Filed 2/14/23 Turner v. Pacifica Foundation CA2/7

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions 

not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion 

has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SEVEN

ANDREA TURNER et al.,

Plaintiffs and Appellants,

v.

PACIFICA FOUNDATION, INC.

et al.,

Defendants and Respondents.

 B314537

 (Los Angeles County

 Super. Ct. No. 

 20STCV46681)

APPEAL from an order of the Superior Court of 

Los Angeles County, Michael L. Stern, Judge. Reversed and 

remanded with directions. 

Alexander Morrison + Fehr, Tracy L. Fehr; The Jaffe Law 

Firm and Stephen R. Jaffe for Plaintiffs and Appellants Andrea 

Turner, Christina Huggins and Donald Goldmacher.
2

Grant | Shenon and Adam Grant for Defendant and

Respondent Pacifica Foundation, Inc.

Eisenberg & Associates and Mark S. Eisenberg for 

Defendants and Respondents Grace Aaron and Alex Steinberg.

_________________________

Andrea Turner, Christina Huggins and Donald Goldmacher

(collectively Turner parties), members of Pacifica 

Foundation, Inc. who serve on Pacifica’s national board of 

directors or the board of a local Pacifica radio station,

1 filed this

derivative lawsuit on behalf of Pacifica (named as a nominal 

defendant) against Grace Aaron and Alex Steinberg, members of 

Pacifica’s national board of directors or officers of the corporation, 

alleging Aaron and Steinberg breached fiduciary duties owed to 

Pacifica and engaged in misfeasance and malfeasance injuring 

the corporation. The trial court sustained without leave to 

amend Aaron and Steinberg’s demurrer to the third amended 

complaint and dismissed the action, ruling the Turner parties 

had failed to make the required prelitigation demand on the 

corporation or to adequately allege demand futility and, in any 

event, Aaron’s and Steinberg’s alleged misconduct was protected 

from liability by the business judgment rule. We reverse and 

remand with directions to sustain the demurrer with leave to 

amend the allegations purporting to satisfy the prelitigation 

demand requirement of Corporations Code section 5710, 

subdivision (b).

1 The Turner parties alleged that Turner was a member of 

Pacifica’s national board of directors and the local station board

of KPFA-FM, Pacifica’s Berkeley-based radio station, and that 

Huggins was chair and Goldmacher a member of the KPFA-FM 

local station board. 
3

FACTUAL AND PROCEDURAL BACKGROUND

1. The Turner Parties’ Allegations of Misconduct by Aaron 

and Steinberg

The Turner parties filed their original complaint on 

December 8, 2020, a first amended complaint on December 11, 

2020 and, pursuant to court order, a second amended complaint 

on February 22, 2021. After the court sustained Aaron and 

Steinberg’s demurrer to the second amended complaint with

leave to amend (discussed in the following section), the Turner

parties on May 17, 2021 filed the operative third amended 

complaint.

The third amended complaint alleged Steinberg was the 

current chair of Pacifica’s national board of directors and that 

Aaron and Steinberg at all relevant times served as members of 

the Pacifica board or officers of the corporation “and/or in another 

formal or de facto affiliation with Pacifica enabling each of them, 

individually or collectively, to exercise influence and control over 

the management and business affairs of Pacifica.”

2

Paragraph 12, with numerous lettered subparts, alleged (in 

language apparently identical to that in paragraph 12 of the 

second amended complaint),

3 that prior to commencing the 

lawsuit, the Turner parties and “others affiliated and aligned

with” them continually demanded that Aaron and Steinberg 

cease the actions alleged to constitute “misfeasance, malfeasance,

[and] breaches of fiduciary duties” (a phrase repeated throughout 

the pleading, which we shorten to “misconduct”). Included in the 

2 Our quotations from the parties’ papers omit unnecessary 

capitalization and their use of bold and italics font.

3 The second amended complaint is not included in the 

record on appeal.
4

paragraph were allegations concerning warnings and 

recommendations from the California Attorney General’s

charitable trust section regarding issues of corporation 

management that had been ignored by Pacifica’s board and 

unsuccessful attempts by the Turner parties to mediate their 

disputes. The paragraph specifically alleged all attempts to 

resolve the issues “have been, would have been and continue to 

be completely futile.”

