Opinion
NOT TO BE PUBLISHED
APPEAL from the judgment of the Superior Court of Los Angeles No. BC340518, Victor H. Person, Judge.
John T. Blanchard for Plaintiffs and Appellants.
Baker, Marquart, Crone & Hawxhurst and Ryan Geoffrey Baker; Quinn Emanuel Urquhart Oliver & Hedges, and Daniel L. Brockett for Defendants and Respondents.
Marcus, Watanabe, Snyder & Dave and Wendy Y. Watanabe for Defendants and Respondents Alyssa Watanabe and Oz Dror.
RUBIN, Acting P. J.
Joseph Brutto, Robert Orr, and Florence Butler, who are minority shareholders of Radiology Practice Management, Inc. (RPM), appeal from dismissal of their complaint against RPM’s other shareholders after the trial court sustained the demurrer of those several dozen shareholders without leave to amend. We reverse to allow appellant Brutto to amend the allegations of his cause of action for inducing breach of contract.
FACTS AND PROCEEDINGS
MEMRAD Medical Group (MEMRAD) is a California medical corporation based in Long Beach. Respondent doctors own all of the shares of MEMRAD’s stock.
Respondent doctors are: Kenneth W. Chin; Robert Marcus; Zareh Ounjian; Angela Sie; Richard Sullivan; Benjamin F. Cowan; Vincent Fennell; John E. Jordan; Robert A. Kolanz; Johnson Lightfoote; Karen Ragland-Cole; John W. Renner; Clyde W. Smith; William Shanahan; Allan Wagman; Carol Wong; Michael Kupfer; Kenneth Lynch; Kenneth Brown; Jhemon Lee; Scott Lipson; Merton Shew; Joel Garris; Alyssa Watanabe; and Oz Dror.
Radiology Practice Management, Inc. (RPM) is a Delaware corporation based in Long Beach. Its principal, if not sole, business is providing management services to MEMRAD. Respondent doctors own a majority of the shares of RPM’s stock; appellants, who were officers of RPM, own the rest of the shares. Appellants did not own any shares in MEMRAD.
Brutto was president and CEO and chairman of the board of directors. Orr was chief financial officer. Butler was vice president of operations.
In 1998, MEMRAD and RPM entered into a 40 year contract under which MEMRAD paid RPM for management services. In late 2004, MEMRAD’s outside consultants, respondents Thomas Pedersen and Patricia Aubort, wrote a report that appellants allege falsely accused appellants of mismanaging RPM. According to appellants, respondents Pederson and Aubort’s report gave respondent doctors a pretext to move against appellants. Citing the report, respondent doctors owning 61 percent of RPM’s stock signed a written consent of shareholders in November 2004 to replace all five of RPM’s then-serving directors with three respondent doctors (respondents Shanahan, Sullivan, and Lee) as the new directors.
Appellants allege RPM’s by-laws required five directors. Under the by-laws, doctors who owned shares in RPM were to hold three board seats. Two non-doctors – one of whom was to be a member of RPM’s management and had been appellant Brutto – were to hold the other two seats; an outsider who did not own any shares in RPM was to hold the second of the two non-doctor seats.
RPM’s new board placed appellants on administrative leave and installed consultants Pederson and Aubort as the new management. RPM’s new board and management terminated the service agreement with MEMRAD. In addition, RPM forgave millions of dollars of MEMRAD’s unpaid fees to RPM. The service agreement and MEMRAD’s fees constituted the “vast majority” of RPM’s assets; without them, RPM was an empty shell with virtually no value.
After RPM’s new board and management gutted RPM, appellants sued respondent doctors and consultants. They alleged respondent doctors breached the doctors’ fiduciary duty as majority shareholders by acting against the interests of appellants as minority shareholders of RPM. The complaint also alleged a cause of action by appellant Brutto against respondent consultants Pederson and Aubort for intentional interference with his individual employment contract with RPM.
Respondents demurred to the complaint. They argued they were individual minority shareholders who owed no fiduciary duty to other shareholders such as appellants. Respondents further argued that the “manager’s privilege” immunized newly-installed officers Pederson and Aubort from liability for interfering with RPM’s contracts when RPM acted through Pederson and Aubort to terminate RPM’s contract with Brutto.
