Was the LSU-Tulane cancer research center a private entity, and which law governed bonds issued for it?

Plain-English summary

Louisiana's Senate president asked whether the LSU-Tulane cancer research center was a private entity and which law governed proposed revenue bonds for its building. In Opinion 03-0427, the AG concluded that the center met the statutory criteria for private status under La.R.S. 17:3390(B). Its nonprofit purpose, board structure, and reimbursement of university support were central to that conclusion.

The AG also said the bond authority chosen mattered. If bonds were issued under the Capital Outlay Act, that act governed them; if issued under the independent HEAL Act authority, the HEAL Act governed. If the issuer cited both, the AG said both sets of provisions would apply, even though some might conflict.

Currency note

This opinion was issued in 2003. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

What the opinion meant at issuance

Cancer center and university leaders

The AG evaluated the center as a nonprofit created to support cancer research and education at the LSU and Tulane health sciences centers. On the board membership and reimbursement facts presented, it found the center qualified as private under the statute. The opinion did not treat every university-affiliated nonprofit as private automatically.

Health Education Authority and bond counsel

The opinion distinguished the HEAL Act's independent bond authority from the Capital Outlay Act's authorization for this project. It said the governing requirements followed the authority invoked for the bonds and warned that citing both made both acts applicable.

Common questions

Why did the AG call the cancer center private?

The AG said the center met the statute's three conditions concerning board composition, election of directors by members, and reimbursement for university-provided support.

Did the center's work with public universities make it a public body under this opinion?

No. The AG concluded that, on the facts reviewed, La.R.S. 17:3390(B) classified the center as a private entity despite its work with the universities.

Could the Health Education Authority issue bonds under the HEAL Act instead of the Capital Outlay Act?

The AG said either independent authorization could be used for the center's bonds. It treated the chosen authority as determining the governing act.

What if both bond statutes were cited?

The AG said both acts' provisions would apply, including provisions that might be mutually exclusive.

Background and statutory framework

The Louisiana Cancer Research Center was created to coordinate research and education by the LSU and Tulane health sciences centers. The AG reviewed the corporation's articles, its nine-member board as then reported, and its undertaking to reimburse university support. La.R.S. 17:1922 linked the center's creation to the private-entity conditions in La.R.S. 17:3390(B), which the AG found satisfied.

The second question concerned revenue bonds to finance a cancer research project. The AG compared the Health Education Authority of Louisiana's authority under La. R.S. 17:3051, et seq., with separate Capital Outlay Act authority. It reasoned that the legal provisions applying to the bonds depended on which authorization the issuer used.

The extract's first-page date reads DEC 6 2003 with spacing that may omit another day digit; the precise issue date is left blank.

Citations and references

• La.R.S. 17:3390(B): conditions for a higher-education-supporting nonprofit to be a private entity.
• La.R.S. 17:1922: creation of the center as a corporation linked to those conditions.
• La. R.S. 17:3051, et seq.: HEAL Act bond authority discussed by the AG.
• Act No. 24 of the Regular Session of 2002: Capital Outlay Act bond authorization discussed in the opinion.

Source

• Landing page: https://www.ag.state.la.us/Opinions
• Original PDF: https://www.ag.state.la.us/Opinion/Download/03-0427

Original opinion text

One American Place
301 Main Street, Suite 600
DEPARTMENT OF JUSTICE
P.O. Box 94005
CIVIL DIVISION
TEL.: (225) 342-7013
BATON ROUGE
FAX: (225) 342-2090

RICHARD P. IEYOUB
70804-9005
ATTORNEY GENERAL

DEC 6 2003
OPINION N[JMBER 03-0427

8 BOND ISSUES
La. R.S. 17:3390; R.S. 17:1921, et seq;
Senator John J. Hainkel, Jr.
R.S. 17:3051, et seq.
Senate President
La. Cancer Research Center is, in accordance
P. O. Box 13824
with R.S. 17:3390, a private entity. Bonds for the
New Orleans, LA 70185
Center can be issued either under the authority
of the Capital Outlay Act or the HEAL Act.
Dear Sen. Hainkel:

You requested the opinion of this office concerning whether the Louisiana Cancer Research Center of L.S.U. Health Sciences Center in New Orleans/Tulane Health Sciences Center (the "Center"), created pursuant to Act No. 41 of the First Extraordinary Legislative Session of 2002 (the =Act"), is a private entity.

