National Med. Assn. v Britton

[*1] National Med. Assn. v Britton 2007 NY Slip Op 51374(U) [16 Misc 3d 1110(A)] Decided on July 9, 2007 Supreme Court, New York County Stallman, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on July 9, 2007
Supreme Court, New York County

National Medical Association and WILLIAM HINES, Plaintiffs,

against

Carolyn B. Britton, Defendant.



117627/06

Michael D. Stallman, J.

Motions designated Seq. Nos. 002 and 003 are consolidated for disposition.

In Motion Seq. No. 002, plaintiff National Medical Association ("NMA") and defendant, Carolyn B. Britton ("Britton") move (1) to substitute the law firm of Epstein Becker & Green, P.C. ("EBG") as counsel for NMA; (2) pursuant to CPLR 1003, to remove NMA as a plaintiff and add it as a defendant; (3) pursuant to CPLR 3211 or 3212, to dismiss the Complaint; (4) pursuant to CPLR 6311, for a preliminary injunction against plaintiff William Hines ("Hines") holding himself out as NMA Chair; and (5) pursuant to 22 NYCRR 130-1.1, for the imposition of sanctions against Garth W. Stewart, Esq. ("Stewart") and Stevens, Hinds & White, P.C. ("SHW")for claiming to represent NMA, filing a complaint on behalf of NMA without its authorization, and refusing NMA's request to withdraw the Complaint.

In Motion Seq. No. 003, Hines moves, pursuant to CPLR 3212, for summary judgment enforcing the determination and vote, made at a November 15, 2006 NMA meeting, to remove Britton as Chair of the Board of Trustees.

NMA and Britton cross-move for an order directing Hines to give security for their reasonable expenses.

Hines commenced this action, derivatively and individually, seeking a declaration that he was duly elected to replace Britton as Chair of NMA's Board of Trustees. Hines also brought a related CPLR article 78 proceeding, entitled Matter of Hines v Judicial Council of the National Medical Association, Sup Ct, NY County, Index No. 101544/07, challenging the respondent's determination to temporarily suspend him from the NMA Board of Trustees. The Article 78 proceeding is decided simultaneously with these motions, by a separate decision and judgment.

The following background is gleaned from the submissions of the parties. NMA, established in 1985, is a New Jersey not-for-profit corporation of African American physicians and health care professionals. A 23-member Board of Trustees is responsible for the property, financial affairs, and operations of NMA.

In an August 10, 2006 meeting, the Board elected Britton Chair of the Board for a second time. However, on November 15, 2006, Hines and seven other NMA trustees held a "special meeting" of the Board of Trustees, in Dallas, Texas, and purportedly elected Hines to replace Britton [*2]as Chair.

On inquiry from Britton, the NMA Judicial Council, which consists of five NMA members invested with the authority to make final interpretations of the NMA Constitution and By-laws, determined that the November 15, 2006 meeting violated Chapter VI, § 3 of the NMA Constitution and By-laws and that the actions taken at that meeting were invalid.

On December 5, 2006, the entire NMA Board held a special meeting at which it reaffirmed that Britton is the Board Chair; affirmed the authority of the Judicial Council to interpret NMA's Constitution and By-laws and determined the invalidity of the November 15, 2006 meeting; and declared that Hines's counsel, SHW, did not have the authority to represent NMA.

Hines's counsel, SHW, filed the Complaint in this action on November 27, 2006.

By letter dated December 11, 2006, Charles E. Barnes, Esq. ("Barnes") of EBG advised Stewart that EBG was counsel for NMA; that Stewart had no authority to represent NMA or file an action on its behalf; that Britton is the duly elected Chair of the NMA Board of Trustees; and that the NMA Judicial Council ruled that the November 15, 2006 meeting and all actions taken therein are invalid. Barnes also demanded that NMA be discontinued as a party plaintiff in this action.

In December 2006, Britton noticed a special meeting of the NMA Board of Trustees which confirmed, inter alia, that EBG is counsel for NMA, and voted to enjoin Hines from holding himself out as Chair of the NMA Board of Trustees or exercising authority on behalf of NMA.

Hines commenced this action individually and derivatively on behalf of NMA to enforce the actions taken by Hines and seven other NMA Trustees at the November 15, 2006 meeting to remove Britton as Chair of the Board of Trustees and to elect himself as her replacement. The parties do not dispute that New Jersey law governs the disposition of claims involving NMA, a New Jersey not-for-profit corporation. However, Hines insists that he may bring this action derivatively, under NJ Stat Ann § 15A:3-5(d), or individually, under New Jersey common law.

The derivative action must fail because this Court lacks subject matter jurisdiction. Section 15A:3-5(d) expressly states that derivative actions under that statute must be brought in New Jersey courts. Moreover, Hines fails to satisfy the prerequisites for bringing a derivative action, namely that one must make a demand on the board to enforce the results of the November 15, 2006 meeting, or demonstrate that such demand should be excused by extraordinary conditions (see In re Cendant Corp. Derivative Litig., 189 FRD 117, 127 [D NJ 1999]).

Neither does this Court have jurisdiction over the claims asserted by Hines individually, because Hines failed to exhaust the remedies set forth in the NMA By-laws. Chapter VIII, § 4B of the NMA By-laws states, in part:

The judicial power of the [NMA] shall be vested in the Judicial Council, whose decisions shall be final, either ab initio or upon reconsideration of a decision based on an appeal for cause. An appeal for reconsideration may be filed with the Council by the aggrieved, by a Member of the Council, or by a majority vote of the Board of Trustees ... . The Judicial Council shall have original jurisdiction in ... [a]ll controversies arising under this Constitution and these By-laws ... . The Judicial Council shall have jurisdiction on all questions of ... the interpretation of the laws of the [NMA].

(Not of Mot [002], Exh A, p. 35). It is beyond dispute that the Judicial Council of the NMA, the body charged with interpreting the corporation's Constitution and By-laws, concluded that the November 15, 2006 meeting and all actions taken therein are invalid. Hines offers nothing to show [*3]that he exhausted the procedures outlined in the NMA Constitution and By-laws to challenge NMA's refusal to validate the November 15, 2006 meeting.

Thus, the branch of Motion Seq. No. 002 seeking to dismiss the Complaint is granted, and the Court need not address the requests to substitute counsel for NMA, to realign NMA as a party defendant, and for injunctive relief. The request for sanctions is denied (see 22 NYCRR 130-1.1) in light of this Court's lack of subject matter jurisdiction.

Moreover, the motion for summary enforcement in Seq. No. 003 must be denied, and the cross motion for security and attorney's fees is denied.

Accordingly, it is

ORDERED that Motion Seq. No. 002 is granted to the extent of dismissing the Complaint, and it is otherwise denied; and it is further

ORDERED that Motion Seq. No. 003 is denied, and the cross motion for security and attorney's fees is denied; and it is further

ORDERED that the Clerk shall enter judgment accordingly.

This constitutes the decision and order of the Court.

Dated: July 9, 2007ENTER:

New York, New York

s/

___________________

J. S. C.