SCA: the lawsuit

[cellio]

As anybody in the SCA already knows, but for the rest of you, the SCA just settled a $7M lawsuit out of court for $1.3M. Corporate liability insurance has thus far refused to cover most of this (so there's another lawsuit over that), and meanwhile the money needs to be paid. The corporation has already spent a lot of money defending this suit so they don't have it; thus they are assessing an 18% levy on all kingdoms, local groups, and major wars (which have their own bank accounts) in North America.

I wasn't sure whether I was going to post about this (the discussion is happening in lots of places already), but a few people have asked what this relatively-long-time-SCAdian thinks, so...

I can't help feeling a bit of Cassandrafreude over this. A few people, most notably Duke Cariadoc (a real-world economist who knows a thing or two about organizational structure and law, and from whom I take a lot of inspiration), have been arguing against the centralized corporation for decades, for reasons including the giant target it paints on the corporate coffers. People called us paranoid. (Granted, I oppose the current centralization for many other reasons too.) Since the corporation asserted its ownership over all local-group funds about 20-25 years ago, I have been expecting something like this to happen. (Before then, a group could maintain its own bank account, absent the benefits of being part of a non-profit, if it wanted to. Some did.)

I have lots of questions about the current situation -- about what options were considered and why others were rejected, and about the timing. This post is not about that.

I have met the president of the SCA and several of its directors. I have had polite, respectful, and challenging conversations with them about various corporate doings. I have found them to be decent people, not at all like the situation in 1994. They are in a difficult position and, frankly, out of their league. This is not about the individual people who are in charge of the corporation. I think the problems are institutional and uncorrectable within the current structure and common mindset of the SCA.

So long as that giant target exists on the (new-reduced) coffers, and especially now that the SCA has settled once and thus demonstrated its willingness to anyone who wants to sue regardless of merit, there will be no end to the problem. Lawsuits are pressed when the potential payoff exceeds the expected costs of prosecution; big bank accounts mean higher potential payoffs. If the target had instead been "SCA Kingdom of the East, Inc" with a tenth the assets of SCA Inc, the settlement probably wouldn't have been $1.3M.

And not only are we a target no matter what we do (the precautions put in place after the current case would not have prevented that case), but every case and every precaution does some incremental harm to the society. People get deterred from volunteering because of either the risks or the new regulations, and meanwhile the level of discourse in these discussions is often rather far below what you would expect from a society founded on chivalric ideals. It's ugly and tiring, and I suspect we lose as many people to the arguments as we do to the underlying situations.

A single corporation holding all those assets does harm to the society. There's just no way around that. The directors of any corporation have a fiduciary responsibility to protect those assets; they do not have a duty to protect the culture that makes the society what it is. A corporation must protect its assets, and fears around that will always trump other concerns. It's not reasonable to expect otherwise.

It's funny: the most consistent argument I've heard for why we need a central corporation is insurance coverage. We're currently suing our insurance provider for refusing to pay a claim.

People have been advocating decentralization since the very beginning -- in fact, the society came first and the corporation only some years later -- but the idea has never taken hold. People like central authority, uniformity across the society, and -- while they grumble about the rent -- a central office that you can call when your newsletter didn't arrive or you need proof of membership for Crown Tourney. Demonstrations from other organizations that a decentralized structure can work are met with indifference or dismissal -- "we're different". Questions about whether the current structure is worth the cost, financial and otherwise, are often met with emotional, not logical, responses, preventing conversational progress. People do not see the possibilities that loosely-associated independent organizations could bring -- that An Tir could have same-sex royalty and AEthelmearc could adopt new fencing forms and Atlantia could reduce the fighting age to 14 and Caid could choose its royalty by vote and... (I'm making up some of these examples, ok?)

As I said before, I believe the president and directors are acting with the best of intentions. But even the best-intentioned people can end up perpetuating something that ought to be re-examined. If the current situation causes the society to re-examine its structure, to allow kingdoms to spin off and make the rules and cultural changes they find appropriate, with the consequent distributed liability, then $1.3M will have been a small price to pay for that change.

But that won't happen, just as it didn't happen in 1994. Too many people in the SCA are too eager to preserve the current structure unexamined, to avoid the responsibility that would come with independence, and to call anyone who says differently a bad person. The biggest fight the SCA has been through during my time was the fiasco that started with the mandatory-membership decree, and that did not rally people for a change in the end. This will not either. We rush to gather the payment for the disaster that has just occurred, but we are unwilling to ask what we should do to reduce the chances of a repeat occurrence. We think new rules will save us and we ignore the sights trained on the bank accounts. People have already compared the current and forthcoming fund-raising to the outpouring of support in the face of hurricanes and floods; I instead compare it to rebuilding on a ten-year flood plain.

I have been drifting away from the SCA over the last couple decades, and this is not my fight. Not this time. Fortunately for me, there are really only three things about the SCA that really matter to me, and the demise of the corporation (were it to happen) would not harm any of them. They are:

1. All the interactions and shared projects with friends across the world-wide society; we'll keep making music and researching clothing and brewing beer and cooking feasts and so on regardless.

2. Local activities. The absence of a tax-exempt corporation with an insurance policy (now shown to be of dubious reliability) won't stop us from gathering for tourneys and feasts and academies. It may affect where and how we do those things, but people who want to have fun together will keep having fun together. Other small groups do things at least as dangerous as we do; surely the liability problem isn't completely intractable.

3. Pennsic. Pennsic is nominally an SCA event, but it is unlike all others I have attended in structure. It is also the largest source of annual revenue for Cooper's Lake Campground, and I have no doubt that were SCA Inc. to vanish, the Coopers would make official what has been true in practice for years, that Pennsic is a Cooper's Lake event.

So if SCA Inc. were to go away, then after some local fund-raising efforts to replace seized property like crowns and loaner armor and kitchen supplies, I think the only impact I would notice would be the refreshing freedom to return to a society that's about the re-creation and the people and the fun. I don't think I'd mind that outcome at all.

Comments

[forest-lady.livejournal.com]

An organization, if you can call it that, which has no corporate structure comparable to the SCA, is the world-wide jousting one. They do really dangerous things and they have a lot of fun, as far as I know, still no insurance, no presidents, no "local groups". I think a lot of re-enactors are like that also.

[goldsquare.livejournal.com]

Which press release? The one that the plaintiff's attorney put out? They know the case as well as anyone. Or are you referring to the SCA announcement and FAQ, neither of which were a press release? Or is there something else?

The SCA was not a party to the criminal case. Nor was the SCA's guilt or innocence in this tort related to its ability to prevent the abuse. That is a fundamental fact that, I think, most critics of the situation fail to understand.

I have read the original filings, and the revised filings: and the SCA was absolutely guilty of the issues in the complaint. Your claim, is roughly, that it was not guilty of stuff it wasn't sued over. Which is not that interesting.

That is why I said "The SCA Deserved It". Because as an organization providing child services, the SCA did NOT do the things that it was supposed to do to minimize the possibility of child abuse.

[goldsquare.livejournal.com]

People often don't factor in the moral hazard of settling, which the original message alluded to. If you settle it just encourages the trolls to sue you again; the only way to avoid that is to have a policy of NEVER settling out of court.

I am certain you are using the phrase "moral hazard" incorrectly.

I'm pretty sure you are ignoring the need for a tort as antecedent to civil litigation.

I think calling the victims of sexual abuse, and their families "trolls" is morally repugnant and shows a deep lack of basic human values, and I am certain you should be ashamed of yourself for that.

There is every reason to believe that the SCA failed to act professionally and appropriately in the creation of child-centered services.

It is absolutely the case that the SCA has a long pattern of hiding incidents of child sexual abuse in its revocations and denials: there are AT LEAST 2 dozen incidents that the SCA has been forced to admit to, consequent to the Schragger situation becoming public.

I am finding most of your post to be ill considered, frankly.

[goldsquare.livejournal.com]

I could not find any data on the topic of employees in the link you provided - and I lack the time to search out more. I note that while the non-profit sector is huge, it seems the vast majority of non-profits are small enough that they can barely afford 1 employee, especially those in the same sector as the SCA.

I had been cited elsewhere in the conversation as using the phrase "Corporations are like airbags", and I probably made a mistake in presuming you had read it. I find your bald assertion that "burn and replace wouldn't work for very long" to be doubtful. I'd like to see more analysis of that from you before I am prepared to believe it.

Your post also asserted that this model would, in the end, fail the umbrella corporation through an inevitable lack of volunteers. That was what I meant with a reference to the shibboleth of "death of the SCA predicted".

My point, which remains, is that while you are positing theory, there are many local affiliation equivalents out there which are successful under that model.

The data is somewhere here (http://www.irs.gov/taxstats/charitablestats/article/0,,id=97186,00.html), I feel sure, but I lack the time to check it. Given how many hobbies, fraternities and sororities, and other similar organizations that I know of do this, and it works, and for many it has worked for decades: I'm letting the facts speak.

One last thought: what new workloads do you think that the Kingdoms would need (if they were separately incorporated as subsidiaries) beyond what they already have? I can think of very very little.

[pryder]

I was using "moral hazard" in the sense that economists use it; it's a well established phrase in that field. Having insurance makes it more likely that you will engage in risky behavior because you are no longer on the hook financially for it. I think the situation with settling lawsuits is analogous; settling lawsuits makes the behavior of being sued more likely. The term doesn't have anything to do with sexual morality but the context might well have lead to confusion.

I am not aware of any cases of the SCA hiding sexual abuse. Perhaps I have been living under a rock. If there are such cases, I am disturbed by that. I admit that I am disturbed when the SCA organization hides ANYTHING; I was seriously disillusioned by the financial mess years ago that forced people to sue the SCA to get financial disclosures.

As for "acting professionally" in the creation of child-centered services, I honestly believe that society has gone overboard in requirements about that, and that people expect too much of organizational responsibility and not enough of personal responsibility. In the framework of the SCA, the usual professional answers of "CORI everybody" and "never leave children alone with one adult" will equal "no child activities in the SCA" - the burdens are just too onerous for an amateur volunteer organization like ours.

[pryder]

I'm curious; how do they manage that without insurance? Around here, no insurance = no site. Pretty much any venue that can host an event of any kind wants to see your insurance certificate.

[goldsquare.livejournal.com]

OK, let's play: as I am lead to believe it, moral hazard comes about when one of two parties in an agreement or contract has an incentive to abrogate that agreement AND is personally protected from the consequences of that abrogation.

I'm unclear how there is a moral hazard in settling a lawsuit, in the sense where you claim it just encourages more suits. What is the contract, what is the abrogation, what is the protection? Who, within the SCA, got paid to allow others to take unnecessary harm, and how are they protected?

If you had said something like "I think a policy of settling nuisance suits too cheaply creates an incentive for others to file more nuisance suits", there might be something to talk about. If that antecedent were what had happened, and if the consequence had also happened, one could talk meaningfully about fiduciary duty, as well as whether this was a nuisance suit or not, and so forth. I'd still be prepared to provide evidence against the antecedent and the consequence in this situation, but at least we'd be using the language correctly.

As for the hidden incidents, let me quote briefly from the announcement of the background checks (http://www.scatoday.net/node/8438) that Society Seneschal Aaron Swiftrunner/George Reed made some years ago: "In response to repeated occurrences of the SCA having to deal with abuse of minors by SCA participants,", "Since 2002, there have been 88 revocation and denial of membership decisions rendered by the Board of Directors. 29 of these have been for conviction of predatory crimes. 24 of these have been with regard to abuse of minors."

I happen to know that there were at least 4 BEFORE that 2002 date.

You may be bothered by the institution of regulations, and there are plenty of them that I would agree with you about. But the SCA just paid 1.3 million for implementing ordinary standards much too late - it's hard to argue against those as being "unnecessary".

[goldsquare.livejournal.com]

Many such sites will allow you to purchase a certificate of insurance, however. Others prefer to purchase one from you: those would be off limits, of course, unless one purchased insurance on a per-event basis.

It may well be (but I am speculating) that events related to horseback riding and competitions have their own special insurance patterns and requirements. I have seen some documentation that the risks of riding are so elevated that many regular CGL insurance policies won't touch it.

[forest-lady.livejournal.com]

I've often wondered that myself

[cellio]

Elsewhere...
Repeat after me: "The SCA deserves it". They did not follow due standards of care, they did not govern themselves well, they did not manage their own situation properly.

That wasn't me; that was somebody else.

A precaution the SCA could reasonably have taken was to not warrant children's officers at all. As I wrote in another comment, this doesn't mean we shouldn't welcome kids -- just that we don't need the legal hassle of taking that responsibility.

[cellio]

I don't think there is anything that could force the corporation to change itself. Self-preservation will dominate, even if the society (not corporation) would be much safer with a different structure.

I suspect that the effect of people pulling back will be short-lived. People didn't quit in droves over the mandatory-membership issue or the non-member tax or any of the social/political issues that have come up since then; they won't over this either. But I think there's been something of a gradual erosion over the last couple decades; we're recruiting less and growing more inward-focused, and I think in the end that will be what causes the SCA to (eventually) collapse, not the corporate doings.

That said, the corporation isn't exactly helping here; there could have been less erosion...

[cellio]

In order to create buy-in from people unwilling to take on creative responsibility (those that play the game, instead of facilitating it - which is most people, as it should be), then they must have a voice with those that do facilitate. So you create a voice by creating an office. It's one way to do it, of course... There are other ways. But it's a way that lifts the burden of individual responsibility for the meta-game from those that don't care to have it.

I have been using "officer" to mean "real-world in charge of something". We've both seen people in the SCA in positions of leadership and influence who aren't officers. For example, the heads of major households can, directly and indirectly, make a lot of stuff happen. But they're not on any list of agents of the corporation. Many SF cons operate the same way: you can make a music program or an art show or a games room or whatever happen without necessarily being on the concom. Religious organizations have this in droves, or at least the ones I'm familiar with do. I suspect but do not know that LARP groups operate this way.

I also like having a combined vision... overarching rules and ideals, some of which are codified. Don't you?

Sure, within reason that permits local variations that make sense to those involved. But overarching corporate rules aren't the only way to do it. Treaties can do that too. One example is the White Scarf Treaty; another is the rules of how the Pennsic War operates. And "inter-kingdom (anything)" tends to operate this way at strictest.

[cellio]

I was a local officer when the chirurgeon change happened (I remember it being discussed at our officers' meetings), which puts it in the mid-to-late-80s.

Too often, children's activities manage to combine the worst aspects of SCA bureaucracy with the worst aspects of babysitting ("just stick them someplace out of the way for the afternoon"). I'm particularly glad to see youth combat flourishing because it's fun for them, on-topic, and right there in the event proper.

[cellio]

I understand that this is how the LARP (live-action role-playing) world works, though I'm not part of it. Perhaps one of my readers who is will comment?

There are lots of organizations where there's no central authority but you can find local groups in most cities (and sometimes elsewhere). Cariadoc uses the gem-collecting community as an example. I would point to English-country and international folk dancing, horse shows, and SF cons as others. They're all different from each other and from the SCA in level of activity, focus, and diversity; I'm not saying any of these is a perfect model. But there seem to be enough of them to support the idea that other models are possible.

The board is unlikely to support shutting down or severely limiting the central corporation in favor of empowering kingdoms, because the would see it as violating their fiduciary obligation -- which is to the corporation, not to the society.

(I have never been a director of the SCA, though I've been a nominee - just to be clear. When I talk about what the board would do I speculate, though I think based on decent evidence.)

[browngirl.livejournal.com]

I think calling the victims of sexual abuse, and their families "trolls" is morally repugnant and shows a deep lack of basic human values, and I am certain you should be ashamed of yourself for that.


I agree with you on this, and I notice this point in your comment was not addressed.

[hildakrista.livejournal.com]

Both excellent points. Thanks for clarifying.

I have two issues with informal leadership: One, that it can work really really well (and does) for in-game play (like organizing events), but it's harder for it to work well for meta-game play (like arranging long-term insurance or writing and maintainting rules, for example) and still have internal consistency.

Two, informal leadership is good when it's working, but when it goes awry, it can get very bad. A formal structure provides more avenues of recourse for the wronged, and a base for rebuilding interest after folks have drifted off or been driven away. Even our formal groups combust sometimes (I can think of 3 in AE alone just in the past 14 years). I think it would happen much more frequently in an informal set up, which I believe would be very bad for retention and would lessen the fun factor considerably.

Consider our own Barony's first Baron, too, and that whole situation. We are a personality-driven society. Formal structure can limit the power of individuals, and with the type of person our hobby sometimes attracts, that can be a very good thing.

On the treaty thing - yup, I like it. I've thought before that such a set up may work fine. I just don't see that it would be any better than what we have now. It would have issues, too, just different ones.

[hildakrista.livejournal.com]

I still think it's reasonable to think that most non-profits have employees. If we're talking about *only* hobbyist 501(c)3's I agree it's probably different. But it appears neither you nor I have the time or inclination to actually check and make real comparisons. I'll agree to disagree on that one.

Under your burn-and-replace model, I was not predicting the death of the SCA. On the contrary, I actually think the SCA as a whole would survive nearly any crisis or reorganization, simply because it fulfills a need that isn't met in many other places (though increasingly, MMORPGs). There will always be someone who wants to play at knights in shining armor, and those with a true interest in re-creating medieval life. What I think could fail is particular local or regional groups, and potentially individuals, especially in litigious areas. I would rather see them protected.

