This opinion is subject to revision before final publication in the Pacific Reporter.

2013 UT 33

I N T HE 

## S UPREME 

## C OURT OF THE 

## S TATE OF 

## U TAH

——————

— H I

- C OUNTRY P ROPERTY R IGHTS G ROUP , L INDSAY A TWOOD , J ERRY G ILMORE , and B RANDON F RANK , individually and for an d on behalf of H I

- C OUNTRY E STATES H OMEOWNERS A SSOCIATION ,

P HASE II, a Utah n on

- profit corporation
, Plaintiffs and Appellants

,

v.

K EITH E MMER , T OM W ILLIAMS , A NTHONY S ARRA , A RLENE J OHNSON , C AROL D EAN , H I

- C OUNTRY E STATES H OMEOWNERS A SSOCIATION , P HASE II , a Utah non

- profit corporation; and D OES 1

- 100,

Defendants and Appellees

.

——————

— No. 20 120202 Filed June 7 , 2013

——————

— Third District

, Salt Lake The Honorable Tyrone E. Medley

No. 090920250

——————

— Attorneys: Troy L. Booher, Clemens A. Landau, Wade R. Budge, Michael J. Thomas

, Salt Lake City, for appellants

. Glenn C. Hanni , Stuart H. Schultz, Salt Lake City, for appellees

.

——————

— J USTICE L EE authored the opinion of the Court, in which C HIEF J USTICE D URRANT , A SSOCIATE C HIEF J USTICE N EHRING , J USTICE D URHAM , and J USTICE P ARRISH joined.

——————

—
J USTICE L EE , opinion of the Court : ¶1 This is an appeal from the dismissal of a derivative suit against the directors of a homeowners association. The derivative plaintiffs are disgruntled property owners who allege that the d irectors favored their own properties in allocating limited r oad construction and maintena nce funds.H I

- C OUNTRY P ROPERTY R IGHTS G ROUP v. E MMER Opinion of the Court

2 ¶2 Instead of defending on the merits, the directors sought to avail themselves of the procedure set forth in Utah Code section
16

- 6a

- 612(4)

— a provision allow ing the board to appoint an ind ependent committee to evaluat e whether maintenance of a deriv ative suit is in the best interest of the nonprofit corporation. The
committee appointed by the directors consisted of two current members and one former member of the board. All owned pro perty allegedly receiving preferenti al treatment. Following an i nvestigation, the committee issued a detailed report. Based on this report, the board sought to have the suit dismissed under section 612 (4)(a). The district court dismissed the suit and the plaintiffs appealed , asserting that the district court erred in concluding that the members of the committee were ― independent ‖ under section 612(4)

. ¶3 We agree and now reverse. We find error in the standard of ―independence‖ applied in the court below, and take this oppo rtunity to clarify t he standard that governs under section 612(4). And under that standard, we conclude that unresolved factual i ssues relating to the independence of the committee members make it impossible for us to make this mixed

- question determin ation in the first instan ce on appeal. We accordingly reman d for further proceedings not in consistent with this opinion.

I
¶4 Hi

- Country Estates Homeowners Association ( HOA) is a nonprofit corporation that provide s road maintenance and other services to the Hi

- Country Estates Phase II development near Herriman. The HOA funds it s activities by levying annual a ssessments on all development property owners, and a high pe rcentage of these assessment proceeds are used for road const ru ction and maintenance. A five

- person board of directors controls the allocation of these funds.
¶5 S everal property owners brought a derivative suit on b ehalf of the HOA against the board’s five directors

— Keith Emmer, Tom Williams, Anthony Sarra, Arlene Johnson, and Carol Dea n. Th es e plaintiff property owners

— who owned property in Area D, which was only accessible by foot, horseback, or ATV

— alleged in a verified complaint that the directors had breached their fiduc iary duties by selectively choosing to construct and maintain roads to benefit their own properties, thus disadvantag ing the plaintiffs.Cite as: 2013 UT 33 Opinion of the Court

3 ¶6 Pursuant to Utah Code section 16

- 6a

- 612(4), t he directors responded by appoint ing a special committee to investigate th e plaintiffs’ claims. This provision allows a corporation to appoin t a ―committee consisting of two or more independent directors‖ to determine whether the derivative suit is in the ―best interest of the nonprofit corporation.‖ I f an independent committee determines that such a suit is ―not in the best interest of the non profit corp oration,‖ then the statute provides that the ―derivative proceeding shall be dismissed by the court on motion by the corporation.‖
U TAH C ODE § 16

