1028-00001 · Client 1028 · Correspondence

pre-suit-response-letter-to-phs.docx DOCUMENT Litigation

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CALDERWOOD & HARKNESS LLP Attorneys at Law One Market Plaza, Suite 3600 San Francisco, CA 94105

Douglas Carmichael Partner Direct Dial: (415) 392-4100 Email: dcarmichael@calderwoodharkness.com

March 3, 2022

VIA EMAIL AND U.S. MAIL

Victoria Huang, Esq. Pratchett, Huang & Solano LLP 555 California Street, 28th Floor San Francisco, CA 94104

Re: Demand Letter Dated January 28, 2022 — The Whitfield-Garner Family Trust and Estuary Foundation; Gift Instrument and Grant Agreement Dated June 15, 2018 (Bay Area Teacher Residency Initiative)

Dear Ms. Huang:

This firm represents Estuary Foundation, a California nonprofit public benefit corporation (EIN 94-3127856), headquartered at 1440 Embarcadero Way, Suite 300, San Francisco, California 94107. We write in response to your demand letter dated January 28, 2022, sent on behalf of your client, The Whitfield-Garner Family Trust ("WGFT"). In that letter, you demand on WGFT's behalf the return of One Million Seven Hundred Thousand Dollars ($1,700,000) in allegedly unexpended and undisbursed grant funds within ninety (90) days, invoking Section 7.2 of the Gift Instrument and Grant Agreement dated June 15, 2018 (the "Gift Instrument"). This letter sets forth Estuary Foundation's response to that demand, including the relevant factual background, Estuary Foundation's legal position, and its proposal for resolving this matter in an orderly and good-faith manner.

We appreciate the seriousness with which WGFT and your firm approach the stewardship of charitable assets. Estuary Foundation shares that commitment. As set forth below, however, Estuary Foundation respectfully disagrees with WGFT's characterization of the operative legal framework and the relief to which WGFT claims entitlement. We set forth our position in detail so that counsel for both parties may evaluate the issues fully and, we hope, chart a path toward a constructive resolution.

Background and Factual Context

The Gift Instrument and the BATRI Program

On June 15, 2018, WGFT executed the Gift Instrument and Grant Agreement (the "Gift Instrument"), pursuant to which WGFT committed a total grant of Five Million Dollars ($5,000,000) to Estuary Foundation for the establishment, operation, and support of the Bay Area Teacher Residency Initiative ("BATRI" or the "Program"). BATRI was designed as a multi-year initiative to recruit, train, and place teacher residents in high-need public schools across the San Francisco Bay Area, with the overarching goal of expanding equitable access to quality educators in underserved communities.

The Gift Instrument structured the $5,000,000 grant across four tranches, each tied to programmatic milestones and annual disbursement schedules, as follows:

• Tranche 1 (June 2018): $1,500,000 — disbursed in full by WGFT to Estuary Foundation.

• Tranche 2 (July 2019): $1,250,000 — disbursed in full by WGFT to Estuary Foundation.

• Tranche 3 (July 2020): $1,250,000 — disbursed in full by WGFT to Estuary Foundation.

• Tranche 4 (July 2021): $1,000,000 — never disbursed by WGFT due to the suspension and subsequent wind-down of the BATRI program, as described in greater detail below.

In total, WGFT disbursed $4,000,000 of the $5,000,000 commitment to Estuary Foundation over the course of three fiscal years. Of that $4,000,000 in disbursed funds, Estuary Foundation expended a total of $3,300,000 on BATRI program operations between 2018 and 2021. These expenditures encompassed teacher resident stipends, partner school coordination and liaison costs, curriculum development and instructional materials, program evaluation and assessment, and allocable administrative overhead — all in direct furtherance of the BATRI program's charitable objectives as defined in the Gift Instrument.

The resulting financial posture is as follows:

• Unexpended balance of disbursed grant funds: $700,000

• Undisbursed Tranche 4: $1,000,000

• Total funds referenced in your January 28, 2022 demand: $1,700,000 ($700,000 unexpended + $1,000,000 undisbursed)

We note at the outset that the characterization of both the unexpended balance and the undisbursed fourth tranche as a single, unified sum subject to a single reversion mechanism conflates two distinct categories of funds with different legal postures. The $1,000,000 in Tranche 4 funds was never transferred to Estuary Foundation and remains in WGFT's custody. Accordingly, there is no "return" of Tranche 4 funds to effectuate — those funds were never disbursed. We address the unexpended $700,000 balance in the legal analysis below.

BATRI Program Accomplishments and Wind-Down

The BATRI program launched in September 2018 with a first cohort of twenty-four (24) teacher residents placed across six (6) partner schools within the San Francisco Unified School District ("SFUSD") and the Oakland Unified School District ("OUSD"). The program provided teacher residents with a rigorous, year-long clinical placement in a partner school classroom under the mentorship of an experienced cooperating teacher, coupled with graduate-level coursework and professional development programming. The inaugural cohort completed its residency year in June 2019. Of the twenty-four residents in the first cohort, twenty-two (22) were successfully placed in full-time teaching positions in Bay Area public schools upon completion of the program — a placement rate of approximately 92%.

