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Lawsuits Between Non-Profits Harm All

After the four-day trial, one of the jurors called it a "heartbreaking" case, even as he and his
fellow panelists took only two and a half hours to award the plaintiff $1.7 million. One board member of the defendant company said of the case before the trial, "I think it's morally offensive." Just days after the jury award was upheld on appeal, the plaintiff's lawyer told me, with what I sensed was rueful disappointment, "I'd guess both sides spent close to a million dollars on the litigation."

What kind of lawsuit can elicit such reactions? A lawsuit brought by one charity against another certainly can. Unlike commercial disputes, in which one business is suing another and paying the lawyers with funds taken, ultimately, from private profits, in a lawsuit between charities, the lawyers are paid with money that would otherwise support a charitable purpose. Even in victory, the "winning" charity's donors and managers can't help calculating how much more good work could have been done had they not gone to court. The "losing" charity feels exactly the same. How is it, then, that such lawsuits begin, much less go to trial? And how do you explain an appeal?

The case prompting these questions is Wounded Warrior Project, Inc. v. Wounded Warriors Family Support, Inc. The similarity of these charities' names is at the root of the dispute, which began in April 2007 when the lawyer for the Florida-based Wounded Warrior Project (WWP), Errol Copilevitz, wrote to the Nebraska-based group then known as Wounded Warriors Inc. to say that due to the similar names and near-identical website URLs, donations clearly intended for WWP were being sent to Nebraska. Efforts to sort things out between the charities, each of which offered support services to returning injured veterans and their families, were unsuccessful. WWP's forensic accountant determined that at least $1.26 million in donations had been misdirected to Wounded Warriors Family Support (WWFS), and WWP got a preliminary injunction shutting down WWFS's website. After WWFS rejected a settlement offer, WWP went to trial. On the Saturday before trial commenced, WWP offered WWFS $100,000 to settle and to take over its similar URL. That offer was also rejected. A week later, in September 2009, the Omaha, Neb., jury awarded WWP $425,000 more than it had asked for (the extra sum based on the Nebraska Consumer Protection Act). After its success at trial, WWP thought it had an agreement with WWFS to finally sort things out when it was faced with an appeal to the 8th Circuit based on largely procedural grounds. Last month, the appeals court ruled decisively in favor of WWP.

This chronology is frustrating and almost inexplicable. Both charities were founded by admirable veterans: WWP by John Melia, a former Green Beret who had been wounded in action, and WWFS by John Folsom, a Marine helicopter pilot and veteran of the Gulf War. They were engaged in similar charitable pursuits. Early on, there was even some cooperation between them. Before trial, both sides at least talked about wanting to settle. Yet, the case went forward. Copilevitz expressed some frustration to me about the length of the litigation. But, he said, WWP could not just "let it go," because ultimately the case was about protecting his client's donors. They had a right to have their charitable contributions be used for the programs to which they had been attracted in the first place.

Matt Butler, the WWFS board member who had called the lawsuit morally offensive, was also quoted in the press with another perspective on donor intent. He said, "Do we want to settle? Absolutely. We don't want to be burning up our donors' precious, hard-earned money to feed lawyers."

Copilevitz and Butler are both right.


Bruce D. Collins

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