An Unincorporated Non-Profit May Leave Its Leaders Open To Liability

A recent case from the Court of Special Appeals of Maryland—which does not involve churches—may have an effect on how churches conduct their business.

In this case, two former employees sued an unincorporated nonprofit association and their individual officers for alleged breaches of their employment contracts.  After a three-day trial, the trial court entered judgment against the nonprofit association, but rejected the claims that the former employees filed against the individual defendants. After noting that unincorporated associations have the power to sue, to be sued and to contract in Maryland, the Court of Special Appeals considered whether the individual members of an unincorporated association who are charged with the organization’s operations and decision-making, could be “exposed to liability” for the unincorporated association’s actions.

The Court of Special Appeals concluded that a remand to the trial court was appropriate because the trial court did not analyze whether the individuals who were sued “were officers who authorized, assented to, or ratified the contract” at issue.  The Court of Special Appeals wrote that such a factual finding was necessary before any one of the individuals could be “personally liable for its breach.”

And that last point is the lesson:  if you have an unincorporated nonprofit organization, the individuals who are handling that organization’s operations and decision-making could be leaving themselves exposed to liability.

For more information or for a consultation regarding your legal issues, please contact McCollum & Associates, LLC, at (301) 864-6070 or jmccollum@jmlaw.net.

 

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