Clarence HERBST, Gerald Miller, Jerome Young, and Emmanuel Alfaro, Plaintiffs-Appellants, v. UNIVERSITY OF COLORADO FOUNDATION and Board of Directors of the University of Colorado Foundation, Defendants-Appellees, and Board of Regents of the University of Colorado, Intervenor-Defendant-Appellee.
Court of Appeals No. 20CA2067
Colorado Court of Appeals, Division III.
Announced March 31, 2022
513 P.3d 388 | 2022 COA 38
Opinion by JUDGE J. JONES
Wilmer Cutler Pickering Hale and Dorr LLP, John Walsh, Michael J.P. Hazel, Denver, Colorado, for Defendants-Appellees
Philip J. Weiser, Attorney General, Jennifer H. Hunt, Senior Assistant Attorney General, Natalie L. Powell, Senior Assistant Attorney General, Erica Weston, Special Assistant Attorney General, Denver, Colorado, for Intervenor-Defendant-Appellee
Philip J. Weiser, Attorney General, Joseph A. Peters, Assistant Attorney General, Denver, Colorado, for Amicus Curiae Colorado State University, Metropolitan State University, and Colorado School of Mines
Opinion by JUDGE J. JONES
¶ 1 The University of Colorado Foundation (Foundation) is a nonprofit charitable corporation. Its stated purposes are to receive, manage, and prudently invest private donations for the benefit of the University of Colorado (CU) and to support CU‘s philanthropic endeavors through donor stewardship. Plaintiffs aren‘t happy with the Foundation‘s return on its investments since at least 2009. Plaintiffs are Clarence Herbst, a CU graduate, donor to the Foundation and to CU, and Trustee Emeritus of the Foundation; Gerald Miller, a CU graduate; Jerome Young, a CU graduate; and Emmanuel Alfaro, a student at CU‘s Colorado Springs campus. They sued the Foundation and its governing board of directors (the Board), on behalf of themselves and a class of similarly situated persons, asserting claims for violation of the Uniform Prudent Management of Institutional Funds Act (the Act),
¶ 2 The gist of plaintiffs’ amended complaint is that the Board has (1) imprudently (indeed, “unlawfully“) invested the Foundation‘s funds by using “actively managed accounts” rather than “passive index funds“;1 (2) overpaid its investment advisors (because the advisors should have put most or all the Foundation‘s investments in passive index funds); and (3) failed to renegotiate or terminate its contracts with its investment advisors since 2008 or 2009. All this, plaintiffs allege, has cost the Foundation over $1 billion in unrealized revenue — money which, they argue, could have been used to reduce tuition, “increase faculty salaries,” “provide more educational resources to CU students and faculty,” and “build more world-class educational facilities to improve the academic experience at CU for its students and its faculty.”2
¶ 3 On defendants’ motion, the district court dismissed the amended complaint in a two-sentence order devoid of any explanation of the reasons for dismissal. It appears, however, that the court accepted defendants’ arguments that none of the plaintiffs has standing and that the amended complaint fails, for various reasons, to state a claim on which relief can be granted.
¶ 4 We conclude that none of the plaintiffs has standing. This is so because under the Act, as at common law, only the Attorney General or a person with a special interest in a charitable trust has standing to sue for mismanagement, and none of the plaintiffs has the requisite special interest.
¶ 5 We therefore affirm the judgment.
I. Standing
¶ 6 If a plaintiff doesn‘t have standing to sue, the court lacks jurisdiction to decide the case. Ainscough v. Owens, 90 P.3d 851, 855 (Colo. 2004); see Hickenlooper v. Freedom from Religion Found., Inc., 2014 CO 77, ¶ 7, 338 P.3d 1002. To establish standing under Colorado law, a plaintiff must show that (1) he suffered an injury in fact and (2) the injury was to a legally protected interest. Reeves-Toney v. Sch. Dist. No. 1, 2019 CO 40, ¶ 22, 442 P.3d 81; Barber v. Ritter, 196 P.3d 238, 245 (Colo. 2008). “[T]he standing requirement distinguishes ‘those
¶ 7 We review de novo whether a particular plaintiff has standing to sue. Barber, 196 P.3d at 245.
¶ 8 This case involves the management of a charitable trust. Defendants argue that the law of charitable trusts bears on the standing analysis. Plaintiffs disagree. Defendants have the better of the argument. Colorado courts frequently consider the law applicable to the claims at issue when determining standing to assert those claims. E.g., Kim v. Grover C. Coors Tr., 179 P.3d 86, 89-90 (Colo. 2007) (shareholder claim against corporate directors); Nicholson v. Ash, 800 P.2d 1352, 1356-57 (Colo. App. 1990) (same).
