duties of the wacc & wacf

8/8/2019 Duties of the WACC & WACF

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Departmental GorrespondenceRKANSAS

KitWilliamsCity AttorneyJason B. KelleyA s sistant C ty A ttorne yO: Mayor |ordanCity Council

FROM: Kit \ilitams, City AttorneyDATE: I)ecember lr20l0RE: Duties of the Walton Arts Center Council, Inc. and theWalton Arts Center Foundation, Inc.

NOTIFICATION OF THE WALTON ARTS CENTER IN 2OO8TIIAT IT IS LEGALLY PROHIBITED FROM MOVING THE MAINPERFORMING ARTS CENTER OUT OF FAYETTEVILLEIn October of 2007, Professor Curt Rom as a Board Member of the WaltonArts Center Council, Inc. asked me about the duties and responsibilities of theBoard of Directors of the Walton Arts Center Council, Inc. I researched thehistory of the creation of Walton Arts Center Council, Inc. by the City of

Fayetteville and the University of Arkansas which began with the InterlocalCooperation Agreement in 1986. On October 11 ,2007,I sent Dr. Rom my lettershowing that the Walton Arts Center Council, Inc. was expressly the "agent" forthe University and the City to construct, manage, operate and maintain a Centerfor the Arts." First Article of Interlocal Cooperation Agreement (emphasis added)This letter speaks for itself and is attached. My basic opinion was that as anagent for the University and City, the Walton Arts Center Council, Inc. "owes acontinuing fiduciary duty both to the City and the University to operate, manageand maintain the 'Walton Arts Center in the best interests of the University ofArkansas and the City of Fayetteville." (page 2, emphasis in original). Such dutywould prohibit the Walton Arts Center from building its primary arts center outsideof Fayetteville.


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KIT WILLIAMSFAYETTEVILLE CITY ATTORNEYDAVID J. WHITAKERAssistant City Attorney]udy HousleyC)ffice ManagerPhone (479)575-8313FAX (479) 57s-831s

HE CITY OF FAYETTEVILLE, ARKANS113 W Mountain, Suite 302Fayetteville, AR 72701-6088

October 1l ,2007

Professor Curt RomUniversity of ArkansasFayetteville, ARRE: IValton Arts Center

Dear Dr. Rom:

By FAX: 575=8619

Thank you for your question about the duties and responsibilities ofmembers of the Board of Directors of the Walton Arts Center Council, Inc. Thisboard with its many volunteer community leaders has served with great distinctionover the last ffteen years and helped make the Walton Arts Center a great successand an integral part of downtown Fayetteville. To understand the obligations ofyour office, it is necessary to consider the founding documents and agreementswhich created your board and the Walton Arts Center itself.The principal agreement which began the process of creating the 'WaltonArts Center was the Interlocal Cooperation Agreement between the Universityof Arkansas and the City of Fayetteville signed by the City on September 16,1986by Mayor Paul Noland, and the University on December 9,7986 by President RayThomton. 'Its First Article called for the "Creation Of Two Separate Non-ProfitCorporations To Construct And Manage The Center For The Arts." The first was

entitled "the University of Arkansas/City of Fayettevi,lle Arts Center Council, Inc.('Arts Center Council') which shall serve as agent for the University and the Cityto construcT,manage, operate and maintain a:Center for the Arts. The Center forthe Arts shall be owned by the City and the University as tenants in common.rl(emphasis added).


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Although this non-proflrt corporation has changed its name to the "WaltonArts Center Council, Inc.," its -duties have remained to "construct, operate, manageand maintain the Walton Arts Center as agent for the University of Arkansas andthe City of.Fayetteville." {Fourth Amendment to the Articles of Incorporation,Third Article, paragraph (b)) (emphasis added)As ''agent"'for the City. and Universi y, this non-profit corporation owes acontin.uing fiduciary duty both to the City and University to operate, manage andmaintain the Walton Arts Center in the best interests of the University of Arkansasand the City of Fayetteville. This is especially clear since the founding InterlocalCooperation Agreement was expressly mde contingent upon approval of theFayetteville voters to tax themselves to finance the 'Walton Arts Center.

"This agreement shall only be effective if the electorsof the City of Fayetteville approve a plan for financingthe City's share of funding for the construction of theCenter for the Ans ...." Afticle VI of the,lnterlocalCooperation Agreement.

