Memphis Health Center, Inc. et al. v. Gregory Grant, et al.

This is a derivative action. The board chairman of a nonprofit health care center was found guilty of submitting false claims in violation of federal law. Thereafter, the health care center’s chief executive officer and two of its board members filed a derivative action on behalf of the health care
center against the chairman and health care center’s remaining board members for violating their fiduciary duties to the corporation. The derivative suit sought, inter alia, injunctive relief to require the board to take action against the board chairman, and to enjoin the board from allegedly violating the CEO’s employment agreement by terminating her. The trial court issued a temporary restraining order, enjoining the board from violating the health care center’s bylaws, from violating federal regulations, and from terminating the employment of the CEO. Subsequently, the trial court found the defendant board members guilty of contempt for violating that order and entered a permanent injunction against the defendants. The permanent injunction awarded in the contempt action removed the defendants from the board and permanently barred them from the premises. The defendants appealed. We affirm, finding that the trial court’s action was warranted in the face of the board’s failure to take action regarding the board chairman after the federal judgment for filing false claims was entered against him.