State Supreme Court Rules in Counsel Fee Case

State Supreme Court Rules in Counsel Fee Case

A school board was not required to pay for its attorney’s legal costs when he was sued in his capacity as solicitor, the state Supreme Court ruled last week in Sahli v. Woodbine Board of Education. However, the court ruled that the board must defray his defense costs when he was sued in his capacity as a temporary volunteer board secretary.

The Supreme Court’s ruling applied the indemnification statute, which requires school boards to pay the legal costs in civil actions for a person holding board “office, position or employment” who is sued for job-related acts.

Dual Roles In this case, the board attorney also served temporarily as the board secretary at several board meetings involving a personnel issue. The employee discussed at the meetings later filed a complaint, alleging violations in the attorney’s capacity as both solicitor and temporary board secretary. The attorney brought an action to compel the board to defray his litigation costs.

The Supreme Court said a school board has no legal obligation to indemnify a board attorney because a solicitor operating as an independent contractor is neither an “employee” nor a person holding an “office or position.”

But the court ruled the attorney was entitled to indemnification when sued as a volunteer board secretary—reasoning that had the regular board secretary been sued, the secretary would be indemnified as a person holding a “position.”

The Supreme Court sent the case back to the trial court to determine the amount the insurer should reimburse the attorney.

Provides Direction This is the first reported case involving indemnification for a board attorney. It provides clear direction that school boards have no obligation to indemnify board attorneys who are not employees—for instance, those who do not receive health or pension benefits from the board, or those who do not have income taxes withheld from their fees. The decision does not address board attorneys who may be otherwise engaged by the board.

The question of indemnification for volunteers is also a novel ruling, saying that boards must indemnify volunteers who serve in statutorily created positions. NJSBA recommends that school boards ensure their insurance policies provide coverage for volunteers.