THE PROGRESSIVE VOICE OF REFORM

RECEIVED MAR 15 1996 [imprint]

SUPERIOR COURT OF THE DISTRICT OF COLUMBIA CIVIL DIVISION

Civil Action No. l358-95 Civil Action No. 7905-95 Calendar #6 Judge Michael Rankin

David Busch, et al. Plaintiffs

v.

National Organization for the Reform of Marijuana Laws, et al.

Defendants

OPPOSITION TO PLAINTIFFS' MOTION FOR PARTIAL SUMIMARY JUDGEMENT

Defendants, National Organization for the Reform of Marijuana Laws, Inc. ("NORML"), Grinspoon, Mullis, Stroup, Viets, Zimmer, Dillon, Turney, Kent, Davis, Morgan, Druyan, Boaz, Ehrenreich, Evans, Galiber, Gleringer, Hamid, Lasagna and Galbraith hereby file this opposition to Plaintiffs'M otion for Partial Summary Judgment as to Counts IV, V, IX and X of the complaint in Civil Action No. 1358-95 and in support thereof state the following: I. Introduction Plaintiffs Busch, Byrne, Jacobs, Lang and Mathre, former members of the board of directors of NORML, filed a complaint on February 18, 1995 (Civil Action No. 1358-95) ("Complaint") seeking declaratory and injunctive relief1 The complaint, essentially, consists of two (2) unrelated sets of allegations: 'Although exclusively equitable relief was sought, plaintiffs improperly requested a trial by jury

First, the Complaint alleges Richard Cowan, former National Director of NORML, made improper payments to himself for expense reimbursement, exceeded his authority in authorizing certain payments, and failed to pay withholding taxes to the IRS.2 Second, the Complaint alleges the board meeting of September 11, 1994 ("September 11 meeting") at which plaintiffs were removed, was not held in conformity NORML's by-laws. The Complaint specifies a variety of procedural defects, including alleged Violations of Robert's Rules of Order, which plaintiffs allege render the actions (specifically the amendment of the by-laws and removal of plaintiffs as directors) at the September 11 meeting void. Plaintiffs seek summary judgment as to Counts IV, V, IX and X of the Complaint. In Counts IV and V, plaintiffs allege that defendants Cowan, Miller3 and Dillon had previously resiened as directors and improperly voted at the September 11 meeting. In Count IX, plaintiffs allege that a motion which passed at the September 11 meeting removinq the directors and replacing them with defendants Grinspoon, Morgan and Druyan "violated" District of Columbia law in that the directors

2Defendants deny plaintiffs possess the requisite standing to assert claims against NORML. To the extent such claims are meritorious, they belong exclusively to NORML, the employer of Mr. Cowan and the sole entity to which he owed a fiduciary duty. Mr. Cowan did not owe any duty, fiduciary or otherwise, to plaintiffs. NORNM recently has received from Mr. Cowan an accounting for his expenses. An audit revealed that NORML owed Mr. Cowan $10,211.20. Following Mr. Cowan's receipt of $2,000, he forgave the balance owed. See affidavit of Richard Cowan ("Cowan Affidavit"), the original of which is attached to Defendants' Opposition to Plaintiffs' Amended Application for the Immediate Appointment of a Receiver and a copy of which is attached to defendants' motion for partial summary judgment, para. 5. The allegations against Mr. Cowan are not the subject of plaintiffs' motion for summary judgment. Even if it is assumed, arguendo, that plaintiffs were improperly removed as directors as a result of procedural deficiencies in the vote on September 11, 1994 to amend the by-laws and remove them as directors, this does not confer standing on them in this proceeding to assert claims against Mr. Cowan. to assert 3Defendants Richard Cowan and Marvin Miller are appearing pro se.

were not removed in the same manner in which they were elected. In Count X, plaintift's allege that the motion passed at the September 11 meeting calling for the appointment/election of three new directors violated NORML's bylaws.

For the reasons stated below, defendants submit: (1) by participating in the vote to amend the by-laws and in the election of replacement directors, plaintiffs are estopped to contest such vote and election; (2) defendants Cowan, Miller, and Dillon properly voted at the September 11 meeting as directors of NORML; and,(3) the actions taken at the September 11 meeting were valid and proper.4 II. Statement of Facts In 1992, Pichard Cowan was hired as National Director of NORML, a non-profit District of Columbia corporation dedicated to "conducting research and educating the public about the medical, scientific and sociological effects of marijuana and developments in the marijuana laws."5 As NationalDirector, Mr. Cowan managed the day-to-day operations of the organization. The board of directors authorized the payment of $2,000 per month as compensation. In 1992, shortly after Mr. Cowan's appointment as National Director, he was elected to the board of directors and served as chairman. At the time of Mr. Cowan's appointment as National Director, four of the five plaintiffs, viz. Al Byrne, Neil Jacobs, Mary Lynn Mathre, and Jeanne Lang were on the board of directors of NORML. 4On or about October 5, 1995, plaintiffs filed a second action, Complaint To Liquidate The Assets And Affairs Of N.O.R.M.L., Civil Action No. 7905-95, which was subsequently amended. In their second complaint, the allegations of which are substantially the same as in the first complaint, plaintiffs seek the immediate appointment of a receiver. This second action was consolidated with Civil Action No. 1358-95. This second complaint is not the subject of plaintiffs' motion for partial summary judgment.

5The Internal Revenue Service has recognized NORML as a tax-exempt organization

[See affidavit of Richard Cowan (Cowan affidavit), para. 2,6, attached to defendants' motion for partial summary judgment].

