Walker v. Women’s Professional Rodeo Ass’n, Inc.
2021 COA 105. No. 20CA0668. Nonprofit Corporations—Business Judgment Rule—Attorney Fees.
August 5, 2021
Plaintiffs were members of the Women’s Professional Rodeo Association, Inc. (WPRA), a Colorado nonprofit corporation that has rules governing its operations. Plaintiffs finished in first and second place in a barrel racing competition at a rodeo in Wyoming (the Rodeo). However, the day before the Rodeo, the judges declared the arena conditions dangerous, so most other contestants did not compete. Plaintiffs sued the WPRA, its chief executive officer (CEO), and the Rodeo organizer after the WPRA did not pay plaintiffs the prize money they claimed they were entitled to. The district court dismissed their claims for failure to state a claim upon which relief can be granted and awarded attorney fees to the WPRA and its CEO.
On appeal, plaintiffs argued that the trial court erred by granting the motions to dismiss, contending that the WPRA failed to follow or misapplied certain of its rules. However, plaintiffs’ allegations centered on the WPRA board’s interpretation and application of certain rules and they do not allege fraud, arbitrariness, or bad faith. Therefore, under the business judgment rule, a court cannot interfere with the board’s decisions. Accordingly, plaintiffs’ claims against the WPRA do not meet the plausibility standard articulated in Warne v. Hall, 373 P.3d 588 (Colo. 2016), and must be dismissed under CRCP 12(b)(5). Further, the district court correctly dismissed plaintiffs’ judicial dissolution and receivership claims because they did not plead the type of wrongful board conduct that would justify granting such drastic relief.
The Court of Appeals also determined that the district court properly found plaintiffs did not raise a reasonable inference that it had specific or general jurisdiction over the organizer. As to the CEO, plaintiffs’ claims for breach of fiduciary duty and breach of contract failed to state a claim upon which relief can be granted because a nonprofit corporation’s directors and officers are not personally liable for the corporation’s acts and plaintiffs did not plead any exception to this rule.
The Court also determined that the district court properly awarded attorney fees to the WPRA and its CEO under CRS § 13-17-201 because plaintiffs’ claims sound in tort. However, the court erred in declining to hold a hearing on the reasonableness of such fees.
The judgment in favor of defendants and the ruling that the WPRA and its CEO are entitled to attorney fees were affirmed. Defendants were awarded their reasonable attorney fees on appeal. The district court’s award of a specific amount of attorney fees to the WPRA and its CEO was reversed and the case was remanded for a hearing on attorney fees.