By Arthur I. Anderson
My earliest memories of Bay View are from the 1950s. Bay View was then, and to this day continues to be, a magical place for me. In retrospect, I now realize that Bay View in the 1950s was still recovering from the financial hard times of the 30s and 40s. There were any number of cottages in various stages of disrepair and a few had even been boarded up and left unoccupied for years.
Hard times bring out the best and the worst in people. All too often economic stress can foster xenophobia as it did in the events leading up to the Nazi takeover in Germany before the outbreak of World War II. In 1947 in a truly dark hour in Bay View history, xenophobia carried the day when the historical evidence suggests that someone in the Bay View leadership revised the Bay View Bylaws to restrict membership to Caucasians and Christians, thereby excluding Blacks and Jews, without bothering to obtain a vote of the Bay View members or Board. Racial and religious bigotry appear to have been officially implemented in Bay View in violation of the Bay View charter, the Bay View Bylaws and Michigan law. The religious bigotry extended to Catholics whose cottage ownership at least as recently as the mid 1970s was capped at 10%. One very unfortunate outcome of the 1947 Bylaw alteration is that religious bigotry continues to haunt Bay View in 2013 –albeit with much greater stakes for Bay View as the result of legal developments over the last two-thirds of a century. Although subsequent membership votes ratified the Christian persuasion requirement and deleted references to the Caucasian race, 1947 lives on in infamy as the year in which the original inclusive membership vision of the Bay View founders was sabotaged and subverted by a highly suspicious alteration of the Bay View Bylaws.
I am a practicing corporate lawyer and received my J.D. from Harvard Law School in 1978. I have been practicing corporate law for almost 35 years and have regularly advised boards of directors with respect to their fiduciary duties. I am not an expert on Michigan law or the Federal Fair Housing Act so the following analysis is not a formal legal opinion. It does, however, represent my best “educated” judgment on what I consider to be a serious breach of fiduciary duties by the Bay View Board.
Bay View’s Chautauqua Heritage and Religious Inclusiveness
Chautauqua NY and Inclusiveness.
According to the Chautauqua Archivist and Historian (with whom I had a recent telephone conversation), the Chautauqua Institution, the largest and most influential chautauqua, has maintained a policy of religious diversity and inclusiveness since its founding in 1874. Chautauqua continues to thrive in the 21st century. Chautauqua celebrates its Christian heritage while maintaining a policy of religious inclusiveness. The mission statement for Chautauqua as reported on IRS Form 990 (highlighting added) reads:
A PROGRAM THAT STIMULATES PROVOCATIVE, THOUGHTFUL ENGAGEMENT OF INDIVIDUALS AND FAMILIES IN CREATIVE RESPONSE TO THE IMPORTANT RELIGIOUS, SOCIAL AND POLITICAL ISSUES OF OUR TIMES AND PROMOTES EXCELLENCE AND CREATIVITY IN THE APPRECIATION, PERFORMANCE AND TEACHING OF THE ARTS A COMMUNITY IN WHICH RELIGIOUS FAITH IS PERCEIVED, INTERPRETED AND EXPERIENCED AS CENTRAL TO THE UNDERSTANDING AND EXPRESSION OF OUR SOCIAL AND CULTURAL VALUES A COMMUNITY WHICH IS OPEN TO ALL WITH PROGRAMS THAT EXPRESS THE INSTITUTION’S CHRISTIAN HERITAGE AND ITS INTERFAITH COMMITMENT A RESOURCE FOR THE ENRICHED UNDERSTANDING OF THE OPPORTUNITIES AND OBLIGATIONS OF COMMUNITY, FAMILY AND PERSONAL LIFE BY FOSTERING THE SHARING OF VARIED CULTURAL, EDUCATIONAL, RELIGIOUS AND RECREATIONAL EXPERIENCE IN AN ATMOSPHERE OF PARTICIPATION BY PERSONS OF ALL AGES AND BACKGROUNDS
Chautauqua is organized as a nonprofit eligible for Section 501(c)(3) tax exempt status under the Internal Revenue Code. GuideStar, the influential information service reporting on nonprofits, has awarded Chautauqua its seal of approval for transparency. Chautauqua’s approach to Section 501(c)(3) status may be worthy of consideration by Bay View as a way to allow Bay View to control its own tax exemption without having to piggy back on the Methodist church. The Method church has made it clear, however, that there is no need to maintain the Christian persuasion requirement in the Bylaws for Bay View to continue to rely on its tax exemption.
