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Hello Cleveland!

By Intellectual Property Law, Esq.

Eric Gibson had an interesting piece in the Wall Street Journal yesterday about the Cleveland Museum of Art's request for court permission to use certain acquisition-restricted funds for non-acquisition purposes (namely, to help complete its renovation/expansion).

He's generally sympathetic to the museum's position -- "Clearly the museum has to do something. Nobody could have anticipated the events of a year ago, and [the museum's director] and his colleagues make a compelling case that the museum has to move forward with its expansion plan rather than mark time" -- but he suggests an alternative solution:

"If these restricted funds are, indeed, the museum's only financing option, then treat them like an individual's 401k, a resource that can be tapped only under specific conditions, but can be borrowed from on occasion. In other words, the museum should announce that while it would still use the interest income from these restricted funds for ... its expansion plan, it would agree to repay that money over a set period of time once the building program was complete."

I want to focus on a different point, however. Gibson worries about "the precedent this could set": he says "you only have to look at how museums have played fast and loose with the deaccessioning rules over the past several years despite AAMD's restrictions to worry about what they might do if given an opening to finesse the rules governing restricted endowments" (my emphasis).

But the museum's actions here don't "give" anyone an opening. That opening already exists, and always has. The doctrine of deviation, upon which the museum relies, has been around forever. If the court grants the museum's application, it won't be creating an opening that other museums will then come rushing through, but allowing it to pass through an opening that was always there.

In fact, as I mentioned in an earlier post, an Ohio probate court already found that income from three of the four funds at issue in this case could be used to fund a previous expansion by the museum. So the "opening to finesse the rules" has existed for this very museum with respect to these very funds for more than 50 years. It seems safe to say they haven't exactly been abusing the privilege. Once again, the people who run our nation's museums are not naughty schoolchildren who need to be penned in by simple, black-and-white rules.

Lee Rosenbaum makes a similar point (similar to Gibson's, not to mine). "Cleveland's actions," she says, "unchecked, would set a dangerous precedent that could have a negative impact on future benefactions, just when museums need help the most." But again: Cleveland is not setting a precedent here, it's following one. Given the existence of the doctrine of deviation, no donor -- in any context -- can ever know with certainty that the terms of their gift will never be altered. Yet donations somehow continue to happen.

Consider, in this connection, the four funds involved in the Cleveland case. As I mentioned above, the probate court ruled in 1955 that income from three of those funds could be used to help complete an expansion of the museum. Among the museum trustees who (according to the museum's current board chairman) "encouraged the museum to go forward with its suit to use acquisition funds for the expansion" was one Leonard Hanna.

The donor of the fourth fund at issue in the current case? Leonard Hanna.

Full post as published by The Art Law Blog on September 17, 2009 (boomark / email).