March 12, 1998 | Read Time: 2 minutes
In the early 1970s, a group of patients at a non-profit hospital in the District of Columbia accused the hospital’s trustees of engaging in financial mismanagement and self-dealing.
The hospital tried to argue that the patients had no right to sue. But the late Gerhard A. Gesell, then a District Court judge, granted the patients legal standing in the case. He said that they had “a sufficient special interest to challenge the conduct of the trustees.”
Judge Gesell’s action underscored an important point about legal standing: While the power to sue charities rests largely with attorneys general or other officials, the rules on standing are continually evolving.
In general, a state’s attorney general is the main enforcer of laws governing charities, though in a few states the power to sue has been given to district or county attorneys or to other officials.
But over the decades, the rules governing right to sue have changed and, in some cases, been broadened.
In a 1993 monograph titled “Standing to Sue in the Charitable Sector,” three New York University law students — Mary Grace Blasko, Curt S. Crossley, and David Lloyd — noted that in some states, the attorney general’s powers do not preclude others from suing.
“A minority trustee or director can sue to secure proper administration of a charity,” the authors wrote. “Further, it is now recognized that a private party can have a ‘special interest’ in a charity that justifies granting standing.”
In some jurisdictions, people who belong to a non-profit organization can sue as a representative of other members on behalf of the charity to stop alleged wrongdoing by managers or directors.
When fraud or deliberate misconduct occurs, a court also may allow a private party to file a lawsuit.
“Courts are particularly sensitive to abuses of fiduciary responsibilities or fraud,” the New York University authors wrote, “and they will more readily allow a private actor to protect the public interest in situations where such abuses are apparent.”
