After securing an order from the trial court on November 19, 2015 compelling The Pennsylvania State University to permit its Trustees to access source materials relating to the Freeh Report, the seven alumni-elected Trustees who petitioned for access to the material were successful this week in recovering their attorney’s fees and costs from The University. On March 13, 2017, the Commonwealth Court held that the Trustees were entitled to be reimbursed by The University for their litigation and counsel fees pursuant to The University’s Bylaws and Charter. The MBK team that represented the Trustees, Daniel T. Brier, Robert T. Kelly, Donna A. Walsh and Frank J. Brier (PSU ’85), initiated the action in the Centre County Court of Common Pleas in April 2015 with a petition to compel access to the material pursuant to a provision in the Pennsylvania Nonprofit Corporation Law which guarantees trustees and directors access to corporate information. The Honorable Daniel Howsare ruled on November 19, 2015 that the Trustees had the right to access the information notwithstanding The University’s assertions that the information was not related to their duties and that disclosure of the information would breach a promise of confidentiality. The Trustees appealed the denial of their claim for reimbursement to the Commonwealth Court which issued a ruling on March 13, 2017 reiterating the conclusions reached by the trial court and finding that The University was obligated under its Charter and its Bylaws to reimburse the Trustees for the attorneys’ fees and costs incurred in litigating the petition to compel access to the Freeh material and in connection with their appeal. The Commonwealth Court’s opinion reaffirms the legal principle that a board majority cannot deny minority directors the right to decide which corporate records they need to fulfill their duties and puts Pennsylvania nonprofit corporations on notice that they risk being held liable for their directors’ litigation expenses if the directors file suit to obtain access to corporate records.
The Commonwealth Court opinion may be accessed at http://www.pacourts.us/assets/opinions/Commonwealth/out/721CD16_3-13-17.pdf?cb=1.
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