The Turner parties alleged specific acts and omissions

constituting actionable misconduct, including interference with 

Pacifica’s professional staff, causing the corporation’s failure to 

comply with Federal Communications Commission (FCC),

Internal Revenue Service (IRS), and other federal and state

regulatory requirements; promoting and causing Pacifica to 

obtain a $3.2 million loan, secured by corporate assets, without 

an identifiable source of funds for repayment of its principal or 

interest; causing the corporation to revise its contribution 

formula, resulting in KPFA-FM, the only station not losing

money, to fund the vast majority of the costs of national 

operations; interfering in several specific ways with the ability of 

Pacifica to receive grants from the Corporation for Public 

Broadcasting (CPB); and facilitating a $500,000 loan to Pacifica

from Pacifica Supporters Loan LLC (PSLL), notwithstanding the 

wife of one of the owners of the lending entity was a member of 

the Pacifica national board and the other owner was closely

involved with Aaron’s separate nonprofit corporation. Other acts 

of purported misconduct, including retaliatory firings, failure to 

conform to the advice of corporate counsel and alienating 

listeners by bizarre programming, were also alleged.
5

Aaron’s and Steinberg’s misconduct, the Turner parties 

alleged, damaged Pacifica in the form of loss of donor and listener 

financial support and the loss, or imminent loss, of substantially 

all its assets, creating a risk of insolvency. The pleading labels 

its single cause of action as one for reimbursement of corporate 

loss and waste and prays for a judgment requiring Steinberg and 

Aaron to reimburse Pacifica for the damages and loss of assets

and revenue caused by their misconduct. 

2. Pacifica’s Demurrer to the Second Amended Complaint

Pacifica—the nominal defendant—demurred to the Turner 

parties’ second amended complaint, arguing they had failed to

properly make a prelitigation demand before filing the derivative 

lawsuit, as required by Corporations Code section 5710, 

subdivision (b). Aaron and Steinberg filed joinders in the

demurrer.

The Turner parties argued the allegations in paragraph 12 

of the pleading established they had satisfied the demand 

requirement. In addition, at the hearing on the demurrer,

counsel for the Turner parties represented that the then-current

iteration of the complaint had been sent to Pacifica’s counsel 

before it was filed. “That’s the definition of submitting a claim 

beforehand,” counsel argued. Counsel also addressed demand 

futility and asserted Pacifica’s repeated refusal to mediate the 

dispute with the Turner parties constituted adequate proof of 

demand futility. 

Responding to the demurrer as filed, the court stated, “I 

agree with the plaintiffs’ side that paragraph 12 fully put the 

defendants on notice. That issue is easily disposed of.” The court

then proceeded to address “problems with this complaint, which 

aren’t even discussed by either side.” The court indicated the 
6

allegations describing Aaron’s and Steinberg’s alleged breaches of

fiduciary duty, misfeasance and malfeasance were ambiguous 

and lacked specificity and suggested further amendment was 

appropriate.4 At this point, counsel for Pacifica, who had earlier 

submitted on his papers on the issue of prelitigation demand, 

argued the allegations in paragraph 12 did not satisfy the 

requirements of Corporations Code, section 5710, subdivision (b), 

and urged the court not to grant leave to amend. The court, 

without further comment on the demand requirement, ruled, 

“The demurrer is sustained with leave to amend to file a third 

amended complaint.”

3. Aaron and Steinberg’s Demurrer to the Operative Third 

Amended Complaint

After the Turner parties filed their third amended 

complaint, expanding somewhat the allegations of misconduct 

against Aaron and Steinberg, Pacifica answered, asserting as 

affirmative defenses the failure to make a prelitigation demand 

or to adequately detail why such a demand would be futile. 

Aaron and Steinberg demurred, arguing the action was timebarred, citing the three-year limitation period in Code of Civil

Procedure section 359; the pleading was unintelligible and failed 

to state facts sufficient to constitute any cause of action; and 

certain defenses (specifically, that board members of a nonprofit 

4 The court commented, for example, “[F]iduciary duty is

mentioned. There’s no misfeasance or malfeasance that’s spelled 

out. And I don’t know what the negligence is in this prayer for 

relief. . . . [W]here’s the duty and all of the rest of that? That’s, 

you know, that’s first-year Torts 101.” The court then asked 

counsel for the Turner parties, “Do you want to respond to that, 

Mr. Jaffe, or do you just want to try to draft another complaint 

with leave to amend?”
7

corporation are protected from personal liability by provisions of 

the Corporations Code, as well as by the common law business 

judgment rule) appeared on the face of the complaint.5

With the demurrer counsel for Aaron and Steinberg 

provided a declaration stating he had attempted to informally 

resolve the issues raised by the third amended complaint’s 

perceived pleading deficiencies by advising counsel for the Turner 

parties that the new complaint was virtually identical to the 

second amended complaint and “fails to allege specific facts that 

connect any of the instances of misconduct alleged in

paragraph 16 to my clients or to the alleged resulting harm. In 

each instance, the [third amended complaint] merely alleges my 

clients ‘caused’ the stated problem without saying how they did 

so. In many of those same instances, the [pleading] fails to 

separate the acts of my clients from the official acts of the 

Pacifica board acting as a whole.” Neither the demurrer nor

Aaron and Steinberg’s meet-and-confer communications with the 

Turner parties challenged the adequacy of their prelitigation

demand.

