Give me a call on the Board Issues Hotline

• Date: 01 August 2017
• DOI: http://doi.org/10.1002/ban.30509
• Published date: 01 August 2017

4 Board & Administrator

DOI 10.1002/ban © 2017 Wiley Periodicals, Inc., A Wiley Company • All rights reserved

continued from page 1

“The attorney director may also have to consider

other actions where the attorney’s or her firm’s

other clients would or might reasonably be expect-

ed to be impacted.”

• Conflicts of interest. Another complica-

tion arises when the board member attorney’s

firm, or one of its clients, gets in a dispute with

the nonprofit. Which role does the member play,

and which party does he represent? If he doesn’t

provide zealous representation for the nonprofit—

or withdraw from representing it—it could cause

major legal issues.

“While a conflict of interest may be a concern

for any director, particularly for one providing

advice to a nonprofit that might impact her per-

sonal business, it’s likely a more tricky concern

for attorneys because they generally owe a duty to

represent their clients zealously within the bounds

of the law,” Berger said. “Breaching such duty may

result in disciplinary actions that other profes-

sions may not be subject to.”

• Loss of attorney-client privilege. When a

board member also serves as an attorney for the

nonprofit, communications might lose critical

attorney-client privilege if they are not handled

properly, the firm says.

“If serving both as a director and an attorney,

the attorney director should identify, preferably

in advance, whenever her communications are

intended as legal advice,” said Berger. “Such com-

munications, if made in a board meeting, should

not be captured in the minutes, which may be ac-

cessible to nonfiduciaries of the corporation (e.g.,

members) and thereby lose their status as privi-

leged communications.”

• Questions of competence. Board member

attorneys should also examine whether they

truly have the knowledge and competency to

advise the organization, given their background

and practice areas. They should be careful when

asked to provide advice in areas in which they

possess some knowledge but don’t have a deep

enough understanding of the intricacies of non-

profit law.

“Attorney directors who do not practice non-

profit law should be careful when, for example,

preparing executive compensation packages

and negotiating sales or asset transfers and

joint venture or partnership agreements, as

there are many nuances in the law that a gen-

eral corporate or tax lawyer may not be familiar

with,” she said.

There’s also the question of which party’s in-

surance will cover acts or omissions of a board

member attorney, NEO Law said. The nonprof-

it’s directors and officers insurance generally

covers certain acts or omissions of the individu-

al acting in the capacity of a board member, but

not in the capacity of an attorney. Meanwhile,

the member’s professional malpractice insur-

ance would cover him when acting in his ca-

pacity as a lawyer, but not in his capacity as a

board member. If there’s confusion about which

role the individual was in during the activity in

question, there’s a chance that neither party’s

insurance would provide coverage. It doesn’t

happen all that often, but it’s still something to

keep in mind.

“It’s likely that either one or the other would

apply if the attorney director was covered by

both types of insurance. However, if there is a

question of in what capacity the attorney direc-

tor acted, each insurance company might deny

coverage, stating that the claim should be cov-

ered by the other,” Berger said. “For example,

if the attorney director negligently assured the

board that unlawful compensation to a contrac-

tor would be fine but did not specify whether her

opinion was provided as legal advice, it may be

unclear which insurance should cover a claim

related to that action.”

For more information, visit http://www.

neolawgroup.com or contact Berger at michele@

neolawgroup.com. ■

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