May 15, 2008 | Read Time: 4 minutes
The Montana Supreme Court last month ousted the board of the Charles M. Bair Family Museum, in Martinsdale, after finding it had violated its fiduciary duties by not spending enough money to give the museum a chance to succeed.
The court found that the Board of Advisers had disregarded the language in the trust that established the museum. The trust, now worth $55-million, states that the museum, an eclectic collection of American Indian artifacts, antiques, and art works, is its “first priority.”
The board spent $600,000 to turn the 26-room Bair ranch home into a museum in the 1990s — despite an estimate by a board-hired expert that the transformation would cost as much as $2.5-million. The board later closed the museum from 2002 to 2005, citing declining attendance and the risk of fire or theft at the museum’s remote location.
“The museum never received a fair opportunity to succeed,” the court wrote.
The case had been closely followed in the nonprofit world. Attorneys general from 13 states filed briefs supporting Montana’s attorney general.
“This is good news for future donors in Montana,” said Montana’s attorney general, Mike McGrath. “This ruling does two things. It assures donors that if you create a trust that is clear in its terms, then the trustees are obligated to follow that. And it makes clear that the attorney general has the responsibility and the duty to enforce trusts.”
Dwindling Visits
The Charles M. Bair Family Trust was created in 1993 by Alberta M. Bair, whose father, Charles, amassed a fortune in sheep, mining, and real estate. It states that Ms. Bair’s “cherished aim and foremost desire” was to create a museum on the family ranch, which is about 120 miles northwest of Billings. She directed the trust to use “whatever principal and income” was needed to “establish, improve, and maintain the museum.”
The museum had 14,000 visitors in 1996, its first year, but attendance declined steadily, so the board voted to close it in 2002.
The board cited as reasons to close the museum the $3-million increase in the appraised value of the collection, to $6.7-million, over just eight years, and its fear that the collection was at risk due to inadequate security and air-conditioning systems.
In 2004, a community group, the Friends of the Bair Museum, threatened legal action if the museum was not reopened. The trustee, U.S. Bank, then asked a district court in Billings to determine whether the trustee had the authority to suspend museum operations. Ms. Bair’s trust had provided for the museum’s five-member board to sell or relocate the museum if it determined, at least five years after her death, that it was “inadvisable to continue the museum for public and educational purposes.”
Montana’s attorney general then intervened in the case.
In July 2006, District Judge G. Todd Baugh ruled that the board had “aptly managed and overseen” its duties, and that it had not acted arbitrarily or capriciously in closing the museum.
But in overturning that decision the Montana Supreme Court found that Judge Baugh had mistakenly viewed the board’s creation of the museum as a “discretionary decision” and had erroneously “applied a deferential standard to the entirety of the board’s conduct relating to the museum.”
“The board’s failure to make the museum ‘museum-ready’ constitutes a breach of the board’s fiduciary duty to the trust,” the court wrote.
The court ordered the trustee to appoint a new board within six months, and it instructed the new board to spend whatever principal and interest are necessary to give the museum a chance to succeed.
Spurring Tourism
Jamie Doggett, a rancher and chairman of Friends of the Bair Museum, says the group is ecstatic about the court’s decision. Even though attendance dropped steadily after the museum’s first year, it still brought plenty of visitors to a sparsely populated rural community. Martinsdale, the nearest town to the ranch, has a population of fewer than 400 people.
“We felt it was important to do all we could to keep this community alive,” Ms. Doggett says. “Four thousand visitors makes a big difference.”
John G. Crist, a lawyer for the trustee, said the board and the trustee believed that the trust was established for general charitable giving and that the museum was just one focus for the trust.
“This is a fundamental shift in the way the Board of Advisers and the trustee have viewed this trust agreement,” Mr. Crist said. “But this is the determination of the court and the trust will implement the changes and do so in a timely fashion.”
The museum, which has generally been open only from May to September, reopened in 2006 and is operated by the Upper Musselshell Historical Society. The Friends of the Bair Museum have requested a full-time permanent curator for the museum, something it has never had.
“That’s certainly something to be considered,” Mr. Crist said. “The goal is to preserve these artifacts and present them in a meaningful way. That’s going to require professional museum expertise.”
The new board’s biggest challenge, Mr. Crist said, will be figuring out a way to get more visitors to the museum. “They have to figure out a way to make it a place that people want to go to frequently,” he said.
