Fundraisers for charity frequently cite the Donor Bill of Rights, created by the Association of Fundraising Professionals and other professional fundraising organizations, as evidence of the charity’s good stewardship of charitable contributions. But what happens when a disgruntled donor claims the charity failed to live up to the high ideals it espoused?
A federal District Court in Tennessee has held that pointing to the Donor Bill of Rights on the website of the NRA Foundation, the charitable fundraising arm of the National Rifle Association, is not sufficient to meet the plausible pleading requirement of federal law and prevent dismissal of the donors’ claim that they suffered damages from fraudulent solicitations.
The ruling occurred in a case brought by several individuals who claimed that donations and memberships were fraudulently solicited by the NRA, its Foundation, and by NRA CEO Wayne LaPierre and that a significant part of the funds were used for purposes unrelated to the stated mission. The claims against the Foundation and LaPierre have been dismissed. The claim against the NRA itself has been allowed to proceed.
The Court cited Rule 9(b) of the Rules of Civil Procedure for the proposition that a party must state “with particularity” the circumstances constituting fraud and said the plaintiffs failed to satisfy this standard on the claims against the Foundation. It said they had failed to identify the “time, place and content” of any specific solicitations that they claimed to be fraudulent.
The plaintiffs alleged generally that they were solicited for funds to be used for the NRA’s core mission of education and protection of Second Amendment rights and that they had relied on statements that were materially and intentionally false. They alleged that during the time they were being solicited the Foundation included statements on its website spelling out the mission and included the Donor Bill of Rights that affirms the right “to expect the board to exercise prudent judgment in its stewardship responsibilities” and “to be assured your gifts will be used for the purposes for which they are given.”
“Even if these statements were construed to make a false statement of material fact — and it is not clear that they can be so construed,” the Court said, “the allegations do not connect the ‘solicitation’ with the statements on the website. In fact, Plaintiffs do not make any allegation that the NRA Foundation solicited funds via the website.” For lack of particularity, the Court dismissed the claims against the Foundation.
The Court also dismissed the claims against LaPierre for failure to cite specific solicitations made by him.
With regard to the NRA itself, however, the case was slightly different. The plaintiffs alleged that the NRA website contained information on its mission and asked visitors to join “RIGHT NOW.” They said the NRA included the uniform disclosure statement required by charitable solicitation statutes on its website and in mailed solicitations. The statement said that “contributions raised will be used to advance the mission of the NRA.”
They also alleged a series of excessive expenditures for insiders and personal expenses of LaPierre, similar to those raised recently by the Attorney General of New York, who has sought restitution from LaPierre and other officers and dissolution of the NRA itself. (The NRA is organized under the charity laws of New York and is treated within the state as a charity, although its federal tax status is that of a 501(c)(4) social welfare organization to which contributions are not deductible, not a 501(c)(3) charity.)
The NRA argued that the allegations were no more than “a passing conclusory assertion” that the NRA knew of and intended the falsity of its statements and related to future action which could not be the basis of a fraud charge. But the Court sais that “it was not necessary that the NRA know at the time what the extraneous expenditures would be, only that they knew that money would be spent outside the mission…. Given the extent of the alleged misspent funds — in both duration and volume — the Court finds Plaintiffs’ allegation that the NRA knew donated funds would not be used to advance the mission of the NRA sufficiently plausible to state a claim.”
The Court also dismissed claims of racketeering against all defendants. (Dell’Aquila v. LaPierre, M.D. TN, No. 3:19-cv-00679, 9/30/20.)
YOU NEED TO KNOW
One of the attorneys listed as appearing for the defense was William A. Brewer of the Brewer law firm in New York. Among the allegations of misspent funds were allegations of paying William A. Brewer, III more than $97,000 per day during the first quarter of 2019 and paying the Brewer Law Firm approximately $2 million per month for legal services over a 13-month period.