Contract analysis

1. Plaintiff Estuary Foundation ("EF"), a California nonprofit public benefit corporation dedicated to advancing equitable access to quality education, brings this action for declaratory relief against Defendant The Whitfield-Garner Family Trust ("WGFT"), a California irrevocable trust, to obtain a judicial determination that EF may lawfully redirect approximately $4,700,000 in donor-restricted grant funds originally

2. EF seeks this declaration because the specific charitable purpose for which the restricted funds were granted — the establishment and operation of BATRI — has become impracticable due to circumstances wholly beyond EF's control. In particular, both Oakland Unified School District ("OUSD") and San Francisco Unified School District ("SFUSD"), the two partner school districts essential to the operation of the BATRI p

3. WGFT is the sole donor that has objected to the proposed reallocation of restricted BATRI funds. Two other donors that contributed restricted funds to BATRI — the Cascabel Education Fund ("Cascabel"), which contributed $2,000,000, and the Newhall-Sievert Foundation ("Newhall-Sievert"), which contributed $1,000,000 — have each provided written consent to the reallocation of their respective restricted funds to EF's

4. Plaintiff Estuary Foundation is, and at all times mentioned herein was, a California nonprofit public benefit corporation organized and existing under the California Nonprofit Public Benefit Corporation Law (California Corporations Code §§ 5110 et seq.). EF was incorporated on April 11, 2009, and is exempt from federal income taxation under Section 501(c)(3) of the Internal Revenue Code (EIN: 94-3127856). EF maint

5. Defendant The Whitfield-Garner Family Trust is, and at all times mentioned herein was, a California irrevocable trust established on March 14, 2003, by the late Herbert R. Whitfield-Garner and Dorothy M. Garner as original settlors. Herbert R. Whitfield-Garner passed away on or about 2019, and Dorothy M. Garner passed away on or about 2016. WGFT is currently administered by Trustee Roland Whitfield-Garner and Co-T

6. This Court has subject matter jurisdiction over this action pursuant to California Code of Civil Procedure Section 1060, which provides that any person interested under a written instrument or who desires a declaration of his or her rights or duties with respect to another may, in cases of actual controversy relating to the legal rights and duties of the respective parties, bring an original action in the superior

7. This Court additionally has jurisdiction over matters involving the administration of charitable trusts and the modification of charitable gift restrictions under California Probate Code Sections 15403 and 15409. The Probate Code vests the superior court with broad equitable authority to modify the terms of trusts and charitable gift instruments where adherence to the original terms has become impracticable, illeg

8. Venue is proper in the Superior Court of California, County of San Francisco, pursuant to California Code of Civil Procedure Sections 395 and 395.5. EF's principal place of business is located in San Francisco, California. WGFT's trust address is located in San Francisco, California. The Gift Instrument that is the subject of this action was executed in San Francisco, California. The BATRI program was headquartere

9. EF was incorporated on April 11, 2009, as a California nonprofit public benefit corporation under the California Nonprofit Public Benefit Corporation Law (California Corporations Code §§ 5110 et seq.). From its inception, EF has been dedicated to its mission of advancing equitable access to quality education through teacher development, school partnerships, and community-based learning initiatives in Northern Cali

10. In fiscal year 2021, as audited by Calloway & Auerbach CPAs, LLP, EF reported annual revenue of approximately $28,300,000 and total net assets of approximately $41,600,000, of which approximately $14,200,000 was classified as donor-restricted net assets. EF's donor-restricted net assets include contributions from range individual donors, family foundations, and institutional funders, reflecting the breadth and de

11. WGFT was established on March 14, 2003, by the late Herbert R. Whitfield-Garner and Dorothy M. Garner, who served as the Trust's original settlors. Herbert R. Whitfield-Garner, a prominent San Francisco businessman and philanthropist, passed away in 2019. Dorothy M. Garner, who shared her husband's deep commitment to educational philanthropy, passed away in 2016. WGFT is currently administered by Trustee Roland W

12. On information and belief, WGFT holds an estimated corpus of approximately $62,000,000 in diversified assets, encompassing publicly traded securities, real estate holdings, and alternative investments. WGFT has historically made significant charitable contributions in the field of education, reflecting the philanthropic priorities and general charitable intent of the original settlors. On information and belief,

13. On June 15, 2018, WGFT and EF executed a document titled "Gift Instrument and Grant Agreement Between the Whitfield-Garner Family Trust and Estuary Foundation for the Bay Area Teacher Residency Initiative" (hereinafter, the "Gift Instrument"). The Gift Instrument was the product of extensive discussions between the parties spanning approximately eighteen months, during which EF developed a detailed program plan f

