Zampogna v. Law Enforcement Health Benefits, Inc.
81 A.3d 1043
| Pa. Commw. Ct. | 2013Background
- Fraternal Order of Police Lodge 5 (Union) represents Philadelphia police officers under a CBA with the City; a Joint Trust oversees health benefits; Health Benefits administers the Members’ health insurance funded by City contributions via the Joint Trust.
- Health Benefits is governed by a Board and exists to receive, hold, invest, administer, and distribute funds to provide health benefits to Members and their families.
- During the 2010 Union President election, Health Benefits’ Board approved using Joint Trust funds to publish and mail election materials endorsing the incumbent candidate against Zampogna, costing $3,840, and included the same message in its newsletter.
- Zampogna filed a declaratory judgment action seeking a permanent injunction and declaratory relief to bar Health Benefits from using public monies for partisan election activity.
- The trial court denied the injunction and dismissed the action; on appeal, the majority reversed and remanded for a declaratory judgment that Board expenditures for partisan activity violated Health Benefits’ governing documents and law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Health Benefits’ expenditure of funds for partisan activity violated its governing documents. | Zampogna argues funds are public and ultra vires to endorse a candidate. | Health Benefits contends expenditures were incidental to its mission and authorized by Board. | Yes, but remanded for declaratory relief only. |
| Whether the trial court should have issued a permanent injunction. | Injury to the corporation’s governance and improper use of funds justify injunction. | Board must be deferred to; no clear legal right to injunction shown. | Remand for declaratory judgment; no ongoing injunction issued. |
| Whether Health Benefits’ actions are ultra vires given its Articles of Incorporation and Bylaws. | Board exceeded authorities by endorsing a candidate with public funds. | Endorsement is incidental to corporate purposes under not-for-profit law. | Incidental power to endorse not recognized; violations found; remand ordered. |
| Whether the action is properly framed as injunctive relief or a derivative action against the Board. | Zampogna sought direct injunctive relief against Health Benefits. | Issues of governance should be addressed via a declaratory judgment; potential derivative action not brought. | Action framed as declaratory relief; remand to enter declaratory judgment. |
Key Cases Cited
- Malone v. Lancaster Gas Light & Fuel Co., 182 Pa. 309 (Pa. 1897) (incidental powers permitted to further main purpose; defer to management)
- Citizens’ Electric Illuminating Co. v. Lackawanna & W.V.R. Co., 255 Pa. 176 (Pa. 1916) (incidental powers allowed when connected and convenient to main purpose)
- In re Chosen Friends Castle No. 33, 342 Pa. 60 (Pa. 1941) (ultra vires concerns when activity is wholly separate from main purpose)
- McLaughlin v. Sch. Dist. of Borough of Lansford, 335 Pa. 17 (Pa. 1939) (public agency power review; distinction from private corporations)
- Common Cause of Pennsylvania v. Commonwealth, 668 A.2d 190 (Pa.Cmwlth.1995) (declatory relief appropriate to restrain unlawful expenditures)
- Citizens United v. Federal Election Commission, 558 U.S. 310 (U.S. 2010) (corporate political expenditures; not controlling law for private nonprofit board authority)