Building on this success, a second cohort of thirty (30) teacher residents enrolled in the BATRI program beginning in September 2019. The second cohort's residency year was well underway when, beginning in March 2020, the COVID-19 pandemic caused severe and unprecedented disruptions to in-person schooling across the region and the nation. School closures, the transition to remote instruction, and the resulting upheaval in classroom-based mentorship fundamentally altered the conditions under which BATRI was designed to operate. Despite these challenges, Estuary Foundation adapted the program to a hybrid model and worked diligently to preserve the residency experience for second-cohort residents to the greatest extent practicable under the circumstances.

In August 2020, OUSD formally notified Estuary Foundation that it was terminating its partnership with the BATRI program, effective immediately, citing district-wide budget constraints exacerbated by pandemic-related revenue shortfalls. The loss of OUSD as a partner district eliminated half of the partner school placements that had been available to BATRI residents and significantly narrowed the program's geographic and institutional reach.

A reduced third cohort of fifteen (15) teacher residents continued in the BATRI program for the 2020–2021 academic year, operating exclusively within SFUSD partner schools. In March 2021, however, SFUSD notified Estuary Foundation that it would not renew the BATRI partnership agreement for the 2021–2022 school year, citing a district-wide program consolidation initiative. With this notification, the second and final partner school district withdrew from the BATRI program.

The third cohort completed the program in June 2021. Of the fifteen residents who began the 2020–2021 cohort, twelve (12) successfully completed all program requirements and were placed in teaching positions — a completion rate of 80%, which is commendable given the extraordinary circumstances under which this cohort operated.

With both OUSD and SFUSD having withdrawn from the BATRI partnership, Estuary Foundation was left without any partner school districts willing or able to host teacher residents. Efforts by Estuary Foundation's program staff to identify replacement partner districts in the broader Bay Area were unsuccessful, as school districts throughout the region faced similar budget pressures and programmatic consolidation priorities in the wake of the pandemic. On December 31, 2021, the Estuary Foundation Board of Directors formally voted to wind down the BATRI program, concluding that continued operation had become impracticable in the absence of any viable partner school district.

Impracticability Was Not Caused by Estuary Foundation

We wish to emphasize — as the foregoing chronology makes clear — that the wind-down of the BATRI program was caused entirely by circumstances beyond Estuary Foundation's control. The program's viability was dependent on the active participation of partner school districts willing to host teacher residents in their classrooms, provide cooperating teacher mentors, and integrate residents into their school communities. Both OUSD and SFUSD withdrew from the partnership for reasons wholly unrelated to Estuary Foundation's management of the BATRI program — namely, pandemic-driven budget constraints and district-wide programmatic consolidation. Estuary Foundation did not elect to discontinue BATRI. Rather, the conditions necessary for the program's operation ceased to exist due to force majeure events and institutional decisions made by third parties over which Estuary Foundation had no control.

Throughout the life of the BATRI program, Estuary Foundation faithfully operated the initiative for three full cohort cycles, successfully placing dozens of teacher residents in classrooms across Northern California's highest-need communities. The program's outcomes — including a cumulative resident completion rate exceeding 85% and strong post-program employment placement results — reflect diligent, mission-aligned stewardship of the charitable funds entrusted to Estuary Foundation by WGFT and by the other donors who supported BATRI.

We also note that Estuary Foundation's broader charitable mission remains robust. Estuary Foundation's general mission — advancing equitable access to quality education through teacher development, school partnerships, and community-based learning initiatives in Northern California — continues to be actively pursued through multiple program areas beyond BATRI. For fiscal year 2021, Estuary Foundation reported annual revenue of $28.3 million and total net assets of $41.6 million, as reflected in Estuary Foundation's audited financial statements prepared by Calloway & Auerbach CPAs, LLP. Estuary Foundation is a well-managed, well-capitalized institution with a proven track record of responsible charitable stewardship, and it remains fully capable of deploying the funds at issue in furtherance of the general educational objectives that animated the original WGFT grant.

Legal Position of Estuary Foundation

Section 7.2 Does Not Compel Automatic Reversion

Estuary Foundation acknowledges that Section 7.2 of the Gift Instrument provides as follows:

"In the event the Program is discontinued prior to the expiration of the Grant Period, any unexpended Grant Funds shall, at the election of Grantor, be returned to Grantor within ninety (90) days of written demand."

Your January 28, 2022 demand letter characterizes Section 7.2 as creating a condition subsequent that triggers an automatic right of reversion upon program discontinuation and written demand by the Grantor. Under this reading, the mere fact of BATRI's discontinuation, combined with WGFT's written demand, is sufficient to compel the return of funds as a matter of contractual right, without regard to equitable considerations or the broader legal framework governing charitable assets.

Estuary Foundation respectfully disagrees with this characterization.

