Director Liability and Charitable Status Under the 2022 Washington Nonprofit Corporation Act: Lessons from Chappel v. Johnson

By Matthew Macklin, Managing Attorney, Stratagem Law Group. The trial court found four violations of the Washington Nonprofit Corporation Act and no fiduciary breach. The Court of Appeals agreed, published its opinion, and explained why. The directors were not personally liable. Even so, the organization left the courthouse under a judgment telling it how to operate.

Stratagem Law Group represented the Seattle Black Firefighters Association and its board in this case, at trial and on appeal. This article discusses the court’s published opinion, which is a public record. Prior results do not guarantee a similar outcome, and nothing here is legal advice.

In this article: Key takeaways · Why I am writing about this case · The dispute, in brief · The Act took effect in 2022 · The four violations · No breach · Who is a charitable corporation? · Membership and voting · Costs · What the court did not decide · What boards should do now · FAQ

Key takeaways

• Violating the Act or the bylaws does not, by itself, establish a breach of fiduciary duty. Whether it does depends on the facts, and on these facts the trial court found none. Director liability to members, moreover, is a separate question, governed by RCW 24.03A.540(5).
• Under RCW 24.03A.540(5), a director is not liable to a member for an action or inaction as a director except for a knowing infliction of harm or an intentional violation of criminal law or of the Act that causes harm.
• An organization is a “charitable corporation” only if it is operated primarily or exclusively for charitable purposes. Charitable language in the articles is not enough on its own, and neither is doing charitable work. Instead, the court read the governing documents as a whole and against the organization’s tax history and conduct.
• For a membership corporation, selling all or substantially all of its assets is a fundamental transaction that requires statutory notice to every member, a quorum, and a membership vote. In other words, a board cannot substitute an informal poll for that process.
• The Act does not make paying dues a condition of membership; the articles and bylaws do, or do not. Because these bylaws were silent, retired members who had stopped paying kept their votes, and the court had authority to say so.

If your nonprofit has no voting members, the membership and notice-and-vote discussion below will not apply to you. However, the director standard, RCW 24.03A.540(5), the charitable-corporation classification, the records rules, and the dual-office rule all do.

Why I am writing about this case

I represented the Association and its board through a bench trial (a trial to the judge, without a jury) in King County Superior Court and then in the Court of Appeals, Division One, which heard oral argument in person in Seattle in July 2025. There, the Attorney General appeared as amicus curiae, a non-party permitted to file a brief, in support of the members’ position that the Association was a charitable corporation. Division One then affirmed on every issue and published its opinion. Chappel v. Johnson, 35 Wn. App. 2d 479, 576 P.3d 578 (2025).

I am writing about it because Washington boards have been operating under chapter 24.03A RCW since January 1, 2022, with very little appellate guidance. As of October 2026, this is the only published Washington appellate decision I have found that applies the Washington Nonprofit Corporation Act’s “charitable corporation” definition in a contested case, and one of the first to address director liability to members under the 2022 standard. So every board, executive director, and member of a Washington nonprofit has a stake in what it says.

The dispute, in brief

The Seattle Black Firefighters Association is a nonprofit corporation founded by the city’s first Black firefighters. For decades it used a house in Seattle’s Central District as a hub for community, charitable, and political activity. Then, in January 2022, the board, led by its president, Douglas Johnson, listed the house for sale, relying on what it described as a membership vote. Erwin Chappel, a Seattle Fire Department captain and Association member, and other active and retired members sued the next month. They alleged breach of fiduciary duty, breach of the bylaws as a contract, and violations of the nonprofit statute. In addition, they asked the court to block the sale and to declare that retired members kept their voting rights. (Slip op. at 2–4.)

After the bench trial, the superior court reached four conclusions. First, retired firefighters remained members with voting rights under the bylaws. Second, the board had violated several provisions of the Act, but the members had not proved a breach of fiduciary duty, and no board member was individually liable. Third, the Association was not a “charitable corporation,” so the house was not property held for charitable purposes. Fourth, costs were not taxable. The board then appealed the membership ruling, while the members cross-appealed on fiduciary duty, charitable status, and costs. The Court of Appeals affirmed on every issue. (Slip op. at 1–2, 4–5, 22.)

