What Happens When a Donor Can’t Honor a Charitable Pledge?
Many people and companies make long-term pledges to charitable organizations. It’s a common way for them to pay off a large charitable gift over several years. But, what if the donor’s financial circumstances change? What if business is bad? What if a company goes bankrupt?
Well, that’s exactly what happened to Arizona-based grocery chain, Bashas‘. In 2005, the company, which has an excellent philanthropic history and reputation, pledged $25,000 a year for 10 years to St. Joseph’s Hospital Foundation. Then, in 2009, it declared bankruptcy as a result of the bad economy, expansion, and competition. (Source: Arizona Republic, 1-27) But, the hospital foundation continued its efforts to collect.
After two attempts through the court system failed, St. Joseph’s and Bashas’ negotiated a settlement for the reduced amount of $50,000, in lieu of the $145,000 remaining pledge. But, the bankruptcy court rejected it as frivolous and unfair to Bashas’ creditors.
So, last year the foundation filed an appeal with U.S. District Court, and again, the judge sided with the bankruptcy court saying, “the hospital foundation or its attorneys were using abysmal judgement and questioned whether other donors would be willing to pledge money if one thought St. Joseph’s would chase you to the end of the world even after a change in circumstance makes fulfillment of the pledge unjust.”
There’s still an ongoing 9th Circuit Court Appeal that may not be considered until next year. The foundation claimed that, “the grocer benefited from positive exposure through published brochures, donor recognition boards and special events.”
What do you think of this situation? Should St. Joseph’s Hospital Foundation have backed off? Is its litigious behavior killing its brand reputation? Is it justified in going after the original pledge?