The Gift Instrument is, at its core, a charitable gift instrument — not a commercial contract between arms-length parties negotiating for mutual economic benefit. The funds at issue were contributed by WGFT as a charitable gift to Estuary Foundation, a tax-exempt public charity, for a designated charitable purpose. The legal character of these funds, and the legal framework governing their disposition, is fundamentally different from that which would apply to a commercial transaction. Charitable gift instruments are subject to the well-established equitable powers of California courts to modify charitable gift restrictions when the original charitable purpose designated by the donor has become impracticable, impossible, or wasteful. These equitable powers exist precisely to ensure that charitable assets continue to serve charitable purposes, even when the specific vehicle or program originally contemplated by the donor can no longer be sustained.

The Cy Pres Doctrine and Equitable Deviation

Under California law, courts possess broad equitable authority to modify the terms and restrictions of charitable gifts and trusts when the specific charitable purpose designated by the donor has become impracticable or impossible of fulfillment.

California Probate Code Section 15409 authorizes a court to modify the administrative or dispositive terms of a trust, including restrictions imposed by a donor in a charitable gift instrument, when compliance with those terms has become impracticable or would substantially impair the purposes of the trust. This provision codifies a longstanding principle of trust and charitable law and provides courts with express statutory authority to adjust gift restrictions in response to changed circumstances.

California Probate Code Section 15403 provides additional authority for equitable deviation from the terms of a trust instrument when circumstances not known to or anticipated by the settlor — or, in the context of a charitable gift, by the donor — render compliance with the trust's terms impracticable, inexpedient, or wasteful. The legislative purpose underlying both provisions is to preserve the charitable character of donated funds and to prevent the frustration of charitable intent by rigid adherence to terms that have been overtaken by events.

The cy pres doctrine — a cornerstone of charitable trust law in California and throughout the common-law world — operates to similar effect. Under the cy pres doctrine, when a court determines that a specific charitable purpose designated by a donor has become impracticable or impossible of achievement, and further determines that the donor manifested a general charitable intent (as distinguished from a specific intent limited solely to the designated purpose), the court may direct that the charitable funds be applied to a purpose as near as possible ("cy pres") to the donor's original charitable intent. The doctrine ensures that charitable assets are not diverted from charitable use simply because the particular programmatic vehicle originally contemplated by the donor is no longer viable.

Here, the donors — the late Herbert R. Whitfield-Garner and Dorothy M. Garner — established the WGFT grant to advance education through the BATRI program. The specific charitable purpose of the grant — to fund the BATRI teacher residency program — has become impracticable due to the loss of both partner school districts, as detailed above. However, the donors' general charitable intent to support education is manifest from the text of the Gift Instrument itself, from the broader history of WGFT's charitable commitments (which have overwhelmingly focused on educational initiatives in Northern California), and from the very nature of the BATRI program's objectives. The Gift Instrument's preamble recites the donors' desire to "support the development of effective teachers and improve educational outcomes for students in underserved communities." That general intent to advance education through teacher development and school improvement is not extinguished merely because a single programmatic vehicle — BATRI — is no longer operational.

Estuary Foundation's broader educational mission — encompassing teacher development, school partnerships, and community-based learning initiatives across Northern California — represents a natural, closely aligned, and substantially similar alternative use of the funds that is fully consistent with the donors' general charitable intent. Reallocation of the restricted BATRI funds to Estuary Foundation's continuing educational programs would honor the spirit and purpose of the original gift while ensuring that the funds continue to serve charitable objectives rather than reverting to a private trust.

The Reversion Clause Does Not Preclude Judicial Modification

Estuary Foundation is aware that WGFT may argue that the express reversion clause in Section 7.2 of the Gift Instrument constitutes a clear and unambiguous expression of the donors' intent that unexpended funds be returned upon program discontinuation, and that this clause precludes the application of cy pres or equitable deviation. Estuary Foundation submits that this argument is not supported by California law.

Even where a charitable gift instrument contains an express reversion clause, California courts retain their equitable authority to modify gift restrictions under the cy pres doctrine and equitable deviation principles when the specific charitable purpose has become impracticable. The existence of a reversion clause is a factor that a court may consider in evaluating whether the donor manifested a general charitable intent, but it is not dispositive and does not strip the court of its supervisory jurisdiction over charitable assets. California courts have long recognized that the court's equitable power over charitable gifts exists to safeguard the public interest in the continued charitable use of donated funds, and a contractual reversion clause in a charitable gift context does not override that supervisory jurisdiction.

Estuary Foundation submits that the funds at issue — contributed as a charitable gift, received by a tax-exempt public charity, and dedicated to a charitable purpose — are properly subject to the court's equitable authority under the cy pres doctrine and the equitable deviation provisions of the California Probate Code. The appropriate forum for resolving the disposition of these funds, in the absence of a consensual agreement, is a court of competent jurisdiction exercising its equitable powers over charitable assets.

Broader Context — Other Restricted BATRI Funds

We bring to your attention an additional consideration that bears on the resolution of this matter. The WGFT grant is not the sole source of restricted funds designated for the BATRI program. Two additional donors contributed restricted funds to BATRI during the program's operational period:

• The Cascabel Education Fund contributed $2,000,000 in restricted funds designated for the BATRI program in 2019.

• The Newhall-Sievert Foundation contributed $1,000,000 in restricted funds designated for the BATRI program in 2020.

The total restricted BATRI funds across all three donors — WGFT, the Cascabel Education Fund, and the Newhall-Sievert Foundation — amounts to approximately $4,700,000 in aggregate. The legal framework governing the disposition of these funds must be addressed in a coherent and consistent manner.

Notably, both the Cascabel Education Fund and the Newhall-Sievert Foundation have consented to the reallocation of their respective restricted BATRI funds to Estuary Foundation's broader educational mission. These donors have recognized that the impracticability of the BATRI program does not extinguish the charitable purpose that motivated their gifts, and they have agreed that reallocation to Estuary Foundation's continuing educational programs represents a faithful and appropriate application of their charitable contributions.

WGFT is the sole donor among the three that has not consented to reallocation. Estuary Foundation seeks to resolve the legal framework governing all of the restricted BATRI funds in a unified and principled manner, and we believe that a judicial determination — or, preferably, a consensual resolution — is the appropriate means of achieving that objective.

Response to the Demand

In light of the foregoing, Estuary Foundation respectfully declines to return the $1,700,000 within the ninety (90) day demand period specified in your January 28, 2022 demand letter.

Estuary Foundation has reached this position in good faith and after careful deliberation. Estuary Foundation believes that the restriction in the Gift Instrument should be modified by a court of competent jurisdiction to permit the reallocation of the unexpended and undisbursed funds to Estuary Foundation's broader educational mission, consistent with the general charitable intent of the late Herbert R. Whitfield-Garner and Dorothy M. Garner. The facts of this case — the impracticability of the specific program, the manifest general charitable intent of the donors, the availability of closely aligned alternative uses, and the broader public interest in the continued charitable application of donated funds — strongly support the exercise of the court's equitable powers.

In the absence of a consensual resolution between the parties, Estuary Foundation intends to seek judicial guidance by filing an action for declaratory relief in the Superior Court of California, County of San Francisco, to obtain a judicial determination regarding the proper disposition of the restricted BATRI funds. Estuary Foundation anticipates that such an action would seek, among other things, a declaration that the cy pres doctrine and/or equitable deviation principles authorize the reallocation of the restricted funds, and an order modifying the Gift Instrument's restrictions accordingly.

Invitation to Confer

Notwithstanding the legal positions set forth above, Estuary Foundation is genuinely committed to exploring whether a consensual resolution of this matter can be achieved before litigation becomes necessary. Estuary Foundation recognizes and respects WGFT's role as a significant donor and its legitimate interest in the stewardship of funds contributed in furtherance of the Whitfield-Garner family's philanthropic legacy. It is Estuary Foundation's sincere hope that the parties can find common ground that honors the donors' charitable intent while addressing WGFT's concerns.

To that end, we propose that counsel for both parties schedule a call or in-person meeting within the next thirty (30) days to discuss potential avenues for resolution. Estuary Foundation is open to a range of potential compromise structures, including but not limited to partial reallocation of the restricted funds, enhanced reporting and transparency requirements with respect to the reallocation, donor recognition and naming opportunities in connection with Estuary Foundation's continuing educational programs, the establishment of an advisory role for WGFT in the selection of specific programs or initiatives to which the funds would be directed, or other accommodations that may address WGFT's concerns while permitting the charitable funds to continue serving the educational objectives that motivated the original gift.

I am available to discuss this matter at your convenience and can be reached directly at (415) 392-4100 or by email at dcarmichael@calderwoodharkness.com.

Reservation of Rights

Estuary Foundation expressly reserves all rights, claims, and defenses available to it under applicable law, including but not limited to the right to seek equitable relief, cy pres modification, and equitable deviation in any judicial proceeding relating to the Gift Instrument, the restricted BATRI funds, or any related matter. Estuary Foundation further reserves the right to assert any and all additional claims and defenses that may become available or appropriate as the facts and circumstances develop.

Nothing in this letter shall be construed as a waiver of any right, claim, or defense of Estuary Foundation, whether or not expressly referenced herein. Nothing in this letter shall be construed as an admission of any fact, legal conclusion, or liability, nor as a concession regarding the proper interpretation or application of any provision of the Gift Instrument or applicable law.

This letter is not intended as, and shall not be construed as, a refusal to engage in good-faith resolution efforts. To the contrary, as stated above, Estuary Foundation welcomes the opportunity to discuss this matter with your client and to explore whether a mutually satisfactory resolution can be reached.

