OVERVIEW OF CERTAIN LEGALISSUES AND RESPONSIBILITIES

A Presentation to the Recycling for Disadvantaged Children's Board

RDC

General Rules and Responsibilities

• You should understand how RDC is organized and the rules governing ito Oregon Not-for-Profit Corporation Lawo Certificate of Incorporationo Bylaws (Bylaws adopted by the Board)o Policieso Resolutions of the Boardo Operations Manualso Practiceso Rules of Order

RDC is

• An Oregon not-for-profit corporation – governed by Oregon law for corporate governance issues

• A U.S. corporation governed by US law• A non-member organization - no shareholders• Focused on “public benefit”• Governed by the Board of Directors

Basic Governance and Tax Exemption Principles

• The Board of Directors is not a Congress• The Board of Directors is a fiduciary body with

responsibility for the whole of RDC and all of its assets

• RDC, and the Board of Directors, is ultimately responsible for the actions taken or omitted by each representative of RDC

Basic Governance and Tax Exemption Principles

• RDC’s policies and procedures prohibit its employees and volunteers from retaining separate legal counsel without the consent of the Executive Director.

Section 501(c)(3) Tax-Exempt Status of RDC

• RDC is exempt from tax under Section 501(c)(3) of the U.S. Internal Revenue Code of 1986

• RDC must operate “exclusively” for “educational and scientific” purposes

• RDC is not a Section 501(c)(6) organization and thus should not engage in a substantial level of activities directed at the protection or promotion of the professional business interests

Fiduciary Duties • Duty of Care• Duty of Loyalty• Duty of Obedience

Fiduciary Duties: Duty of Care • Participate in the decisions of the Board of

Directors and be informed (as to data relevant to the decision)

• Prudent Person Rule: should act in good faith and with that degree of diligence, care and skill which an ordinary prudent person would exercise under similar circumstances in a like position (NPCL Section 717)

Fiduciary Duties - Care• Diligence (also known as “duty of attention”)o Attend meetings regularly - be informed as to minutes and

agenda and attachmentso Spend sufficient time and energy to be reasonably familiar

with matters requiring board or committee attentiono Review adequate informationo Monitor delegated activitieso Ask questions at the meetingso Make your decisions based on your “informed” knowledge

and experience o Maintain a high degree of confidentiality – until public

disclosure

Fiduciary Duties • Business Judgment Rule: good faith and full

disclosure o You can rely on information, opinions and reports from others

including experts o If there is a reason for suspicion – make an inquiryo Delegation – a board or committee does not operate the day-

to-day business of the corporation; the board or committee delegates to corporate agents – volunteer officers and the Staff

o You as a member of the board cannot delegate other individual’s responsibilities

Fiduciary Duties: Duty of Loyalty• Requires that you exercise your powers in the best interests of

RDC as a whole, not in your own interest

• Act only in the best interests of the RDC as a whole• The board acts “for the benefit of the general public”• If there is a conflict between the best interests of RDC as a whole

and the interests of other organizations, you should vote in favor of RDC’s interests

• Advantage must accrue only to the public and the overall organization and never to an individual officer or director or other organization

Fiduciary Duties : Loyalty • Conflicts of interest

o Be aware of the potentialo Act with candor and careo Not automatically illegal or dishonest but must be

disclosed, so they can be dealt with appropriatelyo Must disclose before discussion or presentation to

the board or committeeo After disclosure, board or committee can deal with

this in a disinterested manner - i.e., interested officer or director should absent himself or herself from meeting

Fiduciary Duties • Practical suggestion – do not use

RDC’s name for personal purposes RDC stationery for RDC business only RDC business cards for RDC business only

Fiduciary Duties: Obedience • Carry out specific objectives of RDC Cannot divert corporate resources to other goals Support decisions of the Board once made

• Comply with laws – internal and external Follow RDC procedures – Constitution, Bylaws, Policies

• Comply with law to protect tax exempt status of RDC - Section 501(c)(3)

Liability

• Volunteer Protection Act(the “VPA”)o The VPA was enacted by Congress in 1997o Generally, a volunteer is not liable for

negligent acts taken or omitted while acting within the scope of his/her volunteer responsibilities

Liability

• Volunteer Protection Act (the “VPA”)o Volunteers are still liable for willful or criminal

misconduct, gross negligence and reckless misconduct. The VPA does not cover a volunteer while operating an automobile or other vehicle

o States may provide additional protections or “opt out” of being covered by the VPA

o The non-profit organization (i.e., RDC) is not protected by the VPA; it remains vicariously liable for the acts and omissions of its employees and agents (including volunteers)

Liability

• Indemnificationo Permitted by Oregon law - mandatory if

defense is successfulo When acting as an officer or director, RDC

will defend and pay, if “not found by the Board of Directors to have been taken in bad faith or in a manner inconsistent with the purposes or objectives of RDC. . . .”

