1028-00001 · Client 1028 · Correspondence

client-update-letter-january-2025.docx DOCUMENT Litigation

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PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION

CALDERWOOD & HARKNESS LLP One Market Plaza, Suite 3600 San Francisco, California 94105 Telephone: (415) 623-8000 Facsimile: (415) 623-8001

January 10, 2025

VIA ELECTRONIC MAIL AND FIRST-CLASS MAIL

Priya Chattopadhyay, Esq. General Counsel Estuary Foundation

Margot Ellison-Yee Executive Director Estuary Foundation

1440 Embarcadero Way, Suite 300 San Francisco, California 94107

Re: Estuary Foundation v. The Whitfield-Garner Family Trust Case No. CGC-22-599481 (Superior Court of California, County of San Francisco, Department 302, Hon. Patricia R. Wainwright) C&H Matter No. 1028-00001

Dear Ms. Chattopadhyay and Ms. Ellison-Yee:

I. Purpose of Letter

We are writing to provide a comprehensive update on the current status of the above-referenced declaratory judgment action and to recommend that we schedule a strategy call at the earliest convenience to discuss the path forward. As discussed in greater detail below, the matter has been stayed by stipulation since September 16, 2022, and the parties are now approaching a critical juncture at which continuing the stay may no longer serve Estuary Foundation's ("EF's") interests.

Over the past two-and-a-half years, the stay has served a useful purpose: it has preserved EF's rights while allowing the parties to explore the possibility of a negotiated resolution without incurring the substantial costs of active litigation. However, as we explain in this letter, settlement prospects have not materially improved, the financial exposure associated with the claimed interest on the Cross-Complaint continues to accrue, and we believe the time has come for EF to make a strategic decision about whether to reactivate the litigation and move toward a dispositive resolution. This letter addresses each of these considerations in turn.

II. Background Summary

By way of brief background, EF filed its Complaint for Declaratory Relief on April 25, 2022, seeking a judicial determination that EF may lawfully redirect approximately $4.7 million in restricted grant funds originally designated for the Bay Area Teacher Residency Initiative ("BATRI") to EF's broader educational mission. BATRI was a multi-year teacher preparation and placement program that EF administered in partnership with the Oakland Unified School District ("OUSD") and the San Francisco Unified School District ("SFUSD"), funded through restricted grants from three institutional donors.

The defendant, The Whitfield-Garner Family Trust ("WGFT"), filed an Answer and Cross-Complaint on June 10, 2022. In its Cross-Complaint, WGFT seeks restitution of $1,700,000 — comprised of $700,000 in unexpended disbursed funds and the $1,000,000 undisbursed fourth tranche ("Tranche 4") — plus interest at 7% per annum from April 28, 2022, the date on which the 90-day demand period under Section 7.2 of the Gift Instrument expired.

To provide the full context for the declaratory judgment action, the $4.7 million total at issue is comprised of three components:

(a) $1,700,000 attributable to the WGFT grant, which is the sole contested amount in the litigation;

(b) $2,000,000 from the Cascabel Education Fund, which has formally consented to the proposed reallocation of its restricted grant funds; and

(c) $1,000,000 from the Newhall-Sievert Foundation, which has likewise consented to the proposed reallocation of its restricted grant funds.

WGFT remains the sole objecting donor among the three BATRI funders. EF's declaratory judgment complaint covers all $4.7 million in order to establish the governing legal framework for EF's authority to redirect the entirety of the restricted BATRI funds, including those for which donor consent has already been obtained.

The core legal dispute between the parties centers on two competing theories. EF relies on the equitable doctrines of cy pres and equitable deviation, codified in relevant part under California Probate Code Sections 15409 and 15403, arguing that BATRI's specific charitable purpose became impracticable when OUSD terminated its partnership with EF in August 2020 — citing severe budget constraints exacerbated by the COVID-19 pandemic — and SFUSD thereafter declined to renew its partnership agreement in March 2021, citing district-wide program consolidation. Without school district partners willing to host and employ teacher residents, the specific operational model contemplated by the BATRI program could no longer be carried out, and EF's Board of Directors formally voted to wind down the program effective December 31, 2021.

WGFT, for its part, counters that Section 7.2 of the Gift Instrument dated June 15, 2018 — which governs the WGFT grant — contains an express contractual reversion clause that provides for the return of unexpended and undisbursed funds in the event the designated program cannot be completed. WGFT argues that this contractual remedy supersedes any equitable modification that might otherwise be available under Probate Code Sections 15409 or 15403, and that the reversion clause constitutes the exclusive remedy agreed upon by the parties at the time of the gift.

III. Current Status of the Stay

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

To date, ten joint status reports have been filed with the Court on the following dates:

1. December 16, 2022

2. March 17, 2023

3. June 16, 2023

4. September 15, 2023

5. December 15, 2023

6. March 15, 2024

7. June 14, 2024

8. September 13, 2024

9. December 13, 2024

10. March 14, 2025 (upcoming, to be filed)

Each joint status report filed to date has stated that the parties remain engaged in informal settlement discussions but have not yet reached a resolution, and each has requested that the Court continue the stay for an additional 90-day period. The Court has granted each such request without comment, though we note that Judge Wainwright's standard practice is to inquire more closely into the basis for continued stays after approximately 18 to 24 months, and we anticipate that the Court may begin to express concern about the duration of the stay as we approach the three-year mark.

