Court Opinion

ID: 895648
Source: CourtListenerOpinion
Date Created: 2013-06-07 20:47:33.826416+00
Date Added: 2024-06-11T12:13:38.263877
License: Public Domain

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

                              2013 UT 33

                                IN THE
      SUPREME COURT OF THE STATE OF UTAH
                         ———————
 HI-COUNTRY PROPERTY RIGHTS GROUP, LINDSAY ATWOOD, JERRY
  GILMORE, and BRANDON FRANK, individually and for and on
  behalf of HI-COUNTRY ESTATES HOMEOWNERS ASSOCIATION,
            PHASE II, a Utah non-profit corporation,
                    Plaintiffs and Appellants,
                                   v.
KEITH EMMER, TOM WILLIAMS, ANTHONY SARRA, ARLENE JOHNSON,
 CAROL DEAN, HI-COUNTRY ESTATES HOMEOWNERS ASSOCIATION,
    PHASE II, a Utah non-profit corporation; and DOES 1-100,
                    Defendants and Appellees.
                        ———————
                         No. 20120202
                       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.
                        ———————
    JUSTICE LEE authored the opinion of the Court, in which
   CHIEF JUSTICE DURRANT, ASSOCIATE CHIEF JUSTICE NEHRING,
          JUSTICE DURHAM, and JUSTICE PARRISH joined.
                        ———————

 JUSTICE LEE, 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 di-
rectors favored their own properties in allocating limited road
construction and maintenance funds.
         HI-COUNTRY PROPERTY RIGHTS GROUP v. EMMER
                       Opinion of the Court

  ¶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 allowing the board to appoint an inde-
pendent committee to evaluate whether maintenance of a deriva-
tive 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 prop-
erty allegedly receiving preferential treatment. Following an in-
vestigation, 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 oppor-
tunity to clarify the standard that governs under section 612(4).
And under that standard, we conclude that unresolved factual is-
sues relating to the independence of the committee members
make it impossible for us to make this mixed-question determina-
tion in the first instance on appeal. We accordingly remand for
further proceedings not inconsistent with this opinion.
                                 I
  ¶4 Hi-Country Estates Homeowners Association (HOA) is a
nonprofit corporation that provides road maintenance and other
services to the Hi-Country Estates Phase II development near
Herriman. The HOA funds its activities by levying annual as-
sessments on all development property owners, and a high per-
centage of these assessment proceeds are used for road construc-
tion and maintenance. A five-person board of directors controls
the allocation of these funds.
  ¶5 Several property owners brought a derivative suit on be-
half of the HOA against the board’s five directors—Keith Emmer,
Tom Williams, Anthony Sarra, Arlene Johnson, and Carol Dean.
These 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 fiduci-
ary duties by selectively choosing to construct and maintain roads
to benefit their own properties, thus disadvantaging the plaintiffs.

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                       Opinion of the Court

  ¶6 Pursuant to Utah Code section 16-6a-612(4), the directors
responded by appointing a special committee to investigate the
plaintiffs’ claims. This provision allows a corporation to appoint a
―committee consisting of two or more independent directors‖ to
determine whether the derivative suit is in the ―best interest of the
nonprofit corporation.‖ If an independent committee determines
that such a suit is ―not in the best interest of the nonprofit corpo-
ration,‖ then the statute provides that the ―derivative proceeding
shall be dismissed by the court on motion by the corporation.‖
UTAH CODE § 16-6a-612(4).
  ¶7 The special committee appointed by the HOA consisted of
two current directors, Arlene Johnson and Anthony Sarra, and
one former director, Kim Wilson (who had served on the board
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 committee also owned lots
that were alleged by the plaintiffs to have received preferential
treatment.1 In addition, Wilson had some level of social engage-
ment with members of the board and had previously worked for
Sunrise Engineering, Inc., one of the companies used by the HOA
for its road maintenance projects.
  ¶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 that the suit be dismissed. The board voted to
recommend dismissal to the district court. Sarra and Johnson ab-
stained from this vote.
  ¶9 The property owners opposed the motion and requested
time to conduct additional discovery under rule 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 dis-
miss, asserting that the ―undisputed material facts show that the
board members acted in good faith, with the care of ordinarily

