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Letter to the editor of the Chronicle of Higher Education and Chronicle of Philanthropy - Updated

This letter to the editor was published in the Feb. 13, 2009 issue of the Chronicle of Higher Education and a slightly altered version of this letter was published in the Jan. 29, 2009 issue of the Chronicle of Philanthropy under the headline "Robertson vs. Princeton vs. Donor Intent."

Princeton U. Expounds on Lawsuit's Lessons

In their article about the settlement of the six-and-a-half year old lawsuit brought against Princeton University by current members of the Robertson family (“Settlement Ends Dispute Between Princeton and Donors’ Heirs,” The Chronicle, January 9), Kathryn Masterson and Ben Gose give perfectly sound advice: be clear about the purpose of a gift; have clear guidelines for its use; stay in touch with the donors and involve their children.

But one lesson of the lawsuit is that a university can do all these things—as Princeton did—and still end up in court. In 1961 Princeton and representatives of the Robertson family signed a written document that spelled out the purpose to be served by Marie Robertson’s $35 million gift and the means by which the gift would be administered. For 47 years Princeton has fully adhered to the terms of that document, creating at its Woodrow Wilson School of Public and International Affairs one of the world’s leading graduate programs to prepare students for government and public service.

The Robertson Foundation board, which oversaw the use of the gift, was chaired for 20 years—until his death—by Charles Robertson, Marie’s husband. His son, William Robertson, began serving on that board in 1974, shortly after his graduation from Princeton. He attended every meeting, frequently praised the university’s use of the gift, and never cast a dissenting vote as a board member until he filed his lawsuit in 2002.

Despite all this, William Robertson went to court in an attempt to overturn two key decisions his parents had made: that the gift should be controlled by Princeton and it should be used to support and expand the graduate program of the Woodrow Wilson School. He did this initially because of a dispute over engaging professional management for an endowment that by then exceeded $500 million. As time went on and the endowment increased to more than $900 million under the professional managers who were selected, he downplayed this issue and instead challenged Princeton’s right to make decisions about how best to support its graduate program.

One of the great ironies of this lawsuit is that the press bought into the family’s assertion that the case was about Princeton’s adherence to “donor intent.” While it may have been about whether Princeton properly carried out the terms of the certificate of incorporation that created the Robertson Foundation, and we have no doubt a trial would have convincingly demonstrated that Princeton did, the question of “intent” raised by this trial was precisely the reverse: whether the descendants of a donor can overturn the donor’s intent—as expressed in a carefully negotiated written document agreed to by the donor and the university—with respect to both the purpose of the gift and the mechanism by which it would be administered. It was the Robertsons, not Princeton, who were trying to overturn the donor’s intent.

There is another issue of “donor intent” raised by this case, and it also involves actions taken by the Robertsons. In the 1940s Charles Robertson established a family foundation, the Banbury Fund, to support charitable purposes. In their lawsuit against Princeton the Robertson family members who controlled that foundation drew upon its assets not to support charitable purposes, but to pay for their legal and public-relations expenses. Over the course of the lawsuit, in which they employed a “scorched earth” strategy that dramatically added to legal costs, their expenses exceeded $40 million and the assets of the Banbury Fund dropped from approximately $50 million when the lawsuit began to under $10 million.

So if the first lesson of this lawsuit is that conscientious adherence to the terms of a gift is no protection against ending up in court, the second is that entering into a lawsuit against an opponent who does not have his own resources at risk can lead to a very lengthy and expensive litigation, coupled with an aggressive public-relations campaign.

A third lesson is to think twice before creating the kind of “supporting organization” that was established to administer Marie Robertson’s gift. Such a mechanism can help sustain the interest of the donor and the donor’s advisers, but there are other ways to achieve this goal without introducing a structure that confers corporate obligations and standing to sue that ordinarily would not be available to donors of restricted gifts. This mechanism becomes even more problematical when participation passes from the founding generation—which has a personal connection to the terms they agreed to in making the gift—to later generations that may bring to the table a different agenda for the use of the funds.

Despite some reporting to the contrary, this case did not involve a purpose that changed over time. The nature of government service has changed over the past 47 years, but the purpose of this gift was to support a graduate program in which students may prepare for government service (and public service more broadly), whatever form that service may take. That purpose did not change. But Ms. Masterson and Mr. Gose are right to suggest that gift agreements should include guidelines that provide flexibility for dealing with change, as they are also right to emphasize the importance of having procedures in place to make sure that gifts are being used for their agreed-upon purposes.

This lawsuit was settled when the Robertsons decided not to take the case to trial. To avoid continuing legal expense, Princeton agreed to a settlement amount that will be paid out over a 10-year period and used solely to support charitable purposes. But the key term of the settlement agreement is that the Robertson Foundation is being dissolved, with all of its assets being transferred to Princeton, which will have sole authority to decide how these funds are to be invested and how they can best be used. This means that the bulk of Marie Robertson’s gift is now protected from further attempts to divert it to other uses and that it can continue to be used, in perpetuity, as she intended in making her gift, to support the graduate program of Princeton’s Woodrow Wilson School.

Robert K. Durkee is vice president and secretary, Princeton University

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