The next joint status report is due on June 13, 2025. This upcoming filing presents a natural decision point for EF: the joint report will either request a further continuation of the stay or notify the Court that EF wishes to lift the stay and resume active litigation.

It is important for EF's leadership to understand that, despite the repeated extensions of the stay, no substantive settlement progress has been made. The parties' respective positions remain materially unchanged since the September 2, 2022 mediation conducted before retired Judge Oscar Pelletreau at Bayshore Mediation Services, which ended without agreement after a full-day session. While the stay has preserved the status quo and avoided litigation costs in the interim, it has not generated the negotiating momentum that we had initially hoped it might produce.

IV. Ongoing Financial Exposure from the Stay

One of the most significant practical consequences of the continued stay is the ongoing accrual of claimed interest on WGFT's Cross-Complaint. As noted above, WGFT's Cross-Complaint seeks restitution of $1,700,000 plus interest at a rate of 7% per annum, accruing from April 28, 2022 — the date WGFT asserts the 90-day demand period under Section 7.2 of the Gift Instrument expired without satisfaction.

The annual interest accrual on this claim is approximately $119,000 per year. As of the date of this letter, January 10, 2025, approximately two years and eight and one-half months have elapsed since the April 28, 2022 accrual date asserted by WGFT. This represents potential claimed interest of roughly $320,000, subject to the Court's ultimate determination of whether interest is owed at all, and if so, at what rate and from what date. We note that the 7% rate claimed by WGFT is the default rate under California Civil Code Section 3289(b) for contract claims where the contract itself does not specify an interest rate; the Gift Instrument does not contain an express interest provision, and we believe there are colorable arguments that a lower rate — or no prejudgment interest at all — should apply in the context of a charitable trust dispute.

Each additional 90-day stay period adds approximately $29,750 in claimed interest exposure. Over the course of a calendar year, this amounts to nearly $119,000 in additional claimed liability that EF may ultimately have to contest or account for.

While we believe that EF has strong grounds to contest the interest claim — both as to the applicable rate and as to whether prejudgment interest should be awarded at all in the context of a good-faith cy pres dispute — the continued accrual is a factor that weighs in favor of resolving or adjudicating the matter rather than extending the stay indefinitely. Simply put, delay benefits WGFT's interest claim more than it benefits EF.

We also wish to reassure EF that the Stipulation expressly preserves all parties' rights and tolls applicable limitations periods during the stay. EF has not lost any procedural or substantive rights as a result of the stay to date. All claims, defenses, and counterclaims remain fully preserved, and all deadlines that were in effect at the time of the stay will resume running from the point at which they were tolled.

V. Assessment of Settlement Prospects

We have given careful consideration to the prospects for a negotiated resolution and wish to share our candid assessment with EF's leadership.

Despite more than two years of periodic informal discussions, WGFT — through its co-trustees, Roland Whitfield-Garner and Adrienne Garner-Bosch, advised by family member Nathaniel Whitfield-Garner (who, while not an attorney of record, has been actively involved in the trustees' decision-making) — has not materially shifted from its demand for the full return of $1,700,000 plus accrued interest. WGFT's position has remained consistent and firm throughout the course of the informal discussions: the trustees believe they are entitled to restitution under Section 7.2 of the Gift Instrument, and they have shown no willingness to entertain a compromise that would permit EF to retain any portion of the WGFT funds.

Defense counsel Victoria Huang of Pratchett, Huang & Solano LLP has indicated informally — in conversations with both Douglas Carmichael and Francesca Morano — that WGFT views the Section 7.2 reversion clause as dispositive of the entire dispute and sees little reason to compromise on a position the trustees believe will be vindicated by the Court. While we respect Ms. Huang's advocacy on behalf of her client, this characterization of the legal landscape is, in our view, overstated for the reasons discussed in Section VI below.

The settlement frameworks we proposed during and after the September 2022 mediation — including partial reallocation of a portion of the WGFT funds to EF's broader educational mission with the balance returned to WGFT, enhanced reporting requirements to the Trust regarding the use of reallocated funds, and naming rights or programmatic recognition in honor of Herbert R. Whitfield-Garner and Dorothy M. Garner — have not gained traction. Each of these proposals was communicated in good faith through both counsel and through the mediator, and each was declined by WGFT without a counterproposal.

In our professional judgment, further extensions of the stay without the pressure of active litigation are unlikely to produce a negotiated resolution. The dynamics of the dispute have calcified, and neither party's posture has evolved in a way that suggests a zone of agreement exists under current conditions. We believe that the filing of a motion for summary judgment would materially alter the litigation dynamics and may create new incentives for settlement — either before or after briefing — that do not presently exist.

VI. Recommended Strategy: Reactivation and Motion for Summary Judgment

Based on our assessment of the current posture of the case, the financial exposure from the continued stay, and the stalled settlement discussions, we recommend that EF consider reactivating the litigation and moving for summary judgment on its cy pres and equitable deviation claims. We outline below the strengths of EF's position, the risks that must be considered, and the evidentiary support available for a dispositive motion.

