Spelman College, Bill Cosby, and Mutual Intent in Pledges

Spelman College, Bill Cosby, and Mutual Intent in Pledges

Spelman College, Bill Cosby, and Mutual Intent in Pledges

Spelman College’s decision to terminate a $20 million program supported by Bill Cosby, embroiled in allegations of drug-related seduction, reminds us that donors and recipients mutually depend on good behavior and shared intentions, which are imperiled about once a decade for most charitable organizations.

The problem can originate on either side, as where a recipient wishes to disaffiliate because a donor’s behavior or reputation becomes objectionable–as in that case–or where a donor objects that a recipient is not using funds as intended–as in the 1995 case of Yale University returning $20 million after alumnus Lee M. Bass complained that the school had not used the donation to create classes in Western civilization the donation called for.

Litigation does not often result, but when it does, it can be ugly. Negotiations and structured solutions are usually preferred. Take an example of each: Princeton’s acrimonious litigation with the Robertson family and Lincoln Center’s friendly accord with the Fisher family over renaming Avery Fisher Hal at Lincoln Center.

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Princeton U. and the Robertson Family: Pyrrhic Victories for Each

In 1961, Charles and Marie Robertson made a $35 million gift to Princeton endowment for the purpose of educating graduate students for government careers. They embraced the spirit of the times, captured in President John F. Kennedy’s call to “Ask not what your country can do for you, but what you can do for your country.” Establishing the Robertson Foundation, Princeton invested the $35 million and used the rising investment income to fund such programs—along with many others outside the Wilson School. Indeed, the Robertsons’ gift—which grew to nearly $1 billion today—become a sizable component of Princeton’s overall endowment—about $15 billion today.

While Princeton administrators loved the large and seemingly flexible funding, the Robertsons’ children, who retained a role in overseeing the use of funds, objected. They insisted that Charles and Marie intended a specific and limited use of the funds, solely for training in government careers at the Wilson School. Unable to resolve the disagreement amicably, the Robertsons sued the University in 2002, seeking to terminate the gift and recover the principal.

In the acrimonious litigation, the Robertson family said the university allocated $250 million of foundation funds to non-foundation pursuits, including a new sociology department facility, international affairs programs, and public policy studies—none of which focused solely on training for careers in public service at the Wilson School. The family contended that the University commingled foundation funds with general university funds with the result of disguising how foundation funds were used.

Princeton countered that the University was a complex institution with multiple interconnected missions that result in overlap between Wilson School government careers and broader programming on public and international affairs. It argued that the narrow literal and historical reading of the donor’s intent should yield to a contextual flexible and evolving understanding of donor intent in relation to the University’s needs.

After six years of legal wrangling during which the two sides incurred legal fees exceeding $40 million each, they settled. The Robertson Foundation was dissolved, with $50 million going to fund a new “Robertson Foundation for Government” independent of Princeton and under the family’s auspices. The University also agreed to pay the Robertsons’ legal fees.

While both sides claimed victory, informed observers saw mostly mutual defeat, a pair of Pyrrhic victories. After all, while the Robertsons wrested control of a foundation from Princeton rededicated to their perception of their ancestors’ vision, it was far smaller than what the original endowment had become, and the bruising litigation did not entirely promote family unity. While Princeton retained control over most of the funds along with an expanded authority over allocation, the philanthropic community saw a bald assertion of power over donor intent that is likely to make some donors unwilling to trust the school with their beneficence.

Lincoln Center and the Fisher Family: Mutual Gains

In 1973, Avery Fisher, founder of Fisher Electronics Co., donated $10.5 million to support the renovation of New York City’s Philharmonic Hall, the music house built in 1962 on Manhattan’s upper West side. The pledge agreement provided that the Hall would be renamed Avery Fisher Hall and called for that title to “appear on tickets, brochures, program announcements and the like . . . in perpetuity.” The site has hosted innumerable grand musical performances over the decades, and the name is etched in the consciousness of many a New Yorker, and gave Mr. Fisher, who died in 1994, a bid to immortality.