We look forward to hearing from you.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Douglas Carmichael Partner

cc: Priya Chattopadhyay, Esq., General Counsel, Estuary Foundation cc: Margot Ellison-Yee, Executive Director, Estuary Foundation

CALDERWOOD & HARKNESS LLP Attorneys at Law One Market Plaza, Suite 3600 San Francisco, CA 94105
Douglas Carmichael Partner Direct Dial: (415) 392-4100 Email: dcarmichael@calderwoodharkness.com
March 3, 2022
VIA EMAIL AND U.S. MAIL
Victoria Huang, Esq. Pratchett, Huang & Solano LLP 555 California Street, 28th Floor San Francisco, CA 94104
Re: Demand Letter Dated January 28, 2022 — The Whitfield-Garner Family Trust and Estuary Foundation; Gift Instrument and Grant Agreement Dated June 15, 2018 (Bay Area Teacher Residency Initiative)
Dear Ms. Huang:
This firm represents Estuary Foundation, a California nonprofit public benefit corporation (EIN 94-3127856), headquartered at 1440 Embarcadero Way, Suite 300, San Francisco, California 94107. We write in response to your demand letter dated January 28, 2022, sent on behalf of your client, The Whitfield-Garner Family Trust ("WGFT"). In that letter, you demand on WGFT's behalf the return of One Million Seven Hundred Thousand Dollars ($1,700,000) in allegedly unexpended and undisbursed grant funds within ninety (90) days, invoking Section 7.2 of the Gift Instrument and Grant Agreement dated June 15, 2018 (the "Gift Instrument"). This letter sets forth Estuary Foundation's response to that demand, including the relevant factual background, Estuary Foundation's legal position, and its proposal for resolving this matter in an orderly and good-faith manner.
We appreciate the seriousness with which WGFT and your firm approach the stewardship of charitable assets. Estuary Foundation shares that commitment. As set forth below, however, Estuary Foundation respectfully disagrees with WGFT's characterization of the operative legal framework and the relief to which WGFT claims entitlement. We set forth our position in detail so that counsel for both parties may evaluate the issues fully and, we hope, chart a path toward a constructive resolution.
Background and Factual Context
The Gift Instrument and the BATRI Program
On June 15, 2018, WGFT executed the Gift Instrument and Grant Agreement (the "Gift Instrument"), pursuant to which WGFT committed a total grant of Five Million Dollars ($5,000,000) to Estuary Foundation for the establishment, operation, and support of the Bay Area Teacher Residency Initiative ("BATRI" or the "Program"). BATRI was designed as a multi-year initiative to recruit, train, and place teacher residents in high-need public schools across the San Francisco Bay Area, with the overarching goal of expanding equitable access to quality educators in underserved communities.
The Gift Instrument structured the $5,000,000 grant across four tranches, each tied to programmatic milestones and annual disbursement schedules, as follows:
•  Tranche 1 (June 2018): $1,500,000 — disbursed in full by WGFT to Estuary Foundation.
•  Tranche 2 (July 2019): $1,250,000 — disbursed in full by WGFT to Estuary Foundation.
•  Tranche 3 (July 2020): $1,250,000 — disbursed in full by WGFT to Estuary Foundation.
•  Tranche 4 (July 2021): $1,000,000 — never disbursed by WGFT due to the suspension and subsequent wind-down of the BATRI program, as described in greater detail below.
In total, WGFT disbursed $4,000,000 of the $5,000,000 commitment to Estuary Foundation over the course of three fiscal years. Of that $4,000,000 in disbursed funds, Estuary Foundation expended a total of $3,300,000 on BATRI program operations between 2018 and 2021. These expenditures encompassed teacher resident stipends, partner school coordination and liaison costs, curriculum development and instructional materials, program evaluation and assessment, and allocable administrative overhead — all in direct furtherance of the BATRI program's charitable objectives as defined in the Gift Instrument.
The resulting financial posture is as follows:
•  Unexpended balance of disbursed grant funds: $700,000
•  Undisbursed Tranche 4: $1,000,000
•  Total funds referenced in your January 28, 2022 demand: $1,700,000 ($700,000 unexpended + $1,000,000 undisbursed)
We note at the outset that the characterization of both the unexpended balance and the undisbursed fourth tranche as a single, unified sum subject to a single reversion mechanism conflates two distinct categories of funds with different legal postures. The $1,000,000 in Tranche 4 funds was never transferred to Estuary Foundation and remains in WGFT's custody. Accordingly, there is no "return" of Tranche 4 funds to effectuate — those funds were never disbursed. We address the unexpended $700,000 balance in the legal analysis below.
BATRI Program Accomplishments and Wind-Down
The BATRI program launched in September 2018 with a first cohort of twenty-four (24) teacher residents placed across six (6) partner schools within the San Francisco Unified School District ("SFUSD") and the Oakland Unified School District ("OUSD"). The program provided teacher residents with a rigorous, year-long clinical placement in a partner school classroom under the mentorship of an experienced cooperating teacher, coupled with graduate-level coursework and professional development programming. The inaugural cohort completed its residency year in June 2019. Of the twenty-four residents in the first cohort, twenty-two (22) were successfully placed in full-time teaching positions in Bay Area public schools upon completion of the program — a placement rate of approximately 92%.
Building on this success, a second cohort of thirty (30) teacher residents enrolled in the BATRI program beginning in September 2019. The second cohort's residency year was well underway when, beginning in March 2020, the COVID-19 pandemic caused severe and unprecedented disruptions to in-person schooling across the region and the nation. School closures, the transition to remote instruction, and the resulting upheaval in classroom-based mentorship fundamentally altered the conditions under which BATRI was designed to operate. Despite these challenges, Estuary Foundation adapted the program to a hybrid model and worked diligently to preserve the residency experience for second-cohort residents to the greatest extent practicable under the circumstances.
