Professor Katz Cited in Major Charity Law Case
Professor Robert A. Katz, an expert in nonprofit law, was cited in a major charity law case involving an $880-million endowment that pits Princeton University against the heirs of a supermarket fortune who donated money to the school a generation ago. In an order denying the heirs’ motion for partial summary judgment, Judge Neil H. Shuster, New Jersey Superior Court, refused to use stricter trust law standards to define the University’s duty to advance its charitable mission – sometimes called the “duty of obedience” -- opting instead for the “more flexible and adaptable principles of corporate law.” In his analysis, Judge Shuster quoted extensively from Professor Katz’s article "Let Charitable Directors Direct: Why Trust Law Should Not Curb Board Discretion over a Charitable Corporation's Mission and Unrestricted Assets." This order, one of a set of rulings issued on October 25, 2007, establishes the ground rules for one of the largest lawsuits ever filed exploring how closely colleges must adhere to the original intent of donors.
In his article, Professor Katz opposes a duty of obedience that requires a charitable corporation’s directors to adhere to its original purposes unless these have become impossible, impracticable, or illegal to pursue. In his view, the duty of obedience should simply require directors to follow the purposes set forth in the charity’s articles of incorporation at the time of making the decision. A straightforward ultra vires standard, he argues, is easier to administer and facilitates the redeployment of charitable resources to more socially beneficial uses. Read Judge Shuster’s discussion of Katz’s article at pp. 74-76 of https://www.slashtmp.iu.edu/public/download.php?FILE=rokatz/60135iHf8Cu
The law suit is discussed in the following New York Times article: http://www.nytimes.com/2007/10/26/education/26princeton.html?_r=1&oref=slogin