complaint-for-declaratory-relief.docx

1028-00001 · Client 1028 · Pleadings

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Email: dcarmichael@calderwoodharkness.com

Attorneys for Plaintiff ESTUARY FOUNDATION, a California nonprofit public benefit corporation

SUPERIOR COURT OF THE STATE OF CALIFORNIA

COUNTY OF SAN FRANCISCO

VERIFIED COMPLAINT FOR DECLARATORY RELIEF

INTRODUCTION

1. Plaintiff Estuary Foundation ("EF"), a California nonprofit public benefit corporation dedicated to advancing equitable access to quality education, brings this action for declaratory relief against Defendant The Whitfield-Garner Family Trust ("WGFT"), a California irrevocable trust, to obtain a judicial determination that EF may lawfully redirect approximately $4,700,000 in donor-restricted grant funds originally designated for the now-defunct Bay Area Teacher Residency Initiative ("BATRI") to EF's broader educational mission, consistent with the doctrines of cy pres and equitable deviation under California law. This action is brought pursuant to California Code of Civil Procedure Section 1060, which authorizes actions for declaratory relief where an actual controversy exists between the parties regarding their respective rights and duties. EF seeks this Court's guidance and a definitive resolution concerning the proper disposition of restricted charitable funds that can no longer be applied to the specific purpose for which they were originally restricted.

2. EF seeks this declaration because the specific charitable purpose for which the restricted funds were granted — the establishment and operation of BATRI — has become impracticable due to circumstances wholly beyond EF's control. In particular, both Oakland Unified School District ("OUSD") and San Francisco Unified School District ("SFUSD"), the two partner school districts essential to the operation of the BATRI program, have withdrawn from their respective partnership agreements. OUSD terminated its partnership in August 2020, citing budget constraints exacerbated by the COVID-19 pandemic, and SFUSD declined to renew its partnership in March 2021, citing district-wide program consolidation. Without partner school districts to host and support teacher residents, the BATRI program cannot operate. However, the broader charitable purpose of supporting education in Northern California — the animating intent behind the original gift — remains viable and can be fulfilled through EF's other programs, including teacher development, school partnerships, and community-based learning initiatives.

3. WGFT is the sole donor that has objected to the proposed reallocation of restricted BATRI funds. Two other donors that contributed restricted funds to BATRI — the Cascabel Education Fund ("Cascabel"), which contributed $2,000,000, and the Newhall-Sievert Foundation ("Newhall-Sievert"), which contributed $1,000,000 — have each provided written consent to the reallocation of their respective restricted funds to EF's broader educational mission. EF brings this action not only to resolve the specific dispute with WGFT, but also to establish a comprehensive legal framework governing the entire $4,700,000 in restricted BATRI funds, ensuring that all such funds are administered in conformity with applicable law and in a manner that honors the general charitable intent underlying each gift.

THE PARTIES

4. Plaintiff Estuary Foundation is, and at all times mentioned herein was, a California nonprofit public benefit corporation organized and existing under the California Nonprofit Public Benefit Corporation Law (California Corporations Code §§ 5110 et seq.). EF was incorporated on April 11, 2009, and is exempt from federal income taxation under Section 501(c)(3) of the Internal Revenue Code (EIN: 94-3127856). EF maintains its principal place of business at 1440 Embarcadero Way, Suite 300, San Francisco, California 94107. EF's stated mission is to advance equitable access to quality education through teacher development, school partnerships, and community-based learning initiatives in Northern California. Since its founding, EF has served thousands of students and educators through a range of programs designed to improve educational outcomes in underserved communities. In fiscal year 2021, as audited by Calloway & Auerbach CPAs, LLP, EF reported annual revenue of $28,300,000 and total net assets of $41,600,000, of which approximately $14,200,000 was classified as donor-restricted net assets under applicable accounting standards. EF is governed by a board of directors chaired by Dr. Kenneth Oguike. EF's Executive Director is Margot Ellison-Yee, who has served in that capacity since 2017. EF's General Counsel is Priya Chattopadhyay.

5. Defendant The Whitfield-Garner Family Trust is, and at all times mentioned herein was, a California irrevocable trust established on March 14, 2003, by the late Herbert R. Whitfield-Garner and Dorothy M. Garner as original settlors. Herbert R. Whitfield-Garner passed away on or about 2019, and Dorothy M. Garner passed away on or about 2016. WGFT is currently administered by Trustee Roland Whitfield-Garner and Co-Trustee Adrienne Garner-Bosch, the daughter of the original settlors. Nathaniel Whitfield-Garner, the son of the original settlors, serves as a non-trustee advisor to the Trust. WGFT maintains a trust address at 2785 Pacific Heights Lane, San Francisco, California 94115. On information and belief, the Trust holds an estimated corpus of approximately $62,000,000 in diversified assets, and WGFT has historically made significant charitable contributions in the field of education, reflecting the philanthropic priorities of the original settlors. WGFT is represented in this matter by Pratchett, Huang & Solano LLP, 555 California Street, 28th Floor, San Francisco, California 94104.

JURISDICTION AND VENUE

6. This Court has subject matter jurisdiction over this action pursuant to California Code of Civil Procedure Section 1060, which provides that any person interested under a written instrument or who desires a declaration of his or her rights or duties with respect to another may, in cases of actual controversy relating to the legal rights and duties of the respective parties, bring an original action in the superior court for a declaration of his or her rights and duties. An actual controversy exists between EF and WGFT regarding the permissible use and disposition of restricted grant funds totaling approximately $1,700,000 contributed by WGFT, as well as the broader legal framework governing the full $4,700,000 in restricted BATRI funds. WGFT has demanded the return of $1,700,000 in grant funds, and EF contends that it is entitled to redirect those funds, and the remaining restricted BATRI funds, to its broader educational mission under the doctrines of cy pres and equitable deviation. The dispute is ripe for adjudication, as WGFT's demand letter set a 90-day deadline for the return of funds, and the parties have been unable to resolve the matter through pre-suit negotiation.

7. This Court additionally has jurisdiction over matters involving the administration of charitable trusts and the modification of charitable gift restrictions under California Probate Code Sections 15403 and 15409. The Probate Code vests the superior court with broad equitable authority to modify the terms of trusts and charitable gift instruments where adherence to the original terms has become impracticable, illegal, or wasteful, or where circumstances not known to or anticipated by the settlor or donor threaten to defeat or substantially impair the accomplishment of the charitable purpose. The California Attorney General has been notified of the filing of this action in accordance with California Corporations Code Section 5142 and California Probate Code Section 15004, to the extent such notification is required or appropriate in connection with proceedings involving the administration and modification of charitable gift restrictions. A copy of the notification to the Attorney General's Charitable Trusts Section has been transmitted contemporaneously with the filing of this Complaint.

8. Venue is proper in the Superior Court of California, County of San Francisco, pursuant to California Code of Civil Procedure Sections 395 and 395.5. EF's principal place of business is located in San Francisco, California. WGFT's trust address is located in San Francisco, California. The Gift Instrument that is the subject of this action was executed in San Francisco, California. The BATRI program was headquartered in and operated from San Francisco and the greater San Francisco Bay Area. All material events giving rise to this dispute occurred in the County of San Francisco. Accordingly, venue in this Court is both proper and convenient.

FACTUAL ALLEGATIONS

A. Background of Estuary Foundation

9. EF was incorporated on April 11, 2009, as a California nonprofit public benefit corporation under the California Nonprofit Public Benefit Corporation Law (California Corporations Code §§ 5110 et seq.). From its inception, EF has been dedicated to its mission of advancing equitable access to quality education through teacher development, school partnerships, and community-based learning initiatives in Northern California. Since its founding, EF has served thousands of students and educators across the San Francisco Bay Area and greater Northern California through a range of innovative programs, including teacher residency programs, professional development workshops, curriculum design initiatives, and community-based educational partnerships. EF has developed deep expertise in the design and implementation of programs that address persistent educational inequities, and it has earned recognition from state and national educational organizations for the quality and impact of its work.

10. In fiscal year 2021, as audited by Calloway & Auerbach CPAs, LLP, EF reported annual revenue of approximately $28,300,000 and total net assets of approximately $41,600,000, of which approximately $14,200,000 was classified as donor-restricted net assets. EF's donor-restricted net assets include contributions from range individual donors, family foundations, and institutional funders, reflecting the breadth and depth of support EF has garnered over its thirteen-year history. EF is governed by a board of directors chaired by Dr. Kenneth Oguike. The organization is managed by Executive Director Margot Ellison-Yee, who has served in that capacity since 2017 and who has more than twenty years of experience in nonprofit management and education policy. EF maintains rigorous financial controls and reporting practices, and its financial statements have received unqualified audit opinions for each of the past ten fiscal years.

B. The Whitfield-Garner Family Trust and Its Charitable Giving

11. WGFT was established on March 14, 2003, by the late Herbert R. Whitfield-Garner and Dorothy M. Garner, who served as the Trust's original settlors. Herbert R. Whitfield-Garner, a prominent San Francisco businessman and philanthropist, passed away in 2019. Dorothy M. Garner, who shared her husband's deep commitment to educational philanthropy, passed away in 2016. WGFT is currently administered by Trustee Roland Whitfield-Garner and Co-Trustee Adrienne Garner-Bosch, the daughter of the original settlors. Nathaniel Whitfield-Garner, the son of the original settlors, serves as a non-trustee advisor, providing guidance to the Trustees on matters including the Trust's charitable giving strategy.

12. On information and belief, WGFT holds an estimated corpus of approximately $62,000,000 in diversified assets, encompassing publicly traded securities, real estate holdings, and alternative investments. WGFT has historically made significant charitable contributions in the field of education, reflecting the philanthropic priorities and general charitable intent of the original settlors. On information and belief, WGFT has, since its establishment, donated in excess of $20,000,000 to educational institutions and nonprofit organizations dedicated to improving educational outcomes in the San Francisco Bay Area and throughout California. The WGFT grant to EF for the BATRI program was among the largest single grants in the Trust's history and was motivated by the settlors' longstanding commitment to improving teacher quality and educational equity — a commitment that EF shared and continues to share.

C. The Gift Instrument and Grant Agreement

13. On June 15, 2018, WGFT and EF executed a document titled "Gift Instrument and Grant Agreement Between the Whitfield-Garner Family Trust and Estuary Foundation for the Bay Area Teacher Residency Initiative" (hereinafter, the "Gift Instrument"). The Gift Instrument was the product of extensive discussions between the parties spanning approximately eighteen months, during which EF developed a detailed program plan for BATRI and WGFT conducted its own due diligence regarding the feasibility and potential impact of the program. The Gift Instrument provided for a total grant of $5,000,000 from WGFT to EF, restricted to the establishment, operation, and support of the Bay Area Teacher Residency Initiative ("BATRI") over a five-year grant period running from 2018 through 2023. The Gift Instrument set forth the terms and conditions governing the grant, including the disbursement schedule, reporting requirements, use restrictions, and provisions addressing the discontinuation of the program. A true and correct copy of the Gift Instrument is attached hereto as Exhibit A and is incorporated herein by reference.

14. The Gift Instrument provided for disbursement of the $5,000,000 grant to EF in four tranches, according to the following schedule:

(a) Tranche 1 (upon execution, June 2018): $1,500,000;

(b) Tranche 2 (July 2019): $1,250,000;

(d) Tranche 4 (July 2021): $1,000,000.

Tranches 1 through 3, totaling $4,000,000, were duly disbursed by WGFT to EF in accordance with the schedule set forth in the Gift Instrument. EF acknowledged receipt of each tranche and provided the annual program and financial reports required by the Gift Instrument. Tranche 4, in the amount of $1,000,000, was never disbursed. On information and belief, WGFT withheld Tranche 4 following the suspension of BATRI operations in March 2021 and the program's subsequent wind-down.

15. Section 3.1 of the Gift Instrument contains the central use restriction at issue in this case. Section 3.1 provides, in relevant part:

"The Grant Funds shall be used solely and exclusively for the establishment, operation, and support of the Bay Area Teacher Residency Initiative as described in Exhibit A, and for no other purpose."

This restriction reflects the shared objective of EF and WGFT at the time of execution to develop and sustain a teacher residency program that would serve Northern California school districts by placing carefully trained teacher residents in high-need schools. While the restriction identifies a specific program — BATRI — as the vehicle for the charitable gift, the broader charitable purpose underlying the restriction was the advancement of educational quality and equity in Northern California.

16. Section 7.2 of the Gift Instrument addresses the disposition of funds in the event BATRI is discontinued prior to the expiration of the grant period. Section 7.2 provides, in relevant part:

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

As set forth more fully below, EF contends that Section 7.2 does not operate as a condition subsequent that automatically divests EF of the restricted funds upon the discontinuation of BATRI. Rather, Section 7.2 is discretionary in nature, as indicated by the phrase "at the election of Grantor," and in any event is subject to the overriding equitable authority of this Court to modify charitable gift restrictions under the doctrines of cy pres and equitable deviation. EF further contends that enforcing the reversion clause under the circumstances presented here — where the specific charitable purpose has become impracticable through no fault of the donee, and the donor's general charitable intent can be fulfilled through alternative means — would frustrate the fundamental purposes of the cy pres doctrine and undermine the public interest in the effective deployment of charitable resources.

D. The Bay Area Teacher Residency Initiative ("BATRI")

17. In September 2018, following receipt of the first tranche of WGFT grant funds, EF launched BATRI with a cohort of 24 teacher residents placed across six partner schools in San Francisco Unified School District ("SFUSD") and Oakland Unified School District ("OUSD"). BATRI was designed as an intensive, clinically oriented teacher residency program providing aspiring educators with sustained, mentored clinical training experiences in high-need schools. The program model drew on best practices identified by the National Center for Teacher Residencies and was tailored to address the specific teacher recruitment and retention challenges facing Bay Area school districts. Teacher residents participated in a full-year clinical placement alongside an experienced mentor teacher, received concurrent coursework and professional development, and were supported through a comprehensive program of coaching, feedback, and community building.

18. In June 2019, the first cohort of BATRI residents completed the residency program. Of the 24 residents who began the program, 22 successfully completed all program requirements and were placed in full-time teaching positions in SFUSD and OUSD schools. The completion and placement rate of approximately 92% exceeded national benchmarks for teacher residency programs and demonstrated both the efficacy of the BATRI model and the viability of the teacher residency approach in the Bay Area context. The first cohort's success was cited in EF's annual report and was shared with WGFT and other BATRI funders.

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

20. In March 2020, the COVID-19 pandemic struck the San Francisco Bay Area, and Governor Gavin Newsom issued executive orders requiring the closure of schools and the transition to remote instruction. The pandemic fundamentally altered the operating environment for school-based teacher residency programs, disrupting in-person mentorship arrangements, clinical training placements, and school-site coordination that were essential to the BATRI model. While EF made every reasonable effort to adapt the program to remote and hybrid formats, the clinical and experiential dimensions of the residency model were severely compromised. The second cohort completed the program in a modified format in August 2020, with 25 of 30 residents completing all program requirements.

21. In August 2020, OUSD formally terminated its partnership agreement with EF for the BATRI program, citing severe budget constraints exacerbated by the pandemic and the resulting decline in state and local revenues. The loss of OUSD as a partner district was a significant blow to the BATRI program. OUSD had hosted approximately half of the program's partner school placements, and its withdrawal reduced BATRI's partner school network by approximately half. EF made diligent efforts to identify replacement partner districts, but the widespread disruption caused by the pandemic, combined with the budgetary pressures facing school districts throughout the region, made it impossible to secure alternative partnerships on a timeline consistent with the BATRI program's needs.

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

23. On or about March 15, 2021, SFUSD notified EF in writing that it would not renew the BATRI partnership agreement for the 2021-2022 academic year. SFUSD cited district-wide program consolidation and a strategic decision to focus its limited resources on internally administered teacher development programs. The withdrawal of SFUSD — BATRI's sole remaining partner school district — rendered the continuation of the BATRI program impossible as a practical matter. Without partner school districts willing to host teacher residents and provide the clinical training placements that were the core of the residency model, BATRI could not function.

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

25. On December 31, 2021, EF's Board of Directors held a special meeting at which it formally voted to wind down the BATRI program. The Board's resolution recognized that the program could not be sustained without partner school district participation, that EF's diligent efforts to secure replacement partnerships had been unsuccessful, and that the circumstances giving rise to BATRI's discontinuation were wholly beyond EF's control. The Board's resolution further expressed EF's intent to seek the reallocation of remaining restricted BATRI funds to EF's broader educational mission, subject to donor consent where obtainable and judicial approval where necessary. A true and correct copy of the Board resolution is attached hereto as Exhibit D and is incorporated herein by reference.

E. BATRI Expenditures and Remaining Restricted Funds

26. Between the launch of BATRI in 2018 and the program's formal wind-down in December 2021, EF expended a total of approximately $3,300,000 in BATRI program costs. These expenditures included, but were not limited to, teacher resident stipends and benefits, partner school coordination costs, curriculum development, mentor teacher compensation, program administration and staff salaries, evaluation and assessment, and allocable administrative overhead. All expenditures were made in furtherance of the BATRI program's objectives and were consistent with the terms of the Gift Instrument and the applicable donor restrictions.

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

F. Additional Restricted BATRI Funds from Other Donors

28. In addition to the WGFT grant, EF received restricted contributions from two other donors for the operation of BATRI. In 2019, the Cascabel Education Fund ("Cascabel"), a California nonprofit public benefit corporation, contributed $2,000,000 to EF, restricted to the operation of the BATRI program. Cascabel made this contribution based on the program's demonstrated success with its first cohort and the shared goal of expanding teacher residency opportunities in the Bay Area. Following the wind-down of BATRI, Cascabel has provided written consent to the reallocation of its restricted funds to EF's broader educational mission. A true and correct copy of Cascabel's written consent is attached hereto as Exhibit E and is incorporated herein by reference.

29. In 2020, the Newhall-Sievert Foundation ("Newhall-Sievert"), a California private foundation, contributed $1,000,000 to EF, restricted to the operation of the BATRI program. Newhall-Sievert's contribution was made to support the continuation of BATRI during a period of financial uncertainty caused by the COVID-19 pandemic. Following the wind-down of BATRI, Newhall-Sievert has provided written consent to the reallocation of its restricted funds to EF's broader educational mission. A true and correct copy of Newhall-Sievert's written consent is attached hereto as Exhibit F and is incorporated herein by reference.

30. The total restricted funds designated for BATRI that remain at issue in this action are approximately $4,700,000, calculated as follows:

(a) WGFT unexpended disbursed funds: $700,000;

(b) WGFT undisbursed Tranche 4: $1,000,000;

(d) Newhall-Sievert Foundation restricted funds: $1,000,000;

(e) Total: $4,700,000.

While Cascabel and Newhall-Sievert have each provided written consent to the reallocation of their respective restricted contributions, EF seeks a judicial declaration encompassing all $4,700,000 in restricted BATRI funds. This comprehensive approach is necessary to establish a uniform legal framework governing the disposition of these funds, to ensure that EF's stewardship of the funds is consistent with applicable law, and to provide certainty and finality regarding the rights and duties of all parties.

G. WGFT's Demand and EF's Response

31. On January 28, 2022, counsel for WGFT — the law firm of Pratchett, Huang & Solano LLP, through lead partner Victoria Huang — sent a demand letter to EF (the "Demand Letter"). The Demand Letter asserted that the discontinuation of BATRI prior to the expiration of the five-year grant period triggered the reversion clause set forth in Section 7.2 of the Gift Instrument. The Demand Letter requested that EF return $1,700,000 to WGFT within ninety (90) days of the date of the letter — that is, by no later than April 28, 2022. The Demand Letter further asserted that the reversion clause constituted a binding contractual obligation and that EF's failure to comply would constitute a breach of the Gift Instrument. A true and correct copy of the Demand Letter is attached hereto as Exhibit B and is incorporated herein by reference.

32. On March 3, 2022, EF, through its counsel Calderwood & Harkness LLP and responsible partner Douglas Carmichael, sent a detailed written response to WGFT's Demand Letter (the "Response Letter"). The Response Letter respectfully declined WGFT's demand for the return of $1,700,000 and set forth EF's legal position. Specifically, EF asserted that the restriction on the BATRI funds should be modified under the doctrines of cy pres and equitable deviation, as codified in California Probate Code Sections 15409 and 15403. EF's Response Letter explained that the specific charitable purpose of the BATRI program had become impracticable due to circumstances beyond EF's control — namely, the withdrawal of both partner school districts — and that the donor's general charitable intent to support education in Northern California could and should be honored by redirecting the funds to EF's broader educational mission. The Response Letter further asserted that the reversion clause in Section 7.2 did not preclude judicial modification of the restriction and that EF intended to seek judicial guidance if the parties were unable to reach a negotiated resolution. A true and correct copy of the Response Letter is attached hereto as Exhibit C and is incorporated herein by reference.

33. On April 15, 2022, counsel for EF and WGFT conducted a final pre-suit meet-and-confer telephonic conference in an effort to resolve the dispute without litigation. During the conference, EF reiterated its position that the cy pres and equitable deviation doctrines authorized the modification of the gift restriction, and WGFT reiterated its position that the reversion clause controlled and that EF was obligated to return $1,700,000. The parties explored potential compromise arrangements, including the possibility of WGFT agreeing to a partial reallocation of funds or designating alternative educational programs for the application of the restricted funds, but the parties were ultimately unable to reach a resolution. Following the unsuccessful meet-and-confer, EF determined that judicial intervention was necessary to resolve the dispute and to establish the rights and duties of the parties with respect to the restricted BATRI funds.

H. The Dispute Between the Parties

34. WGFT contends that the unexpended and undisbursed funds totaling $1,700,000 must be returned to the Trust. Specifically, WGFT asserts that Section 7.2 of the Gift Instrument creates a condition subsequent, and that EF's failure to operate BATRI through the expiration of the five-year grant period in 2023 triggers an automatic reversion right in favor of WGFT. WGFT maintains that Section 7.2 constitutes an express contractual remedy that supersedes any equitable modification that might otherwise be available under the cy pres or equitable deviation doctrines. On information and belief, WGFT's position is that the reversion clause reflects the settlors' specific intent that the funds be used exclusively for the BATRI program, and that in the absence of BATRI, the funds should revert to the Trust so that WGFT may direct them to other charitable purposes of its choosing.

35. EF disagrees with WGFT's position. EF contends that the doctrines of cy pres and equitable deviation, as codified in California Probate Code Sections 15409 and 15403, authorize this Court to modify the restriction in the Gift Instrument to permit the use of the restricted funds for EF's broader educational mission. EF's position rests on several independent grounds. First, the specific charitable purpose for which the funds were restricted — the operation of BATRI — has become impracticable due to circumstances beyond EF's control, including the COVID-19 pandemic and the withdrawal of both OUSD and SFUSD as partner school districts. Second, the general charitable intent of the original gift — to support education in Northern California — is evident from the four corners of the Gift Instrument and from WGFT's long and well-documented history of philanthropic support for educational causes. Third, the reversion clause in Section 7.2 does not divest this Court of its equitable jurisdiction to modify the restriction. The cy pres doctrine and the equitable deviation doctrine are rooted in the Court's inherent equitable powers and in the state's sovereign interest in the effective administration of charitable resources. These equitable powers cannot be contracted away by a reversion clause, particularly where the impracticability of the specific charitable purpose has arisen through no fault of the donee and the donor's general charitable intent can be served through alternative means.

FIRST CAUSE OF ACTION

Declaratory Relief — Modification of Restriction Under Cy Pres Doctrine

(Against Defendant The Whitfield-Garner Family Trust)

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

37. An actual, present, and justiciable controversy has arisen and now exists between EF and WGFT concerning the rights and duties of the parties with respect to approximately $4,700,000 in restricted grant funds originally designated for the BATRI program. EF contends that the specific charitable purpose for which the funds were restricted — the establishment, operation, and support of BATRI — has become impracticable, and that the restriction may and should be modified under the cy pres doctrine, as codified in California Probate Code Section 15409, to permit the use of the funds for EF's broader educational mission — a charitable purpose as near as possible to the original charitable purpose of the gift. WGFT contends that the restriction language and the reversion clause in the Gift Instrument require the return of $1,700,000 in WGFT funds to the Trust and preclude any judicial modification of the restriction. This controversy requires judicial resolution.

38. Under the cy pres doctrine, where property is given in trust or under a gift instrument for a specific charitable purpose and that purpose becomes illegal, impossible, or impracticable, the court may direct the application of the property to a charitable purpose as near as possible to the original purpose, provided the donor manifested a general charitable intent. California Probate Code Section 15409 codifies this doctrine and authorizes the court to modify or terminate a trust where the particular charitable purpose or restriction has become unlawful, impracticable, impossible to achieve, or wasteful. The cy pres doctrine serves the vital public policy of preserving charitable gifts for charitable purposes, rather than permitting them to revert to the donor or to be diverted from charitable use, whenever the donor's general charitable intent can be identified and honored.

39. EF submits that the Gift Instrument, read as a whole and in the context of the parties' course of dealing, demonstrates WGFT's general charitable intent to support education in Northern California. The BATRI program was the specific vehicle chosen to effectuate that broader charitable intent, but BATRI was not the totality of that intent. The Gift Instrument's recitals, the detailed description of the BATRI program's educational objectives, and the focus on improving teacher quality and educational equity in underserved communities all reflect a general charitable intent that transcends the specific program. Moreover, WGFT's long history of philanthropic giving to educational organizations throughout California — a history spanning nearly two decades and involving contributions in excess of $20,000,000, on information and belief — further evidences the settlors' and the Trust's general charitable intent to advance education.

40. The impracticability of the BATRI program has been conclusively demonstrated by the following circumstances, none of which was within EF's control or reasonably foreseeable at the time the Gift Instrument was executed:

(a) The COVID-19 pandemic, which struck the San Francisco Bay Area in March 2020, resulting in the closure of schools and the disruption of in-person clinical training placements that were essential to the BATRI model;

(b) OUSD's formal termination of its partnership with BATRI in August 2020, citing pandemic-related budget constraints, which eliminated approximately half of BATRI's partner school placements;

(c) SFUSD's refusal to renew its partnership with BATRI for the 2021-2022 academic year, communicated in March 2021, which eliminated BATRI's sole remaining partner school district; and

(d) The resulting inability to recruit replacement partner school districts or otherwise sustain the teacher residency model, despite EF's diligent efforts to identify alternative partnerships.

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

SECOND CAUSE OF ACTION

Declaratory Relief — Equitable Deviation

(Against Defendant The Whitfield-Garner Family Trust)

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

43. In the alternative to, or in addition to, modification under the cy pres doctrine, EF seeks a declaration that it is entitled to equitable deviation from the terms of the Gift Instrument under the doctrine of equitable deviation, as codified in California Probate Code Section 15403. Under the doctrine of equitable deviation, where compliance with the administrative or distributive terms of a trust or gift instrument has become impracticable, or where adherence to such terms would substantially impair the accomplishment of the trust's charitable purposes, the court may modify the administrative or distributive terms to further the purposes of the trust or gift in a manner consistent with the donor's probable intention.

44. Compliance with the specific restriction in Section 3.1 of the Gift Instrument — that the grant funds be used "solely and exclusively" for the establishment, operation, and support of the BATRI program — has become impracticable. The BATRI program cannot be operated in the absence of partner school district participation, and both OUSD and SFUSD have declined to continue or renew their partnerships with the program. EF made diligent and good-faith efforts to identify replacement partner districts, but these efforts were unsuccessful. The circumstances that rendered the specific restriction impracticable — the COVID-19 pandemic and the resulting financial and operational pressures on Bay Area school districts — were extraordinary, unforeseen, and wholly beyond EF's control.

45. Strict adherence to the restriction in Section 3.1 would result in the indefinite encumbrance of approximately $4,700,000 in charitable funds that cannot be deployed for their restricted purpose. Such an outcome would be contrary to the donors' general intent to support education, contrary to the public interest in the effective use of charitable resources, and contrary to the policy underlying the doctrine of equitable deviation. The indefinite warehousing of charitable funds serves no one — not the donors, not EF, not the students and educators who would benefit from the application of these resources to viable educational programs, and not the public.

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

THIRD CAUSE OF ACTION

Declaratory Relief — Invalidity or Inapplicability of Reversion Clause

(Against Defendant The Whitfield-Garner Family Trust)

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

48. An actual, present, and justiciable controversy has arisen and now exists between EF and WGFT as to the enforceability, proper interpretation, and legal effect of Section 7.2 of the Gift Instrument (the "reversion clause"). WGFT asserts that Section 7.2 operates as a condition subsequent that automatically entitles WGFT to the return of $1,700,000 in unexpended and undisbursed grant funds upon written demand. EF contends that Section 7.2 does not preclude the exercise of this Court's equitable jurisdiction under the cy pres doctrine or the doctrine of equitable deviation, and that the reversion clause is subject to judicial modification where the specific charitable purpose has become impracticable due to circumstances beyond the donee's control.

49. EF further contends that Section 7.2, by its express terms, is discretionary rather than automatic. The clause provides that unexpended funds shall be returned "at the election of Grantor," indicating that the reversion is not self-executing but rather is contingent upon an affirmative election by WGFT. The discretionary nature of the clause undermines WGFT's characterization of it as an automatic condition subsequent. Moreover, even assuming arguendo that WGFT has validly exercised its election under Section 7.2, EF contends that the Court's equitable powers under the cy pres doctrine and California Probate Code Sections 15409 and 15403 supersede contractual reversion provisions in charitable gift instruments. The cy pres doctrine exists precisely to address the situation where a donor's specific charitable purpose has failed, and where the enforcement of reversion or reverter provisions would divert charitable funds from charitable use notwithstanding the donor's general charitable intent. To hold that a reversion clause could categorically bar the application of cy pres or equitable deviation would be to permit donors to contract around the equitable jurisdiction of the courts and the public interest in the preservation of charitable assets — a result inconsistent with the policy and purpose of the cy pres doctrine as codified in California law.

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

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

PRAYER FOR RELIEF

WHEREFORE, Plaintiff Estuary Foundation respectfully prays for judgment against Defendant The Whitfield-Garner Family Trust as follows:

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

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

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

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

5. For such other and further relief as the Court deems just and proper.

VERIFICATION

I, Margot Ellison-Yee, declare as follows:

I am the Executive Director of Estuary Foundation, the Plaintiff in the above-entitled action. I am authorized to make this verification on behalf of Estuary Foundation. I have read the foregoing Verified Complaint for Declaratory Relief and know its contents. The facts stated therein are true of my own knowledge, except as to those matters which are stated on information and belief, and as to those matters, I believe them to be true.

I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct.

Executed in San Francisco, California, on April 25, 2022.

________________________________________

Margot Ellison-Yee Executive Director, Estuary Foundation

Dated: April 25, 2022

CALDERWOOD & HARKNESS LLP

By: ________

Douglas Carmichael (SBN 198462) Responsible Partner

One Market Plaza, Suite 3600 San Francisco, California 94105 Telephone: (415) 773-5000 Facsimile: (415) 773-5001

Email: dcarmichael@calderwoodharkness.com

Attorneys for Plaintiff Estuary Foundation

EXHIBIT LIST

The following exhibits are attached hereto and incorporated by reference into this Verified Complaint for Declaratory Relief:

Exhibit A: Gift Instrument and Grant Agreement Between the Whitfield-Garner Family Trust and Estuary Foundation for the Bay Area Teacher Residency Initiative, dated June 15, 2018.

Exhibit B: Demand Letter from Pratchett, Huang & Solano LLP (Victoria Huang) to Estuary Foundation, dated January 28, 2022.

Exhibit C: Response Letter from Calderwood & Harkness LLP (Douglas Carmichael) to Pratchett, Huang & Solano LLP, dated March 3, 2022.

Exhibit D: Estuary Foundation Board of Directors Resolution to Wind Down the Bay Area Teacher Residency Initiative, dated December 31, 2021.

Exhibit E: Written Consent of Cascabel Education Fund to Reallocation of Restricted BATRI Funds, undated.

Exhibit F: Written Consent of Newhall-Sievert Foundation to Reallocation of Restricted BATRI Funds, undated.

ESTUARY FOUNDATION, a California nonprofit public benefit corporation,	Case No. CGC-22-599481
Plaintiff,	Department 302
v.	Assigned for All Purposes to:

Hon. Patricia R. Wainwright

THE WHITFIELD-GARNER FAMILY TRUST, a California irrevocable trust,

VERIFIED COMPLAINT FOR

Defendant.

Filed: April 25, 2022

DOUGLAS CARMICHAEL (SBN 198462) FRANCESCA MORANO (SBN 224718) SIMONE LAROCHE (SBN 301255) JEFFREY PARK (SBN 318904) CALDERWOOD & HARKNESS LLP One Market Plaza, Suite 3600 San Francisco, California 94105 Telephone: (415) 773-5000 Facsimile: (415) 773-5001
Email: dcarmichael@calderwoodharkness.com
Attorneys for Plaintiff ESTUARY FOUNDATION, a California nonprofit public benefit corporation
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF SAN FRANCISCO
VERIFIED COMPLAINT FOR DECLARATORY RELIEF
INTRODUCTION
1. Plaintiff Estuary Foundation ("EF"), a California nonprofit public benefit corporation dedicated to advancing equitable access to quality education, brings this action for declaratory relief against Defendant The Whitfield-Garner Family Trust ("WGFT"), a California irrevocable trust, to obtain a judicial determination that EF may lawfully redirect approximately $4,700,000 in donor-restricted grant funds originally designated for the now-defunct Bay Area Teacher Residency Initiative ("BATRI") to EF's broader educational mission, consistent with the doctrines of cy pres and equitable deviation under California law. This action is brought pursuant to California Code of Civil Procedure Section 1060, which authorizes actions for declaratory relief where an actual controversy exists between the parties regarding their respective rights and duties. EF seeks this Court's guidance and a definitive resolution concerning the proper disposition of restricted charitable funds that can no longer be applied to the specific purpose for which they were originally restricted.
2. EF seeks this declaration because the specific charitable purpose for which the restricted funds were granted — the establishment and operation of BATRI — has become impracticable due to circumstances wholly beyond EF's control. In particular, both Oakland Unified School District ("OUSD") and San Francisco Unified School District ("SFUSD"), the two partner school districts essential to the operation of the BATRI program, have withdrawn from their respective partnership agreements. OUSD terminated its partnership in August 2020, citing budget constraints exacerbated by the COVID-19 pandemic, and SFUSD declined to renew its partnership in March 2021, citing district-wide program consolidation. Without partner school districts to host and support teacher residents, the BATRI program cannot operate. However, the broader charitable purpose of supporting education in Northern California — the animating intent behind the original gift — remains viable and can be fulfilled through EF's other programs, including teacher development, school partnerships, and community-based learning initiatives.
3. WGFT is the sole donor that has objected to the proposed reallocation of restricted BATRI funds. Two other donors that contributed restricted funds to BATRI — the Cascabel Education Fund ("Cascabel"), which contributed $2,000,000, and the Newhall-Sievert Foundation ("Newhall-Sievert"), which contributed $1,000,000 — have each provided written consent to the reallocation of their respective restricted funds to EF's broader educational mission. EF brings this action not only to resolve the specific dispute with WGFT, but also to establish a comprehensive legal framework governing the entire $4,700,000 in restricted BATRI funds, ensuring that all such funds are administered in conformity with applicable law and in a manner that honors the general charitable intent underlying each gift.
THE PARTIES
4. Plaintiff Estuary Foundation is, and at all times mentioned herein was, a California nonprofit public benefit corporation organized and existing under the California Nonprofit Public Benefit Corporation Law (California Corporations Code §§ 5110 et seq.). EF was incorporated on April 11, 2009, and is exempt from federal income taxation under Section 501(c)(3) of the Internal Revenue Code (EIN: 94-3127856). EF maintains its principal place of business at 1440 Embarcadero Way, Suite 300, San Francisco, California 94107. EF's stated mission is to advance equitable access to quality education through teacher development, school partnerships, and community-based learning initiatives in Northern California. Since its founding, EF has served thousands of students and educators through a range of programs designed to improve educational outcomes in underserved communities. In fiscal year 2021, as audited by Calloway & Auerbach CPAs, LLP, EF reported annual revenue of $28,300,000 and total net assets of $41,600,000, of which approximately $14,200,000 was classified as donor-restricted net assets under applicable accounting standards. EF is governed by a board of directors chaired by Dr. Kenneth Oguike. EF's Executive Director is Margot Ellison-Yee, who has served in that capacity since 2017. EF's General Counsel is Priya Chattopadhyay.
5. Defendant The Whitfield-Garner Family Trust is, and at all times mentioned herein was, a California irrevocable trust established on March 14, 2003, by the late Herbert R. Whitfield-Garner and Dorothy M. Garner as original settlors. Herbert R. Whitfield-Garner passed away on or about 2019, and Dorothy M. Garner passed away on or about 2016. WGFT is currently administered by Trustee Roland Whitfield-Garner and Co-Trustee Adrienne Garner-Bosch, the daughter of the original settlors. Nathaniel Whitfield-Garner, the son of the original settlors, serves as a non-trustee advisor to the Trust. WGFT maintains a trust address at 2785 Pacific Heights Lane, San Francisco, California 94115. On information and belief, the Trust holds an estimated corpus of approximately $62,000,000 in diversified assets, and WGFT has historically made significant charitable contributions in the field of education, reflecting the philanthropic priorities of the original settlors. WGFT is represented in this matter by Pratchett, Huang & Solano LLP, 555 California Street, 28th Floor, San Francisco, California 94104.
JURISDICTION AND VENUE
6. This Court has subject matter jurisdiction over this action pursuant to California Code of Civil Procedure Section 1060, which provides that any person interested under a written instrument or who desires a declaration of his or her rights or duties with respect to another may, in cases of actual controversy relating to the legal rights and duties of the respective parties, bring an original action in the superior court for a declaration of his or her rights and duties. An actual controversy exists between EF and WGFT regarding the permissible use and disposition of restricted grant funds totaling approximately $1,700,000 contributed by WGFT, as well as the broader legal framework governing the full $4,700,000 in restricted BATRI funds. WGFT has demanded the return of $1,700,000 in grant funds, and EF contends that it is entitled to redirect those funds, and the remaining restricted BATRI funds, to its broader educational mission under the doctrines of cy pres and equitable deviation. The dispute is ripe for adjudication, as WGFT's demand letter set a 90-day deadline for the return of funds, and the parties have been unable to resolve the matter through pre-suit negotiation.
