You are on page 1of 28

1

6
IN THE SUPERIOR COURT OF THE STATE OF WASHINGTON
IN AND FOR THE COUNTY OF KING
7
STATE OF WASHINGTON, No. 17-2-33035-3 SEA
8
Plaintiff, DEFENDANTS’ RESPONSE TO
9
vs. MOTION FOR PARTIAL SUMMARY
JUDGMENT
10 ROY BRONSIN HAUETER, et al,
Defendants
11

12 INTRODUCTION AND RELIEF REQUESTED

13 Plaintiff misstates the evidence it has submitted in support of its motion to paint a picture

14 of a family that has devised a scheme to deceive the public for personal gain for more than thirty

15 years with the patriarch as the family’s mastermind. This could not be further from the truth.

16 Defendants have made a few minor mistakes, but they have not engaged in deception and their

17 solicitations are not misleading. Summary judgment should be denied.

18 STATEMENT OF DISPUTED FACTS

19 A. Roy Haueter Is Not a Mastermind and There Is No Scheme.

20 In 1980, Roy Haueter formed FEC to put on live entertainment shows and produce

21 entertainment events for non-profit organizations and independent charities. He also produced

22 publications for those events through FEC’s dba, Universal Publishing. Decl. R. Haueter, ¶3.

Response to Motion for Partial Summary Judgment STEINACKER LAW PLLC


Page 1 of 28 615 E PIONEER, SUITE 212
PUYALLUP, WASHINGTON 98372
(253) 242-3558 - FAX (253) 292-5171
1 Meanwhile, ERN was founded in 1982 by John Young. Roy met John Young a few years

2 later. Att. D at 2. Jan Lee met Roy in the 1990s, but he did not become the president of ERN until

3 2010. Att. A, Ex. 3, pg. 3. CSB was founded around 1990 by David Tingey, a person that Roy

4 Haueter has never met. Att. D at 2. Although Justine Hacken met Roy in the 1990s, she did not

5 become the president of CSB until 2003. Att. A, Ex. 6 at 8; Decl. R. Haueter, Ex. A. SRC was

6 founded in 1988 by Harvey Hawken. Decl. Hawken, ¶2. Roy later met Harvey through their sons.

7 Att. D at 2. CHRA was founded in 1996 as a school project by Travis Waldref, Roy’s son-in-law

8 at the time. Id. Roy took no part in the formation of these charities. Decl. R. Haueter, ¶5.

9 As far back as the 1980s and 1990s, each of the charities utilized various commercial

10 fundraisers such as NW Marketing Co., Community Events Co., and Community Awareness.

11 Decl. R. Haueter, Ex. B.

12 Years after they were founded, each charity asked FEC/UPC to help promote their causes

13 by producing, publishing, and distributing magazines and pamphlets. FEC was paid 20% of gross

14 revenues. These charities were among FEC/UPC’s many clients. Decl. R. Haueter, ¶¶6, 7.

15 Roy Haueter gradually became more involved with the charity events over the years. He

16 especially enjoyed coordinating and participating in the shopping spree events, so much so, that

17 he volunteered to coordinate and drive out to locations to participate in those events at his own

18 expense. Decl. R. Haueter, ¶9. However, when the banks and stores needed something to show

19 that Roy was authorized to do these things, the charity Presidents appointed Roy as Executive

20 Director. Id. at ¶9. Justine Hacken, as President of CSB, appointed Roy in August 2003, thirteen

21 years after it was founded. Att. A, Ex. 8. Harvey Hawken, as President of SRC, appointed Roy in

22

Response to Motion for Partial Summary Judgment STEINACKER LAW PLLC


Page 2 of 28 615 E PIONEER, SUITE 212
PUYALLUP, WASHINGTON 98372
(253) 242-3558 - FAX (253) 292-5171
1 April 2008, twenty years after it was founded. Id. at Ex. 11. And, Jan Lee, as President of ERS,

2 appointed in Roy in January 2011, nearly thirty years after it was founded. Id. at Ex. 4.

3 As Executive Director, Roy did not make decisions or set policy, he simply helped

4 coordinate events and other tasks as directed by the charity Presidents. Decl. Hawken, ¶9; Att. A,

5 Ex. 6 at 11. He also continued to produce and publish their magazines and pamphlets.

6 Roy and his wife have six children who grew up accompanying Roy and participating in

7 coordinating entertainment and charitable events, so it was only natural that a few of them, at one

8 time or another, took a more active role with the charities as well. Decl. R. Haueter, ¶10.

9 B. Brandon Haueter Ran a Successful Commercial Fundraiser Without Roy.

10 Although Roy signed as AGCs incorporator, the commercial fundraiser was Brandon’s

11 venture with his brother Troy. Att. D at 3. Between 2000 and 2010, Brandon and Troy ran the

12 commercial fundraiser on their own. AGC hired Patrick Slusher to train Brandon in the

13 commercial fundraising business. Decl. B. Haueter, ¶2.

14 Brandon hired and trained employees and he ran the fundraising office from A to Z. He

15 was responsible for gathering and sorting all of the mail, sending out donation packets, opening

16 bank accounts, processing funds raised, processing payroll, maintaining records, paying taxes,

17 and paying non-profits their portion. Id.

18 It was also Brandon’s responsibility to obtain new contracts with organizations such as the

19 Bacon Bowl, Fire Fighters, Municipal Motorcycle Officers of CA, Shriners, and other

20 organizations wholly unrelated to the defendant charities, Roy Haueter, or FEC/UPC. Id. In 2000,

21 AGC contracted with SRC for holiday meals, in 2001 AGC gained a contract with CSB, in 2002

22 AGC obtained a contract with CEN, and in 2009 AGC contracted with ERS. Id. at ¶4.

Response to Motion for Partial Summary Judgment STEINACKER LAW PLLC


Page 3 of 28 615 E PIONEER, SUITE 212
PUYALLUP, WASHINGTON 98372
(253) 242-3558 - FAX (253) 292-5171
1 AGC negotiated its own contracts and typically received 65% of the gross revenue raised,

2 although a couple of organizations provided for more. Id. at ¶3. AGC’s success allowed Brandon

3 to purchase all kinds of equipment, including phones, partitions, computers, dialers, and database

4 software. Att. E at 2. As it grew, AGC moved from its Auburn location to the commercial building

5 in Tacoma. Id. Also as it grew, AGC obtained additional contracts, including ones with the four

6 charities, through their respective Presidents, none of whom were Roy Haueter. Decl. B. Haueter,

7 ¶4.

8 Around late 2008 the economy began to take a downward turn and commercial

9 fundraisers, finding it more difficult to raise funds, began closing their doors. Decl. Hawken, ¶10;

10 Att. E at 2. By late 2009, AGC too had decided to close its doors. The company canceled its

11 existing contracts and listed the commercial building for sale. Troy went back to school to finish

12 his degree. AGC has not operated since. Decl. B. Haueter, ¶5.

13 Roy’s only involvement at that time was acting as Executive Director for CSB and SRC

14 in order to coordinate and hold charity events. Att. A, Ex. 8, 11. FEC was producing and

15 distributing magazines and pamphlets as it had been doing for years. Decl. R. Haueter, ¶6.

