The 12th Man Foundation was created as a charitable organization to promote Texas A&M sports, including by financing athletic scholarships. In the 1970s, the Foundation decided to raise money by soliciting donations from prospective donors and telling them they would receive desirable seats to Texas A&M football games. The quality and quantity of seats varied depending upon the amount the Foundation received as a donation, the year the donation occurred, and the duration of the endowment. When Texas A&M joined the Southeast Conference (SEC), the University decided that the football stadium, Kyle Field, needed renovation. To raise funds, the Foundation adopted a similar fundraising procedure.
In developing the project, the Foundation decided it would need to relocate some of those donors who had previously donated funds and been promised seats. Some of these donors claimed that they were promised the “best available seats” in Kyle Field for the duration of their endowments. Even though these donors were offered other seats and parking in the rebuilt Kyle Stadium, they claimed these seats and parking were not what they were promised and were in locations that were less-desirable than what they were promised.
Anticipating that many of the existing donors might be dissatisfied, the Foundation offered to return the original donation to the donors. Some donors accepted the offer, while others wanted what they were originally promised.
The dissatisfied donors sued, alleging breach of fiduciary duty and good faith and fair dealing, among other claims. The Foundation filed a motion to dismiss under the Texas Citizens’ Participation Act (TCPA), which is the state’s anti-SLAPP law. Anti-SLAPP laws are laws designed to protect First Amendment rights; they allow defendants to quickly dismiss meritless lawsuits that are brought against a party for exercising their First Amendment rights.
To succeed on a TCPA claim, the moving party must show that the legal action is based on or in response to a party’s exercise of free speech, petition, or association. If the moving party establishes that one of these rights are implicated, the burden shifts to the plaintiff to show by clear evidence that their underlying case exists for the claim in question. If the plaintiff establishes their case, the burden shifts back to the moving party to show that an affirmative defense applies.
Here, the Court of Appeals found that the Foundation established their actions implicated their right to association—individuals joined collectively to promote their common interest in Texas A&M sports. The Court of Appeals also found that the Foundation showed that this was a matter of public concern, as the nonprofit’s activities were linked to a public university that was supported by public funds.
Because the Foundation established that the action was based upon the Foundation’s right to association, the burden shifted back to the dissatisfied donors to show that their underlying breach of contract claim had merit. The donors argued that the Foundation had a fiduciary duty of care, and the Foundation was liable to them because the officers and directors did not uphold their duty of good faith and fair dealing when they changed their seats and parking in Kyle Stadium. The Court of Appeals disagreed, finding that the duty of good faith and fair dealing of an officer or director is owed to the non-profit organization, not to the individual members of the organization.
The donors also argued that a special relationship existed based on “Aggie loyalty” and “Aggie core values,” giving rise to a fiduciary obligation to the members. The Court of Appeals again disagreed. While the donors may have had expectations in relation to a gift or donation, that does not create a duty of good faith and fair dealing, nor does it establish a fiduciary relationship.
Finally, the donors argued that the Foundation “assured” the donors that in exchange for their generous, early, and loyal support, they would be awarded with the best available parking at the stadium. The Court of Appeals determined that these assurances did not create a fiduciary obligation. The Court of Appeals reversed the trial court’s ruling
Note: This case is relevant for schools as they fundraise and consider what promises they are making to donors. In this case, the Court did not find a fiduciary obligation existed, but there may be times where a donor and a school agree to certain terms and this can create a contractual obligation for schools and donors.
Tex. A&M Univ. 12th Man Found. v. Hines (Tex.Ct.App. June 13, 2024) 2024 Tex. App. LEXIS 4139.)