STATE OF WISCONSIN  CIRCUIT COURT    JEFFERSON COUNTY
______________________________________________
PALMER CHIROPRACTIC UNIVERSITY FOUNDATION,
 an Iowa nonstock corporation,
 723 Brady Street,
 Davenport, Iowa 52803, and

PALMER COLLEGE OF CHIROPRACTIC WEST,
 a California nonstock corporation,
 9 East Tasman Drive,
 San Jose, California 95134,

   Plaintiffs,
v.
 

THE COUNCIL ON CHIROPRACTIC
EDUCATION, INC.,
 a Wisconsin nonstock corporation, 
 8049 North 85th Way
 Scottsdale, Arizona 85359,
        Case No.
        Declaratory Judgment: 30701
PAUL D. WALKER, 
 Quemado, New Mexico 87829, sued in his official capacity,

JAMES F. WINTERSTEIN,
 National University of Health Sciences, 200 East Roosevelt Road,
 Lombard, Illinois 60148.
 sued in his official capacity,

REED B. PHILLIPS
 Southern California University of Health Sciences,
 16200 East Amber Valley Drive,
 Whittier, California 90504,
 sued in his official capacity, and

JOSEPH C. BRlMHALL
 917 East Country Hills Drive
 Ogden, Utah 84403,
 sued in his official capacity,.

   Defendants.
 
 

 

COMPLAINT

Plaintiffs Palmer Chiropractic University Foundation ("Palmer"'), doing business as Palmer College of Chiropractic ("Palmer Davenport") and Palmer College of Chiropractic-West ("Palmer West), by their undersigned attorneys, complain against the defendants by alleging as follows:
 1.  Palmer is a nonprofit corporation organized under the laws of the State of Iowa with its principal place of business located at 723 Brady Street, Davenport, Iowa 52803.  Palmer administers three chiropractic colleges, one located in Davenport, Iowa ("Palmer Davenport"), Palmer West, located in San Jose, California, and Palmer College of Chiropractic Florida ("Palmer Florida"), located in Port Orange Florida.
 2.  Palmer West is a nonprofit corporation organized under the laws of the State of California, with its principal place of business located at 90 East Tasman Drive, San Jose, California 95134.
 3.  Palmer and Palmer West are engaged in the business of educating persons to be chiropractors.
 4.  Palmer Davenport and Palmer West are single-purpose chiropractic colleges offering programs that lead to Doctor of Chiropractic degrees, and they each have institutional accreditation as such from the Council on Chiropractic Education, Inc. ("CCE").
 5.  Defendant CCE is a nonprofit, nonstock corporation organized in 1971 under ch. 181, Stats., with its principal place of business located at 8049 North 85th Way, Scottsdale, Arizona 85369.  CCE's purposes include advocating high standards in chiropractic education, establishing criteria of institutional excellence, evaluating and accrediting chiropractic colleges through its Commission on Accreditation and publishing lists of chiropractic institutions that conform to its standards and policies.  CCE's registered agent has been at all relevant times located in Watertown, Jefferson County, Wisconsin.  In 1994, CCE's offices were relocated from Des Moines, Iowa to Scottsdale, Arizona.  CCE is the accrediting body for chiropractic institutions, such as Palmer Davenport and Palmer West, and ether Doctor of Chiropractic Degree Programs.
 6.  Defendant Paul D. Walker, whose address is Quemado, New Mexico 67829; is the Executive Vice-President of the CCE and is sued in his official capacity,
 7.  Defendant Reed B. Phillips, whose address is 16200 East Amber Valley Drive, Whittier, California 90694, is the President of the CCE Board of Directors, and is sued in his official capacity.
  8.  Defendant James F. Winterstein, whose address is c/o National
University of Health Sciences, 200 East Roosevelt Road, Lombard, Illinois 60148, is the Chairman of the Corporation Board and is sued in his official capacity.
 9.  Defendant Joseph C. Brimhall, whose address is Suite 3, 917 East Country Hills Drive, Ogden, Utah 84404, is Chairman of the CCE Commission on Accreditation, and is sued in his official capacity,
 10.  The terms of defendants Walker, Phillips, Winterstein and Brimhall (collectively, the "Individual Defendants") as CCE officers are scheduled to end during 2003.  As a result, it may be necessary to name their successors as defendants in order to implement the remedies sought in this action.
 11.  This Court has grounds to exercise personal jurisdiction over defendant CCE pursuant to sec. 8O1.05(1)(c), Stats., in that it is a Wisconsin corporation.
 12.  This Court has grounds to exercise personal jurisdiction over the Individual Defendants pursuant to sec. 801.05(8), Stats., in that this action arises out of the activities of CCE, a Wisconsin corporation, while each of them held office as a director, officer, or manager of CCE.

