Lead Stories

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 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.)

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.)

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.

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.)

When wait staff of the Kittansett golf club in Massachusetts sued the club and one of its officers for failure to properly distribute gratuities added to meal charges, the club tendered the claim to its Directors and Officers insurance carrier.  It sought coverage under the provisions providing indemnification for losses suffered from claims for wrongful acts. 

The carrier said it had no obligation under the policy, and a federal District Court has agreed.  It held that the claim was essentially one for money the club already had the obligation to pay, and not for the failure to pay it.  (Kittansett Club v. Philadelphia Indemnity Insurance Company, D. MA, No. 11-11385, 9/10/12.)