Plaintiffs contend they were entitled to summary adjudication on defendants' business judgment rule defense.

Under the business judgment rule, a director cannot be held liable for actions taken in good faith which he or she believes, based on a reasonable investigation, to be in the best interests of the corporation. (Corp. Code, ss. 309 [General Corporation Law], 7231 [Nonprofit Mutual Benefit Corporation Law]; Barnes v. State Farm Mut. Auto. Ins. Co. (1993) 16 Cal. App. 4th 365, 378-379; Gaillard v. Natomas Co. (1989) 208 Cal. App. 3d 1250, 1263, 256 Cal. Rptr. 702.)

Plaintiffs argue the business judgment rule does not apply to actions which are ultra vires or illegal. In part IV, ante, however, we held that, on this record, the contributions were neither ultra vires nor illegal. Accordingly, even assuming, for purposes of argument, plaintiffs have correctly stated the law, they were not entitled to summary adjudication on this defense.

Plaintiffs contend the trial court erred by bifurcating defendants' "special litigation committee" defense. They also contend -- albeit tersely -- it erred by failing to grant summary adjudication on this defense.

Plaintiffs' primary argument is that a "special litigation committee" defense has not been recognized, and should not be recognized, in California. Plaintiffs waived this contention by failing to raise it below. As an alternative ground, however, and because this issue seems likely to loom large on remand, we hold that the special litigation committee defense is legally valid in California. [FN 3]

[FN 3] We are far from convinced that, in ruling on the motion to bifurcate, the trial court was required to consider the validity of the defense. If the defense was indeed invalid, however, it would be a waste of time and money to hold a separate trial on it. Thus, we may treat this issue as properly presented, including in the writ proceeding. (See Cedars-Sinai Medical Center v. Superior Court (1998) 18 Cal. 4th 1, 6-7, 954 P.2d 511; Blue Cross of California v. Superior Court (1998) 67 Cal. App. 4th 42, 47-48.)

[FN 4] The vast bulk of these cases were decided in the 1990's. Plaintiffs' assertion that the special litigation committee defense "is apparently rarely used today, as evidenced by the paucity of reported decision on the subject since the late 1980's" is simply false.

[FN 5] Joy v. North has since been overruled by statute. (Conn. Gen. Stat. Ann. s. 33-724.)

A considerable number of states have codified the special litigation committee defense. (Alaska Stat. Ann. s. 10.06.435, subd. (f) [independent scrutiny standard]; Ariz. Rev. Stat. Ann. s. 10-3634; Conn. Gen. Stat. Ann. s. 33-724; Fla. Stat. Ann. s. 607.07401, subd. (3); Ga. Code Ann. ss. 14-2-744, 14-3-744; Idaho Code Ann. s. 30-1-744; Me. Rev. Stat. Ann. tit. 13-A, s. 632; Minn. Stat. Ann. s. 302A.241; see also Drilling v. Berman (Minn.Ct.App. 1999) 589 N.W.2d 503, 506-507 [construing Minn. Stat. s. 302A.241]; Miss. Code Ann. s. 79-4-7.44; Mont. Code Ann. ss. 35-1-545, 35-2-1304; Neb. Rev. Stat. Ann. s. 21-2074; N.H. Stat. Ann. s. 293-A:7.44; N.C. Stat. Ann. s. 55-7-44; Tex. Bus. Code Ann. art. 5.14, subds. F, H; Va. Code Ann. s. 13.1-672.4; Wis. Stat. Ann. ss. 180.0744, 181.0744.) [FN 6] Of these, all but the Alaska and Minnesota statutes are based on section 7.44 of the American Bar Association's 1984 Model Business Corporations Act, which adopts the original, unmodified version of the defense.

[FN 6] Plaintiffs' assertion that the defense "appears to have been used only briefly in a few states" is, once again, false.

The only California decision concerning the defense is Will v. Engebretson & Co. (1989) 213 Cal. App. 3d 1033, 261 Cal. Rptr. 868. In Will, a stockholder's derivative action, the corporation filed a motion for summary judgment, asserting the special litigation committee defense. (Id., at p. 1037.) The trial court ruled that there was triable issues of fact "'as to the adequacy of the investigation [and] as to the good faith and the independence of the committee.'" (Ibid.) It proceeded, however, to treat the motion as a "'hybrid dismissal' motion"; it held a "'good faith' hearing," determined that the committee was independent and acted in good faith, and dismissed the action. (Id., at p. 1038.)

