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CLALIT HEALTH SERVICES v. ISRAEL HUMANITARIAN FOUNDATION

August 31, 2005.

CLALIT HEALTH SERVICES, Plaintiff,
v.
ISRAEL HUMANITARIAN FOUNDATION, Defendant.



The opinion of the court was delivered by: DENNY CHIN, District Judge

OPINION

In this diversity action for breach of contract and declaratory relief, two not-for-profit entities dispute entitlement to certain bequests of two estates. Before the Court are cross-motions for partial summary judgment. For the reasons that follow, both motions are granted in part and denied in part.

  STATEMENT OF THE CASE

  A. The Facts

  The facts have been described in detail in two prior memorandum decisions, Clalit Health Services v. Israel Humanitarian Foundation, No. 02 Civ. 6552 (DC), 2003 WL 22251329, at **1-2 (S.D.N.Y. Sept. 30, 2003) ("Clalit I"), and Clalit Health Services v. Israel Humanitarian Foundation, No. 02 Civ. 6552 (DC), 2004 WL 2199505, at **1-4 (S.D.N.Y. Sept. 29, 2004) ("Clalit II"). Familiarity with Clalit I and Clalit II is assumed. A brief background and additional facts pertinent to this motion are detailed below.

  1. The Parties

  Plaintiff Clalit Health Services ("Clalit") is a not-for-profit corporation existing under the laws of Israel, with its principal place of business in Israel. (Aviram Decl. ¶¶ 2-3). Clalit provides medical and health care services in Israel. (Id. ¶ 2). Defendant Israel Humanitarian Foundation ("IHF"), formerly known as Israel Histadrut Foundation, is a not-for-profit corporation organized under New York law, with its principal place of business in New York. (Def.'s 56.1 Statement Ex. 1).*fn1 IHF is a charitable foundation that solicits and administers charitable donations for diverse humanitarian causes. (Id.).

  From its inception until 1996, IHF raised money to provide assistance to Histadrut, a social organization started in Israel in 1920 that provided social services, including medical services, to its members. (Id. ¶¶ 1, 4; Am. Compl. ¶ 10).*fn2 The medical arm of Histadrut was Clalit, so money raised by IHF for medical services in Israel was, until that time, invariably given by IHF to Histadrut and, in turn, by Histadrut to Clalit. (Abrams Decl. ¶¶ 3-5, 7). There was no contractual relationship between Clalit and IHF. (Id. ¶ 6).

  In January 1995, a new health insurance law became effective in Israel that guaranteed medical care to all residents by using payroll deductions to fund four designated service providers, the largest of which is Clalit. (Aviram Decl. ¶ 3). As a result of the new law, Clalit no longer receives funding from the Histadrut. (Def.'s 56.1 Statement ¶ 8). In addition, residents of Israel no longer need to be members of Histadrut to be members of Clalit, as was previously the case. (Aviram Decl. ¶ 3).

  This changed the relationship IHF had with Histadrut, and in turn its relationship with Clalit. (Id. ¶ 6; Abrams Decl. ¶¶ 12, 13, 14, 15). Whereas before IHF had raised money exclusively for Histadrut (that, when earmarked for medical services, would be given by Histadrut to Clalit), IHF began to bypass Histadrut*fn3 and enter into agreements with individual charitable entities in Israel, including Clalit. (Def.'s 56.1 Statement ¶¶ 13, 14). On September 9, 1996, IHF and Clalit entered into a "memorandum of understanding" (the "MOU") that governed the terms of IHF's ongoing fundraising efforts for Clalit. (Id. ¶ 14). Most importantly for purposes of this lawsuit, the MOU required IHF to "transmit . . . to [Clalit] . . . the contributions and bequests which IHF receives on its behalf." (MOU ¶ 5).

