Symposium: The Impact of Clergy Sexual Misconduct Litigation on Religious Liberty:
Article: Churches, Charities, and Corrective Justice: Making Churches Pay for the Sins of their Clergy
Among family and friends, coerced sexual relations not only violate the body and spirit of the victim; they also raise deep issues of trust and betrayal. ... (2) The Unavailability of Trust Funds--This argument presupposes that some or all of the funds held by a charitable organization are subject to a charitable trust and are therefore unavailable for tort liability judgments. ... Indeed, in a world where no actor is judgment proof, there would be no need for the doctrine of vicarious liability--each primary actor would be responsible for compensating the victim. ... For example, the distinction between suits by a charitable beneficiary and suits by a stranger will not be relevant once we dismiss the assumption of the risk rationale for charitable immunity. ... It is clear, first, that the Archdiocese is a public charity; second, that, as a public charity, it is eligible for the benefits of the Massachusetts charitable immunity statute; and third, that its charitable status creates an oversight role for the Massachusetts Attorney General. ... By becoming a public charity, the Archdiocese made itself eligible for the benefits of that status--benefits that include application of the doctrine of charitable immunity. ... Nevertheless, I suggested, charitable immunity has some justification if it is understood in terms of the inapplicability of the doctrine of vicarious liability. ... This is an important point because most religious organizations are, in fact, public charities. As such, they hold their funds in trust and must apply them to the public purposes for which they were received. A public charity is formed to benefit the indefinite public. For this reason, the courts have traditionally denied standing to all private parties and left it to the Attorney General to enforce the terms of the trust. Through suits by the Attorney General, the civil courts have retained a special jurisdiction to supervise charitable funds and to see to their "due application." Thus, charities law leads in the direction of a protective and "hands-on" approach. The "hands-on" approach reflects the fact that charitable organizations play an important and valuable role in American life. In this Article, I first explore this role and the distinctive form of government regulation that results. Next, I discuss the difficult issue that arises when charitable organizations behave in a bad or risky way. Specifically, how do we weigh the value of charitable activity against the demands of corrective justice? The doctrine of charitable immunity, which fully or partially exempts charities from suits by tort plaintiffs, has traditionally been used to strike the balance. Because there are many forms of charitable immunity, evaluating the doctrine requires us to understand the various theories that have been used to support it. Exploring these theories will lead me to the conclusion that a certain form of charitable immunity is justified. Finally, I apply this analysis to some of the specific issues raised by the negligent supervision cases in the Archdiocese.
Wells, Catharine P., Churches, Charities, and Corrective Justice: Making Churches Pay for the Sins of Their Clergy, Boston College Law Review, Vol. 44, No. 4/5, pp. 1201-1227, July/September 2003
Article: Race and Sex Discrimination in Charitable Trusts
The law, public policy, and practical politics seem to have come together to inspire attorneys general to refuse to try to enforce race discrimination through charitable trusts. ... The Court went on to evaluate race discrimination in education against the common law requirement that charitable trusts must not violate public policy and concluded that charitable trust law does not permit race discrimination. ... The effect of Pennsylvania v. Brown was that the court used its power to eliminate the race discrimination of a charitable trust, requiring it to go forward on a constitutionally permitted non-discriminatory basis, rather than allowing it to go forward as a discriminatory trust without the involvement of the City of Philadelphia. … The refusal of attorneys general to argue for enforcement of racially discriminatory charitable trusts may reflect our current legal and social values. As a matter of policy and politics, it is unlikely that attorneys general would argue for race discrimination in any form. The law, public policy, and practical politics seem to have come together to inspire attorneys general to refuse to try to enforce race discrimination through charitable trusts. NOTE: Section 3: State Action Through Attorneys General Enforcement
Colliton, James W., Race and Sex Discrimination in Charitable Trusts, 12 Cornell J. L. & Pub. Pol'y 275, Cornell Journal of Law and Public Policy, Spring, 2003
