BACKGROUND 

This case arises from a dispute over ownership and control of a collection of African American books, films and other works of art.  The collection is owned by Plaintiff The Mayme A. Clayton Library and Museum (“MCLM”), and Plaintiff Renai Clayton, Jr. is one of MCLM’s directors.  MCLM had a one dollar a year lease with LA County, at the former Culver City courthouse, located at 4130 Overland Avenue, Culver City, CA (the “Property”).   

Plaintiffs allege that Defendants1 engaged in a scheme to kick MCLM out of its decades-long housing at the Property.  The scheme was designed to force MCLM to move its art collection to Defendant California State University Dominguez Hills (“CSUDH”), so that Defendants could illicitly profit from the collection’s funding capabilities from various governmental agencies.  Plaintiffs allege that Defendants wanted CSUDH to gain possession of MCLM’s collection, so that Defendant Mark Ridley-Thomas could use his public position and influence on the LA County Board of Supervisors to send public monies directly to CSUDH.  In return, CSUDH would kick back financial perks to Thomas and the other Defendants. 

The operative (second amended) complaint alleges claims for (1) Racketeer Influenced and Corrupt Organization (“RICO”) violations, (2) breach of governing documents, (3) breach of undivided loyalty, (4) tortious interference and (5) misrepresentation.   

The facts relevant to this motion are as follows:  MCLM is a non-profit organization.  (Undisputed Material Fact (“UMF”) No. 1.)  MCLM contains a rare collection of books, films, documents, photographs, artifacts and works of art related to the history of African Americans in the United States.  (UMF No. 2.)  Mrs. Mayme A. Clayton founded the collection in 1975.  (UMF No. 2.)  In or about 2007, the collection was moved from Mrs. Clayton’s home to the former Los Angeles County Superior Courthouse in Culver City, located at 4130 Overland Avenue, Culver City, California.  (UMF No. 3.)   

MCLM’s bylaws require a minimum of five directors for the Board of Directors.  (UMF No. 5.)  A board member is required to contribute $1000 in annual dues to MCLM in addition to securing $2000 in cash or in kind support for MCLM annually.  (UMF No. 6.)  Defendants Steven Fisher, Dr. Ruth Jackson and Lindsay Hughes paid annual dues to MCLM every year from the date of their respective appointments to the board of directors until they were terminated from the board of directors.  (UMF No. 7.) 

Term of office for a board director is three years, as stated in the bylaws.  Election to the Board of Directors is by a vote of the majority of directors in office.  (UMF No. 8.)   

On October 13, 2015, Jackson was elected to MCLM’s Board of Directors.  (UMF No. 10.)  On July 1, 2016, Hughes was elected to MCLM’s Board of Directors.  (UMF No. 11.)  On January 15, 2017, Fisher was elected to MCLM’s Board of Directors.  (UMF No. 12.)  Defendants Fisher, Hughes and Jackson were not compensated by MCLM for serving as directors.  (UMF No. 9.) 

On or about August 29, 2019, Plaintiff Renai Clayton, Jr. was elected to the board.  (UMF No. 13.)  After his appointment to the board, Renai Clayton, Jr. did not communicate in any of the board meetings or demand formally or informally that Fisher, Jackson or Hughes’ term limits as directors had expired.  (UMF No. 15.)  Cross-Defendant Lloyd Clayton, who was elected as life director on MCLM’s board of directors, orally asked Jackson to remain on the board because of the value of her work and experience.  (UMF Nos. 15-16.) 

On November 1, 2018, MCLM received a 60 day notice to vacate MCLM from the Culver City Courthouse location.  (UMF No. 19.)  From 2018 to 2020, the board of directors explored partnerships with West LA College, University of California Los Angeles (“UCLA”), University of Southern California (“USC”), California African American Museum (“CAAM”) and CSUDH.  (UMF No. 22.)  Discussions with West LA College, UCLA, USC and CAAM failed during the negotiation process.  (UMF No. 23.)   

