[atrt2] Fwd: Bylaws amendment

Wed Nov 20 03:14:19 UTC 2013

Ahhh! Somehow I had gotten the idea that Becky's 
concern was with how the Reconsideration Bylaws 
were changed, but it is the rules on the Independent Review of Board Actions.

Alan

At 19/11/2013 05:55 PM, Paul Diaz wrote:

>This is Becky Burr's support for her claim, 
>backed by the RySG, that the ICANN Bylaws change 
>related to Reconsideration Requests reduced the 
>accountability protections of the IRP.
>
>
>Begin forwarded message:
>
>>From: "Burr, Becky" <<mailto:Becky.Burr at neustar.biz>Becky.Burr at neustar.biz>
>>Subject: Bylaws amendment
>>Date: November 19, 2013 6:23:36 PM GMT-03:00
>>To: Paul Diaz 
>><<mailto:pdiaz at pir.org>pdiaz at pir.org>, 
>>"<mailto:bcute at pir.org>bcute at pir.org" <<mailto:bcute at pir.org>bcute at pir.org>
>>
>>Summary.  The 11 April 2013 Bylaws amendment 
>>replaced the substantive requirements of its 
>>Articles of Incorporation and Bylaws with 
>>California’s “Deferential Business Judgment 
>>Rule” as the yardstick against which Board 
>>Actions should be measured in an IRP.  In 
>>ICANN’s own words, this standard would require 
>>IRP Panelists to dismiss IRP Requests unless 
>>the claimant can prove that the Board’s 
>>decision involved “fraud, bad faith, 
>>overreaching or an unreasonable failure to 
>>investigate material facts.”  See ICM v. ICANN, 
>>ICANN’s Response to Claimants Memorial on the Merits, §128.
>>
>>
>>Discussion.  The Bylaws amendment, adopted by 
>>the Board without discussion on 11 April 2013, 
>>significantly narrows the scope of the IRP and 
>>profoundly diminishes the measure of 
>>accountability it provides.  Under the new 
>>standard, ICANN will not be held accountable 
>>for any violation of its Bylaws unless the 
>>claimant in an IRP can prove that the violation 
>>was the result of “fraud, bad faith, 
>>overreaching or an unreasonable failure to 
>>investigate material facts.”  As ICANN staff is 
>>well aware, there is no credible basis for 
>>arguing that this change preserves – let alone 
>>expands – accountability protections.
>>
>>
>>The Pre-Amendment Bylaws provided that request for independent review:
>>
>>
>>shall be referred to an Independent Review 
>>Process Panel ("IRP Panel"), which shall be 
>>charged with comparing contested actions of the 
>>Board to the Articles of Incorporation and 
>>Bylaws, and with declaring whether the Board 
>>has acted consistently with the provisions of 
>>those Articles of Incorporation and Bylaws.
>>
>>
>>The Amended Bylaws contain the following new language:
>>
>>
>>The IRP Panel must apply a defined standard of 
>>review to the IRP request, focusing on: did the 
>>Board act without conflict of interest in 
>>taking its decision?; did the Board exercise 
>>due diligence and care in having a reasonable 
>>amount of facts in front of them?; and did the 
>>Board members exercise independent judgment in 
>>taking the decision, believed to be in the best interests of the company.
>>
>>
>>This new language is a restatement of 
>>California’s “Deferential Business Judgment 
>>Rule.”   Under that rule, a California court 
>>will protect individual directors from 
>>liability for Board actions “even if a 
>>reasonable person would have acted differently, 
>>provided the board acted (i) in good faith, 
>>(ii) in the best interests of the association, 
>>and (iii) upon reasonable investigation. 
>><http://www.davis-stirling.com/tabid/835/Default.aspx>Lamden 
>>v. La Jolla Shores, (1999) 21 Cal.4th 
>>249.   The Business Judgment Rule, however, 
>>"provides protection from personal liability 
>>for the individual directors of a non-profit [ 
>>] association. It does not follow and is not 
>>true that the same rule of judicial deference 
>>will also automatically provide cover to the 
>>entity itself.”  Ritter and Ritter v. Churchill, (2008) 166 Cal.App.4th 103
>>
>>
>>ICANN urged the Panelists in ICM v. ICANN to 
>>evaluate the Board’s liability under the 
>>deferential business judgment rule.  In ICANN’s 
>>view, ICM claims should be dismissed unless it 
>>could prove that the Board’s decision reflected 
>>“fraud, bad faith, overreaching or an 
>>unreasonable failure to investigate material 
>>facts.”  See ICANN’s Response to Claimants Memorial on the Merits, §128.
>>
>>
>>A majority of the Panel rejected firmly 
>>rejected ICANN’s argument.  Instead, it 
>>conducted a de novo review of the facts, and 
>>applied the Bylaw requirements without 
>>significant deference to the Board.   The 
>>Majority declared that ICANN is bound by its 
>>Articles of Incorporation and Bylaws, which 
>>“require ICANN to carry out its activities in 
>>conformity with relevant principles of international law,” and
>>
>>
>>do not specify or imply that the International 
>>Review Process provided for shall (or shall 
>>not) accord deference to the decisions of the 
>>ICANN Board. The fact that the Board is 
>>empowered to exercise its judgment in the 
>>application of ICANN’s sometimes competing core 
>>values does not necessarily import that that 
>>judgment must be treated deferentially by the 
>>IRP. In the view of the Panel, the judgments of 
>>the ICANN Board are to be reviewed and 
>>appraised by the Panel objectively, not 
>>deferentially. The business judgment rule of 
>>the law of California, applicable to directors 
>>of California corporations, profit and 
>>nonprofit, in the case of ICANN is to be 
>>treated as a default rule that might be called 
>>upon in the absence of relevant provisions of 
>>ICANN’s Articles and Bylaws and of specific 
>>representations of ICANN – as in the RFP – that 
>>bear on the propriety of its conduct. In the 
>>instant case, it is those Articles and Bylaws, 
>>and those representations, measured against the 
>>facts as the Panel finds them, which are determinative.
>>
>>J. Beckwith Burr
>>Neustar, Inc. / Deputy General Counsel and Chief Privacy Officer
>>1775 Pennsylvania Avenue NW, Washington, DC 20006
>>Office: + 
>>1.202.533.2932  Mobile:  +1.202.352.6367  / 
>><mailto:becky.burr at neustar.biz>becky.burr at neustar.biz / www.neustar.biz
>
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