In July, 1994, the board of directors of NORML decided to cease paying Mr. Cowan a salary and, in lieu thereof, directed that he be paid expenses not to exceed $2500 per month or S7,500 per quarter. Mr. Cowan responded by stating he would resign as NORML's National Director, conditioned on NORML selecting a successor National Director, but would continue as chairman of NORML's board of directors. The majohty of NORML's directors urged Mr. Cowan to continue as National Director. (Cowan affidavit, para. 8).6

Shortly thereafter, Lester Grinspoon, M.D., a prominent psychiatrist at Harvard University and long-time supporter of NORML, offered to recruit nationally prominent individuals to serve on NORML's board of directors, on the condition that Mr. Cowan agree to continue as National Director. Mr. Cowan assisted Dr. Grinspoon in recruiting these individuals in an effort to enhanc NORML's stature, restore NORML's prestige, and augment NORML's ability to attract contributions. Mr. Cowan agreed to continue as National Director, effectively rescinding his earlier conditions resignation. (Id.).

In response to Dr. Grinspoon's offer, Mr. Cowan'distributed a notice of special meeting dated August 9, 1994, notifying the board of directors that a special meeting of NORML's board of directors would be convened on September 11, 1994 to vote to amend Article IV by adding Section Ten to NORML's bylaws, to provide: "...at a duly called and constituted meeting of the NORML 6Plaintiffs' allegations regarding NORML's financial affairs, dealing with the Internal Revenue Service and Mr. Cowan's stewardship as National Director of NORML, contain Plaintiffs' memorandum of points and authorities in support of motion for partial summary judgement ("Memorandum") at 2-3, are irrelevant to the issues raised in this motion.

board of directors, a majority of those directors present can remove any member of the board of directors for any cause which the majority deems appropriate." (See Exhibit 1 attached to defendants' motion for partial summary judgment).

On August 20, 1994, defendant Dan Viets, a member of NORML's board of directors, circulated a memorandum containing the following proposed resolution to be presented at the September 11 meeting: Be it resolved that all members of the present Board of Directors be removed- that Dr. Lester Grinspoon, Dr. John Morgan and Dr. Ann Druyan be appointed to the Board; and that the remaining seats on the Board be filled by the three new members as they see fit.

The September 11 meeting, at which plaintiffs participated and voted, was held by conference telephone. At the meeting the resolution regarding amendment of the bylaws passed by a vote of eight to six. (See Exhibit 6, attached to defendants' motion for summary judgment, at 50-53).7

Also at this meeting the following resolution, previously circulated by NORML director and defendant Dan Viets in substantially the same form, was presented: "...be it resolved that Doctor Lester Grinspoon, Doctor John Morgan and Doctor Anne Druyan be appointed to the board, that all members of the present board of directors be removed, and that the remaining seats on the board be filled by the three new members as they see fit ... [Ilf any of the proposed new board members, [i.e. Grinspoon, Morgan and Druyan] decline to serve, then the present board will

7Article XII of NORML's bylaws state: "Section 1. Procedure. These By-Laws may be amended by the Board of Directors of the Corporation at a duly called meeting or by action in writing, by a simple majority of those present and voting. Section 2. Thirtv Day Notice Requirement. No amendments may be made to the By-Laws unless proposed in writing at the previous Board meeting or provided in writing to members of the Board at least thirty davs before the meeting at which the vote on the amendment is to be taken."

``Plaintiffs concede that Mr. Cowan's calling of the special meeting for September II, 1994 complied with the thirty day notice requirement.

remain and serve along with whichever of the three do agree to serve." (Exhibit 6 at 60-61,80, 86). This resolution also passed by a vote of eight to six. It resulted in (1) the removal of plaintiffs and all other members of NORML's board of directors, and (2) the appointment of defendants Grinspoon, Morgan and Druyan as the new directors. (Exhibit 6 at 104-108). A new board replaced the old board. III. Argument A. NORML's Articles of Incorporation Do Not Permit Members To Vote Plaintiffs allege that the amendment of the bylaws permitting removal of a director for any reason by majority vote of the directors violated the rights of the members of NORML to elect nine of the seventeen members of NORML's board of directors. While it is undisputed that Article IV, Section 3 of NORML's bylaws, in effect as of the September 11 meeting, permitted the members to elect several of NORML's directors, this provision is not enforceable because the articles of incorporation of NORML do not specifically permit members to vote. Only the articles of incorporation of a District of Columbia non-profit corporation may confer upon the members the right to vote. The right to vote cannot be stated in the organization's bylaws.

D.C. Code Annot. §29-516 (a) states: "Members shall not be entitled to vote except as the right to vote shall be conferred by the articles of incorporation."(emphasis added). Section 29516(d) states: "If a corporation has no members or if the members have no right to vote, the directors shall have the sole voting power and shall have all of the authority and may take any action herein permitted members".

NORML was incorporated on March 2, 1971. (See copy of NORML's original articles of incorporation attached hereto as exhibit 1). Article FOURTH states: "The corporation will have members." Article FIFTH states: "The corporation will have only one class of members, called participating members. The rights and responsibilities of the participating members shall he provided in the by-laws". (emphasis added). NORML's original articles of incorporation do not confer upon the members the right to vote.

