote on everything that’s been done for the last few months, but they don’t have an answer runner.
They knew fully well that the election was won. chose to proceed with the election, they’re still claiming that by clients at fault for this because he filed his complaint less than 48 hours before the election.
Well, he probably thought someone would come to their senses and figure out that this was not a proper election. And he wouldn’t have to go to the trope of an expensive hiring council and drafting and filing a complaint and requesting a restraining order.
At the last minute, apparently, though I wasn’t its counsel at the time, but I gather, because of the timing, it must have become apparent that that was not happening. Therefore, he felt to enforce his rights he had to.
He tried to stop this from happening. The court, in the exercise of his discretion, said, no, I’m not going to end the election. Come back to court later if you think that there’s a problem, and that’s why we’re here.
But he tried to keep this from happening. At the point really here, your honor, is that this board of directors for the defense, the defendant, knew, knew the lawsuit was pending, knew that the bylaws didn’t talk about that you could just deseed and then appoint somebody, knew that they were withholding the member’s ability to be represented by Jim Cook by not seeding him until up to perhaps a month after he was approved.
We don’t know that for sure, Bell. We know that he was approved some time in December, but we have no minutes. We have nothing. That seems to be an intentional omission to me, but I can’t say that for sure.
But if we can conclude that, considering that Ms. Anderson says she was taken minutes and they were disapproved and she was told that they weren’t going to use her minutes. So it seems to me that there was something worse going on than just, oh, goodness jee -wiz, we don’t know what to do because we missed a seat.
So, oh, well, take the third highest vote, get her. It was an intentional interference with the process. That’s not clean hands, Your Honor. And because it’s not, now I think it would not be proper for the court to say, well, I’m not going to order a new election because they have taken some actions and it would be a lot of trouble to have to revoke these things.
How much trouble it would be, I don’t know. That’s why I suggested a hearing later if the court grants our motion so that we could actually get into some of that and the court could make an important decision.
So I’m not able to give the court any guidance on that myself. I wish I could. But that’s the whole point, is that they’ve done things wrong. They knew they didn’t do them right. They didn’t substantially comply.
And despite counsel’s argument that Banger versus head out in the community does not support our position, in fact, it does, as everybody addressed, the court felt that the case says discretion has to be exercised reasonably in a good faith.
Was it reasonable for them to not stop the election and redo it right then and there? Was it reasonable for them to continue to meet and hold votes knowing that this complaint was still pending? I’m not sure.
You know, it’s kind of, it makes no sense to me as an attorney that when a complaint is still sitting on file with the court that someone concludes that that’s equitable and is thoughtful because no one’s taking any actions, cases will pen for a long time.
I’m not aware of any case law that says that after a lawsuit has been filed it’s somehow equitable to stop, to take some time to determine how to proceed. And I will also say, Your Honor, that in regard to equitable and thoughtful, all the elements of equitable and thoughtful, they’re not really fleshed out in the defense’s response to our emotions or our emotion or in their emotion.
They just say were equitably a stop, they haven’t gone through any of an analysis about what they can put or cannot show, and it has to be a clear code for convincing evidence of all those elements of ek -stop.
We don’t have any of those in here, so I don’t think the court can really conclude, based on what we’ve seen, that there is at the threshold of showing a ek -stop.
I think that ultimately the shocking thing is that this thing was done, this election was done wrong, we’re fighting tooth and nail to keep somebody from advising or seeking redress from the court, instead of just saying, we screwed up, let’s fix it. That’s something that we could reasonably expect, and we could still reasonably expect that, but that isn’t where we are. We’re litigating until the cows come home, just because I have a client who wanted to have his right to vote, and he was denied his right to vote, and he should have had his right to vote. I don’t know what effect that would have had on the outcome. None of us really know, but that’s not really the point. We don’t need to find out what would have happened, might have happened, or could have happened. What we need to look at is that there was a right, there was a right in the bylaws or contract, it was right in the statute, that right was violated. He has a right now to ask the court to help him fix that, and he can’t do it on his own.
They do it in the court’s permission, as I said. If this court had wanted to fix it without a lot of hassle, they would have simply stepped up and said, oops, let’s try to figure out what to do. But instead they sat on their hands, and now they come into court and say, oh, it’s been all my time, and we’ve already taken actions, and it was still fair, and we did the best we could, without any showing that that substantial compliance can even get it.
the threshold can even be met when it’s a clear record that there were like two seats up for election, should have been thrown. And the cost somewhere, I think, in the materials, there was a cost that it was $2 ,000 to win the 2024 election, not substantial costs.
