Justia Non-Profit Corporations Opinion Summaries
Breathe Southern California v. American Lung Association
“Breathe” was previously known as the American Lung Association of Los Angeles County, affiliated with the national organization, ALA, and the American Lung Association in California (ALAC). Breathe’s predecessor entered into annual agreements with ALAC and the ALA that provided for “income sharing” between Breathe and ALAC, except for “funds restricted in writing by the donor, not later than the date of donation, to exclude or limit sharing, such restriction not having been invited by the donee association.” ALA sued ALAC and its affiliates, including Breathe, for trademark infringement and related causes of action. Under a 2006 Consent Judgment, Breathe disaffiliated from the ALA and ALAC and was renamed. The parties agreed to a process for settling their outstanding accounts.In 2015, ALAC moved to enforce the Consent Judgment by compelling Breathe to share three bequests that were created but not distributed before the Consent Judgment. The trial court ruled in favor of the ALA, concluding the restricted funds exception of the Affiliate Agreement was ambiguous and that the bequests were shareable. The court of appeal reversed. The plain language of the bequests indicates the testators' intentions to benefit only the organization now known as Breathe. Sharing the bequests with the ALA is incompatible with those intentions and is not required under the Affiliate Agreement. View "Breathe Southern California v. American Lung Association" on Justia Law
Washington v. TVI, Inc.
The State of Washington brought multiple claims alleging that TVI Inc., doing business as Value Village, used deceptive advertising and marketing in violation of the Washington Consumer Protection Act (CPA), ch. 19.86 RCW. TVI operated about 20 for-profit thrift stores in Washington under the name Value Village. Approximately 93 percent of Value Village’s retail inventory consisted of used goods donated by the community. To source these community donations, TVI contracted with third-party nonprofit organizations, which TVI called its “‘charity partners.’” By working with charity partners, TVI obtained inventory at a lower price than it would pay a for-profit supplier. The charity partners, in turn, received a predictable source of unrestricted funding, as well as publicity from TVI’s marketing. In 2013, the Consumer Protection Division of the Attorney General’s (AG’s) Office received a complaint from a Washington resident that TVI’s marketing gives the false impression that Value Village is a nonprofit. The AG wrote to TVI in November 2014, instructing it to register as a commercial fundraiser pursuant to the CSA. The AG’s November 2014 letter raised additional concerns that TVI’s “solicitations for charitable contributions and advertisements for its retail stores” were “misleading or deceptive” in violation of the CPA. By the summer of 2015, TVI had posted signs in its stores disclosing its status as a for-profit commercial fundraiser in its stores. Following three years of investigation, the State filed this lawsuit. TVI argued the State's claims infringed on its First Amendment right to solicit charitable contributions on behalf of nonprofit organizations. The Supreme Court agreed with TVI, and remanded this case to the trial court for dismissal of the State’s claims. View "Washington v. TVI, Inc." on Justia Law
Sulzbach v. City & Borough of Sitka, et al.
The City and Borough of Sitka, Alaska allowed an independent nonprofit organization to host a public event at a city facility. The nonprofit organization arranged for a volunteer to hang decorations in the facility; a decoration fell, injuring an event participant. The injured participant sued the City, but not the nonprofit organization, for negligence. The City brought a third-party allocation of fault claim against the volunteer. The parties sought summary judgment, and the trial court concluded that, under federal law, the volunteer could not be held financially responsible for the accident and that the City could not be held vicariously liable for the volunteer’s actions. The remaining negligence issues were decided at a jury trial; the jury determined that the volunteer and the city had not been negligent and therefore were not liable for the accident. The event participant appealed. Finding no reversible error, the Alaska Supreme Court affirmed the trial court judgment. View "Sulzbach v. City & Borough of Sitka, et al." on Justia Law
Fairbanks North Star Borough v. Victory Ministries of Alaska, Inc., et al.
