Vol. 71, No. 7,
July 1998
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.
Back to News Briefs
|