Bay View Inclusiveness prior to 1947.
Bay View also maintained a policy of religious diversity and inclusiveness from its founding in 1875 until the apparently illegal alteration of the Bay View Bylaws in 1947. The purposes and membership clauses in the Bay View charter demonstrate the commitment of Bay View’s founders to religious diversity and inclusiveness as well as an expansive mission for Bay View with an important humanist focus on scientific and intellectual culture.
The relevant language from the membership and purposes articles of the Bay View charter (highlighting added) reads:
Article IX (Bay View Membership)
“Any person of good moral character twenty-one years of age may become a member of this association……, provided always that no person shall become a member without the approval of the board of trustees……”
The language says nothing about Christian persuasion being a requirement for membership. That requirement was only added to the Bylaws in 1947 without, apparently, proper authorization by the Bay View Board or membership. Almost all Christians, I believe, will acknowledge that Christian faith is not a prerequisite for the possession of good moral character and that there are, in fact, faithful Muslims, Jews, Buddhists and Hindus as well as secular humanists and atheists in the United States and around the globe who possess “good moral character”.
Article III (Bay View Purposes)
“To purchase and improve lands to be occupied for summer homes, for meetings and assemblies of associations and societies organized for scientific and intellectual culture, and for the promotion of the Christian religion and morality. The corporators purpose to erect buildings and make improvements on said lands, to lease portions thereof to hold meetings and moral and religious services thereon for moral and religious purposes, and for scientific and intellectual culture.”
It is interesting that the “promotion of the Christian religion and morality” appears at the end of the first sentence following “purchase and improve lands to be occupied for summer homes, for meetings and assemblies of associations and societies organized for scientific and intellectual culture.” The primacy given to real estate activities and scientific and intellectual culture makes it hard to argue that Bay View was exclusively organized for Christian religious purposes.
The 25th Bay View anniversary booklet of 1900 states: “Bay View is not a church or a denominational establishment, but a Christian Institution of the broadest catholicity, welcoming to full membership all men and women of any or no denomination who have a desire to be part of a community such as this, and are willing to assist in perpetuating it according to the principles and purposes of the founders.”
The Federal Fair Housing Act
The Federal Fair Housing Act was passed by Congress after the assassination of Martin Luther King, Jr. in 1968. Congress adopted the Act to allow the Federal government to take a more active role in protecting the fundamental property rights of Americans against racial, ethnic and religious bigotry . Sadly, such bigotry had become widespread after the Civil War in response to the migration of emancipated blacks away from the South and an influx of new immigrants from Ireland, Southern and Eastern Europe and Asia. Restrictive covenants on real property like the 1947 Bay View Bylaw alteration were developed as a technique to legally enforce such bigotry.
Bay View has posted two legal opinions on the Bay View website (which were received over a year ago) that conclude that there is a strong possibility that Bay View is violating the Federal Fair Housing Act. One of the opinions also concludes that there is a strong possibility that Bay View is violating the Elliot-Larsen Civil Rights Act, the Michigan equivalent of the Federal Fair Housing Act. When I informally asked a Bay View Board member last summer what the Board planned to do about the two opinions, he suggested that the opinion from the Beckett fund (also posted on the Bay View website) effectively offsets the other two opinions so that the Board need not be concerned about possible violations of the Federal Fair Housing Act.
Fundamental Problem with Beckett Fund Opinion.
One fundamental problem with the reasoning of the Board member becomes readily apparent from a close reading of the “Assumptions and Qualifications” paragraph in the Beckett fund opinion (highlighting added).
“Assumptions and Qualifications
This memorandum is for the exclusive use of the Bay View Heritage Alliance and should not be relied upon by any organization or individual who is not a part(y) (sic) to the attorney-client relationship between the Becket Fund for Religious Liberty and the Bay View Heritage Alliance. This memorandum is based exclusively on the facts as the Bay View Heritage Alliance has provided them to the Becket Fund, and the Becket Fund does not purport to have full knowledge of every potentially relevant fact. Additional facts might change the relevant legal conclusions. Moreover, this memorandum addresses only questions of federal law, not Michigan state law. We recommend that the Bay View Heritage Alliance consult an attorney admitted to practice in Michigan regarding questions of Michigan law, including the Michigan Elliott-Larsen Civil Rights Act.”
