Network For Good v. United Way of the Bay Area

United Way of the Bay Area (UWBA) (defendant) was a corporation that, among other things, provided back-office services for charities. These services included receiving donations, providing receipts, and transferring donations to the intended charities. The Network for Good (NFG) (plaintiff) operated a website that allowed donors to contribute to virtually any United States charity. NFG contracted with UWBA to handle the donations made through its website. In 2000, UWBA created PipeVine, a nonprofit subsidiary, to handle its charity-donation work, including NFG’s account. However, UWBA transferred more liabilities than assets to PipeVine, leaving PipeVine undercapitalized from the start. To stay afloat, PipeVine used new donations to pay old debts rather than forwarding the funds to the intended recipients. UWBA and PipeVine shared office space, legal and accounting departments, board members, and often transferred employees, and they did not operate at arm’s length. As PipeVine struggled, UWBA did not fix PipeVine’s financial state or ensure it could meet its obligations. After three years, PipeVine ceased operations and went into receivership. The receiver determined that PipeVine had received but not distributed $17.7 million in donations—including nearly $3 million from NFG’s website. NFG quickly used its own funds to pay $2.36 million to the intended charities. NFG then sued UWBA in state court for reimbursement, arguing UWBA was PipeVine’s alter ego. The court held a bench trial and issued its findings of fact and conclusions of law.