The purpose of the Act as set forth in La. R.S. 17:1921 is "to create the Louisiana Cancer Research Center of L.S.U. Health Sciences Center in New Odeans/Tulane Health Sciences Center with the pdmary function of conducting research and promoting education in the diagnosis, detection, and treatment of cancer in its pursuit of obtaining National Cancer Institute (NCI) designation for the two health sciences centers in New Orleans, Louisiana... By coordinating and focusing the cancer research efforts at the Louisiana Cancer Research Center of L.S.U. Health Sciences Center in New Odeans/Tulane Health Sciences Center and by providing modem new research resources and infrastructure, the cancer centers in New Odeans will be able to develop their current facilities and recruit the new faculty members necessary to achieve the designation as an NCI designated cancer center..."

La.R.S. 17:1922 created the Center =as a body corporate under the administration of a govemance board as provided in this Chapter and in accordance with R.S. 17:3390(B)..." (Emphasis added).

La.R.S. 17:3390(B) provides as follows:

"B. A nonprofit corporation, whose principal purpose is to support one or more programs, facilities, or research or educational opportunities offered by public Institutions of higher education, shall be a private entity that shall not be deemed to be a public or quasipublic corporation or an administrative unit, public servant, employee, or agent of any institution of higher education for any purpose whatsoever if it meets all of the following criteria:

Page 2

Senator John J. Hainkel, Jr.
OPINION NUMBER 03-0427
Page -2-

(1) The majodty of the voting members of the corporation’s board of directors are not members or employees of a higher education management board.

(2) The corporation is under the management and control of a board of directors elected by the contributing members or shareholders of the corporation.

(3) The corporation reimburses, either directly or through in-kind services, the cost of housing, personnel, which personnel shall remain public servants for all purposes, and other support furnished to the corporation by any institution of higher education." (Emphasis added)

Thus the question becomes, does the Center satisfy the criteria set forth in La.R.S. 17:3390(B)?

The Center was created as a nonprofit corporation in accordance with the Louisiana Nonprofit Corporation Law, La. R.S. 12:201, et seq.1 The Internal Revenue Service has recognized the Center as a non-profit corporation.2 As set forth in La.R.S. 17:1921, quoted above, and the Articles of Incorporation, there can be no question that the Center’s principal purpose is "to support one or more programs, facilities, or research or educational opportunities offered by public institutions of higher education". Article IV of the Articles of Incorporation sets forth the purposes of the Corporation as follows:

"The Corporation is organized and shall be operated exclusively for charitable, educational and scientific purposes within the meaning of Section 501(C)3) of the Internal Revenue Code of 1986 ... The primary purpose of the Corporation will be to conduct and support research and promote education in the diagnosis, detection, and treatment of cancer in the pursuit of obtaining National Cancer Institute designation for its members, the Louisiana State University Health Sciences Center in New Orleans and the Tulane University Health Sciences Center, which designation is the recognized gold standard for excellence in cancer research, treatment and prevention. To accomplish this purpose, the Corporation will support the cancer research efforts at the Louisiana Cancer Research Center of L.S.U.
Health Sciences Center in New Orleans and Tulane University Health

~See, Certificate of Incorporation and the Articles of Incorporation of Louisiana Cancer Research Center of L.S.U. Health Sciences Center in New Orleans/Tulane Health Sciences Center, Article II(A) and (B).

2See, IRS correspondence dated March 31, 2003.

Page 3

Senator John J. Hainkel, Jr.
OPINION NUMBER 03-0427
Page -3-

Sciences Center as well as provide modern new research resources and infrastructure." (Emphasis added)

As to the three listed criteria in R.S. 17:3990, Article II of the Articles of Incorporation require the Corporation at all times to satisfy those three criteria.

