Johns Hopkins lawsuit highlights questions about schools’ obligations to donors

It took two years to negotiate the deal. But in the end, her family says, Elizabeth Beall Banks, well known in Montgomery County for her opposition to development, sold the 138-acre parcel where she raised Black Angus cattle to Johns Hopkins University for one simple reason: She believed that officials shared her vision for what would become of her beloved farm.

Now, seven years after Banks’s death, her heirs have taken Hopkins to court, alleging that the university has violated the terms of the deal it made with Banks 23 years ago. University officials maintain that they are abiding by Banks’s wishes as outlined in the two-page agreement.

The dispute is now in the hands of a Montgomery County Circuit Court judge, who will determine whether the case will move forward. It is the latest in a series of high-profile disputes that have focused attention on the question of an institution’s obligation to its donors.

“This is an old, old, old issue — as old as charity law,” said Harvey P. Dale, director of the National Center on Philanthropy and the Law at New York University Law School.

No one tracks the number of such cases, but experts say disagreements between donors and institutions are not unusual. It is rare, however, that they spill into public view.

“Institutions are very reluctant to get into these fights because they could cause problems with future donors,” said Leslie Lenkowsky, a professor of philanthropic studies with the Center on Philanthropy at Indiana University. But with millions of dollars at stake, institutions must walk a fine line between protecting their interests and assuring donors that their contributions are being used responsibly.

In one of the most well-known cases, the heirs of Charles and Marie Robertson, of the A&P grocery fortune, sued Princeton University in 2002, alleging that officials had misused the $35 million gift the Robertsons gave the school in 1961 to prepare graduate students for careers in the Foreign Service. (At one point, the gift was worth more than $840 million, by some estimates.) University officials maintained that the family’s interpretation of the gift’s conditions was too narrow and that Princeton had lived up to its obligations.

The case was settled in 2008. The university agreed to pay $40 million in legal fees and give the family $50 million plus interest to start a new foundation. Princeton was allowed to keep the rest of the money.

But the case raised questions in many quarters about donor expectations and institutional obligations.

More restrictions

Colleges and universities are among the institutions most skilled at raising money. According to the Council for Aid to Education, colleges and universities received $30.3 billion in charitable contributions in fiscal 2011, up 8.2 percent from the previous fiscal year. And while many donors are happy to write checks with no strings, a growing number of contributors are placing restrictions on how their money is used.

Even the most well-meaning and straightforward gifts can result in endless complications, said NYU’s Dale. A donor may pass away, and his or her heirs may have different ideas about how a gift should be used; an institution’s priorities or focus can change; or key players involved in securing the gift may leave the organization.