This case arose from a dispute over who had the authority to control litigation involving LePort Educational Institute, Inc. (LEI), a company that formerly operated a nationwide network of private Montessori schools. Carl Barney, a major secured creditor and shareholder of LEI, claimed that LEI had formally transferred him the right to pursue certain legal claims on the company’s behalf. That transfer, referred to as an “assignment,” would have allowed Barney to sue other LEI shareholders and former officers in LEI’s name and to control LEI’s defense of any related counterclaims.
The assignment at issue purported to transfer to Barney all of LEI’s claims against several individuals, including Ramandeep (“Ray”) and Rebecca Girn, who were former shareholders and officers of LEI. It also purported to give Barney authority to retain counsel for LEI and direct LEI’s litigation strategy in disputes arising out of those claims. In practical terms, if the assignment was valid, Barney, rather than LEI’s management, would control how LEI participated in the lawsuit.
Barney sought to pursue claims alleging that the Girns helped transfer LEI’s Montessori schools, employees, and business relationships to Higher Ground Education, a competing school operator, in violation of their duties to LEI. Thereafter, the Girns filed a cross-complaint that included indemnification claims against both Barney and LEI. At that point, a dispute emerged between Barney and LEI’s founder and CEO, Dr. Peter LePort, over who had the legal authority to act for LEI. Barney asserted that the assignment gave him exclusive control over LEI’s defense of the cross-claims, while Dr. LePort disputed the assignment’s validity and continued to act as LEI’s representative, retaining separate counsel to defend the company. Competing attorneys began filing and withdrawing pleadings on LEI’s behalf, creating confusion over who actually spoke for the company in court.
To resolve that dispute, Barney asked the trial court to issue a preliminary injunction barring Dr. LePort, the Girns, and their attorneys from interfering with LEI’s participation in the case “by and through” Barney as assignee. The Girns opposed the request, arguing that Barney lacked authority because the assignment had never been properly approved by LEI’s board of directors under California Corporations Code section 307, subdivision (a)(8).
The trial court granted the preliminary injunction. Although it acknowledged the late timing of the challenge, the court rejected the validity argument on the merits, concluding that the assignment had been properly approved because a quorum was present at the relevant board meeting and the two directors who voted constituted a majority of those voting. The injunction barred the Girns and others from interfering with Barney’s control of LEI’s defense. The Girns appealed.
The Court of Appeal reversed. Interpreting section 307, subdivision (a)(8) and LEI’s bylaws (which mirrored the language in section 307), the Court of Appeal held that board approval required a majority of the directors present at the meeting, or alternatively, a majority of the required quorum if directors withdrew. At the meeting approving the assignment, four directors were present, but only two voted in favor after two recused themselves. Under either statutory scenario, three affirmative votes were required. Because only two directors voted to approve the assignment, the Court concluded it was not validly approved by the board.
The appellate court rejected the trial court’s reasoning that a majority of those voting was sufficient, explaining that neither the Corporations Code nor the bylaws permit courts to disregard the number of directors present when calculating a majority.
Because the assignment’s validity was central to Barney’s claimed right to control LEI’s defense, the Court of Appeal held that the preliminary injunction could not stand. The Court reversed the injunction and remanded the matter to the trial court.
Barney v. 01006531 Ramandeep Girn (Feb. 9, 2026, No. G064412) ___Cal.App.5th___ [2026 Cal. App. Unpub. LEXIS 915].
Note: Although this case arises from a corporate dispute rather than a school operations issue, it offers an important reminder that Boards must strictly comply with Corporations Code and bylaw voting requirements when enacting decisions.