Non-Profits Can Also Face Deadlock And Internal Disputes Over Control

After floundering for months, a non-profit organization in Houston, Texas recently hired me to represent it. It is a staple of my practice to deal with business disputes in which partners or shareholders are fighting each other over control of the company. One partner takes some steps to harm the interests of the other partner, which leads to the filing of a lawsuit. That is the classic case of commercial business litigation.

In this non-profit context, I was confronted with an unusual circumstance. There were effectively two competing factions claiming executive governance over the organization. One of the factions actually brought a lawsuit, naming the non-profit as a Plaintiff. It sued the chairman of the trustees of the organization, and the Plaintiff obtained a temporary restraining order against the chairman. The temporary restraining order required the chairman to turn over the keys to the buildings of the organization to the Plaintiff faction.

When I was contacted by the Interim Executive Board months after the lawsuit started, I was asked to bring the lawsuit to an end. At first blush, that did not seem to be an easy task. The Plaintiff in the lawsuit is the organization. Now, a second lawyer, me, also representing the organization, is asked to step in and stop the lawsuit.

Stop the lawsuit is exactly what I did. The power I had behind me was a vote of the general body of the organization, which passed a unanimous resolution to bring the lawsuit to an end. I then went to the Harris County District Court Judge and asked that the lawyer already purporting to represent the organization be asked to show his authority to continue the lawsuit. This lawyer faced a tall task. All he could argue was there was a split in the organization and that I had no more authority than he did. He could not, however, overcome the fact that the general body of the organization voted.

In my experience, quick, effective, and efficient solutions don’t always lie in the cases or in the books. Here, the deadlock in the organization could only be resolved by thinking outside the box, which required a vote of the general body. Once that advice was implemented, the non-profit organization was successful through my efforts in stopping the lawsuit. It only took three weeks to bring to end what had dragged on for months prior to my arrival.

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