Lead Stories

Directors of a homeowners’ association accused of obtaining personal benefit from their allocation of limited road construction and maintenance funds may not be sufficiently “independent” to determine whether a derivative suit brought against them by other homeowners is in the best interests of the corporation, the Utah Supreme Court has ruled.  It has reversed a trial court decision dismissing the case when the committee conducted an investigation and recommended that the suit be dismissed.  (Hi-Country Property Rights Group v. Emmer, Supreme Ct., UT, No. 20120202, 6/7/13.)

A city council lost its right to name directors to the local hospital board when the hospital board amended its bylaws to eliminate the City’s power to appoint, and the City had no standing to contest the action, the Supreme Court of West Virginia has ruled.  (City of Fairmount v. Fairmount General Hospital, Supreme Ct., WV, No. 12-0205, 6/5/13.)

A booster club fundraising program that allowed parents to meet the mandatory assessment for their children’s participation by raising funds from others has cost the club its 501(c)(3) charitable exemption.  The Tax Court has upheld the IRS’s revocation of exemption.  The Court ruled that the club “operated in a manner that allowed substantial private inurement and promoted private, non-public interests.” The Court concluded that the club did not operate exclusively for charitable purposes.

The Pennsylvania Commonwealth Court has held that communications between Penn State University and the state Secretary of Education, who serves on the University’s board ex officio, are public records subject to disclosure under the state’s Right to Know Law.  But because the Office of Open Records did not determine whether any of the Department’s arguments that statutory exceptions to disclosure applied, the Court remanded the case for further determination of what, if any, records must actually be disclosed. 

A bankruptcy trustee seeking to recover a $62,500 contribution from a Ponzi scheme cannot recover from the church to which the funds were given when the church was merely a conduit for the gift to a third-party charity.  A Bankruptcy Court in Florida has dismissed the trustee’s claim when the church acted in good faith and passed the funds on as required.  (In Re: Engler, Tardif v. St. John the Evangelist Catholic Church, No. 9:08-bk-04360, 7/17/13.)

An animal shelter that decided not to build a new and expanded facility has been ordered to return a $50,000 contribution from donors who made the gift expressly for the construction of new rooms for large dogs and older cats.  An appellate court in New Jersey, in a harshly worded opinion it said was a case of first impression, said that the penalty was possibly the “most lenient sanction” in a case that could include breach of fiduciary duty and civil fraud.  (