On October 4, 1984, articles of amendment to NORML's articles of incorporation ("articles of amendment") were filed to conform the organization's articles of incorporation to those of a charitable and educational organization organized and operated under Section 501(c)(3)) of the Internal Revenue Code. (See exhibit 2 attached hereto). Only Articles THIRD and SEVENTH of NORML's articles of incorporation were amended. Article FOURTH was not changed. Page 4 of the articles of amendment states: "The amendment was adopted at a meeting of the Board of Directors held on September 26, 1984 and received the vote of a majority of the Directors in office, there being no members having voting rights in respect thereof. " (emphasis added). Certainly as of September 26, 1984, directors of NORML recognized that Article FOURTH of NORML's articles of incorporation did not confer upon the members of NORML the right to vote. Inasmuch as Article FOURTH has not been amended since NORML's articles of incorporation were first filed in 1971, the articles of incorporation of NORML still do not confer upon NORML's members the right to vote.

That only an organization's articles of incorporation and not its bylaws may confer the right to vote upon members is clear from a reading of Section 29-516. First, section 29-516(a) presumes that members of a non-profit corporation shall not be entitled to vote except as such rleht shall be conferred by the articles of incorporation. The manner in which the members may vote, however, may be included in an organization's articles of incorporation or bylaws. For example, §29-516(b) states that unless the articles of incorporation or bylaws provide otherwise, members permitted to vote may vote in person or via proxy. The articles of incorporation or the bylaws may permit members entitled to vote to vote by mail. Section 29-516(c) states that the articles of incorporation or the bylaws may provide that in elections of directors, members entitled to vote may vote via cumulative voting.

Unlike the other subsections of §29-516 which refer to the manner in which members may vote, subsection (a) only permits the articles of incorporation and not the bylaws to overcome the presumption that members do not have the right to vote. In applying the oft-stated rule of statutory construction expressio(or inclusio) unis exclusio alterius est, (the expression or inclusion of one thing is to the exclusion of others), by limiting to the articles of incorporation the manner in which the right of members to vote may be conferred, Congress intended that only a non-profit corporation's articles of incorporation and not its bylaws could confer the right to vote upon members.

An organization's articles of incorporation or the general law which expressly declare who shall be entitled to vote and how they shall be entitled to vote, prevail over bylaws. See generally 5 Fletcher Cyc. Corp., §2028 (1987). A bylaw provision cannot confer the right to vote upon a class of persons if neither the articles of incorporation nor the jurisdiction's general corporate law permits such action. Id; Durkee v. People, 155 Ill. 354, 40 N.E. 626 (1895)(where general law of Illinois permitted every stockholder to vote for directors or other managers of the corporation and provided that such directors or managers could not be elected in any other manner, organization's bylaws permitting holders of bonds to vote for directors was void).

Similarly, NORML's articles of incorporation do not confer the right to vote upon members, and merely leave it to the bylaws to determine the members' rights and responsibilities. Therefore, the provision in the Ausaust 28, 1993) bylaws permitting NORML members to vote for up to nine directors is unenforceable and the presumption in §29-516(a) that members have no right to vote applies. Thus, any right of the members to vote for directors as provided in the bylaws but not in the articles of incorporation is illusory and unenforceable. For these reasons, plaintiffs' argument that NORML's members have been deprived the right to vote for directors has no merit whatsoever. B. The Acts of the Fifteen Directors At The September 11 Meeting Were Valid

Plaintiffs assert that NORML's bylaws, in effect as of August 28, 1993, state that NORML shall have 17 directors, nine of whom were to be elected by the members as of the end of 1995. Plaintiffs argue that because NORML did not have 17 directors as of September 1, 1994, NORML's board of directors were powerless to act at the meeting.

Plaintiffs fail to cite any authority for this novel theory. As noted, because the articles of incorporation do not confer upon the members the right to vote, the "requirement" that nine of the seventeen directors be elected by the members is unenforceable.8

8Article IV, Section 3 of the August 28, 1993 bylaws also states: "Three of the seats shall be filled by election by the membership in 1993. The next three seats are to be filled by election by the membership in 1994 and the remaining three seats are to be filled by election by the membership in 1995." Assuming arguendo that members had the right to vote, as of September 11, 1994, more than three months remained for the members to elect three directors and the last three directors were not to be elected until 1995.

Moreover, plaintiffs ignore the long standing rule that the election or appointment of fewer directors than the number fixed by law, the articles of incorporation or the bylaws is not invalid as to those chosen and does not prevent the elected directors from carrying out the corporation's business. See e.g. 19 C.J.S. Corporations, §434(b) (1990) (the election of a smaller number of directors than that fixed by law, charter or the bylaws is not invalid as to those chosen); 18B Am. Jur. 2d Corporations, § 1350 (1985); and Potter v. Patee, 493 S.W. 2d 58 (Mo. Ct. App. 1973).

In Potter, the bylaws of a nonprofit educational corporation provided that the corporation shall have twelve directors. The shareholders at a valid annual meeting elected only ten directors. The court held that the duly elected board of ten directors could conduct the organization's business until the additional two directors were elected. See also State v. Du Brul, 100 Ohio St. 272, 126 N.E. 87, 90 (1919) (the election of four directors of a corporation required to have five is not invalid and permits the four newly elected directors to manage the corporation until a fifth director is elected); Grossman v. Liberty Leasing Co., Inc., 295 A. 2d 749 (Del. Ch. 1972)(where corporation's bylaws provided for five directors and authorized directors to amend bylaws and only four directors served on the board, the four directors had the power to amend the bylaws to increase membership of the board of directors from five to seven and to elect three persons to fill the one vacancy and the two new positions). There is no dispute that fifteen individuals served as directors of NORML as of the September 11 meeting and that these fifteen individuals participated in the meeting. Plaintiffs conveniently ignore Article V, Section 7 of NORML's bylaws which takes effect when vacancies in NORML's directorships occur. Article V, Section 7 states: "At any meeting [of the board of directors], the presence of one third plus one of the Board of Directors holding office at the particular time, disregarding any unfilled vacancies which may then exist, shall constitute a quorum for the transaction of business." (emphasis added). Thus, the presence of six directors at the September 11 meeting would have constituted a quorum. The fact that all fifteen directors attended renders plaintiffs' arguments that an insufficient number of individuals had been appointed or elected to carry out NORML's business a nullity. Because a quorum existed at the September 11 meetinq, actions taken by the board of directors at that meeting were valid.

