Guttman Foundation Sues For Return of $25 Million Gift to CUNY; But The Gift Agreement is Not So Clear
Gift agreements are enforceable contracts, everybody knows that. Pretty much first year law school stuff. Last week, the Stella and Charles Guttman Foundation — a big supporter of public higher education in the Big Apple — sued the City University of New York demanding a return of a $25 million gift. The Guttman Foundation gave CUNY $25 million dollars for a new Community College eleven years ago:
Historically, the Guttman Foundation has supported programs to improve and expand educational opportunities and the delivery of health and social services for children, youth and families in low-income neighborhoods. In 2013, the Foundation made an investment of $25 million to the City University of New York (CUNY) to support CUNY’s community colleges. This College Success Initiative has promoted retention and graduation of New York City public school students at CUNY and assisted community college graduates to go onto their baccalaureate.
The New York Times called such gifts to community colleges “rare and transformational.” According to a complaint filed last week, CUNY failed to start building a new permanent facility for what became Guttman Community College as a result of the gift. The complaint asserts that groundbreaking was supposed to start within ten years:
18. Paragraph 1(b)(iii) of the Agreement gives the Foundation the right to the refund of the entire balance of the Success Fund, including any additions to principal from income or realized gains, if CUNY fails to begin construction on the new GCC facility within ten years of the date of the Agreement.
19. As more than ten years have passed since the execution date of the Agreement without CUNY beginning construction on a few facility for GCC, the Foundation is entitled to the return of the entire balance of the Success Fund.
I looked at the gift agreement and it’s just not as clear as the Foundation is asserting. The Foundation might lose this one by my reading. Here is Paragraph 1(b)(iii):
The University and NCC [new community college] shall also keep the Foundation informed on a current basis of developments relating to and progress made in moving NCC to a new, permanent site. These reports shall include information on the status of any applicable master plan and Public Authorities Control Board submissions and approvals, New York State and City appropriations for the NCC, with developers for development of the proposed NCC site (John Jay College’s former North Hall), schematics showing the new NCC facility and its student capacity, beginning and completion of construction of the new NCC facility, move of NCC into its new facility and the opening thereof. If the NCC will be situated at another site, CUNY will so notify the Foundation, and provide it with information comparable to the foregoing. If after ten (10) years from the date of this Agreement, the new NCC facility is not under construction, the Foundation or its successor and the University will reconsider the Foundation’s Success Fund support of the NCC. The Foundation reserves the right in that event to require the University to refund to it the entire net balance of the Success Fund as more fully described below in section 2.a.
So the right of refund is “more fully described” in section 2.a. Here is Section 2.a.:
a. Upon the execution and delivery of this Agreement, the University will name NCC, in perpetuity, the “Stella and Charles Guttman Community College.” In the event of the merger, consolidation or transfer of all or substantially all the assets of NCC with, into or to another school or other entity, or the conversion of NCC to a four-year college, the continuing entity shall bear the names “Stella and Charles Guttman.” If NCC shall permanently close without a successor entity, the University and the Foundation will agree to name one of the other CUNY community colleges the “Stella and Charles Guttman Community College.” In either of those events, the endowments created hereunder and the other provisions of this Agreement shall apply to the continuing entity or to the other community college, as the case may be. If the University and the Foundation do not agree on the perpetuation of the Stella and Charles Guttman names, the Foundation or it [sic] successor shall so notify the University, and within 30 days after receipt of such notice, the University shall return to the Foundation or its successor the remaining net balance of the Fifteen Million ($15,000,000) Dollars Success Fund endowment, including any additions to principal from income or realized gains.
[emphasis added]. Maybe the parties envisioned a new facility but it hardly looks definite. Or maybe it does, that’s the problem. It looks like the most we know for sure is that the Foundation and CUNY contemplated (1) a new facility to be named after the Guttmans, (2) construction of which would begin within ten years, plus (3) the perpetuation of the Guttman name either on the original building, a newly constructed building, or another existing building, and (4) a refund of the donation “if the University and foundation do not agree on the perpetuation of the Stella and Charles Guttman names.” What, exactly, is the “right” the Foundation reserved? Construction within ten years or perpetual naming rights? There is enough here to preclude summary judgement, at least. There must be a back story to all of this.
darryll k. jones