In their opposition papers the Turner parties referred to 

their lawsuit as a properly pleaded “members’ derivative action”

as defined by the Corporations Code when discussing the 

sufficiency of their allegations of misconduct by Aaron and 

Steinberg, but did not again address the prelitigation demand 

requirement. In their reply memorandum, however, Aaron and 

Steinberg argued the Turner parties had not made the necessary 

5 The demurrer also challenged what it described as the 

first cause of action for breach of contract for failure to state 

sufficient facts and as uncertain. The third amended complaint

contained no cause of action for breach of contract.
8

demand for action on the Pacifica board before filing the lawsuit 

or adequately pleaded demand futility.

6

At the hearing on the demurrer on July 23, 2021, according 

to the parties’ agreed statement, the court raised the 

Corporations Code’s requirement “to plead with particularity the 

individual plaintiffs’ efforts to convince Pacifica’s board to take 

their desired action, or why such efforts would be futile.”

7 In 

response, “[p]laintiffs’ counsel stated that, on April 20, 2021

[during the hearing on Pacifica’s demurrer to the second 

amended complaint], the court previously ruled the notice given 

to Pacifica Foundation in this action was legally sufficient.” The 

parties agree that “[n]othing further was said during the hearing 

regarding the notice issue.”

The parties then addressed whether the third amended 

complaint adequately responded to the court’s concerns, as 

expressed at the prior demurrer hearing, regarding the 

6 The Turner parties in their opposition memorandum and 

Aaron and Steinberg in their reply papers cited Corporations 

Code section 7110, which applies to nonprofit mutual benefit 

corporations, rather than Corporations Code section 5710, 

applicable to nonprofit public benefit corporations such as 

Pacifica. The substance of the demand/futility requirement in

the two provisions is the same.

7 At the hearing on the demurrer and in its subsequent order

sustaining the demurrer without leave to amend, the court cited

the prelitigation demand requirement of Corporations Code 

section 800, subdivision (b)(2), which applies to general 

corporations, rather than Corporations Code section 5710, 

subdivision (b), applicable to nonprofit public benefit 

corporations. The substance of the demand/futility requirement 

in these two provisions (and, as noted, in Corporations Code 

section 7110) is the same.
9

complaint’s lack of specificity as to the individual defendants’

misconduct. The court asked counsel for the Turner parties,

“[C]an you name one instance outside of the business judgment 

rule that harmed Pacifica? Start with Grace Aaron, the one you 

said was behind all of this, can you name just one thing she did to 

harm the corporation?” According to the agreed statement, 

“Plaintiffs’ counsel began to read the allegations of Paragraph 16 

aloud into the record. He had completed reading two of the 

sixteen subparagraphs of substantive allegations in 

Paragraph 16, when the court stated, ‘I’ve heard enough.’ 

Defendants’ counsel requested the opportunity to respond, but

the court did not recognize or respond to him. The court then 

electronically disconnected and ended the hearing without ruling 

on the demurrer or indicating what the ruling would be.” 

In an order filed July 30, 2021 the court sustained the

demurrer without leave to amend and dismissed the action. The 

court ruled the Turner parties had failed to satisfy the 

Corporation Code’s prelitigation demand or demand futility 

requirement and sustained the demurrer on that ground.8 In 

addition, the court ruled the pleading, “on its face, indicates that 

the individual defendants are protected from liability by the 

business judgment rule.” Explaining this aspect of its ruling, the

court stated, in part, rejection of the advice from the California 

Attorney General’s charitable trust section to implement a 

particular financial plan “concern[ed] an operational business 

8 The court in the opening paragraph of its ruling stated, 

“[t]here was a demurrer to the Second Amended Complaint on

the grounds that a corporate demand was never made. The 

demurrer on that ground was sustained with leave to amend. 

This issue is revisited by this demurrer . . . .”
10

decision within the board’s power.” Further, the court wrote, 

“While there are many alleged bad business decisions by the

Pacifica board alleged in the complaint, only two individual 

defendants from the many board members are singled out 

separately. They are not alleged as dominate [sic] members of 

the board, control the votes of other board members or had power 

over the other members of the board in decision-making. [¶] . . . 

The defendants’ actions must be presumed to have been made in 

good faith unless facts to the contrary are alleged. That is not 

the pleaded situation here.”

The Turner parties filed a timely notice of appeal from the 

order dismissing their action and a second notice of appeal from 

the judgment entered after the court awarded costs to Aaron and 

Steinberg. We ordered the two appeals consolidated.