Background

 13.  Article 10 of CCE's Articles of Incorporation ("Articles") provides that CCE "is to have no members who are not directors."
 14.  CCE members are those chiropractic institutions and Doctor of Chiropractic Degree Programs that are accredited by CCE.  Each member (that is, each CCE-accredited institution and Program) is entitled to designate a representative to sit on the Board, and the Board must seat each such designee.  At all relevant times before January 1999, CCE accredited both Palmer Davenport, and Palmer West as chiropractic institutions and seated each of their designees as a voting member of the Board.
 15.  In January 1999, the Board amended the CCE Bylaws (the
"1999 Bylaws") to create a new body called the "Corporation" (which, to avoid confusion, we call the "Membership Body").  Each chiropractic institution and Program accredited by CCE was required to designate "an official at the administrative level" to sit as its representative an the Membership Body, and the Membership Body seated each designee.  Both Palmer Davenport and Palmer West designated representatives to the Membership Body, and the Membership Body seated each of their designees as a voting member.
16.  Paragraph 4.01(3) of the 1999 Bylaws authorizes the Membership Body alone to "decide matters pertaining to incorporation and/or revision of the Bylaws," and only by a two-thirds vote.  The 1999 Bylaws also authorize the Membership Body alone to elect Board members, by a majority vote.  By enacting the 1999 Bylaws the Board gave up its authority to decide matters pertaining to incorporation, to revise the Bylaws and to elect Board members.
 17.  The 1999 Bylaws also changed the composition of the Board so that it would comprise thirteen directors.  Seven directors were to represent CCE-accredited institutions or Programs.  Four directors were to be practicing chiropractors, and two were to be members of the public.  As a. result of the 1999 Bylaws and in violation of Article 10 of the Articles, fewer than all CCE members were represented on the Board.  However, under the 1999 Bylaws, all CCE members were represented on the Membership Body.
 18.  On January 13, 2002, the Board proposed that the Membership Body revise the 1999 Bylaws so as to dissolve itself and transfer back to the Board the powers described above in paragraph 16 (the "Board Proposal").
 19.  Defendant Winterstein, who then served as the chairman of the Membership body, ruled in March 2002 that the representative of Palmer West would not be allowed to sit on the Membership Body or to vote at its March 12, 2002 meeting.
 20.  Of the fourteen members whom, defendant Winterstein and/or defendant Phillips (advised by defendant Walker} allowed to vote at the March 2002 Membership Body meeting, only eight voted in favor of the Board Proposal.  Paragraph 4.01(3) of the 1999 Bylaws requires Bylaws revisions to be enacted by a "two-thirds (2/3) majority vote of [Membership Body] representatives then in office," or at least ten of the fourteen representatives that defendants recognized.  Thus, the Board Proposal failed of adoption at the March 2002 meeting of the Membership Body.
 21.  Following the failure of the Board Proposal March 2002, defendants Winterstein, Phillips and Brimhall wrote to certain members of the Membership Body (not including the designee of Palmer West) on or about April 23, 2002, stating that the Board Proposal did not require a revision of the 1999 Bylaws and therefore did not require a two-thirds vote for passage.  The defendants' letter asked its recipients if they agreed.  Eight of the recipients (still less than two-thirds of the Membership Body) replied that they did agree.
 22.  Thereafter, the Individual Defendants recommended that the Board assume the powers that the 1999 Bylaws gave to the Membership Body.  About May 13, 2002 the Board purported to adopt their recommendation, assumed the Membership Body's powers and attempted to dissolve CCE as a Wisconsin corporation and thereafter attempted to domesticate CCE as an Arizona corporation.
 23.  Defendant Walker played a leadership role in depriving Palmer West of its representation and vote first on the Board and then on the Membership Body.
 24.  Plaintiffs have been injured by the foregoing actions of the defendants, which had the intent and effect of depriving plaintiffs of their rights as members of CCE, including (but not limited to) a reduction in their voting rights in the governance of CCE accorded them by the Articles.

First Cause of Action

 25.  Plaintiffs incorporate as if fully repeated all of the foregoing paragraphs.
 26.  The Membership Body was created by, and its powers are defined by, the 1999 Bylaws.  Consequently, the Membership Body could be dissolved and its powers returned to the Board only by revising the Bylaws again.
 27.  The Membership Body's attempt to dissolve itself and to return its powers to the Board was invalid and ineffective because less than two-thirds of the Membership Body's entire membership voted for the revisions, as required by Article: 4.01(3) of the 1999 Bylaws.
 28.  The Board's later attempts to dissolve CCE as a Wisconsin corporation and thereafter to domesticate CCE as an Arizona corporation were matters that "pertain(ed) to incorporation," and were thus actions that could be taken only by the Membership Body, and not by the Board, according to Article 4.01(3) of the 1999 Bylaws.
 29.  Plaintiff is, therefore, entitled to a judgment pursuant to sec.806.04, Stats., declaring that (i) the Membership Body's attempt to dissolve itself and (ii) the Board's subsequent attempts to dissolve CCE as a Wisconsin corporation and thereafter to domesticate CCE as an Arizona corporation were ultra vires and of no force or effect.

