Exposure to Trustees, Officers Employees and The University Liability, Immunity, Indemnity and Fiduciary Issues 1

Trustee’s Fiduciary Duties Duty to act within the powers and authority of the position Duty to act within the powers and authority of the position Duty of care and ordinary prudence Duty of care and ordinary prudence Duty of loyalty to the University Duty of loyalty to the University Duty of avoidance of conflict of interest Duty of avoidance of conflict of interest 2

Duty To Act Within The Powers And Authority of Position In addition to statutory and implied powers of trustees which authorize authority to act, there are other statutes which mandate action, or which prohibit action. In addition to statutory and implied powers of trustees which authorize authority to act, there are other statutes which mandate action, or which prohibit action. 3

Duty of Care and Ordinary Prudence Trustee’s Duty is owed to institution as a whole, not to individual constituencies. Trustee’s Duty is owed to institution as a whole, not to individual constituencies. Duty to serve in good faith, not opposed to best interests of the university, with care of an ordinarily prudent person in a like position under similar circumstances. Duty to serve in good faith, not opposed to best interests of the university, with care of an ordinarily prudent person in a like position under similar circumstances. Under the common law, if the trustee has greater skill than a man of ordinary prudence, the duty is to exercise that skill as the trustee has. Under the common law, if the trustee has greater skill than a man of ordinary prudence, the duty is to exercise that skill as the trustee has. 4

Duty of Care and Ordinary Prudence ORC Section (B) provides “… [a] trustee shall perform his duties as a trustee, including his duties as a member of any committee…in good faith, in a manner he or she reasonably believes to be in or not opposed to the best interests of…[NEOMED] …and with the care that any ordinarily product person in a like position would use under similar circumstances…” ORC Section (B) provides “… [a] trustee shall perform his duties as a trustee, including his duties as a member of any committee…in good faith, in a manner he or she reasonably believes to be in or not opposed to the best interests of…[NEOMED] …and with the care that any ordinarily product person in a like position would use under similar circumstances…” 5

Duty of Care and Ordinary Prudence “…[trustee] can rely upon information opinions, reports, or statements, including financial statements and other financial data, that are prepared or presented by… trustees, officers, or employees of [NEOMED], counsel, public accountants, or others, or committees of the trustees upon which he does not serve as long as he reasonably believes the information is reliable…” “…[trustee] can rely upon information opinions, reports, or statements, including financial statements and other financial data, that are prepared or presented by… trustees, officers, or employees of [NEOMED], counsel, public accountants, or others, or committees of the trustees upon which he does not serve as long as he reasonably believes the information is reliable…” 6

Duty of Ordinary Care and Prudence Discretion by trustees cannot generally be challenged unless fraud or bad faith is alleged. Discretion by trustees cannot generally be challenged unless fraud or bad faith is alleged. If errors in management of University result from exercise of bad judgment or discretion, but committed in good faith and absent fraud, there is no liability for damages or losses resulting from such discretion. If errors in management of University result from exercise of bad judgment or discretion, but committed in good faith and absent fraud, there is no liability for damages or losses resulting from such discretion. 7

Duty of Loyalty to the University Trustee must keep NEOMED interests paramount Trustee must keep NEOMED interests paramount Trustee cannot: Trustee cannot: (a) engage in any transaction adverse to NEOMED; (a) engage in any transaction adverse to NEOMED; (b) acquire property interests to detriment of NEOMED; (b) acquire property interests to detriment of NEOMED; (c) engage in competing activities to detriment of NEOMED; or (c) engage in competing activities to detriment of NEOMED; or (d) directly or indirectly derive benefits or advantages in dealing with or on behalf of NEOMED. (d) directly or indirectly derive benefits or advantages in dealing with or on behalf of NEOMED. 8

Duty of Avoidance of Conflicts of Interest Trustees may avoid/minimize the effects of conflicts of interest through disclosure of potential conflicts and nonparticipation in certain actions of the Board. Trustees may avoid/minimize the effects of conflicts of interest through disclosure of potential conflicts and nonparticipation in certain actions of the Board. Conflict potentials generally arise whenever a trustee: Conflict potentials generally arise whenever a trustee: (a) directly or indirectly benefits at the expense of NEOMED; (a) directly or indirectly benefits at the expense of NEOMED; (b) represents interests which compete with NEOMED; or (b) represents interests which compete with NEOMED; or (c) fails to comply with Federal and State Ethics Laws. (c) fails to comply with Federal and State Ethics Laws. 9

Trustees in Multiple Roles and with Potential Conflicts Disclosure Disclosure Non Participation Non Participation Abstention from Voting Abstention from Voting 10

“Protections” Available To Trustees IMMUNITY (Ohio) IMMUNITY (Ohio) INDEMNIFICATION (Federal/Other) INDEMNIFICATION (Federal/Other)  LEGAL REPRESENTATION 11

Civil Actions Under State Law If a civil action is brought against a trustee under state law (Ohio)... If a civil action is brought against a trustee under state law (Ohio)... the civil action will be treated as an action against the state, and no personal liability will be imposed... the civil action will be treated as an action against the state, and no personal liability will be imposed... Unless the trustee acted outside scope of official responsibilities, with malice, in bad faith, or in a wanton or reckless manner. Unless the trustee acted outside scope of official responsibilities, with malice, in bad faith, or in a wanton or reckless manner. 12

Civil Actions Under State Law The immunity provided to trustees applies only to civil actions brought under state law, and not to actions brought under federal law or under the law of another state. The immunity provided to trustees applies only to civil actions brought under state law, and not to actions brought under federal law or under the law of another state. 13

Indemnification If a trustee is sued in federal court of non- Ohio jurisdiction, the state (university) will indemnify the trustee for up to $1 million in compensatory damages per occurrence. If a trustee is sued in federal court of non- Ohio jurisdiction, the state (university) will indemnify the trustee for up to $1 million in compensatory damages per occurrence. However, t he trustee will not be indemnified if he or she acted manifestly outside scope of responsibilities, acted with malice, in bad faith, or in a wanton or reckless manner…[no indemnity for punitive damages]. However, t he trustee will not be indemnified if he or she acted manifestly outside scope of responsibilities, acted with malice, in bad faith, or in a wanton or reckless manner…[no indemnity for punitive damages]. 14