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Nonprofit Law/Refund of registration fees from a soccer club

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QUESTION: My son played for a high level comp travel team in the state of CA. The club is a 501(c)(3). We paid our registration fee of $500 and monthly training dues of $200.  3 months into a 10 month season the club decided it couldn't afford to pay for travel any longer and shuttered 2 of the 3 travel teams.  The club is still around and has 20 or so teams.  I requested a prorated refund of the registration fee but was told there is a no refund policy. I cannot find that on anything I signed but for argument sake let's assume that is true.  A few months before the season the Board voted to change the fee structure for the upcoming season to $500 registration fees, $100/month training dues, and the player was responsible for their own travel expenses. It passed unanimously.  2 months later that somehow changed to $500 registration, $200/month training dues, and the club paid for all travel. I later found out that 2 board members changed the policy without the knowledge of the board or a vote. I was the Treasurer and 1st VP when the board voted on the  original fee structure. It was obvious the club couldn't take on $150,000 or more in travel expenses, so the fee structure was put in place to keep the club solvent. I resigned from the board prior to the 2 board members changing the policy without knowledge of other members, but it was brought to their attention after the fact and nothing was done.  Board members have a fiduciary responsibility to act in the best interest of its members, and the decision of those 2 members resulted in the collapse of 2 teams after 3 months.  Under these circumstances, is the club obligated to refund a portion or all of the registration fees?

ANSWER:  I have in my profile that this free forum is only for relevant IRS federal exemption issues of 501(c)(3) organizations. There is no federal law relating to issuing refunds for fees paid.

Even though your issue is a question of state law, I will give you some general advice.  Your payment was not a retail purchase so you are not protected by the State's law regarding those types of refunds. Most states require stores to post their return policies by the cash register or print it on the receipt. Service contracts, (e.g., dating services, wireless phone contracts, etc.) usually give consumers a three day right to cancel but those would not
apply to 501(c)(3) organization dues. In any case, you may be covered in what is called
unjust enrichment and the small claims court would be able to decide on the matter, but, generally, the claim under unjust enrichment would not apply if there is a contract that addresses the issue of refunds.
http://en.wikipedia.org/wiki/Unjust_enrichment

It is not clear from what you wrote whether your family paid for services that were promised and then not delivered.  That is the key issue as to refunds, which is what your question was about.

Harvey Mechanic, Attorney at Law -
Harvey108@hotmail.com

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.    



---------- FOLLOW-UP ----------

QUESTION: This is copied from the material provided at registration:

"All Academy clubs throughout the country are required to play the U.S. Soccer’s mandated 10 month season. League matches will run from September 2013 through June 2014 with finals week taking place.  The break in the season will occur from December 15, 2013 to March 1, 2014.  There will also be two showcase events. (1) In December of 2013 and (1) in June 2014."

The team folded in November, so we received 3 of the 10 months the club guaranteed, and did not attend either of the 2 showcases.  Does this additional information help you to provide a response as to whether or not we are untitled to a refund?

Answer
In this free forum, as I wrote you earlier, I do not provide answers regarding state law issues, but I will comment further and you can take my statements only as general statements of law and not how they will apply in your particular situation.

That first paragraph is interesting, in that it appears that the club has a contractual agreement as part of U.S. Soccer to play a 10 month season and your club informed you of that and, therefore, you were provided that information at registration, a court should include that as part of the agreement between the club and you and, as you paid and the services were not delivered, you should certainly receive a refund. Nothing in the contract indicated otherwise.  It will only cost you a small amount to find out in small claims court and your claim would not be unjust enrichment but breach of contract. Before you file in small claims court, however, you would generally be required (and advised) to mail a certified letter to the club giving them your reasoning and demanding the refund within, let's say, one week.

Harvey Mechanic, Attorney at Law -
Harvey108@hotmail.com

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.  

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Harvey Mechanic

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I am an attorney and I volunteer time to answer general questions about U.S. Federal income tax issues of nonprofit 501(c)(3) public charities only. Those questions could be about establishing and maintaining legal requirements for such non-profit organizations in the United States, including Internal Revenue service filings and requirements. I will not be working on this free forum to answer questions about Nonprofit's possible unrelated or for-profit businesses or how to fill out forms. This forum is only for general questions about federal tax law, not as the law applies to your specific situation. If you do not make your question public then I will not be spending much of my donated time on answers that would not benefit the public. If you have other questions, please contact me at Harvey108@hotmail.com I will reply from my email. In any case, do not reveal confidential information to me until after I have contracted with you to provide personal legal services. My responses on this forum are intended to be general statements of law, should not be relied upon as legal advice, and do not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather extensive information about the situation. To search my previous answers you can do a Google search by "site:allexperts.com/q/nonprofit" without the quotes and then add your search terms before hitting enter.

Experience

I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar and I have maintained my status with the Bar since that time.

Education/Credentials

B.S. Columbia University in New York City, 1970

J.D. (Law Degree) Brooklyn Law School, 1990 -- Cum Laude.


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