What to do if you get sued: A primer for nonprofits

According to a recent survey conducted by the Charity Insights Canada Project, 19 per cent of registered charity respondents had been sued at least once in their organization’s life. It doesn’t happen often but when it does it can be damaging to reputation, time consuming, emotionally draining, and costly, so it helps to have a framework for what to do next. Whether you have received a letter alleging you’ve used a copyrighted photo on your website or court documents threatening to shut down your services due to an incident between clients and neighbours, here are some steps we hope will ground executive directors and boards and keep nonprofits moving forward.

Step 1: Take a Deep breath and learn to cancel out the noise

It costs someone little to send you a threatening letter. Filing a statement of claim to formally initiate the suit costs more but is still pennies compared to the costs of seeing litigation through. People can put almost anything in these initial letters or claims (short of completely baseless legal assertions or knowingly false statements). They will likely use language that sounds definite and demands a lot from you. This may downright scare you. It’s designed to.

Understand that these initial claims are often intended to intimidate you or at least bring you to the table to give them something for free without them having to incur the major expense of taking you to court. So take a deep breath and get into the habit of separating out the bluster and posturing from verifiable claims of fact and sound legal arguments of their implications. Focus your mind on the objective argument and try to tune the rest out. If there’s no sound basis behind what they’re saying, you have a lot less to be concerned about.

Step 2: Verify the facts

If the allegations someone is making have caught you off guard, then it is especially important to verify every detail of what they are claiming. Gathering detailed information (including exact dates and locations of events) complete with supporting documents will not only help focus you, it will make it easier, faster, and therefore cheaper to present your case to any lawyer you retain. It will also increase the likelihood that you’ll get a clearer legal opinion faster from them if your counsel starts with a full picture of the situation. 

Step 3: Notify the board and relevant insurers

The board should be notified of any credible threat of or pending litigation. If gathering the facts does not entail a significant delay, being able to present them with a fulsome picture of the situation also helps ensure board decision-making is well-informed from the start. 

Additionally, depending on the nature of the lawsuit, this liability may be covered by your insurance policy. So review your insurance policy and if there’s a chance that it is covered by your insurer, get in touch. Insurers often have what’s called a “right of subrogation” basically to take over the defence of a lawsuit so they can recover any costs for the damages they need to pay for. 

Step 4: Seeking and retaining the right legal counsel

Lawyers are expensive and if you do not have lawyers in your organization’s network it can be difficult to find pro bono support. However, the expense is more effective the earlier it is incurred in the process. For example, early advice on how credible the threat of litigation is can inform what level of organizational resources are directed to respond to it and avoid costly errors in communications. You may conclude you can simply ignore the threat or decide to indeed settle as soon as possible.

When it comes to choosing the right lawyer, Community Legal Education Ontario developed the following page that offers a general framework for vetting lawyers. Though the page is focused on transitioning to Ontario’s Not-for-Profit Corporations Act, the same principles can apply to other legal issues. In short, it is important that the lawyer’s fees are transparent, that they have the right values and approach that align with your organization, and have the relevant competence for the issue at hand.

Step 5: Giving instructions to your lawyer

Your lawyer will likely require that the board appoint one or more individuals who are empowered and trusted to act as point person (often appointed through a board resolution if the authority is not clear under some bylaw or policy) with the lawyer. This individual (or individuals) must have clear parameters around when they can give instructions to the lawyer and when they must seek broader board approval as well as how, when, and in what detail communications from the lawyer will be communicated back to the board as a whole. 

Especially if there are disagreements on the board or between board and staff about how to handle the litigation, having these systems in place will help ensure the nonprofit is taking a consistent and internally coherent approach to litigation. 

Step 6: Communicating during litigation

Often the biggest concern of nonprofits during litigation is the impact it will have on the nonprofit’s reputation. As such, having a clear plan for how litigation will be communicated about with the community is crucial. Often, if there is an outside party threatening or undertaking litigation, they may simultaneously be engaged in damaging communications on social media and traditional media. For this reason, while your lawyer may want you to minimize all communications about the litigation to mitigate the risk of prejudicing some claim in the litigation, you likely need to have a broader calculus in mind about the impact of failing to speak to certain allegations publicly. Engaging with communications staff and volunteers early and often as you discuss communications strategy with your lawyer will help you strike the right balance between legal and reputational concerns throughout the process. 

Step 7: Learn from the experience

As painful as litigation, or the threat of litigation, can be, it can also be a significant opportunity for your organization to learn and grow (especially if the claim against you has some basis). Documenting your processes as you go along for the future and improving your policies and practices to prevent the situation from recurring will help leave you better prepared.

Conclusion

We have only scratched the surface of this topic, but a few good principles can go a long way in helping to turn down the temperature during a turbulent time. If you are interested in learning more, consider viewing this Canadian Bar Association webinar.