DISCUSSION

1. Standard of Review

A demurrer tests the legal sufficiency of the factual 

allegations in a complaint. We independently review the trial 

court’s ruling on a demurrer and determine de novo whether the 

complaint alleges facts sufficient to state a cause of action or 

discloses a complete defense. (Mathews v. Becerra (2019)

8 Cal.5th 756, 768; T.H. v. Novartis Pharmaceuticals Corp. (2017) 

4 Cal.5th 145, 162.) We assume the truth of the properly pleaded 

factual allegations, facts that reasonably can be inferred from 

those expressly pleaded and matters of which judicial notice has 

been taken. (Evans v. City of Berkeley (2006) 38 Cal.4th 1, 20; 

accord, Centinela Freeman Emergency Medical Associates v.

Health Net of California, Inc. (2016) 1 Cal.5th 994, 1010;

Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081.) 
11

A demurrer based on an affirmative defense is properly 

sustained when the face of the complaint and matters judicially 

noticed clearly disclose the defense or bar to recovery. (Silva v. 

Langford (2022) 79 Cal.App.5th 710, 716; Favila v. Katten 

Muchin Rosenman LLP (2010) 188 Cal.App.4th 189, 224.) If “‘the 

complaint’s allegations or judicially noticeable facts reveal the 

existence of an affirmative defense, the “plaintiff must ‘plead 

around’ the defense, by alleging specific facts that would avoid 

the apparent defense. Absent such allegations, the complaint is 

subject to demurrer for failure to state a cause of action.”’”

(Esparza v. County of Los Angeles (2014) 224 Cal.App.4th 452, 

459.)

We affirm the judgment if it is correct on any ground stated 

in the demurrer, regardless of the trial court’s stated reasons

(Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 967; 

Las Lomas Land Co., LLC v. City of Los Angeles (2009) 

177 Cal.App.4th 837, 848), but liberally construe the pleading 

with a view to substantial justice between the parties. (Code Civ. 

Proc., § 452; Ivanoff v. Bank of America, N.A. (2017) 

9 Cal.App.5th 719, 726; see Schifando v. City of Los Angeles, 

supra, 31 Cal.4th at p. 1081.)

“‘Where the complaint is defective, “[i]n the furtherance of 

justice great liberality should be exercised in permitting a 

plaintiff to amend his [or her] complaint.”’” (Aubry v. Tri-City 

Hospital Dist., supra, 2 Cal.4th at p. 970.) A plaintiff may 

demonstrate for the first time to the reviewing court how a 

complaint can be amended to cure the defect. (Code Civ. Proc., 

§ 472c, subd. (a) [“[w]hen any court makes an order sustaining a 

demurrer without leave to amend the question as to whether or 

not such court abused its discretion in making such an order is 
12

open on appeal even though no request to amend such pleading 

was made”]; see Sierra Palms Homeowners Assn. v. Metro Gold 

Line Foothill Extension Construction Authority (2018) 

19 Cal.App.5th 1127, 1132 [plaintiff may carry burden of proving 

an amendment would cure a legal defect for the first time on 

appeal]; Rubenstein v. The Gap, Inc. (2017) 14 Cal.App.5th 870, 

881 [“‘[w]hile such a showing can be made for the first time to the 

reviewing court [citation], it must be made’”].)

2. Governing Law: The Demand Requirement and the 

Business Judgment Rule

Corporations Code section 5710, subdivision (b), part of

California’s Nonprofit Corporation Law (Corp. Code, § 5000 

et seq.), provides with respect to a nonprofit public benefit 

corporation such as Pacifica, “No action may be instituted or 

maintained in the right of any corporation by any member of such

corporation unless both of the following conditions exist: [¶]

(1) The plaintiff alleges in the complaint that plaintiff was a

member at the time of the transaction or any part thereof of

which plaintiff complains; and [¶] (2) The plaintiff alleges in the

complaint with particularity plaintiff’s efforts to secure from the

board such action as plaintiff desires, or the reasons for not

making such effort, and alleges further that plaintiff has either

informed the corporation or the board in writing of the ultimate

facts of each cause of action against each defendant or delivered

to the corporation or the board a true copy of the complaint which

plaintiff proposes to file.”