16 C. Execution of the Operating Agreements Was Not a Conflict of Interest.

17 The Presidents of the four charities desperately wanted the charities to continue their

18 charitable work. They attempted to find other commercial fundraisers to help them, but they too

19 were going out of business. Decl. Hawken, ¶10. Each charity decided to do solicitation and

20 promotion of their causes on their own. Id.; see also Att. A, Ex. 6 at 12. The Presidents approached

21 Brandon and Roy and proposed that the charities rent space in the commercial building and

22 compensate Brandon (through a new entity, Turnkey Leasing, called TKL in this Response) for

Response to Motion for Partial Summary Judgment STEINACKER LAW PLLC


Page 4 of 28 615 E PIONEER, SUITE 212
PUYALLUP, WASHINGTON 98372
(253) 242-3558 - FAX (253) 292-5171
1 managing the dialers and databases. They also proposed that they continue to compensate UPC

2 20% of gross revenues raised for publishing and distributing their magazines, but in addition UPC

3 would process all campaign mail and deposit all funds into charity accounts. Decl. Hawken, ¶11;

4 Att. D at 3; Att. E at 2. Although Brandon had anticipated pursuing his West Coast Autos

5 operation and Roy had anticipated retiring, they each agreed to the proposal. Att. D at 3; Att. E at

6 2, 3; Decl. R. Haueter, ¶¶12-14; Decl. B. Haueter, ¶¶5-7.

7 On December 22, 2010, each charity, through its respective President, entered into an

8 Operating Agreement with TKL and Universal Publishing. Att. A, Ex. 17 at 1-4. Neither Roy nor

9 Brandon had any input into each President’s decision to sign the agreement; they did not force the

10 Presidents to sign or try to persuade them to sign. Decl. Hawken, ¶12. Also on that date, each of

11 the Presidents entered into an Agreement with one another. Id. at Ex. E. They believed that sharing

12 expenses was the most cost-effective way to continue to promote their causes given the slow

13 economy. Id. at ¶14.

14 There was no conflict of interest between Brandon or Roy and any of the charities when

15 the Operating Agreements were executed. The charity Presidents approached Brandon and they

16 proposed a flat monthly fee of $5600 to manage the dialers and databases which is less than half

17 the average salary for a Fundraising Director/Consultant and is less than the 65% of gross funds

18 raised he was earning as a commercial fundraiser. Decl. B. Haueter, ¶10. (The charities also paid

19 rent of $2,000 per month, but this was in turn paid directly to the lender on the commercial

20 building.) Comparing TKL’s new role to that of AGC’s previous role as a commercial fundraiser,

21 Brandon effectively had fewer duties for less compensation. Id.

22

Response to Motion for Partial Summary Judgment STEINACKER LAW PLLC


Page 5 of 28 615 E PIONEER, SUITE 212
PUYALLUP, WASHINGTON 98372
(253) 242-3558 - FAX (253) 292-5171
1 Likewise, the charity Presidents approached Roy and they proposed that UPC continue

2 publishing and distributing charity magazines for 20% of gross revenues, but that in addition, UPS

3 also process all campaign mail and make all deposits. Decl. R. Haueter, ¶13. Thus, the Agreements

4 provided UPC with more duties for the same compensation. TKL and Universal Publishing were

5 not parties at all to the expense sharing agreement entered into between the charities.

6 Due to circumstances completely outside Roy’s control, each of the charity Presidents

7 resigned. In or about August 2011, Harvey Hawken resigned as President of SRC because his son

8 was in a crippling accident in Afghanistan and his charity efforts were needed at home. Decl.

9 Hawken, ¶15. Jan Lee resigned as President of ERN in or around 2013. Att. A, Ex. 3 at 3. Justine

10 Hacken stepped down as President of CSB after November 2015 and the President of CHRA also

11 stepped down. Decl. R. Haueter, ¶16.

12 Since Roy was already processing the mail as UPC, they thought it would be easy for him

13 to take on the role of president as well. Id. at ¶17. Roy only accepted that role because no one else

14 stepped up to do it. Id. at ¶¶16, 17. As a result, Roy worked diligently to maintain the charities,

15 spending countless uncompensated hours to keep up the registrations in each state, and monitor

16 accounting and expenses. He maintained all of the charities’ books and records at his home in

17 Leavenworth, including all of the historical books and records given to him by each of the

18 Presidents. Id.

19 In addition to his UPC responsibilities of publishing and distributing magazines and

20 pamphlets and his Executive Director responsibilities of coordinating and holding charity events,

21 as President of four charities, Roy also had to analyze and submit payroll to the bookkeeper,

22 respond to letters, phone calls and emails, pay bills, reconcile check registers with bank

Response to Motion for Partial Summary Judgment STEINACKER LAW PLLC


Page 6 of 28 615 E PIONEER, SUITE 212
PUYALLUP, WASHINGTON 98372
(253) 242-3558 - FAX (253) 292-5171
1 statements, renew corporation licenses, register charities in various states, and compile the

2 accounting for the CPA to prepare tax returns. Id. at ¶18. One of Roy’s main responsibilities was

3 to determine where specifically the donated funds would need to be spent to be consistent with

4 what was represented and what was received. Id. at ¶19.

5 CSB held an annual Needy Children’s Shopping Spree campaign to benefit local children

6 living in poverty. Near the end of a campaign, Brandon would provide Roy with a report of the

7 total funds received from each community. Roy coordinated the shopping sprees in each

8 community based upon the funds raised there. Id. at ¶20. ERN held an annual Back to School

9 Helping Hands campaign to benefit local foster children. Near the end of a campaign, Brandon

10 would provide Roy with a report of the total funds received from each community and Roy would

11 work with Head Start programs in those communities to identify the foster children who would

12 participate in the shopping sprees. Id. at ¶21.

13 ERN held campaigns designed to benefit the Civil Air Patrol. Funds raised during the

14 campaign were distributed to Alaska Civil Air Patrol and to Washington Civil Air Patrol. Decl.

15 R. Haueter, Ex. H. Although ERN intended to sell calendars with business advertising, donors to

16 those campaigns received the calendars and several cases of calendars were given to civil air

17 patrols in WA State to distribute in their own communities. Id. at ¶22. SRC held campaigns to

18 benefit Search and Rescue groups as well as NW Bloodhounds. Id. at ¶23. Funds raised during

19 those campaigns went to those groups. Id. at Ex. I. CEN held campaigns to support cancer research

20 but was not very successful after 2011. Id. at ¶24. Head Start programs did in fact request help

21 from CSB. Id. at Ex. J.

22

Response to Motion for Partial Summary Judgment STEINACKER LAW PLLC


Page 7 of 28 615 E PIONEER, SUITE 212
PUYALLUP, WASHINGTON 98372
(253) 242-3558 - FAX (253) 292-5171
1 Another very important responsibility that Roy handled was to ensure that each charity

2 paid its proportionate share of the expenses pursuant to the expense sharing agreement they had

3 entered into with one another. Sometimes it was appropriate for one charity to write a check to

4 another to balance the cost sharing. Id. at ¶26. Also, if a donation was occasionally deposited to

5 the wrong charity account, a check was written to correct it. Id.

6 Although it was never Roy’s intent to be the President of any charity, the responsibility

7 fell on his lap and he believed he was doing the best that he could. Id. at ¶29. While he was

8 President, and in addition to all of the numerous other duties he was responsible for, Roy

9 voluntarily generated $306,150 in grant money for the charities in order to help make sure the

10 shopping sprees were successful. Id. at ¶27. Roy donated his time driving to five states and did

11 not seek reimbursement for the money spent on gas and hotels. Roy never took any compensation

12 for the work he did as President or Executive Director for the charities. His only compensation

13 came through Universal Publishing for processing the mail and sending out the magazines. Id. at

14 ¶28.

15 D. Charities Renting Space From TKL Directed Their Own Solicitations.

16 The charities directed their own solicitations. Charity employees made their calls from the

17 TKL commercial building that they rented space in. Decl. B. Haueter, ¶12. Each charity provided

18 their employees with a script that was read when the employee reached a person on the telephone.

19 Id. at ¶13. Typically, the employee would identify him/herself and location then go into the

20 purposes of the call and ask for a donation when appropriate. If the individual stated that they

21 would like to donate, the employee entered the pledge into the database. Id.

22

Response to Motion for Partial Summary Judgment STEINACKER LAW PLLC


Page 8 of 28 615 E PIONEER, SUITE 212
PUYALLUP, WASHINGTON 98372
(253) 242-3558 - FAX (253) 292-5171
1 At the end of each day, Brandon (for TKL) ran a report of all individuals requesting a

2 pledge kit and the kit was then mailed out to that individual by a charity employee. Id. at ¶14. The

3 pledge kits contained a return envelope, a flyer or pamphlet depending on the particular campaign,

4 a postcard invoice identifying the purpose of the pledge, the caller, pledged amount, disclosures

5 required by the state, and the option to make their donation online at the charity website when

6 applicable. All of the pledge kit materials were provided by the charities. Id.

7 TKL did not have control over hiring and firing charity employees. Id. at ¶10. TKL did

8 not determine how to use the funds raised or receive any of the contributions from donors. Id.

9 Brandon has never been involved with any charity as a Director or in any leadership

10 capacity whatsoever. Id. at ¶11. He has either raised funds for charities as a commercial fundraiser

11 or rented space to and managed dialing equipment and software for charities. Id. Brandon’s job

12 was to set up the daily calling and run the equipment year-round. Anything that did not involve

13 the computer equipment, office equipment, or database management, was not his responsibility.

14 Id. at ¶9.

15 E. Significant Changes Were Made Due to the State’s Investigation.

16 In mid-2015, the charities and the Haueters became the focus of a Civil Investigation by

17 the Attorney General’s office. Roy Haueter was deposed on March 3 and 4, 2016. Decl. R.

18 Haueter, ¶30. After that deposition and after further communications with the AG’s office, he

19 realized that some of the charities’ practices and procedures could be improved. Id. Roy outlined

20 a list of those changes in a letter dated April 15, 2016 and mailed it to Assistant Attorney General

21 Julia McGann. Att. A, Ex. 38, pg. 24.

22

Response to Motion for Partial Summary Judgment STEINACKER LAW PLLC


Page 9 of 28 615 E PIONEER, SUITE 212
PUYALLUP, WASHINGTON 98372
(253) 242-3558 - FAX (253) 292-5171
1 After this, there was a period of several months when the Haueters had not heard anything.

2 When Roy inquired of the AG’s office, he was left with the impression that they were closing the

3 file. Decl. R. Haueter, ¶31. As such, they began to make plans to transition the things Roy was

4 doing to someone else. Id. They recruited new presidents for the charities—Mindee Graver for

5 Emergency Relief Network and Bill and Valerie Kerr for Children’s Safety Society. They decided

6 that ERN and CSS would run two fundraising campaigns each year. Id. Brandon formed Universal

7 Publishing LLC in order to take over what UPC had been doing. Mindee Graver began in about

8 November 2017 to process the mail for the charities. Id.

9 At a board meeting on December 14, 2017, SRC voted to dissolve and planned to distribute

10 the remaining funds. Id. at ¶32. At a board meeting on December 15, 2017, CHRA voted to

11 dissolve and planned to distribute the remaining funds. Id. There is no way that Roy could have

12 known that the Attorney General’s office would file a lawsuit a week later when he attested that

13 there were no pending lawsuits. Id.

14 A few weeks later Children’s Hunger Relief Aid dissolved and the balance in that charity’s

15 account was transferred to Children’s Safety Bureau (now Children’s Safety Society) which

16 utilizes the dba’s Children’s Hunger Emergency Fund and Holiday Relief Meal Fund because

17 Children’s Hunger Emergency Fund and Holiday Relief Meal Fund engage in activities

18 substantially similar to those of Children’s Hunger Relief Aid. Id. at ¶33.

19 Search and Rescue Charities also dissolved and the balance in that charity’s account was

20 transferred to Emergency Relief Services (now Emergency Relief Network) which utilizes the

21 dba Rescue Equipment Drive because Rescue Equipment drive engages in activities substantially

22 similar to those of Search and Rescue Charities. Id. at ¶34.

Response to Motion for Partial Summary Judgment STEINACKER LAW PLLC


Page 10 of 28 615 E PIONEER, SUITE 212
PUYALLUP, WASHINGTON 98372
(253) 242-3558 - FAX (253) 292-5171
1 F. The Haueters Did Not Get Rich Under the Operating Agreements.

2 Pursuant to the Operating Agreements, TKL received a flat fee of $5,600 per month rather

3 than a percentage of what was raised. Decl. B. Haueter, ¶10. This amount is less than half the

4 average salary for a Fundraising Director/Consultant. Id. at Ex. A. As a commercial fundraiser,

5 AGC typically earned 65% of the gross revenue raised, although the Municipal Motorcycle

6 Officers of CA and Texas Fire Fighters Association contracts provided for 85% and 80%

7 respectively. Id. at ¶3. Thus, the $5,600 flat fee is much less than TKL could have earned as a

8 commercial fundraiser. Id. at ¶10.

9 Pursuant to the Operating Agreements, UPC received 20% of gross receipts to continue

10 publishing and distributing each charity’s magazines as well as process all the mail and deposit

11 all the donations into each charity’s account. Decl. R. Haueter, ¶14. UPC had already been

12 publishing and distributing the charity magazines for years prior to this. Thus, although he took

13 on more responsibilities, UPC’s fee was not increased.

14 The Haueters have each provided copies of personal bank account statements and tax

15 returns for a number of past years. The State has alleged that the Haueters “funneled the majority

16 of donations into their own pockets” (Motion for Partial Summary Judgment, 1:21-22). The

17 evidence does not support such an allegation. Rather, all of the financial documents provided by

18 the Haueters show that they received only the amounts to which they were entitled under the 2010

19 contracts they entered with the charity Presidents, which hardly made them rich. They are largely

20 indebted with no appreciable assets. In fact, Roy is pursuing other avenues of income in an effort

21 to avoid having to seek relief under the bankruptcy code. Id. at ¶35.

22

Response to Motion for Partial Summary Judgment STEINACKER LAW PLLC


Page 11 of 28 615 E PIONEER, SUITE 212
PUYALLUP, WASHINGTON 98372
(253) 242-3558 - FAX (253) 292-5171
1 ISSUES PRESENTED

2 Is summary judgment appropriate where there are disputed issues of material fact?

3 EVIDENCE RELIED UPON

4 Defendants’ response is based upon the Declarations of Roy Haueter, Brandon Haueter,

5 Harvey Hawken, and Kevin Steinacker and the exhibits thereto.

6 AUTHORITY AND ARGUMENT

7 Summary judgment may be granted only “if the pleadings, depositions, answers to

8 interrogatories, admissions on file, together with the affidavits, if any, show that there is no

9 genuine issue as to any material fact and that the moving party is entitled to judgment as a matter

10 of law.” CR 56(c); Ruff v. County of King, 125 Wn.2d 697, 703, 887 P.2d 886 (1995). All the

11 facts submitted and the reasonable inferences therefrom are considered in the light most favorable

12 to the nonmoving party. Citizens for Clean Air v. Spokane, 114 Wn.2d 20, 38, 785 P.2d 447

13 (1990). “Credibility determinations, the weighing of the evidence, and the drawing of legitimate

14 inferences from the facts are jury functions, not those of a judge,” and therefore prevent summary

15 judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S. Ct. 2505, 91 L. Ed. 2d 202

16 (1986).

17 A. Some of Plaintiff’s Alleged Violations Are Barred by the Statute of Limitations.

18 “An action upon a statute for a forfeiture or penalty to the state” is limited to a two-year

19 statute of limitations. RCW 4.16.100(2). The two-year limitation on an action for a penalty applies

20 even though RCW 4.16.160 does not impose a statute of limitations against the state for recovery

21 of damages. US Oil Refining Co. v. State Dept. of Ecology, 96 Wn.2d 85, 90, 633 P.2d 1329

22 (1981); see also In re Breast Cancer Prevention Fund, 574 B.R. 193, 216 (WD Wash. 2017)

Response to Motion for Partial Summary Judgment STEINACKER LAW PLLC


Page 12 of 28 615 E PIONEER, SUITE 212
PUYALLUP, WASHINGTON 98372
(253) 242-3558 - FAX (253) 292-5171
1 (applying 2-year statute of limitations to penalties under the CPA). Plaintiff opened its

2 investigation against Defendants on March 10, 2015. Att. C, ¶2. Its complaint was filed on

3 December 21, 2017 (Sub #1). Plaintiff cannot seek the imposition of any penalties on violations

4 prior to December 21, 2015. Plaintiff seeks summary judgment on the issue of liability only, but

5 to the extent it is asking for a determination of liability for the purposes of imposing a penalty

6 under the Consumer Protection Act (CPA), the court should not consider any actions outside the

7 statute of limitations.

8 B. Defendants Have Not Engaged in an Unfair or Deceptive Act.

9 The court should deny summary judgment that Defendants’ actions were unfair or

10 deceptive. To prevail on its CPA claim, the State must prove that Defendants engaged in an unfair

11 or deceptive act or practice occurring in trade or commerce that affects the public interest. State

12 v. Kaiser, 161 Wn. App. 705, 719, 254 P.3d 850 (2001). While the CPA is to be liberally

13 construed, the act should “not be construed to prohibit acts or practices which are reasonable in

14 relation to the development and preservation of business or which are not injurious to the public

15 interest.” RCW 19.86.920. Thus, the court must consider whether Defendants’ actions were

16 reasonable and whether the public interest was harmed.

17 Plaintiff overstates Washington law regarding how a deceptive act should be measured.

18 “A deceptive ac or practice is measured by the ‘net impression’ on a reasonable consumer,” not

19 the least sophisticated one. State v. LA Investors, LLC, 2 Wn. App. 2d 524, 540, 410 P.3d 1183

20 (2018) (quoting Panag v. Farmers Ins. Co. of Wash., 166 Wn.2d 27, 50, 204 P.3d 885 (2009)

21 (emphasis added). The “least sophisticated consumer” language comes from federal cases

22 interpreting the Federal Trade Commission Act and the Fair Debt Collections Practices Act. Jeter

Response to Motion for Partial Summary Judgment STEINACKER LAW PLLC


Page 13 of 28 615 E PIONEER, SUITE 212
PUYALLUP, WASHINGTON 98372
(253) 242-3558 - FAX (253) 292-5171
1 v. Credit Bureau, Inc., 760 F.2d 1168, 1173-4 (11th Cir. 1985). In Panag, our Supreme Court

2 evaluated whether notices sent by a collection agency violated the CPA. Panag, 166 Wn.2d 27.

3 The court held that deception exists if the practice is likely to mislead a “reasonable consumer.”

4 Id. at 50. The opinion discussed standards under the FDCPA and FTC and quoted Jeter’s

5 statement that “the [FTC] should look not to the most sophisticated readers but rather to the least,”

6 but when holding that the collection notices at issue were deceptive, Panag based the holding on

7 the fact that an “ordinary consumer” would have misunderstood. Id.

8 Most reported Washington decisions citing Panag state that the test for an unfair or

9 deceptive act is whether it had the capacity to mislead an ordinary or reasonable consumer.

10 Columbia Physical Therapy, Inc., PS v. Benton Franklin Orthopedic Associates, PLLC, 168

11 Wn.2d 421, 442, 228 P.3d 1260 (2010); LA Investors, LLC, 2 Wn. App. 2d at 540; State v.

12 Mandatory Poster Agency, Inc., 199 Wn. App. 506, 518-9, 398 P.3d 1271 (2017); Rush v.

13 Blackburn, 190 Wn. App. 945, 963, 361 P.3d 217 (2015); Mellon v. Regional Trustee Services

14 Corp., 182 Wn. App. 476, 489 n.2, 334 P.3d 1120 (2014); Behnke v. Ahrens, 172 Wn. App. 281,

15 293, 294 P.3d 729 (2012). The only reported Washington decision that refers to the “least

16 sophisticated” consumer quotation in Panag is Peterson v. Kitsap Community Federal Credit

17 Union, 171 Wn. App. 404, 426, 287 P.3d 27 (2012). Peterson also referred to a reasonable

18 consumer. Id. The opinion did not discuss the standard in any detail and decided the case on other

19 grounds. Id.

20 Considering reasonable and ordinary consumers is consistent with the principle that an act

21 should only be considered unfair or deceptive if it has “the capacity to deceive a substantial portion

22

Response to Motion for Partial Summary Judgment STEINACKER LAW PLLC


Page 14 of 28 615 E PIONEER, SUITE 212
PUYALLUP, WASHINGTON 98372
(253) 242-3558 - FAX (253) 292-5171
1 of the public.” LA Investors, LLC, 2 Wn. App. 2d at 538 (quoting Panag, 166 Wn.2d at 47). It is

2 also consistent with the legislature’s intent not to prohibit reasonable practices. RCW 19.86.920.

