[24144] in APO-L
Re: [APO-L] Board Liability
daemon@ATHENA.MIT.EDU (dave o'leary)
Wed Feb 11 23:30:04 2004
Date: Wed, 11 Feb 2004 20:28:43 -0800
Reply-To: "dave o'leary" <daveol@earthlink.net>
From: "dave o'leary" <daveol@earthlink.net>
To: APO-L@LISTSERV.IUPUI.EDU
In-Reply-To: <001f01c3e02c$bae68c00$0cf1af80@famtree>
Michael,
Somewhat of a late follow-up, but I've been pretty busy recently -
see comments and thoughts throughout -
First, the usual disclaimer - I am not a lawyer, and I don't even play
one on TV or on the Internet. So take whatever I have to say in this
message with a grain of salt (or a full salt shaker).
At 09:41 AM 1/21/2004 -0500, Michael Gallagher wrote:
>APO is a non-profit corporation. It's been 3 years, but my economics
>teacher my senior year of high school said (when I asked) that nonprofit
>groups would probably be S-corporations. Corporations exist to limit
>liability. A stockholder is only liable for the amount of investment s/he
>has individually in such corporation (ie bankruptcy making the shares
>worthless) & the individual cannot be touched by legal suits solely as an
>investor.
There are substantial legal differences between a 501c3 and any of the
forms of for-profit corporations. Individuals can contribute (funds and
time, etc.) to a non-profit, but an individual can not "own" part of a 501c3.
>501c3's are nonprofit corporations and do not have stock, but I would
>conjecture that limited liability applies.
The initial query is about board members (which exist for both APO
and other 501c3's), not about (for profit) shareholders. Just as a
stockholder in an LLC has limited exposure, a stakeholder in a
non-profit also has limited liability, presuming the individual is
not personally negligent. Interpretation of personal negligence can
include not providing appropriate oversight, and not acting to prevent
potentially harmful activities to take place. Laws vary from state to
state on the details. More on this below -
>Any thoughts on why APO does not have a Congressional charter?
Perhaps because we have not sought one, and there is no
reason for Congress to issue one? How is this related to the
message thread?
>What clause allows APO "to sue and be sued"?
I'm not sure where this question comes from, either.
Per Brother Stratton's comments below, any organization
or individual can be sued. I'm not sure why (or where) a
"clause" would be required to "allow" this.
Instead of conjecture, I encourage you and others interested in this
topic (and all who are involved in management or governance
of the fraternity, including chapter officers, section chairs and staff,
advisors, etc.), to research these issues. Here are a several online
references:
http://www.boardsource.org - search for "liability"
http://www.explorium.org/PL_105-19.htm - the Volunteer Protection Act of 1997
http://hahnline.com/d&oexpwa.htm
http://www.nonprofitlaw.com/volrisk/index.shtml
http://www.nonprofitrisk.org/
http://www.eriskcenter.org/knowledge/normac/protecting.html
To respond to some of Rich's specific questions asked in the
initial message on this thread:
Yes - a board member can be sued and could be considered
liable if, for example, they are aware of activities which
are illegal and they don't act to prevent it. The regional
director scenario might be a stretch but not a huge one,
for example, if an RD sees people drinking at a national
convention (or is visiting another region's regional conference)
and sees drinking, and someone is injured after this
person doesn't do anything to stop the behavior.
There are what are referred to as "Good Samaritan" laws in
many states that might help in some situations, at
least where an individual is acting in good faith to assist
another, but these are not likely to be applicable in the
scenarios which I am envisioning (although again, I am
not a lawyer and I am not familiar with all the state laws).
Refer to the "Volunteer Protection Act of 1997" references
above.
In terms of protecting assets, there are different types of insurance
that can be used to protect assets, including Directors and
Officers policies, and other types of umbrella coverage taken
by individual board members to protect personal assets.
Again - a complex topic to be taken up with those who
are familiar with the the up to date materials and laws.
Please keep in mind that these are Internet references and that
you can't always believe what you read on the Internet, and also
that (again) I am not a lawyer. You get what you pay for... that said,
I hope that this response and resources help to illuminate the
discussion rather than adding confusion.
Dave O'Leary
Chair, National Scouting & Youth Service Committee
Alpha Phi Omega, National Service Fraternity
>Michael Gallagher
>----- Original Message -----
>From: <mailto:mark_stratton@yahoo.com>Mark Allen Stratton
>To: <mailto:APO-L@LISTSERV.IUPUI.EDU>APO-L@LISTSERV.IUPUI.EDU
>Sent: Wednesday, January 21, 2004 9:07 AM
>Subject: Re: [APO-L] Board Liability
>
>While I don't have a definitive answer, I'll tell you what my thoughts are
>on this (though I'm certain there are those who can speak with more
>authority than I).
>
>1. There is nothing that prevents the Board (or the Fraternity, for that
>matter) from being sued. In the litigious society in which we leave,
>everyone is a potential target.
>
>2. The best defense that I can think of is for members of the Board to
>diligiently exercise their fiduciary responsibility, to exercise due
>diligence in the course of their duties. By that, I mean to address
>problems when they arise, to work as best as they can to minimize risk,
>and overall, to do the jobs to the best of their ability.
>
>I do not believe there is anyway the structure of the Fraternity or the
>Board can somehow lessen the impact of a potential lawsuit. I say that
>because our governing documents (Articles of Incorporation, National
>Bylaws, etc.) are inferior to the laws of the United States and the
>several states. Given that, any law at issue supercedes our governing
>documents, so I don't think the structure of our organization would have
>any protective value.
>
>Now, as I understand, there are some laws that do offer some measure of
>protection to volunteers (as I recall, I heard about them at the SRW a few
>years back), but I cannot recall the specifics of them.
>
>All of that aside, I am not a lawyer, but I really do think the best
>defense against a lawsuit is to do one's job to the best of one's ability,
>to address problems as they arise, and to minimize risk as best as possible.
>
>Mark
>----- Original Message -----
>From: <mailto:Richard.Vehlow@ogs.state.ny.us>Vehlow, Richard
>To: <mailto:APO-L@LISTSERV.IUPUI.EDU>APO-L@LISTSERV.IUPUI.EDU
>Sent: Wednesday, January 21, 2004 8:57 AM
>Subject: [APO-L] Board Liability
>I was having a dinner conversation with two fellow section staff members
>the other day. We eventually stumbled upon the omnipresent risk management
>topic, and I apparently learned something interesting. If the fraternity
>is sued, the 18-member board can be personally liable!
>We discussed a few what-ifs, and there was an interpretation made that
>theoretically, a region director on one coast can be cleaned out
>financially thanks to the litigation stemming from an incident
>transcontinentally.
>I would assume that members of a volunteer organization would be
>personnally protected against such personal financial risk. When APO faced
>an injury lawsuit in 1988 (which was dismissed), I was understanding that
>the target of the lawsuit was the financial assets of the fraternity itself.
>If this is indeed the case, then what would a board member have to do to
>protect his/her assets if he/she would like to serve in that position? Is
>there a way to structure ourselves to avoid this?
>-Rich Vehlow
>Section 88 Leadership Coordinator
>vehlor@alum.rpi.edu