The Bay View Board, in short, explicitly cannot rely on the Beckett fund opinion and the Beckett fund goes on to acknowledge that if they had access to all of the facts the conclusions reached might be different. I do wonder what the opinion of the Becket fund would be if someone informed them that Bay View had an inclusive membership policy for the first 73 years of Bay View’s existence and that Christian persuasion was apparently illegally inserted into the Bay View Bylaws in 1947. It would seem prudent for the Board to remove the opinion from the Bay View website since neither the Board nor the Bay View membership can rely on it and the opinion continues to be cited to influence public opinion. I would like to think that the continuing references to the opinion and its continuing presence on the Bay View website are a function of a well meaning but misguided legal naiveté rather than an intentional program to confuse and mislead the Bay View membership.
Brief Overview of the Federal Fair Housing Act.
I highly recommend that members carefully review for themselves the two legal opinions that conclude that there is a strong possibility that Bay View is violating the Federal Fair Housing Act. Those opinions include comprehensive analyses of both the law and the legal risks to Bay View. Even a “common sense” review of the language of the Federal Fair Housing Act suggests that Bay View could easily be violating the law. The Act prohibits religious discrimination in housing. The restrictions on religious discrimination in the Act explicitly do not, however, prohibit “a religious organization … or a nonprofit…organization operated, supervised, or controlled by or in conjunction with a religious organization ….from limiting the sale, rental, or occupancy of dwellings that it owns or operates for other than a commercial purpose to persons of the same religion….” (highlighting added)
The “non commercial purpose” use of real estate seems particularly challenging for Bay View to satisfy. Typical non commercial purposes described by one commentator include restrictions on who occupies a rectory or manse or only allowing nuns or monks to reside in a convent or monastery. However, once a religious organization decides to sell or rent homes to lay persons, the commentator concludes that the Federal Fair Housing Act prohibitions on religious discrimination become applicable. Bay View members are allowed to buy, sell and rent cottages for their own personal and commercial benefit, including selling and renting cottages through commercial real estate brokers just like ordinary residential real estate.
Although Bay View does have a religious affiliation with the Methodist Church, ownership of Bay View cottages is not restricted to Methodists. Owners come from a diverse array of religious organizations that includes a number of Protestant denominations and the Roman Catholic Church. It’s easy to see how a court could conclude that the ownership of Bay View cottages is not being restricted by a “religious organization” to “persons of the same religion” .
Indemnification and Personal Liability of Bay View Board
Federal and state laws and regulations, including the Federal Sentencing Guidelines and the Sarbanes Oxley Act, contain strong incentives for profit and nonprofit corporations to address possible violations of applicable law. Numerous articles have been written on “best corporate governance practices” that include promptly addressing possible violations of law. Given the two legal opinions that conclude that there is a strong possibility that Bay View is violating the Federal Fair Housing Act, the Bay View Board may be exposed to personal liability and not entitled to indemnification in connections with violations of the Federal Fair Housing Act.
Article XI of the Bay View Charter.
Article XI of the Bay View charter provides for the indemnification of the Bay View Board and limits their personal liability to Bay View. Such indemnification is, however, limited to what is permitted under the Michigan Nonprofit Corporation Act and the Bay View Board can be held personally liable for actions taken other than in “good faith” and for “knowing violation of law”.
Because Bay View has received two legal opinions that conclude that there is a strong possibility that Bay View’s membership policies violate the Federal Fair Housing Act, it may prove difficult to argue successfully that “acting in good faith” includes delaying taking action for over a year on likely violations of the Federal Fair Housing Act. It also seems possible that any violation relating to events occurring after the receipt of the two legal opinions might be determined to be “knowing”.