3 Further, “acts or practices performed in good faith under an arguable interpretation of

4 existing law do not constitute unfair conduct violative of the consumer protection law.” Perry v.

5 Island Sav. and Loan Ass’n, 101 Wn.2d 795, 810, 684 P.2d 1281 (1984); accord Leingang v.

6 Pierce County Medical Bureau, Inc., 131 Wn.2d 133, 155, 930 P.2d 288 (1997). Thus, although

7 an insurer improperly denied coverage, the denial was not a violation of the CPA because the

8 insurer had reasonable justification for its actions. Leingang, 131 Wn.2d at 155-6. Similarly, the

9 court should consider the reasonableness of Defendants’ actions before determining that they were

10 deceptive.

11 1. There Is No Evidence of Wrongdoing Based on Commonalities between the Charities

12 Plaintiff’s argument that a single enterprise existed and deceived consumers is based on

13 disputed facts and insufficient evidence. Defendants dispute the assertion that the charities were

14 organized or run solely to benefit the Haueter family. Motion for Summary Judgment, pg. 1. The

15 Haueters were not involved in formation of the charities. Decl. R. Haueter at ¶5. Plaintiff makes

16 the conclusory assertion that a donation might have been used for another charity but does not

17 cite any evidence that this ever happened. At times it was appropriate for one charity to write a

18 check to another to balance the cost sharing pursuant to the expense sharing agreement entered

19 into between the charity Presidents. Id. at ¶26. Also, if a donation was occasionally deposited to

20 the wrong charity’s account, a check was written to correct it. Id. Plaintiff seems to argue that

21 the possibility that an improper event could occur is equivalent to proof that it has repeatedly

22

Response to Motion for Partial Summary Judgment STEINACKER LAW PLLC


Page 15 of 28 615 E PIONEER, SUITE 212
PUYALLUP, WASHINGTON 98372
(253) 242-3558 - FAX (253) 292-5171
1 occurred. Plaintiff has not met its burden to establish no disputed issues of material fact sufficient

2 to justify summary judgment.

3 2. Defendants’ Claims of Providing Local Help Are Not Deceptive

4 Plaintiff has not met its burden to establish that any claims to help local children were

5 false. In order to establish that the claim to provide local help is deceptive, Plaintiff must show

6 that donations were not used in the area where the donation was made. Defendants have explained

7 that the use of local mailboxes allowed the charities to keep track of where donations were made.

8 Att. D at 5. The charities then carried out their charitable activities in an area proportionate to the

9 donations received there. Decl. R. Haueter, ¶¶20, 21. Plaintiff submitted in its materials the

10 schedules and calculation of the budget for each local shopping spree. Att. A, Ex. 52 (bates

11 HAUETER__0005-37); see also Ex. 38, 28-34. Plaintiff has presented no evidence that funds

12 were not in fact used locally as donors expected.

13 Defendants’ use of private mailboxes was not deceptive. A post office box or private

14 mailbox is not a false address. It is simply a mailing address. All of the mail sent by the charities

15 was postmarked in Tacoma. Att. C, Ex. 1 at 2; Ex. 3 at 11, 14, 15. Defendants properly printed

16 the address for private mailboxes. US Postal Service Publication 28 on postal addressing standards

17 confirms in section 28 that the proper way to write the address for a private mailbox is to write

18 the street address of the store, the # symbol or the abbreviation PMB, and the box number. Decl.

19 Steinacker, Ex. A. A donor who received a solicitation by mail had first been contacted by phone

20 and would have been informed during the phone call where the charity operated. Decl. B. Haueter,

21 ¶13. Plaintiff would have the court hold that every business that uses a private mailbox is

22 deceiving consumers, because a consumer might think that the business actually had a physical

Response to Motion for Partial Summary Judgment STEINACKER LAW PLLC


Page 16 of 28 615 E PIONEER, SUITE 212
PUYALLUP, WASHINGTON 98372
(253) 242-3558 - FAX (253) 292-5171
1 office instead of it being a mailing address. Using a private mailbox or post office box is a

2 reasonable business practice. Without evidence that funds were not used locally as claimed,

3 summary judgment must be denied.

4 3. Defendants Did Not Misrepresent the Identity of the Charity

5 The use of multiple names by a charity is allowed under Washington law. The CSA

6 requires a charity to provide at registration both the name of the entity and “the name(s) under

7 which the charitable organization will solicit contributions.” RCW 19.09.075(1)(b) (emphasis

8 added). The statute explicitly condones the use of more than one name. State law also allows an

9 entity to register one or more trade names with the secretary of state. RCW 19.80.010. All

10 solicitation by the defendant charities under a name other than the name on the articles of

11 incorporation was done under a name that was registered both as an alternate name with the

12 Charities Division and as a trade name. Decl. Steinacker, Ex. B. Further, the solicitations all

13 showed the federal tax ID number of the sponsoring charity.

14 The Secretary of State has an online tool to search for charities by the tax ID number

15 (FEIN). ccfs.sos.wa.gov (accessed November 15, 2018). A user who clicks on the “advanced

16 search” option can search by the registered alternate name. ccfs.sos.wa.gov/#/cftsearch (accessed

17 November 15, 2018). Registered trade names can also be easily searched online.

18 secure.dor.wa.gov/gteunauth/_/#1 (accessed November 15, 2018).

19 The legislature cannot have intended that charities be allowed to register alternate names

20 but not to use them. Indeed, the registration statute expressly suggests the use of alternate names

21 for soliciting contributions. RCW 19.09.075(1)(b). Plaintiff has not presented evidence that the

22

Response to Motion for Partial Summary Judgment STEINACKER LAW PLLC


Page 17 of 28 615 E PIONEER, SUITE 212
PUYALLUP, WASHINGTON 98372
(253) 242-3558 - FAX (253) 292-5171
1 names used on solicitations were not properly registered and summary judgment must be denied

2 on this point.

3 4. Persuasive Language Is Not Deceptive.

4 Persuasive language in the solicitations should be allowed as an exercise of protected

5 speech. Charitable solicitation is protected under the First Amendment. Village of Schaumburg v.

6 Citizens for a Better Environment, 444 US 620, 633, 100 S. Ct. 826, 63 L.Ed.2d 73 (1980). Any

7 regulation of charitable solicitation “must be undertaken with due regard for the reality that

8 solicitation is characteristically intertwined with informative and perhaps persuasive speech

9 seeking support for particular causes … and for the reality that without solicitation, the flow of

10 such information and advocacy would likely cease.” Id. at 632. Persuasion is not deception. A

11 charity’s use of persuasive language is protected by the First Amendment. These Defendants’ use

12 of the word “urgent” in some solicitations is not completely baseless and does not cross the line

13 from persuasion to deception. See Decl. R. Haueter, Ex. J.

14 5. Other Claimed Statements Were Not Deceptive.

