American Center for Education, Inc. v. Cavnar

Hurst Amyx (plaintiff) was president of the American Center for Education (ACE) (plaintiff), a nonprofit corporation with no shareholders. Samuel Cavnar and George Todt (defendants) were also ACE officers. The three men were ACE’s only directors and the only members of its executive committee. ACE’s bylaws authorized the board to appoint and remove directors, executive-committee members, and corporate officers at will, meaning for any reason. The executive committee was empowered to exercise all the board’s powers between board meetings, except the power to remove a director, provided that a quorum was present. A quorum required three directors for a board meeting and three members for an executive-committee meeting. ACE’s practice was for the executive committee to meet whenever and wherever was convenient for the members, often without notice. The three directors developed conflicting views about ACE’s programs. Amyx held one view, while Cavnar and Todt supported another. Cavnar and Todt decided to remove Amyx from all his corporate roles. Cavnar and Todt met Amyx in his office to attempt an executive-committee meeting. Realizing this, Amyx left, preventing a quorum. Cavnar and Todt then went to ACE’s bank, where Amyx found them, and a dispute ensued over control of ACE’s funds. During this interaction, Cavnar and Todt convened an executive-committee meeting and voted to remove Amyx from the board, the committee, and his position as president. To replace Amyx, Cavnar and Todt also voted to appoint Robert Davies (defendant) as a director. Cavnar and Todt then transferred most of ACE’s funds to a new account inaccessible to Amyx and locked him out of ACE’s offices. Ten days later, Cavnar, Todt, and Davies held a board meeting confirming the executive committee’s bank-meeting actions. Amyx was notified of this meeting but did not attend. Amyx sued Cavnar, Todt, and Davies on behalf of himself and ACE, challenging his removal and the fund transfers. The California superior court held that the removal was invalid and entered judgment for Amyx. Cavnar, Todt, and Davies appealed.