Tuesday, October 4, 2011
Expulsion from a Non-Profit Corporation - Tinsley v. Wildwood County Club, Inc.
Expulsion from a Non-Profit Corporation -
Tinsley v. Wildwood County Club, Inc.
In Tinsley v. Wildwood County Club, Inc., No. 1010-CA-001295-MR (Ky. App. 2011), the Court addressed (a) whether a member had been afforded the “procedural due process” provided for in the bylaws and (b) whether the expelled member was entitled to a refund of his $25,000 membership fee.
In response to allegations of inappropriate conduct including harassment of female employees, the Wildwood Board met and made a preliminary determination that Tinsley would be expelled. By letter, in furtherance of a bylaw affording a member the opportunity to be heard as to expulsion, Tinsley was invited to meet with the Board. Notwithstanding an objection that the hearing would be “moot,” he did appear and through counsel objected to alleged procedural errors on the Board’s behalf – he did not respond as to the merits of the charges. The prior decision to expel Tinsley was affirmed, and a suit followed. The appeal followed the trial court’s denial of summary judgment to Tinsley as to certain points, holding that Wildwood did not violate its bylaws, and a grant of summary judgment to Wildwood on all other matters.
As to the procedural points, relying upon Hartung v. Audubon Country Club, 785 S.W.2d 501 (Ky. App. 1990), the court noted “that judicial review of a club’s actions concerning membership is limited only to enforcement of the club’s own rules.” Slip op. at 11. The Court of Appeals found that the process employed, namely a board vote to expel with an opportunity to be heard and for that vote to be reconsidered, met the requirements of the bylaws. It as well cited Kirk v. Jefferson County Medical Society, 577 S.W.2d 419, 422 (Ky. App. 1978) for the proposition that it is “sufficient that the constitution and bylaws are substantially observed.” Slip op. at 13, n. 11.
As to the right to a refund of his $25,000 (and as to this point there was a dissent), the Court of Appeals determined that the bylaws and related documents provided for three treatments: (i) expulsion for cause with a refund of the fee; (ii) expulsion not for cause with a refund of the fee; and (iii) expulsion for cause with the opportunity for a hearing to challenge the expulsion, but no refund if the expulsion is upheld. Slip op. at 16. Finding Tinsley fell into the third category, he was not entitled to a refund of his $25,000.