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Auerbach v. Jersey Wahoos Swim Club

368 N.J. Super. 403, 846 a.2d 646 (App. Div. 2004)

CHARITABLE IMMUNITY—A non-profit educational organization can avail itself of the charitable immunity defense even if very little of its revenues come from contributions.

A club member brought suit after he was injured when he fell in a stairway area leading to the locker room of a not-for-profit swim club. The club responded by asserting immunity under the Charitable Immunity Act. The Act states that no nonprofit entity organized exclusively for religious, charitable or educational purposes shall be liable for any damages suffered from the negligence of any agent of the entity where the injured party is a beneficiary of the works of the entity. The club then moved for summary judgment, but its application was denied by the lower court when it held that the club was not organized exclusively for educational purposes and received little revenue from contributions, gifts, grants, or donations.

The club was incorporated under the New Jersey Nonprofit Corporation Act. The purpose for which it was formed was to provide facilities for the promotion of swimmers of all levels; to promote and hold amateur athletic contests; to raise funds by membership subscription; and to acquire and manage real property suitable for those purposes.

The lower court noted that the club’s total annual income was more than a million dollars, and that it received most of its revenue from member fees and very little from donations. This meant the club was outside of the Act’s protection because the “dominant theme of the Charitable Immunity Act” was to “protect funds that are contributed through the generosity of the ... donors.”

The New Jersey Supreme Court, in an earlier unrelated case, held that if entities that can prove they are organized exclusively for educational or religious purposes, their activities automatically satisfy the second prong of the charitable immunity standard and further financial analysis is required.

The Appellate Division held that the lack of donations or contributions was irrelevant. Instead, courts should look at an organization’s declared purpose by examining its bylaws and its operations, including its lectures, discussions, and the way it generally exchanges information. Focusing on funding sources may be relevant to charitable organizations, but is less relevant when looking at organizations organized for educational purposes, like the one before the Court. When determining whether an organization was established for educational purposes, a court must grant substantial latitude to non-profit organizations in choosing how to achieve their objectives. A non-profit corporation might be organized for exclusively educational purposes even though it provides an educational experience which is recreational in nature.

That this club’s aim was to teach swimming skills to its members did not preclude a finding that its exclusive organizational purpose was educational. Since its creation, its sole purpose had been to provide a competitive swimming program for as many young athletes as possible. Even the member who had brought the suit admitted that the club’s earnings were devoted to educational purposes, and the Appellate Division found and that it actually advanced the teaching of swimming skills and had not deviated from its stated purpose.

The Court also found the injured member to be a beneficiary of the club’s work since the injury occurred in the club’s pursuit of its educational purposes. To show that a person was such a beneficiary, an organization need only show that, at the time of the injury, it was engaged in the performance of the charitable objective it was organized to advance. This happens when the activity bears a substantial and direct relationship to the entity’s general purpose. Here, the member was injured after he left the pool and while he was heading to the locker room. At the time of his injury, the club was engaged in its swimming operation. Although the club may not have been “teaching” at the time of the incident, the water activity and swimming pool operation generally contributed to its core purposes. Therefore, the Appellate Division reversed the decision of the lower court and found that the club was qualified for immunity under the Act.

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