Functionally the same as the obligation to make a

prelitigation demand on the board of a general corporation or

allege facts sufficient to excuse the demand before filing a

derivative action specified in Corporations Code section 800,
13

“‘[t]he purpose of this requirement is to encourage intracorporate 

resolution of disputes and to protect the managerial freedom of 

those to whom the responsibility of running the business is 

delegated.’” (Shields v. Singleton (1993) 15 Cal.App.4th 1611,

1619; see Apple Inc. v. Superior Court (2017) 18 Cal.App.5th 222,

231-232 [“As a general rule, ‘[m]anagement of a corporation, 

including decisions concerning the prosecution of actions, is 

vested in its board of directors. When the board refuses to

enforce corporate claims, however, the shareholder derivative

suit provides a limited exception to the rule that the corporation

is the proper party plaintiff. In deference to the managerial role

of directors and in order to curb potential abuse, the shareholder

asserting a derivative claim must make a threshold showing that

he or she made a presuit demand on the board to take the desired

action’”].)

“Because the role of managing the business of the 

corporation is vested in its board of directors, not its shareholders

[citation], a shareholder seeking redress on behalf of the 

corporation for alleged mismanagement by corporate officers 

‘“must make an earnest, not a simulated effort, with the

managing body of the corporation, to induce remedial action on 

their part, and this must be apparent to the court.”’” (Apple Inc.

v. Superior Court, supra, 18 Cal.App.5th at p. 232.) In the

derivative complaint the plaintiff “‘must plead “with 

particularity” the attempts that were made to secure board action 

before bringing suit, or, alternatively, the factual basis upon 

which the plaintiff believes that a demand on the board was 

unnecessary, i.e., that a demand would have been futile.’” (Id. at 

p. 231; accord, Bader v. Anderson (2009) 179 Cal.App.4th 775, 

782.) A derivative complaint that fails to adequately allege 
14

compliance with the demand requirement is subject to demurrer. 

(Shields v. Singleton, supra, 15 Cal.App.4th at p. 1619.)

The prelitigation demand requirement “‘is merely an

extension of the business judgment rule, which dictates that 

judicial interference with corporate decision-making should be 

limited.’” (Shields v. Singleton, supra, 15 Cal.App.4th at p. 1619.) 

“‘The common law business judgment has two components—one

which immunizes [corporate] directors from personal liability if

they act in accordance with its requirements, and another which

insulates from court intervention those management decisions

which are made by directors in good faith in what the directors

believe is the organization’s best interest.’ [Citations.] A

hallmark of the business judgment rule is that, when the rule’s

requirements are met, a court will not substitute its judgment for

that of the corporation’s board of directors.” (Lamden v. La Jolla

Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249,

257; accord, Coley v. Eskaton (2020) 51 Cal.App.5th 943, 953;

Berg & Berg Enterprises, LLC v. Boyle (2009) 178 Cal.App.4th 

1020, 1045.)

The aspect of the common law rule relating to the personal

liability of directors of a nonprofit public benefit corporation is 

now defined by Corporations Code sections 5231 and 5233. Those 

provisions immunize directors for their corporate decisions that 

are made “in good faith, in a manner that director believes to be 

in the best interests of the corporation and with such care, 

including reasonable inquiry, as an ordinarily prudent person in 

a like position would use under similar circumstances” (Corp. 

Code, § 5231, subds. (a) & (c)), except if an interested director 

engages in a self-dealing transaction with the corporation. (Corp. 

Code, § 5233.) A director, however, cannot obtain the benefit of
15

the business judgment rule when acting under a material conflict

of interest. (Coley v. Eskaton, supra, 51 Cal.App.5th at p. 953;

Everest Investors 8 v. McNeil Partners (2003) 114 Cal.App.4th

411, 430; Gaillard v. Natomas Co. (1989) 208 Cal.App.3d 1250,

1263.) “Deference under the business judgment rule is premised

on the notion that corporate directors are best able to judge

whether a particular transaction will further the company’s best

interests. [Citation.] But that premise is undermined when

directors approve corporate transactions in which they have a

material personal interest unrelated to the business’s own

interest.” (Coley, at p. 953.)

3. The Trial Court Improperly Sustained the Demurrer

Without Leave To Amend for Failure To Comply with the

Prelitigation Demand Requirement

a. The trial court ruled on the prelitigation demand

issue without adequate notice to the Turner parties

The trial court’s handling of the question whether the

Turner parties satisfied the prelitigation demand requirement for

derivative lawsuit is difficult to fathom. As discussed, the

demurrer to the second amended complaint, filed by nominal

defendant Pacifica, raised only that issue. Following brief

comments from counsel for the Turner parties focusing on

demand futility and Pacifica’s counsel’s statement he did not

need to add anything to the argument in the corporation’s reply

memorandum, the court stated it “agree[d] with the plaintiffs’

side that paragraph 12 fully put the defendants on notice.”

9 The

court then addressed deficiencies it perceived in the second

amended complaint that were not discussed in the papers and

9 It appears from the reporter’s transcript that the court had

not provided a tentative ruling to the parties.
16

invited the Turner parties to attempt to cure those deficiencies

through amendment. The court thereafter sustained the

demurrer with leave to amend, but did not explain what it meant. 

