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UB Foundation affiliate's right to keep records private survives legal challenge

A State Supreme Court justice has dismissed a legal challenge that sought financial records and other documents from a private nonprofit corporation affiliated with the University at Buffalo, the state's largest public university.

Justice Diane Devlin ruled last week that the UB Foundation Faculty-Student Housing Corp. is a private entity that does not handle public funds, and therefore is not subject to the state's Freedom of Information and Open Meetings laws.

UB Law School alumnus John N. Lipsitz had asked the judge in an Article 78 petition to force the Faculty-Student Housing Corp. to turn over several years of its board meeting minutes, annual budgets and other documents, and to make meetings of the board open to the public.

Lipsitz, a partner in the law firm Lipsitz & Ponterio LLC, enlisted another attorney, Sean E. Cooney of Dolce Panepinto, to press his case. Cooney said in an email that he and Lipsitz planned to appeal the ruling. New York's higher courts have yet to weigh in on the issue of whether private foundations affiliated with public universities should be subject to FOIL and Open Meetings Law.

With more than $1 billion in investments and property, the UB Foundation is the wealthiest nonprofit organization in the region and the largest foundation in the State University of New York. The Faculty-Student Housing Corp. is one of six affiliates of the foundation. It was created in 1990 to allow the foundation to leverage assets and borrowing capacity for the construction of new residence halls and apartments.

Lipsitz filed the petition in June, after UB Foundation executive director Edward P. Schneider rejected his Freedom of Information requests, stating that neither the foundation nor its affiliates were state agencies subject to FOIL. Schneider also attached a 2011 decision in which Justice Patrick H. NeMoyer dismissed a similar petition by Artvoice writer Michael T. Quigley, who had sought records related to the foundation's investment, management and disposition of private contributions on behalf of the university. NeMoyer ruled the foundation wasn't subject to FOIL because it didn't administer public funds and thus could not be considered a public agency. Quigley did not appeal, and the foundation has used the decision to ward off requests for information beyond audited financial statements and IRS Form 990 tax returns.

The litigation was among a series of efforts across the state by faculty, some state legislators and watchdog groups that have pushed for years for the UB Foundation, its affiliates and other foundations within SUNY to be more transparent and publicly accountable.

University corporation challenged on sealed records, open meetings

Lawyers for the Housing Corp. accused Lipsitz and Cooney of attempting to relitigate the Quigley case. But Cooney argued in court that the new challenge differed from the Quigley case because the Housing Corp. handles millions of dollars in student housing fees that have what he termed "the unmistakable earmarks of public funds," in part because the public university wields its power to withhold grades and transcripts in collecting student housing charges on behalf of the Housing Corp.

Housing Corp. attorney Benjamin M. Zuffranieri said the fees students pay for housing aren't public funds because they're not mandatory. Students aren't forced to live in Housing Corp. dormitories.

"The profit or loss from this operation goes to the Housing Corporation. It doesn't go to the university," said Zuffranieri of the Hodgson Russ law firm. "The critical piece is, follow the money. It's private money."

Cooney also said the university and the Housing Corp. were "functionally integrated" in such a way that the private entity clearly operates under substantial public control.

Zuffranieri countered with: "There can be a close connection. There can even be a symbiotic relationship. That doesn't make it a public corporation."

Devlin sided with the Housing Corp. She wrote in seven-page decision that the university was "essentially acting as a third-party administrator to collect rents" for the Housing Corp. She also rejected Cooney's argument that the Housing Corp. should be subject to FOIL because of a "close governmental nexus," such as cross marketing of apartments by UB, a facilities management arrangement between the two entities, and the university's setting the rental rents for students choosing to live in Housing Corp. facilities.

These tasks, said Devlin, "do not rise to the level of governmental activities."

Devlin also wrote that the Housing Corp. "has the same legal and operational structure" as the other UB Foundation affiliates that were addressed in the 2011 Quigley decision.

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