The court sustained the demurrer with leave to amend. Addressing appellants’ first cause of action, the court accepted the proposition urged by appellants that, generally speaking, shareholders acting together to control a corporation owe a fiduciary duty to minority shareholders. But, the court further concluded, the mere act of voting by minority shareholders exercising their right to elect a board of directors does not involve wrongful conduct that breaches any such fiduciary duty. And, the court further added, the complaint’s vague allegations of a “conspiracy” among doctor respondents was insufficient to allege that the doctors – each of whom individually owned only about 2 or 3 percent of RPM’s stock – acted in concert so as to trigger a fiduciary duty. The court therefore sustained the demurrer, but granted appellants leave to amend to add allegations of wrongful conduct other than voting to install a new board of directors.
As for the interference cause of action involving Brutto’s employment contract, the court rejected respondents’ assertion of the manager’s privilege for Aubort and Pederson because it was an affirmative defense that the court could not resolve on demurrer. The court nevertheless sustained the demurrer to the interference cause of action with leave to amend because the complaint did not allege how Pederson and Aubort interfered with Brutto’s contract.
Appellants filed a first amended complaint, which is the operative complaint in these proceedings. Appellants alleged respondent doctors who collectively had a controlling interest in RPM had a fiduciary duty toward appellants who were minority shareholders. Appellants alleged respondent doctors violated their duty by installing a new board that eviscerated RPM by transferring RPM’s value to MERRAD shareholders (who were respondent doctors) through RPM’s forgiveness of MEMRAD’s multi-million dollar debt to RPM. According to appellants, RPM’s new board lacked lawful authority to act for RPM because respondents wrongfully used the artifice of a “written consent of shareholders” to install the new board, in violation of Corporations Code section 305, subdivision (b). According to appellants, section 305, subdivision (b) required RPM to hold a shareholders election or obtain the unanimous consent of all shareholders, neither of which occurred, to fill vacant seats on the board of directors following the old board’s ouster.
As for inducing breach of Brutto’s employment contract, appellants alleged consultants Pederson and Aubort interfered with the contract by conspiring with several respondent doctors to use their misleading report about RPM’s purported mismanagement as a pretext to obtain the written consent of the other respondent doctors to replace the old board with new directors.
The court sustained respondents’ demurrer to the first amended complaint without leave to amend. The court concluded voting by shareholders is not actionable, no matter the shareholders’ motives. What matters, the court stated, is conduct, and the conduct about which appellants complained was by RPM’s new board and management, not shareholders, in forgiving MEMRAD’s debt and terminating RPM’s management services contract with MEMRAD. The court further found that appellants’ allegation that the new board was unlawfully constituted failed because the section of the Corporations Code upon which appellants rested their argument – section 305, subdivision (b) – did not apply to non-California corporations such as RPM. (See Corp. Code, § 2115.) (Subdivision (c) of section 305 does apply to non-California corporations, however, and appellants’ argument on appeal shifts to that subdivision without expressly acknowledging their misreliance in the trial court on subdivision (b).) As for Brutto’s cause of action for interference with his employment contract, the court found that Aubort and Pederson’s submission to shareholder doctors of their written report about RPM’s purported mismanagement was not conduct that interfered with or induced RPM’s decision to terminate Brutto’s employment contract.
The court entered judgment for respondents. This appeal followed.
DISCUSSION
1. Appellants Fail to State a Cause of Action for Breach of Fiduciary Duty
RPM’s account receivable from MEMRAD for millions in unpaid fees was RPM’s corporate asset. RPM’s contract to provide management services to MEMRAD was RPM’s corporate contract. Appellants were not owed MEMRAD’s fees, and appellants were not parties to the management contract. When RPM’s board and management forgave MEMRAD’s unpaid fees and withdrew from the management service contract, RPM suffered the economic loss directly; appellants’ losses were indirect as shareholders in that their RPM stock lost value because of the alleged wrongs RPM suffered.
When a corporation suffers injury, and the shareholders’ losses are incidental to the corporation’s losses, the remedy is a derivative action brought by shareholders in the name of the corporation for the corporation’s benefit. As Schuster v. Gardner (2005) 127 Cal.App.4th 305 (Schuster), explains:
“An action is derivative if ‘ “the gravamen of the complaint is injury to the corporation, or to the whole body of its stock and property without any severance or distribution among individual holders, or if it seeks to recover assets for the corporation or to prevent the dissipation of its assets.” ’ [Citation.] . . . An individual cause of action exists only if damages to the shareholders were not incidental to damages to the corporation. [Citation.]” (Schuster at p. 313.)
