David Eisen (Partner-Los Angeles) spoke about a recent case in "L.A. Vehicle Donation Charity Ordered to Shut Down after Alleged False Advertising" in the June 26, 2017, issue of theLos Angeles Business Journal. The case involved a charity that advertised 100 percent of the proceeds from the sale of donated cars would be given to charities selected by the donors, but the lawsuit, which was brought by the California State Attorney General and the Los Angeles County District Attorney, alleged that 97 percent of the sale proceeds went toward administrative costs, including advertising, towing and car repairs. The stipulated final judgment places a permanent injunction on the nonprofit's president, barring him from serving as a director, officer, trustee or employee of any California charitable organization and bans him from doing contract work with charities, holding any management or supervisory position or engaging in fundraising activities. The charity was ordered to pay $30,000 to set up a fund with the California Community Foundation to support charitable programs for the benefit of children. A payment of $870,000 was stayed but may be enforced if the nonprofit violates the injunction.
David called the suit "a classic case of governmental overreach, in which an individual in a small business who was doing the best he could was faced with a Hobson's choice: paying to litigate for the foreseeable future or stop the charitable work that he loved ... the very small amount of money actually paid to resolve this case strongly suggests that the overheated rhetoric in the District Attorney's statement does not match the actual evidence in the litigation."
Originally published by Los Angeles Business Journal.
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