Q: If a city establishes an Association and it is registered as a nonprofit under 501(c)(6) does that Association fall under the Brown Act? If the Association does receive monies from the City under an Assessment is the Association under the Brown Act? If the Association establishes a new organization and is registered as a 501(c)(3)to become eligible for grants does that organization fall under the Brown Act? If the Association gives money to the organization does it fall under the Brown Act? If a Board member of the Association is a member of now the organization is that legal and make it part of the Brown Act?
A: A private entity will be subject to the Brown Act only if it was either:
(A) created by a governmental body in order to exercise governmental authority delegated to it, or
(B) both receives funds from and and shares a board member with a local governmental agency.
Govt. Code section 54952(c)(1).
Thus it seems that the (c)(6) entity is a covered agency.
I am not aware of any court that has looked at the specific question you ask: whether a a private entity created by the private entity that was created by a governmental body would also be covered by the Brown Act. But looking at the language of the law, it appears that it does not.
Let’s walk through it:
The Brown Act applies to “meetings” of “legislative bodies” of “local agencies.” Each of these terms is defined in the Brown Act.
Section 54951 defines “local agency” to mean “a county, city, whether general law or chartered, city and county, town, school district, municipal corporation, district, political subdivision, or any board, commission or agency thereof, or other local public agency.”
Section 54952(c) defines “legislative body” to include “A board, commission, committee, or other multimember body that governs a private corporation, limited liability company, or other entity that either: (A) Is created by the elected legislative body in order to exercise authority that may lawfully be delegated by the elected governing body to a private corporation, limited liability company, or other entity. (B) Receives funds from a local agency and the membership of whose governing body includes a member of the legislative body of the local agency appointed to that governing body as a full voting member by the legislative body of the local agency.”
Thus, according to a strict reading of these two sections, the governing body of a private entity that meets either (A) or (B) will be a “legislative body” of a “local agency,” the private entity does not itself become a “local agency.”
Note that for (B), the entity must receive funds from a “local agency.” So unless the second-level private entity receives funds from the “local agency” itself, a textual argument can be made that (B) will not apply.
That leaves us with (A). By the terms of (A), the private entity must be created not just by any “legislative body” but by “the elected legislative body.” This choice of language seems to be limiting: the condition in (A) that the legislative body be “elected” does not appear elsewhere in the law and thus can be read as a purposeful limitation on extending the Brown Act to second-level entities.
On the other hand, the law is certainly unclear here and a good policy argument can be made that limiting the Brown Act to first level private entities made it easy to evade the law’s requirements. In a similar situation, a court has explained that it is sometimes improper to “elevate form over substance” and “turn a blind eye to such a subterfuge” and thus allow a local agency “to circumvent the requirements of the Brown Act.” Epstein v. Hollywood Entertainment District II Business Improvement District, 87 Cal. App. 4th 862, 872 (2001). As a result, in that case, the Court interpreted the requirement that the private entity be “created by” the elected legislative body very broadly. The Court found that it was sufficient that the City have “played some role” in bringing the private entity into existence by calling for the creation of the entity, even if it did not actually create it itself.
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