“Temporarily Restricted” is a Binding Legal Concept (Garth Brooks v. Oklahoma Hospital)

As highlighted in Garth Brooks’s lawsuit against the Oklahoma hospital, a donor’s restrictions are a legally binding agreement.

On January 25, the jurors sided with Brooks’ in his claim that the Oklahoma hospital had not honored its agreement to use his donation to build a women’s center and name it after his mother as a way to honor her memory. The original donation was $500,000 and the jury awarded an additional $500,000 as punitive damages.

The agreement for the money’s use appears to have been largely verbal with Brooks testifying that he “thought he had a solid agreement” with the hospital’s president but later learned the hospital wanted to use his contribution for other construction projects. Since these projects were not part of the initial plan to honor his mother, Brooks sued for breach of contract. Whether or not potentially bankrupting a hospital in a lawsuit is really the best way to go about honoring one’s mother, is not for me to say.

The hospital argued that the donation was unrestricted and the request to have it directed towards a women’s center in his mother’s name only came after the fact.

It is important for organizations to remember that restrictions placed on donations are legally binding and can be verbal. This was a very expensive example of needing to get it in writing that it either was or was not restricted.

Schedule a consultation with an experienced Aprio advisor to discuss your Tax Exempt and Nonprofit needs.

(source: CBS news)