Representing the Not-for-Profit Board

Best practices for an effective attorney-client relationship

June 12, 2024 Photo

Representing the not-for-profit (NFP) board in connection with a disputed matter poses special challenges for outside defense counsel. The purpose of this article is to identify these special challenges and to propose best practices for meeting them.

It should be noted that some of the best practices identified and discussed are most applicable to smaller organizations, such as homeowners associations (HOAs), faith based congregations, country clubs, social clubs, private schools, camps, theater groups, museums, and the like. These organizations are led by boards comprised by and large of amateur directors. These are people who have limited, if any, prior corporate officer and director experience; who provide their time and effort on a volunteer basis; and who may have intense personal stakes in the organization for which they have volunteered and been chosen to run.

From the outset there are certain steps for defense counsel to take when representing an NFP board involved in a dispute. Following these steps creates a sound foundation for the work to come.

First, speak with the insurance claims professional assigned to the claim. Has that professional handled other claims for this insured? Are they familiar with the board members or individuals involved in the claim? For example, with regard to HOAs, the claims professional may know the community manager, board members, or the HOA’s private counsel; and may be able to smooth the introduction of outside defense counsel to these individuals and assist in building the foundation of relationship and trust.

Second, either after that introduction or on your own volition if such introduction is not forthcoming, identify and speak with the board president/chair to introduce yourself.

  • Assure the individual that while you have been engaged by the directors & officers insurance carrier, you are indeed counsel for the organization just as surely as if they had hired you directly (to dispel the common misconception that defense counsel represents the insurer and not the insured). Use this brief comment as a segue to ask whether the board has an existing relationship with other outside counsel, and ask about any other potentially important third-party relationships, such as a property manager for community associations.
  • Ask for copies of the governing documents, such as the articles of incorporation, or declaration, etc., the by-laws, and any rules and regulations. Also ask for copies of the board’s meeting minutes for the past 12 months. And, while the answer to this question can be found in the governing documents, ask about the election cycle. You will want to know when the board you are counseling and defending is due to possibly change.

Following this initial conversation, you will want to set up a meeting with the entire board. It is typically most convenient for the board to add you to the agenda for the next regularly scheduled meeting. This also tends to ensure that you will be addressing at least a quorum.

Reiterate those introductory remarks about representing the entity, through the board. Misunderstanding of your role is often accompanied by some level of resentment that you have been pressed upon the board without it having had a say. It is fine to address this prejudice directly. Obviously, you will not want to confront anyone at this time and if you find yourself being confronted, defuse the situation with polite diplomacy and with sincere and authentic expressions of your commitment to the welfare of the organization. It might be helpful to have their outside counsel participate in your introduction to help things go smoothly.

If a reservation of rights letter has been issued, the board might naturally ask you to explain it or comment on aspects of it, hypotheticals, etc. Having private counsel present to say that the ROR does not involve defense counsel (and to explain why) can prevent what could otherwise turn into a distracting and confusing sidebar. Outside defense counsel should not comment on the coverage issues in the litigation, nor on the content of the reservation of rights letter. At this time, it is better practice to refer such questions to the claims professional to address. The claims professional should include the HOA’s private counsel in that discussion.

There is a handful of additional topics you must cover when first meeting with the board:

  • Explain how the attorney-client privilege works. Emphasize how easily it can be lost, if, for example, otherwise privileged communications are disclosed during idle conversation in the dog park or at the bus stop. Even information shared between a board member and their spouse can conceivably spoil the privilege, depending on state-specific rules.
  • Be direct in telling the board that if any of them were directly involved in the subject matter of the dispute while arguably acting outside of their board role, they might have to be disqualified from participating in any decisions related to defending the matter. Allegations of self-dealing, for example, could create a conflict that necessitates separate representation and sequestration. It can be very difficult to change, let alone reverse, course during litigation, or as mediation approaches, if conflicts are discovered too late. It can also result in potential complications for insurance coverage, and in a loss of credibility and respect on the part of counsel in the eyes of the board.
  • Explain to the board what a litigation hold is and how it works. Bear in mind that all but the largest NFPs tend to rely on personal email programs (such as Gmail), and that it is not uncommon to see board communications involve board members’ personal work email accounts. This topic alone deserves its own article, but suffice it to say that document preservation, and in due course document collection, are among the very most challenging aspects of your role as outside counsel.
  • Due diligence with the board must also encompass the community’s use of social media. Does the entity have a presence on Facebook? Is there a profile on any social media platform (e.g., Instagram, Pinterest, X, LinkedIn, YouTube) that touches on (let alone might be devoted to) the issue at hand? Capturing this evidence is time-sensitive and requires mindfulness on the part of counsel as to authentication and the chain of custody for later admissibility of evidence. Prompt fact gathering and prompt data collection, to prevent spoliation, can be critical.
  • Finally, when you first meet the board, it is not too soon for you to start thinking about who might be an effective corporate designee/ person most knowledgeable for deposition purposes, when the time for testimony comes. And looking even further down the line, who are the individuals that seem most appropriate as your primary contact for settlement negotiations and/or mediation. For obvious reasons, it is not productive to have the entire board attending mediation. Your first impressions are valuable inputs.

Representing an NFP board in a dispute setting requires specialized knowledge drawn from state law and from the client’s own governance structure, the ability to quickly gain the trust and confidence of a group of strangers, an understanding of digital discovery, and traditional litigation and dispute resolution skills, with an extra measure of patience. Do all of this, and you will have a grateful client, eager to help you achieve their goals.

About The Authors
Multiple Contributors
Jennifer Wojciechowski

Jennifer L. Wojciechowski, Esq. is vice president of operations at Alliant Insurance Services/Community Association Underwriters of America, Inc.

Jonathan S. Ziss

Jonathan S. Ziss is a partner at Goldberg Segalla LLP.

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