Princeton University's lead counsel argued Tuesday in support of the
University's motion asking New Jersey Superior Court Judge Neil H.
Shuster to declare by summary judgment that Princeton is and will
continue to be the sole beneficiary of the Robertson Foundation, and is
and will remain entitled to designate four of the foundation's seven
trustees.
Douglas S. Eakeley of Lowenstein Sandler, representing
Princeton and four University-designated trustees of the Robertson
Foundation, also asked the court to declare that the decision of the
foundation's University-designated trustees to retain the Princeton
University Investment Co. (PRINCO) to manage the foundation's assets is
permitted by the foundation's certificate of incorporation and bylaws,
and was a valid exercise of their business judgment.
In the
first of two days of hearings, Eakeley also opposed a Robertson family
motion seeking to overturn the governance structure of the foundation,
which supports the graduate program of the Woodrow Wilson School of
Public and International Affairs. The hearings will continue Wednesday
with arguments on three additional motions for partial summary
judgment, as well as a motion by Princeton to strike a demand for a
jury trial that was filed by members of the Robertson family long after
they initiated the litigation in July 2002.
"Forty-five years
ago, Marie Robertson made an extraordinarily generous gift of $35
million to or for the use of Princeton University to build and maintain
a graduate program at the Woodrow Wilson School of Public and
International Affairs; the Robertson Foundation was set up as the
vehicle for Mrs. Robertson's gift," Eakeley said in his opening remarks.
"Continuously
since 1961 the Robertson Foundation has contributed funds to Princeton
University, and as a consequence the Woodrow Wilson School has grown
and prospered, and indisputably is today one of the pre-eminent if not
the pre-eminent school of public affairs in the world. At the same
time, the Robertson Foundation funds have been so prudently managed by
the trustees of the foundation that even after the many contributions
to Princeton University, the market value of those assets today is over
$750 million from a gift initially of $35 million.
"Despite this
record of extraordinary success, we are here today -- 45 years after
the foundation was set up and began disbursing funds -- with the
children of Mrs. Robertson who filed this lawsuit claiming that the
foundation from the outset failed to fulfill the donor's intent. The
children make this claim even though the Robertson family members have
been on the board of the Robertson Foundation from the outset; and
indeed Charles Robertson, the husband of Mrs. Robertson, served as
president of the foundation for the first 20 years of its operations.
Plaintiffs' claim is not only several decades late, it is indisputably
erroneous," Eakeley said.
"Let me suggest that there are several
undisputed facts and legal principles that ought to guide the court in
its resolution of these motions," Eakeley said. "The first is the fact
of the Robertson Foundation's certificate of incorporation [which]
clearly and unambiguously describes the purpose of the foundation. The
purpose of the foundation is to contribute the income, funds and
property of the foundation to or for the use of Princeton University …
to establish or maintain and support at Princeton University and as
part of the Woodrow Wilson School a graduate school, where men and
women committed to careers in public service may prepare for careers in
government service."
The second point, he said, is that the
"organizational structure of the foundation was chosen by the donor and
requires that the foundation board be controlled by Princeton
University. This was a condition that was required by the Internal
Revenue Service as a precondition for the gift and income tax
deductibility of the gift, and it was also required by Princeton
University itself before accepting the gift for the simple reason that
Princeton needed those guarantees in order to make the long-term
commitments necessary to build this graduate school, [the] bricks and
mortar, lifetime tenured faculty members, offices of admissions and
placement, and all of the other things that go into building a
world-class graduate school within an integrated University.
"The
bylaws in the certificate establish unequivocally that Princeton is to
control the foundation through designating four of the seven trustees
of the foundation," Eakeley said. "So we have an organizational
structure that … is a defining feature of the foundation from the
outset stipulated by Mrs. Robertson, ratified by her husband, required
by the IRS and a precondition to the University accepting [the gift]."
In
their complaint filed against Princeton, members of the Robertson
family have asked the court to amend the foundation's certificate of
incorporation and bylaws to remove the University from any control or
involvement with the foundation and to remove the University from its
position of being the sole charitable organization that can be
supported by the foundation.
In arguing for Princeton's "sole
beneficiary" motion, Eakeley noted that a ruling for summary judgment
in favor of Princeton would be consistent with the foundation's
charter, well-established law and the donor's intent.
In the
other Princeton motion discussed Tuesday, Eakeley asked Shuster to
uphold the decision of the foundation's University-designated trustees
to retain PRINCO to provide an additional layer of foundation
investment management under the supervision of the foundation's
investment committee. Eakeley emphasized that the Robertson Foundation
has flourished under PRINCO, providing the foundation with access to
diverse investment opportunities and a professional level of managerial
expertise that would not be otherwise available at a comparable cost.
Contrary
to the plaintiffs' arguments, Eakeley said, the decision to retain
PRINCO was not the product of a disabling conflict of interest on the
part of the University-designated trustees because their fiduciary
duties to both the foundation and the University are aligned, as the
sole purpose of the foundation is to support the graduate program of
the Woodrow Wilson School within Princeton University. In presenting
the PRINCO motion, Eakeley outlined the history of extensive
consideration of the decision to retain the management company, which
was first suggested in 1998. A final agreement with PRINCO was approved
in December 2003 after a total of nine potential firms had been
interviewed.
Eakeley also argued against a Robertson family
motion that seeks to overturn the governance structure of the
foundation -- and, by extension, the governance structures of other
supporting organizations around the country. He noted that the
governance structure had been agreed to by Charles and Marie Robertson
and later confirmed by Charles Robertson in correspondence with the
Internal Revenue Service, and that the existence of these arrangements
had been critical both to preserve the charitable nature of the
Robertson gift and to ensure that decisions about the academic program
of the Woodrow Wilson School would remain under the control of the
University.
In his closing comments, Eakeley noted several
expressions of strong support for the University and the Woodrow Wilson
School over many years by Charles and William Robertson, and cited the
extraordinary accomplishments of Anne-Marie Slaughter in her four and a
half years as dean of the School. He described as a "travesty" the
decision by the current generation of Robertson family members to use
private foundation funds to conduct a "scorched earth" discovery
process and "mount a national publicity campaign" in connection with
the lawsuit.
At Wednesday's hearings, attorneys for the University will argue in support of the following Princeton motions:
- The "11(c)" motion asks the court to declare that the foundation's certificate of incorporation authorizes the foundation to spend realized capital gains as well as other income, consistent with well-settled law.
- The "laches" motion asks the court to rule that a six-year statute of limitations and/or the analogous equitable doctrine of laches precludes judicial review at trial of five categories of pre-1996 expenditures that were plainly known, or with the exercise of reasonable diligence should have been known, to the plaintiffs and yet went unquestioned by them for decades prior to the filing of this lawsuit. In particular, plaintiffs William Robertson and Robert Halligan have served on the board of the foundation since 1974 and 1982, respectively.
- The "jury demand" motion asks the court to strike now, rather than waiting until the parties are in the midst of trial preparation, an unusual demand (made by plaintiffs long after the filing of their original complaint) to have a jury decide some of the issues in the case while the trial judge would decide other issues.
More information about the lawsuit can be found at www.princeton.edu/main/news/robertson.