December 10, 2008

Princeton and Robertson Family Settle Donor-Intent Dispute

Princeton University will pay $50-million, plus legal fees, to foundations controlled by heirs of a major donor to the institution, in a settlement agreement that ends a closely watched lawsuit over how strictly nonprofit institutions must adhere to a donor’s demands.

The bitter dispute centered on an endowment, known as the Robertson Foundation, that supports the university’s Woodrow Wilson School of Public and International Affairs.

The endowment, worth more than $900-million as of June 30, will be dissolved and Princeton will retain most of the funds in a new endowment controlled solely by the university.

But the university will reimburse the Robertson family’s foundation, the Banbury Fund, for the $40-million it spent on legal fees, and beginning in 2012, the university will transfer $50-million, plus interest, to a new foundation being established by the Robertsons to support the preparation of students for government service.

“This settlement achieves the university’s highest priorities in this lawsuit, which were to ensure that Marie Robertson’s gift will continue to support the graduate program of the Woodrow Wilson School and that the University would have full authority to make academic judgments about how these funds are to be used,” said Shirley M. Tilghman, Princeton’s president, in a statement.

The lawsuit had been scheduled to go to trial in January.

Ron Malone, a lawyer for the Robertson family, said the heirs feared that even if they had won, Princeton would have pursued appeals for years. “Princeton has a 1000-year view of the world,” he said. “The family was facing spending the rest of their lives litigating against Princeton and using up all the Banbury dollars to do that. Both sides decided that a compromise was in their best interests.”

William S. Robertson, a Robertson Foundation trustee and the lead plaintiff, said he was happy with the settlement, even though his new foundation will receive less than 10 percent of the Robertson Foundation’s assets.

“This settlement is more than a slap on the wrist,” Mr. Robertson said. “This is a message to nonprofit organizations of all kinds and throughout our country that donors expect them to abide by the terms of designated gifts or suffer the consequences.”

A&P Heiress

In 1961, Charles and Marie Robertson, an heiress of the A&P supermarket fortune, made an anonymous gift — worth $35-million at the time — to Princeton to expand the graduate programs at the Woodrow Wilson School. William Robertson, their son, and other family members sued the university in 2002, saying that the university had not adhered to the terms of the gift.

The family members maintained that Princeton had never been serious about fulfilling their parents’ primary goal — preparing graduates of the Wilson school for service in the federal government, particularly in foreign relations.

Princeton argued that its spending had been appropriate, and that it had used the Robertson money to build one of the most highly regarded schools in the country for preparing students for government and public-policy work.

While Princeton, through the settlement, avoids what the defense liked to call the “death penalty” — the loss of the entire endowment — the Wilson school has absorbed a sizable blow from the lawsuit. In addition to the $90-million to be paid out to the Robertsons for legal fees and the new foundation, the endowment fund will also cover any of Princeton’s $40-million in legal fees that are not covered by insurance.

“It is tragic that this lawsuit required the expenditure of tens of millions of dollars in legal fees that could have and should have been spent on educational and charitable purposes,” Ms. Tilghman said, in a letter to the Princeton professors, staff members, and alumni.

The settlement may point to the challenges that donors or any plantiff faces in suing institutions with billion-dollar endowments. Martin Morse Wooster, a historian who has written about the dispute in his book The Great Philanthropists and the Problem of “Donor Intent,” says it appears that the ongoing costs of the suit led the Robertsons to settle, even though he thinks they may have prevailed in court.

“I thought that if it had gone to trial they had a good deal of evidence that Princeton had violated the Robertson Foundation’s principles,” he said. Both parties are filing papers today with New Jersey Superior Court Judge Maria Sypek asking for the settlement to be approved.