A. Strengths of EF's Position

We believe EF has a strong case for equitable modification under the cy pres and equitable deviation doctrines, supported by the following considerations:

1. Well-Documented Impracticability. The impracticability of BATRI's specific charitable purpose is thoroughly documented in the record. OUSD terminated its partnership with EF in August 2020, citing severe budget constraints aggravated by the COVID-19 pandemic. SFUSD subsequently declined to renew its partnership agreement in March 2021, citing district-wide program consolidation that eliminated the administrative infrastructure necessary to support the teacher residency model. Without cooperating school district partners, the BATRI program could not be operationalized in the manner contemplated by the Gift Instrument. The EF Board of Directors formally voted to wind down BATRI on December 31, 2021, after determining that no viable alternative district partnerships were available. This sequence of events establishes a clear and well-supported record of impracticability.

2. General Charitable Intent of the Original Donors. The Gift Instrument, read in its entirety, reflects the donors' — Herbert R. Whitfield-Garner (deceased 2019) and Dorothy M. Garner (deceased 2016) — general charitable intent to support education, not merely the specific operational mechanism of the BATRI program. The preamble to the Gift Instrument expressly states the donors' desire to "advance the quality of public education in the San Francisco Bay Area," and the selection of BATRI was a means to that end, not the end itself. This general charitable intent is the threshold inquiry for cy pres analysis, and we believe EF can demonstrate it convincingly.

3. Both Original Settlors Are Deceased. Both Herbert R. Whitfield-Garner and Dorothy M. Garner are now deceased, which under California law may strengthen the argument for cy pres modification. When the original donors are no longer living, the court focuses on the donor's objectively manifested general charitable intent as reflected in the instrument and surrounding circumstances, rather than on the subjective current preferences of successor trustees or family members. This is a significant factor that favors EF's position.

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

5. COVID-19 Disruptions. The COVID-19 pandemic, which began to affect school district operations in March 2020, provides additional external evidence of impracticability. The pandemic fundamentally disrupted in-person teacher training and placement programs across the state and nation, and it was a direct contributing cause of OUSD's budget crisis and SFUSD's decision to consolidate programs. Courts have recognized pandemic-related disruptions as relevant impracticability evidence in range contractual and equitable contexts, and this evidence will support EF's showing.

B. Risks to Consider

In the interest of providing EF with a balanced assessment, we wish to highlight the following risks associated with a summary judgment motion:

1. WGFT's Section 7.2 Reversion Argument. WGFT's strongest argument is that Section 7.2 of the Gift Instrument contains an express contractual reversion clause that provides for the return of unexpended and undisbursed funds in the event the designated program cannot be completed. WGFT will argue that by agreeing to this clause, EF acknowledged a contractual remedy for this precise scenario and thereby waived any right to seek equitable modification under cy pres or equitable deviation. This is a serious argument that cannot be dismissed lightly, and it will require careful briefing to demonstrate why the equitable doctrines should override or coexist with the contractual reversion provision, particularly in light of the charitable trust context.

2. Contract vs. Charitable Trust Characterization. The court must determine a threshold question: whether the Gift Instrument is governed primarily by contract principles or by charitable trust principles. If the court views the Gift Instrument as primarily a bilateral contract, the Section 7.2 reversion clause may be given greater weight and the availability of equitable modification may be more limited. If the court views the instrument as creating or contributing to a charitable trust — which we believe is the stronger characterization — then the cy pres and equitable deviation doctrines apply with full force, and the reversion clause is merely one factor in the equitable analysis rather than a dispositive contractual term. The outcome of this threshold question will significantly influence the cy pres analysis, and it is not entirely predictable.

3. Triable Issues of Material Fact. There is no guarantee that the court will grant summary adjudication. The court may find triable issues of material fact regarding the donors' intent, the scope of impracticability, or whether EF's proposed reallocation is sufficiently consistent with the donors' general charitable purpose to satisfy the cy pres standard. If the court denies summary judgment, the matter would proceed to a bench trial, which would add time and cost. Even in that scenario, however, the summary judgment briefing would sharpen the issues for trial and would likely prompt renewed settlement discussions.

C. Evidentiary Support Available

We have identified the following evidence that is currently available to support EF's motion for summary judgment, and we believe this evidentiary record is robust:

• The Gift Instrument and Grant Agreement dated June 15, 2018, including Exhibit A, which describes the BATRI program in detail, its objectives, the contemplated cohort structure, and the disbursement schedule for the four tranches of funding;

• BATRI program records documenting three completed cohorts (24 residents in Cohort 1, 30 residents in Cohort 2, and 15 residents in Cohort 3), total expenditures of $3,300,000, and program outcomes including resident placement rates and retention data;

• Correspondence from OUSD dated August 14, 2020, formally terminating its partnership with EF's BATRI program, and correspondence from SFUSD dated March 22, 2021, declining to renew its partnership agreement;

• The EF Board of Directors resolution dated December 31, 2021, formally authorizing the wind-down of the BATRI program and directing EF staff to explore reallocation of restricted funds in accordance with applicable law;

• Audited financial statements prepared by Calloway & Auerbach CPAs, LLP, reflecting FY 2021 restricted fund balances and the classification of the BATRI funds at issue;

• Written consent letters from the Cascabel Education Fund (dated February 4, 2022) and the Newhall-Sievert Foundation (dated February 18, 2022), each confirming consent to the reallocation of their respective BATRI-restricted grant funds to EF's broader educational mission.

We may also wish to retain an expert witness on charitable purpose and nonprofit governance to opine on the consistency of EF's proposed reallocation with the donors' general charitable intent. We will discuss this option further during our strategy call.

