IS IT TIME TO REREAD THE DECISION IN STERN V. LUCY WEBB HAYES?

DATELINE: April 1, 2009, Chicago

We can’t wait to attend a game at the new Yankee Stadium.  Our nephew owns an apartment just three blocks from the stadium, meaning that we can go a game together, and then spend the night in his guestroom.  As part of an agreement that paved the way for the new stadium, the Yankees agreed to contribute $800,000 per year in cash and $450,000 of in-kind items like game tickets to a charity that would benefit members of the community.  

According to Fernanda Santos of the N.Y. Times, a lawyer hired by the Yankees has filed a lawsuit alleging what amounts to breach of fiduciary duty against the chairman of New Yankee Stadium Community Benefits Fund, the charity established by the Yankees.  Lawyer Who Has Hired by Yankees Sues the Team's Bronx Community Charity (Mar. 31, 2009). If the allegations are true, this looks to us like...

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an open and shut case.  The lawyer, Michael Drezin, alleges that the chairman of the board deposited $800,000 of the charity’s money in a non-interest bearing account at a bank that the chairman co-founded and continues to work for.  It is unclear whether the chairman still has an ownership interest in the bank.

Drezin  told the Times, “In my opinion, there’s absolutely no innocent explanation for this behavior.”  The Times reports that the board chair hung up the reporter when asked for comment.

In the lawsuit, Drezin asks for the board chair’s resignation and $35,000 per year which Drezin alleges the Yankees gave to the charity’s board to compensate Drezin for his services.

Well we will be interested to see how this suit plays out.  The facts are reminiscent of those in Stern v. Lucy Webb Hayes National Training School for Deaconesses and Missionaries, 381 F. Supp. 1003 (1974), which also involved non-interest bearing accounts.  The remedy in that case was to require each director to read the court’s opinion.  If the allegations turn out to be true, hopefully the New York court will require more than that.

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