Court Opinion

ID: 4471803
Source: CourtListenerOpinion
Date Created: 2020-01-13 16:00:17.470074+00
Date Added: 2024-06-11T11:38:25.190799
License: Public Domain

No. 19-1478
Hadassah Academic College v. Hadassah, The Women’s Zionist Organization of America, Inc.

                                       UNITED STATES COURT OF APPEALS
                                          FOR THE SECOND CIRCUIT

                                              SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007 IS PERMITTED AND IS GOVERNED BY
FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN
CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE
EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION
“SUMMARY ORDER”). A PARTY CITING TO A SUMMARY ORDER MUST SERVE A COPY OF IT ON
ANY PARTY NOT REPRESENTED BY COUNSEL.

       At a stated term of the United States Court of Appeals for the Second Circuit, held at
the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York,
on the 13th day of January, two thousand twenty.

PRESENT:
           AMALYA L. KEARSE,
           GUIDO CALABRESI,
           SUSAN L. CARNEY,
                       Circuit Judges.
_________________________________________

HADASSAH ACADEMIC COLLEGE,

                   Plaintiff-Appellant,

                             v.                                                            No. 19-1478

HADASSAH, THE WOMEN’S ZIONIST
ORGANIZATION OF AMERICA, INC.,

           Defendant-Appellee.
_________________________________________

FOR PLAINTIFF-APPELLANT:                                             ERIC ASCHKENASY (Peter Reiser, Eric R.
                                                                     Levine, on the brief), Eiseman Levine
                                                                     Lehrhaupt & Kakoyiannis, P.C., New
                                                                     York, NY.
FOR DEFENDANT-APPELLEE:                                  DANIEL L. KURTZ (James S. O’Brien, Jr.,
                                                         on the brief), Pryor Cashman LLP, New
                                                         York, NY.

        Appeal from the judgment and order of the United States District Court for the
Southern District of New York (Torres, J.).

        UPON DUE CONSIDERATION WHEREOF, IT IS HEREBY ORDERED,
ADJUDGED, AND DECREED that the judgment entered on November 2, 2018, is
AFFIRMED.

        Plaintiff-Appellant Hadassah Academic College (“HAC”) appeals from a judgment of
the District Court (Torres, J.) in favor of Defendant-Appellee Hadassah, The Women’s
Zionist Organization of America, Inc. (“Hadassah”).1 The District Court dismissed HAC’s
diversity suit for lack of standing, holding that HAC had not met the “special interest”
exception to the general rule in New York that potential beneficiaries of charities do not
have standing to contest how those charities are administered. HAC appeals.

        We take the following statement of facts from HAC’s complaint, as we must when
reviewing a motion to dismiss. HAC, an Israeli college founded in 1996, brought this suit
against Hadassah, a New York nonprofit corporation founded in 1912, on state law claims
of breach of fiduciary duty, conversion, and unjust enrichment, and sought an accounting
and imposition of a constructive trust. HAC has for many years been a beneficiary of
charitable funds transmitted to it by Hadassah, and funds donated to Hadassah are often
earmarked by donors for later distribution to HAC. HAC alleges that, due to a dispute
between the organizations regarding Israeli real estate, in recent years Hadassah has failed to
transmit to HAC funds so earmarked. We assume the parties’ familiarity with the underlying
facts, procedural history, and arguments on appeal, to which we refer only as necessary to

1 The record on appeal includes gift agreements by which individuals donated money to Hadassah

Medical Relief Association, Inc. (“HMRA”), rather than to the named defendant, Hadassah, and the
two organizations appear to be related. HAC’s Proposed First Amended Complaint attempted to add
HMRA as a defendant. We refer to HMRA and Hadassah together as “Hadassah” for purposes of
this summary order, as the inclusion of HMRA as a defendant does not affect our standing analysis.

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explain our decision to affirm the District Court’s judgment and order. On appeal from a
dismissal for lack of standing, “[w]e review legal questions relating to standing de novo and
factual findings for clear error.” Anderson Grp., LLC v. City of Saratoga Springs, 805 F.3d 34, 45
(2d Cir. 2015) (internal quotation marks omitted).

       Under New York law, the general rule is that “one who is merely a possible
beneficiary of a charitable trust, or a member of a class of possible beneficiaries, is not
entitled to sue for enforcement of the trust.” Alco Gravure, Inc. v. Knapp Found., 64 N.Y.2d
458, 465 (1985). New York law authorizes and obligates the New York Attorney General to
sue on behalf of beneficiaries. Id.; N.Y. Est. Powers & Trusts Law § 8-1.1(f) (“The attorney
general shall represent the beneficiaries of such dispositions for religious, charitable,
educational or benevolent purposes and it shall be his duty to enforce the rights of such
beneficiaries by appropriate proceedings in the courts.”). This rule serves to “prevent
vexatious litigation and suits by irresponsible parties who do not have a tangible stake in the
matter.” Alco Gravure, 64 N.Y.2d at 466.

       HAC argues that it falls within a narrow exception to this general rule, which allows
suits by beneficiaries with a “special interest” in the charitable funds. In Alco Gravure, the
New York Court of Appeals explained that, to qualify for this exception, a beneficiary must
be “entitled to a preference in the distribution of such funds [by the charitable entity] and
the class of potential beneficiaries [must be] sharply defined and limited in number.” 64
N.Y.2d at 465. HAC argues on appeal that the earmarked funds donated to Hadassah give it
a qualifying preference in the distribution of those funds, and that it otherwise satisfies the
exception’s terms.

       To establish a qualifying preference, however, HAC points only to gift agreements
and wills in which donors or testators expressed a desire that the funds directed to Hadassah
eventually flow to HAC, while leaving Hadassah with discretion as to the funds’ ultimate
distribution. The gift agreements that it presents contain terms acknowledging that Hadassah
retains complete discretion in the disposition of the funds notwithstanding the expressed
wishes of the donor. The wills submitted also are devoid of language binding Hadassah or

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restricting its ultimate exercise of discretion. This is not enough to satisfy New York law’s
“special interest” exception.

       In these circumstances, we conclude that HAC has failed to show it is “entitled to a
preference in the distribution of such funds.” Alco Gravure, 64 N.Y.2d at 465. We therefore
affirm the District Court’s dismissal of HAC’s suit for lack of standing.

                                               * * *

       We have considered all of HAC’s remaining arguments and conclude that they are
without merit. The District Court’s judgment is AFFIRMED.

                                                       FOR THE COURT:

                                                       Catherine O’Hagan Wolfe, Clerk of Court

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