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

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         HI-COUNTRY PROPERTY RIGHTS GROUP v. EMMER
                      Opinion of the Court

prudent 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 mo-
tion had urged the court to treat the motion to dismiss as ―one for
summary judgment‖ since 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 member-
ship‖ and ―being named as a director defendant‖ were insuffi-
cient to call into question the independence of Arlene Johnson and
Anthony Sarra. And it further determined that Wilson’s inde-
pendence was not called into question by the ―casual social rela-
tionship‖ 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 in-
quiry upon which its decision was based,‖ and that there was a
―reasonable basis for the [committee’s] conclusion that the deriva-
tive proceeding [was] not in the best interest of the [HOA].‖ The
plaintiff property owners appealed.
                                II
  ¶12 The appellant property owners2 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-
6a-612(4).3 We find error in the standard of ―independence‖ ap-
plied by the district court, and reverse on that basis.

 2 The HOA is the nominal appellant because this is a derivative
suit. See UTAH CODE § 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 ―rea-
sonable inquiry‖ within the meaning of section 612(4)(a). We find
no fault with the district court’s decision upholding the reasona-

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                       Opinion of the Court

  ¶13 We do so under a standard of review that affords some
deference to the district court’s ultimate determination of inde-
pendence (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 Manzanares v. Byington
(In re Adoption of Baby 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‖ de-
terminations depend on the ―particular facts and circumstances‖
of each case, these assessments would generally be entitled to
some measure of deference. See 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 misap-
prehended the meaning of ―independence‖ under section
612(4)(b)—and thus applied the wrong legal standard in assessing
the committee’s independence. The court also committed a second

bleness of the committee’s inquiry, however. The committee’s in-
vestigation was substantial. It (1) ―review[ed] the complaint doc-
uments, meeting minutes, governing documents, email communi-
cation, miscellaneous other communication, statistical data and‖
records of past expenditures; (2) conducted at least twelve tele-
phonic, in-person and/or written interviews; (3) mailed a post-
card to all who owned property in the development, expressing a
desire to discuss issues related to the litigation; (4) ―completed 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 pages of sup-
porting documentation.
 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 determina-
tions).

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          HI-COUNTRY PROPERTY RIGHTS GROUP v. EMMER
                       Opinion of the Court

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 be-
cause the court left unresolved a number of factual issues relevant
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. Be-
cause we remand, we also reach another of the property owners’
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-612(4) prescribes mechanisms
that boards of nonprofit corporations may employ to avoid merits
litigation of derivative suits. Subsection (4)(a) provides that a de-
rivative proceeding ―shall be dismissed by the court on motion by
the corporation if a person or group specified in Subsection (4)(b)
. . . determines in good faith, after conducting a reasonable in-
quiry upon which the person’s or group’s conclusions are based,
that the maintenance of the derivative proceeding is not in the
best interest of the nonprofit corporation.‖ 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 direc-
tors appointed by a majority vote of independent directors pre-
sent at a meeting of the board of directors, whether or not the in-
dependent directors appointing the committee constituted a
quorum.‖ (Emphasis added.)5

 5  On appeal, the owners also challenge the mechanism used to
appoint the special litigation committee, arguing that the commit-
tee’s appointment was suspect because the appointing board
members were not independent. This argument was not pre-
served, however, and we decline to reach it. Although the owners
made arguments 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 argument), they never
challenged the mechanism used to appoint the special litigation
committee. 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.