That doesn’t seem like a lot of money to me, but at any rate. It seems to me, you’re honored that before I wind up, I want to just point out that Lundberg definitely does not apply. That was, as we’ve discussed, a shareholder derivative action, and the court did not discuss ultra -virus at all.
In fact, it said the Washington Nonprofit Corporation Act does not infer the right for a single minority -directed trustee to bring an action on behalf of the corporation. So this was a case since the court probably knows.
where a director did not, like what the other directors were doing, tried to, on behalf of their corporation, or not corporation, sued the corporation. And the court said, no, you can’t do that. But that’s not, have clients not on the court, he’s not suing on behalf of the association.
He’s, he’s straining on behalf of himself. And he feels strongly that he has a right to do that. And I believe he does have a right under the statute and under the bylaws. And I’ll finally wind up here by saying that the contract argument is certainly, I think, a strong one in terms of breach of contract.
The bylaws are not the be -all and the end -all of what a director, excuse me, what a member has a right to do. There’s a suggestion that if the bylaws don’t say you can do it, you can’t do it. The bylaws don’t say a lot of things.
The bylaws don’t say that the directors have a fiduciary obligation to their members, but they do. And I think if a fiduciary obligation is reached, a member has the right to sue. There’s nothing that says anywhere that you’ve waived your right as a member to just have to sit there and take it if the board has done something wrong.
What I’m saying is the board didn’t have the authority to act. That’s ultra -virus under the Wendell case. Wendell also makes it clear that if you acted but you acted improperly, that is a different kind of ultra -virus, which is allowed to be brought to the court’s attention.
And as I said in our materials, that’s what we think 966 has to do. It’s drawing extinction between ultra -virus under 150 and acting improperly and under allowing for redress of that 3% of 966. It appears really in summer on…
that the defendants are just telling my client sit down, shut up, and go on for the ride. But that isn’t what this should be about. He should have a right to have had this process handled properly. He as a member should expect of all businesses that a nonprofit corporation, which is a member of a cooperative, should be run for the benefit of the members.
That seems so fundamental to me. He’s not a shareholder in a big profit corporation, which has lots of other groups and regulations. This is a small organization, and he should not have to come forward and seek to have the court intervene to give him his rights.
But we’ve had no choice but to do that. So all of us said, Your Honor, I’m happy to answer any of your questions. But in some, it’s not a hard… It’s really not a hard thing for this organization to do, to call a new election.
They’ve got their membership records. They’ve got the ballot from last time. Just update it to reflect what it should reflect. Set it down electronically so it’s not even postage involved. Tabulate the results.
And then we’ve done it right. And then as sites that honor the court like to have an evidentiary hearing to consider what actions this court’s taken and whether those should vote it on, we’re certainly okay with that.
But it isn’t a reach to think that this would be a fairly simple, illustrative process. And they do it every year anyway. So we’re asking the court to grant our motion for some free judgment. And now the other side’s motion for some judgment.
And proceed as the court gave appropriate evidence. Thank you, Ms. Higginson. Ms. Dorie, this is your second shot. Yes, thank you, Your Honor. As I hear the main contention from the plaintiff is that they believe that at some point the court realized, hey, we screwed up in this election and they should have just said, well, let’s fix it.
But that is exactly what happened in this case. They caught an error in their election, looked at their bylaws and saw what authority do we as a board have to do to fix this problem. Now, the bylaws say elections are held once a year at the annual election.
That election was already complete by the time this error came to the board’s attention. So we can’t rerun the already completed election. What can we do? Well, we’d have an appointment power under the bylaws.
So we can appoint a vacated seat. And we do need to have all seven seats filled as the bylaws require seven seats. Now, so they use the election results to fill that seat. So, but the real problem here is that the plaintiff doesn’t like the remedy that was selected.
There’s no dispute the error occurred. The question now is, who gets to decide the remedy? Because the bylaws do not say, if there’s a procedural error or someone does not have the right to cast all their votes, a new election must be held.
That’s not what the bylaws say. The statute doesn’t require that remedy either. But the plaintiff believes that that’s the only proper remedy. We disagree strenuously. We believe that not only is that unnecessarily expensive, not likely to change the actual outcome, but it’s in fact more likely to disenfranchise the voters that did cast their ballots.
Because running a second election in the middle of the year is likely to sow confusion among the members and make it less likely that people will actually vote and potentially impact the next election in November when voters might be confused if they’re supposed to vote once again.
