INDEMNIFICATION OF ATTORNEY FEES

The statutes governing non-profit corporations in some states require that employees or “representatives” be indemnified for legal fees in lawsuits in which they are named because of their title or position in the non-profit.  Such statutes do not apply to personal matters that end up court.  However, even a matter that seems merely personal may be escalated by a Plaintiff searching for a Defendant with more resources than that of an individual.

In Kawimbe v African Methodist Episcopal Church, Inc., Opinion and Order (ND GA, 2021) the federal trial court in Georgia dismissed the Plaintiff’s lawsuit to recover attorney fees.  The Plaintiff was the subject of a disciplinary proceeding in the denomination that resulted in a jury trial.  The jury was composed of ministers of the denomination.  The Plaintiff hired legal counsel to conduct the jury trial and prevailed.  However, the legal fees amounted to $75,000.  The Plaintiff claimed the denomination owed the Plaintiff indemnification for the attorney fees expended defending the internal disciplinary proceeding.  The denomination’s governing document incorporated Pennsylvania law and Plaintiff invoked that state’s non-profit corporation indemnification statute.  The federal trial court, however, held the Ministerial Exception did not apply because indemnification for legal fees can be a matter of contract and decided using Neutral Principles of Law and that the indemnification issue did not implicate hiring or firing of clergy.  But, the federal trial court held that in order to determine if Plaintiff’s cost of defense of the disciplinary proceeding was incurred because of his “representative status,” as a Bishop, an element of the statute, the court would be required to inquire into ecclesiastical matters barred by the Ecclesiastical Abstention Doctrine.  The court held it would have to inquire into the duties of a Bishop, the nature of the disciplinary complaint in reference to the denomination’s governing documents and possibly other inquiries.

Written employment contracts that contain indemnification provisions may allow a court to invoke Neutral Principles of Law and decide whether clergy or non-clergy can recover attorney fees expended in their defense of claims, either internal or external.  Denominational governing documents and local church governing documents sometimes contain indemnification clauses, too, that can likewise be subjected to review under Neutral Principles of Law.  The reason may be that the court can assume the clause has been reconciled with ecclesiastical concerns and would not have been included if there was an ecclesiastical issue, or such an issue would have been stated in the clause.  Generic non-profit corporation statutes may not be as easily applied because no similar assumption can be made.

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