14. The Gift Instrument provided for disbursement of the $5,000,000 grant to EF in four tranches, according to the following schedule: (a) Tranche 1 (upon execution, June 2018): $1,500,000; (b) Tranche 2 (July 2019): $1,250,000; (c) Tranche 3 (July 2020): $1,250,000; and (d) Tranche 4 (July 2021): $1,000,000. Tranches 1 through 3, totaling $4,000,000, were duly disbursed by WGFT to EF in accordance with the schedule

15. Section 3.1 of the Gift Instrument contains the central use restriction at issue in this case. Section 3.1 provides, in relevant part: "The Grant Funds shall be used solely and exclusively for the establishment, operation, and support of the Bay Area Teacher Residency Initiative as described in Exhibit A, and for no other purpose." This restriction reflects the shared objective of EF and WGFT at the time of execu

16. Section 7.2 of the Gift Instrument addresses the disposition of funds in the event BATRI is discontinued prior to the expiration of the grant period. Section 7.2 provides, in relevant part: "In the event the Program is discontinued prior to the expiration of the Grant Period, any unexpended Grant Funds shall, at the election of Grantor, be returned to Grantor within ninety (90) days of written demand." As set for

17. In September 2018, following receipt of the first tranche of WGFT grant funds, EF launched BATRI with a cohort of 24 teacher residents placed across six partner schools in San Francisco Unified School District ("SFUSD") and Oakland Unified School District ("OUSD"). BATRI was designed as an intensive, clinically oriented teacher residency program providing aspiring educators with sustained, mentored clinical train

18. In June 2019, the first cohort of BATRI residents completed the residency program. Of the 24 residents who began the program, 22 successfully completed all program requirements and were placed in full-time teaching positions in SFUSD and OUSD schools. The completion and placement rate of approximately 92% exceeded national benchmarks for teacher residency programs and demonstrated both the efficacy of the BATRI m

19. In September 2019, a second cohort of 30 residents began the BATRI program, reflecting the program's expansion and the growing interest among prospective educators. The second cohort was placed across eight partner schools in SFUSD and OUSD. Program operations continued normally through early 2020, and the second cohort was on track to complete the residency in June 2020.

20. In March 2020, the COVID-19 pandemic struck the San Francisco Bay Area, and Governor Gavin Newsom issued executive orders requiring the closure of schools and the transition to remote instruction. The pandemic fundamentally altered the operating environment for school-based teacher residency programs, disrupting in-person mentorship arrangements, clinical training placements, and school-site coordination that wer

21. In August 2020, OUSD formally terminated its partnership agreement with EF for the BATRI program, citing severe budget constraints exacerbated by the pandemic and the resulting decline in state and local revenues. The loss of OUSD as a partner district was a significant blow to the BATRI program. OUSD had hosted approximately half of the program's partner school placements, and its withdrawal reduced BATRI's part

22. In light of OUSD's withdrawal, EF launched a substantially reduced third cohort in September 2020, consisting of 15 residents placed exclusively in SFUSD partner schools. While the third cohort proceeded under challenging circumstances, EF remained committed to delivering the highest quality clinical training experience possible.

23. On or about March 15, 2021, SFUSD notified EF in writing that it would not renew the BATRI partnership agreement for the 2021-2022 academic year. SFUSD cited district-wide program consolidation and a strategic decision to focus its limited resources on internally administered teacher development programs. The withdrawal of SFUSD — BATRI's sole remaining partner school district — rendered the continuation of the B

24. In June 2021, the third and final cohort of BATRI residents graduated the program. Twelve of the fifteen residents completed all program requirements and were placed in teaching positions. EF is proud of the accomplishments of all three BATRI cohorts and the positive impact the program had on the schools and communities it served during its three years of operation.

25. On December 31, 2021, EF's Board of Directors held a special meeting at which it formally voted to wind down the BATRI program. The Board's resolution recognized that the program could not be sustained without partner school district participation, that EF's diligent efforts to secure replacement partnerships had been unsuccessful, and that the circumstances giving rise to BATRI's discontinuation were wholly beyo

26. Between the launch of BATRI in 2018 and the program's formal wind-down in December 2021, EF expended a total of approximately $3,300,000 in BATRI program costs. These expenditures included, but were not limited to, teacher resident stipends and benefits, partner school coordination costs, curriculum development, mentor teacher compensation, program administration and staff salaries, evaluation and assessment, and

27. Of the $4,000,000 disbursed by WGFT to EF under the Gift Instrument, $700,000 remains unexpended and is currently held by EF in a restricted account maintained in accordance with EF's standard accounting practices and applicable nonprofit accounting standards. Tranche 4 of the Gift Instrument, in the amount of $1,000,000, was never disbursed by WGFT to EF and, on information and belief, remains held by WGFT. Acco

