Alert
Alert
12.01.16
The Nonprofit Organizations Practice at Pillsbury has prepared this summary of significant legal and policy developments that have occurred in approximately the past year. All of these developments have potential impacts upon nonprofit membership organizations. Citations are included for those desiring additional details.
Antitrust
Evergreen Partnering Group, Inc. v. Pactiv Corp., 832 F.3d 1 (1st Cir. 2016).
The plaintiff, a converter of polystyrene products, argued that the defendants violated Section 1 of the Sherman Act by conspiring to sabotage its recycling model involving commission payments by rejecting agreements that involved commissions and by blocking access to customers. The plaintiff was required to produce evidence that “tends to exclude the possibility” that the defendants acted independently. The court concluded that the plaintiff failed to provide evidence sufficient to raise a reasonable inference of unlawful action. The court found no genuine issue of material fact as to whether a conspiracy existed.
Kleen Products LLC v. International Paper Co., 831 F.3d 919 (7th Cir. 2016).
Containerboard purchasers sought to recover treble damages under Section 1 of the Sherman Act. The purchasers alleged that defendant companies increased prices by restricting “the supply of containerboard by cutting capacity, slowing back production, taking downtime, idling plants, and tightly restricting inventory.” The circuit court ruled that the district court properly certified a nationwide class of purchasers. The prerequisites for certification were satisfied: There were common methods of proof to show the existence of the alleged collusion and the effect it had on prices, the collusion predominated over other factors that could affect an individual purchaser’s damages, and releases signed by some members would merely limit their recovery period to purchases made after that time.
In re Musical Instruments & Equipment Antitrust Litigation, 798 F.3d 1186 (9th Cir. 2015).
The plaintiffs, purchasers of guitars and guitar amplifiers from the largest retail seller of musical instruments in the United States, claimed that the defendants violated Section 1 of the Sherman Act by conspiring to fix prices. The circuit court rejected the plaintiffs’ argument that it is plausible to infer a price-fixing conspiracy based only on allegations that certain guitar manufacturers each adopted similar advertising policies (“parallel conduct”) under circumstances that suggest the manufacturers agreed among themselves to adopt these policies (“plus factors”). The court found that the plus factors were consistent with rational and competitive business strategies and did not suggest an illegal agreement.
Attorney/Client
Sowell v. DiCara, 127 A.3d 356 (Conn. App. Ct. 2015).
A nonprofit mental health services board of directors was represented by counsel in an underlying wrongful termination action brought by a former employee against the corporation. The former employee's attorney violated a rule of professional conduct when he sent notice of claim letter to board members, in which the attorney stated his view of the applicable law and what he believed would be the legal consequences of the board's dismissal of his client's employment. Although the corporation had been dissolved, the chairperson of the board still had authority to retain counsel to represent the corporation's interests, counsel had filed a certificate of representation of the corporation, the corporation's bylaws indicated that its business affairs were managed by the board, and the attorney acknowledged that he sent the letter to the board members without the prior knowledge or consent of their counsel.
Bankruptcy
Ring v. Elizabeth Foundation for Arts, 136 A.D.3d 525 (N.Y. Sup. 2016).
Elizabeth Foundation for Arts (EFA), a nonprofit corporation, purchased the assets of another nonprofit corporation, Printmaking Workshop, Inc. (PMW). The asset purchase agreement included a clause stating that EFA had no legal obligation to pay past debts of PMW. A creditor brought suit to collect from the acquiring nonprofit under theories of mere continuation and de facto merger. The court affirmed the dismissal of the mere continuation claim because PMW was still registered as an active corporation in New York State and had not been extinguished by the asset purchase. The court then found there was a material issue of fact as to whether a de facto merger had occurred. Summary judgment was denied because a material issue of fact existed.
Civil Procedure
Sampson v. Sisters of Mercy of Willard, Ohio, No. 3:12 CV 824, 2016 WL 614019 (N.D. Ohio Feb. 16, 2016).
An employee who was terminated from a nonprofit association brought action against the association for age discrimination. The former-employee sought an order prohibiting the association from referencing or presenting any evidence in court that it was a nonprofit organization or charitable institution, because it was “not relevant to the claims at issue and, even if it were relevant, allowing this type of evidence would unfairly prejudice jurors because they may misunderstand the terms ‘nonprofit’ and ‘charitable’ and then be reluctant to hold [the association] liable.” The court held that “[The association’s] nonprofit or charitable status is not relevant information for the jury and raises a substantial possibility of undue prejudice. This status is extraneous to the claims the jury will be asked to decide and will not be admitted. While it is possible some jurors will know of the connection between Mercy hospitals and the Catholic faith, or that many hospitals are considered nonprofit entities, the members of the jury will be instructed before opening statements and following the close of evidence that they may not permit bias, sympathy, or prejudice influence their verdict.”