15 Plaintiff continually refers to its calculated percentage of donated funds used for charitable

16 purposes as evidence of false statements. It is not always clear how Plaintiff has determined the

17 percentage or how it has figured the portion used for permissible purposes.1 But even if Plaintiff’s

18 calculation is correct, the Supreme Court has held “there is no nexus between the percentage of

19 funds retained by the fundraiser and the likelihood that the solicitation is fraudulent.” Riley v.

20
1
Plaintiff’s Motion at page 8, lines 16-20 claims that only 20% of the donated funds went to charitable purposes but
21 only makes a blanket citation to the tax returns. The tax returns report a total of $2,568,421 going toward charitable
purposes over the years. Att. A, Ex. 28-31 (adding line 32 on each tax return). That is 75% of the total $3,440,946 of
22 donations and grants reported on the returns. Id. It is difficult to rebut a vague assertion without adequate explanation,
and the moving party should not prevail on summary judgment just because the responding party cannot guess what
allegation is being made.

Response to Motion for Partial Summary Judgment STEINACKER LAW PLLC


Page 18 of 28 615 E PIONEER, SUITE 212
PUYALLUP, WASHINGTON 98372
(253) 242-3558 - FAX (253) 292-5171
1 Nat’l Federation of the Blind of NC, Inc., 487 US 781, 793, 108 S. Ct. 2667, 101 L.Ed.2d 669

2 (1988) (citing Secretary of State of Md. v. Joseph H. Munson Co., 467 US 947, 104 S. Ct. 2839,

3 81 L.Ed.2d 786 (1984)). There are many legitimate factors that might result in high costs. Munson,

4 467 US at 961. “[W]here the solicitation is combined with the advocacy and dissemination of

5 information, the charity reaps a substantial benefit from the act of solicitation itself.” Riley, 487

6 US at 798. Because the purposes of defendant charities include education and advocacy, looking

7 solely at the percentage of funds used specifically for gift cards is not sufficient to establish fraud

8 or misrepresentation. See e.g. Att. A, Ex. 3, at 3 (describing ERS primary purpose as mailing

9 guides and magazines, with the gift cards as a secondary purpose); Att. A, Ex. 6, at 11 (describing

10 CSB primary purpose as education campaign); Att. A, Ex. 42 (CEN health guide); Att. C, Ex. 1,

11 21-24 (outdoor survival guide).

12 Similarly, it is not misleading for the Needy Children’s Shopping Spree to ask for a $50

13 donation to help a needy child without explicitly disclosing the exact percentage of the donation

14 that would to toward purchasing food. “Donors are also undoubtedly aware that solicitations incur

15 costs, to which part of their donation might apply. And, of course, a donor is free to inquire how

16 much of the contribution will be turned over to the charity.” Riley, 487 US at 799.

17 Use of the term “children’s hospital” by Children’s Hospital Emergency Fund was not a

18 CPA violation. Under state and federal trademark law, names that are merely descriptive of the

19 services offered are not eligible for trademark protection without evidence that the name has

20 acquired secondary meaning. E.g Diamond Drill Contracting Co. v. International Diamond Drill

21 Contracting Co., 106 Wn. 72, 86-7, 179 P. 120 (1919); Surfvivor Media, Inc. v. Survivor

22 Productions, 406 F.3d 625, 632 (9th. Cir. 2005). The words “children’s hospital” only describe a

Response to Motion for Partial Summary Judgment STEINACKER LAW PLLC


Page 19 of 28 615 E PIONEER, SUITE 212
PUYALLUP, WASHINGTON 98372
(253) 242-3558 - FAX (253) 292-5171
1 hospital for children and by themselves would not be entitled to any trademark protection by a

2 hospital. Indeed, Plaintiff submitted evidence that some understood the phrase to refer to a

3 children’s hospital in Tacoma and others understood it to refer to Seattle Children’s Hospital,

4 confirming that there is no widespread secondary meaning associating the words “children’s

5 hospital” with any particular hospital. Compare Att. N, Att. Z. There are multiple other examples

6 of children’s hospitals.

7 CHRA/CEN used the term “children’s hospital” to describe its charitable purpose—

8 helping children experiencing a medical difficulty. It did not do anything to try to get potential

9 donors to think it was soliciting on behalf of a particular children’s hospital. Again, the fact that

10 consumers understood it to refer to distinct hospitals confirms that a reasonable consumer would

11 not be justified in assuming the phrase was in reference to a particular hospital. It would be unjust

12 to hold CHRA/CEN liable for confusing customers with a phrase that, in a trademark infringement

13 analysis, would not even get to the stage of evaluating a potential likelihood of confusion because

14 it is merely descriptive.

15 It is not misleading for CHRA to tell donors that it would give out “vouchers” and then

16 purchase gift cards. A voucher is “a form or check indicating a credit against future purchases or

17 expenditures.” www.merriam-webster.com/dictionary/voucher (accessed November 17, 2018).

18 “Voucher” can certainly encompass a gift card, which can be exchanged for future purchases.

19 Plaintiff does not explain how supplying gift cards with which to buy food instead of some other

20 form of a voucher is deceptive or injurious to the public. Giving gift cards to enable needy families

21 to buy food is a reasonable implementation of a promise to give a voucher.

22

Response to Motion for Partial Summary Judgment STEINACKER LAW PLLC


Page 20 of 28 615 E PIONEER, SUITE 212
PUYALLUP, WASHINGTON 98372
(253) 242-3558 - FAX (253) 292-5171
1 ERN did not violate the CPA by asking for donations to help foster children. Contrary to

2 Plaintiff’s assertion, foster children are specifically eligible for enrollment in Head Start

3 regardless of income. 45 CFR § 1302.12(c)(1)(v); see also Decl. R. Haueter, Ex. F. Head Start

4 programs do in fact help foster children. Roy worked with the various Head Starts to identify the

5 foster children who would benefit from the gift cards. Decl. R. Haueter, ¶21.

6 Other allegations of misleading statements in Plaintiff’s motion are based on misstated or

7 incomplete facts. CEN did donate for cancer research in 2011. Att. A, Ex. 28 at 2, although

8 subsequent campaigns were unsuccessful. Decl. R. Haueter, ¶24. CEN received thank you letters

9 in 2011 for their donations from Fred Hutchinson Cancer Research Center, St. Luke’s Mountain

10 States Tumor Institute research program, and Montana Cancer Institute. Att. A, Ex. 38 at 220-

11 222. The website’s reference to Dr. Bronsin was simply an oversight. Decl. B. Haueter, ¶16.

12 ERN donated funds to the Civil Air Patrol and distributed calendars. Id. at ¶22. ERN’s

13 2012 tax return (the year the campaign was run) shows $6,680 went to funding recipients. Att. A,

14 Ex. 30, at 10. In 2012, $3122 went to Alaska Civil Air Patrol and $3,508 went to Washington

15 Civil Air Patrol. Att. A, Ex. 38, at 28.

16 SRC gave funds to local search and rescue groups and the NW Bloodhounds. Decl. R.

17 Haueter, ¶23. SRC’s recipient list for 2016 and 2017 shows that search and rescue groups in

18 various counties were in fact recipients. Att. A, Ex. 48. SRC’s ledger for 2013 indicates that

19 $3,525 went to the campaign’s recipient. Att. A, Ex. 38 at 148. This corresponds to the tax return,

20 showing that $3,525 went to support search and rescue units. Att. A, Ex. 31 at 13. Plaintiff has no

21 evidence that Chelan County wasn’t a recipient in 2013. SRC’s recipient list for both 2016 and

22 2017 show that NW Bloodhounds S & R did in fact receive funds in those years. Att. A, Ex. 48.

