Friday, September 01, 2006

Why a lawsuit

The following was provided to the editor for consideration to post. After reviewing, the facts of the synopsis appear to be correct and the editorial reasoning worth considering.

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Why the Motion to Intervene?
Why the Withdrawal?


Background

LCMS before Kieschnick was elected in 2001

Gerald Kieschnick was elected President of The Lutheran - Church Missouri Synod in July 2001. Before then, the LCMS Synodical conventions, Board of Directors, and Commission on Constitutional Matters had consistently honored and followed Missouri law. In 1994 the CCM issued an opinion, stating that “the Synod must obey the laws of the state from which it derives its legal existence. It is equally obvious that the convention cannot declare the Synod exempt from the operation of law.” The CCM went on to conclude that if a convention resolution “conflicts with the statute, it is a nullity, and binds neither the Board of Directors nor the member congregations.”

Similarly, the President’s Blue Ribbon Committee on Structure appointed by President Al Barry issued a report to the 1998 convention explaining that “the Synod is in no way exempt from the applicable provisions of civil law.” The Blue Ribbon Committee observed that there was in the Synod “disagreement about the precise nature and extent of the Board of Director’s supervisory authority,” and thus conferred with legal counsel extensively to insure that necessary changes were made to the Constitution and Bylaws so that the authority assigned to the Board of Directors did “not conflict with the authority. . . under applicable Missouri law.” The Blue Ribbon Committee report repeatedly states the need for the Synod to comply with Missouri corporate law. The report of the Blue Ribbon Committee was given to every delegate of the 1998 Synodical convention, and the recommendations of the Committee were adopted. The “disagreement” that had existed as a result of certain changes made at the 1992 convention were resolved.

Kieschnick appoints new CCM members

Soon after taking office in September 2001, President Kieschnick appointed three new members to the CCM. Soon after that, the CCM issued a series of opinions that were not consistent with the Blue Ribbon Committee report or the language of the Constitution and Bylaws of the Synod, and more importantly diminished the authority of the Board of Directors in violation of Missouri corporate law. These opinions caused great difficulty for the Board of Directors as it attempted to carry out its responsibilities to the Synod, while also following Missouri law. The opinions also created conflict with other boards and agencies of the Synod. The CCM opinions essentially placed the Board of Directors in the difficult position of having to choose between following the Constitution and Bylaws of the Synod and the laws of the State of Missouri or following the opinions of the CCM. The Board of Directors chose to follow the Constitution and Bylaws of the Synod and Missouri law. President Kieschnick, however, demanded the Board of Directors follow CCM opinions instead, and threatened to bring the matter to the convention.

Kieschnick appoints Floor Committee 7

As the 2004 convention approached, several overtures concerning the Board of Directors and its authority were submitted by certain members of the Synod. Those overtures were assigned to Floor Committee 7, the members of which were all appointed by Kieschnick. Committee 7 proposed dramatic changes to the Constitution and Bylaws of the Synod, as well as the Articles of Incorporation, concerning the authority of the Board of Directors. These changes were proposed to attempt to legitimize the previous opinions of the CCM. During the course of the convention, members of Committee 7 were told by members of the Board of Directors and special legal counsel for the Synod that the proposals of Committee 7 were in violation of Missouri law and would create great difficulty for the Board of Directors.Knowing this, Committee 7 nonetheless made the recommendations to the convention. The 2004 convention adopted two resolutions – one of which had absolutely no discussion from the floor – that altered the authority of the Board of Directors as recommended by Committee 7. One of these resolutions proposed to change the wording of the Constitution. But the congregations of the Synod rejected this Constitutional amendment, thus making the changes in the Bylaws and Articles of Incorporation in direct conflict with the Constitution.

CCM opinions following 2004 convention

CCM opinions limiting the authority of the Board of Directors continued after the 2004 convention. During the latter half of 2005 several questions were submitted to the CCM that raised questions concerning the authority of both the Board of Directors and the President. Three of the questions challenge the Board of Directors’ action in filling vacancies under bylaw 3.2.5 for the CPH Board of Directors and the LCMS Board of Directors. Without first consulting with the Board of Directors or Synod’s legal counsel as required by bylaw 3.9.2.2(b), the CCM issued an opinion stating that the actions of the Board of Directors violated bylaw 3.2.5 and 2004 convention Resolution 7-14 and that the actions of the Board of Directors in filling the vacancies was “null and void.”

Bylaw 3.9.2.2 gives the CCM the function to “interpret the Synod’s Constitution Bylaws and resolutions.” Nowhere in the Bylaws is the CCM given the authority to interpret or overrule actions of the Board of Directors. Before Kieschnick was elected, the CCM had specifically stated that the CCM “is not an adjudicative body. It does not, and cannot, resolve disputed factual issues or assign fault.” The CCM also stated that it “does not undertake to determine the propriety of any specific action taken or not taken by the officers or directors of Synod.” Thus the CCM again departed from the historical role of the CCM and the function assigned to the CCM in the Bylaws. Further, the CCM, in essence, removed from office the two individuals elected by the Board of Directors to the CPH Board of Directors and the LCMS Board of Directors. Missouri corporate law allows members of a board of directors to be removed only by the members. Thus, the CCM’s opinion declaring the Board of Directors’ action “null and void” and thus removing the two board members elected conflicts with Missouri law and usurps the authority of the Synodical convention.