The appellate court began by noting: "The business judgment rule has been held, among other things, to permit a corporation to appoint a special litigation committee to decide whether the maintenance of a shareholder's derivative suit is in the corporation's best interests. [Citation.] The committee may decide that the suit should be dismissed and, if it does, the corporation may make a motion in the trial court to dismiss the suit. It may demur, move for judgment on the pleadings, or seek summary judgment." (Will v. Engebretson & Co., supra, 213 Cal. App. 3d at pp. 1040-1041, fn. omitted, citing Lewis v. Anderson, supra, 615 F.2d at p. 783.) "However, courts which have considered the issue have concluded that judicial review of the independence, good faith, and investigative techniques of a special litigation committee is governed by traditional summary judgment standards." (Id., at p. 1041.) The court concluded the trial court erred by holding a good faith hearing. Once the trial court denied the motion for summary judgment, the plaintiff was entitled to "a trial on the merits as opposed to a 'limited review' of the merits regarding the issue of the good faith and independence of the committee." (Id., at p. 1043.)

The plaintiff had argued the trial court should have used the modified version of the defense, under which the trial court is required to apply its own "independent business judgment." (Will v. Engebretson & Co., supra, 213 Cal. App. 3d at p. 1042, fn. 5, citing Zapata Corp. v. Maldonado, supra, 430 A.2d 779.) Because the appellate court reversed on procedural grounds, it specifically declined to decide whether it should follow the "two-step approach in Zapata." (Will, supra, at pp. 1039, 1042, fn. 5.)

Plaintiffs read Will as declining to decide whether the special litigation committee defense is valid. We disagree. Will cited Lewis as holding that the defense is valid. It then held that the procedural vehicles for asserting the defense include a motion for summary judgment or a full trial, but not a good faith hearing. This implicitly but necessarily means the defense may in fact be asserted. What the Will court did decline to decide was which version of the defense may be asserted -- the majority (and Model Act) "one-step" version, in which the court decides only whether the committee was disinterested, acted in good faith, and investigated adequately, or the minority "two-step" version, in which the court must additionally apply its own business judgment. Under Will, however, the special litigation committee defense, in some form, is valid in California.

Plaintiffs argue there is no reported case in which the special litigation committee defense has been used by a homeowners association. They fail to explain, however, why it could not be. Here, each of the Associations was incorporated as a nonprofit mutual benefit corporation. Thus, basic principles of corporate law apply to them. Such principles specifically include the business judgment rule (Corp. Code, ss. 309, 7231) as well as the principle that the directors may delegate their authority to a committee (Corp. Code, ss. 300, subd. (a), 311, 7210, 7212, subd. (a)).

Plaintiffs also assert that the special litigation committee defense "cannot be . . . used to exculpate directors from liability for ultra vires, illegal or unconstitutional acts." As we have already held, plaintiffs were not entitled to summary adjudication of their claim that the contributions were ultra vires or illegal. But more to the point, plaintiffs appear to be confusing two distinct exercises of business judgment. First, defendants invoke the business judgment rule to protect their decision to make the contributions. We may assume, without deciding, the business judgment rule would not apply to this decision if the contributions were ultra vires or illegal. Second, defendants invoke the business judgment rule to protect the special litigation committees' decision that this derivative action is not in the best interest of the Associations. Even assuming the underlying contributions were ultra vires or illegal, the decision not to pursue a derivative action regarding them was not ultra vires, illegal, or unconstitutional; thus, this decision was entitled to the protection of the business judgment rule. (Abbey v. Control Data Corp. (8th Cir. 1979) 603 F.2d 724, 730, cert. den. (1980) 444 U.S. 1017 [100 S. Ct. 670, 62 L. Ed. 2d 647]; Gall v. Exxon Corp. (S.D.N.Y. 1976) 418 F. Supp. 508, 518.)

Next, plaintiffs argue the special litigation committee defense did not meet the prerequisites of Code of Civil Procedure section 597. This section permits bifurcation of a "defense not involving the merits of the plaintiff's cause of action but constituting a bar or ground of abatement to the prosecution thereof . . . ." Plaintiffs therefore argue the special litigation defense "involves the merits" of their causes of action and is not a mere "bar or ground of abatement."

