One time as the director of a nonprofit, I received an interesting call from a private investigator. He wanted to serve legal papers to our board president. Yikes! That made me sit up in my chair.
As it turned out, the nonprofit was being sued over a matter that—thankfully—pre-dated my time with the organization. I wasn’t named in the lawsuit or anything like that. In addition, the nonprofit had director and officers insurance and the insurance was good enough that it meant any legal bills arising from the lawsuit would be paid by the insurance company. So what started as something that I was very worried about ended up feeling much less scary.
On the one hand, it was still one more thing on my plate that I had to deal with. But on the other hand, it was a fascinating place to be—I was privy to all the ins and outs of the litigation process, but had no personal risk and the case could lead to no financial risk for the organization. It meant I could see what a lawsuit is like from the inside, and yet at a professional and personal distance. All the process, none of the emotion.
I started thinking about that experience the other day because a friend (elsewhere in the country) is involved in a nonprofit that might be looking at some legal issues. It made me want to share some quick lessons I’ve learned about the law, as seen from the perspective of a nonprofit executive director.
(Always worth mentioning before I proceed any further: I am not a lawyer.)
1. You shouldn’t be scared of lawyers.
Because of a dust-up in my homeowner’s association, I once received an all-caps email from a neighbor who threatened to call his LAYER. I didn’t have the heart to correct his spelling, but it kind of took the wind out of the sails of his threat. Really, though, I have worked with lawyers professionally and know many socially, and I will confirm: don’t be scared of lawyers. If someone is coming at your nonprofit and has a lawyer, just pretend they have a LAYER. It might take the edge off your stress a little bit.
(The best way to make sure you feel secure is to make sure your nonprofit has D&O insurance. If you don’t have liability insurance and director and officers (D&O) insurance at your nonprofit, then let me tell you, those are the best bills you can pay. You and your board of directors can sleep better, knowing that the nonprofit is protected, even if the worst should happen.)
2. The cost to hire a lawyer and fight someone in court is crazy expensive.
If there aren’t hundreds of thousands of dollars on the line, it’s almost certainly not worth it. This is true both when you feel that you are owed money and are tempted to sue, and when you are being sued for money. Unless the fate of the nonprofit is on the line, you are probably going to do better to settle something out of court, using a mediator or another cheaper alternative.
3. Lawsuits are driven not by money, but by ego or emotion.
Because of the high financial bar (see lesson 2), you will find that many lawsuits are driven not by money, but by ego or emotion. This isn’t my own advice. Rather, it was a piece of free advice from a lawyer I know, and it’s held true ever since I’ve heard it. Someone feels aggrieved… someone feels they are suffering an injustice… someone feels that their pride has been wounded or that they’ve lost face… that’s when the threat of a lawsuit is at the highest.
As a nonprofit manager, this means that many lawsuits can be avoided long in advance. If you have to let someone go, let them go with dignity—no matter how angry they’ve made you. Treat people with kindness. Apologize early and sincerely when you are in the wrong. Watch yourself for when your own ego and emotion might be escalating a situation.
So those are my three lessons. With any luck, you will never have to use them at your nonprofit. For some practical tips about the law, where I talk to an actual lawyer, I do recommend my podcast interview with Brooke Johnson, a nonprofit attorney. She shares some great advice during the interview. Check it out!
