1028-00001 · Client 1028 · Analysis

internal-case-status-memo-december-2024.docx DOCUMENT Litigation

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PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT

INTERNAL MEMORANDUM

December 20, 2024

TO: Douglas Carmichael, Partner Francesca Morano, Partner

FROM: Simone Laroche, Senior Associate

RE: Case Status Assessment — Estuary Foundation v. The Whitfield-Garner Family Trust, Case No. CGC-22-599481 (Superior Court of California, County of San Francisco, Dept. 302, Hon. Patricia R. Wainwright)

C&H Matter No.: 1028-00001

Client: Estuary Foundation, a California nonprofit public benefit corporation (EIN: 94-3127856)

Client Contact: Priya Chattopadhyay, General Counsel; Margot Ellison-Yee, Executive Director

Client Address: 1440 Embarcadero Way, Suite 300, San Francisco, CA 94107

Opposing Counsel: Victoria Huang and Derek Solano Jr., Pratchett, Huang & Solano LLP, 555 California Street, 28th Floor, San Francisco, CA 94104

I. Purpose

This memorandum provides a comprehensive status assessment of the declaratory judgment action captioned Estuary Foundation v. The Whitfield-Garner Family Trust, Case No. CGC-22-599481, presently pending before Judge Patricia R. Wainwright in Department 302 of the Superior Court of California, County of San Francisco. The action has been subject to a stipulated stay of all proceedings since September 16, 2022 — now more than two years and three months — during which time no substantive progress toward settlement has been achieved. The last meaningful engagement between the parties on the merits of the dispute occurred in approximately mid-2023, and the matter has since become effectively dormant apart from the filing of routine joint status reports at ninety-day intervals.

This memorandum evaluates the current posture of the litigation, the financial implications of continued dormancy, and the strategic options available to the Estuary Foundation ("EF" or "the Foundation") going forward. The memorandum concludes with a recommendation that a strategy call with our client contacts be scheduled in the first quarter of 2025 to discuss the potential reactivation of the case and to obtain client direction on next steps.

The intended audience for this memorandum is Douglas Carmichael, as responsible partner for the matter, and Francesca Morano, as billing partner, for purposes of internal planning, resource allocation, and preparation for client communications.

II. Executive Summary

The Estuary Foundation filed its Complaint for Declaratory Relief on April 25, 2022, seeking judicial authorization to redirect approximately $4.7 million in restricted grant funds from the now-defunct Bay Area Teacher Residency Initiative ("BATRI") to the Foundation's broader educational mission. Of the $4.7 million in restricted funds, $1.7 million originated from the Whitfield-Garner Family Trust ("WGFT") and represents the amount directly at issue in this litigation. The remaining $3.0 million was contributed by two other restricted donors — the Cascabel Education Fund ($2.0 million) and the Newhall-Sievert Foundation ($1.0 million) — both of which have provided written consent to reallocation, but whose funds remain formally restricted pending resolution of the governing legal framework.

On June 10, 2022, WGFT filed an Answer to the Complaint and a Cross-Complaint seeking restitution of $1,700,000, plus interest at 7% per annum running from April 28, 2022 — the date on which the ninety-day demand period under Section 7.2 of the Gift Instrument expired without return of the funds. The annual interest accrual on WGFT's cross-claim is $119,000, meaning that as of the date of this memorandum, the claimed interest has grown to approximately $317,333. Each additional month of dormancy adds roughly $9,917 to the Trust's potential recovery, should its reversion claim ultimately be sustained.

Following an unsuccessful private mediation before the Honorable Oscar Pelletreau (Ret.) at Bayshore Mediation Services on September 2, 2022, the parties entered into a Stipulation and Order Staying All Proceedings, which Judge Wainwright signed and entered on September 16, 2022. The stay has been renewed at each subsequent ninety-day review period. Since the stay was entered, nine joint status reports have been filed — from December 16, 2022 through the most recent filing on December 13, 2024 — each time requesting continuation of the stay and reporting no substantive developments. The next joint status report is due on March 14, 2025.

Informal settlement discussions between counsel occurred sporadically during the first year of the stay but have produced no tangible progress. WGFT's counsel at Pratchett, Huang & Solano LLP has not engaged in any meaningful substantive dialogue since approximately September 2023. The matter appears to have reached an impasse.

Total fees billed to the client through December 31, 2024 are $287,450, of which $274,100 has been collected. Outstanding accounts receivable stand at $13,350. The relatively modest total reflects the dormant posture of the case; the bulk of fees were incurred during the pre-suit research and drafting phase, the initial pleading stage, and mediation preparation.

Based on the analysis set forth below, the litigation team recommends scheduling a strategy call with Priya Chattopadhyay (General Counsel) and Margot Ellison-Yee (Executive Director) in January 2025 to discuss a recommended hybrid approach: making one final structured settlement offer to WGFT with a defined response deadline, and, if that offer is rejected or goes unanswered, proceeding to reactivate the litigation and advance toward summary judgment.

III. Background and Procedural History

A. The Gift Instrument and BATRI

On June 15, 2018, the Whitfield-Garner Family Trust executed the "Gift Instrument and Grant Agreement Between the Whitfield-Garner Family Trust and Estuary Foundation for the Bay Area Teacher Residency Initiative" (the "Gift Instrument"), providing for a total grant of $5,000,000 restricted to the establishment and operation of BATRI over a five-year grant period running from 2018 through 2023. The Gift Instrument was executed on behalf of the Trust by its then-trustee, Herbert R. Whitfield-Garner, and on behalf of EF by then-Executive Director Alan Gunderson.

The $5,000,000 grant was structured in four annual tranches, with disbursement contingent upon EF's submission of annual progress reports and financial certifications in accordance with Section 4.3 of the Gift Instrument. The disbursement schedule and actual disbursement history are as follows:

The key restriction language appears in Section 3.1 of the Gift Instrument, which provides that Grant Funds shall be used "solely and exclusively" for the Bay Area Teacher Residency Initiative "and for no other purpose." This language is unambiguous on its face and constitutes the principal basis for WGFT's position that the funds may not be redirected without the Trust's consent.

The reversion clause appears in Section 7.2, which provides as follows:

If the Program is discontinued prior to the expiration of the Grant Period, any unexpended Grant Funds shall, at Grantor's election, be returned to the Grantor within ninety (90) days of written demand by the Grantor or the Grantor's authorized representative. For purposes of this Section, "unexpended Grant Funds" shall include both disbursed funds not yet expended and any undisbursed Tranche amounts.

BATRI launched in September 2018 with its inaugural cohort of twenty-four teacher residents placed across six partner schools in the San Francisco Unified School District ("SFUSD") and the Oakland Unified School District ("OUSD"). The program model was based on a clinical residency approach in which aspiring teachers were embedded in partner school classrooms under the supervision of mentor teachers, combined with coursework toward a teaching credential through a partnership with San Francisco State University's Graduate School of Education.

The program experienced significant disruptions beginning in 2020. The onset of the COVID-19 pandemic in March 2020 forced the immediate transition to remote learning across all partner schools, undermining the in-classroom residency model that was the foundation of the BATRI design. In August 2020, OUSD formally notified EF that it would not renew its memorandum of understanding for BATRI participation, citing budget constraints and competing priorities related to pandemic recovery. In March 2021, SFUSD likewise declined to renew its partnership agreement, effectively eliminating the last remaining institutional partner necessary to operate the program.

The third and final cohort of BATRI residents graduated in June 2021, though only twelve of the fifteen residents in the cohort completed the program. Following the graduation of the third cohort and the loss of both school district partnerships, the EF Board of Directors voted on December 31, 2021, to formally wind down BATRI operations.

The financial accounting for BATRI is summarized as follows:

In addition to the WGFT grant, BATRI received restricted contributions from two other institutional donors: the Cascabel Education Fund, which contributed $2,000,000 in 2019, and the Newhall-Sievert Foundation, which contributed $1,000,000 in 2020. Both of these donors have provided written consent to the reallocation of their restricted funds to EF's broader educational mission. Including the WGFT funds at issue in this litigation, the total restricted BATRI funds subject to restriction modification is $4,700,000 ($1,700,000 from WGFT + $2,000,000 from Cascabel + $1,000,000 from Newhall-Sievert). The resolution of the legal framework governing restriction modification — particularly the interaction between express reversion clauses and cy pres/equitable deviation doctrines — will have implications for the full $4.7 million pool, even though the Cascabel and Newhall-Sievert donors have consented.

B. Pre-Litigation Demand and Response

On January 28, 2022, WGFT, acting through its counsel at Pratchett, Huang & Solano LLP, sent a formal demand letter to EF requesting the return of $1,700,000 in unexpended and undisbursed Grant Funds within ninety days, as provided by Section 7.2 of the Gift Instrument. The demand letter was signed by Victoria Huang and was transmitted both by certified mail and by email to Margot Ellison-Yee, who had by then succeeded Alan Gunderson as Executive Director.

On March 3, 2022, Calderwood & Harkness LLP responded on behalf of EF by letter from Douglas Carmichael to Victoria Huang. The response acknowledged receipt of the demand letter and the provisions of Section 7.2, but asserted that the restriction on the BATRI funds should be modified under the equitable doctrines of cy pres and equitable deviation, as codified in California Probate Code Sections 15409 and 15403, respectively. The letter explained that BATRI had become impracticable to continue due to circumstances entirely outside EF's control — namely, the termination of both school district partnerships and the disruption caused by the COVID-19 pandemic. The letter further stated that EF intended to seek judicial guidance on the proper disposition of the restricted funds and respectfully declined to return the $1,700,000.

On April 15, 2022, a final pre-suit meet-and-confer telephone call was held between counsel for both parties. Participating on the call were Douglas Carmichael and Simone Laroche for EF, and Victoria Huang and Derek Solano Jr. for WGFT. The call lasted approximately forty-five minutes. WGFT's counsel reiterated the Trust's position that the reversion clause in Section 7.2 was clear and unambiguous and that EF's refusal to comply with the demand constituted a breach of the Gift Instrument. EF's counsel reiterated the Foundation's position that equitable modification was the appropriate remedy under the circumstances and that EF would be filing a declaratory relief action. No resolution was reached, and both sides indicated they would proceed accordingly.

On April 28, 2022, the ninety-day demand period under Section 7.2 expired without return of the funds.

C. Litigation Filings

On April 25, 2022 — three days before the expiration of the demand period — EF filed its Complaint for Declaratory Relief in the Superior Court of California, County of San Francisco. The case was assigned to Department 302, the Honorable Patricia R. Wainwright presiding, and was designated Case No. CGC-22-599481. The Complaint sought a judicial declaration that EF is entitled to redirect the restricted BATRI funds, including the $1,700,000 in WGFT funds, to its broader educational mission under the doctrines of cy pres and equitable deviation.

On June 10, 2022, WGFT, through Pratchett, Huang & Solano LLP, filed its Answer to the Complaint and a Cross-Complaint. The Answer denied EF's entitlement to equitable modification and asserted a number of affirmative defenses, including express contractual terms, failure to mitigate, and estoppel. The Cross-Complaint asserted a single cause of action for restitution, seeking the return of $1,700,000 in unexpended and undisbursed Grant Funds, together with interest at 7% per annum commencing April 28, 2022 — the date the demand period expired. At 7% on $1,700,000, the annual interest accrual is $119,000.

On July 22, 2022, EF filed its Answer to the Cross-Complaint. The Answer was prepared by Simone Laroche and Jeffrey Park, with supervision by Douglas Carmichael. EF denied the existence of an automatic reversion right, denied that Section 7.2 operated as a self-executing condition subsequent, and asserted affirmative defenses including cy pres, equitable deviation, impracticability under both equitable and contractual principles, and waiver. The waiver defense was predicated on the fact that WGFT had not objected when EF publicly announced the wind-down of BATRI in December 2021, and did not issue its demand letter until January 28, 2022 — approximately four weeks later — suggesting at minimum a lack of urgency inconsistent with the Trust's current position.