One point about the appellate process explains much of what follows. The Court of Appeals does not retry a case. Instead, it took the trial court’s findings as established and asked whether the law had been correctly applied to them. That deference is why the trial court’s view of the board’s good faith controlled. (Slip op. at 6, 11.)

The Washington Nonprofit Corporation Act took effect in 2022

Chapter 24.03A RCW, the current Washington Nonprofit Corporation Act, replaced the former chapter 24.03 RCW effective January 1, 2022. Laws of 2021, ch. 176. Because the board’s conduct spanned the changeover, the trial court analyzed the fiduciary claim under both versions, and the Court of Appeals did the same. (Slip op. at 11.)

The two versions describe the director standard of care in similar terms. Under the former Act, a director owed duties of good faith, the best interests of the corporation, and the care of an ordinarily prudent person in a like position. Former RCW 24.03.127. Likewise, under the current Act, each director must act in good faith, with the care an ordinarily prudent person in a like position would exercise, and in a manner the director reasonably believes to be in the corporation’s best interests. RCW 24.03A.495(1). Accordingly, the court treated the two as materially the same. (Slip op. at 12.)

What changed is liability to members. The 2022 Act provides that a director “is not liable to any member” for any action taken or failure to act as a director “except” for a “knowing infliction of harm upon the member” or “an intentional violation of criminal law or this chapter that results in harm or loss to the member.” RCW 24.03A.540(5). (Slip op. at 11–12.) That provision limits a director’s liability to members for acts taken as a director. However, it is not a shield against claims by the corporation itself, against claims outside the director’s capacity, or against declaratory and injunctive relief directed at the organization. It sits at the center of the case.

The four violations

The trial court found that the board violated the Washington Nonprofit Corporation Act and the bylaws in four ways, and the Court of Appeals left those findings undisturbed. (Slip op. at 12–13.)

Notice and quorum for a fundamental transaction

The sale of the house was a “fundamental transaction” because it was a sale of all or substantially all of the corporation’s assets. RCW 24.03A.010(31). For a membership corporation, that triggers RCW 24.03A.890: notice to every member, and a notice that states the purpose of the meeting and describes the disposition, its terms and conditions, and the consideration the corporation will receive. Here, however, the notice did not reach all members and did not carry the required substance. (Slip op. at 12.)

Members’ equal voting rights under the Washington Nonprofit Corporation Act

During the litigation, the board adopted a “policy” that purported to strip retired members of their votes. The Act, however, gives each member the same voting rights as every other member unless the articles or bylaws provide otherwise, gives each member one vote, and bars the board from eliminating an existing right of membership. RCW 24.03A.345, .435, .695. Because the policy was not a bylaw amendment, the court treated it as a violation. (Slip op. at 4, 12–13.)

Records required by the Washington Nonprofit Corporation Act

In addition, the corporation had not kept minutes of its board meetings, the financial statements furnished for the past six years, and other records listed in RCW 24.03A.210(1). (Slip op. at 13.)

One person, two offices

Finally, the president had also been acting as secretary. The Act allows one person to hold more than one office, but not the offices of president and secretary at the same time. RCW 24.03A.585(3). (Slip op. at 13.)

No breach: the director standard under the Washington Nonprofit Corporation Act

The members argued that if the board violated the statute and the bylaws, it necessarily breached its fiduciary duties. The Court of Appeals, however, rejected that argument. (Slip op. at 11, 13.)

What the trial court found

The trial court had described the Association as historically run “very informally,” and it found nothing “malicious, nefarious,” or even negligent in the board’s conduct. (Slip op. at 13.) That was a finding of fact on this record, and the Court of Appeals held it was a permissible one.

The common-law standard for director liability

The court then applied the common-law standard it drew from Annechino v. Worthy and Riss v. Angel. Washington generally does not impose personal liability on an officer unless the officer “knowingly and in bad faith commits or condones a wrongful act,” and courts will not substitute their judgment for that of directors absent fraud, dishonesty, or incompetence. (Slip op. at 13, citing Annechino v. Worthy, 162 Wn. App. 138, 147, 252 P.3d 415 (2011), and Riss v. Angel, 131 Wn.2d 612, 632, 934 P.2d 669 (1997).) By contrast, the members’ principal authority, Senn v. Northwest Underwriters, involved the diversion of $12.3 million and was not comparable. (Slip op. at 13.)

