Private Foundation Assets Not in State's Control
CHICAGO (December 29, 2004) — The 7th Circuit Court of Appeals ruled in favor of McDermott Will & Emery client Illinois Clean Energy Community Foundation and against the State of Illinois in a lawsuit challenging the state's control of private foundation assets. The appeals panel, in a unanimous opinion written by Judge Richard Posner, affirmed a decision for the Foundation in its lawsuit contesting a demand that it turn over $125 million of its endowment to the state.
In April 2004, in a groundbreaking constitutional case, U.S. District Judge Amy St. Eve held an Illinois statute that required the Foundation to "contribute" $125 million to the state general revenue fund is unconstitutional. The Court of Appeals agreed that the state would be violating the U.S. Constitution's prohibition on taking private property for public use without just compensation if it took $125 million from the Foundation.
The case challenged legislation to reduce the Illinois budget deficit by seizing nearly half the endowment of the Foundation, a nonprofit corporation established and originally funded by Commonwealth Edison to give grants in support of activities related to clean energy. The Foundation filed suit seeking a declaratory judgment that the statute violated the Takings and Due Process Clauses of the U.S. Constitution. The state contended that the Foundation is in effect a public entity using public funds, because Commonwealth Edison established the Foundation as part of a legislative process in 1999 for approval of a sale of power plants. The Court of Appeals rejected all of the state's arguments in an opinion that strongly supported the rights of private foundations to maintain their assets free of state control.
The Foundation's lawsuit attracted the involvement of the Donors' Forum, an association of 180 charities, which filed a friend of the court brief supporting the Foundation, and the support of major environmental groups.
The Foundation legal team was led by Bill Boies of the Chicago Trial Department and included Miller Baker, Robert Louthian and Michael Nadel of our Washington, D.C. office, and Neil Kawashima and Peter Schutzel of our Chicago office.