D. Mediation and Stay

On August 15, 2022, the parties appeared before Judge Wainwright for the Initial Case Management Conference. At the conference, the Court expressed a preference for alternative dispute resolution and suggested that the parties attempt mediation before proceeding with discovery. Both parties agreed, and the Court set a follow-up case management conference for October 2022, contingent on the outcome of the mediation.

On September 2, 2022, the parties participated in a full-day private mediation before the Honorable Oscar Pelletreau (Ret.) at Bayshore Mediation Services, located at 201 Mission Street, Suite 900, San Francisco, CA 94105. Attending for EF were Priya Chattopadhyay (General Counsel), Margot Ellison-Yee (Executive Director), Douglas Carmichael, and Simone Laroche. Attending for WGFT were Roland Whitfield-Garner (co-trustee and son of the original settlor), Adrienne Garner-Bosch (co-trustee and granddaughter of Dorothy M. Garner), Victoria Huang, and Derek Solano Jr.

The mediation was unsuccessful. EF submitted a comprehensive mediation brief presenting its cy pres and equitable deviation arguments, with supporting documentation including the Gift Instrument, correspondence with OUSD and SFUSD, the EF Board resolution winding down BATRI, and the consent letters from Cascabel and Newhall-Sievert. WGFT submitted a responsive brief emphasizing the plain language of Section 7.2 and the Trust's position that the settlors' intent was specific to BATRI and did not extend to a general grant for EF's educational programs. Despite Judge Pelletreau's efforts, the parties were unable to bridge the gap between their positions. EF's final position at mediation was to retain all funds and redirect them; WGFT's position was full return of $1,700,000 plus interest. Neither party moved substantially from its opening stance.

Notwithstanding the failure to reach a settlement, both parties expressed a willingness to continue informal discussions while staying the litigation. Accordingly, on September 16, 2022, the parties filed a Stipulation and Order Staying All Proceedings, which Judge Wainwright signed and entered the same day. The key terms of the stay order are as follows:

(a) All proceedings in the action, including discovery, motions practice, and trial, are stayed pending further order of the Court.

(b) The stay shall be reviewed at ninety-day intervals. The parties shall file joint status reports at each interval, advising the Court of the status of settlement discussions and requesting either continuation of the stay or a case management conference to address reactivation.

(c) All parties' substantive and procedural rights are preserved during the stay, and all applicable limitation periods, including but not limited to the five-year deadline under California Code of Civil Procedure Section 583.310, are tolled for the duration of the stipulated stay.

E. Status Reports During the Stay

Since the entry of the stay order on September 16, 2022, the parties have filed nine joint status reports at approximately ninety-day intervals, as follows:

As of the date of this memorandum, the next joint status report is due on March 14, 2025, followed by the subsequent report due on June 13, 2025.

Each of the nine reports has followed the same template format, jointly signed by counsel for both parties, requesting continuation of the stay and representing to the Court that the parties "continue to evaluate settlement options and preserve their respective positions." In reality, the informal settlement discussions referenced in the earlier reports were limited to occasional telephone calls and email exchanges between Simone Laroche and Derek Solano Jr., none of which resulted in any movement from either side's position. Since approximately September 2023, there has been no meaningful engagement from WGFT's side. Solano has been responsive to administrative communications regarding the joint status report filings but has not initiated or responded to any substantive settlement overtures in over fifteen months.

The continued filing of joint status reports requesting an indefinite extension of the stay, in the absence of any genuine settlement progress, presents a number of concerns addressed in Section VI below, including the risk of judicial intervention, the accrual of interest on WGFT's cross-claim, and the impact on EF's financial planning.

IV. Current Financial Status of the Matter

A. Fees Billed and Collected

The firm's engagement in this matter is governed by an engagement letter dated April 1, 2022, executed by EF (through Priya Chattopadhyay) and Calderwood & Harkness LLP (through Francesca Morano). The engagement provides for representation on an hourly fee basis with monthly billing. The applicable hourly rates at the time of engagement were as follows:

Total fees billed to the client through December 31, 2024, are $287,450. Total fees collected through the same date are $274,100. Outstanding accounts receivable stand at $13,350 ($287,450 minus $274,100). The outstanding balance relates primarily to the December 2024 billing cycle, which includes time associated with preparation of the ninth joint status report and this internal memorandum.

The relatively modest total fee figure reflects the dormant nature of the matter since the entry of the stay in September 2022. The substantial majority of fees — approximately $230,000 — were incurred during the active phase of the matter between April and September 2022, encompassing pre-suit research and analysis (including the comprehensive internal research memorandum of April 18, 2022), complaint drafting and filing, answer preparation, mediation briefing and attendance, and initial discovery planning. Since September 2022, ongoing billing has been limited to preparation and filing of joint status reports (approximately three to five hours per report), periodic informal settlement communications, internal status discussions, and client correspondence — averaging approximately $2,500 to $3,500 per quarter.

B. Accruing Interest on WGFT's Cross-Claim

WGFT's Cross-Complaint seeks restitution of $1,700,000 together with interest at 7% per annum, running from April 28, 2022 — the date on which the ninety-day demand period under Section 7.2 expired without return of the funds. The 7% rate is asserted under the Gift Instrument's general remedies provision (Section 9.1), which references the California legal rate of interest under Civil Code Section 3289(b).

The financial implications of this interest claim are significant and grow with each passing month:

The continuing accrual of claimed interest is a meaningful factor weighing in favor of reactivation. Each additional quarter of dormancy adds approximately $29,750 to WGFT's potential recovery, assuming the reversion claim and interest provision are ultimately sustained. If the matter remains dormant through the five-year trial deadline (April 25, 2027, subject to tolling during the stay), the accrued interest on the cross-claim could approach $595,000 — bringing WGFT's total claimed recovery to approximately $2,295,000.

To be clear, EF contests both the underlying reversion claim and the applicability of the 7% interest rate. However, the interest exposure is real and quantifiable, and it represents an escalating cost of inaction that should be squarely presented to the client.

C. Client Financial Context

EF's most recent audited financial statements (FY 2021, audited by Calloway & Auerbach CPAs, LLP) reflect total annual revenue of approximately $28.3 million and total net assets of approximately $41.6 million. Of the total net assets, $14.2 million is classified as donor-restricted, and the remainder ($27.4 million) is classified as without donor restrictions.

The $4.7 million in total restricted BATRI funds — encompassing the $1.7 million from WGFT, the $2.0 million from Cascabel, and the $1.0 million from Newhall-Sievert — represents approximately 33% of EF's total donor-restricted net assets. The resolution of the restriction status of these funds is therefore material to EF's financial planning, its ability to deploy resources for ongoing and new programmatic initiatives, and the accuracy of its financial reporting to other donors, regulatory bodies, and the public.

For its part, the Whitfield-Garner Family Trust has an estimated corpus of approximately $62 million in diversified assets, based on publicly available information and representations made during the mediation. The $1.7 million at issue in this litigation represents less than 3% of the Trust's total value and does not present a financial hardship for the Trust. However, the Whitfield-Garner family — particularly Roland Whitfield-Garner and Adrienne Garner-Bosch, who serve as co-trustees — have articulated a principled position regarding the preservation of donor intent. Their stance does not appear to be motivated by financial necessity but rather by a firmly held view that the settlors' wishes should be honored as written, and that the reversion clause was specifically negotiated to protect against the scenario that has in fact occurred.

V. Assessment of Legal Position

A. EF's Core Arguments (Cy Pres and Equitable Deviation)

EF's primary legal theory rests on the equitable doctrines of cy pres and equitable deviation, both of which are codified in the California Probate Code and have a well-established history of application to charitable gifts and trusts.

Under California Probate Code Section 15409, which codifies the cy pres doctrine, where a particular charitable purpose becomes unlawful, impracticable, or impossible to achieve, and the court determines that the settlor or donor had a general charitable intent, the court may direct that the trust property be applied to a charitable purpose that reasonably approximates the original purpose. The doctrine operates as an equitable remedy designed to give effect to the donor's broader philanthropic objectives when the specific mechanism originally chosen is no longer viable.

Under California Probate Code Section 15403, which codifies the equitable deviation doctrine, the court may modify the administrative terms of a trust or gift instrument where compliance with those terms has become impracticable or wasteful due to circumstances not anticipated by the settlor or donor. Equitable deviation is generally regarded as a somewhat less demanding standard than cy pres, as it focuses on the modification of administrative provisions rather than the fundamental redirection of charitable purpose.

EF's factual basis for invoking these doctrines is strong. BATRI became impracticable to continue because both of the partner school districts upon which the program depended — OUSD and SFUSD — independently terminated their partnerships with EF. OUSD notified EF of its withdrawal in August 2020, citing budget constraints and realignment of priorities in the wake of COVID-19. SFUSD declined to renew its partnership agreement in March 2021. Without school district partners willing to host teacher residents and provide classroom placements, the BATRI model was structurally impossible to operate. These events were entirely outside EF's control and were exacerbated, though not exclusively caused, by the COVID-19 pandemic.

Critically, the Gift Instrument itself demonstrates the Whitfield-Garner family's general charitable intent to support education. The Instrument's recitals reference the settlors' "deep and abiding commitment to public education" and their desire to "expand pathways to the teaching profession for talented individuals committed to serving high-need communities." The original settlors — Herbert R. Whitfield-Garner (deceased January 14, 2019) and Dorothy M. Garner (deceased November 3, 2016) — made substantial charitable commitments throughout the Trust's history, including prior grants to educational institutions and teacher training programs. Herbert Whitfield-Garner personally participated in the negotiation of the Gift Instrument and expressed enthusiasm for BATRI as one component of a broader commitment to educational equity in the Bay Area.

EF's proposed reallocation would direct the restricted BATRI funds to its broader educational mission, encompassing teacher development programs, school partnerships, and community-based learning initiatives in Northern California. These activities are reasonably proximate to the original BATRI purpose — indeed, BATRI was itself an initiative within EF's broader educational program portfolio. The reallocation would preserve the charitable use of the funds while adapting to the changed circumstances that have rendered BATRI inoperable.

The fact that the two other restricted BATRI donors — the Cascabel Education Fund ($2,000,000) and the Newhall-Sievert Foundation ($1,000,000) — have provided written consent to reallocation further supports the reasonableness of EF's proposed course. While WGFT's consent is not legally required if the court grants equitable modification, the consent of the other donors demonstrates that EF's proposal is regarded as reasonable and appropriate by similarly situated grantors who made their contributions for the same restricted purpose.

B. WGFT's Core Arguments (Reversion Under § 7.2)

WGFT's position is grounded in the text of Section 7.2 of the Gift Instrument, which it characterizes as an express contractual reversion clause constituting a condition subsequent: if BATRI is discontinued prior to the expiration of the Grant Period, unexpended Grant Funds revert to the Trust upon written demand. WGFT contends that this clause was specifically negotiated by Herbert Whitfield-Garner to protect the Trust's interests in the event that BATRI did not succeed, and that the clause reflects the settlor's specific — not general — charitable intent with respect to these funds.

WGFT argues that the reversion clause is an express contractual remedy that supersedes, or at minimum takes precedence over, the equitable modification doctrines of cy pres and equitable deviation. In WGFT's view, the Gift Instrument is not a unilateral gift subject to equitable modification at the court's discretion, but rather a bilateral contractual agreement between sophisticated parties, each represented by counsel, that includes a specific and bargained-for remedy in the event of program discontinuation. WGFT contends that applying cy pres or equitable deviation to override an express reversion clause would effectively read Section 7.2 out of the agreement and undermine the sanctity of negotiated donor agreements across the nonprofit sector.

WGFT further contends that it complied with the procedural requirements of Section 7.2 by issuing its written demand on January 28, 2022, and that EF's failure to return the $1,700,000 within the ninety-day demand period (which expired on April 28, 2022) constitutes a breach of the Gift Instrument. WGFT claims 7% per annum interest from that date as a contractual remedy.