Code of Civil Procedure section 597, however, is not the only statute which permits bifurcation. Under Code of Civil Procedure section 1048, subdivision (b), "the court, in furtherance of convenience or to avoid prejudice, or when separate trials will be conducive to expedition and economy, may order a separate trial . . . of any separate issue . . . ." (Italics added.) Moreover, the trial court's discretion to regulate the order of proof (Evid. Code, s. 320) affords sufficient authority to order the separate trial of an affirmative defense. (Donovan v. Security-First Nat. Bk. (1945) 67 Cal. App. 2d 845, 852, 155 P.2d 856, disapproved on other grounds in Rader v. Thrasher (1962) 57 Cal. 2d 244, 251-252, 18 Cal. Rptr. 736, 368 P.2d 360; see also Cohn v. Bugas (1974) 42 Cal. App. 3d 381, 389, fn. 7, 116 Cal. Rptr. 810.)

Here, defendants filed their own motion for summary judgment based on the special litigation committee defense, but it was denied. Plaintiffs therefore argue the defense can be raised only by way of a pretrial motion, and, once such a motion has been denied, the defense cannot be raised again at trial. Indeed, they characterize it as a "procedural mechanism" and not really a "'defense'" at all. We know of no case holding the defense cannot be raised at trial; certainly plaintiffs cite none. Will, the controlling California case, reversed specifically because the plaintiff was entitled to litigate the defense at "a trial on the merits." (Will v. Engebretson & Co., supra, 213 Cal. App. 3d at p. 1043.)

The premise of plaintiffs' argument is that the "sole purpose" of the defense "is to dispose of meritless shareholder 'strike suits' without the need for a full trial." The defense, however, has consistently been viewed as a confluence of the business judgment rule and the demand requirement. As such, its main purpose, like theirs, is to further the fundamental principle that those best suited to make decisions for a corporation -- including the decision to file suit on its behalf -- are its directors, not its stockholders or the courts. (See Roberts v. Alabama Power Company, supra, 404 So. 2d at p. 632; Hirsch v. Jones Intercable, Inc., supra, 984 P.2d 634; Allied Ready Mix Company, Inc. ex rel. Mattingly v. Allen, supra, 994 S.W.2d at p. 8; Auerbach v. Bennett, supra, 47 N.Y.2d at pp. 630-631; Miller v. Bargaheiser, supra, 70 Ohio App. 3d at p. 706; Cuker v. Mikalauskas, supra, 547 Pa. at pp. 606-611; Lewis v. Boyd, supra, 838 S.W.2d at pp. 220-221.) To serve this purpose, the defense must be allowed whenever a committee of disinterested directors acting in good faith has determined a derivative action is not in the best interests of the corporation -- if possible, on motion, but if necessary, in a full trial.

Finally, plaintiffs argue bifurcation would complicate, rather than streamline, the proceedings. They assert that the trial on this defense will require substantial additional discovery. This is equally true, however, if the defense is tried together with all other issues. "'It is within the discretion of the court to order a severance and separate trials . . . [citations], and the exercise of such discretion will not be interfered with on appeal except when there has been a manifest abuse thereof. [Citation.]' [Citation.]" (Omaha Indemnity Co. v. Superior Court (1989) 209 Cal. App. 3d 1266, 1271, 258 Cal. Rptr. 66, quoting McLellan v. McLellan (1972) 23 Cal. App. 3d 343, 353, 100 Cal. Rptr. 258.) We perceive no abuse of discretion. Moreover, even where the trial court has in fact abused its discretion, the petitioner is not necessarily entitled to writ relief. (209 Cal. App. 3d at pp. 1271-1275.) For all these reasons, we decline to issue the requested writ.

Plaintiffs contend they were entitled to summary adjudication and/or an injunction on their causes of action for violation of constitutional rights.