Article: Enron.org: Why Sarbanes-Oxley will not Ensure Comprehensive Nonprofit Accountability
In sum, the mandates, capabilities and incentives of attorneys general motivate them to focus their enforcement efforts on nonprofits' lapses of financial accountability. Unfortunately, as will be shown below, these same factors discourage AGs from prioritizing enforcement of mission and organizational accountability … AGs do indeed seem to be ramping up their enforcement efforts in the nonprofit context. They are using their authority to initiate litigation and their regulatory powers to expand monitoring of nonprofits. At the vanguard, a few AGs have advocated for new nonprofit legislation using Sarbanes-Oxley as a model. In each of these efforts, the priority of financial accountability to AGs is apparent. The New York Attorney General's Office has billed its reforms for the nonprofit sector as consumer protection, though this time for donors, and its safeguards are specifically described as protection against the dissipation of charitable assets. Massachusetts Attorney General Tom Reilly described his draft legislation as addressing the need for charities "to restore the trust and confidence of donors, the public and regulators in their financial competence and integrity;" California Attorney General Bill Lockyer likewise hopes his legislation will "shore up donor confidence." The substance of these proposed reforms demonstrates, once again, that financial accountability concerns dominate AGs' nonprofit enforcement agendas, bearing out the predictions of AG priorities made in Part II. Thus, even activist state AGs will fail to assure comprehensive nonprofit accountability. With this in mind, Part V begins the process of considering alternative mechanisms by which nonprofits' mission and organizational accountability might be enforced effectively. … V. Thoughts on Complements to AG Enforcement … Renewed vigor by AGs to regulate charitable solicitation, to litigate duty of loyalty violations, or to legislate additional disclosure or auditing mechanisms does not address mission and organizational accountability - or impacts them only as unintended, if positive, consequences. Thus, some other mechanisms must be found or created to tackle these real, though often less concrete, challenges. Various commentators have advocated the establishment of new government entities or the use of other governmental or regulatory pathways in order to deter failures of nonprofit accountability. This Part takes a different approach and instead offers initial thoughts on the extent to which self-regulatory means of addressing accountability problems may be used to improve organizational integrity and control mission creep in the nonprofit sector. Of course, a full evaluation of these techniques is a topic for another day. The purpose of this Article is to explain the financial accountability bias of state AGs and the need for additional enforcement mechanisms to complement AG efforts. The discussion that follows is intended only to begin the quest to find these complementary methods of enforcing nonprofit accountability.
Brakman Reiser, Dana, Enron.org: Why Sarbanes-Oxley Will Not Ensure Comprehensive Nonprofit Accountability, (March 2004). Brooklyn Law School, Public Law Research Paper No. 6.
Comment: Who's Minding the Nonprofit Store: Does Sarbanes Oxley have Anything to Offer Nonprofits?
IN JUNE OF 2003, nonprofit public benefit corporation PipeVine, processor of charitable donations for dozens of charities, closed its doors, admitting it did not have enough funds to distribute what it owed to its clients. ... Every state has some form of oversight of nonprofit charitable organizations, typically through the state attorney general's office. In California, for example, the attorney general's office administers nonprofit regulation through its Charitable Trusts Division. California's regulatory scheme requires, among other things, that every charitable organization register with the attorney general's office before conducting fundraising activities. ... In the event of an allegation of malfeasance or misfeasance, the California attorney general has exclusive jurisdiction over actions against nonprofit public benefit or charitable corporations. ... In California, though the attorney general's office has the authority to investigate and intervene in the affairs of most nonprofit charitable enterprises, the state legislature has never adequately funded that effort. ... The first proposed solution suggests increased liability and scrutiny of nonprofit directors, who enjoy some measure of protection from liability by virtue of the business judgment rule. ... Even if state legislatures could be persuaded to pass this kind of legislation, such a proposed solution is likely to result in the inability of nonprofit corporations to attract qualified directors. ... Professionals may need the client's encouragement to ask the tough questions and pursue the answers. ...