WGFT's position is not without force, particularly with respect to the express reversion clause. The clause is clear, specific, and unambiguous. It was negotiated by parties of relatively equal sophistication, both of which were represented by counsel. The scenario it addresses — Discontinuation of the funded program — is precisely what occurred. WGFT's argument that equity should not override express contractual terms in a negotiated grant agreement is the strongest card in its hand and presents the primary area of legal uncertainty for EF.

C. Key Legal Uncertainties

The primary open question in this case is whether Section 7.2's express reversion clause precludes the application of cy pres and equitable deviation, or whether those equitable doctrines may be invoked notwithstanding the existence of a specific contractual reversion provision in a negotiated grant agreement.

This question was addressed at length in the internal research memorandum dated April 18, 2022, prepared by Simone Laroche and transmitted to Douglas Carmichael. The memorandum concluded that EF has strong arguments for equitable deviation and reasonably strong arguments for cy pres, given the well-documented impracticability of continuing BATRI and the general charitable intent reflected in the Gift Instrument's recitals and in the settlors' broader philanthropic history. However, the memorandum also identified the presence of an explicit reversion clause in a negotiated grant agreement — as opposed to a unilateral gift or bequest — as introducing meaningful uncertainty. The equitable modification doctrines developed primarily in the context of charitable trusts and unilateral gifts, and their application to bilateral grant agreements with express reversion provisions is not fully settled under California law.

There is limited California appellate authority directly addressing this question. The leading cases on cy pres (e.g., Estate of Buck (1986) (San Francisco Superior Court), In re Estate of Giffin (1938) 10 Cal.2d 574) and equitable deviation involve testamentary trusts or unilateral gifts, not negotiated grant agreements. Federal tax-exempt organization cases provide some analogous guidance, but the intersection of contract law principles with equitable modification doctrines in the specific context of a negotiated philanthropic agreement between a family trust and a nonprofit grantee remains an area in which judicial guidance would be valuable.

A judicial determination would provide clarity not only for the $1.7 million in WGFT funds but also for the broader framework governing the remaining $3.0 million in restricted BATRI funds from Cascabel and Newhall-Sievert. Although those donors have consented to reallocation, a judicial declaration establishing EF's right to redirect restricted funds under cy pres or equitable deviation would provide a more durable legal foundation than donor consent alone, particularly for purposes of EF's auditors and for any future disputes that may arise with other restricted donors.

Risk Assessment: We assess EF's position as moderate-to-favorable on the merits. The impracticability facts are strong and essentially undisputed. The general charitable intent argument is well-supported. The reversion clause argument is WGFT's strongest card, but California courts have historically disfavored the forfeiture of charitable gifts and have broadly construed general charitable intent where the evidence supports it. If the case proceeds to summary judgment, we believe there is a reasonable probability — estimated at 55% to 65% — that the court would grant modification under cy pres or equitable deviation. However, the outcome is not certain, and the possibility of an adverse ruling — particularly one enforcing Section 7.2 as written — cannot be discounted.

VI. Strategic Options

The litigation team has identified three principal strategic options for the client's consideration. Each option is analyzed below with respect to its advantages, disadvantages, estimated costs, and likely timeline.

Option 1: Continue the Stay and Pursue Further Settlement Discussions

Description. Under this option, EF would maintain its current posture. The firm would file the next joint status report, due March 14, 2025, requesting continuation of the stay, and would continue the ninety-day reporting cycle. EF would simultaneously attempt to re-engage WGFT in substantive settlement discussions, either through renewed direct outreach from counsel or through the engagement of a new mediator.

Advantages.

(a) This option represents the lowest immediate cost to the client, requiring only the continued expenditure of approximately $2,500 to $3,500 per quarter for status report preparation and administrative maintenance of the case.

(b) It preserves the parties' relationship, such as it is, and leaves the door open for a non-litigated resolution. Given the philanthropic context of the dispute and the potential value of a future relationship between EF and the Whitfield-Garner family, this consideration is not trivial.

(c) EF avoids the distraction and public visibility associated with active litigation. As a nonprofit public benefit corporation, EF is sensitive to the optics of a contested legal dispute with a prominent donor family, and continued dormancy shields the matter from public attention.

Disadvantages.

(a) No meaningful settlement progress has occurred in over fifteen months. WGFT's counsel has not engaged substantively since approximately September 2023, and there is no indication that the Trust's position has softened. Continued pursuit of settlement in the absence of any countervailing pressure is unlikely to yield results.

(b) The accruing interest on WGFT's cross-claim increases EF's potential exposure by approximately $119,000 per year, or $9,917 per month. As of the date of this memorandum, the claimed interest has grown to approximately $317,333, and it will continue to grow for as long as the matter remains unresolved.

(c) Judge Wainwright may lose patience with indefinite extensions of the stay. While the stipulated stay order does not contain an express expiration date, the Court retains inherent authority to order the parties to reactivate the case or to dismiss for lack of prosecution. California Code of Civil Procedure Section 583.410 provides that a court may dismiss an action for delay in prosecution if the action is not brought to trial within two years of filing; Section 583.310 imposes a mandatory five-year deadline. The five-year deadline runs from the filing date of April 25, 2022, i.e., April 25, 2027, though the tolling provisions of the stipulated stay order should apply to exclude the period of the stay from the calculation. Nevertheless, the longer the stay continues, the greater the risk that the Court will take action sua sponte or that WGFT will seek to lift the stay on its own initiative.

(d) The continued dormancy of the litigation hampers EF's financial planning regarding the $4.7 million in restricted BATRI funds. The Foundation cannot deploy these funds for programmatic purposes, cannot report their release from restriction in its financial statements, and must continue to maintain them as restricted net assets on its balance sheet, reducing its programmatic flexibility.

(e) The dormancy arguably serves WGFT's strategic interests. If the Trust views the status quo — in which the funds remain restricted and unusable by EF — as preferable to any compromise, then WGFT has no incentive to engage in settlement discussions. The passage of time benefits WGFT both through the accrual of interest on its cross-claim and through the practical immobilization of funds that EF cannot use.

Option 2: Reactivate the Case and Move for Summary Judgment

Description. Under this option, EF would notify WGFT of its intent to lift the stay and would file a motion to lift the stipulated stay. Simultaneously, or shortly thereafter, EF would file a Motion for Summary Judgment (or, in the alternative, Summary Adjudication) on its declaratory relief claim, arguing that the doctrines of cy pres and equitable deviation entitle EF to redirect the restricted BATRI funds as a matter of law. EF would also seek summary adjudication on WGFT's cross-claim for restitution and interest.

Advantages.

(a) This option forces a resolution of the core legal question — the interaction between Section 7.2's reversion clause and the cy pres/equitable deviation doctrines — which is largely a question of law applied to essentially undisputed facts. The key facts are documentary and are not meaningfully in dispute: the Gift Instrument, the school district correspondence, the EF Board resolution, and the program financial records collectively establish the impracticability of continuing BATRI. The principal legal question — whether equitable modification overrides an express reversion clause in a negotiated grant agreement — is a question of law suitable for summary adjudication.

(b) Reactivation stops, or at least addresses, the continuing accrual of interest on WGFT's cross-claim. Even if the interest clock is not formally stopped upon reactivation, active litigation demonstrates to the Court that EF is diligently pursuing resolution, which may bear on the Court's assessment of the reasonableness of any interest award.

(c) EF has strong factual underpinnings for its position. The impracticability of continuing BATRI is well-documented and essentially undisputed. The general charitable intent of the Whitfield-Garner family is supported by the Gift Instrument's recitals and by the settlors' broader philanthropic history. COVID-19 provides additional equitable context.

(d) A preliminary working draft of the summary judgment outline already exists, having been prepared by Simone Laroche and Jeffrey Park in the fall of 2022. While the outline requires updating and substantial development, it provides a head start. The litigation team estimates that a filing-ready motion could be prepared within approximately eight to ten weeks of authorization from the client.

(e) A judicial resolution would establish a legal framework applicable to the full $4.7 million in restricted BATRI funds, including the $3.0 million from Cascabel and Newhall-Sievert. Even though those donors have consented to reallocation, a court order authorizing the redirection of the funds would provide a more robust legal foundation for EF's auditors, for its board of directors, and for any future disputes involving similar donor restriction issues.

(f) Given the documentary nature of the evidence, limited discovery is likely needed in advance of summary judgment. The key documents — the Gift Instrument, the OUSD and SFUSD correspondence, the EF Board resolution, the BATRI financial records, the demand letter, and the pre-suit correspondence — are already in the firm's possession or are obtainable from the client. There may be some limited need for discovery from WGFT (for example, to establish the settlors' broader charitable intent or to obtain trust administration records), but this is unlikely to be extensive or time-consuming.

Disadvantages.

(a) This option entails significant additional cost. Based on the separate litigation budget memorandum prepared by Francesca Morano and Simone Laroche, we estimate that the additional fees to litigate through summary judgment — including motion to lift stay, limited discovery, expert consultation, MSJ briefing, opposition to any WGFT cross-motion, and hearing preparation — would be in the range of $175,000 to $250,000. This does not include trial costs if summary judgment is denied or is granted only in part.

(b) There is a risk that WGFT will file a cross-motion for summary judgment on its reversion claim. If both cross-motions are filed, the Court will be required to determine the legal question on a fully briefed record — which is, in one sense, an advantage (forcing resolution), but which also means that an adverse ruling is possible on a developed record, with fewer options for course correction.

(c) If summary judgment is denied, the case will proceed to a full trial, with attendant further cost escalation. Trial preparation and trial itself could add an additional $300,000 to $500,000 in fees, depending on duration and complexity.

(d) Before or concurrent with MSJ preparation, the team will need to evaluate whether limited discovery is necessary. This may include propounding interrogatories and document requests on WGFT, and potentially taking depositions of Roland Whitfield-Garner and Adrienne Garner-Bosch as current co-trustees of the Trust, to establish the settlors' intent and the circumstances surrounding the negotiation of the Gift Instrument. Expert witness fees may also be incurred if the Court requires expert testimony on charitable purpose and cy pres analysis, though the team's current assessment is that expert testimony is unlikely to be required for summary judgment purposes.

(e) Active litigation may strain EF's relationship with the Whitfield-Garner family, potentially affecting future philanthropic engagement. While the relationship is already strained by the dispute, the transition from a dormant to an actively litigated case may be perceived by the family as an escalation. Given the relatively small philanthropic community in the Bay Area and the Whitfield-Garner family's prominence within it, EF should weigh this consideration carefully.

Estimated Timeline. If the client authorizes reactivation in Q2 2025, we estimate the following approximate timeline:

The exact timeline will depend on Judge Wainwright's calendar and the scope of any discovery that proves necessary. The timeline above assumes a cooperative but not expedited discovery process and a normal briefing schedule on the summary judgment motion.

Option 3: Propose a Structured Compromise to WGFT

Description. Under this option, EF would present a formal written settlement proposal to WGFT through counsel, offering meaningful concessions while preserving EF's ability to use the bulk of the restricted funds for educational purposes. The proposal would be transmitted by Douglas Carmichael to Victoria Huang, with a defined response period. The potential compromise elements are as follows:

(a) EF returns a portion of the $700,000 in unexpended disbursed WGFT funds to the Trust — specifically, 50%, or $350,000 — as a goodwill gesture acknowledging the Trust's concerns about donor intent.

(b) WGFT retains the undisbursed Tranche 4 ($1,000,000), which was never transferred to EF and remains in the Trust's control, resolving that component of the dispute entirely.

(c) EF retains the remaining $350,000 of unexpended WGFT funds, redirected with WGFT's written consent to EF's broader educational mission, including teacher development, school partnerships, and community-based learning initiatives in Northern California.

(d) EF agrees to naming and recognition rights in connection with the redirected funds — for example, naming a teacher development program component after the Whitfield-Garner family — and agrees to enhanced reporting obligations, including annual reports to the Trust for a period of three to five years detailing the use of the redirected funds.

(e) The parties execute a mutual release of all claims, including EF's declaratory relief claim and WGFT's cross-claim for restitution and interest. WGFT's interest claim ($317,333 accrued to date and growing) is waived as part of the global settlement.

