The Standing of Nonprofits Formed for Litigation: Class Action Without the Class?

The Standing of Nonprofits Formed for Litigation: Class Action Without the Class?

Where individuals’ claims are so similar that they can be adjudicated through a single action, suit may be brought as a class action under CR 23.  Among other things, CR 23 has procedural safeguards designed to protect the interests both of unnamed class members who do not participate directly in the lawsuit and of defendants.  But a recent decision by the Washington Supreme Court in Riverview Community Group v. Spencer & Livingston[1] arguably undermines CR 23 by allowing individuals with factually distinct claims to form a nonprofit to sue on their behalf.

In Riverview Community Group, a developer built a golf course and used the course in marketing nearby lots to individual homeowners.[2]  Approximately twenty years later, the developer closed the golf course in order to subdivide it into residential lots.  Some of the homeowners formed a nonprofit, Riverview Community Group (“Riverview”).  Riverview brought suit to ensure that the golf course would continue operations, alleging that oral representations made by the original developer and its successors that the course would remain a permanent fixture gave rise to an implied equitable servitude.[3]  Riverview was “formed for the sole purpose of suing on its members’ behalf,” and its members had purchased their properties from at least four different entities over time.[4]

The defendants argued that Riverview lacked organizational standing.[5]  The Court of Appeals disagreed and reversed the trial court.  The Supreme Court affirmed the appellate court, concluding that Riverview satisfied the three requirements for standing:  ‘“[1] members of the organization would otherwise have standing to sue, [2] the purpose of the organization is germane to the issue, and [3] neither the claim nor the relief requires the participation of individual members.”’[6]

Regarding the third element, the Court focused exclusively on whether the equitable relief requested (limiting the golf course property to use as a golf course) would require the participation of individual members and concluded that it would not.[7]  This part of the test generally prohibits organizations from seeking individualized damages on behalf of its members because of the high degree of member participation that would be required.[8]  But where an organization seeks equitable relief, such concerns are not present because a single remedy is sought that will benefit all injured members.

When properly applied, the no-participation-required element would seem to limit standing to those cases where the members’ claims are similar enough that they can be effectively pursued by the organization.  But where individuals must participate either in establishing their claims or in the fashioning appropriate relief, the justifications for organizational standing are not present.  By focusing exclusively on the “relief requested” language, without analyzing whether the claim asserted required the participation of individuals, the Court seems to have expanded organizational standing to cases where the members may be seeking the same relief, but their claims are so factually distinct that individual participation would be necessary.

Riverview as an entity had no rights in the golf-course property—alleged or otherwise—and had not even existed at the time of the sales.[9]  All alleged representations about the golf course were made to the homeowners on an individual basis, not to Riverview.  Little was known about Riverview’s members other than they purchased their land from at least four different entities and there was “no consistency regarding who made these promises from which [the] court [could] imply the equitable servitude.”[10]  Had there been evidence that the facts giving rise to the members’ claims were so similar that individual participation would not be necessary, the majority’s reasoning may have been stronger.

Given the lack of information about Riverview’s membership and the apparent diversity in experience, it seems unlikely that this case could have been maintained as a class action.  Riverview Community Group effectively allows a group of people with disparate claims who would not otherwise satisfy CR 23 to bring suit collectively by simply forming a nonprofit.

–Sarah Gohmann Bigelow

[1] 337 P.3d 1076 (Wash. 2014).

[2] A recent post to this blog addresses the court’s holding requiring the evidence necessary to establish an equitable servitude.  See  Another Blow to the Statute of Frauds?

[3] Id. at 1077.

[4] Id. at 1088-89 (dissenting).

[5] Id. at 1079.

[6] Id. (quoting Five Corners Family Farmers v. State, 173 Wn.2d 296, 304 (2011).

[7] Id.

[8] Id. at 1084 (concurring).

[9] Id. at 1089 (dissenting).

[10] 1089 (dissenting).