Feature

Tough Transitions: Managing Disputes between the First and Second Generations of Arts Organization Leadership

Brian D. Farkas

©2017. Published in Landslide, Vol. 9, No. 6, July/August 2017, by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association or the copyright holder.

“It’s not about the money.” It’s a phrase uttered emphatically by clients across genres of conflict. Do clients mean it? Parties commonly litigate over money, corporate control, or intellectual property ownership. But sometimes, these concrete concerns are proxy wars for squandered trust, disjointed communication, or broken friendships.

The nonmonetary aspects of conflict are particularly profound for nascent arts organizations. Arts groups exist in communities across the United States, springing up to fill crucial gaps in culture and education. Sometimes they are formally incorporated as nonprofits, but often they begin without legal formality. They are typically established, run, and funded by a single founder or intimate group of founders. While they have much in common with other start-ups, young arts organizations can be heavily driven by mission and by individual personality.

As these fledgling groups blossom over the years, their lack of formality can cause conflicts. This is particularly true at the critical juncture when the first generation of leadership hands over the reigns to the second generation. This inflection point is fraught with peril. Emotions run high; unexpected conflicts emerge. Studies show that less than one-third of family businesses survive the first generational transition1—and similar dynamics are at play for many arts organizations.

What forms might these disputes take? And as lawyers with particular interest in the creative world, how can we help emergent arts groups to manage internal conflicts to ensure their survival?

The Scenario

Imagine that, 10 years ago, Milo learned that local schools had slashed their visual arts budgets. An avid illustrator and lifelong arts enthusiast, he was appalled. He decided to step up, creating an informal organization to match practicing visual artists with local high school students for afterschool enrichment. He called it PaintOn. None of the artists got paid, and neither did Milo. But the students loved it. The schools, too, adored the PaintOn program for filling a critical gap. And although this was not Milo’s full-time job, it was his labor of love.

As the years went by, PaintOn grew. Artists started to receive small stipends for their participation, and the organization started to seek donations from the community. Milo wrote more advanced curricula for classes that the organization would offer to high school students. He used his artistic skills to craft flashy posters to hang on the walls of schools across the state. And he poured countless hours into a beautiful website with sleek branding, along with banners and web ads.

Soon, Milo realized that he could make a career out of being an arts tutor himself, charging students for his services. He decided to resign from PaintOn and leave management to a new generation. Milo struck out on his own, and began advertising his services using the same designs, posters, and ads that he created for the organization. He also employed the same curricula that he wrote for PaintOn in the private classes that he began to offer for profit.

Meanwhile, Milo has not been pleased with the directions PaintOn has recently taken, another reason he decided to leave. The new executive director, Frances, was a former volunteer. She had expanded programs to private high schools and colleges—audiences Milo never envisioned as part of the organization’s mission. Moreover, Frances began to shift the focus from visual arts to creative writing, a field she had studied in college. Milo wrote many e-mails and letters complaining, and was outraged that many went unanswered. He felt consistently disrespected by Frances.

Milo arrives home one day and checks his mail. He spots an envelope from Dewey, Cheatem & Howe LLP. As he reads the letter, his face turns red with anger. PaintOn—the group that he created and to which he devoted countless hours—hired a law firm to write him a cold cease-and-desist letter. They want him to refrain from using “their” curricula and designs. How should Milo and Frances proceed?

The Landscape of Arts Organizations

Arts-related organizations come in many shapes and sizes.2 Some are primarily educational, teaching dance, theatre, or visual arts to particular populations. Others are project-based, organizing performances or installations in particular communities. Still others are mission-driven, using artists to advance certain agendas. Some are formally incorporated, while many are founded without any consideration for legal structure.

Perhaps in a different way than other start-up businesses, young arts organizations feel incredibly personal to their creators. They are more than “companies.” Profit is rarely a motivation. Rather, they are often culminations of lifelong dreams or deep-seated passions. Separating the organization from its founder can be surprisingly difficult; one identity is wrapped into the other.

This melding of identities can result in countless disputes about ownership of ideas—or the running of the organization—once the founder leaves management to the next generation. Ideally, arts groups should consider these issues before they fester into conflict. Unfortunately, experience tells us that many organizations will disregard these issues until after they have already emerged during the “handing off” process. Consider counseling young organizations to follow these strategies to avoid, or resolve, conflicts.

