Harvard Students Sue over University Investments
The Boston Globe reports that seven Harvard students (including some at the Harvard Law School) have filed a lawsuit in Suffolk County Superior Court against the president and fellows of Harvard College for its investment in stocks of companies that produce fossil fuels. The complaint – said to contain 167 pages of exhibits – reportedly alleges “mismanagement of charitable funds” and asserts a tort, “intentional investment in abnormally dangerous activities.” The story states that the 11-page complaint seeks a judicial order to compel divestment.
Relatedly, the law students filing the complaint have taken the opportunity to publicize their effort through an op-ed, also appearing in the Boston Globe. Among the more interesting remarks:
Our legal claims are simple. Harvard is a nonprofit educational institution, chartered in 1650, to promote “the advancement and education of youth.” By financially supporting the most dangerous industrial activities in the history of the planet, the Harvard Corporation is violating commitments under its charter as well as its charitable duty to operate in the public interest.
Our suit charges that the Harvard Corporation is breaching its duties under its charter by investing in fossil fuel companies. Our second count is a novel tort claim, intentional investment in abnormally dangerous activities, that is based in well-established legal principles regarding liability for promoting especially hazardous behavior.
I certainly appreciate that the filing of this lawsuit has given these students a springboard for publicizing their viewpoint. While I would benefit from a review of the complaint (which I do not have), just by reading the press reports, I believe the suit clearly faces obstacles, both procedural and substantive.
The most obvious procedural issue is whether the students have standing. Although some have argued for student standing to bring lawsuits alleging mismanagement by university fiduciaries, see, e.g., Sara Kusiak, Comment, The Case for A.U. (Accountable Universities): Enforcing University Administrator Fiduciary Duties Through Student Derivative Suits, 56 Am. U. L. Rev. 129 (2006), I am skeptical that a court would grant standing to the students in this case. For one thing, I doubt that they are harmed more particularly, in any material way, by Harvard’s investment policy than is the public at large – assuming that the public is harmed in the first place.
Even more important, it seems to me, is the difficulty of convincing a judge that the claims of the students have substantive merit. One could plausibly argue that an environmental organization is violating its mission by investing in fossil fuel company stocks solely for the prospect of earning profits. But Harvard? It is far from clear that Harvard’s investment policies are anti-educational. Of course, one could argue more broadly that all charities must operate in a manner consistent with the public interest by not violating public policy (remember Bob Jones in the tax-exemption qualification context?). However, could we really expect a court to conclude that buying oil company stocks is contrary to established public policy? Imagine the implications! (I say that with a modest chuckle, for “imagining the implications” may be precisely what is driving the legal action.)
And as for that “novel tort claim, intentional investment in abnormally dangerous activities” – I do not know what sanctions apply for raising frivolous claims in Massachusetts state courts, but if I were one of the plaintiffs, I would be concerned enough to research the issue thoroughly (if I had not yet done so) and prepare myself to drop that one from the complaint.
One final point. To doubt the legal merits of the students’ claims is not to deny the ability of charities, such as Harvard and its nonprofit affiliates, to engage in socially conscious investing. There is a major difference between (1) maintaining that charity fiduciaries are free to engage in socially conscious investing without violating their duties to the nonprofit corporation/its charitable purposes, and (2) asserting that charity managers violate their fiduciary duties by making investments that some consider contrary to socially conscious investing. The former respects the right of charity managers to exercise discretion on the matter. The latter can easily take the form of supplanting fiduciaries’ judgment with the judgment of others.
Those interested may wish to consult additional coverage in the New York Times.
JRB