Such naming rights are common fundraising tools for cultural institutions, yet perpetual naming rights give heirs enormous power. In 2002, for example, Avery Fisher Hall needed renovation and Lincoln Center’s leadership developed fundraising strategies, which included creative ways to offer naming rights. Fisher’s family, however, objected, threatening legal action to block such steps. The atmosphere turned acrimonious and bold renovation plans were shelved in favor of modest ongoing maintenance improvements while the rest of the vast Lincoln Center complex got a makeover.

But a decade later, as renovation needs deepened, personal relationships between Lincoln Center’s leadership and Fisher family healed, and a deal became possible. In June 2014, Jed Bernstein, Lincoln Center’s president, ran into Mr. Fisher’s daughter, Nancy, at a dinner party. He invited her and her brother and sister to his office to chat about the future of Avery Fisher Hall.

In the meeting, Bernstein struck a cordial tone and explained the Center’s predicament: it needed a major overhaul costing $500 million and the only to raise that kind of money was to offer the donor the right to name the Hall. The siblings were receptive this time, thanks to both the cordial approach as well as an increasingly desperate need for renovation, made more obvious by the rest of the Lincoln Center complex.

A deal was hammered out over the next three months between Lincoln Center and the Fisher family—Nancy and her brother Charles Avery Fisher and sister Barbara Fisher Snow, as well as their spouses and children (five in all). In the deal, the Center agreed to pay the Fishers $15 million as a flat fee coupled with numerous sweeteners, including: inducting Avery Fisher into a new Lincoln Center Hall of Fame; putting a Fisher family member on the Hall of Fame board; enhancing promotion of the Avery Fisher Artist Program that awards prizes and career grants to promising young musicians; and hosting a gala concert in honor of Avery Fisher and his family.

The family was guided in this difficult decision by an understanding of what Avery Fisher would have wanted. In trying to discern his original intent, they decided that the overriding objective was to sustain the presentation of outstanding classic music at Lincoln Center. That was his goal and the imperative to update the structure meant surrendering his name in favor of attracting major new funding–ultimately provided by David Geffen, who contributed $100 million.

But as the Fishers had done in 2002, they certainly had the contractual right to block it. That’s one reason why most such naming rights in pledge agreements today expire after a term of years.


Lawrence Cunningham, a professor at George Washington University, is in the midst of revising for a second edition his book, Contracts in the Real World: Stories of Popular Contracts and Why They Matter, from which this is adapted.


PRIMARY SOURCES: (1) Daniel Matz, Book Review (of Doug White, Abusing Donor Intent: The Robertson Family’s Epic Lawsuit Against Princeton University, St. Paul, Minnesota: Paragon House, 2014), Philanthropy News Digest (April 8, 2014) and (2) Robin Pogrebinnov, Lincoln Center to Rename Avery Fisher Hall, New York Times (November 13, 2014).

HAT TIPS: Rich Collins (GW), Matthew Diller (Cardozo/Fordham), Monroe Price (Cardozo/Penn).

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Larry is a professor of law at the George Washington University Law School. He joined the GW Law School faculty in 2007, having previously taught for 6 years at Boston College (where he served a 2-year term as Academic Dean) and for 8 years at Cardozo (where he served a 5-year term as Director of the Heyman Center on Corporate Governance). He also taught courses at many other schools in the US and abroad, including Central European University, Columbia University, Hebrew University, University of Navarra, and Vanderbilt University. Before entering academia, he practiced corporate law for 4 years at Cravath, Swaine & Moore. He earned his BA from University of Delaware and his JD magna cum laude from Cardozo. Larry writes extensively in corporate and securities law, with a special emphasis on law and accounting and investor perspectives. He teaches courses in those fields as well as Contracts. He has published a dozen books and 50 law review articles. His recent books include: Contracts in the Real World: Stories of Popular Contracts and Why They Matter (Cambridge University Press 2012), The AIG Story (Wiley 2013), The Essays of Warren Buffett: Lessons for Corporate America (Carolina Academic Press 2013), and Berkshire Hathaway’s Value of Values (Columbia University Press 2014). Areas of Interest: Accounting, Auditing, Contracts, Corporate Law, Finance, Investing, Legal Education, Securities Regulation

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