The Fairbanks North Star Borough partially revoked a local ministry’s charitable property tax exemption after learning that the ministry was renting lodging to the general public. The ministry appealed the Borough’s decision to the superior court. The court remanded the issue to the Borough’s assessor for more detailed findings, instructed the ministry that any appeal following remand should be made to the Board of Equalization rather than superior court, and closed the case. The assessor issued new findings justifying the partial revocation of the tax exemption, and the ministry appealed to both the Board and the superior court (in a different case). The ministry also filed a motion in the first appeal asking the superior court to enforce its order instructing that appeals be made to the Board. The superior court issued a sua sponte order granting the ministry’s first appeal on the merits, finding “that the assessor [did not] rely on sufficient evidence to revoke [the ministry’s] tax exempt status.” The Borough appealed. The Alaska Supreme Court concluded that following remand, supplemental Board findings, and a new appeal from those findings, the superior court lacked the subject matter jurisdiction to decide the ministry’s first appeal on the merits. The Supreme Court therefore vacate its decision granting Victory’s appeal. View "Fairbanks North Star Borough v. Victory Ministries of Alaska, Inc., et al." on Justia Law
Alabama Department of Revenue v. Greenetrack, Inc.
In 2003, the Alabama Legislature and the citizens of Greene County voted to allow nonprofit organizations in that county to operate bingo games for fundraising purposes. Greenetrack, Inc. ("Greenetrack"), which was not a nonprofit organization, almost immediately began offering live and electronic bingo games at its gambling facility. From 2004 to 2008, Greenetrack reaped vast profits under the guise that its whole casino-style bingo operation was constantly being leased and operated by a revolving slate of local nonprofit organizations, whose nominal role earned them a tiny fraction of the bingo proceeds. Eventually, the Alabama Department of Revenue ("the Department") audited Greenetrack, found that its bingo activities were illegal, and concluded that it owed over $76 million in unpaid taxes and interest. Following a decade of litigation, the Alabama Tax Tribunal voided the assessed taxes on the threshold ground that Greenetrack's bingo business (regardless of its legality) was tax-immune under a statute governing Greenetrack's status as a licensed operator of dog races. The Department appealed, and the Alabama Supreme Court reversed, rejecting the statutory analysis offered by the Tax Tribunal and circuit court. Judgment was rendered in favor of the Department. View "Alabama Department of Revenue v. Greenetrack, Inc." on Justia Law
Community Action Agency of Butte County v. Super. Ct.
The issue presented for the Court of Appeal's review in this case centered on whether petitioner, The Community Action Agency of Butte County (CAA), had to produce its business records pursuant to the California Public Records Act (CPRA), the Freedom of Information Act (FOIA), and/or a regulation promulgated by real party in interest, California’s Department of Community Services and Development (the Department). After considering the arguments presented (including those of amici curiae), the text and history of CPRA, and other applicable authorities, the Court concluded: (1) a nonprofit entity like CAA might be an “other local public agency” only in exceptional circumstances not present here; (2) under a four-factor test adopted based on persuasive out-of-state authority, there was not substantial evidence for the trial court’s ruling that CAA was an “other local public agency”; (3) FOIA did not apply to CAA; and (4) the Department’s regulation did not require CAA to provide public access to its records generally. Accordingly, the trial court’s order was vacated. View "Community Action Agency of Butte County v. Super. Ct." on Justia Law
Canyon Vineyard Estates I v. DeJoria
Canyon Vineyard Estates I, LLC (CVE) appealed from a grant of summary judgment in favor of Mountains Restoration Trust (MRT), John Paul DeJoria, the County of Los Angeles, and the California State Attorney General. CVE also appeals from an injunction in favor of MRT and from an award of attorney fees and costs in favor of MRT and the Attorney General. The Second Appellate District affirmed the summary judgment order finding that there is no genuine issue of material fact that the property is subject to a valid conservation easement. However, the court concluded that the injunction is overbroad in that it improperly bars CVE from filing further litigation to challenge the conservation easement without regard to the potential merits of a future claim. Thus, the court reversed the injunction and remanded the matter to the trial court to enter a new injunction that is more narrowly tailored so that it does not enjoin future lawful actions by CVE. The court reasoned that CVE has not demonstrated a triable issue of fact as to whether Tuna Canyon remains subject to a conservation easement held by MRT. The court explained that the grant of a fee title subject to a condition subsequent did not preclude the grant of a conservation easement. Moreover, the court held that the trial court must ensure the injunction does not preclude CVE from exercising its right to seek relief in court. View "Canyon Vineyard Estates I v. DeJoria" on Justia Law