The relevant language of Article XI (highlighting added) reads:
“The Association shall indemnify officers, directors, trustees,… of the Association to the full extent allowed by the Michigan Non Profit Corporation Act, ……
No member of the Board of Trustees of the Association ….shall be personally liable to this Association or to its members, if any, for monetary damages for a breach of the trustee’s ..fiduciary duty; provided, however, that this provision shall not eliminate or limit the liability of a trustee…for any of the following:…..
2. Acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law; ….
The provisions of Article XI of the Bay View charter are consistent with Sections 450.2209 and 450.2561 of the Michigan Nonprofit Corporation Act.
Section 450.2209 of the Michigan Nonprofit Corporation Act.
“Sec. 209. The articles of incorporation may contain any provision consistent with any of the following:……
(c) A provision that eliminates the personal liability of a volunteer director or volunteer officer ….. for a breach of the director’s or officer’s fiduciary duty. The provision does not eliminate or limit the liability of a director or officer for any of the following:….
(ii) Acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law…..”
Section 450.2561 of the Michigan Nonprofit Corporation Act.
Section 450.2561 allows Bay View to indemnify the Bay View Board in connection with legal actions brought against them but only if they have acted in “good faith”.
“Sec.561. Unless otherwise provided by law or its articles of incorporation or bylaws, a corporation has the power to indemnify a person who was or is a party or is threatened to be made a party to any ….action …by reason of the fact that the person is or was a director, officer, employee….. of the corporation ….against expenses including attorneys’ fees, judgments, penalties, fines, and amounts paid in settlement actually and reasonably incurred by the person in connection with the action ….if the person acted in good faith…..”
The Federal Fair Housing Act and the Board’s Fiduciary Duties
I think the Bay View Board clearly has a duty to resolve the issue of whether Bay View’s membership policies violate the Federal Fair Housing Act and that they should seek expert legal advice on how to proceed expeditiously to resolve the issue. Continuing to ignore the opinions seems to be a clear breach of their fiduciary duties and inconsistent with the most basic good corporate governance practices. In the meantime, one option which could mitigate the exposure of Bay View and the Board is to simply stop enforcing the Christian persuasion requirement in the Bylaws. A plaintiff who sought to compel the Board to enforce the Christian persuasion requirement might find it difficult to prevail in court. In a landmark decision, Shelley v. Kraemer (1948), the United States Supreme Court held that judicial enforcement of racially based restrictive covenants constituted discriminatory state action prohibited by the Fourteenth Amendment. The decision is precedent for barring the enforcement of religiously and ethnically based restrictive covenants. The final blow to such restrictive covenants came in Barrows v. Jackson (1953), in which the Court prohibited the granting of damages for the breach of a restrictive covenant. Thus, by 1953 the Court had removed the legal enforceability of restrictive covenants.
“The City upon a Hill” and Christian Values
The image of the “City upon a Hill” has been an inspiration to Americans throughout our history. Ronald Reagan eloquently used the image in his famous farewell address. I think many Bay View members like to think of Bay View as a “City upon a Hill” in its own right. I certainly do. Here are the concluding remarks of Reagan’s address:
The past few days when I’ve been at that window upstairs, I’ve thought a bit of the shining “city upon a hill.” The phrase comes from John Winthrop, who wrote it to describe the America he imagined. What he imagined was important, because he was an early Pilgrim, an early “Freedom Man.” He journeyed here on what today we’d call a little wooden boat, and, like the other pilgrims, he was looking for a home that would be free.
I’ve spoken of the shining city all my political life, but I don’t know if I ever quite communicated what I saw when I said it. But in my mind, it was a tall proud city built on rocks stronger than oceans, windswept, God blessed, and teeming with people of all kinds living in harmony and peace – a city with free ports that hummed with commerce and creativity, and if there had to be city walls, the walls had doors, and the doors were open to anyone with the will and the heart to get here. That’s how I saw it, and see it still. How Stands the City?
And how stands the city on this winter night? More prosperous, more secure and happier than it was eight years ago. But more than that: after 200 years, two centuries, she still stands strong and true on the granite ridge, and her glow has held steady no matter what storm. And she’s still a beacon, still a magnet for all who must have freedom, for all the Pilgrims from all the lost places who are hurtling through the darkness, toward home.
We’ve done our part. And as I “walk off into the city streets,” a final word to the men and women of the Reagan Revolution – the men and women across America who for eight years did the work that brought America back: My friends, we did it. We weren’t just marking time, we made a difference. We made the city stronger – we made the city freer – and we left her in good hands.