On June 15, 2019, MCLM held a board meeting to discuss the necessity to transition the collection to CSUDH.  (UMF No. 26.)  During this meeting, Renai Clayton, Jr. noted that he agreed there is value in the partnership with CSUDH.  (UMF No. 26.)  On April 30, 2020, MCLM and CSUDH began negotiating the loan of the collection for a specified period.  CSUDH agreed to the terms of a loan as opposed to transfer of ownership to the university.  (UMF No. 27.)   

On or about April 2020, preliminary terms were circulated among the board members.  Renai Clayton, Jr. participated in the drafting process of the CSUDH Agreement.  (UMF No. 28.)  On or about May 7, 2020, Renai Clayton Jr. stated in an email to MCLM counsel that Fisher and Lloyd Clayton should sign the agreement with CSUDH, stating that: “the agreement should be signed by the Chairman of the Board – Lloyd Clayton and Executive Director – Steven Fisher.”  (UMF No. 29.)  On May 8, 2020, Renai Clayton Jr. sends an email again stating that: “execution of the agreement requires two signatures: Chairman of the Board of Directors and the Executive Director.”  (UMF No. 30.)     

Fisher, Jackson, Hughes, Boateng, Renai Clayton, Jr. and Lloyd Clayton were part of the six board of directors when the MCLM board resolved to approve the agreement with CSUDH (the “CSUDH Agreement”).  On or about May 15, 2020, the board of directors’ vote was four (4) – two (2) in favor of executing the CSUDH Agreement.  Fisher, Jackson, Hughes and Boateng voted in favor while Renai Clayton, Jr. and Lloyd Clayton voted against.  (UMF No. 18.)      

The MCLM Board of Directors sought the advice of counsel before and after executing the CSUDH Agreement.  On May 15, 2020, MCLM counsel provided her advice to the MCLM Board stating there was no violation of the MCLM bylaws with regard to the May 15, 2020 board vote in favor of execution of the CSUDH Agreement.  (UMF No. 32.)  On May 15, 2020, MCLM counsel informed the board that Lloyd Clayton conferred with counsel and he was willing to sign the CSUDH Agreement.  (UMF No. 36.)  On May 15, 2020, Lloyd Clayton and Steven Fisher on behalf of MCLM fully executed the CSUDH Agreement.  (UMF No. 37.) 

The CSUDH Agreement’s terms provided for a partnership and loan of the collection to CSUDH for a period of eleven (11) years.  Nowhere in the CSUDH Agreement was there a term for “transfer” of ownership or “sale” of the MCLM Collection to CSUDH.  (UMF No. 38.)   

On or about October 29, 2020, the Office of the California Attorney General (“AG”) stated that it does not object to the CSUDH loan of the MCLM Collection.  (UMF No. 39.)  

On or about August 9, 2020, Lloyd Clayton sent letters of termination to Fisher, Hughes, Boateng and Jackson stating that effective immediately they are no longer directors of MCLM.  (UMF No. 40.)   

This hearing is on Defendants Fisher, Hughes, Jackson and Fox Hills’ (“Moving Defendants’”) motion for summary judgment or in the alternative, for summary adjudication.  Moving Defendants argue that summary judgment or adjudication should be granted for (1) all claims against Fisher, Hughes and Jackson (the “Director Defendants”) because they are volunteer board members of a non-profit organization, and Plaintiff was required to seek the Court’s permission before filing suit against them pursuant to Code Civ. Proc. § 425.15(a), (2) the RICO claim on grounds Plaintiffs cannot show an enterprise, existence of a continuing unit and a pattern of racketeering activity, (2) the claim for breach of governing documents because the Director Defendants did not breach any governing documents, (3) the claim of breach of undivided loyalty because it fails to overcome the business judgment rule, (4) the claim for tortious interference because Moving Defendants did not interfere with any economic relationship between MCLM and the County, (5) the misrepresentation claim because Moving Defendants made no misrepresentation nor did they conceal any material facts, and (6) the claim for punitive damages because there is no showing of malice, oppression or fraud.  There was no opposition filed as of the posting of this tentative ruling.        

