Using Charitable Donations to Resolve Disputes in Mediation

I’ve occasionally read about disputes that were resolved in whole or in part through a charitable donation. I recently had an opportunity to use this technique to mediate a dispute between a landlord and a tenant over the condition of the premises vacated by the tenant at the conclusion of the lease.

After occupying the property for approximately six years, the tenant decided it needed a larger space and declined to exercise its renewal option. The lease obligated the tenant to leave the premises in “good condition, reasonable wear and tear excepted.”

Several weeks after the tenant vacated, the landlord sent a substantial bill to the former tenant, accompanied by a letter claiming that the tenant had left a mess, and damaged certain fixtures and walls. The tenant disputed these claims, and insisted that it had left the premises free of debris and in generally good condition, and that all of the landlord’s items constituted “reasonable wear and tear.”

The problem was that the landlord had undertaken some minor renovations immediately after the tenant vacated, and so it was somewhat difficult to establish the condition in which the tenant had left the premises before these renovations started. The condition of the premises at the inception of the lease was also unclear.

The negotiations weren’t going anywhere with the former tenant refusing to pay anything, and accusing the landlord of misrepresenting the condition of the premises, and the landlord demanding a hefty sum, and calling the tenant a liar. To be sure, the sums involved did not really warrant litigation, but the level of hostility was high enough that there was a risk the matter could end up in court (thereby wasting a lot of time and money on both sides).

In connection with trying to resolve the impasse, I asked the principal of the landlord if there was a particular charity with which he was involved. He responded that there was one charity in particular that was near and dear to his heart. I asked the tenant’s principal if he might be willing to make a donation to this charity. The tenant thought it was a worthy cause and agreed. And that is how the matter was resolved, with the tenant making a donation to the charity identified by the landlord. The amount was substantially less than what the landlord was demanding, but meaningful enough to the charity that it generated goodwill for the landlord. And the tenant got a tax deduction.

As noted, I’ve read of other disputes that were resolved in whole or in part through a charitable donation. As an example, in November 2017, Ford Motor Company sued John Cena, a well-known professional wrestler, for breach of contract, fraudulent misrepresentation and unjust enrichment in connection with Cena’s allegedly improper and unlawful resale of a custom-made 2017 Ford GT sports car that Ford had previously sold to Cena under a special program (Ford Motor Company v. John Cena, 17-cv-13876 (E.D. Mich.)).

The Ford GT is a limited edition, two-seater sports car designed to delivered extraordinary speed and exceptional handling. The suggested retail price is $450,000. Ford plans to manufacture only about 1,000 of them over a period of several years.

Ford views the Ford GT as a branding tool, and through a highly selective process, limits sales of the vehicle to car enthusiasts and collectors who agree to serve as ambassadors and influencers for the Ford brand. To prevent purchasers from flipping the car for a profit to speculators, Ford requires the individuals whom it selects as Ford GT purchasers to agree in writing not to sell their vehicle for 24 months after delivery.

Portraying himself as an enthusiast of high-end automobiles, Cena submitted an application to purchase a Ford GT in which, among other statements, he promised to promote the Ford GT brand through his extensive social media presence on Facebook, Twitter and Instagram. Impressed with Cena’s pitch, Ford selected Cena as a purchaser. Cena subsequently signed an order confirmation in which he agreed, among other terms, not to sell the vehicle within the first 24 months after delivery.

Ford delivered a new Ford GT to Cena in September 2017, but subsequently learned in October 2017, that Cena had resold the vehicle for a substantial profit without Ford’s knowledge or approval within a few weeks after taking delivery. Cena did not deny the resale, and promised to work with Ford to “make things right,” but failed to take the steps that Ford demanded. A lawsuit quickly followed.

In June 2018, Cena’s attorneys advised the media that Cena had settled the lawsuit with Ford for an undisclosed sum, which Ford would be donating to charity. In connection with the settlement, Cena stated:

I love the Ford GT and apologize to Ford, and encourage others who own the car to respect the contract. I am pleased we could resolve this matter outside of court, and that a worthy charity will benefit from one of the most iconic cars in the world.

We’d be interested to hear from any mediators that have used a donation to charity to resolve a dispute in whole or in part.