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                       Opinion of the Court

  ¶16 The district court determined that all the requirements of
subsection (4)—including the independence requirement—had
been satisfied as a matter of law. The owners assert that this was
error, arguing that the independence 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 treatment.
  ¶17 We agree. Although the Nonprofit Corporation Act does
not define the term ―independent,‖ see UTAH CODE § 16-6a-
612(4)(b), we discern an operative standard from dictionary defi-
nitions of the term and from other textual and contextual cues
within the statute: Special 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 in-
quiry‖ designed to assess whether that suit is in ―the best interest
of the nonprofit corporation,‖ UTAH CODE § 16-6a-612(4)(a), and
not on self-interest, pressure from an outside source, or some oth-
er motivation. And under this notion of ―independence,‖ the
plaintiff homeowners’ allegations at least call into question the
independence of the special committee members—although unre-
solved factual issues stemming from the district court’s applica-
tion of the summary judgment standard prevent us from making
this independence assessment in the first instance on appeal.
                                 1
  ¶18 The operative term of the Nonprofit Corporation Act is that
requiring that members of a special committee be ―independent.‖
UTAH CODE § 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 direc-
tors‖ to recommend dismissal of a derivative suit. MODEL
NONPROFIT CORP. ACT § 13.05(a)–(b) (2008). The model act defines
an ―independent director‖ as one who ―does not have: (1) a mate-
rial interest in the outcome of the proceeding, or (2) a material re-
lationship 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, other than one that would devolve on the nonprofit

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          HI-COUNTRY PROPERTY RIGHTS GROUP v. EMMER
                        Opinion of the Court

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 HARV. L. REV. 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 circumstances 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 lay-
men in . . . daily usage‖ (internal quotation marks omitted)).
  ¶19 The starting point for discerning such meaning is the dic-
tionary. A dictionary is useful in cataloging a range of possible
meanings that a statutory term may bear. HENRY M. HART, JR., &
ALBERT M. SACKS, THE LEGAL PROCESS: BASIC PROBLEMS IN THE
MAKING AND APPLICATION OF LAW 1375–76 (William N. Eskridge,
Jr. & Phillip P. Frickey eds., 1994). It provides ―an historical rec-
ord, 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 meaning a word must bear in a particular con-
text.‖ Id. (emphasis added). That question will often require fur-
ther refinement—of selecting the best meaning among a range of
options, based on other indicators of meaning evident in the ―con-
text of the statute (including, particularly, the structure and lan-
guage of the statutory scheme).‖ Olsen, 2011 UT 10, ¶ 12.
                                  (a)
  ¶20 Dictionary definitions of ―independent‖ share a core con-
cept. 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 not 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.‖ Id. § 1.40(34). And a ―ma-
terial relationship‖ is ―a familial, financial, professional, employ-
ment, or other relationship that would reasonably be expected to
impair the objectivity of [a director’s] judgment when participat-
ing in the action to be taken.‖ Id. § 1.40(35).

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                        Opinion of the Court

something else.‖ AMERICAN HERITAGE DICTIONARY 892 (5th ed.
2011). Independence, in other words, conveys the idea of not be-
ing ―subject to the control or influence of another,‖ or of not being
―dependent or contingent on something else.‖ BLACK’S LAW
DICTIONARY 838 (9th ed. 2009).
  ¶21 The key determinant of ―independence‖ under these defi-
nitions 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 former consid-
eration 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 defini-
tions themselves indicate. Compare AMERICAN HERITAGE
DICTIONARY 892 (5th ed. 2011) (defining ―independent‖ as ―[f]ree
from . . . influence, guidance, or control‖ (emphasis added)), with
BLACK’S LAW DICTIONARY 838 (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 stat-
ute speaks in both affirmative and negative terms. On the affirma-
tive side, the statute requires the committee’s decision to be
―based‖ ―upon‖ a ―reasonable inquiry‖ into whether ―the mainte-
nance of the derivative proceeding is . . . in the best interest of the
nonprofit corporation.‖ UTAH CODE §16-6a-612(4)(a). That provi-
sion helps clarify the considerations on which the committee’s de-
cision 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 foreclo-
sure of specific outside influences that implicate something other
than the interests of the corporation. The provision lists three fac-
tors and provides that ―[n]one of [them] by itself causes a director

