Princeton, Foundation Settle Donor Intent Case

The Robertson Foundation, with assets of more than $900 million as of this past June, will be dissolved as part of a settlement with Princeton University that ends a six-year landmark donor intent case. Robertson v. Princeton had been scheduled to go to trial Jan. 20 before an agreement was reached last week.

Under the terms of the agreement, the assets will be transferred to create an endowed fund controlled by the university that will support the graduate program of the Woodrow Wilson School of Public and International Affairs, but also repay legal fees and help start a new Robertson foundation.

The Robertson Foundation for Government will have same charter as the original foundation but it will be unaffiliated with Princeton. It will receive $50 million plus interest over the course of a payment schedule from 2012 to 2018: $5 million a year starting in 2012, and $10 million and $15 million in the final two years, respectively. The Banbury Fund, a Robertson family foundation, will be reimbursed $40 million in legal fees over the next three years: $20 million in 2009, and $10 million in 2010 and 2011.

The $90-plus million is expected to come from the transferred assets, which had a value of more than $900 million as of June 30, 2008. The plaintiffs claimed the overall settlement would be more than 20 percent of the “current value” of the endowment but a university spokesperson, while acknowledging the endowment is down, disputed that figure. While it might be unclear how much the endowment’s value has dropped in the past six months, major stock market indices had lost anywhere from a quarter to more than a third of their value as of Dec. 1.

Robertson family members, heirs to the Great Atlantic & Pacific Tea Co. grocery store chain (A&P), filed the lawsuit after William Robertson opposed a recommendation by the other two members of the foundation’s investment committee to engage PRINCO to provide professional investment management.

In July 2002, descendants of donor Marie Robertson and her husband, Charles, sued Princeton to redirect the funds she gave to create the foundation in 1961, at the time a $35-million gift. The foundation’s funds were to be used to support the School of Public and International Affairs. At issue was the merging of foundation money into the Princeton University investment Company (PRINCO), an investment firm that manages university finances, as well as the use of $13 million for the construction of Wallace Hall, which the family claimed was not part of the mission.

“Settlements are always compromises, and compromises don’t represent perfect justice. If the family’s happy with the settlement and Princeton’s happy with the settlement, by definition it’s a good settlement,” said Ronald Malone, lead counsel for the plaintiffs. Negotiations had been on and off for years, but the most recent round began in April at the instigation of Judge Maria Sytek, who presided over the pre-trial portions of the case, he said.

“This settlement achieves the university’s highest priorities in this lawsuit, which were to ensure that Marie Robertson’s gift will continue to support the graduate program of the Woodrow Wilson School and that the university would have full authority to make academic judgments about how these funds are to be used,” said Princeton President Shirley Tilghman. Though both sides expressed confidence in prevailing at trial, they also understood their escalating legal tabs, which already reached into the tens of millions of dollars, would hurt both sides.

Malone said the Robertsons were facing at least another $10 million in legal fees for a six-month trial while Princeton estimated both sides would spend another $20 million on a trial and subsequent appeals.

“If Princeton lost, they have a 1,000-year view of the world and all the money in the world, they would just appeal and appeal,” Malone said. “If there were certainty it would cost ‘x’ amount more, and it was going to be final in one year, then they may have made a different decision,” he said. “The fact that costs essentially had no lid on them, it could go on forever,” Malone said.

“It is tragic that this lawsuit required the expenditure of tens of millions of dollars in legal fees that could have and should have been spent on educational and charitable purposes,” Tilghman said. “We agreed to this settlement so that we could bring the rapidly escalating legal expenses to a halt before a lengthy trial added even more tens of millions of dollars. The settlement also allows the Banbury Fund to resume funding the charitable objectives for which it was established, and it restricts the spending of the new foundation to activities that are compatible with the purposes we serve in carrying out the terms of Marie Robertson’s gift.”

Even though the case was not tried to its conclusion, Malone said it’s still a landmark that has had a huge impact on the world of philanthropy, both benefiting donors and charitable recipients. “No university has ever returned anything close to $100 million,” he said.

“People always understood donor restrictions are something you had to pay attention to. Now everybody understands, you have more than a moral obligation to honor the donor’s restrictions, you have a legal obligation. And when people play fast and loose with donor restrictions they will be held accountable in a court of public opinion and a court of law,” Malone said. “This is no dig on Princeton, but defendants always, when looking down the barrel of a real trial date, that’s when they get serious,” Malone said. Once retired Judge John Pratto was assigned to preside full-time and a trial date was set, “the parties got serious and everybody’s better off,” he said.


This article is from NPT Weekly, a publication of The NonProfit Times.

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