The test for distinguishing between the propriety of pursuing a derivative action or a direct shareholders’ action focuses on who will benefit from the remedy a court may grant. (Tooley v. Donaldson, Lufkin & Jenrette, Inc. (Del.Supr. 2004) 845 A.2d 1031, 1033 [“in determining whether a stockholder’s claim is derivative or direct . . . [the] issue must turn solely on the following questions: (1) who suffered the alleged harm (the corporation or the suing stockholders, individually); and (2) who would receive the benefit of any recovery or other remedy (the corporation or the stockholders, individually)?”].) Here, appellants’ quest to recover unpaid fees and revive the service contract with MEMRAD directly benefits RPM; appellants benefit indirectly only to the extent the value of their stock in RPM rises if legal proceedings breathe new life into RPM. Accordingly, this lawsuit should be properly pursued as a derivative action. As the Delaware Supreme Court emphasized:
In addition to California law, we will for purposes of this appeal also consider Delaware law because appellants contend, without contradiction by respondents, that Delaware law applies to RPM as a Delaware corporation under California’s “internal affairs doctrine,” codified at Corporations Code section 2116. And as Schuster and Tooley demonstrate, both jurisdictions use the same legal test for determining whether a cause of action is direct or derivative.
“[C]ourts should look to the nature of the wrong and to whom the relief should go. The stockholder’s claimed direct injury must be independent of any alleged injury to the corporation. The stockholder must demonstrate that the duty breached was owed to the stockholder and that he or she can prevail without showing an injury to the corporation.” (Tooley v. Donaldson, Lufkin & Jenrette, Inc., supra, at p. 1039.)
The following two cases illustrate the impropriety of appellants’ direct action.
We begin with PacLink Communications Internat., Inc. v. Superior Court (2001) 90 Cal.App.4th 958 (PacLink). If one were to accept appellants’ claim of a direct injury to them entitling them to sue respondent doctors directly, PacLink would present an even stronger case for a direct action than do the facts here. But even under the facts of PacLink, no right to a direct action existed. PacLink involved a limited liability company, in which the plaintiffs owned a minority interest of slightly more than one-third of the company. (PacLink, at p. 961.) The majority members transferred the company’s assets without receiving consideration to another company in which the plaintiffs had no interest. The plaintiffs sued the majority members, alleging the majority had intentionally defrauded them of their interest in PacLink. The majority members defended against the lawsuit by arguing PacLink was the injured party, if any, with standing to sue for the purported wrongful transfer of its company assets. On review, the appellate court agreed. Noting that the same principles governing derivate lawsuits for corporations apply to limited liability companies, the PacLink court stated:
For our analysis, the differences between a limited liability company and a corporation are unimportant. “ ‘A limited liability company is a hybrid business entity formed under the Corporations Code and consisting of at least two “members” [citation] who own membership interests [citation]. The company has a legal existence separate from its members. Its form provides members with limited liability to the same extent enjoyed by corporate shareholders [citation], but permits the members to actively participate in the management and control of the company [citation].’ [Citation.]” (PacLink, supra, 90 Cal.App.4th at p. 963.)
“In this case, the essence of plaintiffs’ claim is that the assets of PacLink[] were fraudulently transferred without any compensation being paid to the LLC. This constitutes an injury to the company itself. Because members of the LLC hold no direct ownership interest in the company’s assets (Corp. Code, § 17300), the members cannot be directly injured when the company is improperly deprived of those assets. The injury was essentially a diminution in the value of their membership interest in the LLC occasioned by the loss of the company’s assets. Consequently, any injury to plaintiffs was incidental to the injury suffered by PacLink[].” (PacLink, supra, 90 Cal.App.4th at p. 964, fn. omitted.)
The second case illustrates an example of a proper direct action – and in offering that illustration, highlights the impropriety of appellants’ direct action. In Jara v. Suprema Meats, Inc., supra, 121 Cal.App.4th 1238, two shareholders who owned a majority of shares in a three shareholder corporation used their control of the corporation to increase their salaries as corporate officers to more than the amount agreed to by all three shareholders. By paying higher salaries, the corporation retained little or no money to pay dividends to shareholders, including the plaintiff minority shareholder. The minority shareholder sued to recover the excess compensation. He did not allege the extra compensation injured the corporation. Indeed, he acknowledged the corporation was successful due to the majority shareholders’ efforts, and conceded their pay was not unreasonable except for being more than the amount set under the shareholders’ agreement. The gist of his complaint was the excess compensation reduced corporate dividends to his unique detriment because he drew no excess corporate salary, unlike the majority for whom the excess compensation was tantamount to disguised dividends. In permitting the minority shareholder to sue directly, the appellate court noted:
We do not cite this second case – Jara v. Suprema Meats, Inc. (2004) 121 Cal.App.4th 1238 (Jara) – by accident. Appellants describe it as the “most comprehensive current analysis of California authorities” involving a shareholder’s right to directly sue other shareholders. Appellants assert Jara “completely answers the issues raised by these defendants and by the lower court.”
“[T]he record shows that the company in fact experienced extraordinary growth while preserving operating reserves and access to credit. Indeed, [the plaintiff] testified that he was happy with the way [the majority] ran the business. He does not claim that the company would have experienced still greater prosperity and growth if the salaries had been smaller but rather maintains that the payment of generous executive compensation was a device to distribute a disproportionate share of the profits to the two officer shareholders during a period of business success.” (Jara, supra, at p. 1258.)
Witkin’s summary of Jara’s significance supports our analysis of the decision. (9 Witkin, Summary of Cal. Law (10th ed. 2005) Corporations, § 181, p. 955.) “In Jara v. Suprema Meats (2004) 121 Cal.App.4th 1238, a minority shareholder brought an action for damages for breach of fiduciary duties against two majority officer shareholders who paid themselves excessive compensation without minority approval, which was required by a prior agreement. The trial court dismissed the action, finding that the claim required a derivative action, which plaintiff had not pleaded. Held, reversed. The payment of the generous executive compensation distributed a disproportionate share of the profits to the two officer shareholders during a period of business success. Thus, the potential damage was not to the business, but to plaintiff, in that he was deprived of his fair share of corporate profits. Under Jones [v. H. F. Ahmanson & Co. (1969) 1 Cal.3d 93, 108], plaintiff is not barred from bringing a personal action claiming damages for a breach of fiduciary duty by the majority shareholders. (121 C.A.4th 1259.)”
Appellants concede their claims support a derivative action, but contend the existence of the right to pursue a derivative action does not preclude a direct action. They are mistaken. Derivative actions and direct actions are mutually exclusive. “Shareholders may bring two types of actions, ‘a direct action filed by the shareholder individually (or on behalf of a class of shareholders to which he or she belongs) for injury to his or her interest as a shareholder’ or a ‘derivative action filed on behalf of the corporation for injury to the corporation for which it has failed or refused to sue.’ [Citation.] ‘The two actions are mutually exclusive: i.e., the right of action and recovery belongs either to the shareholders (direct action) or to the corporation (derivative action).’ [Citation.]” (Schuster, supra, 127 Cal.App.4th at pp. 311-312.)
Appellants attempt to circumvent their failure to pursue a derivative action by alleging respondent doctors breached the fiduciary duty respondents owed to minority shareholders such as appellants, giving appellants a direct claim against respondents. Generally speaking, shareholders have no fiduciary duty to other shareholders or the corporation they own. (Lynch v. Cook (1983) 148 Cal.App.3d 1072, 1082-1083 disapproved on another point by In re Marriage of Arceneaux (1990) 51 Cal.3d 1130, 1137-1138.) We accept, however, as did the trial court, that majority shareholders acting together to control a corporation owe a fiduciary duty to minority shareholders. (Jones v. H. F. Ahmanson & Co., supra, 1 Cal.3d 93, 108.) But the duty is not an abstract one, untied to any particular act or conduct. To breach the duty, the majority must exercise control in a wrongful way. The alleged wrongful conduct here was, broadly speaking, wasting corporate assets that left RPM a valueless hulk. But the actors who hollowed out RPM were the new officers and board, not respondent doctors.
The only conduct appellants properly pleaded against the majority is voting their shares to install a new board. Appellants cite no authority making shareholders liable for electing directors who waste corporate assets. Appellants state that “the defendants’ conduct in merely voting for the prohibited result is sufficient,” but they cite no authority to support that statement – a statement that may very well be the vital, but missing, link in the chain of liability they hope to forge between respondent doctors and RPM’s management and board. Immediately following their statement they cite two decisions, but neither discusses shareholder liability for voting. The decisions instead analyze the circumstances under which a minority shareholder can directly sue majority shareholders.