(f) The $3,000,000 from Cascabel Education Fund and Newhall-Sievert Foundation, for which donor consent to reallocation has already been obtained, proceeds to reallocation on EF's books without further litigation, as those funds are not subject to the WGFT dispute.

Under this proposal, WGFT would recover a total of $1,350,000 of the $1,700,000 in dispute ($1,000,000 in the retained Tranche 4 plus $350,000 in returned unexpended funds), while EF would retain $350,000 in redirected funds and resolve the $317,333-plus interest claim. This outcome provides the Trust with approximately 79% of its claimed principal recovery while allowing EF to demonstrate that it has achieved a meaningful judicial or negotiated authorization for the redirection of restricted funds.

Advantages.

(a) A settlement, if achievable, would provide prompt resolution at substantially lower cost than active litigation. The cost of preparing and negotiating a settlement proposal is a fraction of the $175,000 to $250,000 estimated for summary judgment proceedings.

(b) Settlement preserves and potentially strengthens EF's relationship with the Whitfield-Garner family. The naming rights and enhanced reporting components are designed to address the family's concern about donor intent and to maintain a positive ongoing relationship.

(c) WGFT's recovery of $1,350,000 out of $1,700,000 in claimed principal — approximately 79% — represents a potentially face-saving result for the Trust, particularly given that WGFT's chances of recovering the full amount plus interest at trial are not certain.

(d) Settlement avoids the risk of an adverse judicial ruling on the reversion clause. If the Court were to enforce Section 7.2 as written, EF would be required to return the full $1,700,000 plus potentially substantial accrued interest, an outcome significantly worse than the proposed compromise.

Disadvantages.

(a) WGFT has shown no inclination to compromise during more than two years of dormancy and sporadic settlement discussions. The Trust's position has been consistent and firmly held from the outset, and there is no indication that a formal proposal, however reasonable, would be received with any greater receptivity than prior informal overtures.

(b) If EF makes the proposed settlement offer and it is rejected, EF will have shown its hand without gaining any strategic advantage, and will likely need to proceed to Option 2 regardless, with additional delay.

(c) A settlement in which EF returns a significant portion of the funds would effectively concede that Section 7.2 operates as WGFT contends — or at minimum would be perceived as such by other donors with similar reversion clauses. This could undermine EF's negotiating position in future donor restriction disputes.

(d) Settlement does not establish a judicial precedent or framework for future disputes. A court order authorizing equitable modification would provide durable guidance not only for the WGFT funds but for EF's handling of restricted funds more broadly. A negotiated settlement is particular to the parties and creates no precedent.

VII. Recommendation

Based on the foregoing analysis, the litigation team recommends the following course of action:

First, we recommend scheduling a strategy call with Priya Chattopadhyay (General Counsel) and Margot Ellison-Yee (Executive Director) in January 2025 to present the three strategic options described above and to seek the client's direction. The call should include Douglas Carmichael, Francesca Morano, and Simone Laroche.

Second, the litigation team's preliminary recommendation is to pursue a hybrid of Options 2 and 3, structured as follows:

(a) Phase 1 — Final Settlement Offer (Option 3). EF, through Calderwood & Harkness, would transmit a formal structured settlement proposal to WGFT through Victoria Huang at Pratchett, Huang & Solano LLP. The proposal would incorporate the compromise elements described in Option 3 above, with appropriate modifications based on client input. The proposal letter would include a defined response deadline of forty-five (45) days from the date of transmission.

(b) Phase 2 — Reactivation (Option 2). If WGFT declines the settlement offer, or fails to respond within the forty-five-day deadline, EF would proceed to reactivate the litigation. The firm would file a motion to lift the stipulated stay and would advance promptly to summary judgment. Preliminary MSJ drafting by Simone Laroche and Jeffrey Park would begin immediately upon client authorization, drawing on the existing working outline, so that the motion could be filed on an expedited basis following the expiration of the settlement deadline.

This hybrid approach provides WGFT with one final, clearly defined opportunity to negotiate in good faith and to achieve a result that is objectively favorable to the Trust (recovery of approximately 79% of the claimed principal without the cost and uncertainty of litigation). At the same time, it establishes a definite timeline for resolution, ensuring that the matter does not continue to languish indefinitely to EF's increasing detriment.

In the strategy call with the client, we would emphasize the following considerations:

(a) The matter cannot remain dormant indefinitely. The accruing interest on WGFT's cross-claim, the five-year trial deadline (April 25, 2027, subject to tolling during the stay), and EF's pressing need for financial flexibility with respect to the $4.7 million in restricted BATRI funds all militate strongly in favor of active steps toward resolution.

(b) The next joint status report is due March 14, 2025. A decision on strategy by approximately February 2025 would allow orderly planning for the content of that status report. If the client authorizes the hybrid approach, the March status report could either reflect the pendency of the settlement proposal or, if the settlement deadline has already passed, notify the Court of the parties' intent to lift the stay.

(c) If reactivation is chosen, preliminary work can begin immediately. The existing MSJ working outline, the internal research memorandum, and the firm's familiarity with the factual record provide a strong foundation for prompt action. We estimate that a filing-ready MSJ could be prepared within eight to ten weeks of authorization.

VIII. Open Items and Next Steps

The following items require attention in the near term:

• [ ] Schedule strategy call with Chattopadhyay and Ellison-Yee. Target: late January 2025. Laroche to coordinate with Chattopadhyay's office on availability. Participants: Carmichael, Morano, Laroche, Chattopadhyay, Ellison-Yee.

• [ ] Prepare client update letter summarizing this analysis. Target: early January 2025. Laroche to prepare draft for Carmichael review and signature. The letter should present the three options and the hybrid recommendation at a level of detail appropriate for a client-facing communication, without disclosing internal work product assessments of likelihood of success.

• [ ] If client approves hybrid approach, draft settlement proposal letter. Laroche to prepare initial draft for Carmichael review and transmission to Victoria Huang at Pratchett, Huang & Solano LLP. The proposal should include the specific compromise terms, naming rights and reporting components, the mutual release framework, and a forty-five-day response deadline.

• [ ] Update litigation budget memorandum. Morano and Laroche to review and update the existing litigation budget with current rate assumptions, as hourly rates may have been adjusted since the April 2022 engagement letter. The updated budget should be available for discussion during the client strategy call.

• [ ] Confirm status of $700,000 in unexpended WGFT funds. Laroche to verify with Chattopadhyay that the $700,000 remains segregated on EF's books as restricted funds and has not been commingled or otherwise impaired. Laroche to also confirm with Calloway & Auerbach CPAs, LLP (EF's independent auditor) the treatment of these funds in EF's FY 2023 and FY 2024 financial statements.

• [ ] Confirm status of Cascabel Education Fund and Newhall-Sievert Foundation consent letters. Laroche to verify with Chattopadhyay that the consent letters from both donors remain current and that neither donor has withdrawn or modified its consent during the dormancy period. Copies of the consent letters should be obtained and added to the case file if not already on hand.

• [ ] Review and refresh the preliminary MSJ outline. Laroche and Park to review the working MSJ outline prepared in fall 2022 for current viability, update the case law research to include any developments in California cy pres and equitable deviation law since 2022, and identify any additional factual support or evidentiary submissions that would be required for a filing-ready motion.

• [ ] File next joint status report by March 14, 2025. Laroche to coordinate with Derek Solano Jr. at Pratchett, Huang & Solano LLP on template language for the joint report. The content of the report will depend on the status of the client strategy discussion; if a decision on reactivation has been made by that date, the report should reflect the change in posture.

• [ ] Address outstanding accounts receivable of $13,350. Morano to coordinate with the billing coordinator to follow up on the outstanding balance and ensure prompt collection.

IX. Attachments and Cross-References

The following documents are referenced herein and are available in the firm's document management system under C&H Matter No. 1028-00001:

1. Internal Research Memorandum — Cy Pres and Equitable Deviation Analysis (Laroche to Carmichael, dated April 18, 2022). Comprehensive analysis of EF's legal theories under California Probate Code Sections 15409 and 15403, including survey of relevant California case law and assessment of the interaction between express reversion clauses and equitable modification doctrines.

2. Mediation Brief (submitted on behalf of Estuary Foundation, September 2, 2022). Filed with Bayshore Mediation Services in connection with the mediation before Hon. Oscar Pelletreau (Ret.).

3. Preliminary MSJ Outline (working document, Laroche and Park, fall 2022). Draft outline of anticipated summary judgment motion, including proposed structure, key arguments, and evidentiary submissions. Requires updating and substantial development before filing.

4. Litigation Budget Memorandum (Morano and Laroche). Estimated costs for various litigation scenarios, including summary judgment and trial. Requires updating with current rate assumptions.

5. Ninth Joint Status Report (filed December 13, 2024). Most recent joint status report submitted to the Court pursuant to the September 16, 2022 Stipulation and Order Staying All Proceedings.

6. Engagement Letter (dated April 1, 2022). Governing engagement agreement between Estuary Foundation and Calderwood & Harkness LLP for representation in this matter.

CONFIDENTIALITY NOTICE: This memorandum constitutes attorney work product and is protected by the attorney-client privilege and the work product doctrine. It is prepared solely for internal use by Calderwood & Harkness LLP attorneys assigned to C&H Matter No. 1028-00001 and is not to be disclosed, distributed, or otherwise made available to any person or entity outside the firm without prior written authorization from the responsible partner.

Author: Simone Laroche, Senior Associate, Litigation — General

Distribution: Douglas Carmichael, Responsible Partner; Francesca Morano, Billing Partner

Note: Working Associate Jeffrey Park may be provided a copy of this memorandum for reference purposes upon approval by either receiving partner.

Tranche	Scheduled Date	Amount	Status
Tranche 1	June 2018	$1,500,000	Disbursed June 22, 2018
Tranche 2	July 2019	$1,250,000	Disbursed July 15, 2019
Tranche 3	July 2020	$1,250,000	Disbursed July 10, 2020
Tranche 4	July 2021	$1,000,000	Never disbursed (program suspended)
Total Disbursed	$4,000,000
Total Undisbursed	$1,000,000
Category	Amount
Total WGFT Grant Funds Disbursed (Tranches 1–3)	$4,000,000
BATRI Expenditures (2018–2021)	($3,300,000)
Unexpended Disbursed WGFT Funds	$700,000
Undisbursed WGFT Funds (Tranche 4)	$1,000,000
Total WGFT Funds in Dispute	$1,700,000
Report No.	Filing Date	Summary
First	December 16, 2022	Requested continuation; reported informal discussions underway
Second	March 17, 2023	Requested continuation; reported informal discussions ongoing
Third	June 16, 2023	Requested continuation; reported limited engagement
Fourth	September 15, 2023	Requested continuation; no substantive developments
Fifth	December 15, 2023	Requested continuation; no substantive developments
Sixth	March 15, 2024	Requested continuation; no substantive developments
Seventh	June 14, 2024	Requested continuation; no substantive developments
Eighth	September 13, 2024	Requested continuation; no substantive developments
Ninth (most recent)	December 13, 2024	Requested continuation; no substantive developments
Timekeeper	Role	2022 Hourly Rate
Douglas Carmichael	Responsible Partner	$895

Francesca Morano	Billing Partner	$850
Simone Laroche	Lead Associate	$625
Jeffrey Park	Working Associate	$525
Metric	Amount
Principal claimed	$1,700,000
Annual interest at 7%	$119,000
Monthly interest accrual	$9,917
Interest accrued as of December 20, 2024 (approx. 2 years, 8 months from April 28, 2022)	$317,333 (approx.)
Total claimed amount as of December 20, 2024	$2,017,333 (approx.)
Milestone	Estimated Date
Motion to Lift Stay filed	May–June 2025
Stay lifted; discovery commences	July–August 2025
Limited discovery completed	September–October 2025
MSJ filed	October–November 2025
Opposition and reply briefing	December 2025–January 2026
MSJ hearing	February–March 2026

