News Briefs
1997 Wisconsin Act 140 defines unincorporated nonprofit
associations, limits liability
by Thomas L. Frenn
The Uniform Unincorporated Nonprofit Association Act (UUNAA)
provides clear definitions of what is considered a nonprofit
organization under Wisconsin law and limits the liability of a nonprofit
organization's members.
The Wisconsin Legislature recently passed the Uniform Unincorporated
Nonprofit Association Act (UUNAA) as 1997
Wis. Act 140, effective May 5, 1998.
UUNAA provides limited liability
The major change 1997 Wis. Act 140 makes to Wisconsin law is to
provide very clear statutory authority that an individual member,
director, or officer of a nonprofit unincorporated association is not
personally liable for the organization's contract or tort
obligations.
Prior to the UUNAA, each member, officer, and director of the
unincorporated association was jointly and severally liable for the
contractual obligations of an unincorporated nonprofit association.
Prior law also held that individual members, officers, and directors
may be personally liable for the tort obligations of a nonprofit
unincorporated association. Therefore, under the UUNAA, unincorporated
nonprofit associations now acquire some of the limited liability
provisions of a corporation and protection for its members, officers,
and directors.
1997 Wis. Act 140 does not give volunteers immunity for their own
negligence. However, the Federal Volunteer Protection Act of 1997
provides limited immunity for volunteers.
Act defines nonprofit organizations and members
The UUNAA also provides clarification on what is considered a
nonprofit organization and who would be considered members of that
organization. 1997 Wis. Act. 140, Wis. Stat. section 184.01(2), defines
a nonprofit organization as an "unincorporated organization consisting
of three (3) or more members joined by a mutual consent for common
nonprofit purpose. Joint tenancy, tenancy in common or tenancy by the
entireties does not, by itself, establish a nonprofit association even
if the co-owners share use of property for a nonprofit purpose."
Previous Wisconsin case law generally did not use the term
"unincorporated nonprofit association" but rather used the term
"unincorporated association." The definition of nonprofit association
used in section 184.01(2) is consistent with how the courts have
previously defined unincorporated association. Organizations that
normally would come under this definition include, for example,
churches, fraternities, sororities, clubs, various social groups, and
unions.
The requirement that an unincorporated association have three or more
members is new to Wisconsin law. However, since an organization normally
would require at least two persons to be considered an organization, the
three-member requirement should be considered clarification of the law
rather than a change in the law.
Under the UUNAA members are defined as "persons who, under the rules
of practice of the nonprofit association, may participate in selecting
persons authorized to manage the affairs of the corporation or
developing the policy of the nonprofit association."
The term "member" is not precisely defined under current Wisconsin
case law. In defining a member, the UUNAA generally has focused on the
implications for external relations, such as liability to third-parties
and contractor tort.
Consequently, under the UUNAA a "member" is defined in terms
appropriate to such purposes. Under section 184.10(1), a nonprofit
association may appoint an agent to receive service of process by filing
a form with the Department of Financial Institutions.
Section 184.13 defines who can be served on behalf of an
organization, including: an agent who is authorized to receive process;
an officer, manager, or general agent; or a person who is authorized to
participate in managing the affairs of the unincorporated association.
If none of these persons can be served, service may be made on a member
of the association. This is an expansion of current Wis. Stat. section
801.11(7), which is repealed by Act 140.
Other provisions of the UUNAA
The UUNAA also states that "an unincorporated nonprofit association"
is considered a resident in the county in which it has an office for the
purpose of a lawsuit's venue.
The act also contains provisions clarifying the right of an
unincorporated nonprofit association to hold and transfer interest in
real estate or personal property, and directs disposition of personal
property for inactive unincorporated nonprofit organizations.
Section 184.02 states that the existing common law of unincorporated
nonprofit associations in Wisconsin will remain good law unless
specifically overruled by the UUNAA.
A copy of 1997 Wis. Act 140 may be obtained at the state's Web site or by calling
Legislative Documents at (608) 266-2400.
Thomas L. Frenn is a shareholder in
the Milwaukee law firm of Petrie & Stocking S.C. He chairs the
Nonprofit Organizations Committee of the State Bar Business Law Section,
of which he is a director.
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