Was it sustaining Pacifica’s demurrer, which properly raised only

the adequacy of the prelitigation demand?10 Or the phantom

demurrer never filed by Aaron and Steinberg that the court

apparently believed should have been filed?

The parties obviously believed it was the latter. The

Turner parties’ third amended complaint did not modify the

allegations in paragraph 12, which the court had already stated

gave the requisite notice. Neither Aaron and Steinberg’s meetand-confer letter following the filing of the third amended

complaint nor the demurrer they subsequently filed challenged

the adequacy of the Turner parties’ prelitigation demand. For its

part, Pacifica, while preserving the issue by pleading affirmative

defenses, answered the third amended complaint, rather than

again demurring, even though the language relating to the

demand and demand futility remained the same. Nonetheless, in

their reply memorandum Aaron and Steinberg attacked

paragraph 12 and argued the Turner parties had failed to comply

with the prelitigation demand requirement for a derivative action

filed by a member of a nonprofit corporation.11

10 Pacifica could not assert in its demurrer the issues raised 

sua sponte by the court. (See Apple Inc. v. Superior Court, supra,

18 Cal.App.5th at p. 239 [“while the corporation cannot ‘challenge 

the merits of a derivative claim filed on its behalf and from which 

it stands to benefit,’ it ‘may assert defenses contesting the 

plaintiff’s right or decision to bring suit, such as asserting the 

shareholder plaintiff’s lack of standing’”].)

11 In their respondents’ brief Aaron and Steinberg state, 

“Appellants raised the pre-litigation notification requirements of 
17

At the hearing on the demurrer to the third amended

complaint, when the court raised the issue, counsel for the

Turner parties explained the court had previously ruled the

notice given Pacifica was legally sufficient. As the parties recite

in their agreed statement, “Nothing further was said during the

hearing regarding the notice issue.” Yet in its ruling on the

demurrer, the court first said it had sustained the demurrer to

the second amended complaint on that ground—when it certainly

appears it did not—and then said the issue was being revisited by

the current demurrer—even though the issue was not included in

the demurrer and was only raised for the first time in the reply

memorandum. Thereafter, notwithstanding its assessment on

April 20, 2021 that Pacifica’s challenge to the adequacy of the

allegations of demand and demand futility in paragraph 12 was

“easily disposed of,” on July 30, 2021, addressing the identical

allegations, the court ruled those allegations were insufficient

and denied the Turner parties any opportunity to amend the

pleading. The Turner parties’ objection to the fairness of this

process is well-taken.

b. The issue of the adequacy of the prelitigation demand

has not been forfeited

Notwithstanding our serious concern about Aaron and

Steinberg’s failure to properly identify the adequacy of the

Corp. Code § 7710 in their opposition to the demurrer [AA 349], 

thereby requiring defendants to address it on reply.” While the 

Turner parties in their opposition to the demurrer did on the page 

cited refer, in general, to member derivative actions under 

Corporations Code section 7710, nowhere on that page—or 

anywhere else in the opposition papers—did they discuss the

prelitigation demand requirement.
18

prelitigation demand in their demurrer to the third amended

complaint and the trial court’s reversal of its determination that

the requirement had been satisfied without adequate notice to

the Turner parties, Aaron and Steinberg have not forfeited the

issue, as the Turner parties contend. Adequately alleging a

prelitigation demand or that such a demand would be futile is a

required element of a derivative plaintiff’s standing to file suit on

behalf of the corporation. (Apple Inc. v. Superior Court, supra,

18 Cal.App.5th at p. 248; Bader v. Anderson, supra,

179 Cal.App.4th at p. 793.) “[C]ontentions based on a lack of

standing involve jurisdictional challenges and may be raised at

any time in the proceedings.” (Zolly v. City of Oakland (2022)

13 Cal.5th 780, 789 [internal quotation marks omitted]; accord,

Common Cause v. Board of Supervisors (1989) 49 Cal.3d 432,

438.) Accordingly, a lack of standing may be claimed for the first

time on appeal. (Wanke, Industrial, Commercial, Residential,

Inc. v. AV Builder Corp (2020) 45 Cal.App.5th 466, 474;

Washington Mutual Bank v. Blechman (2007) 157 Cal.App.4th

662, 669.) The issue has been fully briefed and is now properly

before us. 

c. The Turner parties’ allegations of prelitigation

demand and demand futility are insufficient; leave to

amend must be granted

To reiterate, Corporations Code section 5710,

subdivision (b)(2), requires a derivative plaintiff to allege the

plaintiff’s efforts to secure from the board the action the plaintiff

desires or the reasons for not making such effort.12 The action

12 Corporations Code section 5710, subdivision (b)(1), also

requires the plaintiff to allege he or she was a member of the 

corporation at the time of the transactions complained of. 
19

the Turner parties seek in their derivative complaint is recovery

of money damages from Aaron and Steinberg for corporate waste

and breaches of fiduciary duty. Nowhere in the third amended

complaint is there an allegation that the Turner parties asked

the Pacifica board to attempt to obtain that relief. 

