Statute vs. Bylaws

[Mark Apodaca, PRP]

One thing I have experienced in the past while serving as a parliamentarian was when members say, "but the state statute says this and has more authority than the bylaws, therefore the state statute is to be followed."  It has been my understanding that when there is a conflict between the bylaws and state statute, state statute is followed.  This can happen when state statute is not checked when bylaws are being drafted.  If there is no conflict then the bylaws are followed. 

A group of members have been trying to get the President and Secretary of an association removed.  The Board is following the bylaws and points out that only the board can remove a member of the board the group went ahead and called a special meeting without the board's knowledge and voted to remove the two individuals.  The board says that the meeting was null and void because as the bylaws say,

Article IV: Directors

SECTION 7:REMOVAL FROM OFFICE

Any Officer determined by the LAD Board to be incompetent or grossly neglectful of his/her duties may be removed by a two-third (2/3) vote of the voting members of the LAD Board. The officer determined to have been grossly neglectful or incompetent shall have the right to an appeal to be heard and decided at a special session of the Full Members called for that purpose. The decision of a majority of the Full Members at any special meeting called for such purpose shall be final as to the matters specifically appealed thereto.

Under Article VI: Board 

SECTION 3:REMOVAL FROM OFFICE

Any Board member determined by the LAD Board to be incompetent or grossly neglectful of his/her duties may be removed by a two-third (2/3) vote of the voting members of the LAD Board. The officer determined to have been incompetent or grossly neglectful shall have the right to an appeal to be heard and decided at a special meeting of the Full Members called for that purpose. Any Board member with three (3) unexcused absences from LAD Board meetings shall automatically be removed from the Board.

The group is using the statute below:

Louisiana Revised Statutes 12:224 – Board of directors 

(4)  The members, by vote of a majority in interest of all of the voting members, may, at any special meeting called for the purpose, remove from office any one or more of the directors, notwithstanding that his or their terms of office may not have expired, and may forthwith at such meeting proceed to elect a successor for the unexpired term.   

It has always been my understanding that when it comes to statute, as a rule of thumb, the following is used:

Unless otherwise provided in the articles or by-laws

The association allows special meetings when 1/5 of the membership calls for it.  But as I understand, the membership cannot remove the two board members because of the bylaws.

Your thoughts...

Mark

[Bruce Lages]

You need to get real legal advice from a lawyer familiar with the corporate statutes in your state. From a purely non-legal perspective, it is my understanding that the text you quoted and put into red font is in fact used, provided that this text is included in the statute in question. Does the statute that you quoted from include this language, particularly in reference to the section you are citing?

[Guest Zev]

The argument advanced by the board is absurd on the face of it. What the board is saying is that the Louisiana statute is of no effect and that the membership has insufficient authority over the board.

[Mark Apodaca, PRP]

It is located throughout different sections of the nonprofit statute.  What I found interesting was both groups hired their own respective attorneys and both have their own interpretations.  I am not getting involved with the legal aspect of this.  I will only explain what the statute, bylaws and Robert's Rules of Order states.  They need to allow their respective attorneys handle it.

[Mark Apodaca, PRP]

Zev,

If the attorney who drafted the bylaws in 2017 know about the statute, he would not have put it in the bylaws.  In most cases, while a parliamentarian can help draft the bylaws and make sure it does not conflict with the statute, the attorney should make sure it does not conflict with statute.

 

Mark

[Josh Martin]

1 hour ago, Mark Apodaca said:

It has always been my understanding that when it comes to statute, as a rule of thumb, the following is used:

Unless otherwise provided in the articles or by-laws

RONR notes that sometimes statutes permit the bylaws to provide otherwise and sometimes they do not. I am not aware of any rule of thumb on this matter.

“Where a particular type of organization is subject to local, state, or national law containing provisions relating to its procedure—as for certain procedures in a labor organization, in condominium associations, or in an incorporated association—it may be desirable to add at this point a phrase such as, "and any statutes applicable to this organization that do not authorize the provisions of these bylaws to take precedence." However, such statutes (those that do not authorize bylaws to take precedence) supersede all rules of the organization which conflict with them, even if no mention is made of it in the bylaws.”  (RONR, 11th ed., pg. 580, footnote)

I concur with Mr. Lages that whether this particular statute permits the bylaws to take precedence is a question for an attorney.

7 minutes ago, Guest Zev said:

The argument advanced by the board is absurd on the face of it. What the board is saying is that the Louisiana statute is of no effect and that the membership has insufficient authority over the board.

What the board appears to be claiming is that the statute in question permits the bylaws to take precedence. I do not know whether this is correct, but it is not unusual for statutes governing the affairs of societies to provide that the bylaws take precedence, so I would not say this argument is “absurd on the face of it.”