In August 2020, OUSD formally notified Estuary Foundation that it was terminating its partnership with the BATRI program, effective immediately, citing district-wide budget constraints exacerbated by pandemic-related revenue shortfalls. The loss of OUSD as a partner district eliminated half of the partner school placements that had been available to BATRI residents and significantly narrowed the program's geographic and institutional reach.
A reduced third cohort of fifteen (15) teacher residents continued in the BATRI program for the 2020–2021 academic year, operating exclusively within SFUSD partner schools. In March 2021, however, SFUSD notified Estuary Foundation that it would not renew the BATRI partnership agreement for the 2021–2022 school year, citing a district-wide program consolidation initiative. With this notification, the second and final partner school district withdrew from the BATRI program.
The third cohort completed the program in June 2021. Of the fifteen residents who began the 2020–2021 cohort, twelve (12) successfully completed all program requirements and were placed in teaching positions — a completion rate of 80%, which is commendable given the extraordinary circumstances under which this cohort operated.
With both OUSD and SFUSD having withdrawn from the BATRI partnership, Estuary Foundation was left without any partner school districts willing or able to host teacher residents. Efforts by Estuary Foundation's program staff to identify replacement partner districts in the broader Bay Area were unsuccessful, as school districts throughout the region faced similar budget pressures and programmatic consolidation priorities in the wake of the pandemic. On December 31, 2021, the Estuary Foundation Board of Directors formally voted to wind down the BATRI program, concluding that continued operation had become impracticable in the absence of any viable partner school district.
Impracticability Was Not Caused by Estuary Foundation
We wish to emphasize — as the foregoing chronology makes clear — that the wind-down of the BATRI program was caused entirely by circumstances beyond Estuary Foundation's control. The program's viability was dependent on the active participation of partner school districts willing to host teacher residents in their classrooms, provide cooperating teacher mentors, and integrate residents into their school communities. Both OUSD and SFUSD withdrew from the partnership for reasons wholly unrelated to Estuary Foundation's management of the BATRI program — namely, pandemic-driven budget constraints and district-wide programmatic consolidation. Estuary Foundation did not elect to discontinue BATRI. Rather, the conditions necessary for the program's operation ceased to exist due to force majeure events and institutional decisions made by third parties over which Estuary Foundation had no control.
Throughout the life of the BATRI program, Estuary Foundation faithfully operated the initiative for three full cohort cycles, successfully placing dozens of teacher residents in classrooms across Northern California's highest-need communities. The program's outcomes — including a cumulative resident completion rate exceeding 85% and strong post-program employment placement results — reflect diligent, mission-aligned stewardship of the charitable funds entrusted to Estuary Foundation by WGFT and by the other donors who supported BATRI.
We also note that Estuary Foundation's broader charitable mission remains robust. Estuary Foundation's general mission — advancing equitable access to quality education through teacher development, school partnerships, and community-based learning initiatives in Northern California — continues to be actively pursued through multiple program areas beyond BATRI. For fiscal year 2021, Estuary Foundation reported annual revenue of $28.3 million and total net assets of $41.6 million, as reflected in Estuary Foundation's audited financial statements prepared by Calloway & Auerbach CPAs, LLP. Estuary Foundation is a well-managed, well-capitalized institution with a proven track record of responsible charitable stewardship, and it remains fully capable of deploying the funds at issue in furtherance of the general educational objectives that animated the original WGFT grant.
Legal Position of Estuary Foundation
Section 7.2 Does Not Compel Automatic Reversion
Estuary Foundation acknowledges that Section 7.2 of the Gift Instrument provides as follows:
"In the event the Program is discontinued prior to the expiration of the Grant Period, any unexpended Grant Funds shall, at the election of Grantor, be returned to Grantor within ninety (90) days of written demand."
Your January 28, 2022 demand letter characterizes Section 7.2 as creating a condition subsequent that triggers an automatic right of reversion upon program discontinuation and written demand by the Grantor. Under this reading, the mere fact of BATRI's discontinuation, combined with WGFT's written demand, is sufficient to compel the return of funds as a matter of contractual right, without regard to equitable considerations or the broader legal framework governing charitable assets.
Estuary Foundation respectfully disagrees with this characterization.
The Gift Instrument is, at its core, a charitable gift instrument — not a commercial contract between arms-length parties negotiating for mutual economic benefit. The funds at issue were contributed by WGFT as a charitable gift to Estuary Foundation, a tax-exempt public charity, for a designated charitable purpose. The legal character of these funds, and the legal framework governing their disposition, is fundamentally different from that which would apply to a commercial transaction. Charitable gift instruments are subject to the well-established equitable powers of California courts to modify charitable gift restrictions when the original charitable purpose designated by the donor has become impracticable, impossible, or wasteful. These equitable powers exist precisely to ensure that charitable assets continue to serve charitable purposes, even when the specific vehicle or program originally contemplated by the donor can no longer be sustained.