The Interlocal Agreement expressly required the Arts Center would "belocated in Fayetteville, Arkansas." (Article III, Construction Of The Center ForThe Arts). It was obviously the citizens of Fayetteville who voluntarily taxedthemselves to build the Walton Arts Center and its adjoining large parking lot andto fund half the endowment fund to be managed by the other non-profit corporationcreated by the Interlocal cooperation Agreement. This non-profit corporation wasnarned the "University of Arkansas/City of Fayetteville Arts Foundation, Inc."'andwas instructed to "establish an endowment and pay over a portion or all of theincome to the Arts Center Council for the operation, management and maintenanceof the Center for the Arts." (Article 1)

As was earlier noted, the agreement required th "Center for the Arts to belocated in Fayetteville, Arkansas." (Article III) The duties placed upon both non-profit corporations to operate and maintain the Center for the Arts to be located inFayetteville within this initial Interlocal Cooperation Agreement prohibits thosecorporations from attempting to remove the Ar,ts Center from Fayetteville'or to'useany of the endowment in an outside the city location without the express andexplicit approval of such action by both the University of Arkansas and the City ofFayetteville through amending the Agreement and Articles of Incorporation.


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Beause the construction and financing of the Walton Arts Center was onlypossible after an authorizing vote of the citizens of Fayetteville to tax thgmselv.esior this project, the City:Council might actually lack the powel t9 aglee to'themoving of the Arts Center away f,rom Fayetteville whigh. would be clntrary_ tocitizeni'previous electoral decision.. I certainly wutd advise the City^Coungil.torespect the Fayetteville citizens' decision in the late"80's and ,not to frustrate the,l"*mandateioIocateandmaintain'theArtsCenterinFayetteville.I might also call your attention to the 25 year lease^enter.l t1rto on J3luaV18, 1gg4 between the University of Arkansas and City f Fayetteville. asowners/lessors and the Walton Arts Center Council, Inc. to r1ej, property t'forthe purpose of operatirig an arts center or related activity ....1t This: leas-e's initialperid runs untii March 30, 2017, and will automatically renew for anothr 25y.urr until terminatd by either party. The lease period still has almost tgn- yels

left to run. This long lease certainly shows that the intent of not only theUniversity and the City, but also the Walton,Arts Center Council was that thWalfon Arts Center would be operated at its Dickson Street location inFayettville for at least 25 years and probably 50 years.The Fo-urth Amendment To The Articles Of Incorporation of the WaltonArts Center Council, Inc. not only places the duty upon the coryoration in ArticleThree- to "onstruct, operate, manage and maintain the Walton Arts Center as agentfor the University of Arkansas and the City of Fayetteville,!' (b) but in the nextsubsection it states that "the Walton Arts Center to be located in.Fayettevill'e,Arkansas',..." (c) (emphasis added)Thus, it is crystal clear that the continuing intent of all agreements, leases,articles of incooration and citizen votes was to rnaintain the Walton Arts Centerin Fayetteiiltr t be managed by the City's agent, the Walton Arts Center Council,Inc.The Articles of Incorporation give the University of Arkansas an{ the Cityof Fayetteville "the right to rernove any member appointed by it, at any time, with

or withort cause.il {Eighth Article, subsection (b)} The Ninth Article,states:l,,Thi, corporation shall have no, memb-ers. The UniversityofArkansasandtheCityo'fFayettevilleac1ingthroughtheir respective governing bodies, shall have and exercisethe rghts to select, appoint and remove directors of thecorporation . . .."


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I believe the City of Fayetteville is well satisfied at the .remarkable successof th Walton Arts Center. Its creation and efficient operation and managementhave played a significant role in revitalizing Dickson Street and ensuring it remainsthe entertainment and fine arts heart of.Northwest Arkansas. The City has beenhuppy to work with the senior management of the Walton Arts Center ihroughoutits development and stands ready to assist in further long range planning to ensureFayetteville's Walton Arts Center continues its healthy growth and beneficilimpact on our community.

We thank you and all the rest of the volunteer Board of Directors for yourvital work, your farsighted vision and your determnatiqn to rnaintain and evenimprove the ralton Arts Center. Your efforts and those of the earlier,directorshave helped to establish Fayetteville's Arts and Entertainment District, anchored bythe Walton Arts Center, as a vibrant and welcoming location for all of NorthwestArkansas

KIT WILLIAMSFayetteville City AttorneyKW/jhcc Mayor Coody

With kindest regards,


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KIT WILLIAMSFAYETTEVILLE CITY ATTORNEYDAVID I. WHITAKERAssistant City AttorneyHousleyffice Manager

hone (479) 575-831.3AX (479) 57s-8315THE CITY OF FAYETTEVILLE, ARKANSAS

113 W. Mountain, Suite 302Fayetteville, AR 727 01,-6083

January 8,2008

Honorable Scott YaradyAssociate General CounselUniversity of ArkansasFayetteville, AR 72101Dear Scott:

Attached is the letter I provided to Curtthe duties and responsibilities of the membersthe Walton Arts Center Council, Inc.

