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CHARITABLE IMMUNITY IN NEW JERSEY, N.J.S.A. 2A:53A-7
By Michael P. Lengel, Esquire and Benjamin J. Tartaglia, Esquire
"To be beneficent, when
we can is a duty; and besides this, there are many minds so sympathetically
constituted that, without any other motive of vanity or self-interest,
they find a pleasure in spreading joy around them, and can take delight
in the satisfaction of others so far as it is their own work." Immanuel
Kant, Fundamental Principles of the Metaphysics of Ethics (1785).
Charitable Immunity is a very powerful affirmative defense that a non-profit and its workers may assert to deflect claims of negligence. The original purpose of charitable immunity was to avoid diverting charitable trust funds to non-charitable purposes in order to live up to the reasonable expectations of the benefactors. Parker v. St. Stephen's Urban Dev. Corp., Inc.,. New Jersey's Legislature has mandated that the Charitable Immunity Act shall be construed liberally to afford immunity "in furtherance of the public policy for the protection of non-profit corporations, societies and associations organized for religious, charitable, educational or hospital purposes." N.J.S.A. 2A:53A-10; Hardwicke v. American Boychoir School .
Merely being a non-profit organization does not qualify an entity for charitable immunity. The New Jersey Supreme Court held: "nonprofit status … cannot be equated with charitableness. Rather, it is but one factor which merits consideration in the determination whether property is being used for charitable purposes." Presbyterian Homes v. Division of Tax Appeals.
To successfully obtain charitable immunity, an entity must be: (1) formed for non-profit purposes; (2) organized exclusively for religious, charitable or educational purposes; and (3) promoting such purposes at the time of plaintiff's injury who was then a beneficiary of the entity's charitable works. N.J.S.A. 2A:53A-7. If an entity satisfies the elements of Charitable Immunity, it is entitled to immunity without further analysis. O'Connell v. State.
As to the first prong, a defendant must show that is was formed for non-profit purposes. In determining this issue, Courts look to whether the entity was granted non-profit federal tax exemption status under section 501(c)(3) of the Internal revenue Code. Courts also look to language in the entity's articles of incorporation and organizational purpose to determine whether the entity not-for-profit. If an entity has 501(c)(3) status and "non-profit" is mentioned in that entity's articles, New Jersey courts quickly jump to the more arguable and debatable second prong.
As to the second prong, an entity must show that it was organized exclusively for religious, charitable, and educational purposes. Courts therefore examine an entity's articles of incorporation, by-laws, mission statement, organizational purpose and surrounding circumstances to determine an entity's worthiness for charitable immunity.
Significantly, entities that prove they were organized exclusively for educational or religious purposes automatically satisfy the second prong of the charitable immunity standard. Ryan v. Holy Trinity Evangelical Lutheran Church. This is extremely important because an entity with a confirmed educational or religious purpose, unlike a charitable purpose, does not have to show or prove that its operating capital was funded through charitable contributions and is not required to demonstrate a level of income from charitable donations to qualify for charitable immunity. Therefore and if possible, it behooves counsel to assert an educational or religious purpose on behalf of a non-profit entity in addition to any charitable purpose to increase the likelihood of a successful summary judgment motion.
New Jersey courts have broadly defined "educational" to include such activities as: childrearing instruction; teaching baseball skills; an aquarium; and a chamber symphony. Furthermore, a non-profit corporation may be organized exclusively for educational purposes even though it provides an educational experience that is recreational in nature. Morales v. New Jersey Acad. Of Aquatic Sciences.
In Auerbach v. Jersey Wahoos Swim Club, plaintiff was injured after falling down a staircase leading to the men's locker room after swimming at defendant-Wahoos Swim Club pool. At that time, Wahoos was a not-for-profit corporation in the business of training swimmers at various skill levels. After plaintiff filed suit and following discovery, Wahoos filed a motion for summary judgment asserting immunity under New Jersey's Charitable Immunity Act, N.J.S.A. 2A:53A-7 et al. The Appellate Division held that Wahoos was entitled to charitable immunity because defendant was organized exclusively for educational purposes and plaintiff was a beneficiary of the defendant's works. Id.
In determining whether an entity has a charitable purpose, the court examines the entity's aims, origins and method of operation to determine whether the entity's dominant motive is charity or some other form of enterprise. Parker v. St. Stephen's Urban Development Corporation, Inc. As a result, courts engage in a very fact-sensitive shifting and analysis of an entity's articles of incorporation, by-laws, mission statement, and financial statements to determine whether the entity was formed for charitable purposes. Furthermore, courts scrutinize how much funds are received by private contributions in determining whether an entity is indeed charitable.
In Parker v. St. Stephen's Urban Development Corporation, Inc., the Appellate Division reversed the trial court's grant of summary judgment on behalf of a non-profit corporation, St. Stephen's Urban Development Corporation, and held that the St. Stephen's was created to serve purely as a conduit for federal funds in conformity with federal regulation and was not a charity entitled to protection under New Jersey's Charitable Immunity Act. There, plaintiff sued St. Stephen's based on injuries sustained in a trip and fall accident in St. Stephen's apartment complex. St. Stephen's was created "to help fill an immediate need for respectable housing" in Asbury Park in 1971, St. Stephen's constructed an apartment complex with federal funding. St. Stephen's articles of incorporation provided: "defendant's goals include working for the health, welfare, and morals of the community" and assisting low and moderate income persons to obtain housing."
The Parker court then was presented with the issue of whether St. Stephen's was "organized exclusively for charitable purposes." The court held that St. Stephen's was not entitled to immunity because it was organized as a nonprofit corporation in scrupulous conformity with the provisions of the National Housing Act and was therefore a "conduit for federal mortgage money and for federal rent subsidies" and did not create the apartment complex by dedicating church funds. The court emphasized that St. Stephen's did not engage in fund-raising activities or charitable contributions and held that private charitable contributions have been involved at least in part in every case in which immunity has been conferred in New Jersey. Finally the court provided guidance as to what a non-profit must show to substantiate its charitable purpose:
The inquiry in each case should focus on the essence of
the entity itself. If a nonprofit corporation is performing a charitable
service and is essentially supported through charitable contributions,
the fact that it happens to receive some government support would
not alter its nature as a charity for immunity purposes. On the contrary,
where, as here, an entity is expressly conceived, created and operated
to serve purely as a conduit for federal funds in strict conformity
with federal regulations, its denomination as a charity for immunity
purposes is incorrect, notwithstanding its benevolent aims.
The Parker case illustrates that a non-profit trying to prove charitable purpose will not be entitled to charitable immunity if that non-profit does not receive substantial support through charitable contributions.
To satisfy the third condition, an entity must show that the plaintiff was injured while the entity was engaged in the performance of the charitable objectives it was organized to advance. The third condition is satisfied if the particular activity bears a substantial and direct relationship to the entity's general purpose. Loder v. St. Thomas Greek Orthodox Church. A plaintiff is deemed a beneficiary even if plaintiff pays for the defendant's services and even if the plaintiff does not personally receive a benefit.
A non-profit must therefore show that at the time of plaintiff's incident, defendant was engaged in the performance of the charitable objectives it was organized to advance and that the plaintiff was a direct recipient of those good works. DeVries v. Habitat for Humanity.
Once all three prongs are satisfied, an entity is entitled to charitable immunity and the plaintiff's negligence claims may be dismissed by dispositive motion. Benevolence and unbiased kindness should always find protection in the law.
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