C. The Board of Directors Had Authority To Amend The Bylaws To Permit A Majority of the Directors to Remove Anv Individual Director for Any Reason

Plaintiffs argue that the amendment to the bylaws which was passed at the September 11 meeting permitting the directors by majority vote to remove any director for any reason is unenforceable because it conflicts with the provision of the bylaws permitting members to elect nine members of the board of directors. This argument is specious for several reasons.

First, as noted, members have no right to vote because the articles of incorporation do not confer such right upon the members.

Second, even assuming the members were entitled to vote, plaintiffs have not cited any authority which prevents a majority of the directors from removing a director for any reason. The right to amend the bylaws is conferred solely upon the directors as provided in Article XII of NORML's bylaws. Section 1 of Article XII states: "Procedure. These By-Laws mav be amended by the Board of Directors of the Corporation at a duly called meeting or by action in writing bv a simple majority of those present and voting." D.C. Code Annot. §29-513 states that "[t]he power to alter, amend, or repeal the bylaws or adopt new bylaws shall be vested in the board of directors unless otherwise provided in the articles of incorporation or the bylaws." No provision in NORML's articles of incorporation or bylaws prevents the directors from amending the bylaws.

No conflict exists between the right of members to vote for directors and the right of the directors to remove a director for any reason. D.C. Code Annot §29-519(d) states: "A director may be removed from office pursuant to any procedure therefor provided in the articles of incorporation or the bylaws." D.C. Code Annot. §29-520 states: Any vacancy occurring in the board of directors ... may be filled by the affirmative vote of a majotity of the then members of the board of directors...A director elected or appointed, as the case may be, to fill a vacancy shall be elected or appointed for the unexpired term of his predecessor in office.

Article XI of NORML's bylaws provides a procedure for removing and replacinq directors as contemplated by District of Columbia law. To argue that the right of a majority of the directors to remove a director, which procedure complies with District of Columbia law, somehow conflicts with the right of the members to elect directors, where members do not even have the right to vote, defies all logic.

Courts have sustained action by directors of a nonprofit to limit or even eliminate the right of members to vote, where the power to amend the organization's bylaws is vested solely in the board of directors. For example, in Harris v. Board of Directors of Community Hospital of Evanston, 55 Ill. App. 3d 392, 370 N.E. 2d 1121 (1977), members of a not-for-profit hospital filed suit to remove the directors. The organization had 24 directors who were divided into three groups of eight elected to three year terms. Following a disagreement between the members and the board, the members sent a notice scheduling a meeting to remove all of the board members.

At the meeting, the members passed a resolution calling for the board members to show cause why they should not be removed. A month later, the board of directors convened a meeting during which they amended the bylaws to disallow proxy voting, limit the vote of corporate members and permit the board of directors to elect its own members, effectively eliminating the right of the members to vote for directors.

The members held another meeting to remove the directors and install an interim board. The original board of directors refused to recognize the interim board or the removal resolution.

The members challenged the action of the board of directors in revoking from the members the right to vote. The court ruled that the bylwps of the orizanization vested in the board of directors the exclusive power to amend the bylaws as permitted under Illinois law. The court held that the members did not have a constitutional right to vote. The board of directors had the power to amend the bylaws at all times to limit the right of the members to vote and to amend the bylaws to provide for a self-perpetuating board of directors.

Similarly, because District of Columbia law permits the board of directors to have the sole power to amend the bylaws and NORML's bylaws so provide, the board of directors properly amended the bylaws to permit a majority to remove a director for any reason. Even if such amendment somehow curtailed the authority of the members to elect directors, it is a valid exercise of that authority. If the board of directors of a non-profit corporation has the authority to revoke a bylaw provision granting the right to vote to members (as the court in Harris ruled), a fortiori, the board of directors of NORML, a non-profit corporation, had the authority to amend the organization's bylaws to permit removal of directors for any reason. Thus, plaintiffs' contentions that

[page 14 missing]

Notwithstanding the fact that a quorum of the board of directors participated and voted at the September 11 meeting, plaintiffs waived any objections they had regarding the composition of the board by the fact that numerous other meetings of the board of directors had occurred between August 28, 1993 and September 11, 1994 during which plaintiffs appeared, participated and voted and were never heard to complain about the lack of a filil complement of directors. See e.g. minutes of board of directors meetings which occurred in February, 1994, May 1994, and July, 1994 attached hereto collectively as exhibit 3.

Therefore, plaintiffs are esstopped to contest the amendment of NORML's bylaws and the election of Grinspoon, Morgan, and Druyan as directors. It is "black letter" law that: "One who participates in the election of officers or directors is ordinarily estopped from attacking the validity of such election." 19 C.J.S. Corporations §445 (1990) ("Estoppel to Question Right to Office."); See generally, Annot., 64 A.L.R. 3d 358 (1975).

