Keep Committees in Check to Curb Legal Exposure
By: Donald A. Balasa
Q. What can an association do to protect itself from liability resulting from actions of one of its committees?
A. Of great concern for associations is exposure to legal liability because of actions by one of its volunteer bodies other than its board of directors, such as a committee, subcommittee, task force, or subboard. Such trepidation is understandable when the committee is a standard-setting, accrediting, or certifying body. The 1982 U.S. Supreme Court case American Society of Mechanical Engineers v. Hydrolevel Corp. is an example of an association suffering antitrust legal consequences because of conspiratorial conduct by volunteers.
Association executives and elected leaders can take several measures to minimize the likelihood of this type of legal exposure.
Explicit limitation on a committee's actual authority. The nature of the responsibility (the "charge") and the extent of the authority assigned by the board to the committee should be spelled out with sufficient specificity in a written document. It is important that the limitations on the actual authority granted to the committee be delineated, perhaps with examples of what actions are and are not within the scope of the committee's charge. The document should be drafted by association staff and legal counsel and reviewed and approved by the association board.
Members of the committee, at the beginning of their tenure, should be given the document and the opportunity to ask questions. All committee members should be required to sign statements indicating that they have read the document, understand it, and agree to abide by its substance. The signed forms should be returned to association headquarters and kept on file. To provide evidence that the notice of committee responsibilities and limitations is not a meaningless document, the members should be required to sign the form again at the beginning of each term of office.
Rigorous monitoring of potential misuse of apparent authority. A key holding in Hydrolevel is that an association can be held liable for illegal conduct by a committee acting with apparent authority. In other words, even if a committee has not been granted actual authority by the association, the association can be legally bound by the committee's actions if a third party could reasonably conclude that the committee was acting under the actual authority of the association.
To avoid the legal predicament in which the American Society of Mechanical Engineers (ASME) found itself because of the actions of a subcommittee chairman and vice chairman, associations should require the following:
All members of a committee should review and approve written materials that carry legal risks. In Hydrolevel, the chairman of the subcommittee—who was an employee of a competitor of Hydrolevel—wrote a letter criticizing Hydrolevel's product. ASME procedure permitted the chairman to issue such a letter without input from the other members of the subcommittee. Associations would be well advised to not give this degree of unilateral authority to a committee chair.
Association staff should carefully review all written materials that could have legal consequences. A full-time ASME employee served as secretary of the subcommittee. As indicated in the Supreme Court opinion, this employee "signed and mailed the [letter] without checking its accuracy." The Court also noted that the ASME employee "exercised only ministerial duties and played no role in confirming the substance of the … letter."
Associations should require committee members to copy the appropriate staff on all proposed communications before they are sent, and staff should be required to scrutinize any written pieces that could jeopardize the association. Staff should be held accountable for the contents of official association communications and should be given the authority to seek input from legal counsel if there is any question as to the legality of committee correspondence.
Committee members should not be given access to association stationery, hard copy or electronic, or official association email signature blocks or other electronic identifiers. The letter from the ASME subcommittee casting aspersions on the Hydrolevel product went out on ASME stationery. Only designated association staff should be allowed to use association stationery and transmit official correspondence.
Minimizing an association's legal risks from the actions of its committees requires vigilance and prudence. These steps will help association leaders avoid an unexpected and unwelcome liability claim like the one that took ASME all the way to the Supreme Court.
Donald A. Balasa is the executive director and in-house legal counsel of the American Association of Medical Assistants in Chicago. Email: firstname.lastname@example.org