- 6a

- 612(4).
¶7 Th e special committee appointed by the HOA consisted of two current directors, Arlene Jo hnson and Anthony Sarra, and one former director, Kim Wilson (who had served on the b oard from 1994 to 1999). Both Johnson and Sarra had been involved in making the road maintenance and construction decisions that the plaintiffs sought to challenge. Wilson too had been involved in making similar decisions during his time serving on the board

. All three of the members of the special com mittee also owned lots that were alleged by the plaintiffs to have received preferential

treatment. 1 In addition , Wilson had some level of social engag ement with members of the board and had previously worked for Sunrise Engineering, Inc., one of the compa nies used by the HOA for its road maintenance pro jects.
¶8 Together, the committee completed an investigation into the derivative complaint and authored a report. Mr. Emmer, the board’s president

, read the report and recommended to the other board members tha t the suit be dismissed. The board voted to recommend dismissal to the district court

. Sarra and Johnson a bstained from this vote

. ¶9 The property owners opposed the motion and requested time to cond uct additional discovery under r ule 56(f) of the Utah Rules of Civil Procedure . The district court granted this motion, and after further discovery, the board renewed its motion to di smiss, asserting that the ―undisputed material facts show that the board members acted in good faith, with the care of ordinarily

1 All own lots located on Shaggy Mountain Road, a gravel road maintained by the HOA. Shaggy Mountain Road is accessible via Mountain Top Road, a pa ved road maintained by the HOA.H I

- C OUNTRY P ROPERTY R IGHTS G ROUP v. E MMER Opinion of the Court

4 pr udent persons, and in a manner reasonably believed to be in the best interests of the nonprofit corporation.‖
¶10 The district court granted the directors’ motion

. That m otion had urged the court to treat the motion to dismiss as ―one for summary judgment‖ s ince it ―present[ed] matters outside the pleadings.‖ And the district court did so, applying a summary judgment standard in determining that ―[t]here are no genuine issues of material fact with respect to the independence of the members of the SLC.‖ The court concluded that ―board membe rship‖ and ―being named as a director defendant‖ were insuff icient to call into question the independence of Arlene Johnson and Anthony Sarra. And it further determined that Wilson’s ind ependence was not called into que stion by the ―casual social rel ationship‖ and ―business relationship‖ he had with other members of the board, since both were ―limited in nature.‖
¶11 The district court accordingly held that the committee had

― made a determination in good faith, conducted a reasonable i nquiry upon which its decision was based,‖ and that there was a ―reasonable basis for the [committee’s] conclusion that the deriv ative proceeding [was] not in the best interest of the [HOA].‖ The plaintiff property owners appe aled

. II
¶12 The appe llant property owners 2 challenge the dismissal of their suit on several grounds. Their principal contention, however,
is that the special committee appointed by Hi

- Country’s board was not independent within the meaning of Utah Code section 16

- 6 a

- 612(4). 3 We find error in the standard of ―independence‖ a pplied by the district court, and reverse on that basis.

2 The HOA is the nominal appellant because this is a derivative
suit. See U TAH C ODE § 16

- 6a

- 612(1) (―[A derivative] proceeding may be brought in the right of a nonprofit corporation to procure a judgment in its favor by a complainant who is . . . a voting member . . . .‖). For clarity, however, we refer to the property owners as the appellants, given their role in pressing arguments on behalf of the HOA.

3 They also argue that the committee failed to conduct a ―re asonable inquiry‖ within the meaning of section 612(4)(a). We find no fault with the district court’s decision upholding the reason a-Cite as: 2013 UT 33 Opinion of the Court

5 ¶13 We do so under a standard of review that affords some deference to the district court’s ultimate determination of ind ependence (but not to the legal standard forming the premise of its decision) . As explained in greater detail below, the decision to dismiss a derivative suit under Utah Code section 16

- 6a

- 612(4)(a) involves several mixed determinations , see Manzan a res v. Byington (In re Adoption of Bab y B

. ) , 2012 UT 35, ¶ 40, __ P.3d __

— including an assessment of whether special litigation committee members are ―independent‖ within the meaning of Utah Code section 16

