The Ohio attorney general will have to commence an action against one of two feuding boards of directors to determine which gets to operate a Columbus mosque and oversee $432,000 of its corporate funds, the Ohio Supreme Court ruled today.

In a 5-2 per curiam decision, the Supreme Court rejected a requested writ of quo warranto to dissolve the non-profit corporation operating the Omar Ibn El Khattab Mosque, and to allow the Franklin County Common Pleas Court to select a trustee or receiver to establish a new entity to oversee the facility. The decision reversed a December 2018 ruling by the Court to grant the Ohio Attorney General’s Office the requested writ. Lawyers for the original corporate board asked the Court to reconsider the case and it did.

Chief Justice Maureen O’Connor and Justices Judith L. French, Patrick F. Fischer, Michael P. Donnelly, and Melody J. Stewart joined the opinion.

In a dissenting opinion, Justice R. Patrick DeWine wrote that the corporation’s “dysfunction and internal paralysis” throughout the decade-old dispute justifies the “extraordinary remedy” of a writ of quo warranto. Justice DeWine wrote the 4-3 majority opinion in December, and Justice Sharon L. Kennedy joined his opinions in both decisions.

Construction Decision Splits Congregation
In 2007, the Islamic Society of Greater Columbus created a new nonprofit corporation, called the Omar Mosque Association (OMA), to operate the mosque as a separate entity. The entity was to be responsible for the religious and philanthropic activities at the mosque. The plan called for the initial election of a seven-member board of directors for a term ending at the end of 2009. The new board also was charged with writing an OMA constitution and bylaws by the end of 2007.

After the new board formed, it filed for articles of incorporation with the Ohio secretary of state’s office, and began raising money for the expansion and improvement of the mosque. As construction was starting in September 2011, OMA funds were deposited into accounts with JP Morgan Chase Bank.

A dispute ensued between two factions of the mosque membership. The Court opinion refers to the original board as the “Reash/Bray” faction and to the members disputing their authority as the “Khan/Ball” faction, using the names of the attorneys representing the factions.

The parties disputed what caused the schism, whether it was the original board continuing to govern after 2009 without any further elections, or if the Khan/Ball faction opposed the expansion project.

Duel Elections, Struggle for Account Follows
In response to the Khan/Ball faction, the original board called for an October 2011 meeting in which the OMA members could vote to keep the existing board and add four new seats, or elect a completely new board. The majority of attendees chose to keep the original board.

Two weeks later, the Khan/Ball faction convened its own meeting, elected its own board of directors, and declared themselves in charge of the mosque. The second board presented its credentials to Chase Bank to take over the corporate accounts, which had more than $432,000 in it. Chase transferred the signing authority to the second board, and the initial board (the Reash/Brey faction) filed a lawsuit in Franklin County Common Pleas Court against individual members of the Kham/Ball faction seeking damages and the return of authority over the bank accounts. The Khan/Ball faction sought a declaratory judgment from the trial court to declare the second board the legitimate OMA board.

The court allowed Chase Bank to deposit the $432,000 from the three mosque accounts with the clerk of courts until the courts determine who should control the funds.

The trial court stayed the Reash/Brey case after finding that the action they sought requires a writ of quo warranto. In 2015, the attorney general filed a lawsuit against the mosque in the Tenth District Court of Appeals seeking the writ of quo warranto and a request to dissolve the corporation and to appoint a receiver.

Under R.C. 2733.01(A), the attorney general could have proceeded to oust one of the factions, but instead elected under R.C. 2733.02 to dissolve the organization. The attorney general noted that the OMA’s original board violated three governing rules by failing to maintain a record of its members, not maintaining complete accounting records, and not holding annual meetings. Both factions objected to dissolving the organization.

A Tenth District magistrate recommended the appeals court grant the attorney general’s request. The magistrate agreed with the attorney general’s contention that failing to adhere to the “corporate formalities” caused the schism and the first board’s inability to reclaim the money in the Chase accounts. The Tenth District agreed and referred the case to the common pleas court to oversee the dissolution and appoint a trustee to oversee the establishment of a new entity.

The Reash/Brey faction appealed to the Ohio Supreme Court, which affirmed the Tenth District in December 2018. The Reash/Brey faction then filed for reconsideration.

Following Corporate Formalities May Not Have Prevented Rift
In today’s opinion, the Court majority wrote that the magistrate was wrong to conclude the first board’s failure to comply with the formalities “caused” the entity to lose control of the charitable funds.

The majority opinion stated the record demonstrates the dispute “arose over the collection and disbursement of the renovations funds.” The Court stated it found no basis to believe that had the first board followed the formalities it would have prevented the Khan/Ball faction from deciding to conduct its own meeting and attempt to control the funds.

The opinion also noted that Chase Bank could have assessed the rightful owner of the accounts had the mosque had better bookkeeping, but Chase made it “abundantly clear” that it did not want to place itself in the middle of the dispute. The mosque’s account agreement with Chase stated that Chase Bank “may file an action in interpleader with respect to any Account where we have been notified of disputed claims to that Account. If any person asserts that a dispute exists, we are not required to determine whether the dispute has merit.” The opinion stated that based on Chase’s actions and the agreement language, it is unreasonable to believe Chase would have turned over the funds to one faction or the other had the corporate documents been clearer.

Because the failure to follow formalities did not lead to the dispute over the funds, the attorney general is not entitled to the writ to dissolve the board, the Court concluded.
“Despite the attorney general’s understandable reluctance to take sides in the dispute, by seeking this remedy of dissolution, he is effectively taking sides,” the Court stated. “If the Khan/Ball faction is illegitimate, we would be rewarding its improper actions.”

The Court wrote the only way to resolve the action is for the attorney general to initiate another quo warranto action to oust one of the boards of directors rather than dissolve the corporation.

Dissent Says Failure to Follow Statutory Rules Led to Split
Justice DeWine wrote that reconsideration was not appropriate in this case. And he determined that the attorney general’s decision to pursue an action against the corporation was warranted because the corporation’s failure to comply with the statutory requirements led to a fight for power over the corporation and the loss of access to the corporation’s funds.

The dissent found that the corporation “lacked procedures for resolving internal disagreements.” When disputes arose over the initial board’s failure to hold elections and follow the corporate rules, “competing factions vied for control of the corporation’s board and charitable funds.” As a result of the power struggle, the corporation’s funds were frozen.

Justice DeWine explained, “Had the corporation adhered to the requisite formalities, there would have been a mechanism in place for addressing concerns, leadership would have been clearly established, and there would have been no question about who had control over the funds.”

The dissent concluded by noting that the funds have been tied up in litigation since 2011 and have yet to be used for their intended charitable purpose. The dissent would have affirmed the court of appeals’ judgment issuing the writ of quo warranto, dissolving the corporation and facilitating the creation of a new corporate entity to assume control of the charitable funds.

2017-1067. State ex rel. Yost v. Omar Ibn El Khattab Mosque Inc., Slip Opinion No. 2019-Ohio-1958.

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