SAN FRANCISCO — A couple suing Fidelity for contract and tort claims related to their $100 million donation to Fidelity Charitable have proper standing to make a claim, the U.S. District Court for the Northern District of California determined in denying Fidelity’s motion to dismiss.
Emily and Malcolm Fairburn, who operate investment group Ascend Capital, donated $100 million to Fidelity Charitable when facing a major tax bill, the Nov. 28 court ruling said.
Fidelity Charitable is known for providing DAF (donor advised funds) account holders with aggressive advisory rights over their funds, including holding the funds in a dedicated account, giving the donor exclusive advisory rights on the funds, and barring Fidelity Charity from making grants or taking money out of the account without any action from the donor.
Fidelity “only has veto power if the donor attempts to use the funds for an improper or non-charitable purpose,” the court said.
After the Fairburns deposited 1.2 million Energous shares into Fidelity Charitable, the company allegedly liquidated it immediately, the court ruling said.
The Fairburns accused Fidelity of not being forthcoming and using immature tactics as opposed to the strategic tactics they were promised, and sued for misrepresentation, breach of contract and estoppel.
The defendant asked the court to dismiss the claims, but the court disagreed.
The plaintiffs said Fidelity Charitable had given them four promises to convince them to donate their Energous shares: It would use sophisticated, state-of-the-art tactics to liquidate large blocks of stock; it wouldn’t trade more than 10 percent of the daily volume; it would let the Fairburns to oversee the price limit; and it wouldn’t liquidate shares until the beginning of the 2018.
The court said that the promises of using “sophisticated, state-of-the art methods” wasn’t mere puffery or a common promise made to all donors. It added that Fidelity Charitable had traded 16 percent of the daily volume, above the 10 percent limit. Because of the liquidation, the shares were allegedly liquidated for millions of dollars less than they could have been.
U.S. Magistrate Judge Jacqueline Scott Corley ruled on the case.