Robertson vs. Princeton vs. Donor Intent

To the Editor:

The settlement of the six-and-a-half-year-old lawsuit brought against Princeton University by members of the Robertson family (The Chronicle, January 15) has attracted plenty of good advice for nonprofit groups: Be clear about the purpose of a gift, have clear guidelines for its use, stay in touch with the donors, and involve their children.

But one lesson of the lawsuit is that a university can do all these things — as Princeton did — and still end up in court. In 1961 Princeton and representatives of the Robertson family signed a written document that spelled out the purpose to be served by Marie Robertson’s $35-million gift and the means by which the gift would be administered. For 47 years Princeton has fully adhered to the terms of that document, creating at its Woodrow Wilson School of Public and International Affairs one of the world’s leading graduate programs to prepare students for government and public service.

For 20 years, until his death in 1981, Marie’s husband, Charles Robertson, chaired the Robertson Foundation board that oversaw the use of the gift. His son William Robertson began serving on that board in 1974, shortly after his graduation from Princeton, attended every meeting, frequently praised the university’s use of the gift, and never cast a dissenting vote as a board member until he filed his lawsuit in 2002.

Despite all this, William Robertson went to court in an attempt to overturn two key decisions his parents had made: that the gift should be controlled by Princeton and that it should be used to support and expand the graduate program of the Woodrow Wilson School. He did this initially because of a dispute over engaging professional management for an endowment that by then exceeded $500-million. As time went on and the endowment increased to more than $900-million under the professional managers who were selected, he downplayed this issue and instead challenged Princeton’s right to make decisions about how best to support its graduate program.

One of the great ironies of this lawsuit is that the press bought into the family’s assertion that the case was about Princeton’s adherence to “donor intent.” While it may have been about whether Princeton properly carried out the terms of the certificate of incorporation that created the Robertson Foundation, and we have no doubt a trial would have convincingly demonstrated that Princeton did, the question of “intent” raised by this trial was precisely the reverse: whether the descendants of a donor can overturn the donor’s intent — as expressed in a carefully negotiated written document agreed to by the donor and the university — with respect to both the purpose of the gift and the mechanism by which it would be administered. It was the Robertsons, not Princeton, who were trying to overturn the donor’s intent.

There is another issue of “donor intent” raised by this case, and it also involves actions taken by the Robertsons. In the 1940s Charles Robertson established a family foundation, the Banbury Fund, to support charitable purposes. In their lawsuit against Princeton, the Robertson family members who controlled that foundation drew upon its assets not to support charitable purposes, but to pay for their legal and public-relations expenses. Over the course of the lawsuit, their expenses exceeded $40-million, and the assets of the Banbury Fund dropped from approximately $50-million when the lawsuit began to under $10-million.

So if the first lesson of this lawsuit is that conscientious adherence to the terms of a gift is no protection against ending up in court, the second is that entering into a lawsuit against an opponent who does not have his own resources at risk can lead to a very lengthy and expensive litigation, coupled with an aggressive public-relations campaign.

A third lesson is to think twice before creating the kind of “supporting organization” that was established to administer Marie Robertson’s gift.

Such a mechanism can help sustain the interest of the donor and the donor’s advisers, but there are other ways to achieve this goal without introducing a structure that confers corporate obligations and standing to sue that ordinarily would not be available to donors of restricted gifts.

This lawsuit was settled when the Robertsons decided not to take the case to trial. To avoid continuing legal expense, Princeton agreed to a settlement amount that will be paid out over a 10-year period and used solely to support charitable purposes.

But the key term of the settlement agreement is that the Robertson Foundation is being dissolved, with all of its assets being transferred to Princeton, which will have sole authority to decide how these funds are to be invested and how they can best be used. This means that the bulk of Marie Robertson’s gift is now protected from further attempts to divert it to other uses and that it can continue to be used, in perpetuity, as she intended in making her gift, to support the graduate program of Princeton’s Woodrow Wilson School.

Robert K. Durkee
Vice President and Secretary
Princeton University