Edited November 20, 2019 at 10:46 PM by Josh Martin

[Atul Kapur]

1 hour ago, Mark Apodaca said:

It has always been my understanding that when it comes to statute, as a rule of thumb, the following is used:

Unless otherwise provided in the articles or by-laws

 

18 minutes ago, Bruce Lages said:

From a purely non-legal perspective, it is my understanding that the text you quoted and put into red font is in fact used, provided that this text is included in the statute in question. Does the statute that you quoted from include this language, particularly in reference to the section you are citing?

 

5 minutes ago, Mark Apodaca said:

It is located throughout different sections of the nonprofit statute.

I have never heard that this is a "rule of thumb." Some statutes use this phrase in some of their sections to allow the bylaws to contain a different provision. But I have never heard that it is a blanket exemption. I believe that this is why Mr. Lages asked whether the statute you quote uses this language in reference to the section you are citing. You did not answer that question.

[Mark Apodaca, PRP]

Atul,

This particular section does not have "unless otherwise provided"... 

Mark

 

[Mark Apodaca, PRP]

Thanks Josh and Autul for the clarification.

[Mark Apodaca, PRP]

The statute section is under section E

E.  The number, classification, qualifications, compensation, terms of office, manner of election, time and place of meeting, and powers and duties of the directors, may, subject to the provisions of this Chapter, be prescribed by the articles or the bylaws.  Except as otherwise prescribed in the articles or bylaws: 

(4)  The members, by vote of a majority in interest of all of the voting members, may, at any special meeting called for the purpose, remove from office any one or more of the directors, notwithstanding that his or their terms of office may not have expired, and may forthwith at such meeting proceed to elect a successor for the unexpired term.   

What is your interpretation of "by vote of a majority in interest of all of the voting members"?  The association has 178 members and 1/5th is 36.  Not all members voted, just fifty-five showed up at the special meeting to vote which was not called by the Secretary. Under Article V Meetings of the Association, it states:

SECTION 2:SPECIAL MEETINGS

Special meetings of the Association may be called by the President or by the LAD Board and shall be called upon the written request of one-fifth (1/5) of the Full Members of the LAD in a good standing. The purpose of the special meeting shall be stated in the call, and ten (10) days prior written notice shall be given for any such special meeting.

[Josh Martin]

10 minutes ago, Mark Apodaca said:

The statute section is under section E

E.  The number, classification, qualifications, compensation, terms of office, manner of election, time and place of meeting, and powers and duties of the directors, may, subject to the provisions of this Chapter, be prescribed by the articles or the bylaws.  Except as otherwise prescribed in the articles or bylaws: 

(4)  The members, by vote of a majority in interest of all of the voting members, may, at any special meeting called for the purpose, remove from office any one or more of the directors, notwithstanding that his or their terms of office may not have expired, and may forthwith at such meeting proceed to elect a successor for the unexpired term.   

What is your interpretation of "by vote of a majority in interest of all of the voting members"?  The association has 178 members and 1/5th is 36.  Not all members voted, just fifty-five showed up at the special meeting to vote which was not called by the Secretary. Under Article V Meetings of the Association, it states:

SECTION 2:SPECIAL MEETINGS

Special meetings of the Association may be called by the President or by the LAD Board and shall be called upon the written request of one-fifth (1/5) of the Full Members of the LAD in a good standing. The purpose of the special meeting shall be stated in the call, and ten (10) days prior written notice shall be given for any such special meeting.

Questions regarding the proper interpretation of Louisiana statute are beyond the scope of RONR and this forum.

[Mark Apodaca, PRP]

Thanks Josh for pointing this out.

Mark

[Joshua Katz]

Just a few comments:

1. Procedurally, it is procedural statutes that supersede your bylaws. Motions in conflict with substantive statutes (of course, distinguishing these two can be very messy) are, naturally, illegal, but not out of order. A motion to carry out a hit is not responded to with a point of order, but by voting no (or possibly immediately resigning membership). 

2. The statute provided can only be interpreted in light of the rest of the laws of the state, hence, why a lawyer's opinion is needed.

3. But a lawyer is not always available - and, regardless, after receiving legal advice, it is still the job of the chair to rule on points of order, and the right and obligation of the body to deal with appeals. So despite a lack of knowledge, something still must be done. This isn't as odd as it may initially sound - we make dozens of essentially legal decisions in our everyday lives, because we act after determining if the action is legal. "Is it legal to proceed through this intersection?" is one example. The organization proceeds similarly - it does its best, but every action runs the risk of violating the law. That's the nature of things. So even when a statute is procedural, if the chair, as lacking in knowledge as he may be, disagrees with expert counsel, he will rule accordingly - and the same holds true if the chair, wisely, listens to counsel but the body overrules him on appeal. "The lawyer said otherwise" is not a valid point of order - but "a procedural statute says otherwise" is, and is dealt with like any other point of order.

