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Volunteer Board Chair Dismissed From Claim for Contract Default

New York Court says claim may not proceed when plaintiff fails to show intentional misconduct
An appellate court in New York has affirmed the dismissal of a suit against the volunteer board chair of a nonprofit research institute when a company seeking $97,000 on a contract claim failed to allege sufficient facts to show that the board chair had been grossly negligent or engaged in intentional misconduct. ( Krackeler Scientific v. Ordway Research Institute, Supreme Ct., App. Div., Third Dept., 7/26/12 .)

Directors Can’t Amend Bylaws To Remove Voting Rights of Sole Member

Member may remove newly elected directors who sought to change governance without authority
The board of directors of a nonprofit corporation may not by themselves amend the bylaws to deprive the corporation’s sole member of voting rights, an appellate court in New York has affirmed. The member’s voting rights could be removed only by its removal as a member or its resignation under the state law. (Gluck v. Chevre Liady Nusach Hoary, Supreme Ct., App. Div., Second Dept., 7/25/12.) The issue arose following reorganization of Northern Services Group, a nonprofit corporation formed in 2000 to manage seven nursing homes and assisted living facilities which were “sponsored” by Chevre Liady Nusach Hoary, an Orthodox Jewish Congregation. Although Chevre Liady did not formally participate...

Broker/Director’s Insurance Fails to Cover Malpractice Claim

Policy excludes coverage for transactions where broker has financial interest, or is director of a party
The volunteer director of a nonprofit school in Hawai‘i who donated his services as a real estate broker and loaned the school funds to buy real estate jointly with a Buddhist temple has been denied coverage under his professional liability policy in a suit by the temple when the joint purchasers could not agree upon a division of the ownership. An appellate court in Hawai‘i has affirmed a decision that the policy specifically excluded coverage of a claim for damages. ( Keown v. Tudor Insurance Company, Intermediate Ct. of App., HI, No. 29695, 8/16/12 .)

‘Chief Apostle’ Personally Liable For Unpaid Withholding Taxes

Court rejects claim that finding based on bylaws interferes with church’s First Amendment rights
A federal District Court in North Carolina has affirmed a Bankruptcy Court decision holding that the founder and “Chief Apostle” of a church, who had the powers of president and CEO of the corporation, is personally liable for payment of withholding taxes for church employees when the church failed to remit the amounts due. The Court has rejected a claim that an interpretation of her powers, based in part on a reading of the church’s bylaws, violated the Apostle’s and the church’s rights under the First Amendment of the U.S. Constitution. ( Vaughan v. Internal Revenue Service, E.D. NC, No. 4:11-CV-222, 7/16/12 .)

Members of Unincorporated Association May Be Liable for Association’s Debt

Vermont Court sets criteria for imposition of personal liability when club can’t meet obligations
A divided Supreme Court of Vermont has set the conditions under which members of an unincorporated association can be held personally liable for the debts of the association when the association can’t meet its obligations. It has refused to impose liability only on members who were actively involved in the wrongdoing that created the obligation, and imposed liability on anyone who was a member at the time. ( Daniels v. Elks Club of Hartford, Supreme Ct., VT, No. 2010-181, 8/3/12 .) The lengthy opinion is the latest ruling attempting to resolve liability for discrimination claims successfully brought by four women against the Elks Club of Hartford (VT) in a suit originally filed in 1998. The...

Court Can’t Order Contributions In Addition to Maximum Criminal Fine

Government’s request for $44 million in funding for community service projects is rejected
When CITGO Petroleum Corporation and CITGO Refining and Chemicals Company were convicted on two felony counts each of operating an oil water separator without proper emission controls and three misdemeanor counts of unlawfully taking migratory birds the government asked for the maximum criminal fine of $2.9 million. It also asked for a five-year probation and “community service” in the form of fully funding seven proposed projects in the amount of $44 million. The companies said they were willing to pay the fines, but not make the contributions. A trial court in Texas has agreed it has no power to require the contributions. (U.S. v. CITGO Petroleum Corporation, S.D. TX, No. C-06-563, 9/18/12.)

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