The court also looked to Delaware, whose corporate decisions are persuasive rather than binding in Washington, for the point that procedural lapses are not, by themselves, evidence of bad faith. For example, an allegedly falsified minute book that deceived no one was not a breach in Oberly v. Kirby, and missing minutes can be “a cause for suspicion” but are not sufficient to support an inference of bad faith under In re McDonald’s Corp. Stockholder Derivative Litigation. (Slip op. at 14.) The conclusion therefore followed: the superior court “could validly conclude that the Board violated provisions of the NpCA and the bylaws, but without breaching fiduciary duties or committing negligence.” (Slip op. at 14.)

Two limits on the holding

Two limits deserve attention. First, the court did not hold that boards may disregard statutory procedure without consequence; rather, it expressly left open that a statutory violation could amount to a fiduciary breach on other facts. (Slip op. at 15 n.2.) Second, the members did obtain relief: the trial court ordered future elections, enforcement of the bylaws, clarified membership and voting rights, and a compliant meeting to decide the future of the house. As a result, no sale occurred on the strength of the defective corporate acts. (Slip op. at 14.)

Informality did not cost these directors personally. It did cost the organization a trial and a judgment governing how it must operate, and it would have cost the directors as well had the trial court found knowledge, bad faith, or harm. Defense costs are real even when no liability is found. Consequently, indemnification provisions and directors-and-officers coverage are the board-level answer.

Who is a “charitable corporation” under the Washington Nonprofit Corporation Act?

The 2022 Act created a new classification. A “charitable corporation” is a domestic nonprofit “operated primarily or exclusively for one or more charitable purposes.” RCW 24.03A.010(5). A “charitable purpose,” in turn, is one that would make a corporation organized and operated exclusively for that purpose eligible for exemption under section 501(c)(3), or one “considered charitable under applicable law” other than the Act or the Internal Revenue Code. RCW 24.03A.010(6). (Slip op. at 15–16.)

The parties’ positions

The members argued that the Association’s 1979 articles, which recite that the corporation “is organized exclusively for educational, charitable, religious, scientific, and literary purposes,” made it a charitable corporation, and that the board could not unilaterally redefine charitable property as non-charitable. Similarly, the Attorney General, as amicus, argued that the articles plainly stated a charitable purpose and that a charitable corporation cannot change its purpose without following the statute. The board’s position, by contrast, was that the Association had never been a charitable organization. The court’s answer: “Johnson is correct.” (Slip op. at 15.)

The court’s test under the Washington Nonprofit Corporation Act

For a corporation that is not a 501(c)(3) organization, the court held, whether it is “charitable under applicable law” turns on the intent expressed in its articles and bylaws, read under ordinary contract principles, including the “context rule,” which looks to the circumstances and the parties’ conduct. (Slip op. at 16–17.) Here the articles invoked section 501(c)(6), not 501(c)(3). The bylaws, moreover, emphasized recruitment, promotion, and fellowship among members. The founders had deliberately avoided 501(c)(3) status so that the organization could engage in political activity, and current leadership had pursued 501(c)(5) status. Those documents, therefore, “do not unambiguously indicate” an intent to operate primarily or exclusively for charitable purposes. (Slip op. at 18–19.)

The court agreed with the Attorney General on one legal proposition: a charitable corporation cannot change its purpose to a non-charitable one without following the Act’s procedures. But that rule assumes the organization was a charitable corporation to begin with, and this one was not. Hence the court’s conclusion: “Engaging in charitable activities does not make the SBFFA a ‘charitable corporation’ under RCW 24.03A.010.” (Slip op. at 19–20.) The court expressly reserved how the analysis applies to a 501(c)(3) organization, and it did not reach the Attorney General’s argument about the duties owed by directors of a charitable corporation. (Slip op. at 16 n.5, 20 n.9.)

Tax status is evidence, not the answer

One point of vocabulary matters here. Federal tax exemption and the Act’s “charitable corporation” classification are related but distinct. The statutory definition borrows the 501(c)(3) standard, and a corporation’s tax history is evidence of its purposes. Still, the state-law question is whether the corporation is operated primarily or exclusively for charitable purposes, and the IRS does not answer it.