28. In addition to the WGFT grant, EF received restricted contributions from two other donors for the operation of BATRI. In 2019, the Cascabel Education Fund ("Cascabel"), a California nonprofit public benefit corporation, contributed $2,000,000 to EF, restricted to the operation of the BATRI program. Cascabel made this contribution based on the program's demonstrated success with its first cohort and the shared goa

29. In 2020, the Newhall-Sievert Foundation ("Newhall-Sievert"), a California private foundation, contributed $1,000,000 to EF, restricted to the operation of the BATRI program. Newhall-Sievert's contribution was made to support the continuation of BATRI during a period of financial uncertainty caused by the COVID-19 pandemic. Following the wind-down of BATRI, Newhall-Sievert has provided written consent to the reall

30. The total restricted funds designated for BATRI that remain at issue in this action are approximately $4,700,000, calculated as follows: (a) WGFT unexpended disbursed funds: $700,000; (b) WGFT undisbursed Tranche 4: $1,000,000; (c) Cascabel Education Fund restricted funds: $2,000,000; (d) Newhall-Sievert Foundation restricted funds: $1,000,000; (e) Total: $4,700,000. While Cascabel and Newhall-Sievert have each p

31. On January 28, 2022, counsel for WGFT — the law firm of Pratchett, Huang & Solano LLP, through lead partner Victoria Huang — sent a demand letter to EF (the "Demand Letter"). The Demand Letter asserted that the discontinuation of BATRI prior to the expiration of the five-year grant period triggered the reversion clause set forth in Section 7.2 of the Gift Instrument. The Demand Letter requested that EF return $1,

32. On March 3, 2022, EF, through its counsel Calderwood & Harkness LLP and responsible partner Douglas Carmichael, sent a detailed written response to WGFT's Demand Letter (the "Response Letter"). The Response Letter respectfully declined WGFT's demand for the return of $1,700,000 and set forth EF's legal position. Specifically, EF asserted that the restriction on the BATRI funds should be modified under the doctrin

33. On April 15, 2022, counsel for EF and WGFT conducted a final pre-suit meet-and-confer telephonic conference in an effort to resolve the dispute without litigation. During the conference, EF reiterated its position that the cy pres and equitable deviation doctrines authorized the modification of the gift restriction, and WGFT reiterated its position that the reversion clause controlled and that EF was obligated to

34. WGFT contends that the unexpended and undisbursed funds totaling $1,700,000 must be returned to the Trust. Specifically, WGFT asserts that Section 7.2 of the Gift Instrument creates a condition subsequent, and that EF's failure to operate BATRI through the expiration of the five-year grant period in 2023 triggers an automatic reversion right in favor of WGFT. WGFT maintains that Section 7.2 constitutes an express

35. EF disagrees with WGFT's position. EF contends that the doctrines of cy pres and equitable deviation, as codified in California Probate Code Sections 15409 and 15403, authorize this Court to modify the restriction in the Gift Instrument to permit the use of the restricted funds for EF's broader educational mission. EF's position rests on several independent grounds. First, the specific charitable purpose for whic

36. EF re-alleges and incorporates by reference each and every allegation contained in Paragraphs 1 through 35 above, inclusive, as though fully set forth herein.

37. An actual, present, and justiciable controversy has arisen and now exists between EF and WGFT concerning the rights and duties of the parties with respect to approximately $4,700,000 in restricted grant funds originally designated for the BATRI program. EF contends that the specific charitable purpose for which the funds were restricted — the establishment, operation, and support of BATRI — has become impracticab

38. Under the cy pres doctrine, where property is given in trust or under a gift instrument for a specific charitable purpose and that purpose becomes illegal, impossible, or impracticable, the court may direct the application of the property to a charitable purpose as near as possible to the original purpose, provided the donor manifested a general charitable intent. California Probate Code Section 15409 codifies th

39. EF submits that the Gift Instrument, read as a whole and in the context of the parties' course of dealing, demonstrates WGFT's general charitable intent to support education in Northern California. The BATRI program was the specific vehicle chosen to effectuate that broader charitable intent, but BATRI was not the totality of that intent. The Gift Instrument's recitals, the detailed description of the BATRI progr

40. The impracticability of the BATRI program has been conclusively demonstrated by the following circumstances, none of which was within EF's control or reasonably foreseeable at the time the Gift Instrument was executed: (a) The COVID-19 pandemic, which struck the San Francisco Bay Area in March 2020, resulting in the closure of schools and the disruption of in-person clinical training placements that were essentia

41. EF seeks a judicial declaration that the restriction set forth in Section 3.1 of the Gift Instrument may be modified under the cy pres doctrine to permit EF to use the approximately $4,700,000 in restricted BATRI funds for its broader educational mission, including teacher development, school partnerships, and community-based learning initiatives in Northern California. Such a modification would honor the donor's

42. EF re-alleges and incorporates by reference each and every allegation contained in Paragraphs 1 through 41 above, inclusive, as though fully set forth herein.