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
INTERNAL MEMORANDUM
December 20, 2024
TO: Douglas Carmichael, Partner Francesca Morano, Partner
FROM: Simone Laroche, Senior Associate
RE: Case Status Assessment — Estuary Foundation v. The Whitfield-Garner Family Trust, Case No. CGC-22-599481 (Superior Court of California, County of San Francisco, Dept. 302, Hon. Patricia R. Wainwright)
C&H Matter No.: 1028-00001
Client: Estuary Foundation, a California nonprofit public benefit corporation (EIN: 94-3127856)
Client Contact: Priya Chattopadhyay, General Counsel; Margot Ellison-Yee, Executive Director
Client Address: 1440 Embarcadero Way, Suite 300, San Francisco, CA 94107
Opposing Counsel: Victoria Huang and Derek Solano Jr., Pratchett, Huang & Solano LLP, 555 California Street, 28th Floor, San Francisco, CA 94104
I. Purpose
This memorandum provides a comprehensive status assessment of the declaratory judgment action captioned Estuary Foundation v. The Whitfield-Garner Family Trust, Case No. CGC-22-599481, presently pending before Judge Patricia R. Wainwright in Department 302 of the Superior Court of California, County of San Francisco. The action has been subject to a stipulated stay of all proceedings since September 16, 2022 — now more than two years and three months — during which time no substantive progress toward settlement has been achieved. The last meaningful engagement between the parties on the merits of the dispute occurred in approximately mid-2023, and the matter has since become effectively dormant apart from the filing of routine joint status reports at ninety-day intervals.
This memorandum evaluates the current posture of the litigation, the financial implications of continued dormancy, and the strategic options available to the Estuary Foundation ("EF" or "the Foundation") going forward. The memorandum concludes with a recommendation that a strategy call with our client contacts be scheduled in the first quarter of 2025 to discuss the potential reactivation of the case and to obtain client direction on next steps.
The intended audience for this memorandum is Douglas Carmichael, as responsible partner for the matter, and Francesca Morano, as billing partner, for purposes of internal planning, resource allocation, and preparation for client communications.
II. Executive Summary
The Estuary Foundation filed its Complaint for Declaratory Relief on April 25, 2022, seeking judicial authorization to redirect approximately $4.7 million in restricted grant funds from the now-defunct Bay Area Teacher Residency Initiative ("BATRI") to the Foundation's broader educational mission. Of the $4.7 million in restricted funds, $1.7 million originated from the Whitfield-Garner Family Trust ("WGFT") and represents the amount directly at issue in this litigation. The remaining $3.0 million was contributed by two other restricted donors — the Cascabel Education Fund ($2.0 million) and the Newhall-Sievert Foundation ($1.0 million) — both of which have provided written consent to reallocation, but whose funds remain formally restricted pending resolution of the governing legal framework.
On June 10, 2022, WGFT filed an Answer to the Complaint and a Cross-Complaint seeking restitution of $1,700,000, plus interest at 7% per annum running from April 28, 2022 — the date on which the ninety-day demand period under Section 7.2 of the Gift Instrument expired without return of the funds. The annual interest accrual on WGFT's cross-claim is $119,000, meaning that as of the date of this memorandum, the claimed interest has grown to approximately $317,333. Each additional month of dormancy adds roughly $9,917 to the Trust's potential recovery, should its reversion claim ultimately be sustained.
Following an unsuccessful private mediation before the Honorable Oscar Pelletreau (Ret.) at Bayshore Mediation Services on September 2, 2022, the parties entered into a Stipulation and Order Staying All Proceedings, which Judge Wainwright signed and entered on September 16, 2022. The stay has been renewed at each subsequent ninety-day review period. Since the stay was entered, nine joint status reports have been filed — from December 16, 2022 through the most recent filing on December 13, 2024 — each time requesting continuation of the stay and reporting no substantive developments. The next joint status report is due on March 14, 2025.
Informal settlement discussions between counsel occurred sporadically during the first year of the stay but have produced no tangible progress. WGFT's counsel at Pratchett, Huang & Solano LLP has not engaged in any meaningful substantive dialogue since approximately September 2023. The matter appears to have reached an impasse.
Total fees billed to the client through December 31, 2024 are $287,450, of which $274,100 has been collected. Outstanding accounts receivable stand at $13,350. The relatively modest total reflects the dormant posture of the case; the bulk of fees were incurred during the pre-suit research and drafting phase, the initial pleading stage, and mediation preparation.
Based on the analysis set forth below, the litigation team recommends scheduling a strategy call with Priya Chattopadhyay (General Counsel) and Margot Ellison-Yee (Executive Director) in January 2025 to discuss a recommended hybrid approach: making one final structured settlement offer to WGFT with a defined response deadline, and, if that offer is rejected or goes unanswered, proceeding to reactivate the litigation and advance toward summary judgment.
III. Background and Procedural History
A. The Gift Instrument and BATRI
On June 15, 2018, the Whitfield-Garner Family Trust executed the "Gift Instrument and Grant Agreement Between the Whitfield-Garner Family Trust and Estuary Foundation for the Bay Area Teacher Residency Initiative" (the "Gift Instrument"), providing for a total grant of $5,000,000 restricted to the establishment and operation of BATRI over a five-year grant period running from 2018 through 2023. The Gift Instrument was executed on behalf of the Trust by its then-trustee, Herbert R. Whitfield-Garner, and on behalf of EF by then-Executive Director Alan Gunderson.
The $5,000,000 grant was structured in four annual tranches, with disbursement contingent upon EF's submission of annual progress reports and financial certifications in accordance with Section 4.3 of the Gift Instrument. The disbursement schedule and actual disbursement history are as follows:
The key restriction language appears in Section 3.1 of the Gift Instrument, which provides that Grant Funds shall be used "solely and exclusively" for the Bay Area Teacher Residency Initiative "and for no other purpose." This language is unambiguous on its face and constitutes the principal basis for WGFT's position that the funds may not be redirected without the Trust's consent.
The reversion clause appears in Section 7.2, which provides as follows:
If the Program is discontinued prior to the expiration of the Grant Period, any unexpended Grant Funds shall, at Grantor's election, be returned to the Grantor within ninety (90) days of written demand by the Grantor or the Grantor's authorized representative. For purposes of this Section, "unexpended Grant Funds" shall include both disbursed funds not yet expended and any undisbursed Tranche amounts.
BATRI launched in September 2018 with its inaugural cohort of twenty-four teacher residents placed across six partner schools in the San Francisco Unified School District ("SFUSD") and the Oakland Unified School District ("OUSD"). The program model was based on a clinical residency approach in which aspiring teachers were embedded in partner school classrooms under the supervision of mentor teachers, combined with coursework toward a teaching credential through a partnership with San Francisco State University's Graduate School of Education.
The program experienced significant disruptions beginning in 2020. The onset of the COVID-19 pandemic in March 2020 forced the immediate transition to remote learning across all partner schools, undermining the in-classroom residency model that was the foundation of the BATRI design. In August 2020, OUSD formally notified EF that it would not renew its memorandum of understanding for BATRI participation, citing budget constraints and competing priorities related to pandemic recovery. In March 2021, SFUSD likewise declined to renew its partnership agreement, effectively eliminating the last remaining institutional partner necessary to operate the program.
The third and final cohort of BATRI residents graduated in June 2021, though only twelve of the fifteen residents in the cohort completed the program. Following the graduation of the third cohort and the loss of both school district partnerships, the EF Board of Directors voted on December 31, 2021, to formally wind down BATRI operations.
The financial accounting for BATRI is summarized as follows:
In addition to the WGFT grant, BATRI received restricted contributions from two other institutional donors: the Cascabel Education Fund, which contributed $2,000,000 in 2019, and the Newhall-Sievert Foundation, which contributed $1,000,000 in 2020. Both of these donors have provided written consent to the reallocation of their restricted funds to EF's broader educational mission. Including the WGFT funds at issue in this litigation, the total restricted BATRI funds subject to restriction modification is $4,700,000 ($1,700,000 from WGFT + $2,000,000 from Cascabel + $1,000,000 from Newhall-Sievert). The resolution of the legal framework governing restriction modification — particularly the interaction between express reversion clauses and cy pres/equitable deviation doctrines — will have implications for the full $4.7 million pool, even though the Cascabel and Newhall-Sievert donors have consented.
B. Pre-Litigation Demand and Response
On January 28, 2022, WGFT, acting through its counsel at Pratchett, Huang & Solano LLP, sent a formal demand letter to EF requesting the return of $1,700,000 in unexpended and undisbursed Grant Funds within ninety days, as provided by Section 7.2 of the Gift Instrument. The demand letter was signed by Victoria Huang and was transmitted both by certified mail and by email to Margot Ellison-Yee, who had by then succeeded Alan Gunderson as Executive Director.
On March 3, 2022, Calderwood & Harkness LLP responded on behalf of EF by letter from Douglas Carmichael to Victoria Huang. The response acknowledged receipt of the demand letter and the provisions of Section 7.2, but asserted that the restriction on the BATRI funds should be modified under the equitable doctrines of cy pres and equitable deviation, as codified in California Probate Code Sections 15409 and 15403, respectively. The letter explained that BATRI had become impracticable to continue due to circumstances entirely outside EF's control — namely, the termination of both school district partnerships and the disruption caused by the COVID-19 pandemic. The letter further stated that EF intended to seek judicial guidance on the proper disposition of the restricted funds and respectfully declined to return the $1,700,000.
On April 15, 2022, a final pre-suit meet-and-confer telephone call was held between counsel for both parties. Participating on the call were Douglas Carmichael and Simone Laroche for EF, and Victoria Huang and Derek Solano Jr. for WGFT. The call lasted approximately forty-five minutes. WGFT's counsel reiterated the Trust's position that the reversion clause in Section 7.2 was clear and unambiguous and that EF's refusal to comply with the demand constituted a breach of the Gift Instrument. EF's counsel reiterated the Foundation's position that equitable modification was the appropriate remedy under the circumstances and that EF would be filing a declaratory relief action. No resolution was reached, and both sides indicated they would proceed accordingly.
On April 28, 2022, the ninety-day demand period under Section 7.2 expired without return of the funds.
C. Litigation Filings
On April 25, 2022 — three days before the expiration of the demand period — EF filed its Complaint for Declaratory Relief in the Superior Court of California, County of San Francisco. The case was assigned to Department 302, the Honorable Patricia R. Wainwright presiding, and was designated Case No. CGC-22-599481. The Complaint sought a judicial declaration that EF is entitled to redirect the restricted BATRI funds, including the $1,700,000 in WGFT funds, to its broader educational mission under the doctrines of cy pres and equitable deviation.
On June 10, 2022, WGFT, through Pratchett, Huang & Solano LLP, filed its Answer to the Complaint and a Cross-Complaint. The Answer denied EF's entitlement to equitable modification and asserted a number of affirmative defenses, including express contractual terms, failure to mitigate, and estoppel. The Cross-Complaint asserted a single cause of action for restitution, seeking the return of $1,700,000 in unexpended and undisbursed Grant Funds, together with interest at 7% per annum commencing April 28, 2022 — the date the demand period expired. At 7% on $1,700,000, the annual interest accrual is $119,000.
On July 22, 2022, EF filed its Answer to the Cross-Complaint. The Answer was prepared by Simone Laroche and Jeffrey Park, with supervision by Douglas Carmichael. EF denied the existence of an automatic reversion right, denied that Section 7.2 operated as a self-executing condition subsequent, and asserted affirmative defenses including cy pres, equitable deviation, impracticability under both equitable and contractual principles, and waiver. The waiver defense was predicated on the fact that WGFT had not objected when EF publicly announced the wind-down of BATRI in December 2021, and did not issue its demand letter until January 28, 2022 — approximately four weeks later — suggesting at minimum a lack of urgency inconsistent with the Trust's current position.
D. Mediation and Stay
On August 15, 2022, the parties appeared before Judge Wainwright for the Initial Case Management Conference. At the conference, the Court expressed a preference for alternative dispute resolution and suggested that the parties attempt mediation before proceeding with discovery. Both parties agreed, and the Court set a follow-up case management conference for October 2022, contingent on the outcome of the mediation.