What charitable status would have meant

The classification is not academic. Property held by a charitable corporation is “property held for charitable purposes.” RCW 24.03A.165. Such property “may not be diverted from charitable purposes,” its disposition is restricted, and certain dispositions require advance notice to the Attorney General. RCW 24.03A.900. The Attorney General also supervises those assets and may sue to protect them. Had the Association been a charitable corporation, therefore, the house would have been subject to that regime: the Attorney General would have been entitled to notice before a sale, could have challenged a disposition as a diversion of charitable assets, and would have had a seat at the table alongside the membership. (Slip op. at 15, 19–20.)

Membership and voting: the board’s position and the court’s answer

On its own appeal, the board argued that retired members who had stopped paying dues were no longer members in good standing, that the superior court lacked authority to declare the rights of members who were not parties, and that membership under the Washington Nonprofit Corporation Act depends on paying dues. The court disagreed on each point, and its reasoning is sound.

A nonprofit’s governing documents are read like a contract. Roats v. Blakely Island Maintenance Commission, Inc., 169 Wn. App. 263, 273–74, 279 P.3d 943 (2012). The bylaws limit membership to professional firefighters, “current or retired,” set a reduced dues rate for retired members, and nowhere make membership contingent on paying dues. In fact, other provisions assume that a member can fall behind and remain a member. Reading the bylaws as a whole, the court found the trial court’s interpretation “a facially reasonable way to read the bylaws” and declined to revisit it. (Slip op. at 7–8.)

The Act, meanwhile, authorizes a court, in proceedings concerning the members’ list and the validity of corporate action, to determine who is entitled to vote and to order a compliant meeting. RCW 24.03A.405(4), .964(2), .966. Likewise, it leaves dues and assessments to the articles and bylaws rather than imposing a requirement of its own. RCW 24.03A.360. (Slip op. at 9–10.)

The practical lesson for every membership organization is that the Act will not supply a dues requirement the bylaws do not contain. So if dues are meant to be a condition of membership, the bylaws must say so, must set out how a delinquent member is suspended or removed, and must be amended by the vote the bylaws require, not by board policy.

Costs when both sides prevail

Finally, the members sought statutory costs as the prevailing party under RCW 4.84.030. The court affirmed the denial. On one hand, the members had blocked the sale, secured a membership vote, and proved statutory violations; on the other, the board had defeated the fiduciary duty, contract, and individual liability claims and the charitable corporation theory. When both parties prevail on major issues, measured by the relief each actually obtained rather than by counting claims, there may be no prevailing party at all, and therefore no award of statutory costs. (Slip op. at 21–22, citing Phillips Building Co. v. An, 81 Wn. App. 696, 702, 915 P.2d 1146 (1996).)

What the court did not decide about the Washington Nonprofit Corporation Act

Three questions remain open. First, the court did not hold that a statutory violation can never amount to a fiduciary breach; it held that these violations, on these findings, did not. (Slip op. at 15 n.2.) Second, it did not decide how the “charitable corporation” analysis applies to an organization that holds 501(c)(3) recognition. (Slip op. at 16 n.5.) Third, it did not reach the Attorney General’s argument about the duties that directors of a charitable corporation owe. (Slip op. at 20 n.9.) Consequently, a board that fits any of those descriptions should not read this opinion as settling its position.

What Washington nonprofit boards should do now

• Decide, deliberately, whether the organization is a charitable corporation under RCW 24.03A.010(5). Then make sure the articles, bylaws, tax status, and actual operations tell the same story.
• Treat any sale of all or substantially all assets, merger, or dissolution as a fundamental transaction with its own article of the Act. For a membership corporation selling its principal asset, that means RCW 24.03A.890 notice to every member stating the purpose, terms, and consideration, a quorum, and a recorded vote. Mergers and dissolutions, however, have parallel but separate requirements.
• Define membership in the bylaws, including whether dues are a condition of membership and how a member is suspended or removed, and amend only by the vote the bylaws require, never by board “policy.”
• Keep the records RCW 24.03A.210 lists, including minutes of member and board meetings and the financial statements furnished for the past six years. Also keep the offices of president and secretary in separate hands.
• Understand what RCW 24.03A.540(5) does and does not do. It limits a director’s liability to members for acts taken as a director, and only short of knowing harm or an intentional violation. However, it does not shield the organization from declaratory or injunctive relief, court-ordered elections, or the cost of defending a trial.
• Write things down. Minutes, financial statements, and a record of each vote are what a court looks at first when members allege bad faith. In Chappel v. Johnson, for example, the absence of minutes was “a cause for suspicion” that the board overcame at trial; a board should not plan on having to.

