Lead Stories

A trial court in North Carolina has refused to dismiss a corporate derivative suit brought by a private foundation director on behalf of the foundation and against the other four directors for breach of fiduciary duty and gross mismanagement.  The director is seeking damages for the foundation and removal of the other directors from the board.  The defendants had claimed that the director did not meet the requirements of state law to make demands on them before filing the action.

An appellate court in New York has affirmed a Surrogate Court decision that a donor making a charitable bequest from her living trust intended to benefit a specific Catholic school that had been closed for several years and did not show a general charitable intent which would justify invoking the cy pres doctrine to divert the gift to the Catholic Diocese.  The Court, by a vote of 4-1, has affirmed a Surrogate Court decision dividing the gift between two other residuary beneficiaries of the trust.

James M. Montgomery convinced an employee of a bank he was about to open to invest $100,000 in the business, saying he needed the additional money to meet regulators’ capitalization requirements to start operating.  Shortly after the employee made the investment in 2008 and before the bank opened for business, Montgomery directed the bank to transfer $100,000 to his family foundation.  The bank failed in less than a year and all of the initial investors, including the employee, lost their investments.

A federal District Court in Louisiana has ruled that a six-person group home for individuals recovering from drug or alcohol addiction is entitled to a reasonable accommodation under the Fair Housing Act and the Americans with Disabilities Act and should not be required to install automatic sprinklers and fire alarm systems required by the State Fire Marshal for rooming houses. 

The Supreme Court has ended years of confusion among religious organizations by ruling that an employee pension plan established by religiously affiliated organizations is considered a “church plan” and not covered by the Employee Retirement Income Security Act (ERISA).  Several Courts of Appeals had previously ruled that such plans would be subject to more protective ERISA requirements if not established directly by a church.  (See Nonprofit Issues, March 2016.) 

The Supreme Court, by a 7-2 vote, has held that Missouri may not prohibit a church from applying for a grant to improve its school playground simply because it is a church organization.  The policy violates the “Free Exercise” clause of the First Amendment, the Court has said.