University gains control over Robertson endowment in settlement

agreed to settle

Settlement papers were filed Wednesday, and lawyers from both sides will go before Mercer County Superior Court Judge Maria Sypek for final approval Friday afternoon. The trial had been scheduled to begin Jan. 20, 2009.

The Robertson endowment was valued at $900 million as of June 30. Though a statement by the Robertson family said the endowment’s value had since dropped to roughly $600 million, University spokeswoman Cass Cliatt ’96 said in an e-mail that the plaintiffs have understated the endowment’s value by “well over $100 million.”

Over the next three years, the University will reimburse the Banbury Fund, a Robertson family foundation, for roughly $40 million in legal fees that the Robertsons accumulated over the course of the six-year lawsuit. The reimbursement, the first $20 million of which will be transferred in 2009, will come from the newly endowed University fund.

This new fund will also provide a total of $50 million from 2012 to 2018 to a new charitable foundation, created by the Robertson family, that supports preparing students for public service. The settlement also includes a roughly $10 million interest payment.

Tilghman said that while she is confident Princeton would have prevailed had there been a trial, both sides were weighing the prospect of months of trial and possibly years of legal wrangling. Each side has spent more than $40 million in legal expenses to date, and University officials said they believe additional legal expenses would likely have cost another $20 million for each side.

“And even if you imagine the best possible outcome in which the University is fully vindicated at the end of this long, long process, we would still have been left with the structure of the Robertson Foundation,” Tilghman said, adding that over the last several years she “became convinced” that the University would be better off if the foundation were dissolved.

She noted that the foundation was “no longer supporting the educational goals of the Wilson School. It was inhibiting the ability of the school to realize its potential. And once I came to that conclusion, I was persuaded that we are far better off in the long run settling this case, which was the only way we could achieve dissolution.”

The Robertson family will have “no role whatsoever” in managing the fund in the future, Tilghman said.

She said she thinks the current economic crisis had a “big role” in the Robertsons’ decision to suggest a settlement but noted that it did not affect the University’s actions.

“As we have been saying for some time, both in public and in court documents, the Robertson family had been financing this litigation using another family foundation, the Banbury Fund, that had been created by [Charles] Robertson [’26] to support educational purposes and scientific research,” Tilghman said.

She said that the Robertsons could not sustain their litigation using the Banbury fund for financing.

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“From what we now know about the extent of their legal expenses, they had essentially spent down that foundation, and anything that was left was probably taken away during the fall of the market,” she explained. “I think they were facing the prospect of one to two years of additional, very high legal expenses now suddenly having to come out of their own pockets.”

Robertson family lawyer Ron Malone said the economic downturn did not have a major impact on the family’s decision but acknowledged that “the cost of litigation weighed heavily on both sides and particularly on the family because they don’t have the same resources [as the University].”

Malone added that while settlement negotiations had been going off and on since the spring, they became “much more serious” after a firm trial date was set.

“I think what most lawyers will tell you is that as you approach trial and begin to assess the strength of your case and the challenges you’re going to face in presenting your case, it is fairly common for that to be a point where settlement discussions become more engaged,” University Vice President and Secretary Bob Durkee ’69 said.

Susan Gary, a donor-intent expert at the University of Oregon Law School, said that had the case gone to trial, the University would have likely prevailed.

Evelyn Brody, a donor-intent expert at the Chicago-Kent College of Law, went one step further, saying, “I view this as a victory for Princeton.” She added that “I’m very pleased with that result.”

While the case has long been billed as a major front in donor-intent law, Gary said that the legal impact of the case will be diminished because it did not go to trial. She added that she believes Princeton, and charities on the whole, do respect donor intent.

Brody added that when evaluating the case in terms of donor intent law, “You have to remember that this was not a suit by the donors but by the donor’s children — this is very different, and the law knows that.”

University General Counsel Peter McDonough and lead attorney Douglas Eakeley both declined to comment, directing requests for comment to Cliatt.

Robertson attorney Seth Lapidow could not be reached for comment.