VII. Estimated Costs of Reactivation

We have prepared an internal litigation budget projecting the costs of reactivating the matter and pursuing it through the dispositive motion stage. We present these estimates for EF's planning purposes and welcome the opportunity to discuss them in greater detail.

The estimated additional professional fees for the next phase of the litigation are approximately $175,000 to $250,000, depending on the scope of discovery required and whether WGFT files a cross-motion for summary judgment. The range reflects the inherent uncertainty in forecasting litigation costs, particularly with respect to discovery disputes and the complexity of any opposition or cross-motion that Pratchett, Huang & Solano LLP may file.

The key components of this estimated budget include:

• Motion for Summary Judgment Preparation and Briefing: Research, drafting, and filing of the moving papers, including the memorandum of points and authorities, separate statement of undisputed material facts, supporting declarations, and the compendium of exhibits;

• Opposing Any Cross-Motion: If WGFT files a cross-motion for summary judgment or summary adjudication on its restitution claim, EF will need to prepare a full opposition, including a responsive separate statement and supporting evidence;

• Limited discovery: We anticipate the need for targeted written discovery (interrogatories and document requests directed to WGFT concerning the donors' intent, the circumstances of the gift, and the Trust's financial records) and up to two depositions — specifically, the depositions of Roland Whitfield-Garner and Adrienne Garner-Bosch, the co-trustees of WGFT, whose testimony regarding the donors' charitable intent and the negotiation of the Gift Instrument will be relevant to the summary judgment record;

• Potential Expert Witness Fees: If we determine that expert testimony on charitable purpose analysis or nonprofit governance would strengthen the motion, we would engage an appropriate expert and prepare a declaration. We estimate expert fees in the range of $15,000 to $30,000;

• Hearing Preparation: Preparation for oral argument on the motion(s) for summary judgment, including moot sessions and supplemental briefing as may be required by the Court.

Current billing rates for the Calderwood & Harkness team assigned to this matter remain as set forth in the engagement letter dated April 1, 2022:

We note that these are the 2022 rates established in the original engagement letter. Any rate adjustments for 2025 would be communicated separately in accordance with the terms of the engagement letter, and we would discuss any proposed adjustments with Ms. Chattopadhyay before they take effect.

For reference, the total professional fees billed through December 31, 2024 are $287,450. Total fees collected to date are $274,100, leaving an outstanding accounts receivable balance of $13,350. We would appreciate EF's attention to this outstanding balance at your convenience, and we are happy to discuss arrangements for funding the next phase of litigation during our strategy call.

We are prepared to provide a more refined estimate of the reactivation budget once we have EF's decision on the recommended approach and can make more specific assumptions about the scope of discovery and the likelihood of a WGFT cross-motion.

VIII. Proposed Next Steps

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

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

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

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

4. Outstanding accounts receivable and litigation funding. We will address the outstanding $13,350 accounts receivable balance and discuss arrangements for funding the next phase of litigation, including the estimated $175,000 to $250,000 in additional fees.

In the interim, we will continue to monitor the case docket in Department 302 and comply with all court deadlines, including the preparation and filing of the next joint status report on or before the June 13, 2025 due date (or, if EF decides to reactivate before that date, the filing of a notice to lift the stay and a proposed case management schedule).

IX. Confidentiality Note

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

We appreciate Estuary Foundation's continued confidence in our representation throughout this matter, and we look forward to discussing the recommended course of action at your earliest convenience. Please do not hesitate to contact Douglas Carmichael at (415) 623-8012 or dcarmichael@calderwoodharkness.com, or Francesca Morano at (415) 623-8027 or fmorano@calderwoodharkness.com, to schedule the strategy call referenced above.

Sincerely,

CALDERWOOD & HARKNESS LLP

By: ________

Douglas Carmichael Partner One Market Plaza, Suite 3600 San Francisco, California 94105 (415) 623-8012 dcarmichael@calderwoodharkness.com

cc: Francesca Morano, Partner, Calderwood & Harkness LLP

Simone Laroche, Senior Associate, Calderwood & Harkness LLP

Attorney	Role	Hourly Rate
Douglas Carmichael	Partner	$895
Francesca Morano	Partner	$850
Simone Laroche	Senior Associate	$625
Jeffrey Park	Associate	$525