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          HI-COUNTRY PROPERTY RIGHTS GROUP v. EMMER
                       Opinion of the Court

to be considered not independent.‖ UTAH CODE § 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, as-
signs significance to the qualifying phrase ―by itself.‖ See VCS, Inc.
v. Utah Cmty. Bank, 2012 UT 89, ¶ 18, 293 P.3d 290 (rejecting an ar-
gument because it ran ―afoul of the settled canon of preserving
independent meaning for all statutory provisions‖).
  ¶25 In context, that phrase implies that the listed factors are at
least relevant (if not sufficient) to establishing a lack of independ-
ence. Omitting the qualifier (―by itself‖), in other words, would
convey outright irrelevance of the listed factors, and we construe
the added language to add something—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 per-
sonal relationships through its identification of a specific personal
relationship that may cut against a finding of independence—the
nomination of a committee member by a director. See UTAH CODE
§ 16-6a-612(4)(c)(i). And section 4(c)(ii) illuminates the importance
of self-interest by making 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 undermining a committee member’s independ-
ence. Under this provision, ―the approval by the director of the act
being challenged in the derivative proceeding or demand‖ is in-
sufficient alone to foreclose a finding of independence ―if the act

 7  The Wisconsin Supreme Court reached the same result in con-
struing 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, 86 (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 fac-
tors is not solely determinative of the issue of whether a director is
independent.‖ (emphasis added)).

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                         Opinion of the Court

resulted in no personal benefit to the director.‖ Id. § 16-6a-412(4)(c)(iii)
(emphasis added). By negative implication, this provision sug-
gests that if a challenged act does result in a personal benefit to a
director, then a lack of independence is strongly indicated.8 To-
gether, these provisions help clarify that personal relationships or
self-interest give rise to the kinds of influences that might under-
mine a committee member’s independence.
  ¶28 Thus, the structure and context of the Nonprofit Corpora-
tion Act make clear what is otherwise 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 focus on the best interest of the corpo-
ration.
                                    (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 the language
and structure of section (4)(c).
  ¶30 As noted above, that provision sets forth three considera-
tions that are relevant to independence assessments, supra ¶¶ 24–
25 (explaining how the presumption against surplusage makes the
factors in (4)(c) relevant), but emphasizes that these factors are in-
sufficient, standing alone, to ―cause[] a director to be considered
not independent.‖ In doing so, the provision indicates that inde-
pendence 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 the 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 proceed-
ing.‖ (Emphasis added.) The implication is clear. A committee
member’s self-interest is relevant to the pre-merits ―independ-
ence‖ inquiry.
  9The Wisconsin Supreme Court, in construing an identical stat-
utory provision, reached the same conclusion. See Einhorn, 612

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         HI-COUNTRY PROPERTY RIGHTS GROUP v. EMMER
                       Opinion of the Court

  ¶31 For example, the fact that a person was nominated as a di-
rector by an individual named as a defendant in the derivative
suit, see id. § 16-6a-612(4)(c)(i), may suggest a personal relation-
ship between the individuals. It may also suggest that the nomi-
nated person might feel somewhat beholden to or subject to influ-
ence by the nominating individual. And any of these possibilities
might affect a special committee member’s judgment in assessing
whether a suit against that person should proceed on the merits.
Yet 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 spe-
cial 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 reasonably likely to be able to base her deci-
sion 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 The district court erred in applying a standard that diverg-
es from the one outlined above. We also find error in the proce-
dural mechanism—summary judgment—that it invoked in reach-
ing 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 accord-
ingly remand to allow the district court to do so under the stand-
ards set forth in this opinion.
                                 (a)
 ¶34 In assessing the special litigation committee’s independ-
ence, the district court applied a standard that diverged from the
one set forth herein. It identified 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
relation with an individual director accused of wrongdoing.‖).

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                        Opinion of the Court

―personal relationship‖ considerations—―board membership‖
and ―being named as a director defendant‖ for Arlene Johnson
and Anthony Sarra, and a ―casual social relationship‖ and ―busi-
ness 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 significantly, the court ignored the property owners’
assertion that each of the committee members personally benefit-
ed from the allocation decisions challenged in the underlying suit
due to their ownership of property situated on roads that alleged-
ly have received preferential treatment. Receipt of such a ―per-
sonal benefit‖ could jeopardize the independence of a special
committee member under the statute. See UTAH CODE § 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 cat-
egorical 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 beside 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 stakeholders, the allocation
will have redistributive effects (in that those in the group will re-
ceive more than their share of the benefit). Such redistributive al-
locations are like a dividend payable to only half of a corpora-
tion’s shareholders (including, conveniently, the directors declar-
ing it). A dividend of that sort could hardly be dismissed as im-
personal (in the way that a dividend to all shareholders would
be). So the directors’ proposed group/individual distinction is
unpersuasive. In assessing whether 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 assessment of the best interest of the cor-
poration.