Tips for Avoiding First vs. Second Generation Disputes

Memoranda of Understanding

As a lawyer, you might have the immediate urge to push formalization onto a fledgling arts group. But LLC operating agreements, certificates of incorporation, or lengthy partnership agreements are sometimes poor cultural fits. These organizations can be organic in ways that for-profit start-ups are not. Their leaders often resist corporate terminology, preferring to describe themselves as a “community group” or “arts collective.” They may also resist the hierarchy that most corporate forms will push, such as a “managing member” or “CEO.” Moreover, these incipient organizations may not have the resources to pay hundreds of dollars in filing fees or state-required publication fees. As a result, legal registration or formalization is cumbersome.

If you are providing counsel to this sort of organization, you might suggest a less intimidating and expensive method of creating structure: a memorandum of understanding (MOU). An MOU, by its very title, is less threatening: an “understanding” vs. “operating agreement” is a distinction with a tonal difference.

The MOU should address several broad issues. First, it should provide clarity on job responsibilities for the artists/organizers in the short term, with or without a hierarchy. Who will be responsible for publicity? Who will be responsible for creative oversight? Who will be the primary contact person?

Second, the MOU should provide clarity on the budget. What are the potential expenses? Materials? Space rentals? Web hosting? Are the artists or organizers expected to chip in their own money, or will there be some sort of fundraising?3 Will the personal bank account of one of the members be used initially, rather than a business bank account? If the organization receives revenues, who will hold those revenues and how will they be allocated?

Third, the MOU should address the ownership of designs, music, writings, or other creative outputs of the members. Do those belong to the members who created them, or to the organization? As the PaintOn hypothetical above suggests, uncertain intellectual property (IP) rights can cause much grief down the road.

Even by sitting down and asking these questions, an attorney can play an important role in priming the members to consider the legal aspects of their activities. Finally, an MOU intended to deal with these short-term issues should set a specific date when the parties will come back together to reassess their situation. Young arts nonprofits often grow in their missions and budgets. The MOU might be a good stop-gap measure for the early months, but there may soon come a time when the organization needs to be formalized through legal incorporation. A specific reevaluation date will prevent too much growth from unfolding before a proper discussion.

Facilitation

The topics covered by an MOU are not always easy for artists to decide. Several would-be founders may share a general interest in starting an organization, but may lack consensus on operational specifics. As an attorney, you may feel poorly equipped to deal with the creative, cultural, or emotional aspects of these conversations. For example, what might seem to you like a simple decision about titles might actually uncover artistic disagreements about the organization’s mission.

Facilitation might be a useful mechanism for working through such issues. Facilitation involves a third-party neutral guiding a conversation among the founders on key topics. Topics could include many of the structural issues discussed above: mission, job responsibilities, finances, and IP rights.

While some attorneys use “mediation” and “facilitation” interchangeably, many dispute resolution experts view “facilitation” as a preconflict mechanism.4 In other words, facilitation occurs even before there is any crystalized disagreement. It is preemptory.5 Like a couple discussing a prenuptial agreement, a facilitated discussion about a new artistic organization can encourage an open discussion of tough issues before unexpected fights emerge during a divorce.6

The facilitator need not be a litigator, or even an attorney. Instead, he or she might have experience in arts administration, nonprofit management, or a field related to the incipient organization (e.g., dance, theater, or education). Substantive expertise in the organization’s work might actually be more helpful in this context than legal expertise.7 Relevant experience can bring gravitas to conflict management.8 And, more importantly, that individual’s guidance might be more palatable to the organization’s leaders, who may not feel comfortable with a legalistic approach.

Volunteer Lawyers Organizations, Bar Associations, and Clinics

Confronting legal conflicts can be frightening for arts-related nonprofit leaders with little background in business or law. You might be called upon for some informal advice—particularly if you have some connection to the founder(s)—but may not have the ability to become the organization’s pro bono general counsel. Fortunately, there are terrific resources to which you can direct these emergent entities.

Nonprofits exist around the country specifically to help artists and arts organizations with their legal issues. Their names vary from place to place. In New York, the predominant organization is the Volunteer Lawyers for the Arts;9 in Illinois, it’s Lawyers for the Creative Arts;10 in Minnesota, it’s Springboard for the Arts.11 These groups generally employ staff attorneys and law student interns, and also make use of local volunteer attorneys. Their goal is to help arts-related organizations, free of charge, with various knotty legal and business issues. Many offer complimentary libraries with books, forms, and other materials to assist arts leaders. Volunteer lawyers organizations can play a vital role in assisting the organization’s founders in establishing the legal framework—everything from the incorporation to copyright registrations. Through a quick Google search, you can locate the relevant organization in your jurisdiction.12

Even if no specific nonprofit exists there, you might also refer the client to the local or state bar association’s IP or arts committee. These bar groups often maintain lists of attorneys willing to provide no-cost or low-cost representation to emerging arts organizations.

