Lead Stories

The founders of a nonprofit credit repair agency determined to be a front for their for-profit businesses and for them personally have been found personally liable for $256 million in service fees paid by their clients over a several year period.  The First Circuit Court of Appeals has affirmed a trial court decision piercing the corporate veil and imposing the liability.  (Zimmerman v. Puccio, No. 09-1416, 7/27/10.)

When Tulane University in New Orleans sought to reorganize after Hurricane Katrina, its “Renewal Plan” called for the merger of the all-women H. Sophie Newcomb Memorial College and other separate colleges into one undergraduate college called Newcomb-Tulane College.  Descendants of Josephine Newcomb, who left more than $2.6 million to fund the college named after daughter more than a century ago, have fought for many years to keep the all women’s school separate.  The Louisiana Court of Appeals has recently said the University may proceed with its plan.

An interest in a deferred charitable gift annuity is excluded from a bankrupt’s estate and cannot be recovered for the benefit of creditors, a bankruptcy court in Missouri has held.  The Court said the annuity qualifies as a spendthrift trust under the Uniform Trust Code and is excluded by state law.  (In Re: Spector, E.D. MO. Bkrptcy Ct., No. 10-45397-399, 10/26/10.)

Donna Sue Spector worked for a family and its business for many years and expected to be “taken care of” by the family during her retirement.  Her employer had transferred $505,055 to Washington University in 2004 in return for a commitment to provide Spector with monthly payments of $4,166.71 (or $50,000 annually) for life beginning in 2015 when she turned 60.  The amount could not be changed and was “not assignable.”  It was to be governed by Missouri law.

After the officers and directors of the Lemington Home for the Aged concluded that operation of the Home was no longer financially viable and decided to file for Chapter 11 bankruptcy, the Official Committee of Unsecured Creditors sought to increase the funds available for distribution by suing them for breach of fiduciary duty, self-dealing, and “deepening insolvency.”  A federal District Court in Pittsburgh has dismissed all three claims.  (Official Committee of Unsecured

An appellate court in New York has affirmed an order enforcing $900,000 in pledges from a foundation to St. Bonaventure University and dismissing a declaratory judgment action seeking to invalidate them.

The University had obtained the pledges as part of a capital campaign to expand its library.  The foundation argued that the pledges should not be enforced because they were subject to certain conditions and restrictions that were not stated in the pledge agreements.  The Court said that when a pledge is made in writing, unless conditions are expressed or at least implied in the document, state law prevents evidence beyond the written document from being used to prove such conditions, except to show a condition precedent that would cause the agreement to be ineffective.

A putative class action suit brought by a former employee of Wells Fargo Bank in Iowa, who claimed that the bank lacked statutory authority to use payroll deductions to process voluntary charitable contributions from employees, has been dismissed by a federal District Court.  The Court said that the deductions were permitted as a “lawful purpose accruing to the benefit of the employee[s].”  (Ferezy v. Wells Fargo Bank, S.D. IA, No. 4:09-cv-00455, 12/21/10.)