A major legal battle is unfolding in Louisiana, where the State's Office of the Governor and several associated departments have filed a complaint against Citizens United for Economic Equity. The case, which was filed on November 20, 2017, in the Nineteenth Judicial District Court for East Baton Rouge Parish, accuses Citizens United of breaching a Revolving Capital Fund Agreement (RCF Agreement) established to aid small businesses affected by Hurricane Katrina.
The lawsuit stems from funds provided by the U.S. Department of Housing and Urban Development (HUD) through Community Development Block Grants (CDBG). These funds were managed by the State's Office of Community Development Disaster Recovery Unit (OCD-DRU) and administered through the Louisiana Business Recovery Grant and Loan Program (BRGL). Citizens United, a non-profit organization based in New Orleans, became an intermediary during Phase II of this program under a Cooperative Endeavor Agreement executed in 2008.
The crux of the dispute revolves around a two-page RCF Agreement signed in May 2008 and an amendment added in August 2009. According to these documents, Citizens United was to use repaid loan principal from Phase I and II of the BRGL program to support small business development in Louisiana. However, allegations arose that Citizens United exceeded administrative cost limits set at 15% of amounts generated by repaid loans. The State contends that Citizens United incurred "administrative overages" beyond what was allowed, leading OCD-DRU to suspend their lending activities in July 2011.
Despite efforts to resolve compliance issues between OCD-DRU and Citizens United, including allowing lending to resume under strict conditions in September 2014, disputes persisted. In October 2016 and again in September 2017, the State demanded that Citizens United transfer remaining RCF funds and assets to another qualified non-profit organization named NewCorp Inc., but these demands went unmet.
In response to these allegations, Citizens United filed a reconventional demand asserting that they were unfairly singled out for excessive monitoring compared to other intermediaries. They argued that this undue scrutiny prevented them from fulfilling their mission and caused financial damages. Additionally, they claimed entitlement to continue administering the RCF under the original agreement terms.
The case took another turn when the State sought summary judgment on December 28, 2021. They alleged multiple breaches by Citizens United including unauthorized administrative expenses and failure to maintain adequate records. However, Citizens United countered with objections regarding the evidence presented by the State—specifically an affidavit from Vera K. LeSage—and maintained that genuine issues of material fact existed about compliance with contract terms.
After hearing arguments on May 16, 2022, Judge Richard “Chip” Moore ruled in favor of the State’s motion for summary judgment but excluded key pieces of evidence submitted by them. Subsequently, Citizens United's motion for a new trial was denied on December 1st but clarified that all relief sought by the State had been granted initially.
The appellate court reversed this decision citing ambiguities within both agreements regarding administrative costs calculations and proper use classifications as unresolved factual disputes unsuitable for summary judgment resolution.
Representing parties include Kristen D Amond & Alysson L Mills for plaintiffs; Kriste T Utley & Ross A Ledet alongside Alexis R Jani representing defendants; presiding judges are McClendon Hester Miller with Case ID #663632