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Legal Brief                                                         Page 10

 

Personal Liability and the Limits

of Indemnification

 

BY MICHELE HANDZEL

 legalbrief_Handzel

In the early hours of the morning, he kissed her goodbye and watched as she walked to her car. As she drove away, he reflected on how lucky he was to have found such a wonderful woman, so soon after moving to this small town in rural upstate New York.

He recently had been appointed superintendent and was well on his way to achieving the goals the board of education had given him. His primary job was to re-establish open communication among the administration, staff, students and community.

Following his appointment, the board announced this educator would lead the district out of chaos and into some semblance of normalcy. Little did anyone suspect that the local news media soon would break a front-page story that would cause as much chaos as he was tasked with fixing.

The superintendent was having an intimate relationship with his new business official.

Chaotic Twist
The media revealed the superintendent’s relationship with a subordinate member of his staff and showcased the superintendent’s recommendation that the board approve a new contract for her, including language for a rich payout if the board failed to give her tenure.

In another wild twist, media coverage revealed that members of the school board, who denied all knowledge of the business official’s termination provision, actually may have helped her draft it.

The final result? The superintendent lost his job, the business official lost her job, and a member of the board of education resigned.

The business official sued the school district. The superintendent sought indemnification and representation from the board of education but was denied. The board rejected his request, citing his misconduct for recommending an employment contract for his -“girlfriend.”

The board’s denial caught the superintendent off guard because he assumed the district would reimburse him for the cost of his legal defense as the business official’s contract was put up for board approval in the normal course of business.

He denied any knowledge of the actual terms of the contract, claiming the contract was negotiated by the business official directly with the former board president, using the former board attorney. Was the superintendent an innocent victim of circumstance? That is what his defense attorney hopes to prove, and the superintendent was counting on receiving indemnification from the school board that had just fired him.

Defense Limits
Superintendents must be aware there are -limits to indemnification. The general rule is that the board cannot deny reimbursement to the superintendent for the cost of legal fees unless the facts clearly indicate the superintendent acted beyond the scope of his authority. In this case, the superintendent will now have to pay for his legal defense and hope the court orders the board to reimburse him. If the facts show he purposefully used his position of authority to enrich his new girlfriend, then the board presumably is off the hook for his legal fees.

If the board had agreed to indemnify him, would he be forced to use the attorney appointed to him by the board? Probably, unless his employment contract allowed him to engage his own counsel. It is important for all superintendents to note that regardless of how wonderful a relationship they may have with the school attorney, the school attorney works for the board.

In tough fiscal times, boards may try to avoid the cost of legal expenses. Superintendents should understand the limits of indemnification and take steps to preserve their right to independent counsel if a conflict exists between the board and superintendent in defense of a claim. Indemnification rights are different in each state, so superintendents should consult with local attorneys if they have an issue that requires indemnification from the school district.

Superintendents also should communicate with state membership organizations and with AASA to determine whether the professional association can help offset the cost of their legal defense.

Michele Handzel is a school attorney with Capital Region BOCES in Albany, N.Y., and former counsel to the New York State Council of School Superintendents. E-mail: mhandzel@gw.neric.org

 

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