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          HI-COUNTRY PROPERTY RIGHTS GROUP v. EMMER
                       Opinion of the Court

                                 (b)
  ¶37 We likewise find error in the summary judgment mecha-
nism employed in the disposition of the case. Summary judgment
allows disposition before trial on issues on which there is no gen-
uine issue of material fact. See UTAH R. CIV. 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 determination 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 committee
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 question of a
special committee’s independence would implicate disputed is-
sues 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 UTAH R. CIV. P. 56. But such deferral is not tenable under
the procedure envisioned by section 612(4). The statutory mecha-
nism 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 re-
quiring resolution of disputed questions of fact of relevance to the
statutory motion.
                                 (c)
  ¶41 We accordingly reverse the district court’s decision on the
grounds 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.

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                        Cite as: 2013 UT 33
                       Opinion of the Court

 ¶42 On such a posture, we might ordinarily proceed to deter-
mine 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 resolve that
question in the first instance on appeal.
  ¶43 The unresolved issues include the above-noted question of
the nature and extent of the alleged ―personal benefit‖ inuring to
committee members as a result of their ownership of property sit-
uated on a road that allegedly received preferential treatment. See
UTAH CODE § 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 percent-
age of the assessments collected by the HOA are expended on
road maintenance, there are unresolved factual disputes about
whether the road allocation and maintenance decisions chal-
lenged in the derivative suit afforded the special committee mem-
bers any significant 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 commit-
tee’s decision.
  ¶44 The owners also attack Mr. Wilson’s independence by
claiming that he had a social relationship with some of the direc-
tors accused of wrongdoing in this derivative suit. And they as-
sert that he was employed by Sunrise Engineering, a company
that the HOA 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 those members are also defendants in this action. While 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
of all factors bearing on independence. And we are in no position

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          HI-COUNTRY PROPERTY RIGHTS GROUP v. EMMER
                         Opinion of the Court

to make that assessment before resolution of the factual disputes
on other considerations.
  ¶46 In light of these unresolved factual questions, we disagree
with the directors’ assertion that ―the undisputed evidence une-
quivocally shows that the appointing directors and the SLC mem-
bers 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 re-
mand 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 deriva-
tive suit.
 12  See Einhorn, 612 N.W.2d at 93–94 (determining that the district
court had applied the wrong legal standard in assessing the inde-
pendence of the special committee members and remanding to the
district court for an assessment of whether they were because ―the
facts [were] in dispute, and the circuit court ha[d] not made suffi-
cient findings of fact upon which [the Supreme Court could] ap-
ply 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 Colora-
do 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] un-
dertook 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, depending upon the
answer to the questions of whether the [SLC] . . . was an inde-
pendent and disinterested decision-maker. Hence, on remand, the
trial court must make those preliminary determinations. If the
[SLC] . . . was independent, and did employ reasonable proce-
dures in [its] analysis, then the court may not second-guess [its]
business judgment in deciding not to pursue the derivative litiga-
tion.‖).

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                         Cite as: 2013 UT 33
                       Opinion of the Court

                                  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 de-
termining whether a derivative suit should be dismissed, the spe-
cial committee, and not the tainted board, must determine wheth-
er the maintenance of the derivative suit is or is not in the best in-
terest 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 recommenda-
tion13—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 actually did recommend 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 inde-
pendent, 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 delegates to a committee
of disinterested persons the board’s power to control the litiga-
tion. 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.‖ (citation omitted)).
 14 This is what the directors claim occurred in this case, and it al-
so appears to be consistent with Utah Code section 16-6a-
612(4)(a), which notes that it is the committee that must ―deter-
mine[]‖ that the ―maintenance of the derivative proceeding 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.‖

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