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION
CALDERWOOD & HARKNESS LLP One Market Plaza, Suite 3600 San Francisco, California 94105 Telephone: (415) 623-8000 Facsimile: (415) 623-8001
January 10, 2025
VIA ELECTRONIC MAIL AND FIRST-CLASS MAIL
Priya Chattopadhyay, Esq. General Counsel Estuary Foundation
Margot Ellison-Yee Executive Director Estuary Foundation
1440 Embarcadero Way, Suite 300 San Francisco, California 94107
Re: Estuary Foundation v. The Whitfield-Garner Family Trust Case No. CGC-22-599481 (Superior Court of California, County of San Francisco, Department 302, Hon. Patricia R. Wainwright) C&H Matter No. 1028-00001
Dear Ms. Chattopadhyay and Ms. Ellison-Yee:
I. Purpose of Letter
We are writing to provide a comprehensive update on the current status of the above-referenced declaratory judgment action and to recommend that we schedule a strategy call at the earliest convenience to discuss the path forward. As discussed in greater detail below, the matter has been stayed by stipulation since September 16, 2022, and the parties are now approaching a critical juncture at which continuing the stay may no longer serve Estuary Foundation's ("EF's") interests.
Over the past two-and-a-half years, the stay has served a useful purpose: it has preserved EF's rights while allowing the parties to explore the possibility of a negotiated resolution without incurring the substantial costs of active litigation. However, as we explain in this letter, settlement prospects have not materially improved, the financial exposure associated with the claimed interest on the Cross-Complaint continues to accrue, and we believe the time has come for EF to make a strategic decision about whether to reactivate the litigation and move toward a dispositive resolution. This letter addresses each of these considerations in turn.
II. Background Summary
By way of brief background, EF filed its Complaint for Declaratory Relief on April 25, 2022, seeking a judicial determination that EF may lawfully redirect approximately $4.7 million in restricted grant funds originally designated for the Bay Area Teacher Residency Initiative ("BATRI") to EF's broader educational mission. BATRI was a multi-year teacher preparation and placement program that EF administered in partnership with the Oakland Unified School District ("OUSD") and the San Francisco Unified School District ("SFUSD"), funded through restricted grants from three institutional donors.
The defendant, The Whitfield-Garner Family Trust ("WGFT"), filed an Answer and Cross-Complaint on June 10, 2022. In its Cross-Complaint, WGFT seeks restitution of $1,700,000 — comprised of $700,000 in unexpended disbursed funds and the $1,000,000 undisbursed fourth tranche ("Tranche 4") — plus interest at 7% per annum from April 28, 2022, the date on which the 90-day demand period under Section 7.2 of the Gift Instrument expired.
To provide the full context for the declaratory judgment action, the $4.7 million total at issue is comprised of three components:
(a) $1,700,000 attributable to the WGFT grant, which is the sole contested amount in the litigation;
(b) $2,000,000 from the Cascabel Education Fund, which has formally consented to the proposed reallocation of its restricted grant funds; and
(c) $1,000,000 from the Newhall-Sievert Foundation, which has likewise consented to the proposed reallocation of its restricted grant funds.
WGFT remains the sole objecting donor among the three BATRI funders. EF's declaratory judgment complaint covers all $4.7 million in order to establish the governing legal framework for EF's authority to redirect the entirety of the restricted BATRI funds, including those for which donor consent has already been obtained.
The core legal dispute between the parties centers on two competing theories. EF relies on the equitable doctrines of cy pres and equitable deviation, codified in relevant part under California Probate Code Sections 15409 and 15403, arguing that BATRI's specific charitable purpose became impracticable when OUSD terminated its partnership with EF in August 2020 — citing severe budget constraints exacerbated by the COVID-19 pandemic — and SFUSD thereafter declined to renew its partnership agreement in March 2021, citing district-wide program consolidation. Without school district partners willing to host and employ teacher residents, the specific operational model contemplated by the BATRI program could no longer be carried out, and EF's Board of Directors formally voted to wind down the program effective December 31, 2021.
WGFT, for its part, counters that Section 7.2 of the Gift Instrument dated June 15, 2018 — which governs the WGFT grant — contains an express contractual reversion clause that provides for the return of unexpended and undisbursed funds in the event the designated program cannot be completed. WGFT argues that this contractual remedy supersedes any equitable modification that might otherwise be available under Probate Code Sections 15409 or 15403, and that the reversion clause constitutes the exclusive remedy agreed upon by the parties at the time of the gift.
III. Current Status of the Stay
The Stipulation and Order Staying All Proceedings (the "Stipulation") was entered by the Court on September 16, 2022, following the unsuccessful mediation session discussed further below. Under the terms of the Stipulation, the stay is reviewed at 90-day intervals through joint status reports filed by Calderwood & Harkness LLP, on behalf of EF, and Pratchett, Huang & Solano LLP, defense counsel for WGFT, led by Victoria Huang.
To date, ten joint status reports have been filed with the Court on the following dates:
1. December 16, 2022
2. March 17, 2023
3. June 16, 2023
4. September 15, 2023
5. December 15, 2023
6. March 15, 2024
7. June 14, 2024
8. September 13, 2024
9. December 13, 2024
10. March 14, 2025 (upcoming, to be filed)
Each joint status report filed to date has stated that the parties remain engaged in informal settlement discussions but have not yet reached a resolution, and each has requested that the Court continue the stay for an additional 90-day period. The Court has granted each such request without comment, though we note that Judge Wainwright's standard practice is to inquire more closely into the basis for continued stays after approximately 18 to 24 months, and we anticipate that the Court may begin to express concern about the duration of the stay as we approach the three-year mark.
The next joint status report is due on June 13, 2025. This upcoming filing presents a natural decision point for EF: the joint report will either request a further continuation of the stay or notify the Court that EF wishes to lift the stay and resume active litigation.
