Article Archives >> Lead Stories >> December 16, 2004-January 15, 2005
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Court Allows Barnes Foundation
To Move Collection to Philadelphia
Staying in Merion would not generate excitement
or attract “alpha donors” to provide necessary resources
The Orphans’ Court of Montgomery County (PA) has ruled that the Barnes Foundation, which provides art education and maintains a world-class collection predominantly of French Impressionist paintings, may move its primary operations from its present location in suburban Merion to downtown Philadelphia. (The Barnes Foundation, No. 58,788, 12/13/04.)
After two years of courtroom battling, the Barnes’ trustees have been given the go-ahead to accept the offer of the Pew Charitable Trusts, the Annenberg Foundation and the Lenfest Foundation to help raise $150 million for the project. The Court accepted the trustees’ arguments that it was impractical to maintain the program as founder Albert Barnes had dictated where it is and that the move is the least drastic alternative to accomplish Barnes’ intent.
The Court had decided last December that the indenture of trust by which Barnes created the Foundation in 1923 was not “sacrosanct” but had also ruled that the trustees had not proved their case to justify the move. (See Nonprofit Issues, December 2003.)
After six days of hearings in September focusing on specific questions raised by the Court, the Court determined that the Foundation could not raise enough money by selling non-gallery assets to provide an endowment sufficient to stabilize its finances, that the new facility could be constructed within the proposed $100 million budget, and the proposal was economically feasible even though it requires continuous new fundraising of more than $4 million a year after withdrawing at the rate of 5% a year from the anticipated $50 million endowment.
On the economic issues, the Court found that selling certain objects and a portion of the Foundation’s farm in suburban Chester County would generate an endowment of only about $20 million, which would permit an annual draw, at 5%, of $1 million. “History and the evidence presented at these hearings showed this amount would not halt the Foundation’s downward financial spiral,” the Court wrote.
“As for the prospects of generating additional revenue through development, we credited the opinions of the Foundation’s witnesses that maintaining the status quo will neither generate excitement among potential benefactors nor attract the all-crucial ‘alpha donors’ to the cause. In the earlier hearings, it was made clear that Pew, Lenfest and Annenberg (all three unquestionably alpha donors) have deemed the current situation to be unsalvageable, and Dr. Watson [chair of the Foundation’s Board] has testified that the Foundation’s Board has approached all other potential saviors and been rebuffed.”
Although the President of the local township Commissioners had testified that the Township would be helpful in seeking modification of zoning regulations to permit additional visitors, the Court said that “no solid solutions surfaced.” It is “clear that the Foundation has no interest in reaching out for the olive branch extended by the Township, and absent this first step, no resolution is possible. We have no way to force the Foundation’s hand in this regard; and we will never know if a mutually-agreeable solution could have been fashioned.”
The case has generated international interest and far more than ordinary public debate about pending litigation, with passionately articulated views on both sides appearing regularly in the media.
The Court recognized that “by many interested observers, permitting the gallery to move to Philadelphia will be viewed as an outrageous violation of the donor’s trust. However, some of the archival materials introduced at the hearings led us to think otherwise.
“Contained therein were signals that Dr. Barnes expected the collection to have much greater public exposure after his death. To the court’s thinking, these clues make the decision – that there is no viable alternative – easily reconcilable with the law of charitable trusts. When we add this revelation to the Foundation’s absolute guarantee that Dr. Barnes’ primary mission – the formal education programs – will be preserved and, indeed, enhanced as a result of these changes, we can sanction this bold new venture with a clear conscience.”
The Court said its conclusion did not mean that “all doubts about the viability of [the Foundation’s] plans have been allayed.” It recognized that the fund raising goals were “ambitious” and “aggressive.” If the fundraising or projected admissions do not meet expectations, or other components of the feasibility study do not meet reach their targets, “something will have to give,” the Court said.
“We will not speculate about the nature of future petitions that might come before this court; however, we are mindful of the vehement protestations, not so long ago, that the Foundation would never seek to move the gallery to Philadelphia, and, as a result, nothing could surprise us.”
As a final comment, the Court noted that more than $12 million had been spent on rehabilitating the existing gallery (with money raised on the Barnes’ world tours during the 1990s) and another $1.6 million was now recommended to turn it into an administration building for the Foundation and the adjacent arboretum which would be maintained. “The irony of converting a state-of-the-art gallery into perhaps the most expensive administration building in the history of non-profits is not lost to us,” the Court said.
YOU NEED TO KNOW
Although this opinion is actual legal precedent in only one county in Pennsylvania, it helps determine the general climate for challenges to restrictions placed on charitable gifts for donors throughout the country. It may also suggest to “alpha donors” that they can sway court opinions by withholding funding unless the court agrees to the alpha donors’ conditions.
Because the Attorney General was the only party granted standing to intervene in the case and supported the trustees’ petition, the trial court’s decision may never be reviewed. A group of students was denied standing by the Court but was subsequently granted amicus status, without rights to full discovery, when it appeared that there would be no one to raise any counter arguments. The grant of amicus status specifically denied them the right of appeal, however.
Although the students could conceivably appeal the denial of standing, they would have a steep uphill fight to get another shot at their substantive opposition.
The handling of a case like this raises significant issues of public policy. Where the Attorney General has taken a position to support the trustees but there are significant and legitimate issues of public concern to be raised on the other side, should the Court be more expansive in its determination of standing or should it appoint a trustee ad litem, with financial resources provided, to raise the issues? Counsel for the trustees were paid about $1.5 million for this case, funded by some or all of the alpha donors supporting the project. The students’ counsel worked pro bono, with about $30,000 to cover expenses. If we truly believe that strong advocacy and reasonable capacity to get expert testimony on all sides of an issue are important in providing the court with as much information as possible on which to make its decision, shouldn’t we provide a mechanism by which that can occur? And shouldn’t the trial court’s decision be subject to review as other contested cases?
Comments from our readers:
"Your comments are right on the money. What has happened
in the Barnes case is disgraceful. We will live to regret this decision
and future generations will be shocked at the pillaging of this
cultural masterpiece." S.B.
"I am curious. What happens if the Barnes Foundation runs
out of money and it is legally restrained from activities that would
boost the coffers?
Pretend for a moment that there is no move. That there is no rennovation.
That the restricted number of visitors and students don't cover
costs.
Employees would leave if they are grossly underpaid or unpaid.
What happens to the artwork then? It can't be sold. It can't be
maintained. Should it be left in substandard conditions to rot?
Sooner or later all things must change if they are to survive. Or
perhaps that it the intention of some." S.W.
Article Archives >> Lead Stories >> December 16, 2004-January 15, 2005
