January 10, 2002 | Read Time: 3 minutes
Organizers of California AIDS Ride sue two charities to block a competing fund-raising race
An event-planning company in Los Angeles that has helped raise millions of dollars for charities that serve people with AIDS is suing two California AIDS groups to stop them from organizing what the company describes as a copycat fund-raising event.
Pallotta TeamWorks is asking the Los Angeles County Superior Court to stop the Los Angeles Gay & Lesbian Center and the San Francisco AIDS Foundation from staging a bicycle-riding event between the two cities in May, just weeks before the company is to run its ninth annual California AIDS Ride along a similar route. The lawsuit accuses the charities of breaching a contract that the company says specifically prohibits them from organizing their own bikeathons.
Since the first seven-day, San Francisco-to-Los Angeles ride in 1994, the Pallotta-run events have produced a total of about $100-million, with roughly $40-million going to the ride’s two beneficiaries — the Gay & Lesbian Center and the AIDS Foundation. Most of the money, which is raised by riders who solicit pledges, covers the company’s costs to produce the events. The company, which staged 16 bikeathons and walkathons around the nation last year to benefit various AIDS and breast-cancer causes, also earns a flat fee for each event. Pallotta drew $450,000 for last summer’s California ride.
The California charities expect to receive a total of about $6-million, or roughly half of the total amount raised by the 2001 event. But in past years the groups received as much as nearly two-thirds of the event’s proceeds. And following a dispute between the charities and the company over how last year’s proceeds were split, the charities decided to stage their own event.
“You get to the point where you say, Yes, there are millions being raised for charity, but at what cost?” says Gwenn Baldwin, executive director of the Los Angeles Gay & Lesbian Center.
Expense Overruns
Norm Bowling, a spokesman for Pallotta TeamWorks, acknowledges that expenses for last year’s ride ran about 8 percent over budget, and that the charities received a smaller share of the event’s income than in the past. He says those cost overruns were an “aberration.”
Among other factors cutting into the ride’s income, he says, was an unexpectedly low turnout among bicycle riders who had signed up to gather charitable pledges.
The company is going ahead with its California ride in June, having found a new beneficiary: AIDS Project Los Angeles. Even so, says Mr. Bowling, the bikeathon being organized by the ride’s former beneficiaries will damage the AIDS Project’s attempt to raise money through the Pallotta ride.
In its lawsuit, Pallotta says that in contracts signed by the Los Angeles Gay & Lesbian Center and the San Francisco AIDS Foundation for previous rides, the charities “acknowledged and agreed the AIDS Ride event was an original concept” of the company and that neither charity “could use or exploit the multi-day bikeathon fund-raising concept without the express written consent” of the company.
In separate court filings, each of the two charities disputes the company’s exclusive right to operate an AIDS ride. They say that the clause to which they had agreed dealt mostly with the use of Pallotta’s trademarks and logos, which the company has not accused the charities of using in their forthcoming ride. Regardless, the charities say, if the clause was meant to be read as a prohibition against the use of a multiple-day bike ride to raise money, then the clause itself violates California law against limiting business competition.
Pallotta TeamWorks “is engaged in the lawful business of raising (for its own financial interest) money for HIV charities among others by use of bike rides,” says the San Francisco AIDS Foundation’s court papers responding to the lawsuit. “It seeks to restrain [the San Francisco AIDS Foundation] from engaging in that business to eliminate competition with its own business.”
The court is scheduled to hear arguments in the case next week.
