Attorney Service on Church Boards: Do’s and Don’ts
BY JAMES H. PLUYMERT
Attorneys are often asked to serve on their church’s Board of Directors. This can be a wonderful opportunity to serve in a high-impact role for the Kingdom. There will be challenges and a wide variety of expectations about the attorney’s skills, expertise, and ability to contribute meaningfully. There will likely also be an assumption, spoken or unspoken, that the attorney will provide some legal services as a member of the board.
God’s standard is for attorneys to serve humbly and with excellence as board members: “Do not think more highly of yourself than you ought, but rather think of yourself with sober judgement, in accordance with the measure of faith God has given you” (Romans 12:3). With this in mind, the attorney must fulfill the fiduciary duties required of a director and the concurrent ethical duties required of a lawyer.
Church board members generally have two main fiduciary duties: the duty of care and the duty of loyalty. The duty of care applies a “reasonable and prudent person” standard and requires the board member to act with the care a person in a like position would reasonably believe to be appropriate under similar circumstances. The duty of loyalty requires the board member to act in good faith and in the best interests of the church. The duty of loyalty also includes conflict of interest situations.
An attorney serving on a church board also has ethical obligations with regard to conflicts of interest, attorney-client privilege, and the duty of loyalty to the client. In particular, the attorney must be able to exercise independent judgment in dealings with the church.
Duty of Care
People expect attorneys to know more than the average board member, particularly about legal aspects of governance and operations. There may be a tendency of the attorney board member to delve into areas of the law that he or she is not familiar with, especially when doing pro bono work. An attorney has an ethical duty to provide competent representation, and the attorney providing pro bono services has the same duties as attorneys who are paid for their work. The key is for the attorney board member to either be competent in the particular area of law being discussed, or get outside legal counsel skilled in that area of the law. An attorney’s duty of care may be violated if the church even unknowingly violates the law during the attorney’s term of service.
At a minimum, an attorney/ board member should be familiar with: (1) the church’s organizational structure and governing documents such as its Articles of Incorporation and Bylaws; (2) applicable state and federal reporting and registration obligations and the church’s compliance; (3) the church’s financial health and stability; and (4) the church’s contractual obligations.
Most attorneys are usually very diligent in managing legal services for paying clients. Something seems to change, however, when the lawyer’s services are free. Keeping track of priorities is very important, and the duty of care requires that the work of both paying clients and pro bono clients be done in a timely and diligent manner. Particularly when a church is small, an attorney board member may be expected to volunteer legal services and oversight on a broad range of issues. Ask yourself: Can I handle this board commitment? Do not take on more than you can reasonably and competently do!
Duty of Loyalty
The duty of loyalty prohibits directors and officers of a church board from using their position of trust for personal advantage at the expense of the church. This can involve money transactions, and the issue can arise in the context of confidential information obtained through work with the church. The attorney board member may not use confidential information regarding the church to his or her personal advantage or for the advantage of a client or another nonprofit with which the attorney works.
Conflicts of Interest
One of the most complex problems that affects attorneys working for charitable organizations is conflict of interest. Usually a conflict of interest arises in situations in which nothing improper appears to be taking place, and everyone’s intentions are good. For example, a conflict might arise when the board votes on the employment of the attorney or the attorney’s law firm as legal counsel for the church. Likewise, there may be a conflict when the attorney board member is giving advice about charitable giving to a client and recommending that the client make a donation to the church, whether or not the gift is in the client’s best interest or best serves the client’s stewardship goals. The attorney in this situation should make full disclosure to the client of the attorney’s interest in the church’s business affairs and disclose that this might affect the attorney’s professional judgment on behalf of the client. Additionally, the church should have a board-approved conflict of interest policy which includes annual disclosure statements by each church board member. The consequences of an improper conflict of interest can be severe, including payment back to the church of benefits improperly obtained. Other directors who knowingly permitted the improper transactions may be compelled to compensate the church if the primary person is not able to make the church whole, and the credibility and reputation of the church in the community will be damaged.
Attorneys considering board service should take the time to review the rules governing conflicts of interest, including ABA Model Rules of Professional Conduct 1.13 and 1.7 (including comments), as well as state rules and advisory opinions regarding professional conduct.
Concurrent Role as Board Member and Attorney
Many attorneys join a church board thinking they will not be serving as attorney for the church. They can still end up providing legal services, such as when the attorney reviews a contract or assists in the preparation of church bylaws. The problem is that it is often unclear when the attorney board member has crossed the line of being a director and starts providing legal services. Other members of the board may assume that every comment by an attorney board member is legal advice, rather than a business or practical suggestion. The existence of the attorney-client relationship is generally determined by the client’s reasonable expectations, and an attorney’s statements may inadvertently create an attorney-client relationship with the church. To reduce the risk of this misunderstanding, the attorney/board member needs to tell other board members that he or she is not acting as attorney for the church and, if appropriate, suggest that outside legal advice be sought.
Before agreeing to serve, the attorney board member should review his or her own malpractice policy to understand the coverage and exclusions relating to concurrent service for the church. The attorney board member should also confirm that the church has Directors and Officers and Errors and Omissions policies that will provide coverage for service on the board.
Another issue that arises relates to the attorney-client privilege. Other board members may assume that every conversation with an attorney is privileged. The only communications that are privileged are statements by the attorney acting as legal counsel and not as business advisor. This distinction may not be clear to a non-attorney director and should be emphasized on the record when discussing legal issues so that a false sense of confidentiality is not created when the attorney/ board member participates in a discussion.
An attorney serving on a church board can contribute to the Kingdom work of the church in unique and significant ways. By paying close attention to one’s ethical duties as an attorney and one’s fiduciary duties as a director, the attorney board member will serve with diligence and excellence to the great benefit of the faith community.
CLS member James H. Pluymert is an attorney at Pluymert, MacDonald, Hargrove & Lee, Ltd. in Hoffman Estates, Illinois. He represents churches and nonprofit organizations in corporate, employment, real estate, and other legal issues. Jim leads the conciliation ministry at Willow Creek Community Church. This article was printed in “The Christian Lawyer” magazine, Summer of 2015 Edition.