State convention, other defendants seek dismissal in lawsuit related to Judson College bonds
By Jennifer Davis Rash
Defendants in a lawsuit connected to the financial difficulties of Judson College filed a motion to dismiss the case today (Sept. 28).
The plaintiff – Frank C. Mann, a businessman from Winston County – was part of a group of bond holders who put up $11,230,000 in 2010 to assist Judson officials with financial needs at the time. Mann purchased a $1 million bond and is suing to recover his investment.
His suit was filed in Jefferson County’s circuit court July 15 and named the following as defendants:
- Judson trustees Charles F. Dunkin, Roy A. Barnett Jr., Bruce Fuller, Judith Karen Favor and Joan Vignes Newman, who serves as the current chair of the board of trustees. Dunkin, Barnett, Fuller and Favor were trustees in 2010; Newman was not.
- Judson President Daphne Rudicell Robinson, who served as a trustee in 2010.
- Former Judson staff member and general counsel Joseph W. “Bill” Mathews, who served at the school for about a decade beginning in 2008.
- The Alabama Baptist State Convention, the Alabama Baptist State Board of Missions (SBOM) and SBOM Executive Director Rick Lance.
Legal representatives of the defendants are seeking to dismiss the case “in its entirety” for a host of reasons, including the statutes of limitations, the individual defendants’ immunity from suits and the language of the bond instruments.
Background
Judson reportedly paid promised semi-annual interest payments on schedule every year since selling the bonds in 2010, at least until the school closed July 31, 2021. Mann alleges the Oct. 1, 2021, and April 1, 2022, interest payments were not made and believes bond holders were misled about the security of the bonds, which were set to mature serially between 2011 and 2040. Information on how many bonds exist and who invested in them was not readily available, but Mann’s complaint states the current outstanding principal balance is $9,030,000.
Judson administrators are still attempting to sell the campus to fulfill the bonds’ interest payments and final payout as well as clear unpaid loans at three banking institutions. Judson’s debt reportedly totaled more than $15 million when it closed. Efforts are being made to reach Judson officials regarding a financial status update.
Other suits filed
With Judson not being named in the suit, the president, former staff member and five current board members named are represented by individual attorneys. Judson attorneys Ethan Tidmore and Wood Herron are monitoring the case as well as handling lawsuits specific to Judson.
The college was named in two suits filed in September. Three banks in Perry County filed a suit Sept. 12 related to $5.2 million in unpaid loans. Regions Bank filed a suit Sept. 19 connected to the more than $9 million in outstanding bonds (same set of bonds referred to by Mann) “plus accrued interest, fees and costs that continues to accrue.”
State Board legal fees for Judson-related lawsuit being paid out of contingency fund
By Jennifer Davis Rash
Frank C. Mann’s lawsuit naming the Alabama Baptist State Convention and the State Board of Missions as defendants will not hurt Alabama Baptist ministry efforts, said SBOM executive director Rick Lance, who also is named in the suit.
No current or future Cooperative Program funds will be used in defense of the suit, he said, noting trustees of the State Board confirmed this fact in August through an official motion in the form of a resolution. Any legal fees not covered by insurance will be paid out of a contingency fund built up over years for unforeseen circumstances, he said.
Regarding the defendants’ request for dismissal, Lance is optimistic.
Opposing ‘false allegations’
“The simple truth is that neither the state Baptist convention nor any of its officers played any role in the decision to issue bonds for Judson College and are not in any sense responsible for the repayment of those bonds,” he said in a prepared statement. “The Convention and its leadership will vigorously oppose the false allegations contained in the lawsuit.
“Since 1838, Alabama Baptist churches and individuals have contributed millions to Judson College to support its mission of providing Christian Higher education for women, including an untold number of graduates and other alumnae. The financial failure of Judson is a tragedy for Christian higher education, but it is not the fault of the Alabama Baptist State Convention or of ABSC leadership, past or present.”
Convention structure
The state convention is a 501(c)(3) association of churches. It functions two days each year when its members – known as messengers – convene for their annual convention meeting.
The convention has no employees and no board of directors. Baptist churches cooperating with the convention send their selected messengers to the annual meeting to vote on various items including how to distribute the voluntary funds coming from those cooperating churches and to approve board members for the various fostered entities.
Fostered entities are nonprofit institutions “whose work is financially supported by the convention and whose ministries receive the convention’s encouragement and nurture,” according to the convention’s bylaws, which were last revised in 1998. The specifics on the legal relationship with fostered entities is in bylaw 3C.
It declares in part: “The Convention will carefully respect the individual corporate integrity of other entities which enjoy corporate standing under the laws of this or any state. While the entities fostered by this Convention may be referred to as agencies, they are in no wise legal agents of this Convention. … Each corporate entity fostered by the Convention shall trade, contract, create indebtedness, employ, execute notes, buy, sell and do all other business in its own name and in no way as agent for the Convention.”
It further declares “the Convention expects that entities fostered by the Convention will … function under the legal control of a governing body composed of persons who are members of churches cooperating with this Convention.”
Seven fostered entities are currently supported by churches in their giving through the Cooperative Program, but each entity has its own governing board of directors or board of trustees. Judson was supported in this way before it closed the school July 31, 2021. The incorporated business side of Judson continues to exist as a standalone unit, a decision made by board members to have more time to finalize the business matters before fully dissolving.
Judson trustee board
The Judson board is composed of up to 32 rotating members plus a few honorary lifetime members, who hold “all the rights, powers and privileges of active members,” according to Judson’s bylaws. Along with allowing convention messengers to approve its board members, Judson also allowed the convention to approve any proposed charter changes that might have occurred through the years.
The only other legal tie between Judson and the convention is that the convention is to receive the college’s remaining assets upon its dissolution.
Lance, who by nature of his role as executive director of the State Board, also serves as treasurer for the state convention and as an ex officio (nonvoting) member of the boards of each of the fostered entities.
As an ex officio member of Judson’s board until the school closed in 2021, Lance attended board meetings from time to time. However, he was not present at the board meeting related to the bond decision approved by trustees in 2010, the focus of Mann’s suit, and would not have been able to vote if he had been present.
All decisions related to Judson were made by its board of trustees and neither Lance, the state convention nor SBOM had anything to do with those decisions, according to legal representatives for Lance, the convention and SBOM.
Acting on behalf of convention
During its recent August meeting, the State Board authorized Lance to oversee the state convention’s response to the suit “with the advice and counsel” of the State Board trustees’ executive committee.
Additionally, the convention bylaws authorize the State Board trustees to act on behalf of the convention ad interim (between annual meetings), so the State Board members also empowered their executive committee to act on the convention’s behalf on “any matter relating to the Mann lawsuit.”
