Lead Stories

The Fifth Circuit Court of Appeals has ruled that an Accountable Care Organization providing benefits to private parties as a “substantial” part of its activities is not eligible for exemption as a 501(c)(4) social welfare organization.  The ruling is the first modern appellate court ruling rejecting the claim that an organization can qualify for (c)(4) status so long as its “primary” activity is promoting the public good. 

A commercial loan between a bank trustee of a charitable trust and the charity that is the beneficiary of the trust is presumptively fraudulent without clear and convincing evidence to the contrary, an appellate court in Illinois has ruled.  The Court has reversed a trial court decision authorizing the bank to proceed with an action to collect on the note and granted the charity’s motion to rescind the note for breach of fiduciary duty.

Penn State University has been prohibited from proceeding with an internal investigation of the conduct of a University trustee without advancing his legal expenses.  A trial court in Pennsylvania has held that the trustee falls clearly within the protections required by the indemnification provisions of the University’s bylaws and has rejected the University’s defenses in part because they were “specious.”

A trial judge in New York has banned former Executive Vice President Wayne LaPierre from serving in any fiduciary capacity with the National Rifle Association for the next 10 years, but has refused to appoint a monitor to review the operations of the organization as had been requested by New York state Attorney General Letitia James.  The Court has asked the parties to agree on lesser enforceable remedies to assure that future operations are compliant with the law.

An appellate court in Virginia has held that four members of the Virginia Military Institute Alumni Association, including one intending to run for a seat on its board of directors, are not entitled to disclosure of email addresses of the other members under the state’s Nonstock Corporation Act.  In a divided opinion, it has affirmed a trial court decision that a member’s statutory rights to inspect the records of members does not extend to the members’ email addresses.

A nonprofit corporation’s bylaw provision for indemnification does not cover reimbursement of a trustee who is a plaintiff in a lawsuit against the corporation unless specifically provided in the bylaw, the Supreme Court of New Jersey has decided recently.  The Court overturned an award of more than $560,000 in legal fees to a trustee who had filed suit to overturn his removal from the Board of his homeowners’ association.