- 6a

- 612(4)(b). And because , as clarified below, ―independence‖ d eterminations depend on the ―particular facts and circumstances‖ of each case, these assessment s would generally be entitled to

some measure of deference. S ee id. ¶ 43.
¶14 In this case, however, the district court exceeded whatever breathing room this deferential review standard generally affords

. It did so by committing two legal errors. 4 First, the court misa pprehended the meaning of ―independence ‖ under section 612(4)(b)

— and thus applied the wrong legal standard in assessing the committee’s independence. T he court also committe d a second

bleness of the committee’s inquiry, however. The committee’s i nvestigation was substantial. It (1) ―review[ed] the complaint do cuments, meeting minutes , governing documents, email commun ication, miscellaneous other communication, statistical dat a an d‖ records of past expenditures; (2) conducted at least twelve tel ephonic, in

- person and/or written inter views; (3) mailed a pos tcard to all who owned property in the development, expressing a desire to discuss issu es related to the litigation; (4 ) ―co mpleted a study comparing the volume of traffic on different roads within the association with the amount of money spent on the roads over the past fifteen years ‖; and (5 ) compiled a report that was more than forty

- pages long and was supported by many page s of su pporting documen tation.

4 Accordingly, we do not need to determine exactly how much deference such assessments would generally be afforded. See Manzanares v. Byington (In re Adoption of Baby B

. ) , 2012 UT 35, ¶¶ 42

– 44, __ P.3d __ (stating that the degree of deference afforded to mixed questions varies and explaining how to determine the degree of deference to afford to different types of these determin ations).H I

- C OUNTRY P ROPERTY R IGHTS G ROUP v. E MMER Opinion of the Court

6 error by invoking an improper procedural mechanism (summary judgment) in ruling on the corporation’s motion to dismiss

— a mechanism we find incompatible with section 612(4)(a). And b ecause the court left unresolved a number of factual issues rele vant to the independence inquiry in applying this summary judgment standard, we cannot make that assessment in the first instance on appeal. We accordingly remand so the district court can do so. B ecause we remand, we also reach another of the property own ers’ arguments

— and clarify that the special committee, not the board of directors, was required to independently recommend dismissal of the derivative suit.

A
¶15 Utah Code section 16

- 6a

- 6 12(4) prescribes mechanisms that boards of nonprofit corporations may employ to avoid merits litigation of derivative suits. Subsection (4)(a) provides that a d erivative proceeding ―shall be dismissed by the cou rt on motion by the corporation if a person or group s pecifie d in Subsection (4)(b)

. . . determines in good faith, after conducting a reasonable i nquiry upon which the person’s or group’s conclusions are based, that the maintenance of the derivative proceeding is not in the best in terest of the nonprofit corporatio n.‖ Subsection (4)(b)(ii) , in turn, states that the determination may be made by ―a majority vote of a committee consisting of two or more independent dire ctors appointed by a majority vote of independent directors pr esent at a meeting of the board of dire ctors, whether or not the i ndependent directors appointing the committee constitute d a quorum.‖ (Emphasis added.) 5

5 On appeal, the owners also challenge the mechanism used to appoint the special litigation committee, arguing that the commi ttee’s appointment was suspect because the appointing board members were not independent. This argument was not pr eserved, however, and we decline to reach it. Although the owners made argu ments regarding the independence of the directors in asserting that the directors should bear the burden of proof under section 612(4)(e) (and thus preserved that ar gument) , they never challenged the mechanism used to appoint the special litigation
committ ee. That question is accordingly not properly before us, as the district court never had an ―opportunity to rule on the issue.‖ Kell v. State , 2012 UT 25, ¶ 11, 285 P.3d 1133.Cite as: 2013 UT 33 Opinion of the Court

7 ¶16 The district court determined that all the requirements of subsection (4)

— including the independence requirement

— had been satisfied as a mat ter of law

. The owners asse r t that this was

error, argu ing that the indepen d ence of the committee members

was called into question by a number of facts, including that all three members of the committee own property bordering on the roads that allegedly received preferential trea t ment

. ¶17 We agree

. Although the Nonprofit Corporation A ct does not define the term ―independent,‖ see U TAH C ODE § 16

- 6a

612(4)(b), we discern an operative standard from d ictionary def initions of the term and from other textual and contextual cues within the statute : S pecial committees are independent only if there is a reasonable likelihood that they are able to ― base[]‖ their decision regarding a derivative suit ―upon‖ a ―reasonable i nquiry ‖ designed to assess whether tha t suit is in ―the best interest of the nonprofit corpora tion
, ‖ U TAH C ODE § 16

