Contract analysis

I. Purpose of Letter We are writing to provide a comprehensive update on the current status of the above-referenced declaratory judgment action and to recommend that we schedule a strategy call at the earliest convenience to discuss the path forward. As discussed in greater detail below, the matter has been stayed by stipulation since September 16, 2022, and the parties are now approaching a critical juncture at whic

II. Background Summary By way of brief background, EF filed its Complaint for Declaratory Relief on April 25, 2022, seeking a judicial determination that EF may lawfully redirect approximately $4.7 million in restricted grant funds originally designated for the Bay Area Teacher Residency Initiative ("BATRI") to EF's broader educational mission. BATRI was a multi-year teacher preparation and placement program that EF

III. Current Status of the Stay The Stipulation and Order Staying All Proceedings (the "Stipulation") was entered by the Court on September 16, 2022, following the unsuccessful mediation session discussed further below. Under the terms of the Stipulation, the stay is reviewed at 90-day intervals through joint status reports filed by Calderwood & Harkness LLP, on behalf of EF, and Pratchett, Huang & Solano LLP, defens

10. March 14, 2025 (upcoming, to be filed) Each joint status report filed to date has stated that the parties remain engaged in informal settlement discussions but have not yet reached a resolution, and each has requested that the Court continue the stay for an additional 90-day period. The Court has granted each such request without comment, though we note that Judge Wainwright's standard practice is to inquire more

IV. Ongoing Financial Exposure from the Stay One of the most significant practical consequences of the continued stay is the ongoing accrual of claimed interest on WGFT's Cross-Complaint. As noted above, WGFT's Cross-Complaint seeks restitution of $1,700,000 plus interest at a rate of 7% per annum, accruing from April 28, 2022 — the date WGFT asserts the 90-day demand period under Section 7.2 of the Gift Instrument e

V. Assessment of Settlement Prospects We have given careful consideration to the prospects for a negotiated resolution and wish to share our candid assessment with EF's leadership. Despite more than two years of periodic informal discussions, WGFT — through its co-trustees, Roland Whitfield-Garner and Adrienne Garner-Bosch, advised by family member Nathaniel Whitfield-Garner (who, while not an attorney of record, has

VI. Recommended Strategy: Reactivation and Motion for Summary Judgment Based on our assessment of the current posture of the case, the financial exposure from the continued stay, and the stalled settlement discussions, we recommend that EF consider reactivating the litigation and moving for summary judgment on its cy pres and equitable deviation claims. We outline below the strengths of EF's position, the risks that

1. Well-Documented Impracticability. The impracticability of BATRI's specific charitable purpose is thoroughly documented in the record. OUSD terminated its partnership with EF in August 2020, citing severe budget constraints aggravated by the COVID-19 pandemic. SFUSD subsequently declined to renew its partnership agreement in March 2021, citing district-wide program consolidation that eliminated the administrative i

2. General Charitable Intent of the Original Donors. The Gift Instrument, read in its entirety, reflects the donors' — Herbert R. Whitfield-Garner (deceased 2019) and Dorothy M. Garner (deceased 2016) — general charitable intent to support education, not merely the specific operational mechanism of the BATRI program. The preamble to the Gift Instrument expressly states the donors' desire to "advance the quality of pu

3. Both Original Settlors Are Deceased. Both Herbert R. Whitfield-Garner and Dorothy M. Garner are now deceased, which under California law may strengthen the argument for cy pres modification. When the original donors are no longer living, the court focuses on the donor's objectively manifested general charitable intent as reflected in the instrument and surrounding circumstances, rather than on the subjective curre

4. Consent of Other BATRI Donors. Two of the three BATRI donors — the Cascabel Education Fund and the Newhall-Sievert Foundation — have already provided written consent to the reallocation of their restricted grant funds to EF's broader educational mission. This demonstrates that the broader donor community views reallocation as consistent with the original charitable purpose of the BATRI grants, and it undercuts any

5. COVID-19 Disruptions. The COVID-19 pandemic, which began to affect school district operations in March 2020, provides additional external evidence of impracticability. The pandemic fundamentally disrupted in-person teacher training and placement programs across the state and nation, and it was a direct contributing cause of OUSD's budget crisis and SFUSD's decision to consolidate programs. Courts have recognized p

1. WGFT's Section 7.2 Reversion Argument. WGFT's strongest argument is that Section 7.2 of the Gift Instrument contains an express contractual reversion clause that provides for the return of unexpended and undisbursed funds in the event the designated program cannot be completed. WGFT will argue that by agreeing to this clause, EF acknowledged a contractual remedy for this precise scenario and thereby waived any rig

2. Contract vs. Charitable Trust Characterization. The court must determine a threshold question: whether the Gift Instrument is governed primarily by contract principles or by charitable trust principles. If the court views the Gift Instrument as primarily a bilateral contract, the Section 7.2 reversion clause may be given greater weight and the availability of equitable modification may be more limited. If the cour

3. Triable Issues of Material Fact. There is no guarantee that the court will grant summary adjudication. The court may find triable issues of material fact regarding the donors' intent, the scope of impracticability, or whether EF's proposed reallocation is sufficiently consistent with the donors' general charitable purpose to satisfy the cy pres standard. If the court denies summary judgment, the matter would proce

VII. Estimated Costs of Reactivation We have prepared an internal litigation budget projecting the costs of reactivating the matter and pursuing it through the dispositive motion stage. We present these estimates for EF's planning purposes and welcome the opportunity to discuss them in greater detail. The estimated additional professional fees for the next phase of the litigation are approximately $175,000 to $250,00

VIII. Proposed Next Steps In light of the foregoing, we recommend scheduling a call within the next two weeks with Ms. Chattopadhyay, Ms. Ellison-Yee, and — if the Board of Directors wishes to be briefed on the strategic options — Dr. Kenneth Oguike, Chair of the Board, to discuss the following:

1. Whether to continue the stay or reactivate. We will discuss the relative advantages and disadvantages of continuing the stay through the June 13, 2025 joint status report versus lifting the stay and reactivating the litigation in advance of that deadline. As set forth above, our recommendation is to proceed with reactivation, but we recognize that this is ultimately a decision for EF's leadership to make after con

2. Timeline for filing a motion for summary judgment. If EF decides to reactivate, we estimate approximately 60 to 90 days from the decision to proceed to a motion-ready filing. This timeline accounts for the preparation of a comprehensive summary judgment motion, including the assembly of the evidentiary record, the drafting of the memorandum of points and authorities, and compliance with the procedural requirements

3. Whether to make a final settlement overture. Before reactivating, EF may wish to make one final settlement overture to WGFT — potentially incorporating a firm deadline for response in order to create urgency and demonstrate that EF is prepared to proceed to adjudication. We can discuss the terms and framing of any such overture during the call.

4. Outstanding accounts receivable and litigation funding. We will address the outstanding $13,350 accounts receivable balance and discuss arrangements for funding the next phase of litigation, including the estimated $175,000 to $250,000 in additional fees. In the interim, we will continue to monitor the case docket in Department 302 and comply with all court deadlines, including the preparation and filing of the ne

IX. Confidentiality Note This letter constitutes a privileged and confidential attorney-client communication and is intended solely for the use of the named addressees. The information contained herein is protected by the attorney-client privilege and the work product doctrine. Please do not forward, distribute, or disclose this letter or its contents to any third party without our prior written consent. We appreciat