Second Cause of Action

 30.  Plaintiffs incorporate as if fully repeated all of the foregoing paragraphs.
 31.  Article 10 of the Articles provides that CCE "is to have no members who are not directors,"
 32.  The Board violated Article 10 of the Articles and acted ultra vires in 1999 when it changed the membership of the Board so that some CCE members were no longer represented on the Board.
 33.  The Board as constituted under the 1999 Bylaws lacked the power to dissolve CCE as a Wisconsin corporation or thereafter to domesticate CCE as an Arizona corporation.
 34.  Plaintiff is therefore entitled to a judgment, pursuant to sec.
806.04, Stats., declaring that the Board has been improperly constituted since adoption of the 1999 Bylaws and that the Board's attempt to dissolve CCE as a Wisconsin corporation and thereafter to domesticate CCE as an Arizona corporation were ultra vires acts and of no force or effect.

Third Cause of Action

 35.  Plaintiff incorporates as if fully repeated all of the foregoing paragraphs.
 36.  From and after March 24, 1992, Article 3 of the Articles has provided that, "For purposes of this document [i.e.., the Articles], the term institution(s) shall include single purpose chiropractic colleges and doctor of chiropractic programs within other educational institutions."
 37.  Article 3.O3(1) of the 1999 Bylaws provides (with our emphasis) that, "The, membership of the [Membership Body] shall be composed of the [Doctor or Chiropractic Degree Programs] and institutions granted accredited status by the Commission on Accreditation."  The Commission on Accreditation is an arm of CCE, with duties and authority established by the CCE Bylaws.
 38.  At all relevant times and at the present, the CCE Commission has accorded Palmer Davenport and Palmer West accreditation as separate chiropractic institutions.
 39.  Consistent with the Articles and Bylaws, CCE at all relevant times before March 2002 treated both Palmer Davenport and Palmer West as separately accredited chiropractic institutions, with each of them having voting status on the Board until the 1999 Bylaws were adopted and thereafter on the Membership Body.
 40.  When defendants Winterstein and Phillips (with the advice of defendant Walker) ruled in 2OO2 that the representative of Palmer West would not be allowed to sit en the Membership Body or to vote at its March 12, 2002 meeting, they violated the Articles and Bylaws and deprived plaintiffs of their rights as voting members of CCE-.
41. Plaintiffs are therefore entitled to a judgment, pursuant to sec. 806.04, Stats., declaring that the defendants wrongfully deprived plaintiffs Palmer Davenport and Palmer West of their rights to have separate representatives on the Membership Body or, if the Court determines that the Board acted ultra vires in creating the Membership Body in 1999, on the Board.

Fourth Cause of Action

 42.  Plaintiff incorporates as if fully repeated all of the foregoing paragraphs.
 43.  The Articles and the CCE Bylaws constitute a contract between plaintiff and defendant CCE.
 44.  Defendant CCE breached its contract with plaintiff (i) when its Membership Body acted ultra vires to dissolve itself, or (ii) when its improperly constituted Board of Directors acted to dissolve CCE as a Wisconsin corporation and to reconstitute itself as an Arizona corporation, and (iii) when CCE deprived plaintiffs of their rights to have a separate representatives on the Membership Body for each of its accredited chiropractic institutions.
 45.  Plaintiffs have been damaged by defendant CCE's breach of contract.

Fifth Cause or Action

 46.  Plaintiffs incorporate as if fully repeated all of the foregoing paragraphs.
 47.  The Individual Defendants violated their fiduciary duties to the plaintiffs by acting in bad faith and for ulterior motives to deprive plaintiffs of their rights to representation on the governing bodies of CCE.
 WHEREFORE plaintiffs ask the Court for judgment
  a.  making the declarations described above;
  b.  if necessary to restore the status quo ante, injunctions as remedies      supplemental to the foregoing declaratory judgments, requiring the     defendants or the successors to the Individual Defendants to (i) reverse the    dissolution of CCE as a Wisconsin corporation and its subsequent      domestication as an Arizona corporation, (ii) restore the CCE governance to a    condition in which there are "no members who are not directors," (iii) require    CCE to restore  separate voting status on the Board to Palmer Davenport and    Palmer West, and (iv) to take no further actions that are inconsistent with the    Articles;

  c.  for their costs allowed by law; and
  d.  for such ether and further relief as shall be just and equitable.

     FOLEY & LARDNER

     Thomas L. Shriner, Jr.  Bar No. 1015208
     James L. Huston  Bar No. 1012985
     Attorneys for the Plaintiff
     Palmer Chiropractic University Foundation

 777 East Wisconsin Avenue
Suite 3800
Milwaukee, Wisconsin 532O2-5367 
414-271-2400
414.297-4900 (fax)
 
 

Of Counsel:

BITTNER, LAMBERT & WERNER
Richard Bittner Iowa Bar No, 346
Robert D. Lambert  Iowa Bar No. 3022 201 W. Second. Street
1000 U.S. Bank Center
Davenport, Iowa 52801
563-328-3333 (fax) 563-328-3352