43. In the alternative to, or in addition to, modification under the cy pres doctrine, EF seeks a declaration that it is entitled to equitable deviation from the terms of the Gift Instrument under the doctrine of equitable deviation, as codified in California Probate Code Section 15403. Under the doctrine of equitable deviation, where compliance with the administrative or distributive terms of a trust or gift instrum

44. Compliance with the specific restriction in Section 3.1 of the Gift Instrument — that the grant funds be used "solely and exclusively" for the establishment, operation, and support of the BATRI program — has become impracticable. The BATRI program cannot be operated in the absence of partner school district participation, and both OUSD and SFUSD have declined to continue or renew their partnerships with the progr

45. Strict adherence to the restriction in Section 3.1 would result in the indefinite encumbrance of approximately $4,700,000 in charitable funds that cannot be deployed for their restricted purpose. Such an outcome would be contrary to the donors' general intent to support education, contrary to the public interest in the effective use of charitable resources, and contrary to the policy underlying the doctrine of eq

46. EF seeks a judicial declaration that equitable deviation from the restriction in Section 3.1 of the Gift Instrument is warranted under the circumstances, and that EF may use the restricted funds for educational programs consistent with its mission, including teacher development, school partnerships, and community-based learning initiatives in Northern California. THIRD CAUSE OF ACTION Declaratory Relief — Invalid

47. EF re-alleges and incorporates by reference each and every allegation contained in Paragraphs 1 through 46 above, inclusive, as though fully set forth herein.

48. An actual, present, and justiciable controversy has arisen and now exists between EF and WGFT as to the enforceability, proper interpretation, and legal effect of Section 7.2 of the Gift Instrument (the "reversion clause"). WGFT asserts that Section 7.2 operates as a condition subsequent that automatically entitles WGFT to the return of $1,700,000 in unexpended and undisbursed grant funds upon written demand. EF

49. EF further contends that Section 7.2, by its express terms, is discretionary rather than automatic. The clause provides that unexpended funds shall be returned "at the election of Grantor," indicating that the reversion is not self-executing but rather is contingent upon an affirmative election by WGFT. The discretionary nature of the clause undermines WGFT's characterization of it as an automatic condition subse

50. EF further notes that the original settlors of WGFT — Herbert R. Whitfield-Garner and Dorothy M. Garner — are both deceased, and that the current Trustees of WGFT are exercising the "election" under Section 7.2 on behalf of the Trust rather than on behalf of the original donors. The Court should consider whether the current Trustees' position is consistent with the original settlors' general charitable intent, an

51. EF seeks a judicial declaration that Section 7.2 of the Gift Instrument does not compel the return of $1,700,000 to WGFT, and that the reversion clause does not preclude this Court from exercising its equitable authority to modify the restriction and direct the application of the restricted funds to EF's broader educational mission consistent with the doctrines of cy pres and equitable deviation. PRAYER FOR RELIE

1. For a declaratory judgment that EF may lawfully redirect the approximately $4,700,000 in restricted grant funds originally designated for the Bay Area Teacher Residency Initiative to EF's broader educational mission, consistent with the doctrines of cy pres and equitable deviation under California Probate Code Sections 15409 and 15403;

2. For a declaratory judgment modifying the restriction set forth in Section 3.1 of the Gift Instrument and Grant Agreement dated June 15, 2018, to permit the use of the grant funds for EF's broader educational mission, including teacher development, school partnerships, and community-based learning initiatives in Northern California;

3. For a declaratory judgment that Section 7.2 of the Gift Instrument does not compel the return of $1,700,000 to WGFT, and that said clause is subject to the Court's equitable authority to modify the restriction under the doctrines of cy pres and equitable deviation;

4. For an award to EF of its costs of suit incurred herein; and

5. For such other and further relief as the Court deems just and proper. VERIFICATION I, Margot Ellison-Yee, declare as follows: I am the Executive Director of Estuary Foundation, the Plaintiff in the above-entitled action. I am authorized to make this verification on behalf of Estuary Foundation. I have read the foregoing Verified Complaint for Declaratory Relief and know its contents. The facts stated therein are t