Wednesday, August 23, 2023

Fraudulent Inducement of Donations?

A couple years ago, James Huntsman, son of Jon Huntsman Jr. (the former governor of Utah and former presidential candidate, among other things) sued the Church of Jesus Christ of Latter-day Saints (the LDS or Mormon church). He asserted that he had tithed in reliance on church statements that the LDS church did not use tithing money for commercial endeavors, that the church did use tithing money for commercial endeavors, and that therefore he was entitled to have his donations returned, as well as to punitive and exemplary damages. About two years ago, the district court granted the LDS church's motion for summary judgment.

Then, earlier this month, the 9th Circuit reversed. It found that it was possible that a jury could find that "tithing" included earning on invested tithing, and therefore summary judgment was inappropriate in this case. The court remanded it to the district court, though it has extended the deadline for the church to petition for en banc review. 

I wrote about the case at a Mormon-themed blog here. That provides most of the context surrounding this suit. But the case raises a couple interesting broader questions, including nonprofit questions. One is, how often does a disaffected donor allege fraud to try to get their donation returned? (To be clear, at best this case is just barely on the right side of frivolous; as a substantive matter, I don't think Huntsman can win.) Has it happened in the past? Will it be a new trend in the new world of performative litigation? Do nonprofits need to be meticulously clear about what they say they'll do with their money?

Samuel D. Brunson

Current Affairs, Religion | Permalink


It has most certainly happened in the past, though the notoriety of particular cases indicates its rarity (or least the rarity of its being reported in the media).

I can think of three cases off the top of my head, though the details would require some research: 1) the $25 million gift to the Smithsonian for a Western History-themed exhibit that was later opposed by curators, resulting in the return of most of the gift to the donor; 2) the Danforth family's gift to Dartmouth (?) for music education that was allegedly concerted to general use by the university, prompting a legal challenge by the Danforth heirs; and 3) the struggle between the Schwan family and the Lutheran officials administering the Schwan Foundation assets. The case made it to the SD Supreme Court twice, as I remember, as the governance authority split in the donor's will was open to interpretation by both sides, especially after the trust's assets went from $1 billion to about $600 million and a significant portion of the trust's assets were lost in foreign real estate investments in Caribbean resort properties.

Posted by: Michael L. Wyland | Aug 24, 2023 7:56:04 AM

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