[WSBAPT] Harmful nonprofit governance opinion

Mon May 23 13:22:18 PDT 2016

In my private response to Doug after his first post, I told him about a
hostile takeover of a longstanding rural community church and all its
assets. For many decades, it was a nondenominational middle of the road
Christian congregation. It generally ignored its governing documents for
many years. A group of other-minded Christians figured out that whoever
showed up at the annual meeting would be able to vote, they organized and
overwhelmed the usual congregation, voted themselves in, and essentially
stole the entire church for their much more fundamentalist congregation.
Out went the church property, the long-time pastor and all of the church
board, and soon enough, all of the former members.  

I have no idea what the proper remedy is, other than small nonprofits
creating and following reasonable and fair rules to undertake the business
of fulfilling their purposes, but we all know that is not likely to happen
with many small nonprofits. 

Rob

From: wsbapt-bounces at lists.wsbarppt.com
[mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of Doug Schafer
Sent: Monday, May 23, 2016 12:46 PM
To: WSBA Probate & Trust Listserv
Cc: Solo & Small Firm WSBA Listserv
Subject: Re: [WSBAPT] Harmful nonprofit governance opinion

"Bad facts make bad law?"  I'm indifferent about the facts/allegations in
the particular case, but I am quite concerned that the opinion will be a
template for hostile takeovers of small nonprofit groups by dissidents.
Unfortunately, while the leading WA supreme court case (Anderson v.
Enterprise Lodge No. 2, 80 Wn.App. 41, 906 P.2d 962 (1995)) on judicial
deference to nonprofit boards on governance disputes has been cited and
applied muliple times by the COA (and likely by trial courts) to nonprofits
that were not local chapters of national organizations, those all were
unpublished opinions.

Concerning the proposed rule change re citation of unpublished opinions,
see:
http://www.courts.wa.gov/court_rules/?fa=court_rules.proposedRuleDisplay
<http://www.courts.wa.gov/court_rules/?fa=court_rules.proposedRuleDisplay&ru
leId=496> &ruleId=496

Doug Schafer, sitting at Seatac airport

On 5/23/2016 8:33 AM, Edward Clabaugh wrote:

I strongly disagree. 

If you read the facts the non-profit was a sham that did not operate Mukai
Gardens on Vashon Island as it was supposed. It was a vehicle to enrich the
Nelsons. Other non-profits that contributed to the worthwhile cause of
restoring the lovely Japanese garden and home found their funds diverted.
The Nelsons would not account for them. They did not open the garden and
home to the public. This situation has been on-going for years. So people
who wanted to see the non-profit fulfill its mission finally had to take
action. It has been a long battle but finally after many years the Nelsons
are out and the non-profit is fulfilling its mission of restoring the
property and opening it to the public. 

Sent from my iPhone

On May 23, 2016, at 8:11 AM, Doug Schafer <schafer at pobox.com> wrote:

Please carefully read the attached WA Court of Appeals, Div. I, opinion.
Though "unpublished," it provides a template for hostile dissidents to
takeover a membership-based nonprofit corporation by secretly collecting
member applications and dues, then, on the day that the dissidents deposit
the dues (without authority) in the corporate bank account, sending a 10-day
notice for a membership meeting . At that meeting, the "new members" remove
the incumbent directors.  The corporate directors and officers were unaware
of the "new members" until the meeting occurred. Our state supreme court
appears close to adopting a rule that will permit citation to "unpublished"
opinions such as this one.

My fear is that this case will be used disrupt the governance of too many
nonprofit corporations.

The Court of Appeals declined to apply the well-established doctrine that
courts refrain from interfering in the internal affairs of such associations
and defer to the association's own interpretation of its rules unless that
interpretation is arbitrary or unreasonable, by asserting that such doctrine
applied only to local chapters of national organizations.  Case law is
otherwise, however.

When I read this opinion, I emailed one of the lawyers for the losing
parties and urged them to petition for state supreme court review.  I hear
nothing back until last Thurday, when Ms. Matthews phoned me.  I spoke
Friday with her and her NYC lawyer husband, Mr. Nelson, who reported that
the COA denied their motion for reconsideration on May 2, so the deadline
for a petition for review is June 2.  They are, however, "tapped out" and I
sense some despair.

I'm within minutes of departing on a family trip this week, so I'm not
available to assist.

I write in the hope that other lawyers interested in maintaining strong
nonprofit corporations will consider helping Ms. Matthews and Mr. Happy to
petition for review.  That will allow time for them to negotiate with the
prevailing group, and possible reach a settlement whereby they might ask
Division I to withdraw its opinion.  I've seen that is another case.

Nelson Happy:  jnelsonhappy at gmail.com
Mary Matthews:  matthewshistpres at gmail.com

Doug Schafer, lawyer in Tacoma.

<2016_IslandLandmarks_2.pdf>

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