Goodwill Industries Central v. Philadelphia Indemnity
Goodwill Industries of Central Oklahoma, Inc., suspended operations of its retail stores and donations centers on March 25, 2020, to comply with state and local orders regarding the COVID-19 pandemic. After suffering losses due to the shutdown, Goodwill sued its insurer, Philadelphia Indemnity Insurance Company (“Philadelphia”), under its commercial lines policy. The policy provided coverage for “loss of Business Income” when the insured must suspend its operations due to “direct physical loss of or damage to” covered property. The district court granted Philadelphia’s motion to dismiss, concluding the policy did not cover Goodwill’s loss and that the policy’s Virus Exclusion barred coverage. Finding no reversible error in that judgment, the Tenth Circuit affirmed. View "Goodwill Industries Central v. Philadelphia Indemnity" on Justia Law
Turner v. Victoria
Debra Turner, formerly a director and president of the Conrad Prebys Foundation (Foundation), appealed judgments of dismissal in favor of the Foundation and its directors, following orders sustaining demurrers to her probate and civil actions. In those actions, Turner alleged the other Foundation directors breached their fiduciary duties in preapproving a settlement range for Laurie Victoria, who served both as a Foundation director and as the trustee of the Conrad Prebys Trust (Trust), to negotiate a settlement of a trust challenge by a disinherited heir. Turner also challenged Victoria’s actions as trustee. Several months after commencing her action, Turner’s term as a Foundation director and officer expired when she was not reelected to her positions during the annual election process. The civil and probate courts determined that Turner lost standing to maintain her causes of action. The issue this case presented for the Court of Appeal's review centered on whether a director of a nonprofit public benefit corporation who brings an action on behalf of the nonprofit public benefit corporation could lose standing to pursue its claims if the director was not reelected during the litigation. The Court of Appeal concluded the statutory scheme and public policy considerations required a continuous relationship with the public benefit corporation that was special and definite to ensure the litigation was pursued in good faith for the benefit of the corporation. "If a plaintiff does not maintain such a relationship, the statutory scheme provides the nonprofit public benefit corporation with protection through the Attorney General, who may pursue any necessary action either directly or by granting an individual relator status." Because Turner lost standing to pursue her causes of action, the Court affirmed the judgments of dismissal as to Turner acting in her capacity as a former director and officer. The case was remanded, however, with directions for the civil and probate courts to grant 60 days leave to amend, limited to the issue of whether a proper plaintiff could be substituted to pursue the existing claims. The Attorney General could consider during that 60-day period whether granting relator status to Turner, or another individual, for these claims was appropriate. View "Turner v. Victoria" on Justia Law
Americans for Prosperity Foundation v. Bonta
Charitable organizations soliciting funds in California generally must register with the Attorney General and renew their registrations annually by filing copies of their IRS Form 990, on which tax-exempt organizations provide the names and addresses of their major donors. Two tax-exempt charities that solicit contributions in California renewed their registrations and filed redacted Form 990s to preserve their donors’ anonymity. The Attorney General threatened the charities with the suspension of their registrations and fines. The charities alleged that the compelled disclosure requirement violated their First Amendment rights and the rights of their donors. The Ninth Circuit ruled in favor of the Attorney General.The Supreme Court reversed. California’s disclosure requirement is facially invalid because it burdens donors’ First Amendment rights and is not narrowly tailored to an important government interest. Compelled disclosure of affiliation with groups engaged in advocacy may constitute as effective a restraint on freedom of association as other forms of governmental action. Exacting scrutiny requires that a government-mandated disclosure regime be narrowly tailored to the government’s asserted interest, even if it is not the least restrictive means of achieving that end.A dramatic mismatch exists between the Attorney General's asserted interest and the disclosure regime. While California’s interests in preventing charitable fraud and self-dealing are important, the enormous amount of sensitive information collected through the disclosures does not form an integral part of California’s fraud detection efforts. California does not rely on those disclosures to initiate investigations. There is no evidence that alternative means of obtaining the information, such as a subpoena or audit letter, are inefficient and ineffective by comparison. Mere administrative convenience does not “reflect the seriousness of the actual burden” that the disclosure requirement imposes on donors’ association rights. It does not make a difference if there is no public disclosure, if some donors do not mind having their identities revealed, or if the relevant donor information is already disclosed to the IRS. View "Americans for Prosperity Foundation v. Bonta" on Justia Law