All in all, not bad. Not bad at all. And so, goodbye. God bless you. And God bless the United States of America.”
Not many people realize it, but John Winthrop’s “City upon a Hill” can also be used as a cautionary tale about what can go wrong with Christian values. Unfortunately bigotry and intolerance ended up carrying the day in Puritan Massachusetts. In 1659, 1660 and 1661, three Quakers were condemned to death and executed by public hanging for their religious beliefs. Several other Quakers were sentenced to death, but had their punishments commuted to being whipped and banished. The hanging of the Quakers marked the beginning of the end of the theocracy of the Puritans and their independence from English rule. In 1661, the English explicitly forbade Massachusetts from executing anyone for professing Quakerism and in the 1680s England revoked the Massachusetts Bay Colony charter and sent over a royal governor to enforce English law.
We should all strive to achieve Reagan’s vision of a City upon a Hill for Bay View and to resist the religious bigotry and intolerance that ultimately carried the day in Winthrop’s theocracy. Reagan’s vision encompasses the vision of the founders of Bay View and the Chautauqua Institution. His language echoes the language from Bay View’s 1900 25th anniversary booklet and celebrates the possibility of “people of all kinds living in harmony and peace” in a “city upon a hill” with “doors open to anyone”. Chautauqua’s vision has remained intact for 139 years. Unfortunately in 1947, the vision of Bay View’s founders was hijacked by religious and racial bigotry. Bay View managed to overcome the racial bigotry. It’s now time for us to do the same with religious bigotry and to restore the original vision of Bay View’s founders. It is legally, and more importantly, morally the right thing to do.
I would be pleased to work with the Board, expert outside counsel and other members of the Bay View community to develop a plan that (i) restores the vision of the Bay View founders for an inclusive Bay View membership, (ii) eliminates any uncertainty about compliance with the Federal Fair Housing Act and the Elliott Larsen Civil Rights Act, and (iii) preserves Bay View’s Section 501(c)(3) tax exempt status. I have worked on many corporate restructurings over the course of my career and would be more than happy to lend a hand and my legal savvy to get inclusiveness back on track in the Bay View Bylaws after a 66-year-long derailment. 66 years is a long time but not as long the 73 year era of religious inclusiveness that the Bay View founders trumpeted and inaugurated. That golden era is Bay View’s true heritage. It is the Bay View heritage that we should celebrate, cherish and revive.
Notes by Section
1. For the history of the 1947 addition of the Caucasian race and Christian religion membership requirements to the Bay View Bylaws and the Catholic quota, see unpublished research done by David Krause.
Chautauqua, NY and Inclusiveness
2. Information about the Chautauqua Institution, including the GuideStar seal of approval and the Chautauqua IRS Form 990s are available at http://www.guidestar.org/
3. For a summary of the Methodist church’s conclusion that the elimination of the Christian persuasion membership requirement in the Bay View Bylaws will have no impact on Bay View’s tax exempt status, see unpublished memorandum by R. Stanley Sutton, Methodist Minister and Bay View Trustee.
Bay View Inclusiveness prior to 1947
4. The quote from the 25th Bay View anniversary booklet of 1900 is taken from the unpublished Krause research referenced in Note 1.
5. The three legal opinions referenced are available in the password protected Members section of the Bay View website at http://www.bayviewassociation.org/
Brief Overview of the Federal Fair Housing Act.
6. See The Fair Housing Act and Religious Freedom by Michael P. Seng at http://www.jmls.edu/fairhousing/pdf/commentary/fha-religious-freedom.pdf
“The City upon a Hill” and Christian Values
7. My personal commitment to realizing Bay View’s potential as a “City upon a Hill” is reflected in the “Beacons of Culture” initiative which I lead and over the past eight years has been instrumental in arranging Bay View performances by a number of virtuoso artists including Chick Corea, John Jorgenson, Blind Pilot, the Punch Brothers, the Peter Sparling dance company and two Berklee College of Music groups.
8. Reagan farewell address: See
9. Puritan history: Paraphrasing Wikipedia article at http://en.wikipedia.org/wiki/Boston_martyrs