Opinion
No. 145 MAP 2014
03-02-2015
REDACTED, Appellant v. REDACTED, Appellees
ORDER
AND NOW, this 2nd day of March, 2015, the Request for Limited Disclosure is GRANTED. The Prothonotary is DIRECTED to make available, on a publicly-accessible entry, the present order, as well as the attached redacted version of Appellant's Petition for Permission to Appeal and redacted version of the December 30, 2014 order granting permission to appeal. In all other respects, the previously imposed seal, see order dated 12/30/2014, remains in effect pending further order of this Court.
It is further ORDERED that any amicus curiae brief, regardless of the position it supports, is due on or before the due date for Appellant's reply brief.
Exhibit 1
REDACTED Petitioner v. REDACTED Respondents No. 173 MM 2014 ORDER
PER CURIAM
AND NOW, this 30 day of December, 2014, the Petition for Permission to Appeal is GRANTED. The parties are directed to brief the following issues:
1) When counsel for a nonprofit corporation believes that charitable assets are being unlawfully diverted, may counsel disclose this information to the Attorney General's office, as parens patriae for the public to whom the charity and its counsel owe a fiduciary duty?
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The Application to File Under Seal is GRANTED. The Prothonotary is DIRECTED to establish a briefing schedule, with the direction that the matter shall be submitted on the briefs.
Exhibit 2
REDACTED
PETITION FOR PERMISSION TO APPEAL
REDACTED , petitioner in the above matter, hereby petitions the Court for permission to appeal, for the following reasons:
STATEMENT OF JURISDICTION
This is a petition for permission to appeal from an order of the Commonwealth Court, entered in a matter originally commenced in that Court. The order in question, as amended, states that it involves a controlling question of law as to which there is substantial ground for difference of opinion; and that an immediate appeal may materially advance the ultimate termination of this matter. This Court therefore has jurisdiction pursuant to 42 Pa.C.S. §§ 702(a) and 723(a).
ORDERS IN QUESTION
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STATEMENT OF THE CASE
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CONTROLLING QUESTIONS OF LAW PRESENTED
1. When counsel for a nonprofit corporation believes that charitable assets being unlawfully diverted, may counsel disclose this information to the Attorney General's office, as parens patriae for the public to whom the charity and its counsel owe a fiduciary duty?
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REASONS FOR GRANTING THE PETITION
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1. Disclosure to the Attorney General of wrongdoing by a charity is not prohibited by Rule 1.6. is a nonprofit corporation, organized for charitable purposes and tax-exempt pursuant to Section 501(c)(3) of the Internal Revenue Code, 26 U.S.C. § 501(c)(3). As such, its assets (including the value of its employees' time and services) are imbued with the corporation's charitable purpose. "All property held by a charitable nonprofit ... constitutes property committed to charitable purposes," In re Roxborough Memorial Hosp., 17 Fid.Rep.2d 412, 422-423 (Phila. Orph.Ct. 1997), and is held in trust for the public at large. Estate of Primer, 136 A.2d 107, 109 (Pa. 1957) ("beneficiary of charitable trusts is the general public"); In re Stroudsburg Real Property, 23 Fid.Rep.2d 258, 261 (Monroe Orph.Ct. 2003). The rights of the public at large are in turn represented by the Commonwealth as parens patriae, and specifically by the Attorney General. "It cannot be questioned that [the] Attorney General, by virtue of her office, is authorized to inquire into the status, activities and functions of public charities." Comm. v. Barnes Foundation, 159 A.2d 500, 505 (1960). The Commonwealth, through its Attorney General, thus has the rights of a beneficiary to be informed of operations and affairs, see 29 Pa.C.S. § 7710(d), on behalf of the ultimate beneficiary, the public at large.
Where private beneficiaries are concerned, the law is clear that an attorney representing a fiduciary has derivative duties to the beneficiary that transcend those that a lawyer normally owes to a client. See In re Pew Trust, 16 Fid.Rep.2d 73 (Mont. Orph.Ct. 1995). Thus, a trustee "cannot withhold from any beneficiary any documents regarding the management of the trust, including opinions of counsel," Follansbee v. Genlach, 56 Pa.D.&C.4th 483, 491 (All. CP. 2002), and the attorney-client privilege does not apply. Id, at 488.
We submit that the same analysis should apply to the relationship that exists among a public charity, its attorney, and the Attorney General. , as a public charity, owed a fiduciary duty to the public; thus, when lawyer had reason to believe that the corporation was diverting public charitable resources into private pockets, she was at least permitted, if not obliged, to disclose that information to the Attorney General.
Commonwealth Court, however, declined to apply the private-beneficiary cases to this situation, on the ground that "the interests of the public-at-large are well-represented by the Commonwealth acting in its parens patriae capacity." Op. at 22. But with all due respect to that court, this gets it backward: the Commonwealth's parens patriae interests are precisely why the Attorney General should be informed of wrongdoing by a charity, not a reason to keep her in the dark. We submit that, by electing to structure itself as a public charity supported by tax exemptions, has foregone any right to have its lawyer hide its activities from the Commonwealth.
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CONCLUSION
REDACTED Date: November 10, 2014