[Guest Zev]

10 hours ago, Josh Martin said:

What the board appears to be claiming is that the statute in question permits the bylaws to take precedence.

What the bylaws stated, as I perceived it, was that the board could remove another board member. What I also perceived was that the statute allowed the general membership to also remove a board member, and this specific ability was not prohibited by the bylaws. One document granted one right and the statute granted another. The board is saying that because they have this right that the right conferred by the statute is null without the bylaws stating specifically that the board had exclusive and plenary powers in this regard. Perhaps I am reading things incorrectly.

[Richard Brown]

First, let me start by agreeing with my colleagues that this issue depends upon an interpretation of a state statute, something beyond the scope of this forum (even for a fellow Louisianian who is familiar with the Louisiana non-profit corporation statutes).  It also depends upon an interpretation of your organization's bylaws, which is something else beyond the scope of this forum.  But, having said that, I think we can point out a few things:

Depending on your attorney's interpretation of this, I think you have at least partially answered your own question about whether the phrase " Except as otherwise prescribed in the articles or bylaws" is applicable to the state law provision in LRS 12:224 providing that the members may remove directors from office.  That statute DOES contain that language as your own copy and paste shows.  I will bold the provision:

11 hours ago, Josh Martin said:

The statute section is under section E

E.  The number, classification, qualifications, compensation, terms of office, manner of election, time and place of meeting, and powers and duties of the directors, may, subject to the provisions of this Chapter, be prescribed by the articles or the bylaws.  Except as otherwise prescribed in the articles or bylaws: 

(4)  The members, by vote of a majority in interest of all of the voting members, may, at any special meeting called for the purpose, remove from office any one or more of the directors, notwithstanding that his or their terms of office may not have expired, and may forthwith at such meeting proceed to elect a successor for the unexpired term

To me, that provision clearly applies to section 12:224 E (4).  It applies to all of subsection E.  Note the colon (:) at the end of the phrase.  Since your bylaws provide for removal of officers, it may well be that subsection E of the statute is rendered inapplicable.  That's for your attorney to look into. And while we are at it, there might also be the question of whether the terms "director" and "officer" can be used interchangeably under both your bylaws and the statute.  Your bylaws and the statute don't use the terms in exactly the same way. Your membership is trying to remove two OFFICERS, but the statute speaks to removal of directors.

Next, I want to point out that it isn't clear to me whether the bylaw provision granting the board the power to remove officers is an exclusive grant of power to the board... or whether the membership also has that right as the superior body.   So, even if it is determined that the section of the statute permitting the membership to remove directors is not applicable due to the bylaws provision, there is the question of whether the bylaw provision amounts to an exclusive grant of power.  It may be that the membership also has removal power regardless of the pertinent provision of LRS 12:224 E (4).

I haven't noticed that anyone else has weighed in on whether the grant of removal power to the board in the bylaws is an exclusive grant of that power.  I would be interested in hearing those opinions.

Edited to add:  As to the vote required by the phrase "by vote of a majority in interest of all of the voting members,",  honestly don't know.  Taking the bare language of the statute, it seems to mean "the vote of a majority of the entire membership".  Based on the membership numbers you gave us, that would be the affirmative vote of 90 members.  Whether that is what was intended by the awkwardly worded statute, I don't know.  There is some more work for the attorneys.

 

Edited November 21, 2019 at 11:14 AM by Richard Brown
Added last paragraph

[Josh Martin]

4 hours ago, Richard Brown said:

Next, I want to point out that it isn't clear to me whether the bylaw provision granting the board the power to remove officers is an exclusive grant of power to the board... or whether the membership also has that right as the superior body.  

I think it is exclusive, as I previously explained in this thread.

As I said then, however, it is ultimately up to the organization to interpret its own bylaws.

Edited November 21, 2019 at 03:00 PM by Josh Martin

[Richard Brown]

@Mark Apodaca, you might take a look at LRS 12:225 regarding officers and agents which provides as follows as to removal of OFFICERS:

"E.  Any officer or agent may be removed by the board of directors with or without cause at any time, without prejudice, however, to the contract rights of the person so removed.  http://www.legis.la.gov/legis/Law.aspx?d=76414

Since the Louisiana nonprofit corporation law treats officers and directors differently, at least for some purposes, that provision may prove to be useful.

You might also pay attention to the definition of "Directors" in section 201:  "(9)  "Directors" means persons designated in the articles as such, and persons designated, elected or appointed by any other name or title to act as directors, and their successors.  The term, when used in relation to any power or duty requiring collective action, means "board of directors".  http://www.legis.la.gov/legis/Law.aspx?d=76385 

One final point:  Depending on how your officers are selected and whether they must be board members, it is at least theoretically possible for the membership to remove a person as a director, but that person remains as an officer.   Likewise, it may be that the board can remove an officer, but the person nonetheless remains on the board as a director.

I hope the attorneys are being paid well.