- 6a

- 612(4)(a)

, and

not on self

- interest, pressure from an outside source, or some ot her motivation. And under this notion of ―independence ,‖ the plaintiff homeowners’ allegations at least call into question the independence of the special committee members

— although unr esolved factual issues stemming from the district court’s applic ation of the summary judgment standard prevent us from making this independence assessment in the first instan ce on appeal

. 1
¶18 The operative term of the N onprofit C orporation A ct is that requir ing that members of a special committee be ―independent

. ‖
U TAH C ODE § 16

- 6a

- 612(4)(b). Because that term is not expressly defined in the Act, 6 and does not appear to be a technical term of

6 This is in contrast to the Model Nonprofit Corporation Act, which contains a provision

— nearly identical to the one in section 612(4)(b)

— permitting a special committee of ―independent dire ctors‖ to recommend dismissal of a derivative suit. M ODEL N ONPROFIT C ORP

. A CT § 13.05( a)

– (b) (2008). The model act defines an ―independent direct or‖ as one who ―does not have: (1 ) a mat erial interest in the outcome of the proceeding , or (2 ) a material r elationship with a person who has such an interest.‖ Id. § 13.05(f). A ―material interest‖ is defined as ―an actual or potential benefit or detriment

, ot her than one that would devolve on the nonprofitH I

- C OUNTRY P ROPERTY R IGHTS G ROUP v. E MMER Opinion of the Court

8 art, we construe it to partake of ―the ordinary meaning‖ the word ―would have to a reasonable person familiar with the usage and context of the language in question.‖ Olsen v. Eagle Mountain City

, 2011 UT 10, ¶ 9 & n.3 , 248 P.3d 465 (citing Oliver Wendell Holmes, The Theory of Legal Interpretation , 12 H ARV

. L. R EV

. 417,
417

– 18 (1899) (―[W]e ask, not what this man meant, but what those words would mean in the mouth of a normal speaker of English, using them in the c ircumstances in which they were used

. . . . ‖) ) ; O’Dea v. Olea , 2009 UT 46, ¶ 32, 217 P.3d 704 (nontechnical words are generally ―given the meaning which they have for la ymen in . . . daily usage‖ (internal quotation marks omitted) ).
¶19 The starting point for discerning such meaning is the di ctionary. A dictionary is useful in cataloging a range of possible meanings that a statutory term may bear. H ENRY M. H ART , J R ., &
A LBERT M. S ACKS , T HE L EGAL P ROCESS : B ASIC P ROBLEMS IN THE M AKING AND A PPLICATION OF L AW 1 375

– 76 (William N. Eskridge, Jr. & Phillip P. Frickey eds., 1994). It provides ―an historical re cord, not necessarily all

- inclusive, of the meanings which words in fact have borne.‖ Id . at 1190. Such a record, however, will often fail to dictate ―what mean ing a word must bear in a particular co ntext.‖ Id . (emphasis added). That question will often require fu rther refinement

— of selecting the best meaning among a range of options, based on other indicators of meaning evident in the ―co ntext of the statute (in cluding, particularly, the structure and la nguage of the statutory scheme).‖ Olsen , 2011 UT 10, ¶ 12. (a)
¶20 Dictionary definitions of ―independent‖ share a core co ncept . The consistent thread in the dictionaries we have consulted is a lack of ― influence, guidance, or control of another or others,‖

or a state of n ot being ― determined or influenced by someone or

corporation or the members generally, that would reasonably be expected to impair the objectivity of [a director’s ] judgment when participating in the action to be taken.‖ I d. § 1.40(34). And a ―m aterial relationship‖ is ―a familial, financial, professional, emplo yment , or other relationship that would reasonably be expected to impair the objectivity of [a director’s ] judgment when participa ting in the action to be taken.‖ Id

. § 1.40(35).Cite as: 2013 UT 33 Opinion of the Court

9 something else.‖ A MERICAN H ERITAGE D ICTIONARY 892 (5th ed. 2011) . Independence, in other words, conveys the idea of not b eing ―subject to the control or influence of another,‖ or of not being ―dependent or contingent on something else.‖ B LACK ’ S L AW D ICTIONARY 8 38 ( 9th ed . 200 9 ).
¶21 The key determinant of ―independence‖ under these def initions is the absence of factors or interests that might influence or control a decision or outcome. Yet this dictionary conception leaves unanswered two crucial considerations : what amounts to an external or outside influence, and how much such influence is sufficient to compromise one’s independence. The forme r consi deration obviously depends on the nature of the decision and the qualities expected of the decisionmaker. See id

