A little more than eight years ago, I wrote about U.S. District Court Judge Ronald M. Whyte's ruling that a corporate board of directors lacks the capacity of being sued. Theta Chi Fraternity, Inc. v. Leland Stanford Junior Univ., 212 F. Supp. 3d 816 (N.D. Cal. 2016). The question was recently addressed by U.S. Magistrate Judge Sean C. Riordan who reached the same conclusion as Judge Whyte:
Because ACRC is a corporation organized under the laws of California, state law governs the Board's capacity to be sued. See Fed. R. Civ. P. 17(b)(2)-(3). California's Supreme Court has not addressed whether a corporation's board may be sued as a separate legal entity. However, California's Corporation Code only identifies a corporation or association as entities that may be sued. See Cal. Corp. Code § 105. The Court is persuaded that ACRC's Board cannot be sued as an entity separate from ACRC. See Siegler v. Sorrento Therapeutics, Inc., No. 2020-1435, 2021 WL 3046590, at *10 (Fed. Cir. July 20, 2021) (“[U]nder California law, a plaintiff may not sue a corporation's board of directors as an entity separate from the corporation.”). Accordingly, the undersigned recommends ACRC's Board be dismissed with prejudice.
Chand v. Alta California Regional Center, 2024 WL 5040452 (E.D. Cal. Dec. 9, 2024). I have one cavil with Judge Riordan's ruling. Based on a search of the California Secretary of State's website, Alta California Regional Center (ACRC) is a nonprofit corporation. Hence Section 105 of the California Corporations Code is inapplicable. The applicable section is Section 5004.
The holding that one cannot sue "the board", does not itself preclude a lawsuit against the directors as individuals. Siegler v. Sorrento Therapeutics, Inc., 2019 WL 3532294, at *25 (S.D. Cal. Aug. 2, 2019) ("because Plaintiff was able to overcome this obstacle by naming the individual members of the SRNE Board of Directors as defendants in her SAC.").
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