Finally, some law schools offer pro bono clinics specifically aimed at the arts community. For example, Cardozo School of Law’s Indie Film Clinic provides free legal services to filmmakers producing independent and documentary films.13 Clinics like these are supervised by law professors, and can be a perfect match for arts organizations that lack the resources to pay for counsel.

Tips for Resolving First–Second Generation Disputes

Unfortunately, as a lawyer, you may not be contacted until a dispute has already emerged. Perhaps you are approached by a representative of the arts organization, or by one of its disaffected founders. They may ask you whether they should sue. Often, the answer is no.

The court system is often a wholly inappropriate venue for resolving the disputes that emerge between the first and second generations of small arts organizations. Mediation is a process that might be far more effective, economical, and culturally appropriate. Rather than accentuating differences, mediation aims to build compromise and understanding. Rather than airing grievances in publicly filed documents, mediation is confidential. Rather than spending unnecessary budget dollars on lawyers, the parties can split the fees of a mediator or find one to serve pro bono. And rather than limiting the dispute to narrow legal issues, mediation allows for broader discussions of mission, culture, and identity—areas that might be far more meaningful to the parties.

Whether you serve as the mediator yourself, or serve as counsel to one of the “sides” in the mediation, there are many creative approaches that could help the organization to move forward productively without the need for a lawsuit:

Involve the Founding Generation in the Ongoing Life of the Organization

The founders might have moved on from the day-to-day work of the organization, but it can be emotionally vexing to cut it from their lives cold turkey—particularly if they served for many years. And from the organization’s perspective, it might be difficult to lose access to the founders’ immense institutional memory. Perhaps there is a happy medium, such as a formal or informal advisory board, or an annual reception for former officers and directors. These sorts of productive channels can be mutually beneficial ways of strengthening the organization while also allowing the founders to see themselves as ongoing members of the team.

Recognize the Legacy of the Founding Generation

Many arts organizations founders view their work as deeply important. This feeling is not merely ego; in many cases, their work truly did fill critical cultural or educational gaps within the community. As the founders leave the organization, has the next generation appropriately acknowledged their legacy? Has the next generation realized, and expressed, that their own roles wouldn’t exist without their predecessors’ work? There are many ways this can be done elegantly. Consider, for example: (1) a plaque in the office; (2) a reception or dinner in their honor, inviting friends and family; (3) a community event dedicated to their work; or (4) an installation, performance, or ongoing lecture series named for them (depending on the type of organization). There are many imaginative ways of expressing gratitude, and sometimes gratitude can go a long way.

Remind the Parties of Their Common Interests in the Organization’s Mission

Right now, the first and second generations might be trapped in conflict. But, at one point, they all shared a common passion. Perhaps it was a love of dance, or an interest in the community, or an appreciation for painting. Some interest brought them together to create, foster, and work with this small group. Mediation offers the opportunity to remind the parties that, conflict aside, they have a great deal in common. Simply expressing their love for the organization’s mission aloud might be cathartic.

Encourage Compromise

In the PaintOn example above, the second generation leader, Frances, took a very firm position against Milo’s ongoing use of certain intellectual property. Milo, too, seemed to totally discount the organization’s interest in maintaining its curricula and brand as distinct from his own. Litigators might bill many hours fighting over this conflict. Were the curricula protectable as trade secrets? Were the website designs works for hire under the Copyright Act? Is Milo engaging in unfair competition? But these questions may actually be counterproductive to helping Frances and Milo work through their conflict. Instead, perhaps some creativity and honesty are better medicine. To what extent is it critical for PaintOn to prevent Milo from using all aspects of the curricula? How difficult would it be for Milo to alter his branding to address the organization’s concerns of similarity? Are there certain regions or populations that Milo could agree to refrain from servicing? Compromise and pragmatism are critical in mediation.

Concluding Thoughts

Lawyers are often jaded when they hear clients say, half-heartedly, “It’s not about the money.” But when assisting small arts-related groups, attorneys should temper their cynicism. The conflicts within young arts organizations—particularly between two generations of leadership—are rarely wholly financial. Many of the solutions are not wholly financial either. Rather, they involve legacy, memory, identity, and organizational planning.

When assisting nascent arts organizations, lawyers should recall Abraham Lincoln’s admonishment: “Discourage litigation. Persuade your neighbors to compromise whenever you can. . . . As a peacemaker the lawyer has a superior opportunity of being a good [person]. There will still be business enough.”14 Resolving conflicts removes an incredible weight from the shoulders of these already burdened organizations.15 Arts groups play a critical role in American communities small and large. Their continued vitality is within our shared national interest.

Endnotes

1. Mary F. Radford, Advantages and Disadvantages of Mediation in Probate, Trust, and Guardianship Matters, 1 Pepp. Disp. Resol. L.J. 241, 251 (2001). While there is some disagreement about the accuracy of the statistics, most business succession planning experts agree that there are significant difficulties when an organization passes from the first generation of leadership to the second. See Robert Holton, A Critical Look at “Survival” Statistics, Fam. Bus. (May/June 2016), https://www.familybusinessmagazine.com/critical-look-survival-statistics.

2. Research Reports, Am. for the Arts, http://www.americansforthearts.org/by-program/reports-and-data/research-studies-publications/americans-for-the-arts-publications/research-reports (last visited May 22, 2017).

3. Depending on the nature of fundraising that an organization expects to conduct, it may need to formally incorporate, register as a 501(c)(3), and keep careful records of gifts. This is an important point that a discussion around the MOU could elucidate.

4. Janice M. Fleischer & Zena D. Zumeta, Preventing Conflict through Facilitation, Mediate.com (Dec. 1999), http://www.mediate.com/articles/zenandflei.cfm.

5. “Facilitation” is its own preemptory dispute resolution process, but it can also refer to a style of mediation where the neutral avoids evaluation. “[Facilitation] emphasizes the parties’ interests and options and looks for agreements that have as their characteristics the ability to parse out value where it is most highly valued. Facilitative mediators look for confluences of interests. If plaintiff values interest X more than interest Y and the reverse is true for defendant, then a deal that gives more of X to plaintiff and more of Y to defendant is more likely to be satisfying to the parties than if X and Y are distributed evenly.” Richard Birke, Evaluation and Facilitation: Moving Past Either/Or, 2000 J. Disp. Resol. 309, 317 (2000).

6. See Arlene Dubin, Prenups for Lovers: A Romantic Guide to Prenuptial Agreements (1999) (discussing the importance of open communication about finances and potential disagreements before the marriage occurs).

7. Robert A. Baruch Bush & Joseph P. Folger, Reclaiming Mediation’s Future: Re-Focusing on Party Self-Determination, 16 Cardozo J. Conflict Resol. 741, 745–47 (2015) (discussing the relative benefits and drawbacks of a neutral with substantive expertise in a dispute).

8. Forrest S. Mosten & Lara Traum, It Takes a Village: Using Seniors to Help Divorcing Families, 17 Cardozo J. Conflict Resol. 767 (2016) (discussing the helpful role “elders” can play in divorce mediations).

9. See Volunteer Law. for the Arts, https://vlany.org/ (last visited May 22, 2017).

10. See Law. for the Creative Arts, https://law-arts.org/ (last visited May 22, 2017).

11. See Springboard for the Arts, http://springboardforthearts.org/ (last visited May 22, 2017).

12. See National VLA Directory, Volunteer Law. & Acct. for the Arts, https://vlaa.org/get-help/other-vlas/ (last visited May 22, 2017).

13. See Cardozo Indie Film Clinic, https://cardozo.yu.edu/clinics-professional-skills/clinics/indie-film-clinic (last visited May 22, 2017).

14. Abraham Lincoln, Notes for a Law Lecture (July 1, 1850), in The Collected Works of Abraham Lincoln 81 (Roy P. Basler ed., 1953).

15. Eileen Cunniffe & Julie Hawkins, Staging a Comeback: How the Nonprofit Arts Sector Has Evolved since the Great Recession, Nonprofit Q. (Feb. 9, 2016), https://nonprofitquarterly.org/2016/02/09/staging-a-comeback-how-the-nonprofit-arts-sector-has-evolved-since-the-great-recession-2 (outlining the financial and structural challenges currently facing arts nonprofits).

Brian D. Farkas

Brian D. Farkas is an attorney with Goetz Fitzpatrick LLP in New York, NY. He is an adjunct professor in the Kukin Program for Conflict Resolution at Cardozo School of Law.