1DCA Division 1 Oral Argument - 2026/1/12 - Jan 12, 2026

argument

1DCA Division 1 Oral Argument - 2026/1/12

California First District Court of Appeal 1h 45m 8 chapters transcribed 7 days ago official recording ↗

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What issues does the court address in the opening appearances and tentative opinion overview?

Unknown 0:18

Good morning. Please be seated. All right. Counsel, for the first matter, want to state your appearances, please.

Richard Bowles 0:31

Good morning, honorable justices. Richard Bowles and Cheryl Knoll, Bowles and Verner for the appellant.

Unknown 0:36

Thank you.

Christopher Hayes 0:38

Good morning, Your Honor. Christopher Hayes of Raghiante Freitas and Philip Borowski of the Law Offices of Philip Borowski for the respondents.

Unknown 0:45

Thank you. All right, we issued a tentative at the end of last week. We're assuming everybody's gotten it. Okay, good. We all know what the issue is. The issue is whether or not EBO can pursue the derivative claims despite not meeting technically the continuous ownership requirement. And normally what we would do is start with the appellant. But given the nature of the tentative opinion, we're thinking perhaps you would like to

Christopher Hayes 1:14

start. Thank you, Your Honor. I'd be very pleased to start the argument. And if I may, I'd like to reserve three minutes for rebuttal.

Unknown 1:22

Okay.

Christopher Hayes 1:24

So I'd like to start by thanking the court for its tentative opinion. I appreciate the ability to focus on the court's reasoning and the issues that are of most concern to the court. And I also want to thank the court for stating so clearly that the claims by Dr. Patel and Dr. Ganey have not been preserved for review, so that our focus today is only on EBO standing. So with that in mind, there's three things that I'd like to talk about today where I think the tentative is is

Unknown 1:59

Well,

Christopher Hayes 2:01

I think three these are the three things I would say I think the tentative is overextending beyond what is allowed by the statute corporations code 17 709.02 and I think the second point is that it is also overextending the relevant precedents, especially the Supreme Court's opinion in Grosset versus Winos and another appellate opinion in Harrow versus Ibarra, which are both discussed in the tentative. And I think, and the third thing I want to talk about is why the equitable exception that's proposed by the tentative would undermine the rules created by both the statute and the Supreme Court's decision. So to start with the first, just with the statutory limits under the corporation's code, the tentative would create a broad, equitable exception to the continuous ownership rule, which is, I would submit, is not contemplated by the statute.

Christopher Hayes 2:54

Well, is

Unknown 2:54

that really correct? Because it seems like the tentative suggests that given the spirit and the intent and the purpose, of the continuing ownership requirement. That we effectively, as a practical matter, have that here.

Christopher Hayes 3:10

I'm not sure I understand the court's question. I

Unknown 3:15

guess I'm asking you, you're going to start out by telling us that we're not within the understanding of the statute. And my question was, well, what is the purpose and what's the policy behind that? And how does this conflict?

Christopher Hayes 3:29

Well, I would say that it conflicts under the rule of expressio unius because what the legislature said, and the tentative recognizes this as also this court's decision in Surratt 1, the writ decision said, There are two distinct requirements under the statute, the contemporaneous ownership rule, which is not at issue here, and the continuous ownership rule, the one that is at issue. And the legislature gave courts discretion to excuse the contemporaneous ownership rule with a five-factor test. It gave no such discretion in the statute for waiving the continuous ownership rule. The tentative says, well, the silence leaves room for the court to impose equitable exceptions to the continuous ownership rule.

Christopher Hayes 4:22

And I would submit that that's the opposite of what the expressio unius rule requires.

Unknown 4:27

Well, except in our prior opinion, we indicated there could be equitable considerations that merit excusing the compliance with the continuing ownership requirement as well.

Christopher Hayes 4:39

Yes, but when in Surratt 1, what this court said was we recognize the same potential for exceptions that the Supreme Court did in Grosset versus Winas and that a sister appellate court did in Harrow versus Ibarra. And there was a Upon seeing the tentative, I believe it would be helpful if the court would consider what the Supreme Court itself has said about its decision in Grosset v. Monass.