Defense of Officers and Directors of University-related Nonprofit Organizations

Re: Advisory Opinion; Defense of Officers and Directors of University-related Nonprofit Organizations; N.C. Gen. Stat. § 143-300.2 et seq.

Dear Mr. Steimer:

The University of North Carolina at Charlotte (the “University”) has inquired whether the officers and directors of the Foundation of The University of North Carolina at Charlotte, Inc.; the Athletic Foundation of The University of North Carolina at Charlotte; and the University of North Carolina at Charlotte Alumni Association enjoy the benefits of the Defense of State Employees Act (the “Act”), N.C. Gen. Stat. § 143

300.2 et seq. (1999). As set forth below, it is the opinion of this office that the officers, directors and employees of these organizations are not covered by the Act in that such officers, directors and employees are not “employees” of the State of North Carolina as defined under the Act.

The Act provides that, under certain circumstances, the State of North Carolina may provide for the defense of actions brought against an employee or former employee of the State on account of an act done or omission made in the scope and course of his employment as a State employee. See N.C. Gen. Stat. § 143-300.3 (1999). Thus, coverage under the Act is triggered only in instances in which an action has been brought against an employee or former employee of the “State.” See generally id. The Act defines “The State” to include all departments, agencies, boards, commissions, institutions, bureaus, and authorities of the State. N.C. Gen. Stat. § 143300.2(4) (1999). The Act defines “Employee” to include an officer, agent, or employee, but does not include an independent contractor. N.C. Gen. Stat. § 143-300.2(3) (1999).

It is our understanding that each of the aforementioned organizations is a North Carolina nonprofit corporation organized under Chapter 55A of the North Carolina General Statutes and that each of these organizations has been recognized as taxexempt under the United States Internal Revenue Code. Moreover, it is our understanding that each of these organizations supports the University in various ways, such as through fundraising, financial support, or providing social and other activities for various constituencies of the University. Nonetheless, it is our opinion that, despite the support that these organizations provide to the University — a constituent institution of The University of North Carolina and, therefore, an institution of the State of North Carolina — these organizations themselves are not departments, agencies, boards, commissions, institutions, bureaus or authorities of the State of North Carolina.

These organizations are not created by the North Carolina Constitution or the North Carolina General Assembly, nor are their purposes set out in the North Carolina General Statutes. Compare, e.g., Guthrie v. North Carolina State Ports Authority, 307

N.C. 522, 299 S.E.2d 618 (1983). These organizations are not a component of the University of North Carolina or any State agency or department. Id. Instead, however beneficial their activities may be to the University, they are distinct legal entities -nonprofit corporations — governed generally by their own boards of directors. See generally N.C. Gen. Stat. § 55A-1-01 et seq. (1999). Moreover, the mere creation of these nonprofit corporations pursuant to a statutory framework, Chapter 55A of the North Carolina General Statutes, does not render them State agencies. Consequently, the officers, directors and employees of these organizations are not employees of the State and are not covered by the Act by virtue of their positions within these organizations.

We do note, however, that the Act’s definition of “employee” includes agents. In certain circumstances, it is possible that an officer, director or employee of a Universityrelated organization — just like any other individual — could be construed to be acting as an agent of the University (and, thus, the State), independent of his status as an officer, director or employee of the University-related organization. In such circumstances, these officers, directors or employees may be covered by the Act. The scenarios in which those officers, directors or employees could be construed to be agents of the University are necessarily fact-dependent and, therefore, difficult to identify beforehand. We believe, however, that the nexus between the activities of the University and a University-related organization (which are typically supportive of the University) would decrease the likelihood — compared to other individuals — that an officer, director or employee of a University-related organization would be construed to be acting as an agent of the University rather than of the University-related organization of which he is an officer, director or employee.

Finally, we note that officers and directors of these organizations may be entitled to certain protections set forth in N.C. Gen. Stat. §§ 1-539.10, 55A-2-02(b)(4) & 55A-860 (1999).

We hope that this advisory opinion is of assistance to the University, and please let us know if you have any questions concerning the above.

Signed by:

Grayson G. Kelley Senior Deputy Attorney General

Thomas J. Ziko Special Deputy Attorney General

Donald R. Esposito, Jr. Assistant Attorney General

cc: Richard H. Robinson, Jr.