When Nonprofits Fight - Everyone Loses

Don't you hate it when relatives fight? When two best friends beat each other up (verbally or otherwise)? When companies rip into each other?

How about when two organizations whose mission is to serve their membership, the public, and/or the greater good suddenly get ugly? For no real good reason.

Let's say you are Organization #1 and you are in dire financial straits. Your group has one regular source of income - a weekly event. People like this event, nearly 200 attend every week. However, there aren't enough volunteers to run it properly and it has been in steady decline. Organization #1 doesn't make much from it as costs keep increasing. Some months they don't make anything at all and actually come out owing their vendors more than they took in. Eventually the Board of Directors decides this can't continue and votes to shut the event down. It'll be hard but they will get by, God willing.

So they get out the contract they have with Organization #2 to rent the space where the event is held to be sure that they handle everything properly. Contract says that (a) rent shall be paid a month in advance - a check of the records going back to 2007 show that yup, that's been done and is current; (b) if for some reason Organization #1 is no longer licensed to hold the event the contract cancels and no one owes anybody anything - well, since the event is being shut down at the end of the year and there's no license for 2012 ... no license = no obligation. Okay then. Organization #1 notifies Organization #2 two weeks prior to the shut down (after the Board meeting) and after a request for a proposal by Organization #2 offers to sell them the equipment used for the event if they'd like it. 

Flash forward to the day before the final event. Suddenly Organization #2 doesn't want all the equipment but will buy back some of it. And in doing so they will reduce the amount Organization #1 owes them for the month. Okay, seems there is a law saying that some of it can only be purchased from another licensed source, no problem Organization #1 understands. Organization #1 says no thanks to the partial buy back, we'll just keep all of it then. And by the way what do you mean amount owed? And then it gets ugly. Organization #2's representative's emails become more and more unprofessional and take on a threatening tone.

Suddenly Organization #2 says that because Organization #1 didn't give 30 days notice it owes money for January 2012 even though no events will be held in January by Organization #1 and the contract is clear on those two points (a) pay in advance and (b) no license, no event, no obligation. This message is copied to Organization #2's lawyer. Funny, there is no such notice clause in the contract that Organization #1 can find.

So Organization #1 gets nervous and talks to their lawyer who looks at the contract and the bank records and says "yup you don't owe them anything, you didn't breach this contract, they need to let you hold the last event and get your stuff". Lawyer also tells Organization #2's representative (and their lawyer) this. So now it REALLY gets ugly.

Organization #2 then claims that Organization #1 is a month behind in the rent, that some of the items they offered to buy that very morning are now really theirs and that they intend to deny access (i.e. lock out) by Organization #1 to the building and to the property inside belonging to Organization #1 until payment is made. Remember this is a public fundraising event. The people who attend know this was to be the last event, they will be showing up. They will NOT be happy.

Proof is provided by Organization #1 (through their lawyer) that the rent is not behind and has been paid in advance according to the contract since 2007. Organization #2 counters saying that there was one month in 2007 when they didn't receive a check. 

Although requested, no proof has been offered that any items belong to Organization #2 or that rent is past due, or that a payment was missed at any time. Powers that be at Organization #1 have offered to make this payment if in fact it can be shown that money is owed. It's also fine with Organization #1 that some of the items really do belong to Organization #2, just asking to see the receipt since they did offer to buy them that morning. 

Response? 

Powers that be at Organization #2 become rude on the phone and hang up abruptly on organization #1 after repeating to Organization #1 that they will be locked out of the building and will not be able to collect their belongings until payment is made. The public event will not be held and Organization #2 doesn't care about upsetting the attendees, stating they are seeking to protect themselves (one wonders from what or whom?). Organization #2 will speak to their lawyer next week when that person is back in town (never mind that there are several other attorneys in the practice who can no doubt look over the contract and assorted documentation). Organization #1's lawyer is going to attempt to resolve this matter the morning of the event but... Organization #1 is contemplating showing up anyway for their event, lock out or no lock out.... and alerting the media. 

You see, it seems that Organization #2 uses the money they receive from Organization #1 to pay their mortgage. It appears that once it was realized by their representative that said money wasn't going to be there for January the situation devolved into ugliness (perhaps someone is in a state of panic?). Side note: the population that Organization #2 serves has the lawyer for Organization #1 as a member. This lawyer is NOT happy at the treatment his/her client is receiving. Organization #2 doesn't know this... yet.

Both organizations are nonprofits. Both serve distinct segments of the population. One stayed professional throughout the communication process and followed the contract. The other has changed their story multiple times, is refusing to acknowledge the terms of the contract, cannot produce verification of anything they are claiming and has behaved in a very immature and unprofessional manner. 

Seems to me that Organization #1 is trying to resolve all this professionally and amicably and that Organization #2 has a representative that needs to grow up. Funny note, the lawyers did not have to get involved, but Organization #2's person decided to include theirs and so...

At the end who is the loser? The populations these organizations serve and that is a true shame.