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Transparent GMU v. George Mason University

Supreme Court of Virginia

December 12, 2019



         PRESENT: All the Justices



         Transparent GMU and Augustus Thomson (collectively, "Transparent") appeal from the judgment of the Circuit Court of Fairfax County ("circuit court") dismissing with prejudice its first amended verified petition for writ of mandamus. Transparent sought to obtain donor information under the Virginia Freedom of Information Act ("VFOIA"), Code §§ 2.2-3700 et seq., from George Mason University ("GMU") and the George Mason University Foundation, Inc. ("the Foundation"). The questions before us on appeal involve whether the Foundation, a privately held corporation, established to raise funds and manage donations given for the benefit of GMU, is subject to VFOIA. We conclude that the Foundation's records are not subject to disclosure under VFOIA.

         I. BACKGROUND

         A. History of GMU

         In 1949, an exploratory committee, in conjunction with the University of Virginia ("UVA"), was formed to assist in creating a demand for higher education in Northern Virginia. In 1955, UVA's Board of Visitors approved the establishment of a branch college to serve Northern Virginia. The General Assembly thereafter enacted legislation establishing the George Mason College of the University of Virginia ("the College") "subject to the supervision, management, and control of the [UVA] Rector and Visitors." 1959 Acts ch. 60 [H 59] (Apr. 27, 1959).

         The College opened in Fairfax County as a two-year institution in 1964. Due to the rapidly increasing population in Northern Virginia, UVA requested that the General Assembly authorize the College's expansion into a four-year institution. In 1966, the General Assembly approved the request and the College became a four-year degree-granting institution while remaining under UVA's direction. 1966 Acts ch. 68 [H33] (Mar. 1, 1966).

         In 1972, George Mason University officially separated from UVA and became its own public institution of higher education. 1972 Acts ch. 550 [H210] (Apr. 7, 1972). The General Assembly included GMU in the Code as an "educational institution[]" and "public [body] . . . as [a] governmental instrumentalit[y] for the dissemination of education." Code § 23-14 (now Code § 23.1-1101).

         Today, GMU continues to operate as a public institution of higher education and is managed by a board of visitors whose members are appointed by the Governor. Code §§ 23.1-1500, -1501. In addition to conferring degrees and managing GMU's academic programming, "[t]he board shall appoint all teachers, staff members, and agents and fix their salaries and generally direct the affairs of [GMU]." Code § 23.1-1503(A). The General Assembly encourages all of the Commonwealth's public institutions of higher education "to increase their endowment funds and unrestricted gifts from private sources and reduce the hesitation of prospective donors to make contributions and unrestricted gifts." Code § 23.1-101(1). As relevant to the issues before us in this case, each public institution of higher education is further authorized by the General Assembly to "[c]reate or continue the existence of one or more nonprofit entities for the purpose of soliciting, accepting, managing, and administering grants and gifts and bequests, including endowment gifts and bequests and gifts and bequests in trust." Code § 23.1-1010(3).

         B. History of the Foundation

         The George Mason College Foundation, Inc. ("College Foundation") was incorporated by three local businessmen and members of the College's Advisory Committee in February 1966, just prior to the General Assembly's acceptance of the College as a four-year degree granting branch of UVA. The College Foundation's Articles of Incorporation listed the three men as members of the initial Board of Trustees who would manage the College Foundation during its first year of operation. The College Foundation's stated purposes of accepting gifts and donations was "exclusively educational and charitable." The College Foundation was "operated exclusively to receive, hold, invest and administer property and to make expenditures to or for the benefit of [the College]." In addition, the College Foundation "promote[d] the advancement and further[ed] the aims and purposes of [the College] . . . as an institution of higher education by the development and application of financial resources." The Board of Trustees approved Bylaws for the College Foundation in November 1966.

         Two years after the creation of GMU, in 1974, the George Mason College Foundation officially changed its name to "The George Mason University Foundation, Inc." On October 30, 1991, Articles of Incorporation signed by Carrington Williams created "The George Mason University Educational Foundation, Inc." ("Educational Foundation").[1] These Articles of Incorporation gave the Educational Foundation the authority to issue 1, 000 shares of common stock to the George Mason University Foundation.

         On July 1, 1992, the George Mason University Foundation transferred over $21 million in assets to the Educational Foundation in exchange for all of the Educational Foundation's shares of stock. This transfer represented all of the George Mason University Foundation's assets other than the telecommunications assets of Capitol Connection and F Corporation. The George Mason University Foundation became "The George Mason University Instructional Foundation, Inc." in August 1993. In October 1993, the Educational Foundation was renamed to The George Mason University Foundation, Inc. (the current Foundation).

         Today, the Foundation continues to operate as a private non-stock corporation organized under the laws of Virginia. The Foundation and GMU regularly enter into a series of contractual arrangements, one of which is the Affiliation Agreement. The Affiliation Agreement governs the relationship between GMU and the Foundation wherein they "acknowledge that each is an independent entity." The Affiliation Agreement also provides that "[GMU] recognizes that the Foundation is a private corporation with the authority and obligations to keep all records and data confidential with the requirements of law." The Affiliation Agreement confirms the Foundation's purpose as caretaker and manager of funds from private donors intended to benefit GMU, in accordance with the intent of those donors. GMU also acknowledges that the Foundation controls the decision of whether to accept or reject donor gifts.

         C. Circuit Court Proceedings

         On April 5, 2017, Transparent filed VFOIA requests with GMU and the Foundation seeking the following:

For the years of 2008 through 2012, any grants, cooperative agreements, gift agreements, contracts, or memoranda of understanding (including any attachments thereto) involving a contribution to or for [GMU] from any of [several charitable foundations under Charles Koch, Claude R. Lambe, and David Koch].

