Sunday, February 26, 2012

Legal Update - Fisk - Crystal Bridges - and Barnes

I have written a few pieces on the Fisk University - Georgisa Okeefe case and the Barnes Foundation move to Philadelphia. Below are come background comments on both Fisk and Barnes and the concept of "cy pres" which is the partial basis of how our legal system deals with charitable trust disputes. This provides some insights of how and why trusts are and sometimes should be broken.

The Tennesse Attorney General has gone ahead and filed for permission to appeal the most recent ruling in the Fisk case.  Here's a brief AP story.  Here's the brief.  And here is donor-intent protector Lee Rosenbaum, coming out of retirement to cheer on Super Cooper's forfeiting of his neutrality.
A few comments on the brief:
1.  It contains as clear a statement of Donor Intent Absolutism as you will ever see:  "[T]he fact that the donee may cease to exist if it is not permitted to change the conditions of a gift ... does not authorize a deviation from the conditions of the gift."   Wow, that's cold.  O'Keeffe said no sales and that means no sales.  If that results in Fisk having to shut its doors, so be it.  But wasn't it also part of her intent that Fisk own the works?  After all, she could have given them to anyone, but she chose Fisk.  Why do we assume the no sale part of her intent is more important than the Fisk part of her intent?  It's not as if she said "here is a bunch of artwork, I don't really care who owns them or what happens to them just as long as, please God, they never ever be sold!"  In other words, do we really think that, given the choice, O'Keeffe would prefer to see Fisk close down and the works sent somewhere else than the collection sharing arrangement on the table now, in which Fisk survives and retains a 50% interest in the works?
2.  Speaking of that retained 50% interest (and the related right to exhibit the works for two out of every four years):  the brief bizarrely reads as if the whole collection is being shipped off to Russia or something, never to be seen again.  It claims the deal that's been approved converts the collection "into nothing more than a source of revenue for Fisk."  It argues that, under the cy pres doctrine, any deviation "must be as close as possible to what the donor intended" and this deal "is far removed from Ms. O'Keeffe's intent and purpose."  What was that intent and purpose that we are far removed from?  According to the AG, it's that the work "be used for art education in Nashville and the South."  O'Keeffe's "primary charitable purpose was to enable the public -- in Nashville and the South -- to have the opportunity to study the Collection in order to promote the general study of art."  Seriously?  That's their argument?  That a collection-sharing arrangement that has the work in Nashville at Fisk half the time and at a brand new museum of American art in Arkansas (which may well "become a place of pilgrimage for art lovers from around the world") half the time is far removed from an intent to enable the public -- in Nashville and the South -- to have the access to the collection?  Really?
3.  Finally, a word about this silly notion that allowing this collection-sharing arrangement to go forward will "chill" future charitable donations.  Look, this case isn't inventing a new way to subvert donor intent; it's applying long-standing doctrine (one that existed at the time O'Keeffe made her gift).  As the AG's brief itself notes, the cy pres doctrine was "first codified in New York in 1893."  Every single charitable gift comes with an implicit asterisk to the effect that, when changed circumstances make compliance with the terms of the gift impracticable, a court may modify those terms.  That was true before the Fisk decision, and remains true after.  Reversing the decision in this case would not make that asterisk go away.  No donor can ever be "certain" that the conditions of her gift will be honored for all eternity.  Fisk happens.
posted by Donn Zaretsky at 11:52 AM 
The cy-près doctrine ( /ˌsiːˈpreɪ/ see-pray) is a legal doctrine that first arose in courts of equity. The term can be translated (from old Norman French to English) as "as near as possible" or "as near as may be."[1] The doctrine originated in the law of charitable trusts, but has been applied in the context of class action settlements in the United States.[2]

When the original objective of the settlor or the testator became impossible, impracticable, or illegal to perform, the cy-près doctrine allows the court to amend the terms of the charitable trust as closely as possible to the original intention of the testator or settlor, to prevent the trust from failing.