The CCM opinions also are not consistent with Bylaw3.2.5 or Resolution 7-14. Bylaw 3.2.5 and Resolution 7-14 both make it clear that the Board of Directors is to fill vacancies from a “list of nominees.” This “list of nominees” is first submitted to a subcommittee of the Synodical Committee for Convention Nominations. This subcommittee reviews the “list of nominees” and submits to the Board of Directors a “list of candidates” for consideration. The Board of Directors then fills the vacancies by considering the recommendations from the nominating subcommittee and then ultimately selecting from the “list of nominees.” This is essentially the same process as is followed by Synodical conventions where the nominating committee makes its recommendations, and then the delegates can make floor nominations from the list of those previously nominated who are then also on the ballot for consideration. Nothing in Bylaw 3.2.5 or Resolution 7-14 prohibits the Board of Directors from making floor nominations from the “list of nominees.” Robert’s Rules of Order also requires floor nominations when there is a nominating committee. The CCM, without any authority to do so, created a new rule that the Board of Directors could not make floor nominations.

After issuing its opinion overruling the Board of Directors and removing from office those elected, the CCM then backtracked in an effort to cover its failure to follow Bylaw 3.9.2.2 (b), which requires the CCM to “first consult with the Board of Directors of the Synod and/or the Synod’s legal counsel.” But even after receiving input from the Board of Directors and Synod’s legal counsel explaining the deficiencies in the CCM opinion, the CCM refused to budge. Thus the CCM’s opinion setting aside elections by the Board of Directors and removing two directors from office is inconsistent with the applicable Bylaws, a convention resolution, Missouri law, the actions of the Board of Directors, and apparently also even the advice of legal counsel.


The Anderson Lawsuit

In November 2005 the Anderson lawsuit was brought. About 90 members of Synod joined as plaintiffs in this lawsuit. Named as defendants were Gerald Kieschnick and William Dieckelman. The LCMS was designated as a “nominal defendant.” This lawsuit challenged the questionable and large number of exceptions granted by Kieschnick to allow extra delegates to attend the 2004 convention (Count I) and the actions of the CCM that attempted to undermine the legal authority of the Board of Directors (Count II).

After motions to dismiss were filed by the defendants, the Board of Directors adopted a resolution that set in motion settlement discussions with the plaintiffs. Four members of the Board of Directors were appointed to a committee and four plaintiffs were designated. There were multiple meetings between the board committee and the four plaintiffs, some of which were attended by Kieschnick and Dieckleman.

Ultimately the board committee, the four plaintiffs, Kieschnick and Dieckleman reached a proposed settlement. The settlement was subject to the approval of the Board of Directors and the individual plaintiff members. An integral understanding of the agreement, although not expressly stated, was that there would be no more vacancies filled at the Board of Directors that would improperly deprive Board members of the right to make floor nominations. However, at the same meeting that the Board of Directors voted to approve the settlement, the Board, under very dubious circumstances, filled several vacancies, including two on the Board of Directors, one of which had already been filled and thus was not even vacant. Kieschnick apparently was adamant that the Board of Directors must fill the vacancies and that the Board must follow the CCM opinion instead of following the Bylaws and convention resolution, Robert’s Rules, and Missouri law. Kieschnick also, as he has done in other situations, threatened to take action if the Board of Directors did not succumb to his demands.

Last minute changes to the proposed settlement agreement and other events made it apparent that the settlement was going to be used to deprive Board members of the right they otherwise have under the law to seek redress in the courts in order to correct illegal or wrongful activity. The argument was also being made that the settlement meant that the Board of Directors was placed under the authority of the CCM, even though Missouri law makes it clear that “all corporate powers shall be exercised by and under the authority of, and the affairs of a corporation managed under the direction of, its board.”


Motion to Intervene

The consequence of the settlement and how it was going to be used thus forced four members of the Board of Directors to intervene in the Anderson lawsuit in order to prevent the settlement from being used as a means of depriving the Board of Directors of its legal authority. Every Board member has an obligation to act according to the law and to protect the legal integrity of the organization. The Motion to Intervene and Petition did not attempt to set aside or undermine the settlement in any way. It was only an effort to prevent the settlement from being used in a fashion to promote further illegal deterioration of the Board of Directors authority.

The Motion to Intervene and Petition also was not a “suit against the Synod” as some have wrongly characterized it. Instead, the interveners were bringing what is called a “derivative” claim in which they were acting “for the benefit and in the right of” the Synod. Missouri law specifically allows directors to go to court to protect the rights and interests of the corporation. The ability of a board member to protect the legal rights of the corporation can be found in corporate laws across the country and is very important because it helps keep the officers and management in check, and protects the integrity of the corporation. Otherwise, there could be little or no ability to stop conduct that did not follow the law.

The Petition in intervention only asked the court for a “declaration” of the law. The four board members were not asking for damages and were not in any way acting on behalf of themselves. Their action was purely to defend the legal integrity of the Synod.

Kieschnick and Dieckleman, along with a majority of the Board of Directors’ members opposed the motion to intervene. They also moved to disqualify the lawyer selected by the four board members.


Withdrawal of Motion to Intervene - Board of Directors Agreement

The hearing on the Motion to Intervene was scheduled for August 29, 2006, a few days after the Board of Directors’ regular meeting held on August 25-26, 2006. At this Board meeting an agreement was reached between the four Board members intervening in the lawsuit and the rest of the Board members. This agreement included withdrawing the motion to intervene. It also included two extremely important provisions. First, it preserved the rights of Board members to proceed in a separate lawsuit to ensure that the Board and others within the Synod were complying with Missouri law. Thus the agreement prevented the attempts to use the settlement to deprive Board members of this important right and to prevent the efforts to officially place the CCM above the Board of Directors. Second, the agreement allowed for a 30-day period of time in which a committee of the board would meet to discuss openly and honestly the issues concerning board authority. Thus the motion to intervene accomplished exactly what it was intended to do. It put a stop to the efforts to use the settlement to deprive Board members of their legitimate legal rights and the efforts to use the settlement to place the CCM above the Board of Directors. It also appears that the Board of Directors may finally squarely address the legal and authority issues.

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