Justices tease out nuances in Berkshire Museum appeals case

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BOSTON — "Very interesting issues." That was one justice's heartfelt — but noncommittal — observation.

It came late Tuesday morning, after Diana Maldonado and two colleagues on the Massachusetts Appeals Court quizzed attorneys at what might be the last court hearing on the Berkshire Museum's disputed art sales.

It will be months before the three justices decide whether Berkshire Superior Court Judge John Agostini erred last fall in rejecting claims that attorney Nicholas O'Donnell advanced on behalf of three Lenox residents hoping to halt the sales.

By the time the appeals court rules, it is likely the museum will have sold all the works it is allowed to bring to market under terms of an April decision by a Supreme Judicial Court justice, here in this same John Adams Courthouse.

But arguments went ahead nonetheless, as O'Donnell and his clients, on one hand, and the Attorney General's Office, on the other, worked to buttress larger legal issues that go beyond the fate of the museum's holdings.

To wit, who has the authority to challenge the conduct of nonprofit boards — just one state agency, or, under certain circumstances, a nonprofit's members?

The Lenox residents — James and Kristin Hatt and Elizabeth Weinberg — hope to establish that members of a nonprofit organization have the right in Massachusetts to stand up for the best interests of such a group, if it can be shown that its trustees are mismanaging the institution.

The response from the office of Attorney General Maura Healey: No. That's our job. The museum's attorney seconded that opinion.

While a so-called derivative lawsuit is established in the commercial world, it is new territory for nonprofits, according to O'Donnell. In such a claim, a plaintiff claims to act on behalf of the interests of the corporation.

The justices peppered O'Donnell, and then attorneys for the museum and Healey's office, with questions.

Watching from the courtroom were Sharon Gregory and Hope Davis, two members of the citizens group Save the Art-Save the Museum, and Mark Gold, a legal counsel for the museum.

Justice Eric Neyman asked O'Donnell to explain why members of the museum have a right to participate in governance of the institution just because a website page used words like "participation" and "feedback."

"How is participation and feedback tantamount to governance?" Neyman asked.

Pressing the same issue, Justice Gregory I. Massey asked O'Donnell how members differ from everyday citizens. Those citizens would be in a position to bring suit if they, too, were official members of the museum, the lawyer answered.

To Massey's left on the elevated bench, in Courtroom 4, Maldonado earlier had asked a similar question: "Does it make a difference what kind of membership they hold?"

The justices appeared to press the museum, represented by attorney Mark C. Fleming of WilmerHale, just as vigorously, at one point asking Fleming whether he could cite a single legal authority that said members of a nonprofit cannot act in a "derivative" capacity over what they believe to be an organization's best interests.

Not in those words, Fleming answered.

As in all appeals matters, justices look to case law for guidance. Over the course of 30 minutes, the justices and lawyers batted about the names of a dozen applicable cases — all of them cited and dissected in written briefs filed with the court months ago.

Fleming, for the museum, suggested that allowing members to act like disgruntled shareholders — as in the business world — and to sue nonprofit boards would result in chaos. "There would be an expensive and distracting lawsuit that the charity would have to deal with," he said. "It would have the effect of forcing the charity to respond to attacks from all sides."

Courtney Aladro, who heads up the nonprofit and public charities division in Healey's office, used five minutes of the museum's allotted time, backing up its efforts to turn back the appeal.

It falls to the attorney general alone to oversee nonprofits, Aladro said, restating claims in a friend-of-court letter the office submitted in February.

Justice Neyman asked Aladro whether her office has even been on two sides before in the same case — as it has in this one.

After successfully suing to halt planned November art sales, Healey's office eventually came to terms with the museum, supporting a request to the SJC that the museum be allowed to raise $55 million by selling up to 40 works. It has so far raised at least $47 million.

"I don't know if we ever have been," Aladro said.

Though Healey's office dropped its opposition to the art sales, O'Donnell has argued that its earlier arguments still have bearing. In court briefs and filings last winter, Healey's office sharply challenged the integrity of the museum's management.

"It can't be unsaid. It didn't unhappen," O'Donnell said of the attorney general's former criticism of museum conduct.

One of the few clues as to how justices might be viewing the case came after Fleming argued that the attorney general's role is "exclusive."

Neyman pushed back.

"But there are exceptions to that built into our case law," the justice observed.

Though the justices allowed only a half-hour of discussion, the case file includes the entire Superior Court proceedings. It adds up to 11 volumes of material.

On top of that, the justices will consider briefs filed by the museum and O'Donnell and a three-page letter from Healey's office.

In August, Fleming tried to halt Tuesday's proceedings. In a letter to the court, he called the appeal "wholly insubstantial and frivolous," arguing that the April decision by the SJC "confirmed the Attorney General's `exclusive province to ensure that a charitable trust established for the benefit of the public is properly administered.'"

But O'Donnell countered that the museum was "out of order" in its bid to short-circuit a case that was scheduled for argument within weeks.

"The Trustees' desperation to avoid scrutiny for their mismanagement may be understandable, but it is no excuse to deprive the Member Plaintiffs of their case," O'Donnell wrote.

Larry Parnass can be reached at lparnass@berkshireeagle.com, at @larryparnass on Twitter and 413-496-6214.


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