Spence v. Sloan

• Decision Date: 16 August 2022
• Docket Number: S-21-0243
• Parties: Gerald L. SPENCE; John Zelbst; Rex Parris ; Joseph H. Low and Kent Spence, directly on their own behalf and derivatively on behalf of the Trial Lawyers College, a Wyoming nonprofit corporation, Appellants (Plaintiffs), v. John SLOAN; Milton Grimes; Maren Chaloupka; J.R. Clary, Jr. ; Dana Cole and Anne Valentine, Appellees (Defendants), and The Trial Lawyers College, a Wyoming nonprofit corporation, Appellee (Nominal Defendant).
• Court: Wyoming Supreme Court

515 P.3d 572

Gerald L. SPENCE; John Zelbst; Rex Parris ; Joseph H. Low and Kent Spence, directly on their own behalf and derivatively on behalf of the Trial Lawyers College, a Wyoming nonprofit corporation, Appellants (Plaintiffs),

v.John SLOAN; Milton Grimes; Maren Chaloupka; J.R. Clary, Jr. ; Dana Cole and Anne Valentine, Appellees (Defendants),andThe Trial Lawyers College, a Wyoming nonprofit corporation, Appellee (Nominal Defendant).

S-21-0243

Supreme Court of Wyoming.

August 16, 2022

Representing Appellants: J. Kenneth Barbe, II and Hampton K. O'Neill, Welborn Sullivan Meck & Tooley, P.C., Casper, Wyoming; James E. Fitzgerald, The Fitzgerald Law Firm, Cheyenne, Wyoming. Argument by Mr. Barbe, II and Mr. Fitzgerald.

Representing Appellees: Patrick J. Murphy and Zara S. Mason, Williams, Porter, Day & Neville, P.C., Casper, Wyoming. Argument by Mr. Murphy.

Before FOX, C.J., and KAUTZ, BOOMGAARDEN, GRAY, and FENN, JJ.

FOX, Chief Justice.

[¶1] This appeal arises out of a dispute between two factions of the former Board of Directors of the Wyoming Trial Lawyers College; the Spence Group and the Sloan Group. The Spence Group filed a derivative action against both the College and the Sloan Group seeking removal of the Sloan Group from the College's Board and a declaration that the Spence Group constituted the duly acting Board. The district court found the Spence Group lacked standing to bring the derivative action and granted the Sloan Group's motion for summary judgment. We affirm.

ISSUES

[¶2] The issues are:

1. Was the summary judgment order in favor of the Sloan Group an appealable order?

2. Did the district court correctly conclude that the Spence Group lacked standing to bring a derivative action?

3. Did the district court abuse its discretion in ruling that the Spence Group could not bring its derivative action in equity?

FACTS

[¶3] In 1993, Gerald L. "Gerry" Spence established the Trial Lawyers College as a nonprofit corporation pursuant to the Wyoming Nonprofit Corporation Act. The College's bylaws express its mission as follows:

The Trial Lawyer's [sic] College is dedicated to training and educating lawyers and judges who are committed to the jury system and to representing and obtaining justice for individuals; the poor, the injured, the forgotten, the voiceless, the defenseless and the dammed [sic], and to protecting the rights of such people from corporate and government oppression.

In all of its activities, the Trial Lawyer's [sic] College will foster and nourish an open atmosphere of caring for people regardless of their race, age, creed, religion, nation [sic] origin, physical abilities, gender or sexual orientation. We do not offer training for those lawyers who represent government, corporations or large business interests.

[¶4] At some point, tensions developed between members of the College's Board of Directors. The parties disagree whether those tensions stemmed from concerns with alleged deviations from the College's mission by some directors, or the refusal of some directors to approve the use of College savings to build an education center in Gerry Spence's honor. Whatever their genesis, those tensions came to a head in April 2020.

[¶5] On April 13, 2020, the board held a meeting attended by the following directors: John Sloan; Gerry Spence; Joseph Low; Dana Cole; Rex Parris; Anne Valentine; John Zelbst; J.R. Clary, Jr.; Mel Orchard; Milton Grimes; and Maren Chaloupka. During that meeting, Gerry Spence, without offering a reason for the request, asked that Dana Cole and Mel Orchard resign from the board. He informed them that if they refused to resign, the Spence Foundation would terminate the College's lease of the Thunderhead Ranch, where it held courses, and the College would be prohibited from using his name or likeness or the Thunderhead Ranch brand. Mr. Orchard declined the request to resign during the meeting. As to Mr. Cole, Mr. Spence said to him, "I'm going to ask you, [Dana] one more time. Are you going to resign or not." Mr. Cole responded, "I am."

[¶6] That same day, Mr. Spence's attorney provided Board president John Sloan notice of the Spence Foundation's termination of the Thunderhead Ranch lease. The notice allowed the College thirty days to vacate the premises and ordered it to cease and desist use of Mr. Spence's name or likeness, and the Thunderhead Ranch name or brand.