LEGAL STANDARD 

The function of a motion for summary judgment or adjudication is to allow a determination as to whether an opposing party cannot show evidentiary support for a pleading or claim and to enable an order of summary dismissal without the need for trial.  (Aguilar v. Atlantic Ritchfield Co. (2001) 25 Cal.4th 826, 843.)  Code Civ. Proc. §437c(c) “requires the trial judge to grant summary judgment if all the evidence submitted and ‘all inferences reasonably deducible from the evidence’ and uncontradicted by other inferences or evidence, show that there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” (Adler v. Minor Healthcare Corp. (1992) 7 Cal.App.4th 1110, 1119.)   

“The function of the pleadings in a motion for summary judgment is to delimit the scope of the issues; the function of the affidavits or declarations is to disclose whether there is any triable issue of fact within the issues delimited by the pleadings.”  (Juge v. County of Sacramento (1993) 12 Cal.App.4th 59, 67).   

As to each claim as framed by the complaint, the defendant moving for summary judgment must satisfy the initial burden of proof by presenting facts to negate an essential element or to establish a defense.  (Code Civ. Proc. §437c(p)(2); Scalf v. D.B. Log Homes, Inc. (2005) 128 Cal.App.4th 1510, 1520.)  Courts “liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party.”  (Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 389.)  

A moving party may prevail by establishing “the absence of evidence to support the [responding party’s] case.”  (Leslie G. v. Perry & Assoc. (1996) 43 Cal.App.4th 472, 482.)  The defendant must show the plaintiff does not possess needed evidence and also that the plaintiff cannot reasonably obtain the evidence.  (Aguilar v. Atlantic Ritchfield (2001) 25 Cal.4th 826, 854.) 

A moving defendant may rely upon factually devoid discovery responses to shift the burden of proof.  (Union Bank v. Superior Court (1995) 31 Cal.App. 4th 573, 581, 590.)  Thus, in Union Bank, the Court found that the defendant had met its burden of proof for summary judgment, by relying upon plaintiff’s discovery responses, which contained no facts supporting the fraud causes of action at issue in that case.  (Id. at 581, 592-593.)   

Once the defendant has met that burden, the burden shifts to the plaintiff to show that a triable issue of one or more material facts exists as to that cause of action or a defense thereto.  To establish a triable issue of material fact, the party opposing the motion must produce substantial responsive evidence.  (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 166.)  The responding party may not simply rely on mere allegations or denials of the pleadings but must set forth specific facts showing that a triable issue of material fact exists with respect to the claim at issue.  (Aguilar, 25 Cal.4th at 844.) 

DISCUSSION 

Claims Against Directors 

The Director Defendants argue that the claims against them should be dismissed pursuant to Code Civ. Proc. 425.15(a) because they were not compensated for their service as directors of MCLM.  The Court disagrees.     

Section 425.15(a) states that “[n]o cause of action against a person serving without compensation as a director or officer … on account of any negligent act or omission by that person within the scope of that person’s duties as a director acting in the capacity of a board member … shall be included in a complaint or other pleading unless the court enters an order allowing the pleading that includes that claim to be filed after the court determines that the party seeking to file the pleading has established evidence that substantiates the claim.” 

By its terms, the pre-filing requirement of¿Code Civ. Proc. § 425.15(a) only applies to causes of action asserted against a¿volunteer director “on account of any negligent act or omission by that person ...”.  Here, Plaintiffs’ claims against the Director Defendants are not grounded on negligence.  They include claims of intentional wrongdoing, such as RICO, intentional interference with contractual relations and fraud. 

RICO Claim 

Moving Defendants argue that Plaintiffs have not adequately alleged the elements of a RICO claim.  To state a cause of action under RICO (18 U.S.C. § 1961 et seq.) a plaintiff must plead facts to show: “(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.” (Sedima, S.P.R.L.¿v.¿Imrex Co.¿(1985) 473 U.S. 479, 496, fn. omitted.)  Moving Defendants argue Plaintiffs have not met the “enterprise”, “pattern” and “racketeering activity” elements.  The Court addresses only the “pattern” element as it is dispositive of Plaintiffs’ RICO claim.   

A pattern requires at least two acts of racketeering activity.  (Occidental, 235 F. Supp. 3d at 1177.)  Moreover, where, as here, RICO claims are asserted against multiple defendants, a plaintiff must allege at least two predicate acts by each defendant.  (In re WellPoint Inc. Out-of-Network UCR Rates Litig. (C.D. Cal. 2012) 903 F. Supp. 2d 880, 914; Occidental, 235 F. Supp. 3d at 1177.)  The predicate acts must not only be aimed at the same purpose but they must “amount to, or …. otherwise constitute a threat of continuing racketeering activity.”  (H.J. Inc. v. Nw. Bell Tel. Co. (1989) 492 U.S. 229, 237-38.) 

Crucially, courts routinely reject RICO claims founded on a single course of conduct involving a single alleged scheme and a limited number of alleged victims because such allegations do not meet the continuity requirement.  For example, in Edmondson & Gallagher v. Alban Towers Tenants Ass’n (D.C. Cir. 1995) 48 F.3d 1260, the court rejected RICO claims despite the plaintiffs’ allegations of “bribery, extortion [and] wire and mail fraud” because those alleged multiple predicate acts formed “only a single scheme – to prevent or delay the sale of [real property], or to secure a ransom for allowing the sale to proceed.”  (Id. at 1264, 1265.)  It did not matter that the number of predicate acts (fifteen) was sufficient or even that they occurred over a span of three years since the scheme ultimately amounted to a single course of conduct with a “single discrete goal.”  (Id. at 1265; see also Nugent v. St. Agnes Med. Ctr. (9th Cir. 2002) 53 F. App’x 828, 829 (“Where, as here, a scheme involves but a single alleged fraud with a single victim, there is no threat of continuity.”); Efron v. Embassy Suites (Puerto Rico), Inc. (1st Cir. 2000) 223 F.3d 12, 20 (alleged wire and mail fraud over a 21 month period did not suffice when entire scheme amounted to a single fraudulent course of conduct against a single victim); Sil-Flo, Inc. v. SFHC, Inc. (10th Cir. 1990) 917 F.2d 1507, 1516 (multiple predicate acts failed to show a pattern where the acts constituted a “single scheme” to accomplish “one discrete goal, directed at one individual with no potential to extend to other persons or entities”). 

Here, Plaintiffs have alleged a single course of conduct resulting in a single injury to a single victim.  Plaintiffs allege MCLM was harmed by Moving Defendants’ efforts to force it to transfer its collection to CSUDH, which Plaintiffs claim were motivated by a kickback scheme.  These allegations amount to a single course of conduct aimed at a single alleged goal: to force MCLM to transfer its collection to CSUDH, and they are aimed at a single victim: MCLM.  Such allegations do not meet the continuity requirement and are no different from the ones rejected in Edmonson.       

Accordingly, Plaintiffs have failed to show the pattern element.  Therefore, the Court grants the motion for summary adjudication of the RICO claim against Moving Defendants.   

Breach of Governing Documents 

The Director Defendants argue that Plaintiffs cannot show they breached the governing documents.  The Court disagrees. 

Plaintiffs allege that the Director Defendants breached the governing documents by (1) staying past his three year term as a board member and tabling elections for replacement directors (SAC ¶¶ 87(a)(1), 87(b)(1)); (2) holding “false” board meetings with board members whose terms had expired (SAC ¶87(b)(1)), (3) failing to contribute $1000 in annual dues plus securing an additional $2,000 in cash or in-kind support for MCLM annually (SAC ¶87(c)(1)), (4) misappropriating funds by hiring Anthony Elliott to perform accounting services (Id.), (5) holding board meetings without a Clayton family member or designee (SAC ¶87(d)(1)), (6) not allowing other board members access to MCLM’s records (SAC ¶87(e)(1)), and (7) allowing Defendants Mark Ridley-Thomas, Dr. Anthony Samad and CSUDH to purchase their votes through the promises of gifts, jobs or other financial benefits (SAC ¶87(f)(1)). 

Moving Defendants’ motion relies exclusively on the Director Defendants’ declarations.  Those declarations deny some but not all of these allegations.  Specifically, Moving Defendants have not addressed whether they held “false” board meetings, whether they refused to allow certain board members access to MCLM’s records, whether they held board meetings without a Clayton family member or designee and, crucially, whether they sold their votes to Ridley-Thomas, Samad and CSUDH.  While the motion states “Moving Defendants have never sold their votes to third parties nor promised were promised [sic] any gifts or jobs,” (Motion at 21:14-15), that is not attested to in any declaration nor is it included in the separate statement.     ¿ 

A motion for summary adjudication shall be granted only if it completely disposes of a¿cause of action, an affirmative defense, a¿claim for damages, or an issue of duty.  (Code Civ. Proc. §437c, subdivision (f)(1).)  Here, the motion for summary adjudication is applicable to only part of the breach of governing documents claim and, therefore, fails.      

Breach of Undivided Loyalty 

Moving Defendants argue that Plaintiffs’ claim for breach of undivided loyalty fails because they are protected by the business judgment rule.  The Court disagrees.   

California’s business judgment rule as codified in Section 309 of California’s Corporations Code states that a director shall not be liable for actions based on a reasonable exercise of business judgment if done “ in a manner such director believes to be in the best interests of the corporation and its shareholders and with such care including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances.”  (Corp. Code § 309.)     

Plaintiff alleges that Moving Defendants breached their fiduciary duties through “their approval of and/or participation in Defendant Ridley Thomas’s and Defendant CSUDH’s scheme.”  Moving Defendants do not deny the existence of the scheme in their declarations.  Accordingly, they have not shown the business judgment rule is applicable here.    

Tortious Interference 

Moving Defendants argue that Plaintiffs have failed to show they tortiously interfered with the contract between MCLM and the County of Los Angeles.  The Court disagrees. 

The elements of a cause of action for intentional interference with contractual relations are: (1) a valid contract between plaintiff and a third party, (2) defendant’s knowledge of this contract, (3) defendant’s intentional acts designed to induce a breach or disruption of the contractual relationship, (4) actual breach or disruption of the contractual relationship, and (5) resulting damage.  (I-CA Enteprrises Inc. v. Palram Americas, Inc. (2015) 235 Cal.App.4th 257, 289.)   

Here, Plaintiffs allege intentional interference based on Moving Defendants’ participation in an alleged scheme, to interfere with MCLM’s contractual relations with LA County in exchange for kickbacks and bribes.  (SAC ¶103.)  Moving Defendants do not deny the existence of the kickback scheme in their declarations.  Accordingly, the Court denies the motion for summary adjudication of the tortious interference claim against Moving Defendants.     

Misrepresentation 

Moving Defendants argue Plaintiffs have not shown how any of the wrongdoing attributed to them give rise to a claim for fraud.  The Court disagrees. 

The elements of fraud are (1) a misrepresentation (false representation, concealment or nondisclosure), (2) scienter or knowledge of its falsity, (3) intent to induce reliance, (4) justifiable reliance and (5) resulting damage.  (Hinesley v. Oakshade Town Ctr. (2005) 135 Cal.App.4th 289, 294.)  The dispute here centers on whether Plaintiffs have adequately pleaded facts which show who, when, where, to whom, and by what means the representations were tendered.  (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.) 

