MEMORANDUM TO: FROM: RE: JMQ SMC Mahmoud Gamam (Dar Al-Farooq) Process if Non-Profit Corporation Refuses Inspection

Our File No.: 62767-001 UPDATED January 11, 2012

DATED:

You asked me to review the files and Mr. Ojiles October 17, 2011 correspondence regarding which type of entity Dar Al-Farooq is and if it is not a non-profit corporation (organized pursuant to Minn. Chap. 317A), what options are available. I reviewed Mr. Ojiles letter and he indicates Dar Al-Farooq is a Religious Society organized under Minnesota Statutes Chapter 315. I also reviewed the documents we received from our client. One of the documents, from an attorney representing Dar Al-Farooq, Mark Masica, dated February 13, 1998 and sent to the MN Secretary of State, states that Dar Al-Farooq is a religious corporation established pursuant to Minnesota Statutes 315.21. Minnesota Statutes 315.21 states: Subdivision 1.Method. If a church or religious society does not wish to form a corporation under sections 315.01 to 315.20, at least three members may become a corporation by adopting and signing a certificate containing: (1) its name, general purpose and plan of operation, and its location; and (2) the terms of admission, qualification for membership, selection of officers, filling vacancies, and way it is to be managed. Subd. 2.Certificate recorded. The certificate must be recorded with the county recorder of the county of its location. Subd. 3.Existing corporations. An existing corporation created by special law, which does not desire to incorporate under sections 315.01 to 315.20, may

reincorporate under this section, when authorized by a three-fourths vote of its members present and voting at a stated meeting called to consider reincorporation. The Minnesota Secretary of States website indicates Dar Al-Farooq is a non-profit corporation governed by Minnesota Statutes Chapter 317A. One possible explanation for the discrepancy between the 1998 letter and the Secretary of States webpage is that Dar Al-Farooq, at some point after 1998, elected to become governed by Minnesota Statutes Chapter 317A. See Minn. Stat. 317A.021. However, we do not have any documents supporting that theory. It may be beneficial to request copies of any documents on file at the Secretary of State to determine exactly how Dar Al-Farooq is organized. Minnesota Statutes Chapter 315 does not have a correlating statute to Minnesota Statutes 317A.461 providing for access by members or directors to certain enumerated documents. In fact, Minnesota Statutes 317A.051, subd. 2 explicitly states that Chapter 317A does not apply to a religious corporation authorized by chapter 315 unless itelects to be governed by this chapter If Dar Al-Farooq is indeed organized pursuant to Chapter 315 and not 317A, I believe an argument may still be able to be made for access to the documents based on Minnesota Statutes 315.09, which states that a religious corporation may sue and be sued. We would not, it appears, have the statutory support explicitly providing for access to the documents as provided by Minnesota Statutes 317A.461. I have not been able to find any case law on point supporting an argument for the release of documents from a religious corporation. As previously set forth in my September 23, 2011 Memorandum, our client, Mahmoud Gamam, as a member of Dar Al-Farooq and member of the Council of Trustees of Dar Al-Farooq, may inspect the Articles, Bylaws, Minutes, Account Records, Financial Statements and other documents of Dar Al-Farooq. Minn. Stat. 317A.461. Mr. Gamam has a proper purpose to receive the documents based on his membership positions and his concern regarding improper compensation and improper accounting records being kept by Dar Al-Farooq. Unlike for profit corporations, there is not a ten day requirement for the inspection of the documents in a non-profit corporation. See Minn. Stat. 302A.461, subd. 4(a). Additionally, unlike for profit corporations, a non-profit corporation may charge the requesting party a reasonable fee to cover expenses of providing copies of documents. Compare Minn. Stat. 317A.461, subd. 5 and Minn. Stat. 302A.461, subd. 5. Minnesota Statutes 317A.461, subd. 7 provides remedies to a director who is wrongfully denied access to or copies of documents. A member or director who is wrongfully denied access to or copies of documents under this section may bring an action for injunctive relief, damages, and costs and reasonable attorney fees. Id.

Although there is no case law citing Minnesota Statutes 317A.461, the annotation provides a cross reference to Minnesota Statutes 302A.461, 302A.463. I believe we can look to those cases for guidance as to how cases brought under 317A.461 may be addressed by the court. I found a case on point, Blohm v. Kelly, 765 N.W.2d 147 (Minn. Ct. App. 2009), where the Court of Appeals reversed the district courts grant of summary judgment to a closely held corporation and its majority shareholder, for refusing to turn over documents required to be produced for inspection by Minnesota Statutes 302A.461. In Blohm, the district court noted that although the documents had not yet been turned over for inspection, the minority shareholder had failed to provide sufficient evidence of damages. Id. at 158. The Court of Appeals held that the minority shareholder was not required to prove damages and could seek equitable relief pursuant to Minnesota Statutes 302A.467. Id. Minnesota Statutes 302A.467 permits a court to grant equitable relief, as it deems appropriate, for violations of Minnesota Statutes 302A.461. The Court of Appeals held that the minority shareholder, based on Minnesota Statutes 302A.467, could maintain his suit and seek equitable relief, such as an accounting. Blohm, 765 N.W.2d at 158. Although the non-profit corporate Chapter of Minnesota Statutes contains a similar equitable relief statute, it requires the action be brought by at least 50 members with voting rights or 10% of the members with voting rights, whichever is less: If a corporation or an officer or director of the corporation violates this chapter, a court in this state, in an action brought by at least 50 members with voting rights or ten percent of the members with voting rights, whichever is less, or by the attorney general, may grant equitable relief it considers just and reasonable in the circumstances and award expenses, including attorney fees and disbursements, to the members. Minn. Stat. 317A.467. If an action is brought by at least 50 members with voting rights or 10% of the members with voting rights, I believe equitable relief pursuant to Minnesota Statutes 317A.467 is available. Absent the number of members required as set forth above, I believe the appropriate action would be to seek injunctive relief, pursuant to Minnesota Statutes 317A.461, subd. 7, and request costs and reasonable attorney fees incurred in bringing the action.
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