The Case Of The Board Member Who Didn’t Show Up – Or Did She?

by Allen Matkins
Contact

Consider a board with a total of five authorized members but with only three members in office.  The board is facing a various contentious decision on whether to engage in a transaction.  Two of the board members favor approval and one opposes.  All three board members vote on whether to proceed with negotiations.  As expected, the vote is two votes for moving forward and one against.  The board then takes a vote on how to proceed.  Again, the vote is 2 to 1 in favor.  At this point, the board hasn’t taken final action to approve the matter, but it’s clear to all concerned that one board member is going to be voting against it.  When the time comes for a final decision, the board conducts the vote electronically.  This time, the dissenting board member does nothing.  When later asked why, she explains that she did nothing, not because she intended to abstain or to block the transaction, but simply because she did not realize that any further action on her part was required.  Has the board validly approved the transaction?

This was in essence the scenario considered by U.S. District Court Judge James Boasberg in Chamber of Commerce v. NLRB (U.S. Dist. Ct. D.C., May 14, 2012).   He concluded that the NLRB had not validly adopted a rule shortening the time for union elections because no quorum existed when the NLRB voted to approve the final rule.  While there are significant differences between corporate law and the National Labor Relations Act, the issues raised in the case should be of interest to corporate practitioners.

First, the NLRB argued that the board member’s opposition on preliminary matters sufficed to constitute participation in the decision.  The court, however, concluded that participation in preliminary votes did not constitute final agency action.  In the corporate context, it seems obvious that participation in votes authorizing management to negotiate the terms of a transaction or approving  procedural matters does not count as being present at a meeting to approve the transaction. 

Second, the NLRB argued that mere “presence” was sufficient to constitute a quorum.  Because the NLRB didn’t hold a physical meeting, the court had to consider how a quorum is constituted in an online context:

When the very concept of a quorum seems designed for a meeting in which people are physically present in the same place, what does it mean to be present or to participate in a decision that takes place across wires? In other words, how does one draw the line between a present but abstaining voter (who may be counted toward a quorum) and an absent voter (who may not be) when the voting is done electronically?

Judge Boasberg found that while the dissenting member had been sent notice that an electronic vote would be held, he was not present for quorum purposes: “he simply did not show up – in any literal or even metaphorical sense”.  The court did observe that had the board member affirmatively expressed his intent to abstain or even acknowledged receipt of the notification, he “may well have been legally ‘present’ for the vote and counted in the quorum.”

The California General Corporation Law permits, subject to specific conditions, participation in a board meeting either in person or by a variety of electronic methods.  Cal. Corp. Code § 307(a)(6).  Thus, the same question of what constitutes “presence” in an electronic meeting may also arise in the corporate context.

Finally, for administrative law buffs, Judge Boasberg has a footnote discussing whether the court should pay deference to the NLRB’s interpretation of the NLRA under Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 843 (1984).  He doesn’t mention, however, the U.S. Supreme Court’s recent, earlier decision in United States v. Home Concrete & Supply, LLC, No. 11-139, 2012 BL 101632 (U.S. Apr. 25, 2012) in which the court struggles with the question of Chevron deference.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Allen Matkins | Attorney Advertising

Written by:

Allen Matkins
Contact
more
less

Allen Matkins on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.