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D.C. Cir. Affirms, Reverses in APA 'Assessment Fee' Case

The American Psychological Association (APA) is a nonprofit organization, so it can't use membership dues for lobbying. That's why the APA established a subsidiary, the APA Practice Organization (APAPO), to engage in the lobbying that the APA can't. Of course, the APA still can't shuttle any part of its membership dues into the APAPO, so it came up with a new tactic: including a line item for a separate "special assessment fee" in its members' dues statements. You can see where this is going: The special assessment fee doesn't go to the APA; instead, it goes to the APAPO.

APA members discovered that they actually couldn't be required to pay this special fee, even though their dues statements never said they didn't have to pay it. Several members sued under unjust enrichment and false advertising. The district court granted the APA's motions to dismiss. This appeal to the D.C. Circuit followed.

Unjust Enrichment

The district court dismissed the unjust enrichment claim because, it reasoned, unjust enrichment stems from "quasi-contract," which used only in the absence of a contract. In this case, there was a contract between members and the APA; consequently, they couldn't recover in quasi-contract.

The D.C. Circuit, however, rejected this argument: The special fee was an "extra-contractual payment falling outside the 'scope' of the governing contracts." It's not merely the existence of any contract that vitiates quasi-contract; the contact in question has to directly address the problem.

Nothing in the APA's bylaws permitted the APA to take action against a member for failing to pay the special fee. As a result, the court said, this was "a standard pattern of unjust enrichment recovery." The court here also agreed with the platiniffs that the retention was "unjust" in the sense that the plaintiffs had no interest in supporting APAPO lobbying, but were forced to do it anyway.

False Advertising -- Really, It's Choice of Law

The false advertising claim hinges on the fact that the plaintiffs brought suit under California's false advertising statute. The District of Columbia's statute actually precludes members of nonprofit organizations from recovering if the false advertising claim is based on membership in the organization. Really, this is a choice of law problem: California has an interest in making sure its citizens are protected from unfair advertising practices. Washington, D.C., on the other hand, enacted its statute to protect nonprofits.

Applying the four-factor choice of law test from Washkoviak v. Student Loan Marketing Association, the court couldn't conclude that either jurisdiction had a greater interest than the other in applying that state's law. The injuries occurred to California residents in California, but the conduct causing the injury occurred in Washington, at APA headquarters. The third and fourth factors -- the residence of the parties and the place where the relationship was centered -- also didn't come out squarely in favor of either location.

Because the choice-of-law factors were in total equipoise, the court defaulted to the law of the forum state: here, Washington, D.C. As a result, the court affirmed dismissal of the California false advertising claims.

As an aside to anyone who's a member of a nonprofit organization, check your dues statements! Make sure you're not being charged for lobbying that you don't want to be involved in.

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