While, apparently, there are no reported decisions in the District of Columbia on this point, there are ample authorities in other jurisdictions, as well as a decision by the United States Supreme Court. In Handley v. Stutz, 139U.S. 417 (1891), the question inter alia, arose whether stockholders who participated in a vote could later question the legality of the vote. Mr. Justice Brown succinctly stated established law: "[I]t does not lie in the mouth of those who participated in this act [i.e. vote]...to question its validity."

Handley v. Stutz has been cited with approval as "black letter" law on this point. In Petition To Set Aside Election of Directors of Willoughby Walk Cooperative Apartments, Inc., 104 Misc. 2d 447, 428 N.Y. S. 2d 574 (1980) the challenge by a director who participated in the election was summarily rejected by the Court, which held: "Participation at board meetings binds a participant to the action taken and denies to him the right to question the validlty of the meeting. (Handley v. Stutz [citation omitted])." Id., at 576. See also Shamel v. Lite Products Sales, 279 P. 2d 1010 (Cal. App., 1955); Levin v. Hunter, 128 N.E. 2d 360 (I11. App., 1955); Polychronis v. Palace Meat & Grocery Company, 129 P. 2d 879 (Utah, 1942); and, Schroder v. Scotten, 299 A. 2d 431 (Del. Ch.,1972), and, generally, 2 Fletcher Cyc. Corp. §§312-314 (1990).

This rule applies equally to directors and shareholders who participate at meetings by voting or otherwise. See e.g. Scott County Tobacco Warehouses, Inc. v. Harris, 201 S.E. 2d 780 (Va. 1974) (former directors removed at special meeting of shareholders waived notice of special meeting when they participated in and voted at the meeting); Camp v. Shannon 348 S.W. 2d 517 (Tex. 1961)(when stockholder appeared at and participated in a stockholders meeting without objection, he could not complain about the validity of the meeting); Helenic Cultural Circle, Inc. v. Kotsilinbas, 79 Misc. 2d, 361 N.Y. Supp. 2d 797 (1973) (where plaintiff, who challenged the election of 14 persons to the board of directors of a corporation whose certificate of incorporation only authorized the election of 10 directors and participated in numerous previous elections of more than 10 directors without objection, she was estopped from challenging the election of the directors); Frankel v. 447 Central park West Corporation, 176 Misc. 701, 28 N.Y. Supp. 2d 505 (1941)(stockholder could not object to legality of annual stockholder's meeting regarding the election of new directors where stockholder participated in the consideration of a financial statement relating to the corporation).

Plaintiffs should have abstained from voting, refused to participate in discussions of matters raised at the September 11 meeting and articulated their objections clearly to preserve any objections they had regarding the propriety of the meeting. See e.g, Darvin v. Belmont Industries, lnc., 40 Mich. App. 672, 199 N.W. 2d 542 (1972)(stockholder and director of two close corporations who merely attended the meeting of shareholders but did not vote his shares did not waive his right to object to the validity of the notice provided regarding the meetings).

The law, therefore, requires a director to (1) abstain from voting and reserve the right to challenge the legality of the vote, or (2) take part in the vote, hoping thereby that his position capture a majority. What the director cannot do is to have it both ways, In effect, take "two bites at the apple."

Plaintiffs opted to take part in both votes. Accordingly, they are estopped to complain about the outcomes.

E. Plaintiffs Were Properly Removed as Members of NORML's Board of Directors.

Plaintiffs allege in Counts IX and X of the Complaint that the September 11 meeting which resulted in plaintiffs'ouster violated D.C. Code Annot. §29-519(d) in that plaintiffs were not removed in the same manner in which they were elected.11 This contention is insupportable for several reasons.

First, §29-519(b) states that "directors shall be elected or appointed in the manner and for the terms provided in the articles of incorporation or the bylaws." §29-519(d) states: "A director may be removed from office pursuant to any procedure therefor provided in the articles of incorporation or the bylaws, and if none be provided may be removed at a meeting called expressly for that purpose, with or without cause, by such vote as would suffice for his election.

11Plaintiffs assert in their memorandum that D.C. Code Annot. §29-324 also constitutes a basis for voiding the votes taken at the September 11 meeting. Plaintiffs fail to appreciate that §29-324 only relates to "for-profit" entities and merely states that the power to make, alter, amend or repeal the bylaws of a "for-profit" corporation shall be vested in the board of directors unless reserved to the shareholders by the articles of incorporation. Since NORNIL is a non-profit corporation and does not have shareholders, §29-324 is irrelevant.

Plaintiffs' argument, i.e. directors can be removed only in the manner in which they are elected, is relevant only if neither the articles of incorporation nor the bylaws provide for removal of directors. As discussed supra, at the September 11 meeting, the resolution to amend the bylaws to permit a majority of directors present at a meeting to remove directors "for any cause" was approved by an eight to six vote. The subsequent vote to remove all of the directors was valid because it complied with this amendment. Thus, the directors properly were removed pursuant to a "procedure provided in the articles of incorporation or the bylaws" which action was fully in compliance with §29-519(d).

Second, plaintiffs conveniently ignore Article IV, Section 4 of NORML's bylaws which states:

Vacancies. A vacancy existing by reason of the resignation, death, incapacity or removal of a Director before the expiration of his or her term shall be filled by designation of the remaining Directors, at a meeting of the Board though they be less than a quorum of the Board, or by a sole remaining Director.

(emphasis added).

