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Wrongful Withholding of Tips Not Covered by Club’s Insurance

Loss came from pre-existing obligation, not from wrongful act, says Court
When wait staff of the Kittansett golf club in Massachusetts sued the club and one of its officers for failure to properly distribute gratuities added to meal charges, the club tendered the claim to its Directors and Officers insurance carrier. It sought coverage under the provisions providing indemnification for losses suffered from claims for wrongful acts. The carrier said it had no obligation under the policy, and a federal District Court has agreed. It held that the claim was essentially one for money the club already had the obligation to pay, and not for the failure to pay it. ( Kittansett Club v. Philadelphia Indemnity Insurance Company, D. MA, No. 11-11385, 9/10/12 .)

University May Sue Trust To Collect on Donor’s Pledge

“Spendthrift” clause protecting against creditors is ineffective against claims against settlor-beneficiary
The Supreme Court of Illinois has allowed the Rush University Medical Center in Chicago to pursue a claim against a trust created by a donor who died without fulfilling his irrevocable pledge for $1.5 million. The Court said that a trust created by the donor/settlor naming himself as beneficiary could be liable for the debt even though it contained a spendthrift clause saying its assets could not be used to pay claims of creditors. The Court said the common law rule was not abrogated by the state’s enactment of the Uniform Fraudulent Transfer Act. ( Rush University Medical Center v. Sessions, No. 112906, 9/20/12 .) Robert W. Sessions had pledged $1.5 million for the construction of a new...

Colonial Williamsburg may be sued by patron under ADA

A frequent patron of Merchants’ Square in the historic district of Colonial Williamsburg has been permitted to bring a suit against the Colonial Williamsburg Foundation to remove barriers to accessibility. The patron lives in Gloucester, Virginia and claims he visits the Square several times a month but cannot enjoy all of the services and facilities because it is not fully accessible to the wheelchair he uses for mobility. The Foundation sought to dismiss the suit on the ground that the patron had no standing to bring the case, but a federal District Court has denied the motion. To have standing, the Court said, the patron must show that he suffered a particularized “injury in fact”, the...

Nonprofit Law YOU Want to Know

We regularly feature answers to questions from readers in our “Your Legal Questions Answered” column. The full list can be viewed on the site . May we transfer endowment to another charity? I am a member of a 501(c)(3) service organization that has built an endowment of a little over $100,000 over the last 15 - 20 years. During the early years, much of the principal was raised as requests specific to the endowment. In more recent years, we have placed any unspent money from the budget in the endowment. A member has asked that we transfer our endowment to the local community college (2-year). Can we legally donate dollars that were given to our organization for endowment to another...

Receiver Can’t Collect Gift Given As Part Of Ponzi Scheme

College successfully asserts defenses of lack of standing and statute of limitations
A court-appointed receiver for Ponzi-schemer Thomas J. Petters and his affiliated companies has no standing to sue to recover gifts under the Federal Debt Collection Procedures Act, even where the government is one of the creditors, a federal District Court in Minnesota has ruled. It has also held that the receiver was barred by the newly passed state statute of limitations from recovering a $2 million gift from a Petters foundation to College of St. Benedict. ( Kelley v. College of St. Benedict, D. MN, No. 12-822, 10/26/12 .)

Court Refuses to Terminate Small Trust for Charities

Trustee’s fees equaling 30% of income were not unforeseen by donor, it says
Despite the recommendation of the state Attorney General to terminate a $600,000 trust for the benefit of three separate charities because of a high proportion of trustee’s fees, the Appellate Court of Illinois has refused to terminate the trust. It has reversed a trial court decision authorizing the termination. ( Church of the Little Flower v. US Bank, No. 4-12-0266, 11/5/12 .) Erma Donelan established a trust in 1991, with income and emergency funds to herself for life. Any assets exceeding $750,000 at her death were to be distributed 20% to Church of the Little Flower, 20% to St. Joseph’s Home, and 60% to Friends of the Sisters of St. Francis, now a Foundation. Property worth $750,000 was to retained in further trust to pay 7% income to her four sisters-in-law, with any remainder worth more than $500,000 at the death of the last of them to be held in further trust for the three charities.

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