I serve on the board of an association library.
My family has to consider legal proceedings against a school district that provides funds to the library through a public vote (as required by law, when the District puts the ballot out, the amount for the library is separate). Would my personal legal proceedings pose a "conflict of interest" with my position as a trustee? Is there any foreseeable conflict?
Before I answer, I would like to thank this unnamed trustee for bringing forward this important issue. Dealing with personal legal matters is rarely easy; remembering to factor in consideration of one's volunteer obligations at the same time is impressive.
On its surface, this question is a fairly simple exercise: does the status of a library trustee as a plaintiff against the district supporting the library create a "conflict of interest" that would violate the library's bylaws, ethics, or the Not-for-Profit Corporation Law ("NFPCL")?
To address that question, one must first understand what is meant by a "conflict of interest."
The concept “conflict of interest” sounds simple, but often quickly gets, as they say these days, “complicated.”
Why is that? For a library, the concept of a "conflict of interest" could consist of layered elements like the petals of one, single (but complex) rose...or it could be a complex, multi-variety bouquet.
What can comprise this bouquet?
Let's start with the rose.
Section 715-a of the NFPCL requires every charitable corporation in New York (a category that includes most libraries), to adopt and enforce a policy "to ensure that its directors, officers and key persons act in the corporation's best interest and comply with applicable legal requirements, including but not limited to the requirements set forth in section seven hundred fifteen of [the NFPCL]."
Let's peel back the petals on this first thorny flower. In one sentence, 715-a lists a broad expectation (acting in "the corporation's best interest"), a broad mandate ("comply with legal requirements"), and one very specific law to follow (NPFCL 715, which bars "related party transactions").
Let's take that last petal first. What is a "related party transaction?"
According to the NFPCL's "Definitions" section, a "related party transaction" means "any transaction, agreement or any other arrangement in which a related party has a financial interest and in which the corporation or any affiliate of the corporation is a participant..."
Based on the information provided, the trustee submitting the question is not in a "related party transaction". The suit is not against the library, and in this scenario, the district who will be named in the suit is not an "affiliate" of the library. Since the district is required to put the tax vote on the ballot (the school board has no control over this; it has to put the ballot up as proposed by the library board), the act of using the district to float the vote to the public does not create a relationship that could serve as the basis of a conflict.
Let's take the middle petal: "legal requirements?" Is there any "legal requirement" that a trustee not bring an unrelated legal action against a school district who facilitates a library budget vote? No.
And finally, that first, most fraught petal: "the corporation's best interest?" --We're going to leave that for last.
What other “blooms” could join, and affect, this "conflict of interest" bouquet?
Fortunately, no matter how many blossoms in the "conflict of interest" bouquet, the law requires that when the possibility of a conflict arises, it is the board--not the individual trustee--who must assess it.
The NFPCL does that by requiring a board to pass a conflict of interest policy that:
...include[s], at a minimum, the following provisions:
(1) a definition of the circumstances that constitute a conflict of interest;
(2) procedures for disclosing a conflict of interest or possible conflict of interest to the board or to a committee of the board, and procedures for the board or committee to determine whether a conflict exists;
(3) a requirement that the person with the conflict of interest not be present at or participate in board or committee deliberation or vote on the matter giving rise to such conflict, provided that nothing in this section shall prohibit the board or a committee from requesting that the person with the conflict of interest present information as background or answer questions at a committee or board meeting prior to the commencement of deliberations or voting relating thereto;
(4) a prohibition against any attempt by the person with the conflict to influence improperly the deliberation or voting on the matter giving rise to such conflict;
(5) a requirement that the existence and resolution of the conflict be documented in the corporation's records, including in the minutes of any meeting at which the conflict was discussed or voted upon....
So, at the end of the day, no matter how large the "conflict of Interest" bouquet, it is the board, as a whole, who has to sniff out a problem.
In this case, the rub is in that first petal: the requirement that a trustee always act "in the corporation's best interest."