. at 838

– 39 (defining ―independent advice ‖ as ―[c]ounsel that is impartial and not given to further the interests of the person giving it ‖). And the latter question is also open to context

- driven debate, as the cited defin itions themselves indicate. Compare A MERICAN H ERITAGE D ICTIONARY 892 (5th ed. 2011) (defining ―independent‖ as ― [ f ] ree from

. . . influence, guidance, or control ‖ (emphasi s added) )

, with
B LACK ’ S L AW D ICTIONARY 8 38 ( 9th ed. 2009 ) (suggesting a notion of independence requiring only that a decision not be ―dependent or contingent on something else‖).
¶22 To answer these questions, we look to other indicators of statutory meaning, focusing on the language and structure of the surrounding terms of the statute.
(b)
¶23 First, as to what amounts to an external influence, the sta tute speaks in both affirmative and negative terms. On the affirm ative side, the statute requires the committee’ s decision to be ―based‖ ―upon‖ a ―reasonable inquiry‖ into whether ―the maint enance of the derivative proceeding is

. . . in the best interest of the nonprofit corporation.‖ U TAH C ODE §16

- 6a

- 612(4)(a). That prov ision helps clarify the considerations on wh ich the committee’s d ecision is supposed to be based

— specifically, on the ―best interest of the corporation,‖ and not on any other interests.
¶24 Section (4)(c) reinforces this conclusion by negative forecl osure of specific outside influences that implicate so mething other than the interests of the corporation. The provision lists three fa ctors and provides that ―[n]one of [them] by itself causes a directorH I

- C OUNTRY P ROPERTY R IGHTS G ROUP v. E MMER Opinion of the Court

10 to be considered not independent

. ‖ U TAH C ODE § 16

- 6a

- 612(4)(c). We read the statute to deem the listed considerations relevant to the assessment of independence . We reach that conclusion under the presumption of independent meaning (and/or its converse, the presumption against surplusage), which, as applied here, a ssigns significance to the qualifying phras e ―by itself.‖ See VCS, Inc.

v. Utah Cmty. Bank , 2012 UT 89, ¶ 18, 293 P.3d 290 (rejecting an a rgument because it ran ―afoul of the settled canon of preserving independent meaning for all statutory provisions‖).
¶25 In context, that phrase implies that the li sted factors are at least relevant (if not sufficient) to establishing a lack of indepen dence. Omitting the qualifier (―by itself‖), in other words, would convey outright irrelevance of the listed factors, and we construe the added language to add somethin g

— here, to indicate that the considerations enumerated by (4)(c) are relevant , but just not alone sufficient. 7
¶26 Section 4(c)(i) , for example, illustrates the relevance of pe rsonal relationships through its identifi cation of a specific personal relationship that may cut against a finding of independence

— the nomination of a committee member by a director. See U TAH C ODE § 16

- 6a

- 612(4)(c)(i)

. And section 4(c)(ii) illuminates the importance of self

- interest by mak ing reference to a particular form of self

interest

— that implicated where a committee member is named as a defendant in the derivative suit. See id. § 16

- 6a

- 612(4)(c)(ii).
¶27 Section 4(c)(iii) confirms the statute’s focus on self

- interest as a key factor underm ining a committee member’s indepen de nce. Under this provision, ―the approval by the director of the act being challenged in the derivative proceeding or demand‖ is i nsufficient alone to foreclose a finding of independence ― if the act

7 The Wisconsin Supreme Court reached the same result in co nstruing an identical statutory provision, rejecting the proposition that the considerations enumerated in Wisconsin’s statute were irrelevant. See Einhorn v. Culea , 612 N.W.2d 78, 8 6 (Wis. 2000) (―The legislature understood the significance of the factors it listed. It allows the . . . court to give weight to these factors; the statute simply states that the presence of one or more of these fa ctors is not solely determinative of the issue of whether a director is independent.‖ (emphasis added)).Cite as: 2013 UT 33 Opinion of the Court

11 resulted in no persona l benefit to the director .‖ Id. § 16

- 6a

- 412(4)(c)(iii) (emphasis added). By negative implication, this provision su ggests that if a challenged act does result in a personal benefit to a director, then a lack of independence is strongly indicated. 8 T ogether , these provisions help clarify that personal relationships or self

