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Wednesday, November 30, 2011

A Summary Explanation of the Doctrine of Charitable Immunity

Charitable immunity is perhaps one of the most misunderstood concepts in the law. Many charities are under the mistaken assumption that they are immune from any lawsuit simply because they operate as a non-profit and for a charitable purpose. This is a misunderstanding that can have unfortunate consequences.

In Virginia, “[a] charitable institution is immune from liability to its beneficiaries for [ordinary] negligence arising from acts of its servants and agents, but only if due care has been exercised in their selection and retention.” Ola v. YMCA of South Hampton Roads, Inc., 270 Va. 550 (2005). This statement obviously merits further analysis.

First, in order to obtain charitable immunity, the organization must be a charitable institution. To determine whether an institution is charitable, Virginia courts “apply a two-part test, examining (1) whether the organization’s articles of incorporation have a charitable or eleemosynary purpose and (2) whether the organization is in fact operated consistent with that purpose.” Davidson v. The Colonial Williamsburg Found., 817 F.Supp. 611 (E.D. Va. 1993). It is therefore imperative that non-profit organizations operating as charitable or public benefit organizations not only draft articles of incorporation that reflect their mission, but that they also operate in a manner wholly consistent with that mission.

Second, a charitable institution is immune from liability only to its beneficiaries. In Virginia, charities are not immune from liability to legal strangers. A beneficiary is someone that receives something of value, which the organization, through its charitable purposes, undertakes to provide. Egerton v. R.E. Lee Memorial Church, 395 F.2d 381 (4th Cir. 1968). As an example, the recipient of an in-home meal from a charity providing in-home meals to the sick or disabled would be considered a beneficiary of the organization’s charitable purpose. However, the victim of an automobile accident occurring on the roads while the same charity was delivering a meal would not be a beneficiary.

Monday, November 28, 2011

Non-compete Provision - Revisited and Reversed by Virginia Supreme Court

On November 4, 2011, the Virginia Supreme Court issued an important opinion on the enforceability of non-compete agreements in Virginia. In Home Paramount Pest Control Companies, Inc. v. Shaffer, et al., the Supreme Court affirmed the Fairfax County Circuit Court's prior determination that a non-compete provision in a former employee's employment agreement was overbroad and, therefore, unenforceable.

In 1989, in a case involving the same employer, the Supreme Court ruled that an identical provision in an employment agreement was enforceable. Accordingly, the Supreme Court reversed its previous stance, demonstrating the shift in the law that has occurred over the last 22 years. The Supreme Court justified its decision on the basis of several other cases that have been decided since 1989, which cases clarified the law and created the framework from which the 2011 case was decided.

The Supreme Court explained that non-compete provisions are only enforceable if they are narrowly drawn to protect the employer's legitimate business interest, are not unreasonably burdensome on an employee's ability to earn a livelihood and are not against public policy. The employer bears the burden of proving each of these factors. Virginia Courts will consider the function, geographic scope and duration elements of the non-compete when evaluating whether the employer has met its burden. In assessing the "function" element, a Virginia Court will determine whether the prohibited activity is of the same type as that actually engaged in by the former employee while employed by the employer.

Tuesday, November 22, 2011

Successful Defenses to Virginia DWI/DUI

A November 7, 2011 article in the Fairfax News shows that “some 32,760 drunken driving arrests were made across Virginia in 2010, which resulted in 29,063 convictions.” Based upon these statistics, the statewide conviction rate for individuals charged with DWI is approximately 88.7%. This, of course, begs the question: what happens in the other 11.3% of cases.

Presumably, some of the 3,697 remaining cases resulted in plea bargains to lesser offenses such as reckless driving. Others were certainly dismissed after trial upon a finding of not guilty. How did these individuals manage to defy the odds and avoid a conviction for DWI after being charged?

There are a number of reasons why an individual may be found not guilty of a DWI. The situation may be such that the individual charged with DWI was in an accident, the police did not witness the accident and the other driver involved in the accident fails to appear in court. In this situation, if the defendant did not make any statements, there is no evidence that the defendant was driving the vehicle.

In order to stop a vehicle on the highways, police must have reasonable suspicion that the vehicle is involved in criminal activity or has committed a traffic violation. If the police stop a vehicle because they have nothing more than a hunch that the driver may be intoxicated, the traffic stop itself is unlawful and everything that follows will be suppressed by a court, including the arrest for DWI.

Monday, November 21, 2011

The Importance of By-Laws to Resolve Governance Battles

Non-profit organizations need to have a clear governance structure. One reason is that it is not uncommon for the members, officers and/or directors of non-profit organizations to engage in power struggles, particularly if the organization has grown from a small, cohesive group to a larger, loosely organized membership. In some cases, a single member or a small group of members who disagree with the organization’s current management or general objectives can create a significant rift in the organization by publicly denouncing the current administration (or worse, purporting to assert control over the organization). As in any organization, a certain amount of turnover and change can be very positive, but a power struggle may destroy the organization itself. In order to minimize governance battles, the organization’s governing documents need to be strong enough to prevent dissention amongst the members, officers or directors from crippling the organization’s stated purpose (and perhaps, its existence).

The best way to proactively eliminate the risk of organizational anarchy is for the organization to adopt clear, coherent and thorough by-laws. In our experience, many non-profit organizations fail to adopt by-laws with mechanisms designed to provide clear power demarcations and methods for resolution of control issues. In addition, many organizations are using outdated by-laws which were not written for the organization as it is currently structured and operated, or for the technological age, when e-mails and social media can improve communication but can also facilitate membership dissention on a very public platform.

At a minimum, the by-laws of every non-profit organization should clearly set out the following: