Squabbles Within the Family
Adam Aptowitzer, June 11, 2008
It is not often that we hear of cases where charities sue other charities but such an occurrence is going on in Ottawa. There are several aspects to the case which might be of interest to charity law practitioners.
The Crisis Pregnancy Centre of Ottawa (operating as the “First Place Pregnancy Centre”) has sued Planned Parenthood Ottawa for defamation over comments that the Centre is “anti-choice”. Apparently, the Crisis Pregnancy Centre of Ottawa, operating as the First Place Pregnancy Centre, was one of three charities who stood to receive funds from a raffle organized by a group of the wives and girlfriends of the Ottawa Senators players. The Statement of Claim states that Planned Parenthood issued a press release that it “.considered it our responsibility to make sure the public clearly understands that a portion of their money will go to the First Place Pregnancy Centre, which we consider to be an anti-choice organization”. The press release was picked up by various national media outlets and was sent to the Ottawa Senators Foundation in order to pressure the Foundation to drop First Place from the program.
As the organizer of the event, the Senators Foundation apparently pressured First Place to withdraw from the Program. The Statement of Claim indicates that First Place, not wanting to interfere with the Foundation’s positive image, felt compelled to withdraw from the program and forfeit the estimated $33,000 and additional publicity it stood to receive from the event.
The Statement of Claim also makes it clear that First Place does not offer referrals for abortion if clients choose this option but does refer them to third party medical practitioners who will provide the referral based on their own judgement. Given the sensitive nature of language in the abortion debate, being tainted with the term “anti – choice” can be ruinous for an organization providing advice to people in difficult circumstances. In this case, First Place claims it has resulted in fewer clients and diminished fundraising opportunities directly as a result of Planned Parenthood’s actions.
First Place is seeking $150,000 to cover lost funding in the alleged damage to its reputation as well as $450,000 in punitive damages. In a for profit context one would expect the statement of claim to account for the loss of clients as part of the damages. However, in a charity context the damages are somewhat more remote from the cause of action. In this case, as the clients of the charity do not pay a fee and there is no per client fee paid by any government authority the damage relates to the fact that the decline of clients leaves the charity with a lesser argument to fundraise. From a litigation perspective this must make the case for damages more difficult to argue.
First Place must also consider the effect conducting this litigation may have on its disbursement quota (particularly if it loses the case). Litigation can be expensive and defending its reputation is not an activity in furtherance of its charitable activities. A review of First Place’s T3010 makes it clear that even a modest expense on this litigation could make the disbursement quota rules a concern.
A review of Planned Parenthood’s T3010 makes it clear that requested damages of $600,000 is four times its total gross assets which raises the spectre of bankruptcy and the possible liability of the co-defendant employees. However, assuming Planned Parenthood does not have insurance, payment of the award may put it offside the disbursement quota rules in the year in which the payment would be made. In effect, Planned Parenthood is in double jeopardy given that even if it has the funds to make good on the potential damages, the disbursement quota rules, if enforced strictly, might prove fatal to the organization’s charitable status.
One other interesting tangent to this case arises out of the Statement of Claim’s description of Planned Parenthood as a ‘political pressure group’. Many lawyers and judges are unfamiliar with the charity law sector and may be unaware that describing a charity in such terms could at least lead to an audit of the charity’s activities if not a revocation of the charity’s status. If such wording finds its way into the final judgement the CRA may use that as proof to take action against Planned Parenthood for being overly involved in political activities (notwithstanding that their actions in this particular case likely do not qualify as political).
There are several lessons to be learned from this dispute. The first is that there is a place for directors and officers insurance in running a charity. The second is that an overly strict application of the disbursement quota rules could unfairly cripple a charity from protecting its rights. Finally charities need to be very careful in how they are perceived by others because one never knows how those perceptions could come back to haunt.