So the remedy that they are proposing and asking to impose not just for a plaintiff but to impose on the entire association is just the plaintiff’s judgment of what proper means. But we have no guidance on what the proper remedy is because the bylaws don’t require this and the bylaws don’t clarify what to do when there’s a procedural error.
And that’s where it is appropriate for the court to look at the act and the bylaws and say, okay, when the bylaws are silent and when the act is silent, who has the authority to decide how to fix the problem?
And overwhelmingly, the statute and the bylaws are clear that it’s the board that is to exercise that discretion. Now, the other key point that I keep hearing with plaintiff’s argument is that he was denied his right to vote under the bylaws and under their statute.
We disagree. He was able to participate in the vote and the election that was held. Same as every other member. His voice was equal measure as all the other membership. There’s actually no requirement in the bylaws that each seat must be individually voted for.
In fact, it seems that if the board decided it could have just run the election and had everyone cast one vote and done a ranked choice solution and seated the members one, two, and three. So it is not that he was denied a right to vote.
It’s that there was a procedural deficiency in how many votes were cast for the seats that were available. Now, turning to the breach of contract claim, the same problem exists for the breach of contract claim.
Nothing in the bylaws says that this is a remedy or a right that the plaintiff has, which is to sue the association to impose his own preferred remedy. There’s no specific right in the bylaws that require this result.
Additionally, that contract claim was not proper. And I understand that there’s a reference to the word contract in the complaint, but the complaint is very clear that it is stating one single cause of action, the first and only cause of action for violation of the statute, and any reference to the bylaws of the contract in connection with those allegations supports the violation claim.
There’s no separate allegations to a breach of contract claim. And we very vigorously contend that that was never a properly pled claim in this place. But in any case, even if the bylaws were, even if the nonprofit statute allows members to sue to enforce bylaws as a contract, even if the nonprofit act allowed that, this is not a case where there was a breach of a specific contract for which there was a remedy.
There’s no specific right to demand this particular remedy. And in that circumstance, we think that the plaintiff is fundamentally misunderstood. what he is legally allowed to demand of the association.
And just to finish up, the accusation or the allegation that to rerun the election would be no problem, very simple, that just simply isn’t the case. And if the plaintiffs were awarded the belief that they’re seeking, it would be unbelievably harmful for this association, lest with only three board seats left, because if they’re going to invalidate all the decisions after the November election, there was another seat that was appointed.
So they’d be left with only three volunteered board members. And invalidating all of the decisions to date would upend all of their operations for the last six months. And it is an extraordinarily extreme result that the plaintiff is asking for a ballot deficiency issue.
And we seriously contend that it would not be appropriate for neither the plaintiff or the court to superimpose its judgment when the board so clearly have the probability to exercise that judgment. Thank you, Ms.
Dohey. Anything else you want to say? No, Your Honor. Great, thank you. Appreciate the argument by both sides today, as well as the briefing. I think in the situation when there are cross -motions for summary judgment, it certainly offers the opportunity for really thorough briefing and arguments.
And I appreciate that. And have reviewed it all. I appreciate that each side, you know, wants to make their position really simple and at the same time has offered complications to the other side’s argument.
And so I’m gonna exercise my right to take a closer look at everything that’s been submitted and to issue a right decision rather than trying to issue a decision orally right now. So I appreciate that everyone wants an answer and there are a lot of folks observing today, especially when- there are these kinds of detailed legal arguments on summary judgment.
It is often my practice and my preference to issue a written decision so that I also can really thoughtfully go through each of the arguments and make it clear what decision I’m making on each argument and how those interrelate.
Because in this case arguments do actually intersect quite a bit. So again, I apologize that I’m not simply giving everyone a quick decision, but I do want to be thoughtful in the way that I analyze these issues, which I very much appreciate affect a lot of people.
So I will be issuing that written decision as soon as I am able. Usually I do that in the form of a very detailed letter decision and then if I think there’s any question about how that will translate to an order, I would give the parties a chance to present their own orders.
If I think it’s pretty simple yes or no, then I’ll issue an order as well, but that depends on the actual decision that’s issued. Does anyone have any clarifying questions or want to say anything further before we conclude today?
No, I thank you very much for giving us this extra time. No, I appreciate all the argument. Mr. Ray, anything else? No, thank you, Your Honor. OK, thanks for everyone’s time. Again, I appreciate that these issues affect a lot of people, and we’ll get that decision issued as soon as I can.
It is going to take me a little bit of time, so please don’t be expecting that in the next week or two, but I will do that as soon as I’m able. Thanks very much. That concludes the hearing today. We are adjourned.