The Cy Pres Doctrine and Equitable Deviation
Under California law, courts possess broad equitable authority to modify the terms and restrictions of charitable gifts and trusts when the specific charitable purpose designated by the donor has become impracticable or impossible of fulfillment.
California Probate Code Section 15409 authorizes a court to modify the administrative or dispositive terms of a trust, including restrictions imposed by a donor in a charitable gift instrument, when compliance with those terms has become impracticable or would substantially impair the purposes of the trust. This provision codifies a longstanding principle of trust and charitable law and provides courts with express statutory authority to adjust gift restrictions in response to changed circumstances.
California Probate Code Section 15403 provides additional authority for equitable deviation from the terms of a trust instrument when circumstances not known to or anticipated by the settlor — or, in the context of a charitable gift, by the donor — render compliance with the trust's terms impracticable, inexpedient, or wasteful. The legislative purpose underlying both provisions is to preserve the charitable character of donated funds and to prevent the frustration of charitable intent by rigid adherence to terms that have been overtaken by events.
The cy pres doctrine — a cornerstone of charitable trust law in California and throughout the common-law world — operates to similar effect. Under the cy pres doctrine, when a court determines that a specific charitable purpose designated by a donor has become impracticable or impossible of achievement, and further determines that the donor manifested a general charitable intent (as distinguished from a specific intent limited solely to the designated purpose), the court may direct that the charitable funds be applied to a purpose as near as possible ("cy pres") to the donor's original charitable intent. The doctrine ensures that charitable assets are not diverted from charitable use simply because the particular programmatic vehicle originally contemplated by the donor is no longer viable.
Here, the donors — the late Herbert R. Whitfield-Garner and Dorothy M. Garner — established the WGFT grant to advance education through the BATRI program. The specific charitable purpose of the grant — to fund the BATRI teacher residency program — has become impracticable due to the loss of both partner school districts, as detailed above. However, the donors' general charitable intent to support education is manifest from the text of the Gift Instrument itself, from the broader history of WGFT's charitable commitments (which have overwhelmingly focused on educational initiatives in Northern California), and from the very nature of the BATRI program's objectives. The Gift Instrument's preamble recites the donors' desire to "support the development of effective teachers and improve educational outcomes for students in underserved communities." That general intent to advance education through teacher development and school improvement is not extinguished merely because a single programmatic vehicle — BATRI — is no longer operational.
Estuary Foundation's broader educational mission — encompassing teacher development, school partnerships, and community-based learning initiatives across Northern California — represents a natural, closely aligned, and substantially similar alternative use of the funds that is fully consistent with the donors' general charitable intent. Reallocation of the restricted BATRI funds to Estuary Foundation's continuing educational programs would honor the spirit and purpose of the original gift while ensuring that the funds continue to serve charitable objectives rather than reverting to a private trust.
The Reversion Clause Does Not Preclude Judicial Modification
Estuary Foundation is aware that WGFT may argue that the express reversion clause in Section 7.2 of the Gift Instrument constitutes a clear and unambiguous expression of the donors' intent that unexpended funds be returned upon program discontinuation, and that this clause precludes the application of cy pres or equitable deviation. Estuary Foundation submits that this argument is not supported by California law.
Even where a charitable gift instrument contains an express reversion clause, California courts retain their equitable authority to modify gift restrictions under the cy pres doctrine and equitable deviation principles when the specific charitable purpose has become impracticable. The existence of a reversion clause is a factor that a court may consider in evaluating whether the donor manifested a general charitable intent, but it is not dispositive and does not strip the court of its supervisory jurisdiction over charitable assets. California courts have long recognized that the court's equitable power over charitable gifts exists to safeguard the public interest in the continued charitable use of donated funds, and a contractual reversion clause in a charitable gift context does not override that supervisory jurisdiction.
Estuary Foundation submits that the funds at issue — contributed as a charitable gift, received by a tax-exempt public charity, and dedicated to a charitable purpose — are properly subject to the court's equitable authority under the cy pres doctrine and the equitable deviation provisions of the California Probate Code. The appropriate forum for resolving the disposition of these funds, in the absence of a consensual agreement, is a court of competent jurisdiction exercising its equitable powers over charitable assets.
Broader Context — Other Restricted BATRI Funds
We bring to your attention an additional consideration that bears on the resolution of this matter. The WGFT grant is not the sole source of restricted funds designated for the BATRI program. Two additional donors contributed restricted funds to BATRI during the program's operational period:
•  The Cascabel Education Fund contributed $2,000,000 in restricted funds designated for the BATRI program in 2019.
•  The Newhall-Sievert Foundation contributed $1,000,000 in restricted funds designated for the BATRI program in 2020.
The total restricted BATRI funds across all three donors — WGFT, the Cascabel Education Fund, and the Newhall-Sievert Foundation — amounts to approximately $4,700,000 in aggregate. The legal framework governing the disposition of these funds must be addressed in a coherent and consistent manner.
Notably, both the Cascabel Education Fund and the Newhall-Sievert Foundation have consented to the reallocation of their respective restricted BATRI funds to Estuary Foundation's broader educational mission. These donors have recognized that the impracticability of the BATRI program does not extinguish the charitable purpose that motivated their gifts, and they have agreed that reallocation to Estuary Foundation's continuing educational programs represents a faithful and appropriate application of their charitable contributions.
WGFT is the sole donor among the three that has not consented to reallocation. Estuary Foundation seeks to resolve the legal framework governing all of the restricted BATRI funds in a unified and principled manner, and we believe that a judicial determination — or, preferably, a consensual resolution — is the appropriate means of achieving that objective.
Response to the Demand
In light of the foregoing, Estuary Foundation respectfully declines to return the $1,700,000 within the ninety (90) day demand period specified in your January 28, 2022 demand letter.
Estuary Foundation has reached this position in good faith and after careful deliberation. Estuary Foundation believes that the restriction in the Gift Instrument should be modified by a court of competent jurisdiction to permit the reallocation of the unexpended and undisbursed funds to Estuary Foundation's broader educational mission, consistent with the general charitable intent of the late Herbert R. Whitfield-Garner and Dorothy M. Garner. The facts of this case — the impracticability of the specific program, the manifest general charitable intent of the donors, the availability of closely aligned alternative uses, and the broader public interest in the continued charitable application of donated funds — strongly support the exercise of the court's equitable powers.
In the absence of a consensual resolution between the parties, Estuary Foundation intends to seek judicial guidance by filing an action for declaratory relief in the Superior Court of California, County of San Francisco, to obtain a judicial determination regarding the proper disposition of the restricted BATRI funds. Estuary Foundation anticipates that such an action would seek, among other things, a declaration that the cy pres doctrine and/or equitable deviation principles authorize the reallocation of the restricted funds, and an order modifying the Gift Instrument's restrictions accordingly.
Invitation to Confer
Notwithstanding the legal positions set forth above, Estuary Foundation is genuinely committed to exploring whether a consensual resolution of this matter can be achieved before litigation becomes necessary. Estuary Foundation recognizes and respects WGFT's role as a significant donor and its legitimate interest in the stewardship of funds contributed in furtherance of the Whitfield-Garner family's philanthropic legacy. It is Estuary Foundation's sincere hope that the parties can find common ground that honors the donors' charitable intent while addressing WGFT's concerns.
To that end, we propose that counsel for both parties schedule a call or in-person meeting within the next thirty (30) days to discuss potential avenues for resolution. Estuary Foundation is open to a range of potential compromise structures, including but not limited to partial reallocation of the restricted funds, enhanced reporting and transparency requirements with respect to the reallocation, donor recognition and naming opportunities in connection with Estuary Foundation's continuing educational programs, the establishment of an advisory role for WGFT in the selection of specific programs or initiatives to which the funds would be directed, or other accommodations that may address WGFT's concerns while permitting the charitable funds to continue serving the educational objectives that motivated the original gift.
I am available to discuss this matter at your convenience and can be reached directly at (415) 392-4100 or by email at dcarmichael@calderwoodharkness.com.
Reservation of Rights
Estuary Foundation expressly reserves all rights, claims, and defenses available to it under applicable law, including but not limited to the right to seek equitable relief, cy pres modification, and equitable deviation in any judicial proceeding relating to the Gift Instrument, the restricted BATRI funds, or any related matter. Estuary Foundation further reserves the right to assert any and all additional claims and defenses that may become available or appropriate as the facts and circumstances develop.
Nothing in this letter shall be construed as a waiver of any right, claim, or defense of Estuary Foundation, whether or not expressly referenced herein. Nothing in this letter shall be construed as an admission of any fact, legal conclusion, or liability, nor as a concession regarding the proper interpretation or application of any provision of the Gift Instrument or applicable law.
This letter is not intended as, and shall not be construed as, a refusal to engage in good-faith resolution efforts. To the contrary, as stated above, Estuary Foundation welcomes the opportunity to discuss this matter with your client and to explore whether a mutually satisfactory resolution can be reached.
We look forward to hearing from you.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Douglas Carmichael Partner
cc: Priya Chattopadhyay, Esq., General Counsel, Estuary Foundation cc: Margot Ellison-Yee, Executive Director, Estuary Foundation

CALDERWOOD & HARKNESS LLP Attorneys at Law One Market Plaza, Suite 3600 San Francisco, CA 94105

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