Recommendations by the Attorney General’s charitable trust

section that the board resolve various operational issues,

discussions by the Turner parties with Aaron, Steinberg and the

board concerning amendments to the corporation’s bylaws, and

efforts to mediate the ongoing disputes do not constitute a

demand the board take action against Aaron and Steinberg. 

However, at the hearing on the demurrer to the

second amended complaint, counsel for the Turner parties

advised the court he had provided a copy of that iteration of the

complaint to the corporation’s counsel before it was filed. 

Depending on the circumstances under which that occurred and

any discussion that may have accompanied it, that action may

satisfy the requirements of Corporations Code section 5710,

subdivision (b)(2). The Turner parties are entitled to leave to

amend to include this information in support of their standing as

derivative plaintiffs, as well as to supplement paragraph 12 with

any other material responsive to this issue. (Recall, the Turner

parties have not previously had a reason to expand their

prelitigation demand allegations because the trial court seemed

to overrule the only prior demurrer addressed to that issue.)

As for demand futility, the Turner parties point to their

allegations that Aaron, Steinberg and the entire Pacifica board

Paragraph 2 of the third amended complaint does just that, 

alleging that each of the Turner parties was a member of Pacifica

“[a]t all times mentioned herein.”
20

repeatedly disregarded warnings about financial and operational

misconduct raised by the Attorney General’s office and corporate

counsel and for years failed to comply with applicable laws and

regulations issued by the FCC, IRS and state regulators. 

Necessarily, they argue, any request for reform from plaintiffs

would have been equally unavailing.

While perhaps a reasonable worldview, this analysis does

not comply with the requirements for pleading demand futility as

articulated in case law. When, as is generally the case here, the

derivative claim stems from conduct that did not involve a

decision of the board, plaintiffs are “‘required to allege facts “with

particularity” [citation] sufficient to “create a reasonable doubt

that, as of the time the complaint is filed, the board of directors

could have properly exercised its independent and disinterested

business judgment in responding to a demand.”’ . . . Hence, ‘the

court must be apprised of facts specific to each director from

which it can conclude that that particular director could or could

not be expected to fairly evaluate the claims of the shareholder

plaintiff.’” (Apple Inc. v. Superior Court, supra, 18 Cal.App.5th at

p. 253; accord, Shields v. Singleton, supra, 15 Cal.App.4th at

p. 1622.) 

The third amended complaint contains no factual

allegations of any sort regarding nondefendant directors of

Pacifica other than the board member whose spouse was involved

with the PSLL loan, let alone specific facts permitting the

conclusion a majority of the directors could not fairly evaluate

claims that Aaron and Steinberg had breached fiduciary duties,

causing significant financial injury to the corporation. In sum,

the trial court correctly ruled, as pleaded, the allegations of

demand futility were insufficient. Again, however, given the lack
21

of notice to the Turner parties, if good faith amendments are

possible that would satisfy the requirements for establishing

demand futility, they are entitled to make a final attempt to

do so.

4. The Trial Court Improperly Sustained the Demurrer on

the Ground the Directors Were Protected from Liability

by the Business Judgment Rule

“‘Notwithstanding the deference to a director’s business

judgment, the [business judgment] rule does not immunize a

director from liability in the case of his or her abdication of

corporate responsibilities . . . .’ [Citation.] . . . ‘“When courts say

that they will not interfere in matters of business judgment, it is

presupposed that judgment— reasonable diligence—has in fact

been exercised. A director cannot close his eyes to what is going

on about him in the conduct of the business of the corporation

and have it said that he is exercising business judgment.”’

[Citations.] [¶] Put differently, whether a director exercised

reasonable diligence is one of the ‘factual prerequisites’ to

application of the business judgment rule.” (Palm Springs

Villas II Homeowners Assn., Inc. v. Parth (2016) 248 Cal.App.4th

268, 279-280; see Affan v. Portofino Cove Homeowners Assn.

