Facts

Plaintiff Network for Good is a Maryland-based charity that collects online gifts for charities nationwide. Defendant United Way of the Bay Area ("United Way") is a charitable organization. In the early 1990's, United Way created United Nonprofit Operations to process donations. On July 1, 2000, United Way and United Nonprofit Operations became separate entities, and United Nonprofit Operations was renamed as PipeVine.

Network for Good and PipeVine contracted for PipeVine to process Network for Good's donations. PipeVine financially collapsed on June 2, 2003, without distributing over $17 million in charitable contributions it had collected.

Network for Good contends it had to use $2.4 million of its own money for contributions PipeVine collected but had not distributed to the intended charities. Network for Good sued United Way maintaining it was an alter ego of PipeVine, and accusing it of, among other things, fraud and breach of contract.

PLAINTIFF'S CONTENTIONS:
Network for Good contended that PipeVine and United Way were alter egos, as they shared a CFO, assets and various employees who moved from each organization. Plaintiff also contended that United Way misrepresented its financial statements and undercapitalized PipeVine, prompting PipeVine's 2003 collapse. Plaintiff further contended that because United Way allegedly hid the fact that it owed PipeVine several million dollars, PipeVine had to use new donor money to cover operating costs. The 2003 collapse forced plaintiff to pay $2.4 million out-of-pocket to charities through grants and out of Network for Good's reserves.

DEFENDANT'S CONTENTIONS:
Defendant contended PipeVine was a separate entity after 2000 and that it was not responsible for the losses Network for Good suffered when PipeVine collapsed.

Result

San Francisco County Superior Court Judge Robert Dondero found that United Way of the Bay Area and PipeVine were alter egos and that the key factor supporting this conclusion was United Way's failure to put adequate assets into PipeVine at the point when it attempted to spin off the venture. The judge awarded Network for Good $4.7 million in total damages. The court found insufficient evidence to award punitive damages.