Civil war within a Sudan relief agency


Sudanese refugees displaced by the war in the Nuba Mountains sat in front of their makeshift house in Golo, Fashoda county, in the Upper Nile State on Sunday. (Reuters/Andreea Campeanu)

From Bishop Macram Max Gassis v. Corkery (Del. Ct. Ch. May 28, 2014) (some paragraph breaks added), an interesting opinion that helps illustrate how the law of charitable corporations, a branch of corporate law, deals with conflicts between leading figures within those organizations:

Sudan is a country shattered by sectarian civil war. Particularly harshly affected have been the regions in central Sudan, where the conflict between the Islamic government and its Christian citizens has been keen. The southern portion of Sudan has recently seceded and formed a new nation, South Sudan. Unfortunately, conflict persists, both there and in what was the central — now the southern — regions of Sudan itself.

This unfortunate litigation involves a struggle over a charitable corporation founded to help the oppressed people described above, particularly but not exclusively the people of the Nuba Mountain region of what is now the southern part of Sudan. The charity, now known as Sudan Relief Fund, Inc. (the “Fund”), consisted of two very different but indispensable elements: organizers and fund-raisers in the United States, and those guiding the use of charitable funds on the ground in one of the more remote and dangerous areas of the world. Although the Fund is not officially associated with the Catholic Church, its board members are all congregants of that Church, and the Fund has distributed its charity through a Catholic group — the Comboni Missionary organization — and the Catholic Diocese of El Obeid, which encompasses the Nuba Mountain region.

The Bishop of El Obeid, from the time of the Fund’s creation until recently, was Macram Max Gassis. Bishop Gassis was the face of the charity, which for many years bore the name Bishop Gassis Sudan Relief Fund. He directed the charitable works on the ground in Sudan. Bishop Gassis was also the designated Chairman of the Board of the Fund. Both his status as board member and Chairman were largely honorific, however; he devoted little effort towards operating or overseeing the charity. His Fund-related time was spent on the ground in Sudan, doing the work for which the charity was organized.

On August 23, 2013, the Fund’s board of directors voted to remove Bishop Gassis from the board. This litigation resulted, with the Plaintiff, Bishop Gassis, alleging that the board breached its fiduciary duties, misappropriated his name and likeness and committed other actionable wrongs. The Amended Complaint also seeks a determination that Bishop Gassis and two other board members were not validly removed from, and thus still serve on, the board. This Memorandum Opinion addresses that summary proceeding under Section 225 of the DGCL.

I find that Bishop Gassis was validly removed by a two-thirds vote of directors, as provided in the Fund’s Bylaws, effective September 21, 2013; that he ceased to be a member, officer, or director of the Fund at that time; and that he therefore lacks standing to challenge the current composition of the board. The other issues will be addressed by separate Opinion.

The court’s opinion is long and detailed; those interested in the case can read it here, but here’s an excerpt (some paragraph breaks added):

[T]he record supports the Defendants’ contention that they acted to remove Bishop Gassis not out of self-interest, but because the directors believed it was in the best interests of the beneficiaries of the Fund to do so. The Defendants have identified some of their reasons for removing Bishop Gassis, including (1) personality conflicts that made him a difficult director with whom to work; (2) their negative perception of his interactions with the Fund’s beneficiaries in Sudan; (3) concerns about the Bishop’s extravagant spending throughout his travels, as well as other disagreements about his lifestyle that might reflect negatively on the Fund; FN119 (4) their suspicion that the Bishop’s projects had been double-funded; and (5) what the board perceived as Bishop Gassis’s belief that he had a personal ownership interest in the Fund and its assets.

Further, the directors had business reasons for strategically timing his removal: Ann credibly testified at trial that the board’s less-than-transparent plan to remove the Bishop on his seventy-fifth birthday was motivated by an interest in smoothly transitioning Bishop Gassis out of the Fund in an effort not to disrupt the flow of donations from donors. Those acts, based on the record evidence, were motivated by the Defendants’ desire to protect the interests of the beneficiaries of the Fund in Sudan, the only people who would be harmed if donations ceased due to a scandal. Notably, except with respect to the Corkerys (and the Bishop himself), there is no allegation of self-interest; all other directors were independent and disinterested. The record is clear that all the Defendants have understood that their fiduciary duties run to the suffering people of Sudan, despite the parties’ disagreement as to how best to satisfy those duties.

The driving force of this litigation is Bishop Gassis’s belief that he is essential to the success of the Fund, so that it must be a breach of duty for the Board to remove him. Specifically, the Bishop contends that, despite any shortcomings he may have had as a board member, or would have as an ex-bishop attempting to oversee projects in Sudan, his name and likeness were an asset essential to the Fund, so that any action that risked loss of that asset necessarily constituted a breach of fiduciary duty.

It is clear that the use of the Bishop’s name and likeness was an asset that had value to the Fund for many years. I note, however, that discharging Bishop Gassis from the board did not necessarily mean loss of that asset. Setting that aside, weighing loss of the name and likeness against the detriment of retaining Bishop Gassis as a board member and Chairman is precisely the type of business decision the board is charged with making. In any event, the record does not support the contention that, in discharging Bishop Gassis and risking loss of his name and likeness, the board acted adversely to the interests of the beneficiaries of the Fund in Sudan.

Ultimately, while the Defendants’ conduct throughout 2011, 2012, and 2013 was far from transparent, the record supports a finding that Bishop Gassis’s removal was the product of a valid business decision, and did not pose a “palpable threat” to the Fund’s charitable purpose. I therefore decline to invalidate his removal on the basis that the Defendants breached their fiduciary duties either to the Bishop personally or to the Fund’s beneficiaries.

The opinion dealing with the other issues, such as misappropriation of the name and likeness, is apparently still forthcoming.

Eugene Volokh teaches free speech law, religious freedom law, church-state relations law, a First Amendment Amicus Brief Clinic, and tort law, at UCLA School of Law, where he has also often taught copyright law, criminal law, and a seminar on firearms regulation policy. Before coming to UCLA, he clerked for Justice Sandra Day O'Connor on the U.S. Supreme Court and for Judge Alex Kozinski on the U.S. Court of Appeals for the Ninth Circuit. Volokh is the author of the textbooks The First Amendment and Related Statutes (4th ed. 2011), The Religion Clauses and Related Statutes (2005), and Academic Legal Writing (4th ed. 2010), as well as over 70 law review articles. Volokh is also an Academic Affiliate for the Mayer Brown LLP law firm.
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