Retired judge to decide Robertson lawsuit

Fratto, who replaced Mercer County Superior Court Judge Maria Sypek in September, ruled at an Oct. 24 hearing he will first hear evidence and rule on all liability issues in the case. If he determines in the first phase that the defendants are in fact liable, he will then rule on damages in a second phase. The trial is set to begin on Jan. 20, 2009.

The dispute, which has become the largest donor-intent lawsuit in U.S. history, began in July 2002 when foundation trustee William Robertson ’72, along with other members of the Robertson family, filed a complaint alleging that the University has misspent and mismanaged the endowment created by Charles ’26 and Marie Robertson’s 1961 gift to establish the Wilson School’s graduate program.

In the most recent round of motions in the six-year-old case, Fratto declined to split the trial in the manner requested by the Robertson family and declined to begin the trial with an evaluation of individual defendants’ fiduciary duties to the foundation, as the University had requested. The foundation has seven trustees, four of whom are University-appointed and three of whom are appointed by the Robertson family.

Attorneys for the Robertson family filed a motion for the trial to be split into two phases, the first of which would have addressed the foundation’s spending from its inception in 1962 until the Robertson family filed its complaint in 2002, and a second that would have addressed spending decisions by the foundation’s University-appointed trustees since the complaint was filed. The University’s attorneys countered that such a split would be unfair because it would be contrary to the normal trial process and would hinder the defendants’ ability to mount their defense.

Instead, the University’s lawyers filed a motion to start the trial by addressing claims against the named defendants in the case, examining the specific spending decisions with which the plaintiffs have taken issue. President Tilghman, Stephen Oxman ’67 and Peter Wendell ’72 are all named defendants in the case. Both men served as University-designated trustees of the Robertson Foundation. Another defendant, former University trustee Jay Sherrerd ’52, who also sat on the Robertson Foundation board, passed away in April.

“We strongly urged [Fratto] to try liability issues first, and that’s exactly what he’s done,” said Douglas Eakeley, a partner at Lowenstein Sandler, which is representing the University. “It’s a very logical way to do it. Where we slightly differed was we said ‘let’s start with claims against the [three named] defendants.’ ”

Robertson family attorney Ron Malone said in an e-mail there was “no chance an experienced jurist like Judge Fratto would grant [the University’s motion to start the trial with claims against the trustees].”

“Princeton’s motion to start the trial with claims against the individual trustees and Princeton’s counterclaim that the Court would not be justified in severing Princeton’s ties to the Robertson Foundation was stillborn,” said Malone, a partner at Shartsis Friese, one of the law firms that represents the Robertson family.

Attorneys will next appear before Fratto today to argue several in limine motions, seeking to exclude certain pieces of evidence from the trial. Both sides declined to estimate how long the trial will last.

Change behind the bench

Fratto is the third judge to preside over the case. Sypek, whom he is replacing, took over the case after Superior Court Judge Neil Shuster retired on March 1. Shuster had presided over the case since it was filed on July 17, 2002. In late June, Sypek postponed the start of trial from October 2008 to January 2009.

Sypek, who as chasncery judge also must oversee many other cases in Mercer County, told both parties that she would have very limited time to try the case. Linda Feinberg, the county’s assignment judge, then asked State Supreme Court Chief Justice Stuart Rabner ’82 to recall a retired judge.

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Rabner agreed to the request. Fratto will be able to hear the case on a continuous basis because, unlike Sypek, he does not have a docket of other cases. The trial is expected to run four days per week when it begins in late January. Malone said that he sees no conflict of interest in that Rabner, who appointed Fratto, received a degree from the Wilson School.

A graduate of Temple University and Temple Law School, Fratto was appointed to the bench in 1989 and retired in 2005. He served in the civil, family and criminal divisions and was the presiding civil judge for Camden County.

A historic case

In 1961, Charles ’26 and Marie Robertson gave $35 million to establish an endowment for the Wilson School’s graduate program. The endowment has since grown to more than $900 million.

Since the Robertson family’s complaint, the case has become the most expensive lawsuit in University history. The two sides together have spent more than $50 million in legal fees and submitted more than 400,000 pages of documents.

The lawsuit has provoked national interest, raising questions about donor rights and the fiduciary duties of nonprofit organizations. The Robertson family maintains that the University has misused the foundation’s funds and, in failing to adequately place Wilson School graduates in federal government jobs, has ignored the intent of the late donors. The University, on the other hand, has said that it does an adequate job of placing graduates in the public sector. If successful in taking control of the foundation, the Robertsons have said that they would turn over the funds to another university to train students for public service.

The family also contends that the University, by investing the Robertson funds with the Princeton University Investment Company (PRINCO), has violated one of Charles Robertson’s strongest principles: that his donation would remain separate from the University’s general fund. The University, however, notes that though both endowments have the same manager, the funds are separate.

In January 2006, the University and the Robertson family both filed several motions for partial summary judgment, in which particular facets of the case are decided by the court without a trial. After hearing oral argument on the motions in November 2006, Shuster released a 335-page ruling in October 2007.

Both sides scored minor victories, but Shuster declined to rule on whether Princeton was the sole beneficiary of the Robertson Foundation and also reserved judgment on whether the University had exercised proper diligence by turning over the Robertson funds to PRINCO for management.

In June, a New York appeals court ruled the University was entitled to nearly $10 million in insurance proceeds to cover some of its legal fees in the Robertson case. The decision required the National Union Fire Insurance Company of Pittsburgh, Pa., to honor the full amount of the policy. The company had previously only been willing to pay up to a $5 million sublimit on the $15 million policy.