“Good Counsel”: Lesley Rosenthal Pens A Users’ Manual To Legal Matters In The Nonprofit Sector

Monday, February 20, 2012 - 10:59

The Editor interviews Lesley Rosenthal, VP, General Counsel & Secretary at Lincoln Center for the Performing Arts, and author, Good Counsel: Meeting the Legal Needs of Nonprofits.

Editor: Please tell us about your professional background.

Rosenthal: When I graduated from Harvard Law School, I knew that I wanted to be a public interest lawyer, but I took a bit of a circuitous route. I clerked for the Honorable Shirley Wohl Kram in the Manhattan federal court for two years, and she encouraged me to spend some time in the private sector before working in a public organization. There was one firm in particular I noticed coming through her courtroom regularly with impressive pro bono matters – prisoners’ rights, civil rights matters, environmental matters and others – and that was Paul, Weiss, Rifkind, Wharton & Garrison LLP. I applied and ended up working there for 13 years.  In that time, I came to understand how lawyers can serve business needs and interests and at the same time take on a wide variety of pro bono matters.

I served as the outside pro bono general counsel of the modern dance company that my college roommate performed with – Doug Elkins Dance Company – when it was just starting out. While “general counsel” may be a vaunted title for helping them figure out some pretty basic matters, the law firm was nonetheless very receptive and assigned me a supervising partner.

I went on to act as outside pro bono general counsel of a somewhat larger organization, the Child Care Action Campaign, which advocated for businesses to provide quality child care onsite for their workers. I worked on several gratifying human rights matters on behalf of political and religious refugees. 

The skills I acquired along the way helped me to service my paying clients, and they also allowed me to apply when the position of general counsel of Lincoln Center opened up. Music is a long-time passion of mine: I’m a violinist, I’m married to a jazz pianist, and our kids both play music. I landed here about seven years ago and love every minute of it. It’s nice to have only one client; I can focus my professional energies and attentions on the mission of Lincoln Center, which is to put the best of the performing arts in front of as many people as possible.

Editor: What inspired you to write Good Counsel: Meeting the Legal Needs of Nonprofits, and for whom did you write it?

Rosenthal: One thing I’ve done here is to galvanize substantial in-kind, pro bono support by the legal profession for Lincoln Center. I call the group of attorneys we’ve gathered the Lincoln Center Counsels’ Council, and they give us an enormous amount of strategic and legal advice. My efforts came to the attention of Steve Younger, then president of the New York State Bar Association, who had been asked by the chief of the Charities Bureau of the New York State Attorney General’s office if NYSBA could enlist more lawyers to volunteer with nonprofits. Steve asked if I could spearhead that effort – basically to do for the state of New York’s nonprofits what I’d done for my client.

The magnitude of the need was so compelling – of about 80,000 nonprofit organizations in the state of New York, 60,000 of them are not represented by counsel. So of course I said yes. Then I asked him what kind of training materials he had, because you can’t just introduce a willing lawyer to a needy nonprofit; they must become mutually informed. It turns out there really wasn’t anything available that would help launch these new pro bono relationships. There are isolated articles and some terrific blogs, as well as some 1,200-page treatises about specific issues such as nonprofit corporate law and tax exemption, but none really filled the bill.

Editor: Good Counsel is a real users' manual.

Rosenthal: Exactly, and it’s in plain English so that lawyers and their clients can read it together. It’s actionable, too: work plans at the end of each chapter orient the reader to asking the appropriate questions. How can I get a handle on what our contract processes are? What is in our trademark portfolio? How should Legal interface with Operations and Security?

Editor: For those of our readers not in the nonprofit world, would you describe the major concerns of legal departments or individual counsel at such entities?

Rosenthal: I would put them into three buckets. First are the legal needs that pertain specifically to nonprofit organizations. In most states there is a separate corporate law for nonprofits with which they must comply, and of course the IRS has a whole host of laws and regulations pertaining to the tax exemption. Other laws that specifically apply to nonprofits include restrictions on lobbying. Still other laws pertain to fundraising, which is peculiar to the nonprofit sector.

The second group includes what I call general business laws, which apply to every organization whether or not it is a nonprofit – for example, labor and employment laws, intellectual property laws, and building codes and permits. Those laws are not suspended just because you’re not-for-profit. The applicability of general business laws to nonprofits sometimes comes as a surprise to organizations’ leaders.