With specific regards to the first criteria, that the majority of the voting members of the corporation’s board of directors are not members or employees of a higher education management board, La. R.S. 17:1923 provides with respect to the governing board, in pertinent part as follows:

A.... The board shall consist of the senior vice president for health sciences of Tulane University Health Sciences Center, a senior Louisiana State University Health Sciences Center representative appointed by the president of the Louisiana State University System, a member appointed by the senior vice president for health sciences of Tulane University Health Sciences Center, a member appointed by the president of the Louisiana State University System from the Louisiana State University Health Sciences Center, the secretary of the Department of Economic Development or his designee, the chairman of the Louisiana Board of Regents or his designee, and such other persons as may be appointed by the unanimous consent of the board..."

Thus, the statute requires a minimum of six persons on the Board, of which only two are members or employees of a higher education management board3, namely L.S.U. Article VI of the Articles of Incorporation provides that "the number of Board members shall be determined by the Board from time to time." We have been advised that the Board currently has a total of nine members, of which only two are L.S.U. employees.

Regarding the second criteria, that the "corporation is under the management and control of a board of directors elected by the contributing members or shareholders of the corporation", Article VI of the Articles of Incorporation further provides that the =Board of Directors shall be composed of the persons elected by the Corporation’s members following their appointment or designation as provided below" followed by the six persons listed in the statute. While a portion of the members of the Board are designated by

3The higher education management boards are the Board of Supervisors of Louisiana State University and Agricultural and Mechanical College, the Board of Supervisors of Southem University and Agricultural and Mechanical College, the Board of Trustees for State Colleges and Universities (now the University of Louisiana System), and the Board of Supervisors of Community and Technical Colleges. La. R.S. 17:3202, La. R.S. 17:3399.5.

Page 4

Senator John J. Hainkel, Jr.
OPINION NUMBER 03-0427
Page -4-

statute, under the Articles of Incorporation all members must also be elected by the members. The members of the Center are the L.S.U. Health Sciences Center in New Orleans and the Tulane University Health Sciences Center.

We have been advised that the Center, in accordance with the Articles of Incorporation, will reimburse, either directly or through in-kind services, the cost of housing, personnel, which personnel shall remain public servants for all purposes, and other support furnished to the corporation by any institution of higher education.

Based upon the foregoing, it is the opinion of this office that the Center meets the criteria set forth in La.R.S. 17:3390 and thus is a private entity that shall not be deemed to be a public or quasipublic corporation or an administrative unit, public servant, employee, or agent of any institution of higher education for any purpose whatsoever.

You also requested the opinion of this office concerning a proposed bond issuance by the Health Education Authority of Louisiana (~HEAL") for and on behalf of the Center. You advised that HEAL contemplates issuing its revenue bonds pursuant to the authority contained in La. R.S. 17:3051, et seq. (the ~HEAL Act’) and lending the proceeds to the Center for the purpose of financing the cost of acquiring, constructing and equipping a cancer research project. HEAL was also granted authority to issue revenue bonds for a cancer research project in Act No. 24 of the Regular Session of 2002 (the "Capital Outlay Act’). You question whether the provisions of the Capital Outlay Act would apply to the bonds if the bonds were issued under the HEAL Act.

There are many instances where there is more than one authorization for the issuance of bonds for a particular entity or project. One example pertains to the bond authorizal~on for the Greater New Orleans Mississippi River Bridge No. 2. In Act No. 402 of the Regular Session of 1976, as amended, the legislature authorized the issuance of both general obligation bonds and revenue bonds for the construction of the bridge. At the same time, general obligation bonds for the project were authorized in the annual omnibus bond authorization act. The State issued bonds, on more than one occasion in the 1980’s, utilizing the omnibus bond act authorization and not the general obligation authorization contained in Act 402.

Likewise, if the bonds for the Center are issued under the authorization of the Capital Outlay Act, the provisions of the Capital Outlay Act would apply to the bonds. If however, the independent authorization for the issuance of the bonds contained in the HEAL Act is used, then the provisions of the HEAL Act and not the Capital Outlay Act would apply. Of course, if both the HEAL Act and the Capital Outlay Act are cited as the authority for the issuance of the Center bonds, both Acts, which may contain mutually exclusive provisions, would apply to the bonds.

Page 5

Senator John J. Hainkel, Jr.
OPINION NUMBER 03-0427
Page -5-

Trusting this adequately responds to your request, we remain

Yours very truly,

RICHARD P. IEYOUB
Attorney General

BY:
S. HESS
Attorney ,=neral

RPI/MSH