When is it time for my nonprofit to sue someone? | Options for Handling Conflict from Demand Letters to Litigation

If your nonprofit is in the midst of conflict, it can be difficult to know how to solve it when emotions run high and the nonprofit’s mission is at stake. In this article, we’ll outline a few options you might be able to use to solve conflict, whether it’s a dispute with a vendor, a board member, a staff member, or volunteer. Keep in mind that each conflict is different, so if you want an opinion from an attorney experienced in nonprofit law, please reach out to us to schedule a consultation

Demand letters & Cease and Desist Letters

A demand letter is a letter from an attorney that establishes what action you’d like the other party to take. Another option is a cease and desist letter, which essentially tells the other party what action(s) you’d like them to stop. These letters can be useful in a variety of contexts, but keep in mind that at least one of the concerns you address should be something that the law or your bylaws address. 

For example, if you have a board member who harasses staff and uses the name of the nonprofit to take action that goes against the charitable purpose of your nonprofit, you’ll want to take action. A cease and desist letter may be a useful first step in letting them know that you’re taking their conduct seriously, and you’re willing to take legal action if they do not stop

With a demand letter, your attorney outlines the action the other party must take to avoid legal action. Let’s say your nonprofit animal shelter hires someone to renovate your veterinary clinic, but they never complete the job. They leave the job halfway finished, then disappear, taking your money with them. In this scenario, your attorney can draft a letter demanding they either finish the job or return the funds for the work they did not complete.

Keep in mind, these are simple examples, and reality is often more complex. When it comes to these letters, the power of having an attorney involved in a situation, even if it’s just to draft and send a letter, can move people to action. Rarely do people want to get into a messy lawsuit.

Ghost-Written Letters

If you like the appeal of a cease and desist or a demand letter but you’d rather  try to preserve the relationship, a ghost-written letter may be in order. In this scenario, the attorney drafts a letter for you that appears to come from your organization instead of from the attorney directly. A letter of this nature can be a gentler first step, as it eliminates the pressure of the other party knowing you have an attorney involved.

An example of this would be if your nonprofit is in a partnership with another organization. Let’s say the leadership of organization B is not aware that their staff aren’t fully fulfilling their end of the partnership, and the leadership of organization A wants to let them know to try to correct it. A ghost written letter that was created by an attorney but is sent from organization A could be a good place to start. This opens the lines of communication to try to solve the problem, and allows the other party to try to correct any mistakes they may not be fully aware of.

Amending your documents

For some nonprofits, amending the organization’s corporate documents may help solve a conflict. This often means amending the bylaws.

For example, if you run a membership club for senior citizens and there’s a small group of members who have gone rogue, you might be able to amend your bylaws to include provisions about how members are added and removed. With the small group of members removed, your club can be free to function as usual. 

Litigation

The most well-known and expensive method to solve legal conflict is litigation. Litigation can be a lengthy process, but there are instances where it’s warranted.

Disputes over large sums of money often fit into this category. With amounts under $10,000, it will likely be more expensive to bring legal action than to solve the conflict another way. Before you get to litigation, be sure you’ve taken steps to try to mitigate the conflict, whether it’s a letter from an attorney or scheduled conversations with a neutral third party. But if the time comes, litigation can be a useful method to spur on change.

Let’s say a charitable foundation gives a grant to charity A for $500,000. When the grant report comes due, the foundation doesn’t receive the required grant report from charity A. When the foundation attempts to contact them to gain the report, they learn the leader of charity A has used the money to buy things for himself, not for the charitable purpose the money was supposed to serve. At this point, the foundation can have their attorney send a demand letter, but the conflict will likely be litigated. 

Conclusion 


Every nonprofit runs into conflict at some point, big or small. Every conflict is different, so be sure you have an attorney with plenty of experience in nonprofit law to help you get through it. The age-old adage is true, though – an ounce of prevention is worth a pound of cure. Learn more about how to prevent risk, develop policies that can resolve conflict, and ensure your organization has proper insurance coverage by contacting us for a consultation with one of our nonprofit attorneys.

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