Justia Non-Profit Corporations Opinion Summaries

The Caribe Resort Condominium Association Board of Directors, Larry Wireman, and Judy Wireman, along with Caribe Realty, Inc., Caribe, Inc., and Sentinels, LLC, sought a writ of mandamus to direct the Baldwin Circuit Court to dismiss derivative claims brought by Robert Simmons and other condominium-unit owners on behalf of the Caribe Resort Condominium Association. The claims included allegations of breaching duties, wasting corporate assets, entering into inflated self-dealing contracts, and misappropriating funds.The Baldwin Circuit Court denied the motion to dismiss, leading to the current petition. The petitioners argued that Alabama law does not recognize derivative actions on behalf of nonprofit corporations. They noted that while Alabama law allows derivative actions for for-profit corporations, limited-liability companies, and limited partnerships, it does not provide similar provisions for nonprofit corporations. They also pointed out that the Alabama Nonprofit Corporation Law, which adopted the Model Nonprofit Corporation Act, intentionally omitted the chapter on derivative proceedings.The Supreme Court of Alabama agreed that Alabama law does not generally recognize derivative actions for nonprofit corporations. However, it noted that under § 10A-3-2.44(2), Ala. Code 1975, members of a nonprofit corporation can bring a representative suit against officers or directors for exceeding their authority. The court found that the Caribe members' claims against the board defendants alleged that the board exceeded their authority, thus falling under this provision. However, claims against the Wireman companies did not fall under this provision and were due to be dismissed.The Supreme Court of Alabama granted the petition in part, dismissing the claims against the Wireman companies, and denied it in part, allowing the claims against the board defendants to proceed. View "Ex parte Caribe Resort Condominium Association Board of Directors" on Justia Law

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

Clay County Animal Shelter, Inc. ("the animal shelter"), appealed a circuit court judgment declaring Act No. 2018-432, Ala. Acts 2018, to be unconstitutional. The animal shelter was a nonprofit “no-kill” organization that provided food, water, medical care, spay and neutering services, and adoption services for stray and abandoned animals in Clay County, Alabama. Most of the people working at the animal shelter were unpaid volunteers. The animal shelter incurs numerous expenses associated with operating the shelter and caring for the animals. The legislature sought to provide funding to the animal shelter with proceeds from the tobacco tax authorized in Clay County pursuant to section 45-14-244, Ala. Code 1975. It was undisputed that Act No. 2017-65, the appropriation measure at issue, did not receive the vote of two-thirds of all the members elected to each house. The Clay County Commission argued that that portion of Act No. 2017-65 purporting to distribute funds to the Clay County General Fund to be disbursed to the animal shelter was, therefore, unconstitutional. After careful consideration, the Alabama Supreme Court concluded the circuit court erred in declaring Act No. 2018-432 as unconstitutional. Judgment was reversed. View "Clay County Animal Shelter, Inc. v. Clay County Commission et al." on Justia Law