‘Reality has to prevail’

Lead plaintiff William Robertson ’72 said in an interview Wednesday evening that the negotiations were straightforward and that the settlement was “as good a result as we might have received in a trial.”

Robertson did not display the usual confidence that he had exhibited throughout the six years of legal proceedings.

“The prospect of a New Jersey judge taking away hundreds and hundreds of millions of dollars from one of New Jersey’s prized possessions was a little far-fetched, and we knew that going in,” he said.

The result was “really good,” he said. “We have a new foundation that will be adequately funded to carry out our parents’ real intent, and we can do it our way. Princeton has more than enough money to do it their way.”

Just over a year ago, after the then-presiding Mercer County Superior Court Judge Neil Shuster issued rulings on seven motions for partial summary judgment that gave small wins to both sides, Robertson family plaintiff Anne Meier was confident the Robertsons would go on to prevail in the rest of the suit.

“We’ve begun interviewing people whom we’d consider giving the money to,” Meier told The Daily Princetonian in October 2007.

When asked why his lawyers approached the University with a settlement proposal last month, Robertson explained that “reality has to prevail.”

“They will never come over to our way of thinking,” he said. “But they have made some improvements, and I hope that they continue to do so. The fact is that this publicity is very damaging to the University, and I think they realized that they had to write a very large check to put an end to this.”

“I think both sides are pretty satisfied,” he said. “We feel as though we have succeeded in making a point.”

A historic case

In July 2002, Robertson and other members of the Robertson family filed a complaint alleging that the University has misspent and mismanaged the endowment created by Charles and Marie Robertson’s 1961 gift to fund the Wilson School’s graduate program.

The plaintiffs challenged the decision by the Robertson Foundation board to invest the Robertson funds with the Princeton University Investment Company (PRINCO), saying it violated one of Charles’ strongest principles: that his donation would remain separate from the University’s general fund. The University, however, noted that though both endowments have the same manager, the funds themselves are separate.

Tilghman, Stephen Oxman ’67 and Peter Wendell ’72, all of whom have served as University-designated trustees of the Robertson Foundation, were named defendants in the case. Another defendant, former University trustee Jay Sherrerd ’52, who also sat on the Robertson Foundation board, passed away in April.

The Robertson family also maintained 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 firmly denied these claims. The Robertsons had said they would turn over the funds to another university if they were successful in taking control of the foundation.

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 arguments on the motions in November 2006, Shuster released a 335-page ruling in October 2007, giving minor victories to both sides but declining to rule on whether Princeton was the sole beneficiary of the Robertson Foundation. He also reserved judgment on whether the University had exercised proper diligence by turning over the Robertson funds to PRINCO for management.

Seven months before, in March 2007, the University returned close to $800,000 to the Robertson Foundation, acknowledging that it did not adequately inform the foundation’s trustees of the short-lived Graduate Funding Agreement.

In June 2008, 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 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.

Earlier this fall, both sides filed motions that were denied. The Robertsons wanted two separate trials, one to evaluate actions taken before the lawsuit was filed and one for actions taken after. The University wanted the trial to first address claims against the named defendants in the case before addressing other claims.

John Fratto, the current judge in the case, instead decided he would first hear evidence and rule on all liability issues in the case. If he had determined in the first phase that the defendants were in fact liable, he would then have ruled on damages in a second phase.

Fratto was the third judge to preside over the case. Sypek, whom he replaced, took over the case after 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 chancery judge also must oversee other cases in Mercer County, told both parties in September that she would have very limited time to try the case, so State Supreme Court Chief Justice Stuart Rabner ’82 recalled the retired Fratto.

Though Fratto was scheduled to preside over the trial, both sides were scheduled to go before Sypek on Friday to discuss a few remaining issues from her time on the case. The parties will instead present the settlement to Sypek for approval.

Staff writer Josh Oppenheimer contributed reporting.

For The Daily Princetonian's full coverage of the Robertson case, visit our Robertson page.