Third, D.C. Code Annot. §29-520 expressly provides that "[a]ny vacancy occurring in the board of directors...may be filled by the affirmative vote of a majority of the the members of the board of directors..."(emphasis added). Thus, the directors, pursuant to section 4 of the bylaws, had the authority to appoint substitute directors.

Fourth assuming for the sake of argument that NORML's bylaws contained no provision for removal of directors, and directors could only be removed in the manner in which they were elected, any director could still be removed by majority vote of the directors because the articles of incorporation do not confer upon the members the right to vote.

For these reasons, plaintiffs'argument that NORML's directors could only be removed by, vote of the members has no merit.

F.Plaintiffs Erroneously Allege That Defendants Cowan, Dillon and Miller Were Not Entitled to Vote at the September 11 Meeting

Plaintiffs allege that the votes of three board members, viz. Richard Cowan, Marvin Miller and Stephen Dillon in favor of the resolutions amending the bylaws and removing the directors, were invalid. Plaintiffs allege these directors previously had tendered their resignations. Plaintiffs misconstrue and ignore the plain meaning of the various communications these individuals submitted regarding their status as directors.

Plaintiffs erroneously allege that Cowan resigned as a member of the board of the directors of NORML on July 2-3, 1994. Mr. Cowan served as National Director, administering NORML's day-to-day operations and also served on the board of directors of NORML as its chairman. Thesewere two distinct and different positions. Following the July, 1994 board of directors meeting Mr. Cowan submitted his resignation as National Director,12 conditioned on the appointment of an acceptable successor. He did not offer to resign as chairman of the board.

Mr. Cowan never resigned as chairman of the board of diurectors of NORML. Plaintiffs confuse the positions of National Director and chairman of the board. Mr. Cowan served as chairman of the board until September 11, 1994, the date the resolutions in issue were approved. He resigned as National Director of NORML on July 31, 1995. (Cowan affidavit, para. 8). Therefore, it is clear 12As noted above, the majority of NORML's board of directors asked Cowan to remain as National Director. Dr. Grinspoon offered to recruit nationally known individuals to serve on NORML's board of directors if Mr. Cowan continued as National Director. Cowan agreed to rescind his earlier conditional resignation. He continued to serve as NORML's National Director unti July 31, 1995.

as a matter of law that Cowan remained eligible as NORML's chairman of the board to vote at the September 11 meeting.

On August 2, 1994, Marvin Miller sent a letter to the board of directors of NORML stating:

Please take this as NOTICE that I hereby resiizn from the Board of Directors of NORML. I will, at the Board's pleasure, continue my liaison with the NORML Legal Committee... I concur with Dan Viet's motion [of August 20, 1994 to remove the members of the board of directors) but before its implementation, a replacement Board needs to be put in place in order to conform to our bylaws. This replacement, at least in part, ought to be named at once.

On August 9, 1994, Mr. Miller sent a letter to Dan Viets and Richard Cowan, more than one month prior to the September 11 meeting, stating: "Please be advised that it has come to my attention that there is confusion or misunderstanding regarding my resignation. I wish to clarify that situation. If it is not clear, I wish to make it clear that my resignation contemplated that there be no resignations effective until such time as a new Board had been constituted. I recommend that a new Board be constituted straight away." (emphasis added). (See exhibit 3) to defendants' motion for partial summary judgment).

On September 26, 1994, Miller sent a third letter to NORML's board of directors stating: "As many of you know, I tendered a conditional resignation prior to the September 11 conference call meeting. The resignation was, in essence, conditional upon a new Board being constituted. My resignation is now unconditional." (emphasis added).(See exhibit 7 to defendants' motion for partial summary judgment).

As for Stephen Dillon, he was a member of NORML's board of directors from approximately November, 1991 until September 11, 1994. On August 4, 1994, Dillon sent a letter to NORML's board of directors "urging them to support Dan Viets' motion to dissolve the current Board, except for Richard Cowan, and with the expressed understanding that there was in existence a newlyconstituted Board including Dr. Lester Grinspoon, Dr. John Morgan, Dr. Ethan Nadelmann and Carl Sagan." [See affidavit of Stephen W. Dillon ("Dillon affidavit"), para. 2 attached to defendants' motion for partial summary judgment]. To the extent this letter is susceptible of construction as a tender of his resignation as a director, such "tender" clearly was conditional on adoption of Viets' motion "to dissolve the Board, passing a vote of the Board and on the qualification and installation of the new Board, including the individuals listed above." (Dillon affidavit, para. 2, 3). These conditions were not satisfied.

On August 10, 1994, one month prior to the September 11 meeting, Dillon submitted a memorandum to the board of directors of NORML acknowledging that the motion to dissolve the Board had not carried and that the new board of directors had not yet been appointed. He stated: On August 4, 1994, I sent my support ... to dissolve the current Board (except for Dick Cowan) and resigned with the understanding that a new Board had been formulated with such individuals as Dr. Lester Grinspoon, Dr. John Morgan, Dr. Ethan Nadelmann, and Carl Sagan to work with Dick for the immediate and future good of NORML. I view my tendered resignation as conditional on the appointment of the "new Board" which has not yet been fully constituted or appointed. This is similar to Marvin Miller's position.

(emphasis added). (See exhibit 4 to defendants' motion for partial summary judgment).

Clearly, Mr. Miller and Mr. Dillon submitted conditional resignations predicated on the appointment of a new board of directors, which did not occur until the September 11 meeting when the board of directors passed the resolutions amending the bylaws and removing the directors and replacing them with defendants Grinspoon, Morgan ahd Druyan.

