The Court of Appeals of Tennessee has approved the part of a cy pres order authorizing Fisk University to sell a one-half interest in the Steiglitz art collection to Crystal Bridges Museum of American Art in Bentonville, AR, for $30 million, but has reversed that part of the order that required Fisk to put $20 million into an endowment for maintenance of the collection.  The Court of Appeals said the trial court had no authority to impose the additional requirement. (In Re: Fisk University, No. M2010-02615-COA-ReCV, 11/29/11.)

The collection of nearly 100 paintings collected by American photographer Alfred Steiglitz had been given to the University by artist Georgia O’Keeffe along with four of her own paintings, with a provision that no part of the collection could be sold.  Because of the University’s financial problems, Fisk asked a trial court in 2005 for authorization to sell one of the pieces for $7.5 million to improve its financial condition.  After the Georgia O’Keeffe Foundation and the Attorney General objected, Fisk asked for approval to sell a half-interest to the Crystal Bridges Museum, founded by Alice Walton, daughter of Wal-Mart founder Sam Walton, and split the time of exhibition with the museum. The trial court held that cy pres was not available, but the Court of Appeals reversed on appeal.

On remand, the trial court rejected two proposals submitted by the Attorney General and approved a revised agreement with Crystal Bridges. The court also required Fisk to utilize $20 million for a separate endowment to maintain the collection and allowed the remaining $10 million to be used at the University’s discretion.  The Attorney General appealed the approval of the agreement, and the University appealed the imposition of the requirement for an endowment.

Applying New York substantive law to the case, the trial court sought to determine the donor’s “full dispositional design” in order to make an order that would most effectively accomplish its general purpose. “At the time of the gift, the South was segregated by race and locating the Collection at Fisk was unique,” the Court of Appeals said. “Despite the de jure racial segregation existing in the 1940s and 1950s, whites visited on the Fisk campus for various cultural and intellectual pursuits. The selection of Fisk was also unique in that, while five of the six recipients of the entire Stieglitz collection were museums, Fisk was the only university.”  It pointed out that Ms. O’Keeffe pursued efforts to assure that the collection would be maintained properly. “There is no doubt that placing the art at Fisk was a strong social statement and integral to Ms. O’Keeffe’s general intent to expose Nashville and the South to the art.”

Recognizing that the trial court’s decision was a matter of discretion, the Court of Appeals found that it was appropriate to reject the Attorney General’s proposals because they failed to locate the collection at the University and failed to provide money for the university to take care of it.  It was also appropriate for the trial court to accept the agreement with Crystal Bridges because of its “superior resources” to provide support for the collection and its assurance that the collection would remain in Nashville for part of the time.

But with regard to the endowment, the Court said that “the larger question is whether and to what extent the court could sua sponte mandate that Fisk establish an endowment as part of the court’s approval of the application for cy pres relief. This is a unique issue and precedent is scarce.”  It pointed out that there was nothing about an endowment in the gift and nothing about the use for student educational purposes.   “Although it was appropriate for the court to consider the extent to which Ms. O’Keeffe’s dispositional design would be carried forward in the future, the court exceeded its statutory authority to free the gift ‘from [a] specific restriction, limitation or direction’ when it decreed how the proceeds of the sale would be spent and the manner in which the funds would be accounted.” 

It said that there is no authority for the court to require that the 50% Nashville interest be “financially secure, independent of Fisk’s financial fortunes” and reversed that part of the order.  It advised the trial court to consider “whether further measures are necessary to accomplish the purposes of the gift.”  It specifically told the court to consider the effect of a pledge of $1 million by Alice Walton to assist the University in fulfilling its obligations under the agreement.

But it further said that in holding that the court’s authority “does not extend to requiring an endowment, we do not preclude the court from approving an endowment or other dedicated source of support in the event such a proposal is presented.”

YOU NEED TO KNOW

The courts sometimes make excruciatingly narrow distinctions.  If the trial court had known that its order would be reversed if it required an endowment but would be affirmed if it accepted a proposal for an endowment, is it unreasonable to expect that an endowment might have been suggested and then become a proposal if the university and the museum knew that the alternative could be denial of the requested sale? 

It has been more than 6 years since this case was started because of the university’s financial difficulties. One can only imagine the cost of these proceedings that are not finished yet.