News Articles

Ga. Supreme Court to hear case pitting convention v. college

ATLANTA (BP)–The Georgia Supreme Court is the next stop in the legal battle between the Georgia Baptist Convention and Shorter College over the college’s intent to separate itself from the convention.

In March, the college lost in the Georgia Court of Appeals, which ruled in favor of the Georgia convention’s position that Shorter had acted illegally in April 2003 in dissolving itself and transferring all its assets to a new corporation with a self-perpetuating board of trustees.

The day after the Georgia Supreme Court’s Sept. 14 announcement, the convention’s attorney, Walter Bush, said in a statement, “It is not uncommon for the Georgia Supreme Court to grant certiorari [a hearing] in a case involving significant legal issues.”

Bush noted: “… we do not believe that the Court will condone the actions of Shorter’s board [of trustees].”

The focus of the Georgia Supreme Court, he said, will be “issues dealing with nonprofit corporate law and the fiduciary duties of nonprofit directors. This case will allow the Court to address concerns relating to fiduciary duties of nonprofit directors….”

As stated by the Georgia Supreme Court, the hearing will involve the question: “Did the Court of Appeals improperly apply for-profit corporation law to Shorter College, which is a nonprofit corporation, and does nonprofit law dictate a different outcome?”

The case is assigned for oral arguments in January.

A news release by Shorter College, meanwhile, quoted the Rome, Ga., institution’s president, Ed Schrader as saying, “We are gratified that the court has seen merit in our appeal and agreed to hear our case.”

The news release, recounting Shorter’s account of the case, noted that its trustees took action in November 2002 “to reorganize the governance of the college to provide for a board of trustees independent of the GBC. The Board made the decision to reorganize based on a report from the College’s accrediting agency finding that the GBC appeared to be unduly influencing the independence of the Board. In December 2002, the GBC challenged Shorter’s reorganization, and a Superior Court in DeKalb County ruled that Shorter had the right to dissolve and reorganize. Subsequently, the Georgia Court of Appeals reversed the lower court ruling. Today’s ruling means that the Georgia Supreme Court will ultimately decide the validity of Shorter’s corporate reorganization.”

The news release noted that Schrader and the college remain open “to negotiations with the Georgia Baptist Convention leadership for settlement of the case outside of these legal proceedings.”

But Bush told the Rome News-Tribune he is skeptical: “They say they want to resolve it, but they want to resolve it one way: on their terms.”

Shorter attorney David Guldenschuh told the newspaper, “I do believe that after the Georgia Supreme Court rules on this case, that will be the end of the dispute about how Shorter is reorganized.”

The Georgia Court of Appeals, in its March 17 ruling in favor of the convention, stated that “the trial court erred in failing to consider the GBC’s contention that the dissolution was a sham.” Upon reviewing Shorter’s action, the court concluded, “It is not a true dissolution. Absent the GBC’s approval, it cannot stand.”

Quoting from Shorter’s charter, the appeals court stated that the college “shall be managed, operated and controlled by a Board of Trustees” and that all trustees “shall be elected” by the Georgia Baptist Convention.

At the time, the Georgia convention’s executive director, J. Robert White, called the appeals court ruling not only “a great decision for the convention” but one with “broad and positive implications for Baptists, other denominations and nonprofit corporations” that have longstanding relationships with similar institutions.

After the appeals court decision, Shorter trustee chairman Gary Eubanks said in a prepared statement, “The ruling by the Court of Appeals is disappointing, and we believe there are strong reasons for the Georgia Supreme Court to hear our case, consider its merits and reverse today’s decision.”

Eubanks claimed that the issue “is fundamentally about” Shorter College complying with accreditation requirements of the Southern Association of Colleges and Schools. “Our goal,” Eubanks said, “is to protect Shorter College and foster its cherished academic reputation.”

The standoff between the college and state convention festered for a year before ending up in court.

In November 2001, the college leased all of its assets and operations to Shorter College Foundation, Inc., which had been created with a self-perpetuating board of trustees to control the college. Upon learning of the lease in January 2002, the convention, which had invested more than $26 million dollars in the institution, immediately cut off funding. The college then rescinded the lease.

Collaboration in the trustee selection process eroded when Shorter’s board of trustees amended their bylaws on May 31, 2002, to gain additional control over the trustee process. In accordance with its new bylaws, the college then selected 16 candidates to fill eight trustee positions and submitted its list to the GBC.

The convention claimed the new bylaw amendment was illegal and in conflict with Shorter’s charter. At its annual meeting on Nov. 12, 2002, the GBC rejected the college’s proposed candidates, instead electing eight others to serve as trustees. Shorter’s bylaw amendment in May was later declared void in the court case.

Shorter’s efforts to separate from the convention continued and on Nov. 22, 2002, its trustees voted to sue the convention and to dissolve the college and transfer all assets and liabilities to the Shorter College Foundation.

That is when the litigation began.

Shorter filed a lawsuit against the convention and the Georgia Baptist Foundation seeking funds which the convention had withheld until the standoff could be resolved.

The convention responded to the lawsuit with a counterclaim, seeking an injunction to stop the college from implementing its dissolution plan. On April 23, 2003, Judge Daniel Coursey of the DeKalb Superior Court issued an order which allowed Shorter to dissolve the corporation known as Shorter College. The school then transferred all its assets and operations to the Shorter College Foundation, Inc.

The trial court’s order was appealed to the Georgia Court of Appeals, which resulted in the March 17 decision this year that Shorter acted contrary to Georgia law governing nonprofit corporations.

Convention attorney Walter Bush, who argued the case, said at the time of the Court of Appeals ruling: “Setting aside the dissolution will reinstate Shorter College as an institution of the Georgia Baptist Convention.”
This article includes background information from The Christian Index, newsjournal of the Georgia Baptist Convention.