Article Archives >> Lead Stories >> June 1-15, 2006

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Philanthropist Sues Grantee
After Relationship Goes Sour
Court dismisses defamation, interference claims,
allows both sides to argue breach of contract

Rhode Island philanthropist Alan Shawn Feinstein entered into a contract on behalf of his Alan Shawn Feinstein Foundation to provide $3 million to help end hunger in America. The contract was signed by Larry Brown, director of the Center on Hunger and Poverty, originally at Tufts University and then at Brandeis.

The contract called for various activities on both sides. Feinstein would provide in three $1 million gifts over three years to be marketed as “challenge grants,” while Brown was supposed generate a national campaign involving celebrity participation and give Feinstein naming rights on a building.

When Feinstein became dissatisfied with Brown’s efforts, he refused to make the first $1 million grant. The Foundation had been established as a “supporting organization” to the Rhode Island Foundation and Brown ultimately sought the help of that foundation’s CEO, Ronald Gallo, to resolve the issues. After a meeting, Brown wrote to Gallo expressing his hope that things could be worked out.

The letter included a statement that Brown had learned that Feinstein “apparently has a history of making funding commitments and then reneging on them.” A few months later, the directors of the Rhode Island Foundation decided they should end their relationship with Feinstein as soon as the dispute was settled.

Feinstein sued for defamation and for interference with a good business relationship, as well as breach of contract. Brown separately sued Feinstein for breach of contract.

On Brown’s motion for summary judgment to dismiss the claims, a federal District Court in Massachusetts has dismissed the defamation and interference claims, but not the breach of contract case.

On defamation, the Court ruled that although there might be enough to show actual malice in the statements, Brown had a qualified privilege to write to Gallo because Gallo had an interest in the issues and the information might be of assistance in protecting that interest. It also concluded that Brown’s only reason for sending the letter was to remedy the contract dispute.

On the interference claim, the Court ruled that Brown did not have “an intent to do harm without justification” and granted judgment for Brown.

On the breach of contract claim, the Court noted that the term “challenge grants” was not defined in the contract and was susceptible to multiple meanings and that there was conflicting testimony on the intent of the naming rights, particularly whether they were to be in perpetuity. Noting that Brown had also filed a breach of contract case against Feinstein, the Court ruled that there were issues for a jury to decide. (Feinstein v. Brown, D. RI, No. C.A. No. 030436, 5/11/06.)

YOU NEED TO KNOW

Litigation between grantors and grantees is extremely rare, and suits by grantors against their grantees are even rarer. This sounds like litigation that no one will ever win.

Article Archives >> Lead Stories >> June 1-15, 2006