Heath, Jane, Who's Minding the Nonprofit Store: Does Sarbanes-Oxley Have Anything to Offer Nonprofits?, 38 U.S.F. L. Rev. 781, University of San Francisco Law Review, Summer, 2004
Article: An Allegory of Good (and Bad) Governance: Applying the Sarbanes-Oxley Act to Nonprofit Organizations
In the wake of the corporate accounting scandals that rocked the nation in 2002, Congress passed the Public Company Accounting Reform and Investor Protection Act of 2002, more commonly known as the Sarbanes-Oxley Act. ... Once fluent in these new ideas of "best practices," these board members, valued for their executive judgment, are likely to expect nonprofits to follow similar standards regardless of whether the law strictly requires it of them. ... The Act's requirements for the disclosure of corporate governance structures can be seen as encouraging recommended governance structures. ... The disclosures required by the IRS with form 990 are currently the most similar means in place for nonprofit regulation. ... Additions the IRS is considering include: (1) disclosing transactions with "substantial" donors, officers, directors, trustees, and key employees; (2) revealing whether or not the nonprofit has a conflict of interest policy; and (3) indicating whether or not the organization maintains an independent audit committee. ... Yet another concern is that if the definition of "independent" means that the board member refrains from engaging in fundraising or other acts, will that same board member be sufficiently motivated to engage in an in-depth examination of the nonprofit's financials? ... III. Current Enforcement Mechanisms and Critiques of the Present Regime … A. State Attorneys General … The role of policing nonprofit compliance with applicable law typically falls to the office of the state attorney general. Generally, donors, beneficiaries, and members of the general public are denied standing to sue nonprofit organizations for breach of fiduciary duties or enforcement of the public trust. Recently, courts have begun to interpret the strict standing rules more leniently and have allowed the members, directors, and other "interested parties" of the organization the right to sue. Another emerging trend is the authorization, in some states, of relators: third parties granted the right to sue the nonprofit when the attorney general alone would otherwise have had sole standing. It should be emphasized, however, that these remain rare exceptions to the general rule of limited standing. Additionally, even if other parties are granted standing, there is presently little incentive to bring suit since any monetary damages will be payable to the nonprofit, not to the party bringing the suit. The current restrictions on standing have engendered much criticism. It has been noted that attorneys general have limited time and resources, and that, with their other significant duties to the public, monitoring charities often ranks low on their lists of priorities. Attorneys general frequently experience political pressure to pursue cases other than those against well-connected charitable board members. Often, only the most egregious abuses become the subject of attorney-general suits. The capture of a state authority by prominent board members can also lead to a lack of enforcement. The subsequent dearth of enforcement in this area has led many to argue for broader standing rules. Yet, with the exception of the limited expansion of the doctrine noted above, the traditional restrictive rule remains in force.
Szymanski, Wendy K., An Allegory of Good (and Bad) Governance: Applying the Sarbanes-Oxley Act to Nonprofits., 2003 Utah L. Rev. 1303, Utah Law Review, 2003
Syposium: New Forms of Governance: Ceding Publis [sic] Power to Private Actors: Administrative-Law-Like Obligations on Privatized Entities
Privatization is often thought of as a cure for many of the problems associated with government provision and procurement of goods or services, both because private entities are freed from restrictions placed only on government, and because private entities are subject to market discipline, which makes them better able to respond to changes in the social environment. ... B. Review of Corporate Management ... Private entities taking over government institutions, such as private prison operators, private companies hired to run public schools, and private companies operating social services agencies, are likely to be subject to the greatest scrutiny, but even companies providing goods and services to the government in "contracting out" forms of privatization are likely to be more heavily regulated than other private businesses. ... Further, there was no general prohibition on employment discrimination. ... Since the adoption of the Fourteenth Amendment, a strong antidiscrimination norm has applied to government. ... " Developments highly relevant to privatization, beginning during the Second World War, provoked the wider application of antidiscrimination norms in the private sector. ... While President Clinton's attempt failed, it is likely that government will continue to use the privatization connection to extend government regulation. ... If the Federal Deposit Insurance Corporation (FDIC), for example, were sold to a private company, or if the insurance the FDIC provides were put out for bids, it is likely that any private entity assuming this function would be held to strict legal standards. ... The social effect of privatization is likely to be muted unless accompanied by radically reduced regulation. …This Article elaborates these points as follows. In Part I, I compare the regulation of private entities to administrative law and other norms that traditionally are thought of as applying to the public sector. In the course of this comparison, I look more specifically at the availability of information in both the public and private sectors, at the way that the review of corporate management resembles judicial review of administrative agency action and at the mechanisms employed for monitoring privatized institutions generally. In Part II, I illustrate the way in which regulation of privatized entities is enhanced through the example of the application of antidiscrimination norms in privatization. In Part III, I consider why the phenomena addressed by this Article occur, that is, why it is that privatization so often involves increased government regulation and scrutiny of the private actors involved in privatization. … Some may take my argument - that privatization is unlikely to result in significant social change unless accompanied by massive deregulation - as an argument against privatization on the basis that given this understanding, it is not worth taking the trouble to privatize. Others who see great potential in privatization might view this reality as an argument in favor of deregulation so the potential of privatization can be realized. I do not mean to take sides on this matter. Rather, I point out the effect and conclude that some privatization measures might be worth taking anyway.