Plaintiffs rely on a well-known series of cases holding that the First Amendment is violated when certain organizations compel their dissenting members to pay dues to support political or ideological causes not germane to their purposes. Organizations that have been held to be subject to this prohibition include labor unions (Abood v. Detroit Board of Education (1977) 431 U.S. 209 [97 S.Ct. 1782, 52 L.Ed.2d 261]), the State Bar (Keller v. State Bar of California (1990) 496 U.S. 1 [110 S.Ct. 2228, 110 L.Ed.2d 1]), and the student body of a state university (Smith v. Regents of University of California (1993) 4 Cal.4th 843, cert. den. 510 U.S. 863 [114 S.Ct. 181, 126 L.Ed.2d 140]).

Defendants predictably respond that they are not subject to this constitutional prohibition because their collection of dues does not constitute state action. Alternatively, defendants respond that plaintiffs were not entitled to summary adjudication because there were triable issue of fact with respect to damages. We agree with the second point. We therefore do not reach the state action question.

"A party may move for summary adjudication as to one or more causes of action within an action, one or more affirmative defenses, one or more claims for damages, or one or more issues of duty, if that party contends that the cause of action has no merit or that there is no affirmative defense thereto, or that there is no merit to an affirmative defense as to any cause of action, or both, or that there is no merit to a claim for damages, as specified in Section 3294 of the Civil Code, or that one or more defendants either owed or did not owe a duty to the plaintiff or plaintiffs. A motion for summary adjudication shall be granted only if it completely disposes of a cause of action, an affirmative defense, a claim for damages, or an issue of duty." (Code Civ. Proc., s. 437c, subd. (f)(1), italics added.) "A plaintiff or cross-complainant has met his or her burden of showing that there is no defense to a cause of action if that party has proved each element of the cause of action entitling the party to judgment on that cause of action. . . ." (Code Civ. Proc., s. 437c, subd. (o)(1), italics added.)

In light of these provisions, a motion for summary adjudication cannot be granted solely as to liability. If issues remain to be determined regarding the calculation of damages, it is inappropriate to grant summary adjudication. (Department of Industrial Relations v. UI Video Stores, Inc. (1997) 55 Cal.App.4th 1084, 1097; 3 Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 1999) ¶ 10:52.2, p. 10-27.)

[FN 1] Plaintiffs have not argued that they were seeking summary adjudication of "an issue of duty." (Compare Linden Partners v. Wilshire Linden Associates (1998) 62 Cal.App.4th 508, 517-522 and Transamerica Ins. Co. v. Superior Court (1994) 29 Cal.App.4th 1705, 1712-1713 with Regan Roofing Co. v. Superior Court (1994) 24 Cal.App.4th 425, 432-438.) We deem any such argument waived.

Plaintiffs argue that, because the contributions were not germane to the Associationsþ purposes, the entire amount of the contributions can be recovered. Under the cases on which plaintiffs rely, however, an organization is free to support even ideological causes which are not germane to its purposes; it simply cannot do so with dissenting members' dues. Thus, it would be inappropriate to award the total contributions.

Alternatively, plaintiffs argue the appropriate remedy would be "a judgment requiring the . . . Associations to notify all members whose dues were misappropriated . . . of their right to receive a rebate." Plaintiffs offer no authority for this suggestion. Admittedly, similar remedies have been approved with respect to future dues. (Keller v. State Bar of California, supra, 496 U.S. at pp. 16-17; Smith v. Regents of University of California, supra, 4 Cal.4th at pp. 862-863.) They are inappropriate, however, with respect to dues already collected in the past. (Railway Clerks v. Allen (1963) 373 U.S. 113, 118-119 [83 S.Ct. 1158, 10 L.Ed.2d 235]; International Machinists v. Street (1961) 367 U.S. 740, 774 [81 S.Ct. 1784, 6 L.Ed.2d 1141] ["Any remedies . . . would properly be granted only to employees who have made known . . . that they do not desire their funds to be used for political causes to which they object. . . . [D]issent is not to be presumed -- it must affirmatively be made known . . . by the dissenting employee."].) Such a remedy would be particularly inappropriate here because, as to any dissenting members other than plaintiffs, the one-year statute of limitations (see City of Huntington Park v. Superior Court (1995) 34 Cal.App.4th 1293, 1297) presumably has run.