It is important for EF's leadership to understand that, despite the repeated extensions of the stay, no substantive settlement progress has been made. The parties' respective positions remain materially unchanged since the September 2, 2022 mediation conducted before retired Judge Oscar Pelletreau at Bayshore Mediation Services, which ended without agreement after a full-day session. While the stay has preserved the status quo and avoided litigation costs in the interim, it has not generated the negotiating momentum that we had initially hoped it might produce.
IV. Ongoing Financial Exposure from the Stay
One of the most significant practical consequences of the continued stay is the ongoing accrual of claimed interest on WGFT's Cross-Complaint. As noted above, WGFT's Cross-Complaint seeks restitution of $1,700,000 plus interest at a rate of 7% per annum, accruing from April 28, 2022 — the date WGFT asserts the 90-day demand period under Section 7.2 of the Gift Instrument expired without satisfaction.
The annual interest accrual on this claim is approximately $119,000 per year. As of the date of this letter, January 10, 2025, approximately two years and eight and one-half months have elapsed since the April 28, 2022 accrual date asserted by WGFT. This represents potential claimed interest of roughly $320,000, subject to the Court's ultimate determination of whether interest is owed at all, and if so, at what rate and from what date. We note that the 7% rate claimed by WGFT is the default rate under California Civil Code Section 3289(b) for contract claims where the contract itself does not specify an interest rate; the Gift Instrument does not contain an express interest provision, and we believe there are colorable arguments that a lower rate — or no prejudgment interest at all — should apply in the context of a charitable trust dispute.
Each additional 90-day stay period adds approximately $29,750 in claimed interest exposure. Over the course of a calendar year, this amounts to nearly $119,000 in additional claimed liability that EF may ultimately have to contest or account for.
While we believe that EF has strong grounds to contest the interest claim — both as to the applicable rate and as to whether prejudgment interest should be awarded at all in the context of a good-faith cy pres dispute — the continued accrual is a factor that weighs in favor of resolving or adjudicating the matter rather than extending the stay indefinitely. Simply put, delay benefits WGFT's interest claim more than it benefits EF.
We also wish to reassure EF that the Stipulation expressly preserves all parties' rights and tolls applicable limitations periods during the stay. EF has not lost any procedural or substantive rights as a result of the stay to date. All claims, defenses, and counterclaims remain fully preserved, and all deadlines that were in effect at the time of the stay will resume running from the point at which they were tolled.
V. Assessment of Settlement Prospects
We have given careful consideration to the prospects for a negotiated resolution and wish to share our candid assessment with EF's leadership.
Despite more than two years of periodic informal discussions, WGFT — through its co-trustees, Roland Whitfield-Garner and Adrienne Garner-Bosch, advised by family member Nathaniel Whitfield-Garner (who, while not an attorney of record, has been actively involved in the trustees' decision-making) — has not materially shifted from its demand for the full return of $1,700,000 plus accrued interest. WGFT's position has remained consistent and firm throughout the course of the informal discussions: the trustees believe they are entitled to restitution under Section 7.2 of the Gift Instrument, and they have shown no willingness to entertain a compromise that would permit EF to retain any portion of the WGFT funds.
Defense counsel Victoria Huang of Pratchett, Huang & Solano LLP has indicated informally — in conversations with both Douglas Carmichael and Francesca Morano — that WGFT views the Section 7.2 reversion clause as dispositive of the entire dispute and sees little reason to compromise on a position the trustees believe will be vindicated by the Court. While we respect Ms. Huang's advocacy on behalf of her client, this characterization of the legal landscape is, in our view, overstated for the reasons discussed in Section VI below.
The settlement frameworks we proposed during and after the September 2022 mediation — including partial reallocation of a portion of the WGFT funds to EF's broader educational mission with the balance returned to WGFT, enhanced reporting requirements to the Trust regarding the use of reallocated funds, and naming rights or programmatic recognition in honor of Herbert R. Whitfield-Garner and Dorothy M. Garner — have not gained traction. Each of these proposals was communicated in good faith through both counsel and through the mediator, and each was declined by WGFT without a counterproposal.
In our professional judgment, further extensions of the stay without the pressure of active litigation are unlikely to produce a negotiated resolution. The dynamics of the dispute have calcified, and neither party's posture has evolved in a way that suggests a zone of agreement exists under current conditions. We believe that the filing of a motion for summary judgment would materially alter the litigation dynamics and may create new incentives for settlement — either before or after briefing — that do not presently exist.
VI. Recommended Strategy: Reactivation and Motion for Summary Judgment
Based on our assessment of the current posture of the case, the financial exposure from the continued stay, and the stalled settlement discussions, we recommend that EF consider reactivating the litigation and moving for summary judgment on its cy pres and equitable deviation claims. We outline below the strengths of EF's position, the risks that must be considered, and the evidentiary support available for a dispositive motion.
A. Strengths of EF's Position
We believe EF has a strong case for equitable modification under the cy pres and equitable deviation doctrines, supported by the following considerations:
1. Well-Documented Impracticability. The impracticability of BATRI's specific charitable purpose is thoroughly documented in the record. OUSD terminated its partnership with EF in August 2020, citing severe budget constraints aggravated by the COVID-19 pandemic. SFUSD subsequently declined to renew its partnership agreement in March 2021, citing district-wide program consolidation that eliminated the administrative infrastructure necessary to support the teacher residency model. Without cooperating school district partners, the BATRI program could not be operationalized in the manner contemplated by the Gift Instrument. The EF Board of Directors formally voted to wind down BATRI on December 31, 2021, after determining that no viable alternative district partnerships were available. This sequence of events establishes a clear and well-supported record of impracticability.