  The MOU also required IHF to disclose to Clalit the following: (1) regarding "prior" bequests, "[a] list of bequests to [Clalit] and/or its facilities currently on file with the IHF . . . including the recipient institution, department, etc., and the outright amount and/or percentage of bequest" (id. ¶ 7(d)); (2) "copies of all documents relating to bequests, executed wills, charitable remainder trusts, perpetual trusts and/or annuities of every type, as well as all chattel and/or real properties of every type, naming [Clalit] and/or any of its facilities as donee and/or beneficiary" (id. ¶ 8); (3) "in the case of segregated endowment funds, all relevant information regarding the time period of the trust, the income per annum and the principal amount at the conclusion of the period" (id. ¶ 9); and (4) "if requested, an accounting and all relevant information regarding estates in probation in which [Clalit] is named as beneficiary in whole or in part, including total and final distribution figures of said estates." (Id. ¶ 10).

  2. The Berlin Will

  On or about July 27, 1984, Leon Berlin executed a will (the "Berlin Will") in California. (Berlin Will at 1). Berlin died on June 21, 1999. (Def.'s 56.1 Statement ¶ 46). The Berlin Will makes eight specific bequests, in amounts ranging from $5,000 to $20,000, and then provides: I give the residue of my estate, after payment of taxes as directed in the clause entitled Death Taxes, to the charitable beneficiary named below, provided that on the date of my death it is an organization described in section 2055(a) of the Internal Revenue Code. If it is not an organization so described, I give the residue as follows:
Charitable beneficiary: ISRAEL HISTADRUT FOUNDATION, INC., whose present address is 8455 Beverly Boulevard, Los Angeles, California.
Alternative distribution: To Jewish Charities for the education of underprivileged, needy and deserving children in Israel, which charities are to be selected by my Executor.
I request that said gift, be used, if possible, by the ISRAEL HISTADRUT FOUNDATION, INC., as follows:
(1) Twenty-Five percent (25%) of said gift to be directed for use at the Histadrut Carmit Children's Village in Jerusalem, Israel, and Children's Village of Histadrut at Tivon, Haifa, Israel;
(2) Twenty-five percent (25%) of said gift to be used to establish scholarships in the names of my late parents HYMAN BERLIN and REBECCA BERLIN, for needy and deserving children through the Histadrut Scholarship Fund;
(3) Twenty-five percent (25%) of said gift to be directed for use by the KUBAT [sic] HOLIM for general pediatric purposes;
(4) Twelve and one-half percent (12½%) of said gift is to be directed to the HISTADRUT AMAL EDUCATIONAL SYSTEM; and
(5) Twelve and one-half percent (12½%) of said gift is to be directed for use at KAPLAN HOSPITAL in Rehovot, Israel, and used, if possible, for cancer research in the department of Dr. Zvi Bentwhich.
Each use of this residuary gift is to be commemorated by a plaque or other testamentary acknowledgment in the names of my late parents HYMAN BERLIN and REBECCA BERLIN.*fn4
(Berlin Will at 3-4). IHF received a total of $2,869,090.93 from the Berlin estate. (Pl.'s 56.1 Statement ¶ 24). IHF did not transfer any of the funds it received from the Berlin estate to Clalit. (Id. ¶ 27). Instead, IHF transferred $500,000 from funds received from the Berlin estate to the "IHF Geriatric Center" in or about January 2001. (Id. ¶ 26).

  3. The Nower Trust

  Joseph Nower executed a revocable living trust on March 16, 1992 (the "Nower Trust"). (Id. ¶ 29). Elaine Levitt, the former national sales director of IHF, is listed as one of the trustees of the Nower Trust. (Id. at ¶ 17; Nower Trust at 1, 7). The trust document does not indicate that Levitt was appointed in her capacity as an IHF employee. Nower directed that upon his death

 
all property then belonging to the income or principal of the Trust shall be distributed as follows:
. . .
(2) The Entire Trust Corpus and all accumulated income shall be distributed and paid over as soon as reasonably possible as law and good administration will permit to the Israel Histadrut Foundation . . . for the express benefit and general use in Israel of the Kupat Holim Hospitals in Israel and for no other purpose and said charitable foundations should not use the funds domestically.
(Nower Trust at 6). As to how the trust would be funded, the trust document provided that Nower "or another person or persons? may hereafter deposit with the Trustees cash or other property, or may ...

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