¶ 9 Indeed, in Anderson v. Suthers, 2013 COA 148, ¶¶ 14, 19, 338 P.3d 384, the division considered the common law of charitable
¶ 10 This limitation on standing exists because, “[i]n the case of a charitable trust, the beneficiary is the unspecified, indefinite general public to whom the social and economic advantages of the trust accrue[ ].” Denver Found. v. Wells Fargo Bank, N.A., 163 P.3d 1116, 1125 (Colo. 2007); see Restatement (Second) of Trusts § 364 cmt. a (Am. L. Inst. 1959); 5 Austin Wakeman Scott et al., Scott and Ascher on Trusts § 37.3.10, at 2431 (5th ed. 2008). And, “[a]s a consequence, the responsibility for public supervision of charitable trusts traditionally has fallen to the state‘s Attorney General ....” Denver Found., 163 P.3d at 1125-26; accord Anderson, ¶ 16; The Law of Trusts and Trustees § 411; Scott and Ascher on Trusts § 37.3.10, at 2431-35; see Ireland v. Jacobs, 114 Colo. 168, 170-71, 179, 163 P.2d 203, 204-05, 208 (1945) (proposed trust to create a college scholarship fund was a public trust which the Attorney General could enforce);
¶ 11 Does this limitation apply to suits against institutions, like the Foundation, covered by the Act? Yes. As noted, section
¶ 12 We also find support for this position in the decisions of courts in other jurisdictions. The Act is, as the title says, a uniform act. Many states have adopted it. And courts in such states have held that, subject to specific exceptions (one of which we discuss below), only the attorney general has standing to protect the public interest in a trust subject thereto because the uniform act leaves room for application of the common law rule. E.g.,
¶ 13 But that doesn‘t end our analysis. “Parties with special interests in the benefits of a charitable trust have been accorded standing to enforce the trust, but only when they are ‘entitled to benefits different from those to which members of the public are entitled generally.’ ” Anderson, ¶ 19 (quoting Scott and Ascher on Trusts § 37.3.10); see Siebach, 361 P.3d at 138. To put a finer point on it, “[t]he mere fact that a person is a possible beneficiary is not sufficient to entitle him to maintain a suit for the enforcement of a charitable trust.” Restatement (Second) of Trusts § 391 cmt. c; accord Warren v. Bd. of Regents of Univ. Sys. of Ga., 247 Ga. App. 758, 544 S.E.2d 190, 193 (2001). Rather, “[s]pecial standing applies only where ‘the claim has arisen from a personal right that directly affects the individual member’ of a charitable organization.” Harvard Climate Just. Coal. v. President & Fellows of Harvard Coll., 90 Mass. App. Ct. 444, 60 N.E.3d 380, 382 (2016) (quoting Weaver v. Wood, 425 Mass. 270, 680 N.E.2d 918, 923 (1997)); see also Scott and Ascher on Trusts § 37.3.10, at 2440-47 (discussing examples of such interests); Restatement (Second) of Trusts § 391 cmt. c.
¶ 14 Applying these principles, we examine whether any of the plaintiffs have “special interest” standing, keeping in mind that the plaintiffs assert an interest in the management of the Foundation — that is, in selecting investment advisors and choosing investment options.5
¶ 15 Herbst argues that he has a special interest by virtue of having “created special academic programs at the University.”6 But this is merely a form of the “close and lengthy association” argument rejected in Anderson. And this is merely an allegation that such programs would benefit from better financial performance by the Foundation, which is insufficient to create standing. See Anderson, ¶ 16; The Law of Trusts and Trustees § 414.
¶ 16 Herbst‘s status as a donor to the Foundation and CU is likewise insufficient to give him standing.7 Where a donor isn‘t seeking to enforce some condition attendant to his donation (with an express reservation of the right to do so) or claiming to have been misled into making the donation, his mere status as a donor confers upon him no special status vis-a-vis the trust. Carl J. Herzog Found., 699 A.2d at 998-1002 (no such standing at common law or under the uniform act); Matter of Lindmark Endowment, 2019 WL 5546205, at **9-10 (no exception under the uniform act for donors); Hardt v. Vitae Found., Inc., 302 S.W.3d 133, 138-39 (Mo. Ct. App. 2009) (donors didn‘t have standing under the uniform act to enforce restrictions on their gift); Siebach, 361 P.3d at 135-38 (donors had no special interest absent express retention of a reversionary interest in the funds; donors had traditional standing as to claims that their donations were fraudulently induced). Herbst makes no
¶ 17 Miller and Young (CU graduates) and Alfaro (a current CU student) assert special interest standing as the “intended beneficiaries” of the Foundation. But again, one‘s status as a member of the class to be benefited by a trust doesn‘t confer standing on such a person to enforce a trust. Anderson, ¶ 16; The Law of Trusts and Trustees § 414. And we fail to see how that status should give someone standing to challenge the investment decisions and management of a trust. In Harvard Climate Justice Coalition, the court held that students objecting to Harvard‘s endowment fund‘s investment decisions lacked special interest standing because they “fail[ed] to show that they have been accorded a personal right in the management or administration of Harvard‘s endowment that is individual to them or distinct from the student body or public at large.” Id. at 382-83; see also Russell v. Yale Univ., 54 Conn. App. 573, 737 A.2d 941, 946 (1999) (students lacked standing to challenge reorganization of a divinity school funded by a charitable trust). Miller, Young, and Alfaro likewise fail to assert any such individualized or distinct interest in the Foundation‘s investment and management decisions. It follows that they, too, lack special interest standing.9
¶ 18 The cases on which plaintiffs rely in arguing for a contrary conclusion are easily distinguishable. Branson School District RE-82 v. Romer, 958 F. Supp. 1501 (D. Colo. 1997), aff‘d, 161 F.3d 619 (10th Cir. 1998), involved a question of standing under federal law to bring an action under the Supremacy Clause, article VI, clause 2 of the United States Constitution. Brotman v. East Lake Creek Ranch, L.L.P., 31 P.3d 886 (Colo. 2001), concerned the standing of an entity to challenge an agreement entered into by the State Board of Land Commissioners, which holds land in trust not for the benefit of taxpayers at large, but for Colorado‘s public schools. Nothing in either case sheds light on the standing issue in this case.10
¶ 19 For the foregoing reasons, we conclude that the named plaintiffs lack standing to pursue their claims against the Foundation and the Board.11 The district court therefore correctly dismissed the amended complaint. Freedom from Religion Found., ¶¶ 7, 12.12
II. Defendants’ Attorney Fees
¶ 20 Defendants request an award of their attorney fees incurred on appeal. But they
III. Conclusion
¶ 21 The judgment is affirmed.
JUDGE LIPINSKY and JUDGE GOMEZ concur.