You mention many other hobbies and similar organizations that are separately incorporated under an umbrella organization, and it works for them. I'd be happy to let those facts speak, but I am not familiar with any of them that are comparable to the SCA in size or principal. Or type of volunteer, for that matter. You mention fraternities and sororities, and you have a point there, but these have a both a constant infux of new folks, and a very limited term of engagement - burn-out is unlikely there, so I can't call them analagous. I looked at a couple of other living history organizations, and the ones I saw are all much smaller than the SCA, and limited geographically. Give me an example of a truly nationwide, hobbyist non-profit umbrella with membership numbers similar to ours. The Civil War folks, maybe? Don't know much about them, though I'm pretty sure they don't have a national umbrella. I'm not challenging you - I'm actually interested.

You find my assertions doubtful, and I find yours so, too, based on what I know. Honestly, your model for the SCA is a thought-experiment based on a hypothetical. It's interesting, but I'm not surprised we see the path of the thing differently. There are too many unknowns, and I assume we both have different experiences within the SCA (I don't know who you are).

Don't get me wrong, though. I don't think the current system is perfect, or even ideal. I see how Monica's suggestion could change things for the better in some ways, but I also think it would change other things for the worse. It's my opinion based on my experience and sadly (hard to admit), my fears.

[julia-spring.livejournal.com]

Why? The current board members suffer from the same syndrome that royalty do (for good or for bad)-- once they're done with their tenure they still want friends to play with. Board members in the SCA are just dudes that play in a different group.

[julia-spring.livejournal.com]

What's the better arrangement for the health of the SCA? What other format or structure would suit our needs without adding layers in the long run? Not trolling, just not equipped with the knowledge.

[grouchyoldcoot.livejournal.com]

At the very least, trust. Elections work because they engender trust. There is no down side; those who like the current board members can just vote for them. Plus, I personally believe it would have prevented situations like the one we had 15 years ago, when the board seemed very much out of sync with the Society.

[metahacker.livejournal.com]

One idea: Balkanism. A merest skeleton, holding almost no funds, and presenting no credible target, coordinates as little as possible between many small groups. Perhaps even event-specific corporations, e.g., a "Pennsic Ltd." Many cons work this way.

I'm not clear on how the corporate insurance works, so I can't speak to it; but would a local corporation (e.g., a Barony-level LLC) be as juicy a target for lawyers? Yes, a lawsuit can ruin a local group, and it might have to declare bankruptcy; the damage would then seem to be minimized. Or perhaps this overexposes the individuals involved; I'm not familiar with the law here.

(I'm not sure what the problem with adding layers is, if the overall ends up more efficient. Perhaps you can speak to that.)

[goldsquare.livejournal.com]

Well, most torts are pursued in courts, despite the high cost of litigation, because there is a reasonable probability of payout - most attorneys work on contingency, and they won't work without a good possibility of getting paid.

When a corporation is pursued, it has two levels of assets: its own, and whatever is pledged in surety by an insurer. Insurance can be tricky - because one needs to maintain enough to satisfy the law, enough to satisfy business partners and vendors, and enough to protect the individuals that work for the corporation - but at the same time, much more than that and you increase the risk of torts. Since it's all risk mitigation and management, it is a balancing act.

The advantage to a series of affiliated corporations under an umbrella, is that the tort, if it occurs and is the worst case, limits the damages to unrelated others. There are people throughout the US that are angry about this suit, because "it happened far away and yet it hurts me". That is the protection that affiliation brings, not just the reduction in tort liability. Compartmentalization.

There are related issues of efficiency, but one pays them for the added protection. In a tort-rich-environment like the US, that is a price most often worth paying.

[goldsquare.livejournal.com]

IRS Publication 557 talks about Group Exemptions, and that is a model that one can investigate. (Although that's a particularly lawyer-speak dense way to learn about it.)

Many organizations use exactly that model of affiliation.

[cellio]

One, that it can work really really well (and does) for in-game play (like organizing events), but it's harder for it to work well for meta-game play (like arranging long-term insurance or writing and maintainting rules, for example) and still have internal consistency.

That could well be, yes. I haven't made a study of it, but what you say rings true. I have seen it work well for meta stuff (for example, I was on the committee that revised my congregation's bylaws last year), but certainly more people want to play than enable play.

Two, informal leadership is good when it's working, but when it goes awry, it can get very bad.

This can go badly awry with formal systems, too. When a volunteer organization needs to remove someone from a position, it gets ugly no matter how it happens. Plenty of local SCA groups have been damaged by fallout from such things. :-(

On the treaty thing - yup, I like it. I've thought before that such a set up may work fine. I just don't see that it would be any better than what we have now. It would have issues, too, just different ones.

It's better in one key way: treaties, being agreements among peers rather than rules from above, can be revoked if they are no longer working. Members have absolutely no recourse other than pleas to the BoD if they don't like how something's being done.

[cellio]

Thanks, and welcome.