Nonprofit organizations survive on trust. Donors give because they believe their contributions are being stewarded wisely. Volunteers join boards because they understand the weight of public confidence and the responsibility that comes with governing an institution designed to serve the community. But that foundation of trust collapses when the law shields directors who turn a blind eye to obvious wrongdoing. That is exactly what the District of Columbia has done.
The recent Casa Ruby litigation exposes a systemic flaw in DC’s nonprofit governance laws, one that undermines the very idea of fiduciary responsibility. The DC Court of Appeals held that board members who never asked questions, never reviewed basic financial information, and never monitored the most rudimentary affairs of a multimillion-dollar organization could not be held liable for the organization’s collapse. Instead, the only director exposed to potential liability was the one who asked for documents — a request the court interpreted as evidence that she might have known something was wrong before she resigned. This outcome is not just counterintuitive. It is dangerous. It sends the message that a director can avoid accountability simply by refusing to look.
The District’s legal framework makes that outcome possible. Under current law, board members of charitable corporations are immune from money damages unless they commit the “intentional infliction of harm.” That standard, as courts have now held, requires proof of actual knowledge — not negligence, not gross negligence, not willful blindness, but positive, concrete knowledge that inaction will cause harm. The result is a system in which the most disengaged directors are the safest directors. Those who ask questions risk liability. Those who never ask anything at all walk away untouched. That is not a governance system. It is an incentive structure for apathy.
A Collapse Years in the Making
Casa Ruby’s failure did not happen overnight. For years, the organization’s executive director opened unauthorized credit lines, withdrew massive sums of cash, transferred tens of thousands of dollars overseas, and increased her own salary without any board approval. These actions were documented in public records, flagged repeatedly by outside accountants, and obvious to anyone exercising even minimal oversight. The board noticed none of it. And when the executive director resigned, they failed to change account access, failed to secure financial controls, and failed to intervene even as employees were begging for help.
The court-appointed receiver described this behavior in stark terms: a board that did not meet, did not review financials, did not monitor accounts, and did not respond when the organization entered crisis. That dereliction allowed nearly another $120,000 to vanish after the executive director’s departure. In total, the organization hemorrhaged hundreds of thousands of dollars in taxpayer grant funds while the board stood by. The law, however, protected those directors because their inaction, however extreme, did not meet the impossible threshold of “actual knowledge.”
This is not simply a tale of one organization’s downfall. Casa Ruby was a critical provider of services to LGBTQ+ youth. Its collapse displaced vulnerable people, cut off access to emergency housing, and burdened already stretched social-service systems. When governance fails at a charity, the consequences are not abstract. They are borne by real people, often those least able to withstand the fallout.
How Willful Blindness Became a Shield
The Court of Appeals decision makes one fact clear. Under current DC law, willful blindness is not enough to hold a director accountable. A board member may ignore red flags, refuse to review readily available public filings, decline to question dramatic changes in organizational finances, and still be immune. Only if the director actually knows that harm will result (and chooses to allow it) can liability attach. For the Casa Ruby board, this meant that years of non-inquiry, indifference, and abandonment of duty could not, as a matter of law, amount to intentional harm.
Ironically, the only director whose case survived dismissal was the one who attempted to fulfill her duties. By asking for financial documents, she triggered an inference that she might have known enough to be legally responsible. Her colleagues, who were completely inert, remained insulated. This outcome reveals a core distortion in the statute. The more diligent a director is, the nearer they come to liability. The less they do, the greater their protection. No rational system of nonprofit governance should produce that result.
This approach stands in stark contrast to other jurisdictions, which recognize that recklessness, conscious disregard, or willful blindness can be just as harmful as intentional wrongdoing. Many states explicitly exclude reckless or grossly negligent conduct from volunteer protections. DC, however, remains an outlier. Its laws protect even the most extreme forms of neglect.
The Human Cost of Weak Governance Laws
Nonprofit boards are not ceremonial bodies. They are entrusted with overseeing missions that serve the public good — feeding families, sheltering youth, supporting seniors, and protecting the vulnerable. When the law sends the message that these duties are optional, the entire sector suffers.
Board appointments become honorary rather than substantive. Directors participate casually, attend infrequently, and feel little obligation to understand the finances or operations of the organizations they govern. Meanwhile, bad actors, those who exploit charitable assets for personal gain, thrive in the shadows created by weak oversight. That dynamic played out vividly at Casa Ruby, where millions of public dollars were placed in the hands of a board that simply did not look.
The District relies heavily on nonprofit partnerships to deliver essential services. When a nonprofit collapses due to unchecked internal misconduct, the consequences ripple outward: clients are displaced, emergency systems are overwhelmed, other nonprofits absorb unmet need, and the public’s trust in charitable institutions erodes. Preventing those failures requires more than hope. It requires laws with real expectations and real consequences.
A Call for Modernizing DC Law
The District of Columbia must act. Its nonprofit governance laws should not incentivize inattention or protect directors who deliberately decline to perform their duties. The solution is straightforward and well-supported by national models. Revise D.C. Code § 29-406.31 to allow liability for reckless misconduct or willful disregard of fiduciary duties.
This reform would not punish well-meaning volunteers for honest mistakes. It would target only the most egregious cases. Those in which directors consciously avoid obvious problems, refuse to act when risk is clear, or abandon their oversight roles entirely. It would align DC with states that already recognize that deliberate indifference is incompatible with fiduciary stewardship. And most importantly, it would restore the principle that the public’s trust in charitable institutions deserves legal protection.
Donors, employees, volunteers, and clients all rely on nonprofit boards to perform their duties with diligence and care. They have a right to expect that board service carries responsibility — not immunity for indifference. As Casa Ruby demonstrates, when the law rewards willful blindness, the people who suffer most are the ones the nonprofit was created to help. The District can and must do better.
About the Author: Nick Harrison is a Washington, D.C. attorney and Managing Partner of Harrison-Stein, PC, where he serves as outside general counsel to nonprofit organizations and advises boards on fiduciary duties, governance practices, and regulatory compliance. He previously worked on the court-appointed receivership team in the Casa Ruby litigation, helping uncover the governance failures that led to the organization’s collapse. Drawing on this firsthand experience as well as years of representing nonprofits, community organizations, and public-service institutions, Nick writes about accountability not as an abstract legal issue but as a practical necessity for protecting the people these organizations exist to serve.
