Judge Orders Service Provider to Vacate Premises in Legal Dispute with United Way

A family service provider’s 12-count lawsuit levels a series of allegations against Northwest Montana United Way and its executive director, including wrongful termination, breach of contract and more.

Northwest Montana United Way maintains it has done nothing improper, and the chair of the board testified at an Oct. 16 court hearing that the lawsuit and accompanying public attention is harming the organization.

While a temporary restraining order initially allowed the provider, Two Bears Family Center, to continue operating at the Gateway Community Center, a district court judge on Oct. 16 sided with United Way and ordered the center to move out by Oct. 18.

The center’s directors, Bernadette McDonald and Kimberly Kearney, have moved operations to a temporary location and are searching for a permanent space. Their lawsuit seeks relief for monetary and punitive damages through a jury trial, with a scheduling conference set for Nov. 25. They filed their 23-page complaint in district court on Oct. 7.

McDonald and Kearney say United Way’s actions alleged in the litigation have harmed them, their business and their clients, describing the children and families who depend on their services. The center offers parenting and family-crisis support, including drug-testing and supervised visitation services for people involved with Child and Family Services (CFS) of the Montana Department of Public Health and Human Services.

But Carol Nelson, chair of the Northwest Montana United Way board, testified that parting ways with Two Bears was a legal and appropriate business decision. She said the litigation is damaging to an organization that serves as an umbrella organization for a wide array of local nonprofits, at a time when it’s in the middle of its fundraising campaign.

“We’ve already been harmed by it,” a tearful Nelson said at the Flathead County District Court hearing. “It’s so sad because it’s going to hurt a lot of people and a lot of agencies. This is going to hurt us bad, I’m afraid, and that makes me very sad.”

McDonald and Kearney say last year they approached Northwest Montana United Way Executive Director Sherry Stevens, identified as Sharon Stevens in the complaint, about providing services out of the Gateway Community Center. In September 2018, United Way agreed to serve as the center’s sponsor and fiscal agent, meaning Two Bears operated as a program of United Way, which oversaw the center’s finances.

United Way is a charitable organization that provides base funding and other types of support and services to nonprofits and human-service programs across the region, working with more than 100 agencies altogether. It operates the Gateway Community Center in Kalispell, formerly the Gateway West Mall, as a nonprofit center, serving as landlord and umbrella organization to a number of agencies.

Last year, United Way settled a separate breach-of-contract lawsuit filed by Summer Baldridge, a Whitefish man who said he had not received funds due to him from the 2015 purchase of the mall property.

The yearlong relationship between United Way and Two Bears has been marred by financial disputes, with McDonald and Kearney alleging mismanagement and lack of transparency by Stevens, who they said kept them in the dark about finances and spurned repeated requests to see financial information. They contend that United Way’s termination of their employment was in retaliation for requesting to view the records.

United Way counters that it had exclusive control over the finances as the fiscal agent, as required by the Internal Revenue Service. It states in court documents that there was never a landlord-tenant agreement, and that Kearney and McDonald were United Way employees given work space to complete their employment duties.

Beginning in August, McDonald and Kearney began expressing their desire and ability to become an independent entity not associated with United Way, and McDonald provided a timeline to Stevens, who didn’t respond. According to the district court judge’s findings of fact, Two Bears “assumed it would be able to retain its space with United Way.”

On Sept. 16, United Way sent a letter to Two Bears announcing it was severing its fiscal agency relationship with the organization. The letter stated that the center had been operating under a trial period and that its “large amount of outstanding receivables” posed a financial hardship on United Way, while citing McDonald’s timeline as a “voluntary resignation.”

Two Bears disputes that it was operating at a $36,000 deficit and that there had ever been a trial-period agreement.

“There was no written agreement regarding the fiscal agency, nor was there any specific expiration date of the relationship,” the complaint states.

The letter directed Two Bears to vacate the premises within three days. Two Bears hired a lawyer, and after a period of back and forth between the two sides’ attorneys, McDonald and Kearney were required to cease operating at 5 p.m. on Oct. 4. They filed their lawsuit on Oct. 7, which was followed by the judge’s temporary restraining order, incorrectly filed as a preliminary injunction, allowing Two Bears to maintain operations until the court hearing.

McDonald testified in court that the three days of closure demonstrated the center’s importance to its clients, with disruptions separating families and harming sobriety treatment.

“We scrambled and had to discuss with Child and Family Services our ability to provide these services to families,” McDonald said. “Child and Family Services then scrambled to try to find an alternative location to provides these services. Some of our families didn’t see their children over the weekend.”

In her Oct. 16 order, Judge Amy Eddy denied Two Bears’ request for preliminary injunction, ruling that there is “no evidence” that McDonald and Kearney will “suffer irreparable injury” without it. She stated that Two Bears recently formed a for-profit LLC, obtained insurance and has directly contracted with CFS. She also noted that United Way is not allowed to rent or provide space to for-profit entities.

Nelson, United Way’s board chair, said the combination of Two Bears’ interest in becoming an independent entity and its operating deficit led to the decision to cut ties.

“We were pleased when they said they are able to go on their own,” Nelson said. “We realized that for us as a financial institution, with them in the red was not a good business decision for the United Way. We felt that if they felt they can go on their own, that would be great because it’s an important service they’re offering.”