On September 2, 2022, the parties participated in a full-day private mediation before the Honorable Oscar Pelletreau (Ret.) at Bayshore Mediation Services, located at 201 Mission Street, Suite 900, San Francisco, CA 94105. Attending for EF were Priya Chattopadhyay (General Counsel), Margot Ellison-Yee (Executive Director), Douglas Carmichael, and Simone Laroche. Attending for WGFT were Roland Whitfield-Garner (co-trustee and son of the original settlor), Adrienne Garner-Bosch (co-trustee and granddaughter of Dorothy M. Garner), Victoria Huang, and Derek Solano Jr.
The mediation was unsuccessful. EF submitted a comprehensive mediation brief presenting its cy pres and equitable deviation arguments, with supporting documentation including the Gift Instrument, correspondence with OUSD and SFUSD, the EF Board resolution winding down BATRI, and the consent letters from Cascabel and Newhall-Sievert. WGFT submitted a responsive brief emphasizing the plain language of Section 7.2 and the Trust's position that the settlors' intent was specific to BATRI and did not extend to a general grant for EF's educational programs. Despite Judge Pelletreau's efforts, the parties were unable to bridge the gap between their positions. EF's final position at mediation was to retain all funds and redirect them; WGFT's position was full return of $1,700,000 plus interest. Neither party moved substantially from its opening stance.
Notwithstanding the failure to reach a settlement, both parties expressed a willingness to continue informal discussions while staying the litigation. Accordingly, on September 16, 2022, the parties filed a Stipulation and Order Staying All Proceedings, which Judge Wainwright signed and entered the same day. The key terms of the stay order are as follows:
(a) All proceedings in the action, including discovery, motions practice, and trial, are stayed pending further order of the Court.
(b) The stay shall be reviewed at ninety-day intervals. The parties shall file joint status reports at each interval, advising the Court of the status of settlement discussions and requesting either continuation of the stay or a case management conference to address reactivation.
(c) All parties' substantive and procedural rights are preserved during the stay, and all applicable limitation periods, including but not limited to the five-year deadline under California Code of Civil Procedure Section 583.310, are tolled for the duration of the stipulated stay.
E. Status Reports During the Stay
Since the entry of the stay order on September 16, 2022, the parties have filed nine joint status reports at approximately ninety-day intervals, as follows:
As of the date of this memorandum, the next joint status report is due on March 14, 2025, followed by the subsequent report due on June 13, 2025.
Each of the nine reports has followed the same template format, jointly signed by counsel for both parties, requesting continuation of the stay and representing to the Court that the parties "continue to evaluate settlement options and preserve their respective positions." In reality, the informal settlement discussions referenced in the earlier reports were limited to occasional telephone calls and email exchanges between Simone Laroche and Derek Solano Jr., none of which resulted in any movement from either side's position. Since approximately September 2023, there has been no meaningful engagement from WGFT's side. Solano has been responsive to administrative communications regarding the joint status report filings but has not initiated or responded to any substantive settlement overtures in over fifteen months.
The continued filing of joint status reports requesting an indefinite extension of the stay, in the absence of any genuine settlement progress, presents a number of concerns addressed in Section VI below, including the risk of judicial intervention, the accrual of interest on WGFT's cross-claim, and the impact on EF's financial planning.
IV. Current Financial Status of the Matter
A. Fees Billed and Collected
The firm's engagement in this matter is governed by an engagement letter dated April 1, 2022, executed by EF (through Priya Chattopadhyay) and Calderwood & Harkness LLP (through Francesca Morano). The engagement provides for representation on an hourly fee basis with monthly billing. The applicable hourly rates at the time of engagement were as follows:
Total fees billed to the client through December 31, 2024, are $287,450. Total fees collected through the same date are $274,100. Outstanding accounts receivable stand at $13,350 ($287,450 minus $274,100). The outstanding balance relates primarily to the December 2024 billing cycle, which includes time associated with preparation of the ninth joint status report and this internal memorandum.
The relatively modest total fee figure reflects the dormant nature of the matter since the entry of the stay in September 2022. The substantial majority of fees — approximately $230,000 — were incurred during the active phase of the matter between April and September 2022, encompassing pre-suit research and analysis (including the comprehensive internal research memorandum of April 18, 2022), complaint drafting and filing, answer preparation, mediation briefing and attendance, and initial discovery planning. Since September 2022, ongoing billing has been limited to preparation and filing of joint status reports (approximately three to five hours per report), periodic informal settlement communications, internal status discussions, and client correspondence — averaging approximately $2,500 to $3,500 per quarter.
B. Accruing Interest on WGFT's Cross-Claim
WGFT's Cross-Complaint seeks restitution of $1,700,000 together with interest at 7% per annum, running from April 28, 2022 — the date on which the ninety-day demand period under Section 7.2 expired without return of the funds. The 7% rate is asserted under the Gift Instrument's general remedies provision (Section 9.1), which references the California legal rate of interest under Civil Code Section 3289(b).
The financial implications of this interest claim are significant and grow with each passing month:
The continuing accrual of claimed interest is a meaningful factor weighing in favor of reactivation. Each additional quarter of dormancy adds approximately $29,750 to WGFT's potential recovery, assuming the reversion claim and interest provision are ultimately sustained. If the matter remains dormant through the five-year trial deadline (April 25, 2027, subject to tolling during the stay), the accrued interest on the cross-claim could approach $595,000 — bringing WGFT's total claimed recovery to approximately $2,295,000.
To be clear, EF contests both the underlying reversion claim and the applicability of the 7% interest rate. However, the interest exposure is real and quantifiable, and it represents an escalating cost of inaction that should be squarely presented to the client.
C. Client Financial Context
EF's most recent audited financial statements (FY 2021, audited by Calloway & Auerbach CPAs, LLP) reflect total annual revenue of approximately $28.3 million and total net assets of approximately $41.6 million. Of the total net assets, $14.2 million is classified as donor-restricted, and the remainder ($27.4 million) is classified as without donor restrictions.
The $4.7 million in total restricted BATRI funds — encompassing the $1.7 million from WGFT, the $2.0 million from Cascabel, and the $1.0 million from Newhall-Sievert — represents approximately 33% of EF's total donor-restricted net assets. The resolution of the restriction status of these funds is therefore material to EF's financial planning, its ability to deploy resources for ongoing and new programmatic initiatives, and the accuracy of its financial reporting to other donors, regulatory bodies, and the public.
For its part, the Whitfield-Garner Family Trust has an estimated corpus of approximately $62 million in diversified assets, based on publicly available information and representations made during the mediation. The $1.7 million at issue in this litigation represents less than 3% of the Trust's total value and does not present a financial hardship for the Trust. However, the Whitfield-Garner family — particularly Roland Whitfield-Garner and Adrienne Garner-Bosch, who serve as co-trustees — have articulated a principled position regarding the preservation of donor intent. Their stance does not appear to be motivated by financial necessity but rather by a firmly held view that the settlors' wishes should be honored as written, and that the reversion clause was specifically negotiated to protect against the scenario that has in fact occurred.
V. Assessment of Legal Position
A. EF's Core Arguments (Cy Pres and Equitable Deviation)
EF's primary legal theory rests on the equitable doctrines of cy pres and equitable deviation, both of which are codified in the California Probate Code and have a well-established history of application to charitable gifts and trusts.
Under California Probate Code Section 15409, which codifies the cy pres doctrine, where a particular charitable purpose becomes unlawful, impracticable, or impossible to achieve, and the court determines that the settlor or donor had a general charitable intent, the court may direct that the trust property be applied to a charitable purpose that reasonably approximates the original purpose. The doctrine operates as an equitable remedy designed to give effect to the donor's broader philanthropic objectives when the specific mechanism originally chosen is no longer viable.
Under California Probate Code Section 15403, which codifies the equitable deviation doctrine, the court may modify the administrative terms of a trust or gift instrument where compliance with those terms has become impracticable or wasteful due to circumstances not anticipated by the settlor or donor. Equitable deviation is generally regarded as a somewhat less demanding standard than cy pres, as it focuses on the modification of administrative provisions rather than the fundamental redirection of charitable purpose.
EF's factual basis for invoking these doctrines is strong. BATRI became impracticable to continue because both of the partner school districts upon which the program depended — OUSD and SFUSD — independently terminated their partnerships with EF. OUSD notified EF of its withdrawal in August 2020, citing budget constraints and realignment of priorities in the wake of COVID-19. SFUSD declined to renew its partnership agreement in March 2021. Without school district partners willing to host teacher residents and provide classroom placements, the BATRI model was structurally impossible to operate. These events were entirely outside EF's control and were exacerbated, though not exclusively caused, by the COVID-19 pandemic.
Critically, the Gift Instrument itself demonstrates the Whitfield-Garner family's general charitable intent to support education. The Instrument's recitals reference the settlors' "deep and abiding commitment to public education" and their desire to "expand pathways to the teaching profession for talented individuals committed to serving high-need communities." The original settlors — Herbert R. Whitfield-Garner (deceased January 14, 2019) and Dorothy M. Garner (deceased November 3, 2016) — made substantial charitable commitments throughout the Trust's history, including prior grants to educational institutions and teacher training programs. Herbert Whitfield-Garner personally participated in the negotiation of the Gift Instrument and expressed enthusiasm for BATRI as one component of a broader commitment to educational equity in the Bay Area.
EF's proposed reallocation would direct the restricted BATRI funds to its broader educational mission, encompassing teacher development programs, school partnerships, and community-based learning initiatives in Northern California. These activities are reasonably proximate to the original BATRI purpose — indeed, BATRI was itself an initiative within EF's broader educational program portfolio. The reallocation would preserve the charitable use of the funds while adapting to the changed circumstances that have rendered BATRI inoperable.
The fact that the two other restricted BATRI donors — the Cascabel Education Fund ($2,000,000) and the Newhall-Sievert Foundation ($1,000,000) — have provided written consent to reallocation further supports the reasonableness of EF's proposed course. While WGFT's consent is not legally required if the court grants equitable modification, the consent of the other donors demonstrates that EF's proposal is regarded as reasonable and appropriate by similarly situated grantors who made their contributions for the same restricted purpose.
B. WGFT's Core Arguments (Reversion Under § 7.2)
WGFT's position is grounded in the text of Section 7.2 of the Gift Instrument, which it characterizes as an express contractual reversion clause constituting a condition subsequent: if BATRI is discontinued prior to the expiration of the Grant Period, unexpended Grant Funds revert to the Trust upon written demand. WGFT contends that this clause was specifically negotiated by Herbert Whitfield-Garner to protect the Trust's interests in the event that BATRI did not succeed, and that the clause reflects the settlor's specific — not general — charitable intent with respect to these funds.
WGFT argues that the reversion clause is an express contractual remedy that supersedes, or at minimum takes precedence over, the equitable modification doctrines of cy pres and equitable deviation. In WGFT's view, the Gift Instrument is not a unilateral gift subject to equitable modification at the court's discretion, but rather a bilateral contractual agreement between sophisticated parties, each represented by counsel, that includes a specific and bargained-for remedy in the event of program discontinuation. WGFT contends that applying cy pres or equitable deviation to override an express reversion clause would effectively read Section 7.2 out of the agreement and undermine the sanctity of negotiated donor agreements across the nonprofit sector.
WGFT further contends that it complied with the procedural requirements of Section 7.2 by issuing its written demand on January 28, 2022, and that EF's failure to return the $1,700,000 within the ninety-day demand period (which expired on April 28, 2022) constitutes a breach of the Gift Instrument. WGFT claims 7% per annum interest from that date as a contractual remedy.
