In a unanimous (5-0) decision issued by the PA Supreme Court on Thursday, December 28, 2006, the Justices ruled that the Milton Hershey School Alumni Association (MHSAA) did not have "standing" to question actions of the governing Board of Trustees of the Milton Hershey School (MHS), which was established as a charitable trust by the Last Will of Milton Hershey.
In an Associated Press article entitled "Justices Rule Against Milton Hershey School Alumni", published on December 30, 2006, in various Pennsylvania newspapers, including the Williamsport Sun-Gazette and the York Dispatch, the Court's decision was reported:
Milton Hershey School alumni do not have the legal right to go to court and challenge the operations of a charitable trust established by the late chocolate magnate, the Pennsylvania Supreme Court ruled Thursday.The decision was reported in greater depth, with comments from interviews, in an article entitled Justices Rebuff Alumni, by Reggie Sheffield, published in the Patriot News (Harrisburg, PA) on December 29, 2006:
In a 5-0 decision, the justices overturned a Commonwealth Court ruling that said the Milton Hershey School Alumni Association had a ‘‘special interest’’ and that the judicial oversight the alumni sought would help the charity run more efficiently.
The Supreme Court noted the alumni group is not mentioned in the document setting up the Milton Hershey School Trust, which finances a school for unprivileged children that Hershey and his wife established in 1909.
‘‘Nothing in this litigation would affect the association itself; it loses nothing and gains nothing,’’ wrote Justice J. Michael Eakin. ‘‘The association’s intensity of concern is commendable, but it is not a substitute for an actual interest.’’
On December 30th, the Patriot issued a correction to the article, as noted by the MHSAA on its website:
The Milton Hershey School Alumni Association has been stripped of its ability to use the courts to question the operation of the Milton Hershey School by a state Supreme Court decision.
Yesterday's 10-page decision, meant to clarify the law on who may use the courts to challenge a charitable trust in Pennsylvania, also brought to the surface fissures within the association.
The 5-0 decision, written by Justice J. Michael Eakin, overturned a Commonwealth Court ruling that the 5,500-member alumni association could challenge in court decisions made by the school.
The ruling also upheld a 2003 decision by Dauphin County Orphans' Court Judge Warren G. Morgan in which Morgan labeled as "preposterous" the alumni association's demand for the appointment of two people to help oversee the operation of the $5 billion trust that funds the school. Morgan had issued a similar opinion in 1999.
Attorneys who filed the lawsuit on behalf of the alumni association asked the court to grant it standing, meaning a legal determination that the association had sufficient legal interest in the administration of the trust to allow it to file suit.
The Patriot News issued a retraction today concerning the article Reporter Reggie Sheffield wrote on December 29 about the PA Supreme Court ruling. The reporter, quoting an unreliable source, wrote that MHSAA's attorney did not have permission from the MHSAA to file the lawsuit.On a legal issues forum hosted by the MHSAA, various alumni of the MHS vented their disappointment & frustration with the decision.
The Patriot's retraction, found on page 2, is as follows:"The board of directors of the Milton Hershey School Alumni Association voted unanimously, with one abstention, to authorize a lawsuit against the Milton Hershey School board of managers and state Attorney General's office. A majority of association members later approved the action, and a two-third majority of the board also approved an appeal of the trial court's ruling. A story in yesterday's editions quoted an alumni activist who claimed that the group's attorney, board member Ric Fouad, did not have authorization from other board members or the alumni group as a whole to pursue the lawsuit."
On the other hand, Leroy Zimmerman, Chair of the School's Board of Trustees, issued a public statement, dated December 28th, found here, urging continued cooperation between the Trustees and the Alumni for a common purpose of serving the students.
His statement closes with comments about the broader principle confirmed by the PA Supreme Court that affects other non-profit organizations & trusts:
Lastly, it should be noted that this is an important decision for Pennsylvania jurisprudence, because it restores the longtime legal definition of standing to bring a cause of action.This places the Pennsylvania Attorney General's Office as the intercessor and the public's sole advocate in making objections to the governance of charitable trusts, absent other provisions in an originating document.
In doing so, the Court has contributed materially to the productive operation of important societal institutions, beyond the Milton Hershey School. The School is grateful to the many civic and governmental leaders who sought to file documents in support of our position.
The Office of Attorney General is elective; and its character has varied over its history, according to the history offered by the AG's website. On that webpage, the fundamental duties of the Pennsylvania Attorney General, as provided statutorily in the Commonwealth Attorneys Act, are listed in eight bullet points. No mention is made there about representation of the public's interest in charitable organization matters.
However, on a separate webpage is found the description of the PA AG's Charitable Trusts and Organizations Section:
The Charitable Trusts and Organizations Section protects the public's interest in all property committed to charitable purposes. Among its variety of responsibilities, the Section:
- Investigates and initiates legal actions against charitable organizations and/or their professional fundraisers to ensure that charitable donations are lawfully raised and expended;
- Oversees nonprofit corporations generally, including nonprofit mergers, conversions and acquisitions, and may seek to revoke an organization's franchise and articles whenever it misuses, abuses or fails to use its powers and privilege;
- Reviews the actions of executors and trustees in wills and trusts containing charitable gifts to make certain that the fiduciaries have acted properly and efficiently; and
- Makes copies of Internal Revenue Service Forms 990PF of Pennsylvania's private foundations available for public inspection.
The Charitable Trusts and Organizations Section attorneys are available to conduct public education programs and provide information on charitable solicitations and requirements. The Section has offices in Harrisburg, Philadelphia and Pittsburgh.
Question: Should the role and standards of the Attorney General's Office in representing the "public's interest" in such charitable matters be further specified in the Commonwealth Attorneys Act?
As I suggested in a posting made on December 27, 2006, entitled "Fiduciary Duties When Art Is "For Sale", I suggest that the extent & enforcement of the "public's interest" in the operations of non-profit organizations be reviewed by the Pennsylvania Legislature for clarification.
The current state of the common law on this issue in Pennsylvania is set forth in the Supreme Court's opinion, IN RE: MILTON HERSHEY SCHOOL AND HERSHEY TRUST COMPANY, TRUSTEE OF MILTON HERSHEY SCHOOL TRUST (No. 137 MAP 2005), as posted by the AOPC here.
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There might finally be closure in the long legal battle between the Milton Hershey School and its alumni association, while leaders from both sides have had personal communication for the first time since 2004.
Yesterday the Pennsylvania Supreme Court denied the alumni association's application for reargument of a 5-0 December decision denying the group the ability to challenge the school's operations in court.
The alumni association sought standing, a determination that it has sufficient legal interest in the administration of the school's multibillion-dollar trust to allow it to sue.
The association claimed the court ignored a "special interest" test in its December decision.
The association has long complained that the school for disadvantaged children in Derry Twp. does not use enough of the trust to help children.
Alumni association president Robert Heist said the decision makes it more difficult for the association to have influence in ensuring the school enforces Milton S. Hershey's deed of trust, which describes how the school is to operate.
"At the same time, I think this brings closure to years of litigation and fighting and opens up the door of opportunity for us to continue the process of rebuilding our relationship with the Milton Hershey School," Heist said.
To see a copy of the Pennsylvania Supreme Court's Per Curiam, one-line Order, dated February 21, 2007, denying the MHS Alumni Association's Petition for Reargument, click here (PDF format, 1 page).