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Rettek v. Ellis Hospital

January 12, 2009

NORMA CUMMINGS RETTEK, PLAINTIFF,
v.
ELLIS HOSPITAL; LINDA BREAULT MARK BRESLIN; CHRISTINE CIOFFI; JAMES CONNOLLY; GARY EBELTOFT; HOWARD S. FOOTE; D. JOSEPH GERSUK; MARSHALL G. JONES; PATRICK KEHOE; ROBERT J. KENNEDY; ROBERT LIEBERS; JUDITH B. MCILDUFF; DEBORAH MULLANEY; ROBERT F. MURRAY; SARAH SCHERMERHORN; PAUL SCUDDER; RICHARD TOLL; AND VINCENT J. ZECCOLA, AS TRUSTEES OF ELLIS HOSPITAL; DOMINICK BIZZARRO; ROBERT A. BREAULT, GREGG W. BROWN; THOMAS D'ANDREA; HARRY DEPAN; THOMAS DONOVAN; JOHN FLYNN; FRANK HARTE; DALE HEDMAN; JOHN JASKI; NORA JASKI; BONNIE MCGUIRE JONES; WILLIAM J. KENNEALLY; BARBARA C. LAWRENCE; SUE LEHRMAN; MARK M. LITTLE; RICHARD LIPMAN; HUGH J. MURPHY; JOAN R. PIPITO; ZYGMOND SLEZAK; SUZANNE SMITH; JOHN VAN DELOO; KIRBY VOSBURGH; CHARLES WILLIAMSEN; AND GARY WOOD, AS FORMER TRUSTEES OF ELLIS HOSPITAL; JAMES W. CONNOLLY, AS PRESIDENT AND CHIEF EXECUTIVE OFFICER OF ELLIS HOSPITAL; ANDREW M. CUOMO, AS ATTORNEY GENERAL OF THE STATE OF NEW YORK; AND JOHN DOES 1-30, DEFENDANTS.



The opinion of the court was delivered by: Gary L. Sharpe U.S. District Judge

MEMORANDUM-DECISION AND ORDER

I. Introduction

Plaintiff Norma Rettek ("Rettek") brings this action seeking, inter alia, to enforce the terms of charitable bequests made to Ellis Hospital ("Ellis" or the "Hospital") through the wills of her uncle and aunt, John and Anna Belanger. (See Dkt. No. 1.) Pending are motions to dismiss by all defendants pursuant to FED. R. CIV. P. 12(b)(6). (See Dkt. Nos. 5,6.) For the reasons that follow, the motions to dismiss are granted, and Rettek's action is dismissed in its entirety.

II. Facts and Procedural History*fn1

John and Anna Belanger died in 1968 and 1969, respectively. (See Compl. at ¶¶ 13, 14; Dkt. No. 1.) Neither was survived by issue. Id. at ¶ 18. Through their wills, the Belangers' left 75% of their residuary estates to Ellis, a non-profit New York corporation, in the form of use restricted gifts (the "Belanger Legacy"). Id. at ¶¶ 13,14. Specifically, Article FIFTH of Mr. Belanger's will provided for the disposition of his residuary estate as follows:

(1) Seventy-five per centum (75%) thereof to the Ellis Hospital of Schenectady, New York, to be used in improving the facilities of the present Nurses Training School. In the event that circumstances prevent or dictate the termination of such training school, it is my wish that this deviseee [sic] be used for such major project such as facilities for an extended care unit or nursing home accommodations which will provide adequate minimal medical attention and care.

Id. at ¶ 13. Article TENTH of Mrs. Belanger's will contained a residuary clause which was, for all intents and purposes, identical to Article FIFTH of Mr. Belanger's will. Id. at ¶ 14. In total, the Belanger Legacy totaled over $2.3 million. Id. at ¶ 15. These bequests were motivated by John Belanger's wish to honor his deceased sister, Lurline Cummings, who had been a nurse.

Plaintiff Rettek is the daughter of Lurline Cummings and the niece of the Belangers. From 2003 to 2005, Rettek sat on the Board of Trustees for the Ellis Hospital Foundation in recognition of gifts she had given to the Hospital and the Belangers' generosity. Id. at ¶¶ 4, 34, 47. In response to inquiries in the mid-1990's, Rettek discovered there was no "tangible evidence" that Ellis had spent any of the Belanger Legacy to improve the facilities of the Nursing School, as required by the Belangers' wills. Id. at ¶ 31. Rather, the two buildings which housed the School of Nursing on the Hospital campus were demolished in 1974, and the School was repeatedly relocated to a series of different rented facilities. Id. at ¶¶ 21-26. Additionally, disclosures by the Hospital revealed that it had "borrowed" the Belanger Legacy for "projects required by the Hospital and its patients" including its general building program, but not the Nursing School. Id. at ¶¶ 27-29, 40-42. In 2004, Ellis disclosed that it finally intended to use a modest portion of the Belanger Legacy to equip a new facility for the School of Nursing. Id. at ¶¶ 24, 36. However, Ellis also planned to charge the School rent from the Belanger Legacy for use of the new facility, thus enabling the Hospital to continue using the Belanger Legacy for general purposes. Id. at ¶¶ 37, 46. Ellis compounded these improprieties by failing to ensure that the Belanger Legacy was properly invested. Id. at ¶ 30.

Despite Rettek's repeated disclosure demands, Ellis refused to provide more than minimal information regarding its use of the Belanger Legacy. Id. at ¶¶ 38, 39, 43, 44. Accordingly, in March of 2005 Rettek, through counsel, notified the Charities Bureau of the New York Attorney General's Office of the alleged misappropriation by Ellis. Id. at ¶ 48. From 2005 to 2007, Rettek's counsel communicated and met with the Charities Bureau repeatedly in an effort to fashion an appropriate remedy. Id. During this period the Bureau also contacted and visited Ellis in an effort to investigate the accuracy of Rettek's allegations. Id. at ¶ 49. Apparently dissatisfied with the lack of progress, Rettek's counsel advised the Charities Bureau in June of 2008 that Rettek intended to commence a judicial action against the Hospital unless a satisfactory resolution of the matter was achieved. Id.

With no such resolution forthcoming, Rettek filed this diversity action in August of 2008, asserting state claims for breach of trust; breach of fiduciary duty under the common law and § 717 of the Not-for-Profit Corporation Law ("N-PCL"); imprudent investment under N-PCL §§ 512 and 717; modifying the terms of a gift without judicial permission or donor consent in violation of N-PCL § 522; and seeking, inter alia, the imposition of a constructive trust, an accounting, and a declaratory judgment. Id. at ¶¶ 50-81. In essence, Rettek seeks to enforce the restrictions on the charitable gifts given to Ellis through the Belangers' wills.

III. Standard of Review

The standard of review under FED. R. CIV. P. 12(b)(6) is well established and will not be repeated here. For a full discussion of the standard, the court refers the parties to its decision in Dixon v. Albany County Bd. of Elections, No. 1:08-CV-502, 2008 WL 4238708, at *2 (N.D.N.Y. Sept. 8, 2008).

IV. Discussion

The defendants seek to dismiss this action on grounds that Rettek lacks standing to enforce the terms of the Belangers' charitable bequests to Ellis. The current and former board members and officers of Ellis named as defendants herein also move to dismiss because they are protected by the business judgment rule, and because all common law claims asserted in the complaint are preempted by the N-PCL. Finding ...


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