Nonprofit Law YOU Want to Know
We regularly feature answers to questions from readers in our “To the Point” column. The full list can be viewed on the site.
What should counsel do when board chair “goes rogue”?
Lead Stories
Attorney for Dissident Director Not Liable to Nonprofit for Malpractice
Director had no authority to hire on behalf of corporation, therefore there was no attorney-client relationship
An attorney hired by a dissident director of a nonprofit corporation in an attempt to regain control of the organization may not be sued by the nonprofit for malpractice, the Supreme Court of Ohio has ruled. The director did not have authority to hire on behalf of the organization and there was therefore no attorney-client relationship. (New Destiny Treatment Center v. Wheeler, No 2010-298, 5/18/11.)
Donor Has Standing to Sue, But Loses Claim on Use of Gift
Gift agreement gives basis for suit, but Court says Seminary did not breach agreement
A donor disgruntled over the handling of a scholarship fund he created in honor of his parents has won the battle of standing to bring his complaint, but has lost the war in his effort to move the funds. A federal District Court in Illinois has said that the Seminary that received the gift did not violate the gift agreement. (Pearson v. Garrett-Evangelical Theological Seminary, N.D. IL, No. 11-cv-0019, 5/13/11.)
National Girl Scouts May Not Force Local Councils to Reorganize
Court of Appeals reverses trial court and applies Wisconsin franchise law to stop change
The Seventh Circuit Court of Appeals has reversed a Wisconsin District Court decision and held that the Wisconsin fair-dealership law prevents the Girl Scouts of America from forcing the “reorganization” of local chapters over the objection of one of them. (Girl Scouts of Manitou Council v. Girl Scouts of the United States of America, No. 10-1986, 5/31/11.)
Nonprofit Officers May be Tried For Misuse of Gifts, Election Fraud
Court refuses to dismiss counts of indictment against president and executive director of association
A federal District court in Louisiana has refused to dismiss indictments against the president and executive director of the Louisiana Horsemen’s Benevolent and Protective Association for a range of criminal charges including allegedly rigging a board election and illegally misusing funds donated to the Association after Hurricane Katrina. (U.S. v. Alfortish, E.D. LA, No. 10-328, 6/8/11.)
PA Court Limits Standing To Sue Nonprofit Corporations
Blue Cross subscribers are not officers, directors, members or “others” able to contest breach of NPCL
The Pennsylvania Supreme Court has affirmed an appellate court decision limiting the types of people who may sue a nonprofit corporation for an alleged violation of the state’s Nonprofit Corporation Law. It has held that Blue Cross insurance subscribers cannot sue because their rights or duties as “a member, director…, officer or otherwise” will not be affected by the corporate action. (Petty v. Hospital Service Association of Northeastern Pennsylvania, No. 34 MAP 2010, 6/20/11.)
The decision appears to be the final determination in almost 10 years of litigation brought by a group of Blue Cross health insurance subscribers who argued that Blue Cross had retained excessive reserves and effectively increased their premiums. They also sued for breach of contract and breach of fiduciary duty.