WGFT's position is not without force, particularly with respect to the express reversion clause. The clause is clear, specific, and unambiguous. It was negotiated by parties of relatively equal sophistication, both of which were represented by counsel. The scenario it addresses — Discontinuation of the funded program — is precisely what occurred. WGFT's argument that equity should not override express contractual terms in a negotiated grant agreement is the strongest card in its hand and presents the primary area of legal uncertainty for EF.
C. Key Legal Uncertainties
The primary open question in this case is whether Section 7.2's express reversion clause precludes the application of cy pres and equitable deviation, or whether those equitable doctrines may be invoked notwithstanding the existence of a specific contractual reversion provision in a negotiated grant agreement.
This question was addressed at length in the internal research memorandum dated April 18, 2022, prepared by Simone Laroche and transmitted to Douglas Carmichael. The memorandum concluded that EF has strong arguments for equitable deviation and reasonably strong arguments for cy pres, given the well-documented impracticability of continuing BATRI and the general charitable intent reflected in the Gift Instrument's recitals and in the settlors' broader philanthropic history. However, the memorandum also identified the presence of an explicit reversion clause in a negotiated grant agreement — as opposed to a unilateral gift or bequest — as introducing meaningful uncertainty. The equitable modification doctrines developed primarily in the context of charitable trusts and unilateral gifts, and their application to bilateral grant agreements with express reversion provisions is not fully settled under California law.
There is limited California appellate authority directly addressing this question. The leading cases on cy pres (e.g., Estate of Buck (1986) (San Francisco Superior Court), In re Estate of Giffin (1938) 10 Cal.2d 574) and equitable deviation involve testamentary trusts or unilateral gifts, not negotiated grant agreements. Federal tax-exempt organization cases provide some analogous guidance, but the intersection of contract law principles with equitable modification doctrines in the specific context of a negotiated philanthropic agreement between a family trust and a nonprofit grantee remains an area in which judicial guidance would be valuable.
A judicial determination would provide clarity not only for the $1.7 million in WGFT funds but also for the broader framework governing the remaining $3.0 million in restricted BATRI funds from Cascabel and Newhall-Sievert. Although those donors have consented to reallocation, a judicial declaration establishing EF's right to redirect restricted funds under cy pres or equitable deviation would provide a more durable legal foundation than donor consent alone, particularly for purposes of EF's auditors and for any future disputes that may arise with other restricted donors.
Risk Assessment: We assess EF's position as moderate-to-favorable on the merits. The impracticability facts are strong and essentially undisputed. The general charitable intent argument is well-supported. The reversion clause argument is WGFT's strongest card, but California courts have historically disfavored the forfeiture of charitable gifts and have broadly construed general charitable intent where the evidence supports it. If the case proceeds to summary judgment, we believe there is a reasonable probability — estimated at 55% to 65% — that the court would grant modification under cy pres or equitable deviation. However, the outcome is not certain, and the possibility of an adverse ruling — particularly one enforcing Section 7.2 as written — cannot be discounted.
VI. Strategic Options
The litigation team has identified three principal strategic options for the client's consideration. Each option is analyzed below with respect to its advantages, disadvantages, estimated costs, and likely timeline.
Option 1: Continue the Stay and Pursue Further Settlement Discussions
Description. Under this option, EF would maintain its current posture. The firm would file the next joint status report, due March 14, 2025, requesting continuation of the stay, and would continue the ninety-day reporting cycle. EF would simultaneously attempt to re-engage WGFT in substantive settlement discussions, either through renewed direct outreach from counsel or through the engagement of a new mediator.
Advantages.
(a) This option represents the lowest immediate cost to the client, requiring only the continued expenditure of approximately $2,500 to $3,500 per quarter for status report preparation and administrative maintenance of the case.
(b) It preserves the parties' relationship, such as it is, and leaves the door open for a non-litigated resolution. Given the philanthropic context of the dispute and the potential value of a future relationship between EF and the Whitfield-Garner family, this consideration is not trivial.
(c) EF avoids the distraction and public visibility associated with active litigation. As a nonprofit public benefit corporation, EF is sensitive to the optics of a contested legal dispute with a prominent donor family, and continued dormancy shields the matter from public attention.
Disadvantages.
(a) No meaningful settlement progress has occurred in over fifteen months. WGFT's counsel has not engaged substantively since approximately September 2023, and there is no indication that the Trust's position has softened. Continued pursuit of settlement in the absence of any countervailing pressure is unlikely to yield results.
(b) The accruing interest on WGFT's cross-claim increases EF's potential exposure by approximately $119,000 per year, or $9,917 per month. As of the date of this memorandum, the claimed interest has grown to approximately $317,333, and it will continue to grow for as long as the matter remains unresolved.
(c) Judge Wainwright may lose patience with indefinite extensions of the stay. While the stipulated stay order does not contain an express expiration date, the Court retains inherent authority to order the parties to reactivate the case or to dismiss for lack of prosecution. California Code of Civil Procedure Section 583.410 provides that a court may dismiss an action for delay in prosecution if the action is not brought to trial within two years of filing; Section 583.310 imposes a mandatory five-year deadline. The five-year deadline runs from the filing date of April 25, 2022, i.e., April 25, 2027, though the tolling provisions of the stipulated stay order should apply to exclude the period of the stay from the calculation. Nevertheless, the longer the stay continues, the greater the risk that the Court will take action sua sponte or that WGFT will seek to lift the stay on its own initiative.
(d) The continued dormancy of the litigation hampers EF's financial planning regarding the $4.7 million in restricted BATRI funds. The Foundation cannot deploy these funds for programmatic purposes, cannot report their release from restriction in its financial statements, and must continue to maintain them as restricted net assets on its balance sheet, reducing its programmatic flexibility.
(e) The dormancy arguably serves WGFT's strategic interests. If the Trust views the status quo — in which the funds remain restricted and unusable by EF — as preferable to any compromise, then WGFT has no incentive to engage in settlement discussions. The passage of time benefits WGFT both through the accrual of interest on its cross-claim and through the practical immobilization of funds that EF cannot use.
Option 2: Reactivate the Case and Move for Summary Judgment
Description. Under this option, EF would notify WGFT of its intent to lift the stay and would file a motion to lift the stipulated stay. Simultaneously, or shortly thereafter, EF would file a Motion for Summary Judgment (or, in the alternative, Summary Adjudication) on its declaratory relief claim, arguing that the doctrines of cy pres and equitable deviation entitle EF to redirect the restricted BATRI funds as a matter of law. EF would also seek summary adjudication on WGFT's cross-claim for restitution and interest.
Advantages.
(a) This option forces a resolution of the core legal question — the interaction between Section 7.2's reversion clause and the cy pres/equitable deviation doctrines — which is largely a question of law applied to essentially undisputed facts. The key facts are documentary and are not meaningfully in dispute: the Gift Instrument, the school district correspondence, the EF Board resolution, and the program financial records collectively establish the impracticability of continuing BATRI. The principal legal question — whether equitable modification overrides an express reversion clause in a negotiated grant agreement — is a question of law suitable for summary adjudication.
(b) Reactivation stops, or at least addresses, the continuing accrual of interest on WGFT's cross-claim. Even if the interest clock is not formally stopped upon reactivation, active litigation demonstrates to the Court that EF is diligently pursuing resolution, which may bear on the Court's assessment of the reasonableness of any interest award.
(c) EF has strong factual underpinnings for its position. The impracticability of continuing BATRI is well-documented and essentially undisputed. The general charitable intent of the Whitfield-Garner family is supported by the Gift Instrument's recitals and by the settlors' broader philanthropic history. COVID-19 provides additional equitable context.
(d) A preliminary working draft of the summary judgment outline already exists, having been prepared by Simone Laroche and Jeffrey Park in the fall of 2022. While the outline requires updating and substantial development, it provides a head start. The litigation team estimates that a filing-ready motion could be prepared within approximately eight to ten weeks of authorization from the client.
(e) A judicial resolution would establish a legal framework applicable to the full $4.7 million in restricted BATRI funds, including the $3.0 million from Cascabel and Newhall-Sievert. Even though those donors have consented to reallocation, a court order authorizing the redirection of the funds would provide a more robust legal foundation for EF's auditors, for its board of directors, and for any future disputes involving similar donor restriction issues.
(f) Given the documentary nature of the evidence, limited discovery is likely needed in advance of summary judgment. The key documents — the Gift Instrument, the OUSD and SFUSD correspondence, the EF Board resolution, the BATRI financial records, the demand letter, and the pre-suit correspondence — are already in the firm's possession or are obtainable from the client. There may be some limited need for discovery from WGFT (for example, to establish the settlors' broader charitable intent or to obtain trust administration records), but this is unlikely to be extensive or time-consuming.
Disadvantages.
(a) This option entails significant additional cost. Based on the separate litigation budget memorandum prepared by Francesca Morano and Simone Laroche, we estimate that the additional fees to litigate through summary judgment — including motion to lift stay, limited discovery, expert consultation, MSJ briefing, opposition to any WGFT cross-motion, and hearing preparation — would be in the range of $175,000 to $250,000. This does not include trial costs if summary judgment is denied or is granted only in part.
(b) There is a risk that WGFT will file a cross-motion for summary judgment on its reversion claim. If both cross-motions are filed, the Court will be required to determine the legal question on a fully briefed record — which is, in one sense, an advantage (forcing resolution), but which also means that an adverse ruling is possible on a developed record, with fewer options for course correction.
(c) If summary judgment is denied, the case will proceed to a full trial, with attendant further cost escalation. Trial preparation and trial itself could add an additional $300,000 to $500,000 in fees, depending on duration and complexity.
(d) Before or concurrent with MSJ preparation, the team will need to evaluate whether limited discovery is necessary. This may include propounding interrogatories and document requests on WGFT, and potentially taking depositions of Roland Whitfield-Garner and Adrienne Garner-Bosch as current co-trustees of the Trust, to establish the settlors' intent and the circumstances surrounding the negotiation of the Gift Instrument. Expert witness fees may also be incurred if the Court requires expert testimony on charitable purpose and cy pres analysis, though the team's current assessment is that expert testimony is unlikely to be required for summary judgment purposes.
(e) Active litigation may strain EF's relationship with the Whitfield-Garner family, potentially affecting future philanthropic engagement. While the relationship is already strained by the dispute, the transition from a dormant to an actively litigated case may be perceived by the family as an escalation. Given the relatively small philanthropic community in the Bay Area and the Whitfield-Garner family's prominence within it, EF should weigh this consideration carefully.
Estimated Timeline. If the client authorizes reactivation in Q2 2025, we estimate the following approximate timeline:
The exact timeline will depend on Judge Wainwright's calendar and the scope of any discovery that proves necessary. The timeline above assumes a cooperative but not expedited discovery process and a normal briefing schedule on the summary judgment motion.
Option 3: Propose a Structured Compromise to WGFT
Description. Under this option, EF would present a formal written settlement proposal to WGFT through counsel, offering meaningful concessions while preserving EF's ability to use the bulk of the restricted funds for educational purposes. The proposal would be transmitted by Douglas Carmichael to Victoria Huang, with a defined response period. The potential compromise elements are as follows:
(a) EF returns a portion of the $700,000 in unexpended disbursed WGFT funds to the Trust — specifically, 50%, or $350,000 — as a goodwill gesture acknowledging the Trust's concerns about donor intent.
(b) WGFT retains the undisbursed Tranche 4 ($1,000,000), which was never transferred to EF and remains in the Trust's control, resolving that component of the dispute entirely.
(c) EF retains the remaining $350,000 of unexpended WGFT funds, redirected with WGFT's written consent to EF's broader educational mission, including teacher development, school partnerships, and community-based learning initiatives in Northern California.
