On March 30, 2012, the Supreme Court of Texas denied review of Paula Gaughan’s lawsuit against the National Cutting Horse Association (“NCHA”). 

We first covered the Gaughan case in a post back in August of 2011, shortly after the Fort Worth Court of Appeals affirmed the trial court’s judgment in favor of the NCHA. The trial court’s now completely final judgment awards the NCHA $75,000 in attorneys’ fees and denies Gaughan’s request that certain NCHA financial records be judicially declared available for inspection by all NCHA members. For more information, see this article.

The Justices of the Supreme Court of Texas

The NCHA is a Texas nonprofit corporation. The Gaughan case dealt primarily with a company’s duties under the Texas Non-Profit Corporation Act to maintain and, in some cases, allow members to inspect the nonprofit’s books and records. The trial and appellate courts held that the NCHA complied with the portions of the Act that were at issue in the lawsuit.

While we’re on the topic of a member’s suit against a horse association, it is a convenient time to point out that the NCHA would likely be deemed a “voluntary association” under Texas law. Here are some “fun facts” about voluntary associations:

• It is the right of a voluntary association to manage, within legal limits, its own affairs without interference from the courts. This is what they call the “policy of judicial nonintervention.”

• Review of a voluntary association’s actions is severely limited under Texas law. Courts will not interfere with the internal management of a voluntary association so long as the governing bodies of such association do not act totally unreasonably, contravene public policy, break the law, or violate the association’s own rules and procedures.

• An individual, by becoming a member of a voluntary association, subjects himself or herself, within legal limits, to the association’s power to administer its rules as well as its power to make its rules.

• An exception to the policy of judicial nonintervention can be made where a valuable right or property interest is at stake in a lawsuit.

Although the policy of judicial nonintervention did not directly come up in the Gaughan case, these issues often preclude or limit the ability of a court to interfere in disputes between members and horse industry associations. 

Related Post:  NCHA Litigation Update:  NCHA Wins Again