The first case, Smith v. Tele-Communication, Inc. (1982) 134 Cal.App.3d 338, involved a parent corporation that filed a consolidated tax return with the subsidiary while it engaged in liquidating the subsidiary. The filing captured tax benefits for the parent corporation and reduced the distribution to the single minority shareholder in the subsidiary. The court held that the gravamen of the complaint was injury to the plaintiff as the only minority shareholder arising from an alleged breach of fiduciary duty by the majority shareholder. The allegations “raised a question as to whether the allocation [of tax savings] was inherently fair and equitable” to the plaintiff.
The second decision was Crain v. Electronic Memories & Magnetics Corp. (1975) 50 Cal.App.3d 509 (Crain). There, a majority shareholder exercised its control over the company to sell the entire business to a third party for cash and then lend the cash back to the third party in return for an unsecured promissory note. The minority shareholders sued the majority shareholder alleging the transaction made the company a shell corporation with its principal asset being only an unsecured note. The court held that the complaint alleged a breach of fiduciary duty that entitled the plaintiffs to individual relief against the majority shareholder.
Jara says Smith and Crain “uphold the individual standing of a minority shareholder to bring suit against majority shareholders alleging a breach of a fiduciary duty that deprives the minority shareholder of a proportionate share of the corporation's value.” (Jara, supra, 121 Cal.App.4th at p. 1255.)
Jara discussed both Smith and Crain. It concluded they offered some support to individual claims by minority shareholder against majority shareholders who “retain a disproportionate share of the corporation’s ongoing value.” (Jara, supra, 121 Cal.App.4th at pp. 1255, 1258; see also Pareto v. F.D.I.C. (9th Cir. 1998) 139 F.3d 696, 700 [noting in Crain only minority shares rendered worthless].) Analyzing a body of law that it implied was unclear, Jara cut through the confusion by focusing on Jones. Jara stated, “This review of the case law serves to demonstrate that we may most profitably look to Jones itself in applying the distinction between individual and derivative actions. Jones not only represents controlling authority but also displays a clarity and relevance to the present case that we have not found elsewhere in the case law.” (Jara, at p. 1257.) Crain noted, “In Jones, the majority shareholder engaged in activities which increased the value of his shares at the expense of plaintiffs’ minority shares-which were rendered valueless. In the instant case, [the majority shareholder and the other defendants as its agents] likewise engaged in self-enriching activities” by generating a substantial sum of cash for themselves by selling the company’s assets. (Crain, supra, 50 Cal.App.3d at pp. 521-522.) Here, however, RPM’s majority shareholders as RPM shareholders were equally as injured as appellants when RPM’s new management gutted the company. Because the majority shareholders retained no greater or “disproportionate” share of RPM’s value as RPM shareholders than did appellants, Smith and Crain are distinguishable. The improper benefit that appellants claim respondent doctors received from the wrongful conduct came not in their capacity as RPM shareholders but as MEMRAD shareholders.
2. No Remedy in Corporations Code Governing Corporate Elections
Appellants concede the majority shareholders could lawfully remove the old board of directors. Appellants contend, however, that the new board was not lawfully constituted because the majority did not comply with Corporations Code section 305, subdivision (c). Broadly speaking, that statute applies when directors appointed by other directors to fill vacancies reduce the number of directors elected by shareholders to less than a majority of the directors. When it applies, the statute authorizes a shareholder owning more than 5 percent of voting shares to demand a special meeting for shareholders to elect a new board. Because there was no such meeting here, appellants contend RPM lacked a board after respondents removed the old board.
Subdivision (c) states: “If, after the filling of any vacancy by the directors, the directors then in office who have been elected by the shareholders shall constitute less than a majority of the directors then in office, then both of the following shall be applicable: [¶] (1) Any holder or holders of an aggregate of 5 percent or more of the total number of shares at the time outstanding having the right to vote for those directors may call a special meeting of shareholders, or [¶] (2) The superior court of the proper county shall, upon application of such shareholder or shareholders, summarily order a special meeting of shareholders, to be held to elect the entire board. The term of office of any director shall terminate upon that election of a successor.”
