A New Jersey appeals court has ruled that donors in that state who gave to charities, only to have the charity use the money for purposes other than that intended by the donor, are due a refund. This precedent-setting decision potentially affects hundreds, if not thousands, of nonprofits all across New Jersey.
Honoring donor intent is not a new subject. In fact, we covered that topic quite some time ago in our much-read article, Are You Misappropriating Your Nonprofit’s Funds? That post deals specifically with charities that solicit gifts for a specific purpose, only to spend the money on something else. But while the topic may not be new, the court ruling is. The court essentially said that charities cannot ask for money for a specific purpose, then pull a bait-and-switch after the gift is made. Judge Jose Fuentes wrote the decision for the 3-judge panel and stated,
We believe that responsible charities will welcome this decision because it will assure prospective donors that the expressed conditions of their gift will be legally enforceable.
Nonprofit watchdogs and funding experts have weighed in on the decision, mostly in support. CharityWatch founder, Daniel Borochoff, commented,
Nobody’s forcing the nonprofit to take that money. They only should take it if they are willing to accept the terms under which it is given.
The actual case that led to this decision was brought by Bernard and Jeanne Adler, who together gave $50,000 over 3 years to a Princeton, N.J.-based no-kill animal shelter, SAVE. The 4-installment donation was made based on a specific solicitation SAVE made to its top donors at an event designed to raise money for shelter expansion. The Adlers strongly supported the expansion plans and gave the money with the understanding that their gift would also include naming rights for the new rooms.
In 2006, however, SAVE announced it was merging with another foundation and was abandoning its expansion plans. The Adlers requested a refund of its $50,000 gift, which was refused. After multiple, unsuccessful attempts to convince SAVE to refund the donation voluntarily, the Adlers filed suit.
The trial court found for the Adlers, stating that the gift and its solicitation was unequivocal and that SAVE’s alternative plans for the money did not satisfy the conditions of the gift. The appellate court upheld that ruling.
The Adler’s attorney, Stuart Polkowitz, commented after the appellate ruling,
In the end, the appellate decision relied on the very, very most basic principle of charitable giving: What was the donor’s intent? This is a rare case in terms of published opinions where we actually had a live donor, so the court could go right to the facts.
While unrestricted donations are not affected, this decision has a profound impact on restricted giving. Before this ruling, it was mostly an issue of ethics. Now, it’s a legal standard.