## Facts

- Multiple Sclerosis Service Organization of New York, Inc. (MSSO) was a New York charitable not-for-profit corporation formed to provide direct services to people with multiple sclerosis (MS), not research.
- MSSO’s principal program was a Brooklyn physical fitness center tailored to persons with MS.
- Over time, MSSO’s finances worsened and it determined it could not continue operating the center.
- MSSO asked the New York City Chapter of the National Multiple Sclerosis Society (NYC Chapter) to take over the facility; the NYC Chapter declined.
- MSSO’s board voted to sell the center and distribute the proceeds to four other charities that provided direct services to individuals with serious, chronic, irreversible conditions, but were not MS-specific.
- MSSO sought court approval of its dissolution plan and distribution of assets under the Not-for-Profit Corporation Law (N-PCL).
- The NYC Chapter and the New York Attorney General objected, arguing that contributions were intended for MS beneficiaries and the assets should go only to MS-focused organizations.

## Issues

1. Whether asset distribution on dissolution of a charitable corporation under N-PCL §§ 1005(a)(3)(A) and 1008(a)(15) is governed by a flexible “substantially similar activities” standard rather than traditional cy pres’s “as nearly as possible” donor-intent approach.
2. Whether the Appellate Division erred by requiring MSSO’s assets to be distributed to MS-specific organizations based on a strict donor-intent/cy pres analysis.
3. What factors a court should consider in deciding whether proposed distributees are “engaged in activities substantially similar to” those of the dissolving corporation.

## Decision

- The Court of Appeals reversed the Appellate Division.
- The Court held that the N-PCL dissolution standard is “less restrictive” than cy pres rules applicable to charitable trusts and certain donor-restricted funds.
- The Court remitted the matter to Supreme Court for a hearing and determination under the correct N-PCL “substantially similar activities” standard.

## Legal Principles

- Upon dissolution of a charitable corporation, N-PCL requires transfer of assets to one or more organizations “engaged in activities substantially similar to” the dissolving corporation’s activities.
- This N-PCL “quasi cy pres” standard is more flexible than common-law cy pres and EPTL standards governing failed charitable dispositions and certain large public-subscription funds.
- In reviewing a dissolution distribution plan, the court should consider: (1) the source of the funds; (2) the corporation’s stated purposes and powers; (3) activities and services actually provided; (4) the relationship between proposed distributees’ activities/purposes and the dissolving corporation’s; and (5) the board’s bases for its recommendations.
- Donor purpose may be considered through these factors, but it does not control to the same degree as in charitable trust cy pres analysis; the board’s plan receives meaningful weight within statutory limits.

## Conclusion

The Court of Appeals held that dissolution distributions by charitable corporations are governed by N-PCL’s flexible “substantially similar activities” test rather than strict cy pres, and it remanded for a hearing applying the statutory factors to MSSO’s proposed distributees.


In re Multiple Sclerosis Serv. Org. of N.Y., Inc., 68 N.Y.2d 32 (N.Y. 1986)