Response to Motion for Partial Summary Judgment STEINACKER LAW PLLC


Page 21 of 28 615 E PIONEER, SUITE 212
PUYALLUP, WASHINGTON 98372
(253) 242-3558 - FAX (253) 292-5171
1 NW Bloodhounds Search and Rescue still maintains a website. www.nwbloodhounds.org

2 (accessed November 17, 2018).

3 C. Turnkey Leasing Is Not a Commercial Fundraiser

4 Turnkey Leasing is not a commercial fundraiser. Its role is closer to that of a consultant

5 than a commercial fundraiser.

6 “Commercial fundraiser” … means any entity that for compensation or other


consideration directly or indirectly solicits or receives contributions within this
7 state for or on behalf of any charitable organization or charitable purpose, or that is
engaged in the business of, or represents to persons in this state as independently
8 engaged in the business of, soliciting or receiving contributions for such purposes.
However, a commercial coventurer, fund-raising counsel, or consultant is not a
9 commercial fund-raiser or commercial fund-raising entity.

10 RCW 19.09.020(5).

11
“Fund-raising counsel” or “consultant” means any entity or individual who is
retained by a charitable organization, for a fixed fee or rate, that is not computed
12
on a percentage of funds raised, or to be raised, under a written agreement only to
plan, advise, consult, or prepare materials for a solicitation of contributions in this
13
state, but who does not manage, conduct, or carry on a fund-raising campaign and
who does not solicit contributions or employ, procure, or engage any compensated
14
person to solicit contributions, and who does not at any time have custody or control
of contributions.
15

16 RCW 19.09.020(10).

17 A commercial fundraiser can include “individuals, contract employees, and independent

18 contractors … that solicit or receive charitable contributions, if compensated.” WAC 434-120-

19 210. It follows that individuals and contractors who do not solicit or receive charitable

20 contributions are not commercial fundraisers.

21 A commercial fundraiser must be registered because it engages with the public. It must

22 post a bond if it receives contributions, is compensated on something other than a flat fee, is

Response to Motion for Partial Summary Judgment STEINACKER LAW PLLC


Page 22 of 28 615 E PIONEER, SUITE 212
PUYALLUP, WASHINGTON 98372
(253) 242-3558 - FAX (253) 292-5171
1 authorized to incur expenses on behalf of the charity, or if it is a new fundraiser that was not

2 previously registered. RCW 19.09.191. A consultant, on the other hand, does not need to register

3 or post a bond.

4 TKL does not employ those who make the phone calls or the call center supervisor. Decl.

5 B. Haueter, ¶10. It has no control over who is employed or how they are paid. Id. It does not solicit

6 or receive contributions or decide the content of any solicitation. Id. TKL manages the equipment

7 used to make phone calls for a fixed fee. Id. at ¶9; see also Att. E, ¶10. Its activities are more like

8 that of a paid consultant (who is authorized under the law to plan and prepare materials for a

9 solicitation of contributions) rather than a commercial fundraiser (who itself solicits the

10 contributions on behalf of the charities). TKL does not engage in any of the activities that would

11 require a bond.

12 D. Required Records Were Kept By the Charity President

13 Defendants did not intend to admit that the charities had no principal place of business at

14 all. Defendants’ answer to paragraph 10.2 of the Amended Complaint was intended to admit that

15 there was no single address that the charities used and that they listed both the Tacoma commercial

16 building and various PO boxes on their filings with the Secretary of State. The charities did

17 operate mainly from two locations—one for fundraising activities and one for administrative

18 functions. To the extent that the answer to paragraph 10.2 is unclear or suggests that there was no

19 principal place of business at all, Defendants move to amend their answer accordingly. Leave to

20 amend pleadings under CR 15 should be liberally granted when justice requires. See Tagliani v.

21 Colwell, 10 Wn. App. 227, 517 P.2d 207 (1973) (leave to amend complaint should have been

22 granted after oral ruling granting defendant’s summary judgment motion).

Response to Motion for Partial Summary Judgment STEINACKER LAW PLLC


Page 23 of 28 615 E PIONEER, SUITE 212
PUYALLUP, WASHINGTON 98372
(253) 242-3558 - FAX (253) 292-5171
1 The charities’ fundraising efforts after 2011 were conducted from the commercial building

2 in Tacoma. Att. A, Ex. 3 at 3; Ex. 6 at 9; Att. F at 224. Once Roy became the president of each

3 charity, their records were kept at his home in Leavenworth, including historical records given to

4 him by the prior Presidents. Decl. R. Haueter, ¶17. The required records were kept.

5 E. The Two Dissolved Charities Distributed Assets to the Continuing Charities.

6 At the end of 2017, when Roy thought the AG’s investigation was winding down, it was

7 decided to dissolve two of the charities. Decl. R. Haueter, ¶¶29, 30. The remaining charities

8 intended to continue charitable efforts similar to those of the dissolved charities. The CHRA

9 Articles of Incorporation provided: “Distribution of assets on dissolution or final liquidation shall

10 be to another nonprofit organization as determined by the Board of Directors.” Att. A, Ex. 12. The

11 funds of CHRA and SRC were given to the two remaining charities. Decl. R. Haueter, ¶¶30, 31.

12 F. The Nonprofit Defendants Did Not Breach Fiduciary Duties

13 The nonprofit organizations may be trustees of a charitable trust, but they did not breach

14 their duties as trustees. Generally, a trustee’s duty prevents self-dealing and transactions where

15 the trustee receives an improper benefit. E.g. RCW 11.98.078(1), (2). But a contract between a

16 charity and a fundraiser owned by a director of the charity is not a direct conflict of interest. BCPF,

17 574 B.R. at 221. “Legacy [the fundraiser], Paton [the director], and BCPF [the charity] are

18 technically separate and distinct entities.” Id. There was also no direct conflict in BCPF because

19 there was no showing that the charity itself improperly benefited from the contract with the

20 fundraiser, or that the charity paid more than market rates. Id. Similarly, the contracts between the

21 charities and TKL or FEC/UP were not contracts directly with any Haueter family member.

22 Plaintiff has no evidence that the charities overpaid for fundraising. Indeed, the evidence suggests

Response to Motion for Partial Summary Judgment STEINACKER LAW PLLC


Page 24 of 28 615 E PIONEER, SUITE 212
PUYALLUP, WASHINGTON 98372
(253) 242-3558 - FAX (253) 292-5171
1 that a commercial fundraiser would have taken more of the donated funds. Decl. B. Haueter, ¶3;

2 Att. A, Ex. 10 (Bates 5516) (60% of gross paid to commercial fundraiser). FEC’s contracted 20%

3 was the proportion it had received previously for organizing fundraising events. Decl. R. Haueter,

4 ¶7. The charities would have had to rent space regardless of whether the Haueters were involved

5 and Plaintiff has no evidence that the rent paid by the charities was higher than market rates.

