Georgia Supreme Court rules against renegade college trustees
MBC attorney offers reaction as Georgia Convention prevails
May 31, 2005
ATLANTA (BP)—The Georgia Supreme Court, in a 4-3 decision May 23, upheld a Georgia Court of Appeals ruling that Shorter College’s actions to sever ties with the Georgia Baptist Convention be set aside as outside the bounds of state corporate law.
A DeKalb County Superior Court judge, in April 2003, had allowed Shorter to dissolve and transfer its assets to the newly formed Shorter College Foundation Inc., thus discontinuing the Georgia Baptist Convention’s selection of the college’s trustees.
In March 2004, a three-judge panel of the Georgia Court of Appeals ruled in favor of the convention’s appeal. Shorter then took the case to the Georgia Supreme Court.
The Georgia Supreme Court ruling focused on “issues dealing with nonprofit corporate law and the fiduciary duties of nonprofit directors,” convention attorney Walter Bush said. “This case allowed the court to address those concerns.”
Shorter has 10 days to ask the Georgia Supreme Court to rehear the case; otherwise, the decision will be final. The college said in a May 23 statement that “our legal team is reviewing the Court’s ruling and will advise us on our options.”
J. Robert White, executive director of the Georgia convention, stated May 23, “We are happy the Supreme Court vindicated our position. We have held from the very beginning that Shorter’s actions violated its charter and the law. We intend to continue our historical and long-standing relationship and friendship with the college. Our desire is to see Shorter as a fully accredited, growing and financially stable educational institution of the Georgia Baptist Convention.”
White told the convention’s newsjournal, The Christian Index, “The case will have a significant impact on not-for-profit corporations in Georgia and should positively influence relationships between state conventions and their institutions.”
The struggle between the convention and the educational institution, which began in 2001, has been followed closely by other state conventions as they evaluate similar longstanding relationships with their entities.
In Missouri, for example, the state Baptist convention is in a court battle to reclaim five breakaway entities with assets totaling an estimated $250 million.
Lead MBC attorney Mike Whitehead told the state convention’s newsjournal, The Pathway, that the Shorter College case “is not binding precedent” on the Missouri Court of Appeals, where part of the case is now pending, “but it is certainly relevant, and persuasive.”
“GBC has won an important legal victory for all non-profit ministries,” Whitehead said. “While Georgia Supreme Court decisions are not binding legal precedent in other states, this case will be persuasive authority for courts across America who face similar facts. The commitment and investment of Georgia Baptists to stand up for truth and to stay the course will pay future dividends to Missouri Baptists and to other state conventions.
“The Georgia Supreme Court agreed that GBC was the sole ‘member’ of the College corporation, by virtue of the GBC’s right to elect trustees. This was a key to GBC’s victory. We are urging the Missouri courts to make the same finding. Establishing the Convention’s ‘sole member’ status creates a number of important rights and protections under the corporate code. It would have been simpler if the charters had simply said ‘the Convention is the sole member.’ Absent that, we expect the Missouri Courts, like the Georgia courts, to hold that the right to elect trustees makes the convention a statutory member,” Whitehead said.
“There are some important differences in the Shorter case. In Shorter, the college sued the state convention, so there was no procedural dispute about the Convention’s standing, as has been raised by the defendants in Missouri. In Shorter, the trustees tried to dissolve the College corporation and transfer assets to a newly created Shorter College Foundation, whose trustees would not be elected by GBC. In Missouri, the Convention had the right to control assets on dissolution, so the agencies did not attempt this tactic,” he said.
Shorter, in its statement after the court ruling, said it “disagrees with the majority’s opinion on the law and agrees completely with the dissent authored by Chief Justice Fletcher and joined by Justices Hunstein and Sears.” The statement described the college as “gratified that the Georgia Supreme Court concluded that Shorter’s Board acted in compliance with its fiduciary duties in the best interests of Shorter College…. Our priority is to preserve the accreditation of Shorter College.”
Shorter College was founded in 1873 and has been affiliated with the Georgia Baptist Convention since 1959.
The Georgia Court of Appeals, in its 2004 ruling in favor of the convention, stated that “the trial court erred in failing to consider the GBC’s contention that the dissolution was a sham.” Upon reviewing Shorter’s action, the court concluded, “It is not a true dissolution. Absent the GBC’s approval, it cannot stand.”
Quoting from Shorter’s charter, the appeals court stated that the college “shall be managed, operated and controlled by a Board of Trustees” and that all trustees “shall be elected” by the Georgia Baptist Convention.
The controversy began in November 2001 when the college leased all of its assets and operations to Shorter College Foundation, Inc., which had been created with a self-perpetuating board of trustees to control the college. Upon learning of the lease in January 2002, the convention, which had invested more than $26 million dollars in the institution over the years, immediately cut off funding. The college then rescinded the lease.
Collaboration in the trustee selection process eroded when Shorter’s board of trustees amended their bylaws in May 2002 to gain additional control over the trustee process. In accordance with its new bylaws, the college then selected 16 candidates to fill eight trustee positions and submitted its list to the GBC.
The convention claimed the new bylaw amendment was illegal and in conflict with Shorter’s charter. At its annual meeting in November 2002, the GBC rejected the college’s proposed candidates, instead electing eight others to serve as trustees.
Shorter’s efforts to separate from the convention continued; ten days after the GBC’s annual meeting, its trustees voted to dissolve the college and transfer all assets and liabilities to the Shorter College Foundation and to sue the Georgia convention for the funds that had been withheld until the standoff was resolved. As claimed by the college, the trustee action was “based on a report from the College’s accrediting agency finding that the GBC appeared to be unduly influencing the independence of the Board.” That accrediting agency report, however, has never been released by the college.(Compiled by Art Toalston with reports from Gerald Harris and Diane Reasoner.)