Bitter Legal Dispute Pits National Diabetes Group Against a State Affiliate

A federal courtroom in Providence, R.I., is the arena for an angrily contested breakup involving the American Diabetes Association and its Rhode Island affiliate.

The Rhode Island group split off from its institutional parent rather than give up its autonomy, which it would have had to do under a national reorganization plan.

A U.S. District judge must decide whether the former affiliate, now called the Diabetes Foundation of Rhode Island, is entitled to keep its lists of local donors and members, as well as some $325,000 raised from Rhode Islanders to fight diabetes mellitus. The association argues that the local group has no right to retain those assets, contending that it broke its contractual agreement when it unilaterally severed ties last December.

The conflict dates to last June, when the national association’s board voted to abandon its structure of 51 independent affiliates coordinated by a national office and replace it with a single non-profit organization. To conform with that system, state affiliates are dissolving and merging their resources with those of the national association, whose efforts will be coordinated through 12 regional offices. The idea is to eliminate the duplication inherent in governing and managing 51 separate organizations with a similar purpose.

But the Rhode Island group, which had operated autonomously for 22 years before affiliating with the American Diabetes Association in 1980, feared that some of its own popular programs would be scaled back or ended if it melded into the association. At risk, it says, are programs that provide counseling and treatment to the poor and that send diabetic kids to summer camp, as well as an ambitious $1.5-million project to identify the estimated 20,000 Rhode Islanders who are unaware that they have the disease.

The national group has been moving steadily away from delivering such services and toward emphasizing public education and scientific research, says Cherie Kearns, executive director of the Rhode Island organization. “We ran into philosophical differences,” she says. “We hated breaking with the national group, but I don’t think we’re losing anything.”

Ms. Kearns says her group also believes that the rupture will save it money, because no longer will 42 per cent of the money it raises be passed along to the national office, as was required under the affiliation agreement. Instead of keeping just 37 per cent of its revenue for its own programs, it will now keep nearly 80 per cent. And, she adds, the group hopes to pare down its overhead expenses — which now amount to 21 per cent of revenue — by hooking up with United Way.

The Rhode Island group’s officials also feared that if the group had merged with the national association, its assets might have been used to shore up the shaky finances of affiliates in other New England states. “We were afraid our money was going to go to patch up red ink,” says Jeffrey H. Gladstone, a Providence lawyer who chairs the foundation’s board. “We wanted to make sure we maintained control of these charitable funds for the Rhode Island community.”

The American Diabetes Association, for its part, contends that the Rhode Island organization’s decision to disaffiliate has no legal effect, since the local group violated procedures set forth in its charter, bylaws, and agreement with its national parent.

“According to our interpretation of our existing agreements with the Rhode Island affiliate, it is clear that the affiliate’s assets are the property of the American Diabetes Association,” says Jerry Franz, national vice-president for communications and programs. “That is the crux of the dispute.”

After learning about the December 1 vote of its affiliate, the association moved quickly to protect those assets. A top association official notified the U.S. Postal Service in late December to forward all mail addressed to the affiliate to the association’s regional office in Massachusetts.

The local group reacted with outrage to that step, and several days later it obtained a restraining order that allows the foundation to continue receiving mail at its East Providence address.

But a federal judge must now sort out the issues and decide which organization is entitled to the affiliate’s assets. Meanwhile, the American Diabetes Association continues to operate in Rhode Island from its regional office in Massachusetts, and it plans to open an office in Providence.

“The association is concerned about continuing to serve the people of Rhode Island,” says Mr. Franz. “The A.D.A. is still operating there and will continue to do so.”

The foundation says it wants a quick resolution to the legal battle.

“We will be happy to live in harmony with the A.D.A.,” Mr. Gladstone says. “It serves no one’s interest to pursue litigation that will only eat up our resources and prevent both organizations from fulfilling our missions.”