Appellants’ reliance on subdivision (c) fails. First, fellow directors did not appoint the new board; the majority shareholders selected it by written consent. Hence, a precondition for subdivision (c)’s application – appointed directors reducing elected directors to less than a majority of the board – does not exist here. Moreover, even if appellants had authority that for purposes of subdivision (c) selection by shareholders’ written consent is not equivalent to shareholder election, appellants do not explain how violation of subdivision (c) translates into the money damages they seek in their complaint.
Appellants also contend the selection of the new board members did not comply with RPM’s by-laws requiring that certain of the directors have no financial interest in the corporation. They do not, however, develop the point with citations to legal authority or argument beyond asserting that independent directors would have prevented the alleged looting. Accordingly, we pass on the contention as subsumed within the causation elements of their causes of action. (Landry v. Berryessa Union School Dist. (1995) 39 Cal.App.4th 691, 699-700.)
3. Complaint Fails to State a Cause of Action for Inducement of Breach of Contract
Appellant Brutto alleges consultants Pederson and Aubort interfered with his employment contract by writing a report that falsely accused him of mismanaging RPM. According to Brutto, the consultants knew several co-conspiring respondent doctors would circulate the report among other respondent doctors in order to get their written consent to remove the old board and install a new one. The court sustained respondents’ demurrer to the cause of action because the court found the complaint did not allege any acts by Pederson or Aubort that constituted interference; writing a report, the court concluded, was not by itself actionable.
Appellant Brutto requested leave to amend his complaint. We conclude such leave is proper because the record and appellants’ briefs suggest Brutto can allege Pederson and Aubort did more than write a report. (Qualcomm, Inc. v. Certain Underwriters At Lloyd’s, London (2008) 161 Cal.App.4th 184, 191 [in reviewing demurrer sustained without leave to amend, appellate court must “decide whether there is a reasonable possibility that the defect can be cured by amendment”].) According to Brutto, Pederson and Aubort “in the guise of being independent consultants, created a materially false and misleading report regarding the administration of the business, property and affairs of R.P.M. by the plaintiffs and the prior Board of Directors and gave that report to the Doctor Conspirator Defendants for their use in obtaining the other Doctor Defendants’ execution of the Written Consent.” In other words, the report was a pretext.
One who interferes with a contract need not have as his primary purpose the contract’s breach. (Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 56 [“the tort of intentional interference with performance of a contract does not require that the actor’s primary purpose be disruption of the contract”].) If the interferer’s primary purpose need not be the contract’s breach, it seemingly follows that one may state a cause of action if the interferer’s conduct was a necessary condition for the breach. Here, the conspiring doctors used the report to secure the other shareholders’ consent to replace the board. By replacing the board, the conspiring doctors laid the groundwork for terminating Brutto’s contract. As Brutto explains, the report “was part and parcel of the conspirator defendants’ scheme to seize and loot RPM, and that the discharge of plaintiff Brutto . . . was essential to their scheme.” (See Mayes v. Sturdy Northern Sales (1979) 91 Cal.App.3d 69, 79 overruled on other grounds in Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 521 fn.10 [cause of action arises when non-contracting parties conspire to induce breach of contract].) From such allegations, we find the pleadings hold open the possibility, subject of course to later proof, that Pederson and Aubort caused RPM to breach Brutto’s contract, and are thus potentially liable for inducing breach of contract.
DISPOSITION
The judgment is reversed and remanded for further proceedings. Each side to bear its own costs on appeal.
Although we include appellants’ attempts to state a direct cause of action for breach of fiduciary duty were unavailing, we leave open the question of whether appellants acting on behalf of RPM may upon remand amend their complaint to state a derivative cause of action. (See Gaillard v. Natomas Co. (1985) 173 Cal.App.3d 410, 413 overruled on another point in Grosset v. Wenaas (2008) 42 Cal.4th 1100, 1112 [suggesting proper approach if party cannot state derivative claim is to grant leave to amend to see if it can state another claim].) Because the parties did not brief this issue on appeal, we leave resolution of the question in the first instance to the trial court.
WE CONCUR: FLIER, J., EGERTON, J.,. Concurring and Dissenting:
Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
I join in Parts 1 and 2 of the majority opinion. As to Part 3, I would affirm the trial court’s order sustaining respondents’ demurrer without leave to amend.
Corporations Code section 2116 states: “The directors of a foreign corporation transacting intrastate business are liable to the corporation [and] its shareholders . . . [for] violation of official duty according to any applicable laws of the state or place of incorporation or organization, whether committed or done in this state or elsewhere. Such liability may be enforced in the courts of this state.”