Liability

• Indemnificationo General indemnification of each person

“who serves as a duly authorized voluntary member or employee of a duly authorized RDC activity”

o Found by Board of Directors to be “duly authorized” and “not ... taken in bad faith or in a manner inconsistent with the purposes or objectives of RDC”

Liability

• Indemnificationo Directors & Officers Liability Insurance

Coverageo GOOD NEWS - no individual board member

has ever been sued in that capacity

Examples of the boards Legal Issues

• Defamation• Contracting

o Breach of Contracto Termination of Contracts o Hotel Contractso Other Services Contracts o Contract Exclusivity

• Publication/Editorial Related Suits

• Export Compliance • IP Ownership• Terminating

incorporated entities• 501(c)(3) restrictions

Defamation: E-Mail Guidelines• There are four elements essential to a cause of

action for defamation:o (1) a false and defamatory statement concerning

another;o (2) an unprivileged publication of the statement to a third

party;o (3) if the defamatory matter is of public concern, fault

amounting at least to negligence on the part of the publisher; and

o (4) damage to the reputation of the plaintiff, whether actual or presumed by law.

E-Mail Guidelines• Statements otherwise defamatory when made

by management, employees, and volunteers, of RDC to others within the corporation, if made in good faith and for a legitimate business or professional reason, to persons who have a “need to know” may be immune from liabilityo There have been cases in other organizations

where authors, other volunteers and staff members have considered asserting claims for defamation based on statements in e-mails

E-Mail Guidelines• The following characteristics of e-mail increase the

likelihood that a false statement may be made while undermining the availability of the privilege:o An e-mail communication is a corporate “record,” one that

usually can be retrieved even if it has been previously deleted and not been printed and filed

o E-mail communications are typically informalo Technology facilitates the non-thoughtful mass distribution of

an e-mail which may result in distribution of an e-mail beyond the need to know

o E-mails are frequently sent just after being typed by the author, without considered review and thought and are not usually vetted or cleared with colleagues or superiors, as letters often are

E-Mail Guidelines

• Assume email will go to the “WORLD”• Use the same care used to write a letter when you write

e-mail correspondence with an employee of RDC. Informal correspondence is fine for informal situations, but use appropriate tone and language

• Consider your audience and use discretion so as to identify the persons who are actually involved in a particular project, especially when the project involves sensitive issues and personal working relationships

• Consider telephone when in doubt about sending the e-mail

General Corporate AdviceInterpretation of Constitution and Bylaws.

Board IssuesAnnual presentation regarding fiduciary duties of Board.

FinanceWork in connection with credit arrangements, including NJEDA financings.

Tax IssuesProtecting Tax-Exempt status; structuring income/royalty arrangements to avoid unrelated business income tax (UBIT); preparing determination letter and private letter ruling requests to the Internal Revenue Service.

Contract Review/Conference ServicesMiscellaneous contracts for RDC activities and function agreement, RDC facilities issues, conference management agreements, etc.

Publishing AgreementsReview of contracts for RDC publications, license arrangements, online publishing. Advice regarding distribution arrangements for electronic products.

IEEE - LEGAL ISSUES AND ADVICE

When to seek advice:Human Resources“Seek Advice” concerning employment issues and developments in employment law—specific employees and general policies; Employee handbook.RDCPlanned Giving Program—fundraising alternatives, including gift annuities, pooled income fund.Real EstateCommercial real estate lease agreements.LitigationCommercial—various contractual disputes; Employment—discrimination, wrongful discharge; Publications—libel and general liability reviews; Standards—general liability reviews of standards Antitrust/Competition LawProduct distribution and pricing issues.PrivacyData privacy requirements in the United States and other countries.ERISA/Employment BenefitsTax-qualified benefit plans and arrangements.

RDC - LEGAL ISSUES AND ADVICE

RDC - LEGAL ISSUES AND ADVICE

StandardsIn addition to seeking advice concerning the structuring and formation of the RDC Industry Standards and Technology Organization, Seek advice on the Standards Association regarding trademarks and other intellectual property, licensing including a substantial agreement with the IEC, corporate governance, review of draft standards, preparation of policy statements for federal agency review, litigation support including responses to third party subpoenas, participation as amicus in certiorari petition to the U.S. Supreme Court, and risk analysis of potential liability associated with the development of standards.

Intellectual PropertyCopyrights, trademarks, web site commerce, licensing agreements.

InternationalAdvice and liaison with foreign counsel on non-U.S. tax and corporate law and risk management issues principally in connection with foreign conferences.

Export Control ComplianceLegal research and advice concerning export control compliance matters, including ITAR and OFAC. Including development of strategies to deal with, and appearances before, relevant government agencies to assure legal compliance and, where appropriate, seek exemptions and licenses.

Recycling for Disadvantaged Children

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