By FAX:575-5046

Rom after he inquired aboutof the Board of Directors of

Kw/jhEnclosure

With kindest regards,

KIT WILLIAMSFayetteville City Attorney


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KIT WILLIAMSFAYETTEVILLE CITY ATTORNEYDAVID I. WHITAKERAssistant City AttorneyJudy HousleyOffice ManagerPhone (479) 575-8313FAX (479) s7s-8315

THE CITY OF FAYETTEVILLE, ABKAN1.1.3 W. Mountain, Suite 302Fayetteville, AR 727 0l -608

May 13,2008

Honorable Tameron C. BishopDavis, tright, Clark, Butt & CarithersP.O. Box 1688Fayetteville, AR 7 27 02-l 688RE: Walton Arts Center Council Council, Inc.

Dear Tameron:

By FAX:52t-7661

Enclosed is a copy of the letter I sent to Professor Curt Rom pursuantto his question about duties and responsibilities. Please let me know if youhave any different take on the duty the Walton Arts Center Council, Inc.board members owe to the City and University.With kindest regards,

KVi/jhAttachment

KIT WILLIAMSFayetteville City Attorney


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THE WALTON ARTS CENTER'S CORPORATE BOARDSMUST NOT DAMAGE FAYETTEVILLE'S INTERESTSDespite knowing for at least 2 Vz years that the Fayetteville City Attorney,sclear legal opinion was that attempting to construct a new principal peiforming ttt

center outside of Fayetteville would violate the V/alton Arts Center's fiduciaryduty to Fayetteville, the Walton Arts Center leadership has continued to pursue outof Fayetteville expansion options that would damage Fayetteville's interests.Although I do not represent the V/alton Arts Center Council, Inc. or theWalton Arts Center Foundation, Inc., the Board Members of those corporationsneed to clearly understand their fiduciary duties to the City of Fayetteville beforecasting any votes that could violate those duties. They should know that theFayetteville Aldermen and Mayors have long publicly stated that they would doeverything possible to keep the main performing arts center located in Fayetteville.That is why Fayetteville and the University worked long and hard to present a jointand feasible plan to keep the main performing arts center here in Fayetteville.Rejection of this proposal presented by the owners of the 'Walton Arts Center andthe incorporators of both the Walton Arts Center Council and Foundation by theirown agents who then agree to move the main performing arts center out ofFayetteville could bring personal liability for any Board Mmbers of those twoCorporations who vote for such action as a breach of their fiduciary duties toFayetteville and the University.The use of any assets of the Walton Arts Center Council or Foundation tohelp build or operate a performing arts center outside Fayetteville would violatethe fiduciary duty of any board member voting for such use of funds. In discussingthe relationship of the Walton Arts Center Council, Inc. with the City oFayetteville, Arkansas Attorney General Dustin McDaniel described the Counil as"an entity whose sole function ... would be to serve the City's interests as reflectedin the interlocal agreement." Arkansas Attomey General Opinion No. 2009-1g3,page 10.

"The cardinal principle of all agency is good faith. Inaccepting the office of depositary, appellant became the agentof both buyer and seller. This created a relation of confidencethe depositary could not thereafter violate nor pervert to hisown advantage or the detriment of either principal." collins v.Hetmon, 225 Ark. 666, 284 S.W. 2d 628, 633 (1955)(emphasis added)


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The Walton Arts Center Foundation, Inc. was initially funded by theUniversity and by the citizens of Fayetteville who invested $1.5 million taxpayerdollars into the Foundation to help ensure operational solvency for the V/altotr arttCenter. The Article of Incorporation also expressly make the V/alton Arts CenterFoundation, Inc. Qike the V/alton Arts Center Council, Inc.) the express agent ofthe City and University.

"It is well settled that an agent is a fiduciary and respect to thematters within the scope of his agency. The very relationimplies that the principal has reposed some trust or confidencein the agent. Therefore, the agent or employee is bound to theexercise of the utmost good faith and loyalty toward hisprincipal or employer. He is duty bound not to act adverselyto the interest of his employer by serving or acquiring anyprivate interest of his own in antagonism or opposition thereto.His duty is to act solely for the benefit of the principal inall matters connected with his agency. This is a rule ofcommon sense and honesty as well as of law. (I)t is theduty of the agent to further his principal's interests even at theexpense of his own in matters connected with the agency."Yahraus v. continental oil company,2lg Ark. g72,239 s.w.2d 594, 596 (1951) (quoting from 2 American Jursprudence5252) (emphasis added)The City of Fayetteville and the University of Arkansas by presenting theirjoint proposal have clearly expressed their interest to keep the principal performingarts center in Fayetteville. The Walton Arts Center's two corporate boards havthe duty as our agents to further the City's and University's "interests even at theexpense of (their) own . ..." Id.

"An agent is liable to his principal for negligence in thehandling of the principal's business entrusted to him, or for anomission or neglect to perform a duty on his part withreference thereto, if the principal suffers a loss by reasonthereof." United State Fire Insurance Co. v. Montgomery,256Ark. 1047,511 S.W. 2d 659,663 (1974)

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