Receipt of Substantial Contributions
Does Not Constitute ‘Doing Business’
New York Court says it has no jurisdiction
to hear case against Mass General Hospital
A federal District Court has held that it has no personal jurisdiction to hear a suit against Massachusetts General Hospital and several affiliates, despite the fact that the hospital raised more than $50 million in charitable contributions from New Yorkers in the four years prior to the suit. The fundraising activity was not sufficient to constitute “doing business” in the state, the Court held. (Nelson v. Massachusetts General Hospital, S.D. NY, No. 04-CV-5382, 9/20/07.)
A widow sued for wrongful death and medical malpractice after her husband, who lived in New York, died after being admitted to Mass General’s emergency room in 2003. Jurisdiction in New York state was “the whole ball game” because Massachusetts maintains a charitable immunity rule that limits damages to $20,000, and New York refuses to enforce such limitations on the ground that they are against public policy.
Less than .5% of the 5 million patients at Mass General each year listed their address as New York. It had four contracts with New York entities, licensing materials for medical research in Massachusetts. It had an interactive website but few New York participants. The site generated $665 in contributions from 11 donors in New York state.
The Massachusetts General Hospital (“TMGH”) is a separate corporation that is sole member of General Hospital Corporation which operates Mass General. The primary activity of TMGH is to do fundraising for the Hospital, operating from its principal place of business in Boston. It runs a national direct mail campaign and made a total of about 1200 fundraising trips in four years, but only 10 to New York and only one of which resulted in an overnight stay in New York. Although TMGH raised more than $50 million over four years from New Yorkers, about 15% of its total charitable fundraising, the Court held that it was not sufficient to constitute doing business in the state and create personal jurisdiction.
The “traditional indicia of doing business” were “lacking,” the Court said. It had no offices, employees, bank accounts or phone listings in New York and did no advertising in New York. TMGH had no contracts in New York and had not engaged in litigation in New York.
Since TMGH’s only substantial activity was fundraising, the Court analyzed its New York results in context of its charitable giving receipts, not the total expenditures of the Hospital itself. Nevertheless, it found no jurisdiction.
The chief development officer testified that TMGH did not consider New York a “focus” of its fundraising activity. Fewer than 1% of its development trips were to New York. “Former patients who live in New York, like former patients everywhere, receive direct mail solicitations from TMGH, but they are sent from Boston and yield little income. Most of the money received from New York sources comes, not via solicitation (whether in person or by mail) but from individuals or entities in New York who have taken the initiative in showing support for the work of Mass General, like the executive at a New York based foundation who was pleased with the care received by a relative at Mass General.”
The question, the Court wrote, “is whether TMGH’s receipt of significant charitable revenues from New York sources, without more, can justify a finding of ‘doing business’ in New York. The answer is no – at least where the fundraising is done from out-of-state and the defendant has no permanent physical presence in New York.”
The plaintiff argued that TMGH should be considered doing business in New York because it was registered as a charitable institution in the state for charitable solicitation purposes. “Unfortunately for plaintiff, a defendant’s compliance with statutory registration requirements is not a basis for exercising jurisdiction,” the Court said.
The Court also found that the other entities did not conduct sufficient activity within New York to create personal jurisdiction.
YOU NEED TO KNOW
This is an interesting case that could easily have gone the other way with a little bit of physical presence in New York.
Note that the standard for the requirement to register is not whether an entity is “doing business” within the state as measured by traditional jurisdictional rules. The requirement to register arises under most state registration laws with a single solicitation within a state.
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