- interest give rise to the kinds of influences that might unde rmine a committee member’s independence.
¶28 Thus, the structure and context of the Nonprofit Corpor ation Act make clear what is ot herwise missing from the dictionary definition of ―independent‖: The influences that may deprive a committee member of the independence required by statute are the self

- interests and personal relationships that have a tendency to undermine the statutory fo cus on the best interest of the corp oration. (c)
¶29 That leaves the question of how much outside influence is sufficient to compromise a committee member’s independence. A threshold answer to that question is also implicit in t he language and structure of sec tion (4) (c)

. ¶30 As noted above, that provision sets forth three consider ations that are relevant to independence assessments, supra ¶ ¶ 24

– 25 (explaining how the presumption against surpl u sage makes the factors in (4)(c) relevant), but emphasizes that these factors are i nsufficient, standing alone, to ―cause[] a director to be considered not independent.‖ In doing so, the provision indicates that ind ependence does not require a complete absence of any self

- interest or personal connection. 9

8 Section 612(3)(e) is to the same effect. In clarifying the scope of discovery available in these proceedings, this section condones an inquiry into ―whether the person or group conducting th e inquiry is independent and disinterested,‖ while foreclosing discovery of ―any facts or substantive issues with respect to the act, omission, or other matter that is the subject matter of the derivative procee ding.‖ (Emphasis added.) The implication is c lear. A committee member’s self

- interest is relevant to the pre

- merits ―indepen dence‖ inquiry.

9 The Wisconsin Supreme Court, in construing an identical sta tutory provision, reached the same conclusion. See Einhorn , 612H I

- C OUNTRY P ROPERTY R IGHTS G ROUP v. E MMER Opinion of the Court

12 ¶31 For example, the fact that a person was nominated as a d irector by a n individual named as a defendant in the derivative suit, see id. § 16

- 6a

- 612(4)(c)(i), may suggest a personal relatio nship between the individuals. I t may also suggest that the nom inated person might fee l somewhat beholden to or subject to infl uence by th e nominating individual

. And a ny of these possibilities might affect a special committee member’s judgment in assessing whether a suit against that person should proceed on the merits.
Y et section (4)(c) still says that the nomination is insufficient standing alone to establish a lack of independence.
¶32 Thus, the Nonprofit Corporation Act does not require sp ecial committee members to be completely free from influence, guidance, or control in order to qualify as independent. Instead, we read the statute simply to identify the kinds of considerations that might undermine a committee member’s independence, and to leave for case

- by

- case evaluation the question whether the committee member is r easonably likely to be able to base her dec ision on the best interest of the nonprofit corporation, and not on

some external consideration rooted in self

- interest or motivated by a personal relationship

. 2
¶33 T he district court erred in applying a standard that diver ges from the one outlined above. We also find error in the proc edural mechanism

— summary judgment

— that it invoked in reac hing its decision. And because that decision left unresolved some factual questions of relevance to the disposition of the case, we are unable to resolve the matter on the record before us. We accor dingly remand to allow the district court to do so under the stan dards set forth in this opinion.
(a)
¶34 In assessing the special litigation committee’s indepen dence, the district court applied a standard that diverged from the one set forth herein. It iden tified some external ―self

- interest‖ and

N.W.2d at 90 . (―A finding that a member of the special litigation committee is independent does not require the complete absence of any facts that might point to non

- objectivity. A director may be independent even if he or she has had some personal or business relatio n with an individual director accused of wrongdoing.‖).Cite as: 2013 UT 33 Opinion of the Court

13 ―personal relationship‖ considerations

— ―board membership‖ and ―being named as a director defendant‖ for Arlene Johnson and Anthony Sarra

, and a ―casual social relationship‖ and ―bus iness relationship with director defendants ‖ for Kim Wilson . But it did not address whether or to what extent these considerations were likely to affect the committee members’ decision.
¶35 More signifi cantly, the court ignore d the property owners’

asse rtion that ea ch of the committee members personally benefi ted from the allocation decisions challenged in the underlying suit due to their ownership of property situated on roads that allege dl y have received preferential treatment. R eceipt of such a ―pe rsonal benefit ‖ could jeopardize the independence of a special committee member under the statute

. See U TAH C ODE § 16

- 6a

612(4)(c)(iii)

. 10
¶36 The district court accordingly erred. The statutory standard as clarified above is a fact

- intensive one, not susceptible to the ca tegorical analysis it was given below.