At the surface, there is no conflict whatsoever in this scenario: the school district is not a partner or contractor with the library, and the school board has no discretion about whether or not to put the library's budget on the ballot (they must put it exactly as the library board requests it). Therefore, even if the contemplated lawsuit by the trustee is not taken kindly by the school district's board, there can be no direct negative impact.
Now, however, for a pragmatic answer: in a world where everything is political, and library budgets all the more so, could an adversarial relationship between an individual library trustee and a school district board be in something other than "in the best interest" of the library?
That consideration--and its answer--is not a legal issue. In this scenario, there is nothing that violates the law, and I have never seen an oath of office, nor a bylaws provision, that would bar trustee service under such circumstances. Further, as discussed above, even if the school board takes umbrage, they would be powerless to block the requested ballot item.
However, there is a "soft" consideration here that goes beyond the law. I categorize these types of concerns not as "legal" issues, but that dreaded concept: "diplomacy."
When it comes to "diplomacy"...could members of a community, including an individual school board member in their individual capacity, decide to take a dim view of a library trustee who is suing their district, and try to punish the library? They shouldn't, but as individuals, speaking just for themselves, they could...they absolutely could. And even though their negative actions couldn't block the budget vote, it could influence a vote in non-official ways.
That said, the possibility of such personal vengeance in no way creates a legal conflict of interest. So, for the reasons set forth above, a board doing an assessment of this situation--unless their policy specifically includes a unique definition or example that bars trustees sowing bad PR, even incidentally--would likely not determine that it constitutes a forbidden conflict.
Of course, a trustee may decide that they have enough on their plate, just being a plaintiff in a stressful lawsuit, and resign to avoid the (real or possible) stress of the situation. Or the board and trustee may engage in some practical "risk management" and mutually agree that, given a high likelihood it could impact the board-to-board relationship, it is best if the trustee steps down for a time. But such an option would not be required by law and would be based on pragmatism...and it could only be effected with the consent of the trustee.
And THAT is my answer to this very important question.
I wish the trustee who posed it both 1) a thoughtful and supportive library board, and 2) a school board with the ability to maturely and completely compartmentalize legal issues from diplomatic ones.
 For purposes of this question, we'll assume that the only "support" the district provides to the library is the budget ballot (there is no MOU or even informal agreement for other assistance, like overflow parking, or hosting the annual fund-raiser).
 Public or association, in this case.
 There is no case law that picks apart how the commas in the sentence impact the interpretation and inter-relation of its required elements; that would be a dream case of mine (not that I wish the need to make that argument on any client of mine).
 "Related party" means (i) any director, officer or key person of the corporation or any affiliate of the corporation; (ii) any relative of any individual described in clause (i) of this subparagraph; or (iii) any entity in which any individual described in clauses (i) and (ii) of this subparagraph has a thirty-five percent or greater ownership or beneficial interest or, in the case of a partnership or professional corporation, a direct or indirect ownership interest in excess of five percent. "Relative" of an individual means (i) his or her spouse or domestic partner as defined in section twenty-nine hundred ninety-four-a of the public health law; (ii) his or her ancestors, brothers and sisters (whether whole or half blood), children (whether natural or adopted), grandchildren, great-grandchildren; or (iii) the spouse or domestic partner of his or her brothers, sisters, children, grandchildren, and great-grandchildren.
 In this case, the "corporation" is the library.
 I have not read every law passed in New York State, but I am willing to go out on a limb for this one.
 As you can see in the NFPCL, not-for-profit corporations have the right to define their own notion of "conflict," so long as the policy meets the requirements of the law.
 Only an association library might need to consider this, since the oath required of public libraries does not add to the obligation to be free of conflicts of interest (although it does undergird it).
 For instance, if the strategic plan called for the library to enter into a contract with the district in the future.
 That's right. The next time your board has to assess if the board chair's cousin getting the winning bid to the parking lot resurfacing job is a conflict, just envision being handed a fragrant mass of lilies and roses!
 Education law Section 259, found at https://www.nysenate.gov/legislation/laws/EDN/259.
Tags: Association Libraries, Board of Trustees, Ethics, Policy