For example, in Jackson v. Phillips,[3] the testator bequeathed to trustees money to be used to "create a public sentiment that will put an end to negro slavery in this country."[4] After slavery was abolished by the Thirteenth Amendment to the United States Constitution, the funds were applied cy-près to the "use of necessitous persons of African descent in the city of Boston and its vicinity."

University of Pennslyvania Law Review - Excerpts -

The battle over the modification of the trust bylaws will be based on the intent of Albert C. Barnes as the court finds it. The relevant legal question is not what is best for the public, but what Dr. Barnes would have done if he were alive today. The importance of Barnes’s wishes is in no degree lessened because he has been dead for over fifty years. Charitable trusts and all of the idiosyncratic provisions of their founders run in perpetuity. Notwithstanding the potential for a meaningful public benefit, donor intent— not public interest—remains paramount in the administration and modification of charitable trusts.....

The history and current status of charitable trust law is crucial to understanding the Barnes dilemma and how the law currently protects donor intent. The codification of charitable trusts first began in 1601 with the Statute of Charitable Uses.....

To the extent that the influence of donor intent has declined in the United States, it has been at the behest of a handful of lenient judges and jurisdictions,62 by trustees in states without funding for sufficient oversight,63 or by donors themselves who intentionally design trusts with greater discretion.
64 Unless they litigate for a cy pres deviation, trustees are charged with fulfilling the purposes of the trust for the specific class of beneficiaries and in the precise manner ordered by the donor.65 Thus, general public interest can be taken into consideration only insofar as the terms of the trust allow. In a restrictively worded trust such as that governing the Barnes Foundation, the trust terms leave little room for the public interest beyond what is achieved by Barnes’s specific directives. Steadfast respect for donor intent has been justified by theories of private property, freedom of testation, and society’s moral and legal obligation to the donor’s largess.The next Part articulates why respect for donor intent should extend no further than the long-term benefits that it provides for the
This Part explores three benefits that charitable trusts receive that are critical to their growth and survival: tax exemption, an exception to the rule against perpetuities, and public enforcement of trust provisions. The public cost of providing these benefits is significant and often not offset by the increase in public welfare attributable to trusts. While charitable trusts need only meet a nominal threshold for the public good they provide, the public costs they create are highly variable. The Barnes Foundation epitomizes that problem by providing....

The Barnes Foundation’s 1992 decision not to deaccession over fifteen paintings was based partly on public outcry, serving as an example of how extralegal forces can help to maintain aspects of donor intent.168 Without a court ruling or expensive litigation, the trustees backed down from a decision that the public viewed as an inappropriate use of the Foundation’s assets.169....

The doctrine of cy pres limits the likelihood that impracticability, impossibility, or illegality of specified purposes will lead to failure of the trust because cy pres allows the trust purposes to be modified.189 Although in some cases cy pres has been used as a vehicle to undermine
donor intent,190 typically and traditionally it is used to perpetuate the original intent. Under most cy pres laws, modifications must approximate what the donor would have wanted if he had anticipated the failure of the purposes of the trust. The current Barnes Foundation litigation highlights these problems. Albert C. Barnes’s idiosyncratic beliefs and dictations live with us to this day, regardless of the resulting detriment to the public. A world-class collection remains shrouded by restrictive trust terms, with access limited to mere hundreds of people per week, when millions clamored to view the art on its one-time tour. Meanwhile, the collection has benefited from huge tax breaks, ongoing enforcement of trust terms, and use of the judicial system and the office of the Attorney
General for enforcement of each of the Barnes indenture’s provisions. Now the Foundation, the City of Philadelphia, and the public have a unique and unprecedented opportunity to open the collection and free it from unreasonable restraints. Under current law, however, it is unclear whether the court will allow such a significant departure from Barnes’s original terms. This Comment has discussed five ways that the public interest can be incorporated into the administration of charitable trusts like the Barnes Foundation. Through statutory reform and changes in the public policy regarding charitable trusts, perhaps the public will displace donors as the true beneficiary of charity in America.

No comments: