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Problems arise when donors want their money back

How legal scuffles can halt progress on important projects.

When a donor wants his money back, the resulting litigation can resemble a nasty child custody battle. There are two well-intentioned parties and an innocent. The generous donor and the admirable charity are akin to parents; the charitable purpose is akin to the innocent and defenseless child. As in a custody battle, everybody wants to do the right thing, but the legal wrangling can nevertheless have an unsatisfying outcome.

Such a tussle is now in progress over the construction of an Armenian genocide museum and memorial in Washington, D.C. There are multiple parties and at least three current lawsuits, but the gist of the dispute is that after having donated $15 million (including several adjacent lots) to the Armenian Assembly of America to purchase a downtown site, Gerard Cafesjiian and his family foundation claimed, among other things, they had been shut out of the decision-making process and that the project had strayed from its original vision. Three years after the donation was confirmed in 2003, Cafesjiian sought to reclaim his donation and filed a lien against the building. The non-profit corporation holding the property disputed the claims and alleged, among other things, a breach of fiduciary duty by Cafesjiian’s agents on its board.

The parties, despite multiple resolution attempts over the years, are still far apart. Even the federal judge in the case, Armenian Genocide Museum and Memorial, Inc. v. The Cafesjiian Family Foundation, Inc., et al., wrote in March of this year that the parties “continue to press forward with any and all grievances against each other.” According to a court transcript, the judge told the parties, “I must say, I’m very irritated. … These cases are not a good use of judicial resources and, frankly, probably not of your clients’ resources, either.” Nevertheless, her rulings have allowed the dispute to go forward.

Therein lies the frustration. A lay person would look at the facts (and believe me, I’ve given you only a taste of the many disputes) and quickly reach a sensible conclusion. Perhaps when (or if) this case gets to a jury of 12 lay persons that will happen. But in the meantime a judge must follow the law. Unfortunately, the law gives warring parties ample room and plausible arguments to defend conduct that most reasonable people would see as conniving, manipulative, disloyal and maybe even illegal. A judge does not have that luxury, however. 

U.S. District Judge Colleen Kollar-Kotelly must wade through the meaning of fiduciary duty—then if she finds such a duty, whether it was breached. In these cases, that question might turn on whether a trustee had resigned by the time he may have committed the breach. She has to rule on whether the filing of the lien on the property actually clouded the property title, thereby causing damage to the charity’s ability to raise money, or, as is claimed, the lien merely accurately described the property’s status. There is a question as to whether a trustee’s absence from decisive meetings was purposeful or coerced to the point he no longer had any duty to the charity. There is a question of whether one of the trustees was acting as a lawyer, in which case the Rules of Professional Conduct must be consulted. She must resolve a question about whether a fiduciary duty is limited by a contract because the donations in these cases were significantly conditioned in writing. There is a question of whether D.C. or Delaware law applies. And the list goes on.

And the cases go on too. If you count the beginning of the matter from 2003, it has been a seven-year dispute with no end in sight. Yet, it appears all of the appropriate formalities were followed in setting up the charity, conducting the meetings, giving proper notice, executing of documents and so forth. Unless a jury of 12 ordinary people gets to decide, there may never be an Armenian genocide museum. 

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Bruce D. Collins

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