2. General Charitable Intent of the Original Donors. The Gift Instrument, read in its entirety, reflects the donors' — Herbert R. Whitfield-Garner (deceased 2019) and Dorothy M. Garner (deceased 2016) — general charitable intent to support education, not merely the specific operational mechanism of the BATRI program. The preamble to the Gift Instrument expressly states the donors' desire to "advance the quality of public education in the San Francisco Bay Area," and the selection of BATRI was a means to that end, not the end itself. This general charitable intent is the threshold inquiry for cy pres analysis, and we believe EF can demonstrate it convincingly.
3. Both Original Settlors Are Deceased. Both Herbert R. Whitfield-Garner and Dorothy M. Garner are now deceased, which under California law may strengthen the argument for cy pres modification. When the original donors are no longer living, the court focuses on the donor's objectively manifested general charitable intent as reflected in the instrument and surrounding circumstances, rather than on the subjective current preferences of successor trustees or family members. This is a significant factor that favors EF's position.
4. Consent of Other BATRI Donors. Two of the three BATRI donors — the Cascabel Education Fund and the Newhall-Sievert Foundation — have already provided written consent to the reallocation of their restricted grant funds to EF's broader educational mission. This demonstrates that the broader donor community views reallocation as consistent with the original charitable purpose of the BATRI grants, and it undercuts any suggestion that reallocation is inconsistent with reasonable donor expectations.
5. COVID-19 Disruptions. The COVID-19 pandemic, which began to affect school district operations in March 2020, provides additional external evidence of impracticability. The pandemic fundamentally disrupted in-person teacher training and placement programs across the state and nation, and it was a direct contributing cause of OUSD's budget crisis and SFUSD's decision to consolidate programs. Courts have recognized pandemic-related disruptions as relevant impracticability evidence in range contractual and equitable contexts, and this evidence will support EF's showing.
B. Risks to Consider
In the interest of providing EF with a balanced assessment, we wish to highlight the following risks associated with a summary judgment motion:
1. WGFT's Section 7.2 Reversion Argument. WGFT's strongest argument is that Section 7.2 of the Gift Instrument contains an express contractual reversion clause that provides for the return of unexpended and undisbursed funds in the event the designated program cannot be completed. WGFT will argue that by agreeing to this clause, EF acknowledged a contractual remedy for this precise scenario and thereby waived any right to seek equitable modification under cy pres or equitable deviation. This is a serious argument that cannot be dismissed lightly, and it will require careful briefing to demonstrate why the equitable doctrines should override or coexist with the contractual reversion provision, particularly in light of the charitable trust context.
2. Contract vs. Charitable Trust Characterization. The court must determine a threshold question: whether the Gift Instrument is governed primarily by contract principles or by charitable trust principles. If the court views the Gift Instrument as primarily a bilateral contract, the Section 7.2 reversion clause may be given greater weight and the availability of equitable modification may be more limited. If the court views the instrument as creating or contributing to a charitable trust — which we believe is the stronger characterization — then the cy pres and equitable deviation doctrines apply with full force, and the reversion clause is merely one factor in the equitable analysis rather than a dispositive contractual term. The outcome of this threshold question will significantly influence the cy pres analysis, and it is not entirely predictable.
3. Triable Issues of Material Fact. There is no guarantee that the court will grant summary adjudication. The court may find triable issues of material fact regarding the donors' intent, the scope of impracticability, or whether EF's proposed reallocation is sufficiently consistent with the donors' general charitable purpose to satisfy the cy pres standard. If the court denies summary judgment, the matter would proceed to a bench trial, which would add time and cost. Even in that scenario, however, the summary judgment briefing would sharpen the issues for trial and would likely prompt renewed settlement discussions.
C. Evidentiary Support Available
We have identified the following evidence that is currently available to support EF's motion for summary judgment, and we believe this evidentiary record is robust:
• The Gift Instrument and Grant Agreement dated June 15, 2018, including Exhibit A, which describes the BATRI program in detail, its objectives, the contemplated cohort structure, and the disbursement schedule for the four tranches of funding;
• BATRI program records documenting three completed cohorts (24 residents in Cohort 1, 30 residents in Cohort 2, and 15 residents in Cohort 3), total expenditures of $3,300,000, and program outcomes including resident placement rates and retention data;
• Correspondence from OUSD dated August 14, 2020, formally terminating its partnership with EF's BATRI program, and correspondence from SFUSD dated March 22, 2021, declining to renew its partnership agreement;
• The EF Board of Directors resolution dated December 31, 2021, formally authorizing the wind-down of the BATRI program and directing EF staff to explore reallocation of restricted funds in accordance with applicable law;
• Audited financial statements prepared by Calloway & Auerbach CPAs, LLP, reflecting FY 2021 restricted fund balances and the classification of the BATRI funds at issue;
• Written consent letters from the Cascabel Education Fund (dated February 4, 2022) and the Newhall-Sievert Foundation (dated February 18, 2022), each confirming consent to the reallocation of their respective BATRI-restricted grant funds to EF's broader educational mission.
We may also wish to retain an expert witness on charitable purpose and nonprofit governance to opine on the consistency of EF's proposed reallocation with the donors' general charitable intent. We will discuss this option further during our strategy call.
VII. Estimated Costs of Reactivation
We have prepared an internal litigation budget projecting the costs of reactivating the matter and pursuing it through the dispositive motion stage. We present these estimates for EF's planning purposes and welcome the opportunity to discuss them in greater detail.
