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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.<br><br>
Alan<br><br>
<br>
At 19/11/2013 05:55 PM, Paul Diaz wrote:<br><br>
<blockquote type=cite class=cite cite="">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. <br><br>
<br>
Begin forwarded message:<br><br>
<blockquote type=cite class=cite cite=""><b>From: </b>"Burr,
Becky"
<<a href="mailto:Becky.Burr@neustar.biz">Becky.Burr@neustar.biz</a>
><br>
<b>Subject: Bylaws amendment</b><br>
<b>Date: </b>November 19, 2013 6:23:36 PM GMT-03:00<br>
<b>To: </b>Paul Diaz
<<a href="mailto:pdiaz@pir.org">pdiaz@pir.org</a>>,
"<a href="mailto:bcute@pir.org">bcute@pir.org</a>"
<<a href="mailto:bcute@pir.org">bcute@pir.org</a>><br><br>
<u>Summary</u>. 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 <i>ICM v. ICANN</i>, ICANN’s
Response to Claimants Memorial on the Merits, §128. <br><br>
<u><br>
Discussion</u>. 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. <br><br>
<br>
The Pre-Amendment Bylaws provided that request for independent review:
<br><br>
<br>
<i>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. </i> <br><br>
<br>
The Amended Bylaws contain the following new language: <br><br>
<br>
<i><a name="IV-3.4a"></a>The IRP Panel must apply a defined standard of
review to the IRP<a name="IV-3.4a"></a> 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.<br>
</i><br>
<i><br>
</i>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<i>.
<a href="http://www.davis-stirling.com/tabid/835/Default.aspx">Lamden v.
La Jolla Shores</a></i>, (1999) 21 Cal.4th 249. The Business
Judgment Rule, however, "provides protection from personal liability
for the <i>individual directors</i> 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.”
<i>Ritter and Ritter v. Churchill, </i>(2008) 166 Cal.App.4th 103
<br><br>
<br>
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. <br><br>
<br>
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<br><br>
<br>
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.
<i>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.</i> <i>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. <br>
</i> <br>
J. Beckwith Burr<br>
<b>Neustar, Inc. /</b> Deputy General Counsel and Chief Privacy
Officer<br>
1775 Pennsylvania Avenue NW, Washington, DC 20006<br>
Office: + 1.202.533.2932 Mobile: +1.202.352.6367 /
<a href="mailto:becky.burr@neustar.biz">becky.burr@neustar.biz</a> /
<a href="http://www.neustar.biz/" eudora="autourl">www.neustar.biz</a>
</blockquote><br>
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