(2010) 189 Cal.App.4th 930, 941, 943 [finding homeowners

association “failed to establish the factual prerequisites for

applying the rule of judicial deference” at trial, where “there was

no evidence the board engaged in ‘reasonable investigation’

[citation] before choosing to continue its ‘piecemeal’ approach to

sewage backups”]; Burt v. Irvine Co. (1965) 237 Cal.App.2d 828,

852 [“‘The rule exempting officers of corporations from liability

for mere mistakes and errors of judgment does not apply where 

the loss is the result of failure to exercise proper care, skill and 

diligence. “Directors are not merely bound to be honest; they 
22

must also be diligent and careful in performing the duties they 

have undertaken. They cannot excuse imprudence on the ground 

of their ignorance or inexperience, or the honesty of their 

intentions; and, if they commit an error of judgment through 

mere recklessness, or want of ordinary prudence and skill, the 

corporation may hold them responsible for the consequences”’”].)

Because application of the business judgment rule “‘raises 

various issues of fact,’ including whether ‘a director acted as an 

ordinarily prudent person under similar circumstances’ and 

‘made a reasonable inquiry as indicated by the circumstances’”

(Palm Springs Villas II Homeowners Assn., Inc. v. Parth, supra,

248 Cal.App.4th at p. 280), “‘[s]uch questions generally should be 

left to a trier of fact.’” (Ibid.; accord, Gaillard v. Natomas Co., 

supra, 208 Cal.App.3d at p. 1267.) However, as the trial court 

ruled, the business judgment rule creates a rebuttable 

presumption a director’s decisions were made in good faith and 

upon the exercise of informed judgment resulting from 

reasonable inquiry as to facts material to determining what 

action is in the best interests of the corporation. (Lee v.

Interinsurance Exchange (1996) 50 Cal.App.4th 694, 711, 715.) 

The presumption attaches only in the absence of bad faith or a 

conflict of interest and may be rebutted by showing the director 

acted without reasonable inquiry when such inquiry would 

otherwise be required. (Everest Investors 8 v. McNeil Partners,

supra, 114 Cal.App.4th at p. 431.)

The third amended complaint generally alleged Aaron and 

Steinberg knew their conduct was unlawful and failed to use 

reasonable business judgment when undertaking various actions 

causing harm to Pacifica, including preventing the timely

completion of annual audits necessary to qualify for federal 
23

grants and interfering with professional staff’s ability to comply 

with FCC and IRS requirements, risking loss of Pacifica’s taxexempt status. In addition, the Turner parties specifically

alleged Aaron improperly acted as a director in approving the 

$500,000 loan from PSLL to Pacifica in March 2018

notwithstanding a disqualifying conflict of interest—a conflict

highlighted in a warning letter from Pacifica’s corporate counsel 

attached as an exhibit to the pleading. They further alleged that 

Aaron and Steinberg in 2021 refused to allow the national board 

of directors to consider a proposal to purchase the broadcast 

license of New York City station WBAI-FM, which would have 

ameliorated the corporation’s dire financial situation, not because 

they believed in good faith the sale was not in the corporation’s 

best interests but based on their personal ideological beliefs. Also 

alleged was Aaron and Steinberg’s unlawful use of corporate 

funds to pay their attorney fees in defense of the Turner parties’

lawsuit.

Although the general allegations that Aaron and Steinberg 

acted without reasonable care to protect the interests of the 

corporation, without more, might be insufficient to rebut the 

presumption of good faith, at the pleading stage the Turner 

parties’ additional, specific allegations of bad faith in connection 

with the PSLL loan, the proposed sale of the WBAI-FM license 

and use of corporate funds to pay their own attorney fees 

adequately pleaded conduct outside the protection of the business 

judgment rule and were sufficient to survive demurrer. (See

Everest Investors 8 v. McNeil Partners, supra, 114 Cal.App.4th at

p. 430 [“[t]he business judgment rule does not shield actions 

taken without reasonable inquiry, with improper motives, or as a

result of a conflict of interest”]; Lee v. Interinsurance Exchange, 
24

supra, 50 Cal.App.4th at p. 715 [presumption created by the 

business judgment rule can be rebutted by affirmative allegations 

of facts that, if proved, “would establish fraud, bad faith, 

overreaching or an unreasonable failure to investigate material 

facts”].)

13 The trial court erred in sustaining the demurrer on 

this ground.

DISPOSITION

The order of dismissal is reversed and the cause remanded 

with instruction to the trial court to vacate its order sustaining 

Aaron and Steinberg’s demurrer without leave to amend and to

enter a new order sustaining the demurrer with leave to amend. 

The Turner parties are to recover their costs on appeal.

PERLUSS, P. J.

We concur:

SEGAL, J.

FEUER, J.

13 These allegations of misconduct were also sufficiently 

specific to defeat Aaron and Steinberg’s arguments, not 

addressed by the trial court when sustaining the demurrer, that 

the pleading was uncertain, failed to state facts sufficient to 

constitute a cause of action and did not identify any wrongful 

conduct that occurred within three years of the filing of the 

complaint (on December 8, 2020).