The estimated additional professional fees for the next phase of the litigation are approximately $175,000 to $250,000, depending on the scope of discovery required and whether WGFT files a cross-motion for summary judgment. The range reflects the inherent uncertainty in forecasting litigation costs, particularly with respect to discovery disputes and the complexity of any opposition or cross-motion that Pratchett, Huang & Solano LLP may file.
The key components of this estimated budget include:
• Motion for Summary Judgment Preparation and Briefing: Research, drafting, and filing of the moving papers, including the memorandum of points and authorities, separate statement of undisputed material facts, supporting declarations, and the compendium of exhibits;
• Opposing Any Cross-Motion: If WGFT files a cross-motion for summary judgment or summary adjudication on its restitution claim, EF will need to prepare a full opposition, including a responsive separate statement and supporting evidence;
• Limited discovery: We anticipate the need for targeted written discovery (interrogatories and document requests directed to WGFT concerning the donors' intent, the circumstances of the gift, and the Trust's financial records) and up to two depositions — specifically, the depositions of Roland Whitfield-Garner and Adrienne Garner-Bosch, the co-trustees of WGFT, whose testimony regarding the donors' charitable intent and the negotiation of the Gift Instrument will be relevant to the summary judgment record;
• Potential Expert Witness Fees: If we determine that expert testimony on charitable purpose analysis or nonprofit governance would strengthen the motion, we would engage an appropriate expert and prepare a declaration. We estimate expert fees in the range of $15,000 to $30,000;
• Hearing Preparation: Preparation for oral argument on the motion(s) for summary judgment, including moot sessions and supplemental briefing as may be required by the Court.
Current billing rates for the Calderwood & Harkness team assigned to this matter remain as set forth in the engagement letter dated April 1, 2022:
We note that these are the 2022 rates established in the original engagement letter. Any rate adjustments for 2025 would be communicated separately in accordance with the terms of the engagement letter, and we would discuss any proposed adjustments with Ms. Chattopadhyay before they take effect.
For reference, the total professional fees billed through December 31, 2024 are $287,450. Total fees collected to date are $274,100, leaving an outstanding accounts receivable balance of $13,350. We would appreciate EF's attention to this outstanding balance at your convenience, and we are happy to discuss arrangements for funding the next phase of litigation during our strategy call.
We are prepared to provide a more refined estimate of the reactivation budget once we have EF's decision on the recommended approach and can make more specific assumptions about the scope of discovery and the likelihood of a WGFT cross-motion.
VIII. Proposed Next Steps
In light of the foregoing, we recommend scheduling a call within the next two weeks with Ms. Chattopadhyay, Ms. Ellison-Yee, and — if the Board of Directors wishes to be briefed on the strategic options — Dr. Kenneth Oguike, Chair of the Board, to discuss the following:
1. Whether to continue the stay or reactivate. We will discuss the relative advantages and disadvantages of continuing the stay through the June 13, 2025 joint status report versus lifting the stay and reactivating the litigation in advance of that deadline. As set forth above, our recommendation is to proceed with reactivation, but we recognize that this is ultimately a decision for EF's leadership to make after considering all relevant factors, including the financial commitment required.
2. Timeline for filing a motion for summary judgment. If EF decides to reactivate, we estimate approximately 60 to 90 days from the decision to proceed to a motion-ready filing. This timeline accounts for the preparation of a comprehensive summary judgment motion, including the assembly of the evidentiary record, the drafting of the memorandum of points and authorities, and compliance with the procedural requirements of the San Francisco Superior Court.
3. Whether to make a final settlement overture. Before reactivating, EF may wish to make one final settlement overture to WGFT — potentially incorporating a firm deadline for response in order to create urgency and demonstrate that EF is prepared to proceed to adjudication. We can discuss the terms and framing of any such overture during the call.
4. Outstanding accounts receivable and litigation funding. We will address the outstanding $13,350 accounts receivable balance and discuss arrangements for funding the next phase of litigation, including the estimated $175,000 to $250,000 in additional fees.
In the interim, we will continue to monitor the case docket in Department 302 and comply with all court deadlines, including the preparation and filing of the next joint status report on or before the June 13, 2025 due date (or, if EF decides to reactivate before that date, the filing of a notice to lift the stay and a proposed case management schedule).
IX. Confidentiality Note
This letter constitutes a privileged and confidential attorney-client communication and is intended solely for the use of the named addressees. The information contained herein is protected by the attorney-client privilege and the work product doctrine. Please do not forward, distribute, or disclose this letter or its contents to any third party without our prior written consent.
We appreciate Estuary Foundation's continued confidence in our representation throughout this matter, and we look forward to discussing the recommended course of action at your earliest convenience. Please do not hesitate to contact Douglas Carmichael at (415) 623-8012 or dcarmichael@calderwoodharkness.com, or Francesca Morano at (415) 623-8027 or fmorano@calderwoodharkness.com, to schedule the strategy call referenced above.
Sincerely,
CALDERWOOD & HARKNESS LLP
By: ________
Douglas Carmichael Partner One Market Plaza, Suite 3600 San Francisco, California 94105 (415) 623-8012 dcarmichael@calderwoodharkness.com
cc: Francesca Morano, Partner, Calderwood & Harkness LLP
Simone Laroche, Senior Associate, Calderwood & Harkness LLP
Attorney | Role | Hourly Rate
Douglas Carmichael | Partner | $895
Francesca Morano | Partner | $850
Simone Laroche | Senior Associate | $625
Jeffrey Park | Associate | $525

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VIA ELECTRONIC MAIL AND FIRST-CLASS MAIL

CALDERWOOD & HARKNESS LLP

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