Even after nearly three decades of handling shareholder disputes, every so often I get a case that presents new challenges and never-before-seen issues. Last week, we were able to declare victory in one such case when my partner, Andrew Linden, and I successfully moved to dismiss a corporate governance case involving an Indian Temple on First Amendment grounds. In other words, the Court agreed that allowing the case to go forward would violate our clients’ right to the free exercise of their religion, all over an issue that many private companies face– who is in charge.
This case involved an internal battle over who constituted the rightful and duly-elected Board of Directors of the Temple, which was overseen by their religious leader in India. (The religion at issue has 90-million adherents worldwide.) The non-profit corporation’s by-laws, written two decades ago and promptly ignored by everyone, stated that the Temple should have three Directors, but in practice, they had always had more than a dozen. The two Plaintiffs contended that a long-retired Board member technically never retired and had the right under the by-laws to appoint them as the only other “true” Directors (for a total of three). They tricked the retired (and gravely ill) Board member (who spoke and read little English) into signing documents purportedly appointing the Plaintiffs as Board members.
Regardless of what the widely-ignored by-laws said (or did not say), the Defendants (along with Plaintiffs until their removal from the Board, which prompted the lawsuit) had acted as Directors for decades. As such, they made both day-to-day and long-term strategic decisions for the Temple. When the Plaintiffs insisted that they were now the sole Board members, all the parties agreed to put the issue to their spiritual leader in India, who ruled that Defendants, not Plaintiffs, were the true Board and should be the ones running the Temple. In rendering his decision, he noted that one of the core tenets of the religion was selfless altruism, which Plaintiffs had violated by their very actions of attempting to gain control in the way they had done it.
Plaintiffs filed suit in Superior Court of New Jersey, asking the Court to strictly interpret the by-laws and rule that they, not Defendants, are in charge of the Temple, despite their religious leader’s pronouncement on this very issue. After significant discovery, taken so that the Court could be presented with a fully developed evidentiary record, the Court agreed with Defendants’ position – Plaintiffs were effectively seeking an Order preventing the Defendants from following a religious decision by their religious leader on a religious issue. The Court agreed that making such a decision would require it to overstep what a court is constitutionally permitted to do by impermissibly intertwining itself with religious issues.
Such a case is extremely rare, as for-profit corporations (unlike this Temple, which is still a corporation) are not involved in such religious issues. If you have any questions about this post or any other related matters, please contact me at dcroberts@norris-law.com.