Article Archives >> Lead Stories >> June 16-30, 2009
In-Person Solicitations Create
Grounds for State Court Jurisdiction
Multiple meetings and state charitable solicitation registration
show out-of-state charity sought to avail itself of state law
A dissatisfied donor to the Ronald Regan Presidential Foundation in Simi Valley, California, has been allowed to sue the Foundation in New York State because the Foundation’s multiple calls, letters, and personal meetings in New York were sufficient to create state court jurisdiction, a federal District Court has held.
Although the Foundation was not registered to do business in New York, its multiple activities and its registration for charitable solicitation purposes showed that it sought to avail itself of the laws of New York, the Court said. (Sills v. The Ronald Regan Presidential Foundation, S.D. NY, No. 09 Civ. 1188, 5/27/09.)
Richard Sills, a New York resident, filed suit in state court in Manhattan, claiming that $200,000 he donated to the Foundation was not being used as he specified. The Foundation removed the case to federal court and then moved to dismiss the case for lack of the court’s personal jurisdiction over it. The Foundation has more than 75 employees, all in California. It has no office, phone number, bank account or property in New York and is not registered to do business as a foreign corporation. Nevertheless, the Court denied the motion.
The Foundation does not advertise in New York, other than incidentally on its website. It does, however, do mass mailings to lists of potential donors in the state. Sills first became a donor in 1997 as the result of one of the mass mailings. His $1000 gift made him a member of the “Chairman's Club” of the Regan Library, and the Foundation began to give him more serious personal attention.
Board member Steve Forbes invited him to a fundraising luncheon at Forbes’ apartment in New York City, which Sills attended. A subsequent gift of $100,000 generated more attention, including calls, letters and further solicitation. Several more $100,000 gifts resulted in a visit by the Foundation’s executive director and development director. When Sills expressed displeasure about some activities at the Presidential Library, he received a letter from the Chair of the Board saying how important he was as a donor, and suggesting that he might attend a reception in New York during the Republican National Convention in 2004 and an Air Force One Gala hosted by the Foundation’s “Trustee and Friend, Rudy Guiliani,” also in Yew York.
Sills subsequently gave two additional gifts of $100,000 each to establish various educational programs at the Library, making his total contributions nearly $650,000. It is the use of these last two gifts over which he sued.
New York’s “long-arm” jurisdiction statute gives state courts jurisdiction over any person not domiciled in the state who “in person or through an agent … transacts any business within the state,” where the cause of action arises from that business.
The Court recognized that not all purposeful activity would be sufficient to create jurisdiction. It cited situations in which jurisdiction was not created by “petty contacts,” such as a single order of goods, the transitory presence of a corporate officer, or materials shipped by an out-of-state consultant. But it concluded that “the totality of the circumstances” in this case did create jurisdiction.
“The Foundation endeavored to cultivate an ongoing relationship with Sills through a campaign of solicitation in New York by which it actively projected itself into the state,” the Court said. It cited the “numerous letters and telephone solicitations,” the invitation to the fundraiser, the visit at his home, and the praise for his generous donations, all designed to establish a substantial “business” relationship with Sills.
The Court also cited the Foundation’s registration with the state for charitable solicitation purposes. “Having so registered,” the Court said, “the Foundation unmistakably purposefully availed itself of the privileges and benefits of New York laws; absent this registration, the Foundation would be prohibited from soliciting contributions from any person or organization anywhere within New York.”
The Court recognized that charitable solicitation registration alone might not support a finding of “doing business,” but said the registration was “jurisdictionally significant in the present context and amply supports a finding of the requisite purposeful availment” of New York law.
The Foundation also argued that there was no “nexus” between the transaction of business in New York and the cause of action, but the Court said Sills’ claims “directly relate to the Foundation’s repeated solicitation of him in New York.”
YOU NEED TO KNOW
This case helps draw the line that determines the type of activity that will create personal jurisdiction for a donor to sue a charity away from its home state. The Court seems to be saying that mail solicitation alone may not suffice, but that in-person solicitation and/or events will be enough. Charities should realize that substantial personal attention to donors in their homes is likely to create jurisdiction if there should be subsequent litigation in the donors’ home states.
There are still a number of interesting questions to be decided if this case moves forward without a settlement. Does the donor have standing to contest the use of the gifts, or is the Attorney General the only person who can do so? If so, which Attorney General? Which state law applies if the state rules are different?
Article Archives >> Lead Stories >> June 16-30, 2009