Frequently asked questions about the Washington Nonprofit Corporation Act

Does a Washington nonprofit need a membership vote to sell its building?

Often, yes. If the corporation has members and the building is all or substantially all of its assets, the sale is a fundamental transaction under RCW 24.03A.010(31), and the corporation must follow the notice, quorum, and voting procedures of RCW 24.03A.890. If the corporation is also a charitable corporation, the Attorney General is entitled to notice as well. In Chappel v. Johnson, for instance, a listing and purported vote that did not meet the statutory requirements violated the Washington Nonprofit Corporation Act.

Can directors be personally liable for violating the Washington Nonprofit Corporation Act?

To a member, only within narrow limits. RCW 24.03A.540(5) limits a director’s liability to members to a knowing infliction of harm or an intentional violation of criminal law or of the Act that causes harm. Chappel v. Johnson holds that statutory and bylaw violations do not by themselves establish a fiduciary breach, although it expressly leaves open that they could on other facts. Meanwhile, the corporation itself remains subject to court orders requiring it to comply.

Is every Washington nonprofit a “charitable corporation”?

No. The term is defined in RCW 24.03A.010(5) and requires that the corporation be operated primarily or exclusively for charitable purposes. Doing charitable work, therefore, is not enough. In Chappel v. Johnson, an association whose articles invoked section 501(c)(6), whose bylaws centered on member recruitment and fellowship, and whose founders had deliberately avoided 501(c)(3) status was not a charitable corporation, even though it had long engaged in charitable activity. The court, however, left open how the analysis applies to a 501(c)(3) organization.

Do retired members keep their vote if they stop paying dues?

It depends on the bylaws. The Act leaves dues to the articles and bylaws, RCW 24.03A.360, and does not itself make payment a condition of membership. In Chappel v. Johnson, for example, bylaws that admitted “current or retired” firefighters, set a reduced rate for retirees, and never conditioned membership on dues were read to preserve retired members’ votes. When membership is disputed, moreover, the Act authorizes a court to determine who is entitled to vote and to order a compliant meeting. RCW 24.03A.405(4), .964(2), .966.

Sources

Cases (authorities cited in the opinion and in this article)

• Chappel v. Johnson, 35 Wn. App. 2d 479, 576 P.3d 578 (2025) (No. 86392-4-I): slip opinion.
• Annechino v. Worthy, 162 Wn. App. 138, 252 P.3d 415 (2011), aff’d, 175 Wn.2d 630, 290 P.3d 126 (2012).
• Riss v. Angel, 131 Wn.2d 612, 934 P.2d 669 (1997).
• Senn v. Northwest Underwriters, Inc., 74 Wn. App. 408, 875 P.2d 637 (1994).
• Roats v. Blakely Island Maintenance Commission, Inc., 169 Wn. App. 263, 279 P.3d 943 (2012).
• Phillips Building Co. v. An, 81 Wn. App. 696, 915 P.2d 1146 (1996).
• Oberly v. Kirby, 592 A.2d 445 (Del. 1991); In re McDonald’s Corp. Stockholder Derivative Litigation, 291 A.3d 652 (Del. Ch. 2023) (persuasive authority).

Statutes

• Chapter 24.03A RCW, the Washington Nonprofit Corporation Act, including RCW 24.03A.010(5), (6), (31); .165; .210; .345; .360; .405; .435; .495; .540(5); .585(3); .695; .890; .900; .908; .964; .966; Laws of 2021, ch. 176.
• Former RCW 24.03.127 and former RCW 24.03.225(3) (repealed effective January 1, 2022); RCW 4.84.030.

Further reading

• Pillsbury Winthrop Shaw Pittman LLP, Developments in Nonprofit and Association Law 2025–2026 (summarizing Chappel v. Johnson).
• Law360, “Wash. Charitable Limits Don’t Apply To Firefighter House Sale” (Sept. 16, 2025) (subscription).

This article is provided by Matthew Macklin and Stratagem Law Group for general informational and commentary purposes only. It is not legal advice, does not create an attorney-client relationship, and should not be relied on without consulting counsel about your specific situation. Prior results do not guarantee a similar outcome.