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October 2013

Gordon & Rees Phoenix Team Wins Summary Judgment for Nonprofit in Breach of Contract Suit

On Sept. 24, Gordon & Rees Phoenix partner Deanna R. Rader, with the assistance of senior counsel Molly C. Machold, won summary judgment in favor of their client, a nonprofit corporation running a charter school and preschool.

In the breach of contract action, a former director and board member who had been removed from the nonprofit’s board of directors filed suit seeking to take control of the nonprofit’s preschool. The former director previously had leased the nonprofit’s preschool location and assets to operate the preschool, but had forfeited his lease two years prior to his removal from the board. The nonprofit had been operating the preschool prior to the lease and operated the preschool once again after the lease was forfeited.  Following his removal from the board, the former director filed suit for breach of contract, conversion, and unjust enrichment, claiming that he owned the preschool and attempting to take control of the preschool location and assets. 

Rader and Machold successfully argued that the director never owned the preschool location and assets and had no right to operate the preschool after he forfeited the lease. Further, even if the former director had not forfeited the lease, the commercial lease agreement between the parties had expired and there was no longer any business relationship between the parties. 

Because there was no existing contract between the parties and because the former director had no ownership interest in the preschool location and assets, the court granted summary judgment in favor of the nonprofit and against the former director.