Fiscal Sponsor Successfully Fends Off Lawsuit by Nonprofit

In a rare court opinion involving a fiscal sponsorship arrangement, MobilizeGreen, Inc. v. Community Foundation (Jan. 27, 2022), the District of Columbia Court of Appeals affirmed summary judgment in favor of a fiscal sponsor facing a lawsuit from a dissatisfied nonprofit. MobilizeGreen alleged that fiscal sponsor Community Foundation breached the terms of a fiscal sponsorship agreement by failing to transfer the fiscal sponsorship to a substitute. MobilizeGreen also alleged that the Community Foundation breached a fiduciary duty the Foundation owed to MobilizeGreen with respect to the management of funds received from the U.S. Forest Service.

Agreeing with the trial court that had granted summary judgment in favor of the Community Foundation, the appellate court concluded that the Community Foundation did not breach its contractual obligations to MobilizeGreen, Inc. and did not assume any fiduciary obligations to MobilizeGreen, even assuming that it could have done so. More specifically, both courts found it was the contractual responsibility of MobilizeGreen, not the Community Foundation, to transfer the fiscal sponsorship to a third party and so its failure for a period of time to seek consent for such a transfer from the U.S. Forest Service was its responsibility. The appellate court also found that the parties’ obligations to each other were fully set forth in the fiscal sponsorship agreement and no extra-contractural fiduciary duties existed.

Lloyd Mayer