[¶7] On April 26, 2020, Mel Orchard emailed his written resignation to Mr. Sloan, effective immediately. Two days later, on April 28, Gerry Spence, John Zelbst, Rex Parris, Joseph Low, and Kent Spence, in their capacity as Board members, filed a complaint against the College seeking its dissolution and distribution of its assets to another nonprofit corporation to carry out its purpose. Alternatively, the complaint asked "that the court exercise its equitable powers to remove all directors other than plaintiffs and allow plaintiffs, therefore, to carry on the mission of the organization." Also on April 28, Mr. Spence's attorney filed with the Secretary of State articles of incorporation for a nonprofit corporation called "Gerry Spences [sic] Trial Lawyers College at the Thunderhead Ranch."

[¶8] Also that day, Mr. Sloan emailed Mr. Cole and advised him that resignations must be in writing to be effective. He also informed Mr. Cole that he was preparing to send out a meeting notice and did not wish to include Mr. Cole unnecessarily. Mr. Cole responded:

In our board meeting on April 13, 2020, Gerry Spence asked for my resignation from the Board of Directors of the Trial Lawyers College. I was preparing to do so in writing as required by Wyoming law. However, it has come to my attention that a lawsuit has been filed seeking to dissolve the Trial Lawyers College. While I was reluctantly willing to walk away from the organization I have served for 25 years, I am unwilling to see it destroyed. Therefore, a written notice of resignation will not be forthcoming. I will remain in my position as a member of the Board of Directors of the Trial Lawyers College and will continue to fulfill my fiduciary duties.

[¶9] Mr. Sloan sent written notice of a special meeting to be held on May 6, 2020. The notice went to John Sloan, Milton Grimes, J.R. Clary, Jr., Dana Cole, Anne Valentine, Maren Chaloupka, Kent Spence, Rex Parris, Gerry Spence, Joseph Low, and John Zelbst. The notice indicated that the meeting's purpose was to discuss and vote upon the following agenda items:

1. Amend Article IV(B)(1) of the existing Bylaws of the Trial Lawyers College -- which currently says, "The number of Directors shall not be less than seven (7) and not more than fourteen (14)" -- to reduce the number of Directors to now provide, "The number of Directors shall not be less than five (5) and not more than eleven (11)."

2. Election of Directors.

3. Election of all Officers.

[¶10] Each of the notified directors attended the May 6 meeting.¹ They were aligned then and remain aligned as follows:

Sloan Group	Spence Group
1. John Sloan, President	1. Gerry Spence
2. Milton Grimes, Vice President	2. Joseph Low
3. Dana Cole, Secretary	3. John Zelbst
4. JR Clary, Jr., Treasurer	4. R. Rex Parris
5. Maren Chaloupka	5. Kent Spence
6. Anne Valentine

[¶11] During the meeting, Mr. Clary moved to amend the bylaws to reduce the minimum and maximum number of directors as detailed in the meeting agenda, and Mr. Grimes seconded the motion. The motion passed by a vote of six to four, with the Sloan Group voting in its favor and the Spence Group against it.² The Board then moved to the second agenda item, the election of officers. Ms. Chaloupka nominated each member of the Sloan Group to the Board, including herself, and Ms. Valentine seconded the nomination. The Sloan Group voted in favor of the nominated slate with six votes, and the Spence Group voted against it with four, so the Sloan Group was reelected to the Board. Mr. Zelbst then nominated each member of the Spence Group to the Board, including himself, and Mr. Parris seconded the motion. The Spence Group voted in favor of the nominated slate with four votes, and the Sloan Group voted against it with six. The Spence Group was therefore not reelected to the Board. [¶12] Mr. Sloan excused the Spence Group from the meeting and proceeded to the election of officers. Ms. Valentine nominated Mr. Sloan for president, Mr. Grimes for vice president, Mr. Clary for treasurer, and Mr. Cole for secretary, and Ms. Chaloupka seconded the nominations. The nominations passed with a unanimous vote. The meeting then adjourned with no other action taken.³

[¶13] On June 22, 2020, the Spence Group filed a derivative action against the Sloan Group and the College. The complaint alleged that Dana Cole was not a director because of his April 13, 2020, resignation, and Maren Chaloupka was not a director because her election five years earlier had not been held in compliance with statutory and bylaw requirements. It further alleged that some or all the Sloan Group directors should be removed from the Board because they represented big business, insurance companies, corporations, or the government, and/or had engaged in dishonest conduct or a gross abuse of authority or discretion. It sought a declaration that Dana Cole and Maren Chaloupka were not directors; and removal of any Sloan Group director found to have engaged in fraudulent or dishonest conduct, or a gross abuse of authority or discretion, or activities contrary to the College's mission statement. It also sought a declaration that the Spence Group members are the duly acting directors.

[¶14] The parties stipulated to consolidation of the dissolution and derivative actions for purposes of discovery. Their stipulated motion noted that the parties "take no position, at this time, as to whether or not these two cases should also be consolidated for trial[.]" The district court consolidated the cases for purposes of discovery, stating it "defers making any ruling or pronouncement on whether these cases should also...