6 Plaintiff also has not shown a breach of fiduciary duty based on an indirect conflict of

7 interest. Washington’s statutory definition of a trustee’s duty of loyalty prevents transactions with

8 the trustee’s spouse and family members, agents of the trustee, or entities where the trustee has

9 an ownership interest in the entity or the entity has an ownership interest in the trustee. RCW

10 11.98.078(3). None of these directly apply to the situation here because the nonprofit

11 organizations do not have family members or owners. And any such apparent conflict of interest

12 from a transaction with a family member “is rebutted if the trustee establishes that the conflict did

13 not adversely affect the interests of the beneficiaries.” RCW 11.98.078(3)(b). Similarly, an

14 indirect conflict of interest does not result in liability if the trustee can show that the transaction

15 was fair. BCPF, 574 B.R. at 220 (quoting Karen E. Boxx, Of Punctilios and Paybacks: The Duty

16 of Loyalty Under the Uniform Trust Code, 67 Mo. L. Rev. 279, 282 (Spring 2002)). Here,

17 construing the facts in Defendants’ favor, the transactions with TKL and FEC were not any more

18 than what would have been paid to a fundraiser with no connection to the Haueter family.

19 Payments to both TKL and FEC have been in exchange for valuable services and rent.

20 With regard to the specific allegation that that the December 2010 contracts were the result

21 of self-dealing, Neither Roy nor Brandon Haueter convinced the charity presidents to enter into

22 the contracts and Plaintiff has presented no evidence to the contrary. Decl. Hawken, ¶12.

Response to Motion for Partial Summary Judgment STEINACKER LAW PLLC


Page 25 of 28 615 E PIONEER, SUITE 212
PUYALLUP, WASHINGTON 98372
(253) 242-3558 - FAX (253) 292-5171
1 Plaintiff cannot prevail on summary judgment by making an assertion that magazines were

2 not mailed out annually without providing any supporting evidence. Plaintiff bears the burden of

3 proof. Nevertheless, Defendants have submitted evidence that the magazines were mailed out.

4 Att. D, Ex. A.

5 Plaintiff has no evidence that the accounting records of the charities are inaccurate.

6 Plaintiff asserts that Defendants’ own accountant was confused, but the portion of the deposition

7 cited to is simply the accountant’s explanation of one incident where he did not immediately see

8 the reason for one number on the tax return and had to ask the client for an explanation. Att. L,

9 34-37. Upon investigation, the accountant determined that the number was correct. Id. at 37:1.

10 There is no evidence that the “accounting practices were outside accounting norms,” and even if

11 a trained accountant would have done things differently on occasion, that by itself does not mean

12 that the charity breached a fiduciary duty, especially without evidence that the records are faulty

13 or inaccurate.

14 The individual defendants are not trustees and did not owe fiduciary duties. The trustee is

15 the one who hold the property for a charitable purpose. RCW 11.110.020. All property donated

16 was held by the charities, not by the individuals. The individuals were not trustees.

17 Plaintiff relies on State v. Taylor, 58 Wn.2d 252, 362 P.3d 247 (1961), for a description

18 of the duties of a trustee, but that opinion does not hold that the individual officers or directors of

19 a nonprofit corporation are trustees. The trust at issue in Taylor was created by a trust instrument

20 that specifically named individuals as trustees. Id. at 254. In BCPF, Judge Barreca did not find

21 persuasive the arguments that an individual officer would be the co-trustee of a charitable trust

22 and therefore did not reach the issue of the individual’s liability. BCPF, 574 B.R. at 218. Rather

Response to Motion for Partial Summary Judgment STEINACKER LAW PLLC


Page 26 of 28 615 E PIONEER, SUITE 212
PUYALLUP, WASHINGTON 98372
(253) 242-3558 - FAX (253) 292-5171
1 than the fiduciary duty of a trustee, the individual’s duty of care as director of a nonprofit

2 corporation is that of a reasonably prudent person. RCW 24.03.127. Plaintiff has not argued or

3 shown that the individual defendants breached this standard of care.

4 G. Dissolution of the Nonprofits Is Not Warranted

5 As discussed above, genuine issues of material fact prevent a finding that the charities

6 have abused their authority or that Defendants have acted in an illegal, oppressive, or fraudulent

7 manner, or that assets have been wasted. Summary judgment dissolution under RCW 24.03.250

8 or 266 is not warranted.

9 H. Individual Defendants Are Not Personally Liable.

10 There are disputed issues of fact that prevent a finding of personal liability on summary

11 judgment. First, for the reasons argued above, the court should not find a CPA violation on

12 summary judgment. Further, corporate officers can be personally liable when there is evidence

13 that they “knowingly committed wrongful acts or directed others to do so knowing the wrongful

14 nature of the requested acts.” Annechino v. Worthy, 175 Wn.2d 630, 637, 290 P.3d 126 (2012)

15 (citing State v. Ralph Williams’ N.W. Chrysler Plymouth, Inc., 87 Wn.2d 298, 322, 553 P.2d 423

16 (1976); Grayson v. Nordic Constr. Co., 92 Wn.2d 548, 551, 554, 599 P.2d 1271 (1979); and

17 others). In Annechino, a bank officer reviewed and approved an erroneous account chart but there

18 was no evidence he knew the chart was incorrect or knowingly directed the misconduct of the

19 employee, so the bank officer was not personally liable. Id. at 637-38. Annechino clarifies that it

20 is not enough merely that an officer somehow participates in conduct that is wrongful, the director

21 must know that the conduct is wrongful in order to be personally liable.

22

Response to Motion for Partial Summary Judgment STEINACKER LAW PLLC


Page 27 of 28 615 E PIONEER, SUITE 212
PUYALLUP, WASHINGTON 98372
(253) 242-3558 - FAX (253) 292-5171
1 Roy Haueter did not mastermind a scheme to mislead donors. He has worked for years

2 and donated many hours to carry out the organizations’ charitable purposes. He did not knowingly

3 direct any wrongful conduct and had no intent to deceive. Brandon Haueter has never been a

4 director of any of the charities or otherwise acted in any leadership capacity. He has not decided

5 the content of any solicitation nor had any control over how funds have been used. His actions for

6 the charities have been at the direction of others.

7 I. Conclusion

8 For all of the foregoing reasons, summary judgment should be denied.

9 DATED this 19th day of November, 2018.


STEINACKER LAW PLLC
10

11
KEVIN T. STEINACKER, WSBA No. 35475
12 Attorney for Defendants

13 I certify that this memorandum contains 8,341 words, in compliance with the Local Civil Rules.

14

15

16

17

18

19

20

21

22

Response to Motion for Partial Summary Judgment STEINACKER LAW PLLC


Page 28 of 28 615 E PIONEER, SUITE 212
PUYALLUP, WASHINGTON 98372
(253) 242-3558 - FAX (253) 292-5171