California’s Hastings Law School name change sparks $1.7 billion legal battle that shows just how hard it is to drop donor names

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(THE CONVERSATION) Six descendants of Serranus Clinton Hastings, California’s first chief justice, and a group that says they represent alumni are suing the state of California over its decision to rename a nearly 150-year-old law school. The University of California, Hastings College of the Law will become UC College of the Law, San Francisco, in 2023, pursuant to legislation passed by state lawmakers and signed by Governor Gavin Newsom on September 23, 2022.

The lawsuit also targets David Faigman, the school’s dean and chancellor, and all of its trustees – who voted for the change after learning of Serranus Hastings’ role in the massacre of Native Americans in the mid-19th century. The rebranding is one of the ways the school actively seeks reconciliation with the Yuki people, whose communities were wronged at the time. He filed a motion to dismiss the lawsuit on November 2, 2022.

The lawsuit cites an 1878 agreement with the state of California to establish and fund the law school, which promised the Hastings heirs US$100,000, plus interest, if the school ever “ceased to exist.” One hundred and forty-four years later, that would be $1.7 billion, the San Francisco Chronicle reported. The lawsuit also disputes evidence of Hastings’ ties to the slaughter of Indigenous peoples and claims the change would waste taxpayers’ money.

The Conversation US asked nonprofit law scholar Terri Lynn Helge to explain why it’s so difficult to break previous agreements with donors, even when more than a century has passed.

What typically happens when charities are pressured to distance themselves from past donors?

Charities face a dilemma when donors become an embarrassment. They must decide whether to keep the money given by the now tarnished donor or return the tainted funds.

But returning that money just because the donor’s reputation is now tainted can land the charity receiving the funds in trouble with state regulators. Also, the charity cannot simply rebrand the program, building, or fund with the donor’s name when that philanthropist becomes controversial.

These complications are one of the reasons some charities choose to keep a donor’s name after a high-profile disgrace. Nearly 10 years after the Enron scandal broke, for example, the University of Missouri at Columbia appointed its first Kenneth Lay Professorship in Economics. The pulpit was named in honor of the late founder of Enron, a company that imploded amid a massive accounting fraud scandal. The source of funding for this chair was $1.2 million worth of Enron stock that Lay had donated in 1999, two years before the company’s demise. Despite the collapse of Enron, which led to the dissolution of accounting giant Arthur Andersen LLP, the University of Missouri refused to end this chair – which still exists.

Similarly, Northwestern University still has a building named after Arthur Andersen, founder of the accounting firm and former faculty member, at its business school.

But times have changed. And many universities and other charities are now looking for ways to distance themselves from controversy, sometimes at great expense.

Do the donors or their heirs authorize this type of rebranding?

Yes, but it usually involves a long negotiation process.

One example is the Metropolitan Museum of Art’s decision to remove the Sackler family name from several exhibits. Following a four-year campaign by activists outraged by the Sackler family’s role in the opioid crisis, the Metropolitan Museum of Art announced in December 2021 that it would remove all mention of the Sackler name from “seven named exhibition spaces”.

In a statement, the museum said it was taking this step after reaching an agreement with the descendants of Mortimer and Raymond Sackler, two brothers who made their fortunes from the sale of OxyContin – a prescription drug at the center of the opioid crisis.

Are there other ways to avoid being sued for removing a donor’s name?

Yes. A charity can ask a court to authorize the overriding of naming rights restrictions in legally binding agreements in a particular type of legal proceeding. Under what is called the “cy pres” doctrine, the courts have this power if the charity can show that the restrictions contained in these agreements have become impossible to comply with.

Charities that lose in court may end up paying large sums to rebrand. One example is Vanderbilt University’s 2002 attempt to rename Confederate Memorial Hall, a building the school had acquired through a merger with the George Peabody College for Teachers in 1979.

Peabody had received a $50,000 gift from the United Daughters of the Confederacy in 1933 to fund its construction, on the condition that the building bear the nickname in perpetuity. After Vanderbilt publicly announced that it would remove this tribute to the Confederacy from the building’s name and walls, the organization sued to enforce the terms of its donation agreement.

A trial court initially approved Vanderbilt’s Cy Pres request to rename the building. An appeals court overturned that decision and ordered the university to repay the United Daughters of the Confederacy the value of its original donation, adjusted for inflation, in exchange for the right to rename the building.

A decade later, anonymous donors gave Vanderbilt the $1.2 million it took to get rid of what Chancellor Nicholas S. Zeppos called “a symbol of exclusion and a contradiction that divides our our hopes and dreams of being a truly great and inclusive university”.

If Hastings’ descendants prevail with their lawsuit, the damages paid could be more than 1,000 times the amount Vanderbilt ultimately paid to rename Confederate Memorial Hall.

How can charities avoid being trapped like this in the future?

Complications that can arise from contaminated donors are prompting charities to require “moral provisions” in naming rights agreements. These provisions allow charities to remove the names of donors from buildings, scholarships or scholarships or to return donated funds in the future, following allegations or convictions of immoral or illegal behavior by the part of the donors.

But activating these provisions can be difficult, as it is difficult to clearly define what constitutes morally repugnant behavior and who decides when it has occurred.

Alternatively, charities can set expiration dates in all of their naming rights agreements that allow a donor’s name to be removed after a specified period of time. The Louvre, a French museum, limits naming rights to a maximum of 20 years. This allowed him to quickly remove the Sackler name from spaces with the family nickname due to the family’s role in the opioid crisis.

Otherwise, universities, museums and other charities have to choose from a few bad options.

Portions of this article originally appeared in an article published on March 28, 2019.

Vanderbilt University financially supports The Conversation US

This article is republished from The Conversation under a Creative Commons license. Read the original article here: 192566.

Jon J. Epps