Wash. judge hears Lung Association dispute

The American Lung Association on Friday asked a judge to put its Northwest chapter out of business, after the chapter gave its Seattle headquarters and $600,000 to a different, newly created charity.

At a hearing in King County Superior Court, Judge Regina Cahan made clear she didn't quite understand the chapter's rationale for giving away the building or the money. But she also called the national organization's attempt to deal with the matter "heavy-handed" and questioned whether it was entitled to the legal relief it sought.

"Aren't there other ways besides a preliminary injunction that would serve your means?" she asked the American Lung Association's lawyer.

The national organization, founded in 1904, asked Cahan for an injunction barring the American Lung Association of the Northwest from continuing to use the ALA name or logo. The national charity also seeks control of the chapter's headquarters and financial assets as it establishes a new Northwest affiliate.

The Northwest chapter, launched in 1906, runs the charity's efforts in Idaho, Alaska and Washington, including teen anti-smoking efforts, support of indoor smoking bans, and fundraising bike rides and climbs of Mount Rainier.

The spat has been a black eye for the lung association, with some donors saying they would direct their money elsewhere. The judge said she would rule early next week.

The dispute began in late summer, after the Northwest chapter's new chief executive, Mike Alderson, joined two other people, including the former chief executive of Harborview Medical Center, in creating a new charitable organization, the Pacific Northwest Lung Cancer Foundation. Alderson persuaded the chapter's board to give his new foundation the Northwest chapter's one-story, brick headquarters building - assessed at $3.2 million - for just $10.

He also persuaded the board to give the new foundation $1.2 million - $600,000 immediately and $600,000 later - to help get it off the ground. The new foundation's goal was to do high-caliber fundraising that would benefit not only the Northwest chapter, but other organizations devoted to lung health.

The national charity's lawyer, Jed Powell, told Cahan that Alderson had a clear conflict of interest in using his new foundation to "loot Northwest's assets and resources."

In court declarations, Alderson and chapter directors insisted that giving away those assets was a creative way of dealing with financial difficulties. By doing so, the chapter could get the building's maintenance costs off its books, for example.

And, they said, the national organization was threatening to merge the regional affiliate with other chapters unless it boosted its fundraising substantially. The new foundation started by Alderson was to have a full-time development staff, and would be able to spend its money more flexibly because it had a much smaller board of directors, they said.

"Our average donation is less than $10 per donor," Alderson said after the hearing. "The foundation was talking about going after six-figure donations."

The judge repeatedly questioned the Northwest chapter's explanations, noting that the $1.2 million promised to the new foundation represented a large chunk of the chapter's $2.6 million cash assets.

"It's one thing to give away some money," she said. "It's another thing to give away such a large portion of your money."

As for having a full-time development staff, she asked, "Wouldn't it be better for the American Lung Association of the Northwest to have that in their own shop?"

Terence J. Lynam, a lawyer for the chapter, acknowledged its approach was "a little out of the box," but said nothing it did violated the agreement between the chapter and the national organization. The court should not be second-guessing the doctors and other well-intentioned citizens who serve on the chapter's board, he argued.

Powell disagreed. He said there were clear violations of the agreement, including of one provision that prohibits affiliates from forming new, competing charitable foundations.

While the chapter is allowed to make charitable donations that would further the lung association's mission, he said, Alderson's foundation was so new it had not even adopted a mission. The Northwest chapter had no guarantees that its gifts to the Pacific Northwest Lung Cancer Foundation would be repaid in any way, he said.

"Giving away that much money on faith is a breach of their fiduciary duty," Powell told the judge.

The national charity several weeks ago ordered the Northwest chapter to stop using the American Lung Association name and logo, but it continued, and the only way to remedy that is with a preliminary injunction from the court, Powell said. The judge suggested that other measures, such as putting a legal hold on the headquarters building, might suffice; Powell responded that for legal reasons, the ALA did not have those options.

The Northwest chapter argues that an injunction would put it - and its 40 employees - out of work immediately, before a trial can be held to determine whether the national organization has the right to dissolve it under the contract agreement that governs their relationship.

"It would be the death penalty of this organization without a trial," said Kelly Corr, a lawyer representing several ALA-Northwest board members named as defendants.