Noteworthy developments in nonprofit corporation law
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Noteworthy Developments in Nonprofit Corporation Law. Michael W. Peregrine Gardner, Carton & Douglas April 25, 2003. WELCOME. Goals of Presentation. To review the significant series of developments in nonprofit and charitable trust law that have occurred in the last several years.

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Noteworthy Developments inNonprofit Corporation Law

Michael W. Peregrine

Gardner, Carton & Douglas

April 25, 2003




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The Outline/Bibliography/ issues with nonprofit charitable clients.Other Resources


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Part I issues with nonprofit charitable clients.Recent Noteworthy CaseLaw Developments


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Health Midwest: issues with nonprofit charitable clients.

  • Kansas Litigation

  • Missouri Litigation


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  • CareFirst: issues with nonprofit charitable clients. the opinion of the Insurance Commission.


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HealthPartners issues with nonprofit charitable clients.

  • Business Compliance Review

  • “Appointment of Directors” Litigation


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In Re Milton Hershey School Trust issues with nonprofit charitable clients.

  • The “Public Interest” as a Trust Beneficiary

  • Liberalized Preliminary Injunction Criteria

  • Impact on Governance


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The issues with nonprofit charitable clients.Banner Health System Litigation

  • Increase in value from contributions and benefits should be retained by the community


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Littauer v. Spitzer issues with nonprofit charitable clients.

  • “Good News” for Nonprofit “M&A”?


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The issues with nonprofit charitable clients.AHERF Settlement

  • Continued Focus on Application of Restricted Gifts

  • “Zone of Insolvency” Issues


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The Virginia Experience issues with nonprofit charitable clients.


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Allina Health System issues with nonprofit charitable clients.

  • Affiliate Divestiture

  • Waste of Charitable Assets

  • Impact on Management, Governance


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Emerging Issues: issues with nonprofit charitable clients.

  • Parent/Subsidiary Conflicts

  • Charitable Solicitation Concerns

  • Imprudent Investment


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Notable Private Actions issues with nonprofit charitable clients.

  • Chairman of the Board v. Trinity

  • Smithers v. St. Luke’s-Roosevelt Hospital

  • Eychaner v. Roosevelt University

  • In re: Terra Foundation


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  • The Cleveland Clinic issues with nonprofit charitable clients.

  • Art Institute of Chicago

  • United Way of National Capital Area

  • Barnes Foundation Museum



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Part II Parent/Subsidiary Health Systems.The Impact of the “CorporateResponsibility Environment”


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And Just What Is That Parent/Subsidiary Health Systems.Environment?


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NASCO Parent/Subsidiary Health Systems.

The National Association of State Charity Officials


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Key Developments Parent/Subsidiary Health Systems.

  • Powers Report

  • NYSE Report

  • Sarbanes

  • NASCO Focus

  • IRS Announcement


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“The Powers Report” Parent/Subsidiary Health Systems.

Report by the Special Investigative Committee of the Board of Directors of Enron Corp.

February 1, 2002


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NYSE Corporate Accountability Report led it to take action.

(June 6, 2002)

  • Increasing Role and Authority of Independent Directors

  • New Audit Committee Requirements


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Sarbanes-Oxley Act (July 30) led it to take action.

  • Designed to protect the interests of investors and provide market stability.

  • Does not apply to nonprofits


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NASCO led it to take action.

  • Focus at state level of oversight of charitable corporations and protection of charitable assets, and the duties and obligations of officers and directors.


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IRS led it to take action.

  • Modification of Form 990 Return to Include Questions Related to the Integrity of the Organization’s Financial Statements.


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Part III led it to take action.The Relevance to Nonprofits


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Part IV obligation over nonprofit charities following AHERFLessons Learned;Governance Guidelines


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Conclusion obligation over nonprofit charities following AHERF


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