A Dangerous Precedent for Unpopular Groups

Nonprofit groups, with the government’s imprimatur, have always given people in the minority — and those with

new or unpopular ideas — an opportunity to promote their causes. But a Pennsylvania court ruling was a major setback to the longstanding protection that the law gives to nonprofit groups, regardless of the popularity of their causes.

The decision came in a lawsuit over the fate of the Barnes Foundation, an organization with a multibillion-dollar collection of artworks that wanted to alter restrictions imposed by its founder.

A Pennsylvania judge ruled in December that the foundation could move the art collection to downtown Philadelphia and use it to create a traditional art museum, even though the nonprofit group’s founder, Albert C. Barnes, had clearly set forth a different purpose for the foundation: to maintain an art-education program in Merion, a Philadelphia suburb.

Despite the attention the ruling received, too few people in the nonprofit world have absorbed the real impact of the case. Nor did any of the major organizations that represent nonprofit groups get involved in ways that would have ensured that the judge’s decision was based on an understanding of how charitable organizations are supposed to benefit society.

It is possible that this unfortunate legal precedent will not stand because a Pennsylvania court ruled this month that an appeal may proceed. But it is important to take a detailed look at what happened in the case — getting beyond what was reported in the news media — so that everyone understands why this case merits the full attention of all nonprofit organizations.

Albert Barnes, a Philadelphia doctor, established his foundation in 1922 and transferred to it many of his assets, including his priceless art collection. In both written documents and oral statements he made very clear that he wanted the foundation to continue to promote, in a school setting, a unique method of teaching art appreciation that he had developed with help from other scholars of his day.

The teaching was to take place in a specially constructed gallery built on property Dr. Barnes owned in Merion, and he wanted public access to the gallery limited so that students could focus on their work during their classes. He also stipulated that the portion of his art displayed in the teaching gallery at his death could never be moved, but the balance of his art could be sold by the foundation to support its work.

The foundation’s original trustees adhered to the letter of Dr. Barnes’s instructions, but as the makeup of the board changed over the years, the board’s dedication declined. Trustees showed less interest in Dr. Barnes’s mission and instead focused on attracting more visitors to view the art in the teaching gallery.

Trustees then pursued several legal efforts to change aspects of Dr. Barnes’s instructions so they could try new ventures. In addition, they poured large sums of money into what proved to be poorly conceived projects to expand the operations of the Barnes Foundation.

By 2002 the foundation was in serious financial trouble. It had little cash and a looming debt of $800,000. In desperation the board sought outside funds. The Pew Charitable Trusts and several other grant makers offered money, provided they would have a voice in planning for the future of the foundation.

To do what the foundations and the trustees wanted, however, the foundation needed legal permission from the court to depart from Dr. Barnes’s instructions. So the foundation petitioned the court to allow it to reconfigure the makeup of the board and to move all of the Barnes’s artworks to a museum to be built in the center of Philadelphia. Under their plan, the museum would include a section where the interior of the Barnes teaching gallery would be recreated to make it possible to continue Dr. Barnes’s art-education program in the new facility.

Trustees of the Barnes Foundation board made it clear that without court approval of the changes, Pew and other grant makers would not provide the money they had pledged. The trustees’ argument was that the Barnes Foundation could only gain financial stability if it transformed itself into a traditional museum in a big city where it could attract large paying crowds.

Leading politicians in the state and the Office of the Attorney General — the agency charged with protecting the interests of the public in court actions of this nature — signaled their strong support for moving the collection. They too argued that the approach offered a way to “open up” Dr. Barnes’s art to the public and to create another art attraction for the city of Philadelphia.

But art students at the school and others (on whose behalf I testified as an expert on the general practices of museums) urged the courts not to allow the foundation to deviate from Dr. Barnes’s intentions. They argued that the art-education program was unique and important, and with proper management the Barnes Foundation had sufficient financial resources to maintain the program.

In a case of this nature, where an organization is seeking to change instructions imposed by a donor, the organization must prove to the court that through no fault on its part it is no longer possible or practical for it to adhere to the donor’s instructions. Also, it must establish that the changes it now seeks from the court actually further what the donor hoped to achieve. The law applies these tests because it recognizes the importance to society of protecting the unique missions of nonprofit organizations to put forward new and often challenging ideas.

How, then, did the Pennsylvania court handle these tests? Simply put, it ignored them.

In the contract Dr. Barnes drafted when transferring his extensive art collection and other assets to the foundation, he stipulated that the foundation must agree to follow “the covenants and conditions and none other” as set forth in the contract. This document clearly limits the purpose of the foundation to the promotion of Dr. Barnes’s teaching program.

However, in its opinion the court did not focus on the language in the contract. Instead, it gave far more attention to the viability of the foundation’s plan to move the art collection to the center of Philadelphia.

Once the court decided that the plan could generate enough income for the new museum’s operation, it was clear that it had no interest in dealing with the issues that should have been explored.

As a rule, courts do not override terms in a valid written contract unless it has clear evidence to support such action. One is hard-pressed to find any such evidence in this case. Even the court was unable to do no more than say it was relying on “signals” to support its conclusion that Dr. Barnes really did not mean what he stated in his contract with the foundation.

The court also chose to ignore other evidence. Dr. Barnes had years after drafting the contract creating his foundation to alter its terms if he had second thoughts or wanted to clarify the terms of the contract, but he never did anything to alter his “none other” directive. That greatly undercuts any argument that these words need not be taken literally.

What’s more, plenty of evidence is available to prove that Dr. Barnes created his formal art-appreciation program because he believed one learned little by walking through a traditional museum. Yet, that did not stop the court from stating that it could sanction “with a clear conscience” the foundation’s plan to use Dr. Barnes’s largess to construct a large traditional museum in the center of Philadelphia.

Given the lack of evidence to support its ruling, it seems clear that this court decision was made completely in response to public pressures.

If a poll had been taken before the decision was handed down, it is fair to say that the majority of people in Philadelphia would have voted for the foundation’s plan because a new museum would mean more tourists’ dollars, more jobs, and more leisure opportunities.

Also, the foundation had the backing of major political figures, grant makers willing to provide millions of dollars for the project, and a state’s Office of the Attorney General that was unwilling to ask hard questions. It is also worth noting that professional organizations with a vested interest in the vitality of the nonprofit world, such as the American Association of Museums and Independent Sector, did not see fit to raise the level of discourse on the important issues presented by the case.

A court decision that relies on public opinion, rather than adherence to legal principles, is terribly short-sighted. The law recognizes that all legitimate nonprofit groups have a right to exist regardless of their popularity. It protects the right of the nonprofit group to promote its distinctive, and maybe unpopular, mission with as much vigor as it protects other forms of free speech. In the Barnes case, the court never mentioned that principle. In fact, the message “back what is popular” urges just the opposite.

What happened in the Barnes case should have galvanized nonprofit organizations. Instead, the big issue was missed by most people, including the news media, and all the public discussion focused on the effects the decision would have on future donors. Few people seemed to realize that the case undercuts one of the main reasons Americans support nonprofit groups — so that society has the benefit of many diverse and often unpopular ideas. In doing so, it set a precedent that, if allowed to stand, could eventually emasculate the nonprofit world.

Marie C. Malaro is a professor emeritus of museum studies at George Washington University and the author of A Legal Primer on Managing Museum Collections and Museum Governance: Mission, Ethics, Policy, both published by Smithsonian Press.