(d) EF agrees to naming and recognition rights in connection with the redirected funds — for example, naming a teacher development program component after the Whitfield-Garner family — and agrees to enhanced reporting obligations, including annual reports to the Trust for a period of three to five years detailing the use of the redirected funds.
(e) The parties execute a mutual release of all claims, including EF's declaratory relief claim and WGFT's cross-claim for restitution and interest. WGFT's interest claim ($317,333 accrued to date and growing) is waived as part of the global settlement.
(f) The $3,000,000 from Cascabel Education Fund and Newhall-Sievert Foundation, for which donor consent to reallocation has already been obtained, proceeds to reallocation on EF's books without further litigation, as those funds are not subject to the WGFT dispute.
Under this proposal, WGFT would recover a total of $1,350,000 of the $1,700,000 in dispute ($1,000,000 in the retained Tranche 4 plus $350,000 in returned unexpended funds), while EF would retain $350,000 in redirected funds and resolve the $317,333-plus interest claim. This outcome provides the Trust with approximately 79% of its claimed principal recovery while allowing EF to demonstrate that it has achieved a meaningful judicial or negotiated authorization for the redirection of restricted funds.
Advantages.
(a) A settlement, if achievable, would provide prompt resolution at substantially lower cost than active litigation. The cost of preparing and negotiating a settlement proposal is a fraction of the $175,000 to $250,000 estimated for summary judgment proceedings.
(b) Settlement preserves and potentially strengthens EF's relationship with the Whitfield-Garner family. The naming rights and enhanced reporting components are designed to address the family's concern about donor intent and to maintain a positive ongoing relationship.
(c) WGFT's recovery of $1,350,000 out of $1,700,000 in claimed principal — approximately 79% — represents a potentially face-saving result for the Trust, particularly given that WGFT's chances of recovering the full amount plus interest at trial are not certain.
(d) Settlement avoids the risk of an adverse judicial ruling on the reversion clause. If the Court were to enforce Section 7.2 as written, EF would be required to return the full $1,700,000 plus potentially substantial accrued interest, an outcome significantly worse than the proposed compromise.
Disadvantages.
(a) WGFT has shown no inclination to compromise during more than two years of dormancy and sporadic settlement discussions. The Trust's position has been consistent and firmly held from the outset, and there is no indication that a formal proposal, however reasonable, would be received with any greater receptivity than prior informal overtures.
(b) If EF makes the proposed settlement offer and it is rejected, EF will have shown its hand without gaining any strategic advantage, and will likely need to proceed to Option 2 regardless, with additional delay.
(c) A settlement in which EF returns a significant portion of the funds would effectively concede that Section 7.2 operates as WGFT contends — or at minimum would be perceived as such by other donors with similar reversion clauses. This could undermine EF's negotiating position in future donor restriction disputes.
(d) Settlement does not establish a judicial precedent or framework for future disputes. A court order authorizing equitable modification would provide durable guidance not only for the WGFT funds but for EF's handling of restricted funds more broadly. A negotiated settlement is particular to the parties and creates no precedent.
VII. Recommendation
Based on the foregoing analysis, the litigation team recommends the following course of action:
First, we recommend scheduling a strategy call with Priya Chattopadhyay (General Counsel) and Margot Ellison-Yee (Executive Director) in January 2025 to present the three strategic options described above and to seek the client's direction. The call should include Douglas Carmichael, Francesca Morano, and Simone Laroche.
Second, the litigation team's preliminary recommendation is to pursue a hybrid of Options 2 and 3, structured as follows:
(a) Phase 1 — Final Settlement Offer (Option 3). EF, through Calderwood & Harkness, would transmit a formal structured settlement proposal to WGFT through Victoria Huang at Pratchett, Huang & Solano LLP. The proposal would incorporate the compromise elements described in Option 3 above, with appropriate modifications based on client input. The proposal letter would include a defined response deadline of forty-five (45) days from the date of transmission.
(b) Phase 2 — Reactivation (Option 2). If WGFT declines the settlement offer, or fails to respond within the forty-five-day deadline, EF would proceed to reactivate the litigation. The firm would file a motion to lift the stipulated stay and would advance promptly to summary judgment. Preliminary MSJ drafting by Simone Laroche and Jeffrey Park would begin immediately upon client authorization, drawing on the existing working outline, so that the motion could be filed on an expedited basis following the expiration of the settlement deadline.
This hybrid approach provides WGFT with one final, clearly defined opportunity to negotiate in good faith and to achieve a result that is objectively favorable to the Trust (recovery of approximately 79% of the claimed principal without the cost and uncertainty of litigation). At the same time, it establishes a definite timeline for resolution, ensuring that the matter does not continue to languish indefinitely to EF's increasing detriment.
In the strategy call with the client, we would emphasize the following considerations:
(a) The matter cannot remain dormant indefinitely. The accruing interest on WGFT's cross-claim, the five-year trial deadline (April 25, 2027, subject to tolling during the stay), and EF's pressing need for financial flexibility with respect to the $4.7 million in restricted BATRI funds all militate strongly in favor of active steps toward resolution.
(b) The next joint status report is due March 14, 2025. A decision on strategy by approximately February 2025 would allow orderly planning for the content of that status report. If the client authorizes the hybrid approach, the March status report could either reflect the pendency of the settlement proposal or, if the settlement deadline has already passed, notify the Court of the parties' intent to lift the stay.
(c) If reactivation is chosen, preliminary work can begin immediately. The existing MSJ working outline, the internal research memorandum, and the firm's familiarity with the factual record provide a strong foundation for prompt action. We estimate that a filing-ready MSJ could be prepared within eight to ten weeks of authorization.
VIII. Open Items and Next Steps
The following items require attention in the near term:
• [ ] Schedule strategy call with Chattopadhyay and Ellison-Yee. Target: late January 2025. Laroche to coordinate with Chattopadhyay's office on availability. Participants: Carmichael, Morano, Laroche, Chattopadhyay, Ellison-Yee.
• [ ] Prepare client update letter summarizing this analysis. Target: early January 2025. Laroche to prepare draft for Carmichael review and signature. The letter should present the three options and the hybrid recommendation at a level of detail appropriate for a client-facing communication, without disclosing internal work product assessments of likelihood of success.
• [ ] If client approves hybrid approach, draft settlement proposal letter. Laroche to prepare initial draft for Carmichael review and transmission to Victoria Huang at Pratchett, Huang & Solano LLP. The proposal should include the specific compromise terms, naming rights and reporting components, the mutual release framework, and a forty-five-day response deadline.
• [ ] Update litigation budget memorandum. Morano and Laroche to review and update the existing litigation budget with current rate assumptions, as hourly rates may have been adjusted since the April 2022 engagement letter. The updated budget should be available for discussion during the client strategy call.
• [ ] Confirm status of $700,000 in unexpended WGFT funds. Laroche to verify with Chattopadhyay that the $700,000 remains segregated on EF's books as restricted funds and has not been commingled or otherwise impaired. Laroche to also confirm with Calloway & Auerbach CPAs, LLP (EF's independent auditor) the treatment of these funds in EF's FY 2023 and FY 2024 financial statements.
• [ ] Confirm status of Cascabel Education Fund and Newhall-Sievert Foundation consent letters. Laroche to verify with Chattopadhyay that the consent letters from both donors remain current and that neither donor has withdrawn or modified its consent during the dormancy period. Copies of the consent letters should be obtained and added to the case file if not already on hand.
• [ ] Review and refresh the preliminary MSJ outline. Laroche and Park to review the working MSJ outline prepared in fall 2022 for current viability, update the case law research to include any developments in California cy pres and equitable deviation law since 2022, and identify any additional factual support or evidentiary submissions that would be required for a filing-ready motion.
• [ ] File next joint status report by March 14, 2025. Laroche to coordinate with Derek Solano Jr. at Pratchett, Huang & Solano LLP on template language for the joint report. The content of the report will depend on the status of the client strategy discussion; if a decision on reactivation has been made by that date, the report should reflect the change in posture.
• [ ] Address outstanding accounts receivable of $13,350. Morano to coordinate with the billing coordinator to follow up on the outstanding balance and ensure prompt collection.
IX. Attachments and Cross-References
The following documents are referenced herein and are available in the firm's document management system under C&H Matter No. 1028-00001:
1. Internal Research Memorandum — Cy Pres and Equitable Deviation Analysis (Laroche to Carmichael, dated April 18, 2022). Comprehensive analysis of EF's legal theories under California Probate Code Sections 15409 and 15403, including survey of relevant California case law and assessment of the interaction between express reversion clauses and equitable modification doctrines.
2. Mediation Brief (submitted on behalf of Estuary Foundation, September 2, 2022). Filed with Bayshore Mediation Services in connection with the mediation before Hon. Oscar Pelletreau (Ret.).
3. Preliminary MSJ Outline (working document, Laroche and Park, fall 2022). Draft outline of anticipated summary judgment motion, including proposed structure, key arguments, and evidentiary submissions. Requires updating and substantial development before filing.
4. Litigation Budget Memorandum (Morano and Laroche). Estimated costs for various litigation scenarios, including summary judgment and trial. Requires updating with current rate assumptions.
5. Ninth Joint Status Report (filed December 13, 2024). Most recent joint status report submitted to the Court pursuant to the September 16, 2022 Stipulation and Order Staying All Proceedings.
6. Engagement Letter (dated April 1, 2022). Governing engagement agreement between Estuary Foundation and Calderwood & Harkness LLP for representation in this matter.
CONFIDENTIALITY NOTICE: This memorandum constitutes attorney work product and is protected by the attorney-client privilege and the work product doctrine. It is prepared solely for internal use by Calderwood & Harkness LLP attorneys assigned to C&H Matter No. 1028-00001 and is not to be disclosed, distributed, or otherwise made available to any person or entity outside the firm without prior written authorization from the responsible partner.
Author: Simone Laroche, Senior Associate, Litigation — General
Distribution: Douglas Carmichael, Responsible Partner; Francesca Morano, Billing Partner
Note: Working Associate Jeffrey Park may be provided a copy of this memorandum for reference purposes upon approval by either receiving partner.
Tranche | Scheduled Date | Amount | Status
Tranche 1 | June 2018 | $1,500,000 | Disbursed June 22, 2018
Tranche 2 | July 2019 | $1,250,000 | Disbursed July 15, 2019
Tranche 3 | July 2020 | $1,250,000 | Disbursed July 10, 2020
Tranche 4 | July 2021 | $1,000,000 | Never disbursed (program suspended)
Total Disbursed | $4,000,000
Total Undisbursed | $1,000,000
Category | Amount
Total WGFT Grant Funds Disbursed (Tranches 1–3) | $4,000,000
BATRI Expenditures (2018–2021) | ($3,300,000)
Unexpended Disbursed WGFT Funds | $700,000
Undisbursed WGFT Funds (Tranche 4) | $1,000,000
Total WGFT Funds in Dispute | $1,700,000
Report No. | Filing Date | Summary
First | December 16, 2022 | Requested continuation; reported informal discussions underway
Second | March 17, 2023 | Requested continuation; reported informal discussions ongoing
Third | June 16, 2023 | Requested continuation; reported limited engagement
Fourth | September 15, 2023 | Requested continuation; no substantive developments
Fifth | December 15, 2023 | Requested continuation; no substantive developments
Sixth | March 15, 2024 | Requested continuation; no substantive developments
Seventh | June 14, 2024 | Requested continuation; no substantive developments
Eighth | September 13, 2024 | Requested continuation; no substantive developments
Ninth (most recent) | December 13, 2024 | Requested continuation; no substantive developments
Timekeeper | Role | 2022 Hourly Rate
Douglas Carmichael | Responsible Partner | $895
Francesca Morano | Billing Partner | $850
Simone Laroche | Lead Associate | $625
Jeffrey Park | Working Associate | $525
Metric | Amount
Principal claimed | $1,700,000
Annual interest at 7% | $119,000
Monthly interest accrual | $9,917
Interest accrued as of December 20, 2024 (approx. 2 years, 8 months from April 28, 2022) | $317,333 (approx.)
Total claimed amount as of December 20, 2024 | $2,017,333 (approx.)
Milestone | Estimated Date
Motion to Lift Stay filed | May–June 2025
Stay lifted; discovery commences | July–August 2025
Limited discovery completed | September–October 2025
MSJ filed | October–November 2025
Opposition and reply briefing | December 2025–January 2026
MSJ hearing | February–March 2026

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT

INTERNAL MEMORANDUM

Record

Parties

Dates

Amounts