Then the third bucket, which the book really couldn’t get into, contains specialty laws covering specific types of organizations. For example, if you’re the general counsel of a blood bank, you need to know FDA; if you are working in education with students, you must adhere to student privacy laws. In all cases you must know the relevant state laws.

Editor: Would you recount for us some of the highlights of your career here?

Rosenthal: When I joined Lincoln Center in 2005, it was on the cusp of an extremely exciting redevelopment program of 37 different interrelated projects to refurbish Lincoln Center, make it more accessible to the public, and take it into the 21st century.

In the original architecture, most of the buildings were fully clad in travertine marble. To make Lincoln Center more open and inviting, our lead design architect Liz Diller ripped out much of that travertine at eye level along 65th Street and replaced it with glass. Now you can see inside Juilliard and Alice Tully Hall.

Signage was also lacking, so we have added dynamic signage that we call the “infoscape.” Today, these electronic kiosks allow people to see not only what is playing and where to get a ticket, but also how to get there. The signage is also visually arresting, with its projections of dancers, musicians and other performers.

Upon my arrival, my job was to set the legal context for all of this renovation to happen. That context included contractual relationships with the architects and the construction managers; pledge agreements for the fundraising campaign; financing documentation; insurance; and legal arrangements among the 11 different arts organizations that reside here – each with its own board, management and balance sheet.

At the same time we were intent on keeping all of our arts activities open, meaning the day-to-day legal issues were all still percolating – artist contracts, HR matters, operations and facilities management, and the like.

Editor: Do you have a department of your own here?

Rosenthal: We have two to three in-house attorneys, a superb executive assistant, and the Counsels’ Council. In recent years, some of the larger firms have been loaning out attorneys to us for six- to 12-month stints.

Editor: Do you have any general advice for nonprofits regarding fundraising?

Rosenthal: One of the central insights I’ve gained here is that fundraising is absolutely a critical, fundamental part of every nonprofit, and learning the laws about fundraising has been really interesting to me. The first thing you are taught in contract class at law school is that there has to be something of value exchanged between the parties – say, 200 widgets for $200 – in order for an agreement to be enforceable. But what if I promise to give you $200 tomorrow? That’s not an enforceable agreement. If somebody’s promising you $1 million in support of your building program, and you’re really counting on that money, how do you write the gift agreement such that it’s enforceable? As readers go through the book, they will find some subtle but important linguistic formulations they can use in a pledge agreement to make it enforceable. While no one wants to go after a pledger who reneges, if you are financing a project, it’s helpful to be able to show the lending institution your enforceable pledges.

Editor: Once an incorporated nonprofit has acquired its tax-exempt status, what are key points for retaining it?

Rosenthal: The IRS has become much more active in reviewing compliance. The key tool is the Form 990, the informational return that nonprofits must send to the IRS once a year. Nonprofits must be mindful of filing and of their transparency and accountability obligations to the IRS to maintain their tax-exempt status, which for many organizations is the most precious asset they have.

Following some recent governance scandals in the nonprofit sector, the IRS has become more stringent about board members truly exercising independent judgment over the affairs of the organization. A nonprofit’s reason for being must be to carry out a public mission and not to benefit any private party, even the private party that launched the organization.

Editor: Are labor and employment laws any different in the nonprofit sector?

Rosenthal: Labor and employment laws apply to the nonprofit sector just as they do in the business sector, but they arise in different contexts. People who work in the nonprofit sector often do so out of a sense of good will, and may be paid a lot less than they might be paid to do a similar job in the private sector, so the organizational dynamic and psychology is a little different when you’re addressing the legal needs of a nonprofit workforce. In addition, when you have volunteers, you have to make sure that you have structured your program such that it complies with the minimum wage laws. The same is true of student internships.

Having a good and up-to-date personnel manual is also key.

Editor: How do you suggest small nonprofits avail themselves to pro bono counsel?

Rosenthal: Many wonderful organizations out there are providing pro bono legal assistance to nonprofit organizations. A list of those resources can be found on the free website that is associated with Good Counsel, at www.wiley.com/go/goodcounsel.