The University can claim a number of small victories in its high-profile battle with the Robertson family after Mercer County Superior Court Judge Neil Shuster released rulings on seven motions for partial summary judgment. But the critical issues — the ones that make this one of the most closely watched cases in the country — are going forward to trial.
University general counsel Peter McDonough expressed optimism for what yesterday's ruling means about the ongoing proceedings of the case. "It has really set up a road map for ultimately ending this case, and doing it rather efficiently, all things considered," he said. The judge fully granted two of the five motions filed by the University and partially granted another.
But Robertson attorney Frank Cialone said the family had equal cause to be upbeat because one of the Robertsons' two motions was partially granted. "We came out, with minor exceptions, with every dollar of our claim intact, with the court having any remedy at its disposal up to and including total divestment of the foundation from the University," he said. "We're feeling pretty good."
"I think the judge had ample opportunity, if he had hostility to the [Robertsons'] other claims, to display it, but he didn't," he added.
A trial date has not yet been set and is likely many months away.
Shuster's decisions
The rulings — 335 pages long and almost 11 months in coming — were on seven motions for partial summary judgment: five filed by the University and two by the Robertsons. A motion for partial summary judgment asks a judge to make a ruling on a specific matter to simplify issues for trial. A judge can also reserve judgment until he hears testimony at trial.
Ultimately, today's events will not drastically alter the landscape of this legal battle, which is essentially the point of summary judgment; it is meant to solve obvious points of law, clearing the battlefield for the truly contentious issues to take center stage.
Shuster ruled that the case will not be tried to a jury, granting one of the University's five motions. The Robertson family had asked to try some issues to a jury, but even Cialone appeared at peace with the judge's ruling.
"At the end of the day, Judge Shuster has been on this case for a long time, and he has clearly dedicated a lot of time to this case, and we'd be perfectly fine trying the case to him," he said.
Moreover, a jury trial would undoubtedly have further complicated what already amounts to a bewildering tangle of legal thorns.
McDonough said the University's biggest win came on the issue of whether the foundation's capital gains and appreciation can be spent in addition to dividends and interest. Capital gains and appreciation on the Foundation's endowment have been spent since the mid-1990s, Cialone said.
"For us, it was critically important that the point be made and be made forcefully that this inhibition of current and future spending was not going to be one of the outcomes of this very sad and protracted saga," McDonough said.
The issue fits a larger pattern of the rulings: a small win on a certain issue for the University that doesn't change the larger claims at issue. Shuster's rulings do not reduce the size of the claim the Robertsons would win if the lawsuit were decided wholly in their favor.
Charles '26 and Marie Robertson's children allege that the University has misused the Foundation's funds by ignoring the donors' original intent, which was to support the Wilson School's graduate program and place its graduates in federal government jobs, especially those in foreign policy. The University says that it has always abided by the original intent of the Robertson donation.
The plaintiffs are seeking the return of $207 million they say was improperly diverted from the Foundation into the University's general fund, spent on things like jointly appointed professors, research grants, the Woolworth building and the Office of Population Research. They are requesting an additional $300-400 million in investment returns on the improperly diverted funds and the right to sever the Foundation's relationship with the University. The University denies it spent the money improperly.
Cialone said the Robertsons' cause for optimism was a small but specific finding by the court of an instance of "ultra vires" expenditure, or money spent beyond the Foundation's purpose as stated in its charter. The instance concerns $62,500 used to fund a psychology professor.
In its press release, the University said that the summary judgment was issued for the $62,500 because the University had admitted the money was improperly spent and paid it back. Though Shuster made note of this in his ruling, he also points to the income transfer as being "ultra vires."
"Here, as set forth in the Foundation's Certificate, the Foundation was created to fund the attendant expansion of the Wilson School graduate program," he wrote, directly after quoting the legal definition of the phrase "ultra vires." "Clearly, funding a psychology professor, at least as it occurred in this instance, is not encompassed by the purpose."
The Robertsons' only tangible loss was a comparatively small one: The judge reduced the family's claim by $16 million because its claim to recover double-charged equipment expenses was outside the statute of limitations.
Shuster declined to rule on whether Princeton was the sole beneficiary of the Robertson Foundation. The Robertsons contend that the actual beneficiaries of their parents' donation were the American people, not the University.
He also reserved judgment on whether the University had exercised proper diligence in choosing the Princeton Investment Company, which also manages the University's general endowment. The family contends the University has violated one of Charles Robertson's most treasured precepts: that his donation remain separate from the University's general fund. The University says the money is kept in separate accounts; the family isn't convinced.
Fiduciary duty
One of the most contentious issues argued last November was whether to apply the business decision standard or the more strenuous entire fairness standard to contested transactions. The former assumes that financial decisions were made in good faith; the latter, applicable when board members have a "disabling conflict of interest," would require the University to show that each one of its transactions was made after considering other options fairly.
Robertson family attorneys argued that the fact that several members of the Foundation's board members were University officials created a serious conflict of interest, but the judge disagreed.
"[T]he Court is not satisfied that the mere existence of the University's control over the Foundation Board, or the existence of University personnel on the Foundation Board, creates an 'omnipresent danger' that the University, acting in its position of control may be acting primarily in its own interests, and not those of the Foundation," Shuster wrote.
But Shuster also declined to accept the University's suggestion that the business decision standard be adopted across the board. Instead, he said that each disputed spending decision should be examined and identified as "ultra vires" — beyond the legal powers of the Foundation — or not. If it is determined to be, the money in question would have to be returned to the Foundation. If not, the spending decision would then be examined as a breach of fiduciary duty, the highest legal relationship imposed by law. Princeton has admitted that it has a fiduciary duty to the Foundation. If a breach of fiduciary duty is determined to have occurred, then the appropriate standard — business decision or entire fairness — would be selected.
University attorneys can breathe a brief sigh of relief that the court declined to compel them to prove the "entire fairness" of every transaction at issue, as the Robertson family asked. But Robertson attorneys say they'll gladly move case-by-case.
"Believe me, we are more than happy to go through all the details of the spending claims and allocations that we've alleged," Cialone said. "That is not the silver bullet that Princeton would like it to be."
Both sides expressed happiness with Shuster, to whom the case will likely be tried. McDonough said Shuster was known for being a "thoughtful jurist." "He's really demonstrated that in spades here today," he said.
"I think [Shuster] listens to both sides, listens to everything, and then makes his decisions," Robertson heir and plaintiff Anne Meier said.
As the suit wends its way towards trial — probably still at least a year away — the two parties find little else they can agree on.
The Robertsons, for their part, are so confident that they will prevail that they are already courting other potential recipients of their money.
"We've begun interviewing people whom we'd consider giving the money to," Meier said.
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