It is well settled that resignations of directors may be conditioned upon the occurrence of a particular event. For example, in Seal of Gold Mining Co. v. Slater, 161 Ca. 621, 120 P. 15 (1911), the director of a corporation who tendered his resignation in writing conditioned upon acceptance of the resignation by the corporation could participate in meetings of the board of directors before his resignation was accepted. In Mayo v. Internment Properties, 128 P. 2d 417 (Cal. App. 1942), a director who submitted a written resignation to take effect upon the election and qualification of his successor in the future, could participate in a meeting of the board of directors to elect a successor. See also, Smith v. Great Basin Grain Co., 98 Idaho 266, 561 P. 2d 1299 (1977) and In Re Hawaii Times, Ltd., 53 B.R. 560 (Bkrtcy, 1985) which recognize that resignations of directors can be made conditional upon the occurrence of a future event.

That Messrs. Miller and Dillon conditioned their resignations on the removal of the present directors and the appointment of their replacements is clear. Moreover no director at the September 11 meeting objected to Messrs. Miller and Dillon voting. No motion was made to challenge their entitlement to vote. (Dillon affidavit, para. 7-8, Miller affid. para. 8). Therefore, neither Mr. Dillon nor Mr. Miller resigned from the board of directors prior to September 11, 1994. They properly voted to amend the bylaws and remove the board of directors. Plaintiffs cannot now be heard to contest the validity of the September 11 meeting when they did not object to Messrs Cowan, Miller and Dillon participating in the meeting where plaintiffs not only participated but also voted on the motions at issue in this proceeding.

G.Plaintiffs Did Not Plead A Derivative Action and Plaintiffs Are Not Entitled To An Award Of Attoney's Fees

1. No Derivative Action Was Plead Plaintiffs falsely assert that the Complaint was filed in the nature of a derivative suit, pursuant to D.C. Superior Court Civil Rule 23.1., even though the Complaint does not contain any references whatsoever to this type of action. Plaintiffs, in conceding that a derivative action was never plead, nevertheless argue the Complaint should be deemed a derivative proceeding, without first filing a motion to amend. Regardless of this procedural lapse, as a matter of law, the Complaint cannot be construed as a derivative action.

Rule 23.1 provides that a derivative action shall be brought by 1 or more shareholders or members to enforce a right of a corporation which the corporation may properly assert and which the corporation has failed to enforce. The complaint alleging the derivative action must be verified and shall allege "(1) that the plaintiff was a shareholder or member at the time of the transaction of which the plaintiff complains...and (2) that the action is not a collusive one to confer jurisdiction on the Court which it would not otherwise have. The complaint shall also allege with particularity the efforts, if any, made by the plaintiff to obtain the action the plaintiff desires from the directors or comparable authority and, if necessary, from the shareholders or members and the reasons for the plaintiffs failure to obtain the action or for not making the effort. The derivative action may not be maintained if it appears that the plaintiff does not fairly and adequately represent the interests of the shareholders or members similarly situated in enforcing the right of the corporation or association.

The Complaint was never verified. The verification must be attached to the complaint and nt to an unrelated, subsequent affidavit, as plaintiffs assert. Moreover, the Complaint fails to state

that the action "is not a collusive one to confer jurisdiction on the Court which it would not othenwise have."

Plaintiffs in paragraph 2 of the Complaint merely allege they are directors of NORML and "otherwise maintain voting rights pursuant to NORML's by-laws and Articles of Incorporation". Yet plaintiffs do not allege they were members of NORML "at the time of the transaction of which th plaintiff complains".

Plaintiffs fail to describe with particularity the efforts expended to obtain the "the action the plaintiff desires from the directors or comparable authority". Plaintiffs fall to allege with particularity the reasons for their failure to obtain such action. In sum, the Complaint is neither styled nor plead as a derivative action and plaintiffs' attempt to have the Complaint construed as such should be ignored.

Aside from the procedural deficiencies inherent in the Complaint, the substance of the allegations fail to come within the confines of a derivative action. As noted, a member bringing a derivative action "stands in the shoes of the corporation and must base the action on the rights belonging to the corporation... The shareholder [member] cannot bring a derivative proceeding unless there is a meritorious cause of action which could be enforced by the corporation. There must be some injury, or threat of injury, to the corporation at the time of the proceeding. If there is no loss or damage to the corporate the shareholder member cannot bring a derivative proceeding.

Fletcher's Corporate Encyclopedia, §5947. See also, Brown v. Ferro Corp., 763 F. 2d 798 (6th Cir. 1985)(prerequisite to maintenance of a derivative action is damages sustained by the corporation as a consequence of the alleged wrong)

"A derivative proceeding seeks to enforce a corporate cause of action against officers, directors and third parties. [There must be a] valid claim on which the corporation could have sued [and] the corporation itself had refused to proceed after suitable demand, unless excused by extraordinary circumstances." Ross v. Bernard, 396 U.S. 531 (1970).

In a derivative action, the plaintiff asserts the rights of the corporation, Vann v. Industrial Processes Co., 247 F. Supp. 14 (D.D.C. 1965). It is clear from the Complaint that the plaintiffs assert a primary not a derivative claim when they seek a review NORML's corporate and financial records and a declaration that the September 11 meeting was invalid. These claims could never be asserted by NORML.

To the extent count I of the Complaint could be construed as a possible cause of action by NORML against Cowan, (which count is not the subject of this motion) the derivative action claim fails because plaintiffs have never plead with particularity the nature of the demand made against the directors to proceed against Mr. Cowan. Such a demand is critical as a prerequisite to entertaining sued a derivative acfion. See e.g. Gaubert v. Federal Home Loan Bank Board, 863 F. 2d 59 (D.C. Cir. 1988)(shareholders bringing a derivative action must first contact the board of directors and give the board the opportunity to pursue the litigation on behalf of the corporation. The demand requirement may alert the board to problems of which it was unaware and may cause it to assert the complainant's cause more directly, efficiently and effectively.) Without stating with particularity the nature of the demand made upon the directors or why such action was not taken, the derivative action must fail. Because the Complaint is bereft of any allegations whatsoever regarding any demand made upon NORML to take any of the action sought by plaintiffs in the Complaint, and because primarily all of the claims in the Complaint are personal to the plaintiffs, the claim that the Complaint states a derivative cause of action must fail. 2. Plaintiffs Are Not Entitled To Attorneys' Fees Plaintiffs allege that if they prevail they are entitled to attorneys' fees based on the "common fund or benefit" theory. This contention has no merit whatsoever.

Under the "American Rule" followed by the District of Columbia, the prevailing party generally is not entitled to recover attorneys' fees from the losing party, except for three very limited instances where (1) the losing party has "acted in bad faith, vexatiously, wantonly, or for oppression reasons", (2) a statute permits recovery of attorney's fees or (3) a person has preserved or recovered a fund or property for the benefit of others. Passtou, Inc. v. Spring Valley Center, 501 A. 2d 8 (D.C. App. 1985); In Re Antioch University, 482 A. 2d 133) (D.C. App. 1984). See generally, Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240 (1975).

The rationale for awarding attorneys' fees based on the common fund or benefit doctrine is to "permit...a party preserving or recovering a fund for the benefit of others in addition to himself to recover his costs, including his attomeys' fees, from the fund or property itself or directly from the other parties enjoying the benefit". Passtou, Inc., supra at 12 quoting Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 257. The doctrine operates to spread "litigation cost proportionately among all the beneficiaries so that the active beneficiary does not bear the entir burden alone and the "stranger" beneficiaries do not receive these benefits at no cost to themselves.' Id.

In Alyeska, the Supreme Court articulated those circumstances under which an award of attorneys' fees under the common benefit doctrine may be awarded: "[t]he classes of beneficiaries were small in number and easily identifiable. The benefits could be traced with some accuracy, and there was reason for confidence that the costs could indeed by shifted with some exactitude to those benefitting". Alyeska, supra, 421 U.S. at 264, n.39.

Thus, the common benefit theory contemplates a fund out of which beneficiaries of the plaintiffs success who were strangers to the lawsuit should bear their fair share of the cost of securing the benefit by paying the prevailing party's attomey's fees from the fund. See e.g. District Of Coluimbia v. Green 381 A. 2d 578 (taxpayers who prevented the collection of illegally imposed property taxes by the District of Columbia could collect attorneys fees from a fund ordered by the court to be established through imposition of an additional fee to be paid by taxpayers) In this case, however, for purposes of the plaintiffs' motion for partial summary judament, plaintiffs are merely seeking restoration of their directorships through a declaration by this court that the September 11 meeting was void. Even assuming that plaintiffs' prevail on their motion, no common fund will be established from which attorneys' fee could be paid and no common benefit will be established.

Plaintiffs argue that requiring NORML to "seat a full .17 members to its Board of Directors ...will result in a substantial benefit to all of the members of NORML". Plaintiffs also assert that a decision in their favor will restore the rights of members, like shareholders, to maintain control over their corporation. (Memorandum at 22). These arguments have no merit.

Plaintiffs do not set forth the nature of the benefit inuring to the members if plaintiffs prevail on their motion. They ignore the fact that the articles of incorporation do not confer the right to vote upon the members. They also fail to apprehend that the directors are authorized to amend the bylaws to remove directors for any reasons and take whatever action is necessary to mana2e the organization.

Further, plaintiffs' reliance Mills v. Electric Auto-Lite Co. 396 U.S. 375 (1970) is entirely misplaced. In Mills, minority shareholders who challenged misleading proxy statements regardinia a proposed merger filed a stockholders derivative action and were permitted to recover attorneys' fees. The Supreme Court stated that an award of attorneys' fees against the corporation mav be appropriate as a means of spreadinig the costs to shareholders who have benefitted from the litigation and who have an ownership interest in the corporation. The purpose of such an award "to a plaintiff who has succeeded in establishing a cause of action is not to saddle the unsuccessful party with the expenses but to impose them on the class that has benefitted from them and that would have had to pay them had it brought the suit." Id. at 396-397.

In contrast, plaintiffs have neither plead a derivative action nor have they taken any preliminary steps necessary to have the case characterized as a derivative proceeding. Plaintiffs assert that assessing costs of litigation against NORML constitutes an assessment "proportionately against all of the members of the class who benefitted". This contention is absurd. Unlike a stockholders derivative suit where the stockholders have an absolute right to vote and have a financial stake in the success or failure of the corporation members of a non-profit corporation in the District of Columbia are presumed not to have the right to vote unless the articles of incorporation so provide. Members of a non-profit corporation, unlike shareholders, have no financial stake in its operation, and do not stand to gain through an increase in the value of their stock when a corporation's financial situation is improved as a result of the derivative litigation. Thus, no benefit would occur if plaintiffs prevail other than their own private aggrandizement, For these reasons, if plaintiffs prevail on their motion, they are not entitled to -attorneys' fees. ??