However, the familiar¿who-what-where-when-how requirement for fraud claims is somewhat relaxed when, as here, the claim is based on an allegedly fraudulent omission.  (Alfaro v. Community Housing Imp. System & Planning Ass'n, Inc. (2009) 171 Cal.App.4th 1356, 1384¿(who-what-where-when-how rule “is intended to apply to affirmative misrepresentations . . .¿[I]t is harder to apply this rule to a case of simple nondisclosure. How does one show ‘how’ and ‘by what means’ something didn’t happen, or ‘when’ it never happened, or ‘where’ it never happened?”].) 

Here, Plaintiffs allege omissions, not affirmative misrepresentations.  Specifically, they allege the Director Defendants failed to disclose they were voting to move the MCLM collection to CSUDH in exchange for kickbacks from Defendants Ridley-Thomas and CSUDH; they had no intention of abiding by the bylaws, and they were self-dealing in approving payments to friends or personal subsidiaries.  (SAC ¶ 109.) 

Moving Defendants’ declarations do not deny these material omissions.  They do not deny there was a kickback scheme, or they were engaged in self-dealing.  Accordingly, the Court denies summary adjudication of the fraud claim.     

Punitive Damages 

Moving Defendants argue that Plaintiffs’ claim for punitive damages must fail because he has not acted with malice, oppression or fraud.  The Court disagrees.   

Cal. Civ. Code section 3294 provides the basis upon which punitive damages can be recovered.¿ Punitive damages may only be sought where there is clear and convincing evidence that the defendant has been guilty of malice, oppression or fraud:¿ 

(c)(1) “Malice” means conduct which is intended to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.¿ 

(c)(2) “Oppression” means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights.¿ 

(c)(3) “Fraud” means an intentional misrepresentation, deceit or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise¿ 

causing injury.¿¿ 

(Civ. Code §3294.)¿ 

Section 3294 was amended in 1987 to increase the burden of proof required in order to allege a punitive damages claim as well as to raise the level of misconduct necessary for an award of punitive damages.¿ The California Supreme Court has ruled that the insertion of the word “despicable” in section 3294 created a “new substantive limitation on punitive damage awards.”¿ (College Hospital Inc. v. Superior Court (1994) 8 Cal.4th 704, 725.)¿ “Despicable” means conduct that is “so vile, contemptible, miserable, wretched or loathsome that it would be looked down upon and despised by ordinary decent people.”¿ (Scott v. Phoenix Schools, Inc. (2009) 175 Cal.App.4th 702, 715.)¿ “Such conduct has been described as having the character of outrage frequently associated with [a] crime.”¿ (Id.)¿ 

Punitive damages are disfavored by public policy and are allowed only under the most extreme circumstances and in the “clearest of cases.”¿ (Woolstrum v. Mailloux (1983) 141 Cal.App.3d Supp. 1, 9.)¿ “To contain the generosity and emotionality of juries, appellate courts have set the threshold high in defining situations in which punitive damages can be given.¿ Conduct which may be characterized as unreasonable, negligent, grossly negligent or reckless does not satisfy the highly culpable state of mind warranting punitive damages.¿ Conduct which warrants punitive damages must be of such severity or shocking character [as] warrants the same treatment as accorded willful misconduct – conduct in which defendant intends to cause harm.”¿ (Id. at 10 (internal quotations and citations omitted).)¿¿ 

Here, Moving Defendants’ declarations fail to address the existence of a kickback or other self-dealing scheme.  The existence of such a scheme could support a finding of malice, oppression or fraud.  Accordingly, the Court denies the motion for summary adjudication as to the punitive damages claim.      

CONCLUSION 

Based on the foregoing, the Court DENIES Moving Defendants’ motion for summary judgment and GRANTS IN PART and DENIES IN PART their motion for summary adjudication.  

IT IS SO ORDERED. 

DATED: February 16, 2024 ___________________________ 

Edward B. Moreton, Jr. 

Judge of the Superior Court