10 The directors contend that this benefit is not a ―personal‖ one since the members of the committee were not the only ones who owned property located along roads serviced by the HOA . But that is bes ide the point. The mere fact that the benefit was not ―unique‖ to these committee members does not mean that it could not have been ―personal‖ to them. Whenever a ―group‖ receiving an allocation of a corporate benefit includes less than all corporate stak eholders, the allocation will have redistributive effects (in that those in the group will r eceive more than their share of the benefit). Such redistributive a llocations are like a dividend payable to only half of a corpor ation’s shareholders (including, c onveniently, the directors decla ring it). A dividend of that sort could hardly be dismissed as i mpersonal (in the way that a dividend to all shareholders would be). So the directors’ proposed group/individual distinction is unpersuasive. In assessing wheth er a benefit is a personal one, the focus should be on the likelihood that a particular benefit would lead a person to decide whether to recommend dismissal of the derivative suit in order to protect or preserve that benefit

— and not on an independent asses sment of the best interest of the co rporation.H I

- C OUNTRY P ROPERTY R IGHTS G ROUP v. E MMER Opinion of the Court

14 (b)
¶37 We likewise find error in the summary judgment mech anism employed in the disposition of the case. Summary judgment allows disposition before trial on issues on which there is no ge nuine issue of material fact. See U TAH R. C IV

. P. 56( c ). In cases where the evidence yields only one reasonable assessment of questions of fact, summary judgment avoids the cost and time of trial upon a determi nation that the moving party is entitled to judgment as a matter of law.
¶38 This mechanism is incompatible with the procedure for dismissal envisioned by section 612(4). The questions implicated on a statutory motion to dismiss by a special litigation committ ee do not lend themselves naturally to summary resolution. They are, as noted, inherently fact

- intensive. And thus they typically would not be susceptible to disposition on the basis of a lack of any ―genuine issue‖ of material fact. More often, the questi on of a special committee’s independence would implicate disputed i ssues of fact on which reasonable minds could differ.
¶39 That eventuality, under a summary judgment model, would require denial of the motion and deferral of the matter for trial. See U TAH R. C IV

. P. 56

. But such deferral is not tenable under the procedure envisioned by section 612(4). The statutory mech anism of dismissal is a basis for a threshold avoidance of discovery and trial on the merits. That mechanism cannot be folded into a trial on the merits without undermining its raison d‘etre

. ¶40 Thus, although the statute contemplates a pretrial motion, that motion cannot properly be shoehorned into rule 56. It must instead be viewed as a sui generis statutory proceeding

— one r equiring resolution o f disputed questions of fact of relevance to the statutory motion. (c)
¶41 We accordingly reverse the district court’s decision on the ground s that it was premised on a faulty legal standard and based on an inapplicable procedural framework . At the same time, we also acknowledge that our decision breaks new ground on issues of first impression in Utah, in a manner that the district court should not be faulted for not anticipating.Cite as: 2013 UT 33 Opinion of the Court

15 ¶42 On such a posture, we might ordinarily proceed to dete rmine whether the district court’s decision might still be affirmed under the legal standard as clarified on appeal. But that analysis is not possible on the current record. Unresolved factual questions bearing on independence make it impossible for us to resolv e that question in the first instance on appeal.
¶43 The unresolved issues include the above

- noted question of the nature and extent of the a lleged ―personal benefit‖ inuring to committee members as a result of their ownership of property si tuated on a road that allegedly received preferential treatment. See
U TAH C ODE § 16

- 6a

- 612(4)(c)(iii). Although the directors admit that the HOA had limited funds (likely not enough to construct and maintain all necessary roads) and that a substantial perce n tage of the assessments collected by the HOA are expe nded on road maintenance , there are unresolved factual disputes about whether the road allocation and maintenance decisions cha llenged in the derivative suit afforded the special committee me mbers any s ignificant benefit

