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Liability, Immunity, Indemnity and Fiduciary Issues

Liability, Immunity, Indemnity and Fiduciary Issues. Exposure to Trustees, Officers Employees and The University. Trustee’s Fiduciary Duties. Duty to act within the powers and authority of the position Duty of care and ordinary prudence Duty of loyalty to the University

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Liability, Immunity, Indemnity and Fiduciary Issues

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  1. Liability, Immunity, Indemnityand Fiduciary Issues Exposure to Trustees, OfficersEmployees and The University

  2. Trustee’s Fiduciary Duties • Duty to act within the powers and authorityof the position • Duty of care and ordinary prudence • Duty of loyalty to the University • Duty of avoidance of conflict of interest

  3. Duty To Act Within The PowersAnd Authority of Position • In addition to statutory and implied powersof trustees which authorize authority to act,there are other statutes which mandateaction, or which prohibit action.

  4. Duty of Care and OrdinaryPrudence • Trustee’s Duty is owed to institution as awhole, not to individual constituencies. • Duty to serve in good faith, not opposed to best interests of the university, with care of anordinarily prudent person in a like positionunder similar circumstances. • Under the common law, if the trustee has greater skill than a man of ordinary prudence, the duty is to exercise that skill as the trustee has.

  5. Duty of Care and OrdinaryPrudence • ORC Section 1702.30(B) provides “… [a] trustee shall perform his duties as a trustee, including his duties as a member ofany committee…in good faith, in a mannerhe or she reasonably believes to be in or notopposed to the best interests of…[NEOMED]…and with the care that any ordinarilyproduct person in a like position would useunder similar circumstances…”

  6. Duty of Care and OrdinaryPrudence • “…[trustee] can rely upon informationopinions, reports, or statements, includingfinancial statements and other financialdata, that are prepared or presented by…trustees, officers, or employees of [NEOMED], counsel, public accountants, or others, or committees of the trustees upon which he does not serve as long as he reasonably believes the information is reliable…”

  7. Duty of Ordinary Care and Prudence • Discretion by trustees cannot generally bechallenged unless fraud or bad faith isalleged. • If errors in management of University result from exercise of bad judgment or discretion, but committed in good faith and absent fraud, there is no liability for damages or losses resulting from such discretion.

  8. Duty of Loyalty to the University • Trustee must keep NEOMED interests paramount • Trustee cannot: • (a) engage in any transaction adverse to NEOMED; • (b) acquire property interests to detriment ofNEOMED; • (c) engage in competing activities to detriment of NEOMED; or • (d) directly or indirectly derive benefits oradvantages in dealing with or on behalf ofNEOMED.

  9. Duty of Avoidance of Conflictsof Interest • Trustees may avoid/minimize the effects ofconflicts of interest through disclosure ofpotential conflicts and nonparticipation in certain actions of the Board. • Conflict potentials generally arise whenever a trustee: • (a) directly or indirectly benefits at theexpense of NEOMED; • (b) represents interests which compete with NEOMED; or • (c) fails to comply with Federal and State Ethics Laws.

  10. Trustees in Multiple Roles andwith Potential Conflicts • Disclosure • Non Participation • Abstention from Voting

  11. “Protections” Available To Trustees • IMMUNITY (Ohio) • INDEMNIFICATION (Federal/Other) • LEGAL REPRESENTATION

  12. Civil Actions Under State Law • If a civil action is brought against a trusteeunder state law (Ohio) . . . • the civil action will be treated as an actionagainst the state, and no personal liabilitywill be imposed. . . • Unlessthe trustee acted outside scope ofofficial responsibilities, with malice, in badfaith, or in a wanton or reckless manner.

  13. Civil Actions Under State Law • The immunity provided to trusteesapplies only to civil actionsbrought under state law, and not toactions brought under federal lawor under the law of another state.

  14. Indemnification • If a trustee is sued in federal court of non-Ohio jurisdiction, the state (university) will indemnify the trustee for up to $1 million incompensatory damages per occurrence. • However, t he trustee will not be indemnified if he or she acted manifestly outsidescope of responsibilities, acted with malice,in bad faith, or in a wanton or recklessmanner…[no indemnity for punitive damages].

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