Beerman, Jack M., Administrative-Law-Like Obligations on Private[Ized] Entities., 49 UCLA L. Rev. 1717, UCLA Law Review, August, 2002
Article: Practical Guide to Major Changes Now Under Discussion in the Nonprofit Sector
Whatever recommendations, if any, may be adopted on the national level, New Hampshire has developed a strategy of its own for the nonprofit sector. In 2004, the New Hampshire Charitable Foundation and the New Hampshire Attorney General's Office jointly convened a committee to discuss standards for the sector. The "Excellence in Nonprofit Governance Committee" (the "Committee") is composed of 21 members and held a series of listening sessions around the state to discuss legal and ethical standards. At a February 2005 press conference with the Governor and Attorney General, the Committee announced an action plan with practical steps to guide New Hampshire nonprofit entities in concrete ways. NOTE: Heavy and useful footnotes
DeLucia, Michael, Practical Guide to Major Changes Now Under Discussion in the Nonprofit Sector, 46 N.H.B.J. 34, New Hampshire Bar Journal, Spring, 2005
Student Derivative Actions
Comment: The Case for A.U. (Accountable Universities): Enforcing University Administrator Fiduciary Duties Through Student Derivative Suits
The public craze for corporate accountability has sparked a recent debate over the state of nonprofit governance and charitable accountability. ... As a nonmember nonprofit corporation, enforcement of a school's charitable mission and trustee and administrator fiduciary duties lies primarily with state attorneys general. ... This nonmember structure bars students from bringing derivative actions under the RMNCA and other state nonprofit corporation laws and limits the opportunities for private party enforcement in the private university setting. ... Stern allows courts to look beyond technical nonprofit membership as a prerequisite to derivative standing and permit interested nonmembers to bring derivative actions against nonprofit corporations in order to fill gaps in charitable enforcement. ... Although the Stern court did not explicitly hold that nonmembers were entitled to bring a derivative suit on behalf of a nonprofit corporation, this was the exact effect of the court's ruling. ... Other courts interpreting and explaining Stern have noted that the most important of these factors is the effective lack of public regulation; someone needs to monitor the charity's function, and where state regulatory functions are lacking or nonexistent, private parties have a better claim to standing in enforcement actions.
Kusiak, Sara R., The Case for A.U. (Accountable Universities): Enforcing University Administrator Fiduciary Duties Through Student Derivative Suits, 56 Am. U.L. Rev. 129, American University Law Review, October, 2006
COMMENT: To Call or Not to Call? An Analysis of Current Charitable Telemarketing Regulations
The telemarketing business has experienced substantial growth in the United States over the past few decades. ... In an effort to reduce deceptive telemarketing practices, the TSR requires that certain disclosures be made to the consumer during every telephone call. ... Restricting the practices of telemarketing companies that work on behalf of charitable organizations offers consumers a means to distinguish between solicitation calls made by the charity itself and solicitation calls made by third parties on behalf of a charitable organization. ... Thus, to limit properly the intrusion of telephone solicitations and to increase consumer confidence in charitable telemarketing, the FCC should work in concert with the FTC to preclude all professional telemarketing companies, regardless of their purpose, from calling those consumers that do not wish to be called. ... Therefore, if the telemarketer follows the required disclosures, the speech is not misleading. Additionally, because solicitation is considered commercial speech, and as stated above in the discussion of Virginia State Board, commercial speech is protected by the First Amendment, then it follows that telemarketing sales calls are lawful. ... Experience has shown that calls do not subside with entity-specific lists because every telemarketing company is still entitled to interrupt a consumer at least once. ...
Meacham, Augusta, To Call or Not to Call? An Analysis of Current Charitable Telemarketing Regulations, 12 CommLaw Conspectus 61, The Catholic University of America, 2004