DATELINE: August 5, 2009, Chicago
The ongoing controversy surrounding Brandeis University’s decision to close the Rose Art Museum continues to yield interesting tidbits. On July 27. 2009, Meryl Rose, Jonathan O. Lee, and Lois Foster filed lawsuit against Brandeis University in Supreme Judicial Court for Suffolk County. The suit asks for somewhat open-ended relief. Essentially, the court is asked to either...
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stop the closing of the Rose and sale of its artwork, or to turn the assets over to the Rose Preservation Fund.
We imagine that the first hurdle the three plaintiffs will face is a challenge by Brandeis University to their standing. That question is likely to consume several years of time if the parties exercise all appeal rights. Whether the three having standing is a question of Massachusetts law. Under general principles of charity law, the three probably lack standing: Donors lack standing. Much, however, can turn on gift and estate planning documents and whether the courts view the gifts as conditional (right of reversion) or restricted (no right of reversion) gifts. The donors may also be able to argue special interest standing, but the Massachusetts Attorney General is aware of and, according to the plaintiffs' own pleadings, has been involved in the dispute. Attorney general involvement can undercut a claim to special interest standing.
The three plaintiffs will undoubtedly argue that their status as members of the Board of Overseers of the Rose Museum provides them with standing. As we understand the board’s legal status, it is advisory. That fact may undercut their claim. At this point, all we can say is that both sides have sufficient facts to keep the battle over standing going for several rounds of court decisions. In the end, we bet the three will lose on the standing issue, but there are cases where donors have prevailed. See, for example, Smithers v. St. Luke’s-Roosevelt Hospital, 281 A.D.2d 127 (N.Y. App. Div. 2001).
What really interested us about the lawsuit was an assertion made in the pleadings on behalf of Lois Foster. Specifically, Paragraph 13 of the pleadings states:
Brandeis has executed several agreements with the Fosters, premised on the Museum’s continued existence and vitality (Exhibits N-Q). One such agreement would require Lois Foster to leave $1.8 million to further endow the Museum director’s chair. (Exhibit R). In spite of the Rose’s closure as a museum, Brandeis is seeking to enforce the pledge, claiming that the conversion of the Museum, including the Foster Wing, to an education center is a suitable use within Brandeis’s discretion, to which Mrs. Foster is unalterably opposed.
In our limited review of the pleadings, we didn't see any indication that Lois Foster was seeking specific relief regarding the pledge in this suit. We can only wonder, however, whether Brandeis might use the enforceability of the pledge as a bargaining chip in any settlement negotiations.
The pledge agreement does not specify whether the obligation terminates in the event that the Rose ceases operation or no longer has a museum director who holds the Chair created under a July 24, 1986 agreement. Interestingly, the chair agreement does not expressly provide for reversion of the funds in the event Brandeis does not maintain the Chair or the Rose Museum. It specifically uses the phrase “restricted to the purposes of the ‘Chair Fund.’” In our view, this requires the parties to look to the law of cy pres and equitable deviation to determine what happens to this endowment if the Rose Museum ceases operation. Claims of a reversionary interest will be hard to support.
Lois Foster obviously has a strong emotional argument that she should not have to fulfill the remaining portion of a pledge for an intended purpose that no longer can be fulfilled if Brandeis does close the Rose Museum and no longer maintains or owns the associated collection. Unfortunately the law, as far as we know, has not adequately addressed this problem. Technically speaking, we suspect the pledge is enforceable, with the law of cy pres and equitable deviation governing how the proceeds are deployed, but we suspect that the notion of impossibility of performance that exists in contract law could cause a judge to simply declare that the pledge is no longer enforceable.
Professor Evelyn Brody looked at the question of the enforceability of pledges in the context of a bankruptcy. The Charity in Bankruptcy and Ghosts of Donors Past, Present, and Future, 29 Seton Hall Leg. J. 471 (2005). She essentially punts on the issue, acknowledging that there is just not enough law to know how the courts will handle the enforceability of pledges in bankruptcy. During the course of her discussion, she refers to an article by Alan Farnsworth that also suggests under contract law there is no clear or universally accepted answer. We certainly wouldn’t object if a court provided relief to Lois Foster should she or her estate refuse to fund the pledge: Current law (or lack thereof) certainly provides a court with sufficient latitude to fashion what strikes us an equitable result.
Others, however, have no excuse for putting themselves in Lois Foster’s position. In many states, written pledges constitute legally binding obligations. Donors should insist and their lawyers should include clauses in pledges that address change of purposes and conditions. Donors should recognize that linking termination to bankruptcy raises difficult issues. In such case, the donor should seek advice from a lawyer schooled in bankruptcy law and recognize that a court might include the pledge as an asset of the bankruptcy estate.
Lois Foster and her husband assumed the Rose would always be the Rose that they knew and loved. She and her husband should have specified in the pledge agreement circumstances that would result in the termination of the pledge. Other donors can and should do this in their pledges. Of course this runs counter to the interests of the charity, which is why the same lawyer should never represent both the charity and the donor.
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