Court Ruling Could Influence Restrictions Donors Place on Bequests

A Pennsylvania court’s decision to allow a nonprofit organization to disregard a key part of its founding donor’s instructions could have repercussions for charities, as donors decide how best to ensure that their philanthropic intentions are honored over time.

The court ruled last month that the Barnes Foundation, in Merion, may move its multibillion-dollar art collection to a new location, deviating from directions laid out by Albert C. Barnes in a detailed agreement signed more than 80 years ago. Dr. Barnes died in 1951.

Judge Stanley R. Ott of the Montgomery County Orphans’ Court, which oversees charitable trusts, said in his 41-page decision that he saw “no viable alternative” for the cash-strapped organization other than moving its gallery to a more accessible location in downtown Philadelphia, where it can benefit from the backing of new donors and the revenue from more visitors. The foundation has been near bankruptcy since 1998, when it spent the last of its endowment. Years of costly legal disputes, infighting among foundation trustees, and limitations put on the Barnes both by its founder and local authorities had drained the institution of money.

Reading the Signals

Judge Ott acknowledged in his decision that some observers would consider the move an “outrageous violation of the donor’s trust.” But, he said, he found “signals” within the volumes of materials in the two-year court fight that Dr. Barnes had “expected the collection to have much greater public exposure after his death.” And, he said, since the move would help preserve the foundation and its mission — art education — he could sanction the changes “with a clear conscience.”

Legal experts say that as a lower-court ruling, Judge Ott’s decision does not set any precedent that other courts in the state and elsewhere must follow. However, some lawyers who specialize in trusts and estates, advisers to donors, and fund raisers around the country say it may spark serious debate in the world of charity.

Some charity leaders hope the decision will prompt more donors to structure their gifts in a way that allows changes without court approval in response to unforeseen factors.

“There’s a lesson for the rest of us,” says Charles W. Collier, Harvard University’s senior philanthropic adviser. “Because times and circumstances change, we want to avoid rigidity. You shouldn’t have to go to court on every issue large and small pertaining to a donor’s directions, a donor’s intent. There should be flexibility built into these documents so that people of sound judgment can follow through without disruption.”

Renata J. Rafferty, a donors’ adviser in Indian Wells, Calif., points to a potential message on the flip side. “Donors who feel not just passionate, but fanatical about their wishes for how their wealth will be used when they are gone should take every single step to ensure that their intentions are carried out to the letter for as long as they hope,” she says.

And, Ms. Rafferty adds, she would even advise donors who feel most strongly about their gifts to enunciate up front the options they don’t want considered if the circumstances surrounding the contribution should change.

“I could never in good conscience tell a donor to loosen up on their desires,” she says.

Donald W. Kramer, a Philadelphia lawyer who publishes the online newsletter Nonprofit Issues, says the Barnes case also raises questions about how nonprofit organizations can best deal with competing interests of donors.

In his decision, Judge Ott cited an offer by three local donors — the Pew Charitable Trusts and the Annenberg and Lenfest Foundations — in 2002 to help the Barnes raise $150-million to pay for the gallery’s move. The foundations said they would follow through on their pledges if the court approved the move. Judge Ott said the potential financial backing of these “alpha donors,” as one witness in the case described them, was an important consideration in his decision.

“Donors may get the idea that they have a little more leverage to make things happen when we see a case like this where it looks like ‘alpha donors,’ by adding or withholding funds, can help sway court opinions,” Mr. Kramer says.

Fallout Expected

Julian Bond, chairman of the National Association for the Advancement of Colored People, warns that such a phenomenon may change donors’ giving plans. Mr. Bond, whose father was a friend of Dr. Barnes, say he worries that donors may give less, change which institutions they choose to support, or not make gifts at all depending on how strongly they feel about how their money is to be used, he says.

“Doesn’t this decision say to every donor that no matter how strong your intentions are someone with more money and better lawyers can come along some years later and change the gift?” Mr. Bond asks.

Bernard Watson, chair of the Barnes governing board, says no. He flatly rejects the notion that Dr. Barnes’s wishes have been overturned in favor of the wishes of new donors. The trustees, he says, sold the idea for the move to Annenberg, Lenfest, and Pew after the board had already decided that moving the collection was necessary to save the organization and put it on firm financial footing for the future. And, he says, more important, the move does not stray from Dr. Barnes’s vision.

“The plan keeps intact his mission, which was to share his collection with the public — even more so after his death — and to educate the public,” says Mr. Watson, whose tenure on the board expires this year. “We lose everything if we go bankrupt. Dr. Barnes loses.”

Kimberly Camp, the foundation’s executive director, says the organization’s present leaders have extracted, and the court has approved, a healthy and accurate interpretation of a flexible document. “Barnes had no intention of the foundation becoming a tomb,” she says. “He talked about it as responsive, flexible, answerable to changes in society.”