— or, for that matter, whether these committee members received any preferential treatment at all. And without findings on these points, we cannot determine whether the receipt of this benefit was likely to taint the commi ttee’s decision.
¶44 The o wners also attack Mr. Wilson’s independence by claim ing that he had a social relationship with some of the dire ctors accused of wrongdoing in this derivative suit. And they a ssert that he was employed by Sunrise Engineering, a company that the HO A has hired in the past to work on its roads and that
continues to seek to obtain road maintenance contracts from the
HOA. But we do not know the extent of this social relationship or the scope of Mr. Wilson’s employment relationship.
¶45 Finally, the property owners assert that two committee members were directors who approved the acts being challenged
in the derivative suits (and were intimately involved in making those decisions as Director of Roads and Director of Legal), and that thos e members are also defend ants in this action. W hile there do not appear to be unresolved factual disputes relating to these particular assertions, there is certainly room for disagreement about the weight of these considerations in the overall assessment

o f all factors bear ing on independenc e . And we are in no positionH I

- C OUNTRY P ROPERTY R IGHTS G ROUP v. E MMER Opinion of the Court

16 to make that assessment before resolution of the factual disputes on other considerations.
¶46 In light of the se unresolved factual questions, we disagree with the directors’ assertion that ―the undisputed evidence un equivocally shows that the appointing directors and the SLC me mbers were independent‖ or that ―[p]laintiff has entirely failed to present any evidence that would negate that independence.‖ 11 The directors may or may not be right, but we are in no position to decide that in the first instance on appeal. We accordingly r emand to allow the district court to make this assessment, applying the definition of independence clarified in this opinion. 12

11 The board members’ allegation that they have done no wrong misses the mark. This is a merits argument. If it is true that they have done no wrong, presumably they will prevail in the deriv ative suit.

12 See E inhorn, 612 N.W.2d at 93

– 94 (determining that the district court had applied the wrong legal standard in assessing the ind ependence of the special committee members and remanding to the district court for an assessment of whether they were because ―the fac ts [were] in dispute, and the circuit court ha[d] not made suff icient findings of fact upon which [the Supreme Court could] a pply the legal test set forth‖); Hirsch v. Jones Intercable, Inc ., 984 P.2d 629, 638 (Colo. 1999) (en banc) (holding that ―the role of a Color ado trial court in reviewing an SLC’s decision regarding derivative litigation should be limited to inquiring into the independence and good faith of the committee. Here, the trial court did not make any findings with regard to whether the [SLC] was in fact independent and disinterested or whether the procedure [it] u ndertook for evaluating the claims was appropriate. . . . Here, the trial court decided not to defer to the [SLC’s] business judgment. That conclusion may or may not be correct, depe nding upon the answer to the questions of whether the [SLC] . . . was an ind ependent and disinterested decision

- maker. Hence, on remand, the trial court must make those prelimina ry determinations. If the [SLC]

. . . was independent, and did employ reasonab le proc edures in [its] analysis, then the court may not second

- guess [its] business judgment in deciding not to pursue the derivative litig ation.‖).Cite as: 2013 UT 33 Opinion of the Court

17 B
¶47 Because we remand, we also briefly address another issue that may arise on remand

. The property owners assert that where a nonprofit corporation elects to use a special committee in d etermining whether a derivative suit should be dismissed, the sp ecial com mittee, and not the tainted board, must determine whet her the maintenance of the derivative suit is or is not in the best i nterest of the corporation. We agree. Utah Code section 16

- 6a

612(4)(a) clearly states that it is the special committee (and not the board) that must make this determination and recommend ation 13

— although the statute does not foreclose the possibility that the special committee might recommend such a course of action and the board might then simply implement it. 14 Whether the
committee act ually did recomm end dismissal in this case appears to be a disputed issue on the record before us. Thus, on remand, if the directors continue to press their independence challenge, and if the court ultimately determines that the committee was ind ependent, the court must also determine that the committee

— not the board

— recommended dismissal of the suit in order for the court to accept its recommendation.

——————

13 See Janssen v. Best & Flanagan , 662 N.W.2d 876, 884 (Minn. 2003) (―The key element is that the board del egates to a committee of disinterested persons the board’s power to control the litig ation. A mere advisory role of the special litigation committee fails to bestow a sufficient legitimacy to warrant deference to the committee’s decision by the court.‖ (ci tation omitted)).

14 This is what the direct ors claim occurred in this case , and it a lso appears to be consistent with Utah Code section 16

- 6a

612(4)(a), which notes that it is the committee that must ―dete rmine[]‖ that the ―maintenance of the derivative pr oceeding is not in the best interest of the nonprofit corporation,‖ but says that the ―derivative proceeding shall be dismissed by the court on motion by the corporation.‖