This brings us to a more fundamental problem with plaintiffs' constitutional claims. In this appeal, plaintiffs repeatedly assert that they brought these claims individually, not derivatively. This is belied, however, by their complaint, in which each and every cause of action was pleaded as a derivative claim. Thus, in support of their causes of action for violation of constitutional rights, plaintiffs alleged that the use of assessments to make the contributions violated not only their own constitutional rights but those of other dissenting members. They alleged that the Associations had been damaged; they sought damages, on behalf of the Associations, from the Directors. They did not seek any damages (other than attorney's fees) on their own behalf, nor did they seek any damages from the Associations.

These were not appropriate derivative claims. "A shareholder's derivative suit seeks to recover for the benefit of the corporation and its whole body of shareholders when injury is caused to the corporation that may not otherwise be redressed because of failure of the corporation to act. Thus, 'the action is derivative, i.e., in the corporate right, if the gravamen of the complaint is injury to the corporation, or to the whole body of its stock and property without any severance or distribution among individual holders, or it seeks to recover assets for the corporation or to prevent the dissipation of its assets.' [Citations.] '. . . [A]lthough the corporation is made a defendant in a derivative suit, the corporation nevertheless is the real plaintiff and it alone benefits from the decree; the stockholders derive no benefit therefrom except the indirect benefit resulting from a realization upon the corporationþs assets. The stockholder's individual suit, on the other hand, is a suit to enforce a right against the corporation which the stockholder possesses as an individual.' [Citation.] (Jones v. H.F. Ahmanson & Co. (1969) 1 Cal.3d 93, 106-107, quoting Gagnon Co., Inc. v. Nevada Desert Inn (1955) 45 Cal.2d 448, 453.)

Plaintiffs did not allege, and could not allege, any violation of the Associations' constitutional rights. Moreover, the alleged violation did not affect all members of the Associations equally; it affected only dissenting members, i.e., those (evidently a minority) who opposed Measure S. Thus, plaintiffs' constitutional claims could be alleged only as individual, and not as derivative, causes of action.

The trial court could properly have denied summary adjudication on this ground alone. Certainly, given this pleading deficiency, plaintiffs are not entitled to a writ of mandate compelling the trial court to grant summary adjudication. If plaintiffs attempted to amend their complaint so as to frame the constitutional causes of action as individual claims, a number of additional issues would arise. For example, it is not at all clear that plaintiffs could properly join both individual and derivative claims in a single complaint. (See Shenberg v. DeGarmo (1943) 61 Cal.App.2d 326, 331; but see Code Civ. Proc., s. 427.10, subd. (a); see also 1 Friedman, Cal. Practice Guide: Corporations (The Rutter Group 1999) ¶ 6:620.1, pp. 6-135-6-136.) Thus, we are not in a position to ignore this pleading deficiency.

We conclude the trial court did not err by denying summary adjudication on plaintiffsþ constitutional causes of action.

Plaintiffs' motion for a preliminary injunction sought to enjoin defendants from making any future contributions (1) to Taxpayers, (2) to influence the use of the El Toro Air Base, or (3) to support or oppose any ballot measure. Even assuming plaintiffs' constitutional claims were meritorious, any such injunction would have been an improper remedy. "For the majority also has an interest in stating its views without being silenced by the dissenters. To attain the appropriate reconciliation between majority and dissenting interests in the area of political expression, . . . the courts . . . should select remedies which protect both interests to the maximum extent possible without undue impingement of one on the other." (International Machinists v. Street, supra, 367 U.S. at p. 773.)

As a constitutional matter, the Associations were free to contribute to political or ideological causes; the only issue was whether they could tap into dissentersþ wallets to do so. An injunction prohibiting the Associations from making the specified contributions at all "would completely silence the majority because a hypothetical minority might object." (First National Bank of Boston v. Bellotti (1978) 435 U.S. 765, 794, fn. 34 [98 S.Ct. 1407, 55 L.Ed.2d 707].) It would infringe the Associations' constitutional rights and those of their nondissenting members. It follows that the trial court did not err by denying plaintiffs' motion for a preliminary injunction.

The order denying plaintiffs' motion for a preliminary injunction is affirmed.

Plaintiffs' petition for a writ of mandate is denied. Defendants shall recover costs against plaintiffs. (Cal. Rules of Court, rules 26, 56.4(a).)

Richli, J.

We concur:

Hollenhorst, Acting P.J.
Ward, J.