         GMU responded that it did not have any of the requested records in its possession. The Foundation responded that it was not a public body and its records were not public records subject to VFOIA.

         Transparent thereafter filed a verified petition for mandamus, injunctive, and declaratory relief ("original petition") against GMU and the Foundation. Among the theories for relief, Transparent asserted that "[a]s an alter-ego of [GMU], the Foundation must be considered a public body subject to [VFOIA], and the Foundation and/or [GMU] therefore denied [Transparent] their rights under [VFOIA] by failing to adequately process their request." Transparent claimed that GMU delegated "important public functions" to the Foundation and GMU "continues to exercise control over these functions," including establishing policies for the Foundation's acceptance of gifts and fund disbursement, providing the salary for the Foundation's president and Chief Executive Officer, and requiring the Foundation to consult with GMU "regarding the Foundation's fund-raising and donor acquisition programs and the Foundation's gift management and gift acceptance policies." Transparent further alleged that "at all relevant times, [GMU] and the Foundation have acted as a single entity," and that GMU's employment of the Foundation as an alter-ego denied their VFOIA rights.

         GMU and the Foundation demurred to Transparent's alter-ego theory, contending that Transparent failed to allege that the Foundation "was a device or sham used to disguise wrongs, obscure fraud, or conceal crime" to "pierce the corporate veil." The circuit court sustained the demurrer to the alter-ego theory and granted Transparent leave to amend its remaining claims.

         Transparent next filed a verified first amended petition for mandamus relief ("amended petition"), alleging two counts against GMU and three counts against the Foundation. Transparent alleged that:

[Count] I: [GMU] denied [Transparent] their rights under the Act by refusing to search for and provide requested records as the legal custodian of records held by its agent, the Foundation, in the transaction of public business.
[Count] II: [GMU] denied [Transparent] their rights under the Act by refusing to search for and provide requested records as the legal custodian of records possessed and/or used in the transaction of public business by Dr. Janet E. Bingham, an officer, employee, and/or agent of the University.
[Count] III: As an entity created to perform delegated functions of [GMU] and/or to advise [GMU], the Foundation is a public body subject to the Act and therefore denied the Petitioners their rights under the Act by failing to respond to their records request.
[Count] IV: As a corporation supported principally by public funds, the Foundation is a public body subject to the Act and therefore denied [Transparent] their rights under the Act by failing to respond to their records request.
[Count] V: The Foundation denied [Transparent] their rights and privileges under the Act because the requested records are public records, which the Foundation must ensure are open to inspection and copying regardless of its status as a public body.

         The Foundation and GMU filed demurrers and GMU filed a plea in bar of sovereign immunity. The Foundation argued that only public entities are subject to VFOIA, regardless of whether the records requested are public records. GMU argued that it was not required to obtain records never in its possession.

         The circuit court entered a memorandum opinion and order sustaining GMU's plea in bar against Counts I and II, and sustaining the Foundation's demurrer to Counts IV and V. The circuit court began by addressing the alter-ego theory that it had dismissed, and stated that it was dispositive that "there was no evidence that the corporate body was created as a sham entity," noting that Code §§ 23.1-101[2] encourages public universities to increase their endowment funds and Code § 23.1-1010[3] allows the establishment of private entities to engage in fundraising for public institutions.

         As to Counts I and II, the court determined that as a public entity, GMU was only responsible for documents it did not possess if (1) it originally possessed the records, which was not alleged, or (2) it knows of another public entity that possesses the records, in which case, it need only provide contact information for that entity. The court also found that GMU was not required to produce the Foundation's documents merely because Dr. Janet E. Bingham ("Dr. Bingham") serves as both Vice President of University Advancement and Alumni Relations for GMU and President and Chief Executive Officer of the Foundation. The court concluded that Dr. Bingham "[w]hen acting in her role as a Vice President of GMU, the University has control and custody over her work product and those records over which she is a custodian at GMU." However, when acting "[i]n her role as President of the Foundation, she is in the employ of the Foundation, and the Foundation has control and custody over her Foundation work records." In sustaining the demurrer, the court "conclude[d] that, as a matter of law, where an employee of a public body serves in an official capacity for a third party, that service does not automatically subject documents held by that third party to VFOIA [disclosure obligations]."

         As to Counts IV and V, the court held that the Foundation receives insufficient public funds to be designated a public entity, and VFOIA only compels public entities to produce public records. As to Count III, however, the court concluded that whether the Foundation was a public body depended on the "totality of factors present in the relationship between the Foundation and [GMU]."

         The circuit court held a bench trial on Count III. Mary Susan Van Leunen ("Van Leunen"), the chief financial officer of the Foundation, testified that the Foundation's mission is to assist GMU by accepting, managing, and investing

philanthropic funds that come in to the Foundation and we expend those funds for the benefit of [GMU]. We also manage a real estate portfolio for the benefit of [GMU] in most cases, and operate really to accept and manage philanthropic funds, including our endowments and real estate properties.

         Van Leunen explained that the Foundation is managed by a Board of Trustees and that GMU does not control the Foundation. She testified that no GMU employee, including the President, can direct the Foundation "as to what to do or how to do it."

         Van Leunen testified that the Foundation has assets of "approximately [$]400 million" and receives between $50 and $60 million in gifts and pledge payments annually. She stated that gifts are assessed administrative fees and endowment accounts are assessed annual management fees, neither of which is paid by GM U.She also stated that the Foundation receives a small budget from GMU. In 2016, the ...

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