7. This Court additionally has jurisdiction over matters involving the administration of charitable trusts and the modification of charitable gift restrictions under California Probate Code Sections 15403 and 15409. The Probate Code vests the superior court with broad equitable authority to modify the terms of trusts and charitable gift instruments where adherence to the original terms has become impracticable, illegal, or wasteful, or where circumstances not known to or anticipated by the settlor or donor threaten to defeat or substantially impair the accomplishment of the charitable purpose. The California Attorney General has been notified of the filing of this action in accordance with California Corporations Code Section 5142 and California Probate Code Section 15004, to the extent such notification is required or appropriate in connection with proceedings involving the administration and modification of charitable gift restrictions. A copy of the notification to the Attorney General's Charitable Trusts Section has been transmitted contemporaneously with the filing of this Complaint.
8. Venue is proper in the Superior Court of California, County of San Francisco, pursuant to California Code of Civil Procedure Sections 395 and 395.5. EF's principal place of business is located in San Francisco, California. WGFT's trust address is located in San Francisco, California. The Gift Instrument that is the subject of this action was executed in San Francisco, California. The BATRI program was headquartered in and operated from San Francisco and the greater San Francisco Bay Area. All material events giving rise to this dispute occurred in the County of San Francisco. Accordingly, venue in this Court is both proper and convenient.
FACTUAL ALLEGATIONS
A. Background of Estuary Foundation
9. EF was incorporated on April 11, 2009, as a California nonprofit public benefit corporation under the California Nonprofit Public Benefit Corporation Law (California Corporations Code §§ 5110 et seq.). From its inception, EF has been dedicated to its mission of advancing equitable access to quality education through teacher development, school partnerships, and community-based learning initiatives in Northern California. Since its founding, EF has served thousands of students and educators across the San Francisco Bay Area and greater Northern California through a range of innovative programs, including teacher residency programs, professional development workshops, curriculum design initiatives, and community-based educational partnerships. EF has developed deep expertise in the design and implementation of programs that address persistent educational inequities, and it has earned recognition from state and national educational organizations for the quality and impact of its work.
10. In fiscal year 2021, as audited by Calloway & Auerbach CPAs, LLP, EF reported annual revenue of approximately $28,300,000 and total net assets of approximately $41,600,000, of which approximately $14,200,000 was classified as donor-restricted net assets. EF's donor-restricted net assets include contributions from range individual donors, family foundations, and institutional funders, reflecting the breadth and depth of support EF has garnered over its thirteen-year history. EF is governed by a board of directors chaired by Dr. Kenneth Oguike. The organization is managed by Executive Director Margot Ellison-Yee, who has served in that capacity since 2017 and who has more than twenty years of experience in nonprofit management and education policy. EF maintains rigorous financial controls and reporting practices, and its financial statements have received unqualified audit opinions for each of the past ten fiscal years.
B. The Whitfield-Garner Family Trust and Its Charitable Giving
11. WGFT was established on March 14, 2003, by the late Herbert R. Whitfield-Garner and Dorothy M. Garner, who served as the Trust's original settlors. Herbert R. Whitfield-Garner, a prominent San Francisco businessman and philanthropist, passed away in 2019. Dorothy M. Garner, who shared her husband's deep commitment to educational philanthropy, passed away in 2016. WGFT is currently administered by Trustee Roland Whitfield-Garner and Co-Trustee Adrienne Garner-Bosch, the daughter of the original settlors. Nathaniel Whitfield-Garner, the son of the original settlors, serves as a non-trustee advisor, providing guidance to the Trustees on matters including the Trust's charitable giving strategy.
12. On information and belief, WGFT holds an estimated corpus of approximately $62,000,000 in diversified assets, encompassing publicly traded securities, real estate holdings, and alternative investments. WGFT has historically made significant charitable contributions in the field of education, reflecting the philanthropic priorities and general charitable intent of the original settlors. On information and belief, WGFT has, since its establishment, donated in excess of $20,000,000 to educational institutions and nonprofit organizations dedicated to improving educational outcomes in the San Francisco Bay Area and throughout California. The WGFT grant to EF for the BATRI program was among the largest single grants in the Trust's history and was motivated by the settlors' longstanding commitment to improving teacher quality and educational equity — a commitment that EF shared and continues to share.
C. The Gift Instrument and Grant Agreement
13. On June 15, 2018, WGFT and EF executed a document titled "Gift Instrument and Grant Agreement Between the Whitfield-Garner Family Trust and Estuary Foundation for the Bay Area Teacher Residency Initiative" (hereinafter, the "Gift Instrument"). The Gift Instrument was the product of extensive discussions between the parties spanning approximately eighteen months, during which EF developed a detailed program plan for BATRI and WGFT conducted its own due diligence regarding the feasibility and potential impact of the program. The Gift Instrument provided for a total grant of $5,000,000 from WGFT to EF, restricted to the establishment, operation, and support of the Bay Area Teacher Residency Initiative ("BATRI") over a five-year grant period running from 2018 through 2023. The Gift Instrument set forth the terms and conditions governing the grant, including the disbursement schedule, reporting requirements, use restrictions, and provisions addressing the discontinuation of the program. A true and correct copy of the Gift Instrument is attached hereto as Exhibit A and is incorporated herein by reference.
14. The Gift Instrument provided for disbursement of the $5,000,000 grant to EF in four tranches, according to the following schedule:
(a) Tranche 1 (upon execution, June 2018): $1,500,000;
(b) Tranche 2 (July 2019): $1,250,000;
(c) Tranche 3 (July 2020): $1,250,000; and
(d) Tranche 4 (July 2021): $1,000,000.
Tranches 1 through 3, totaling $4,000,000, were duly disbursed by WGFT to EF in accordance with the schedule set forth in the Gift Instrument. EF acknowledged receipt of each tranche and provided the annual program and financial reports required by the Gift Instrument. Tranche 4, in the amount of $1,000,000, was never disbursed. On information and belief, WGFT withheld Tranche 4 following the suspension of BATRI operations in March 2021 and the program's subsequent wind-down.
15. Section 3.1 of the Gift Instrument contains the central use restriction at issue in this case. Section 3.1 provides, in relevant part:
"The Grant Funds shall be used solely and exclusively for the establishment, operation, and support of the Bay Area Teacher Residency Initiative as described in Exhibit A, and for no other purpose."
This restriction reflects the shared objective of EF and WGFT at the time of execution to develop and sustain a teacher residency program that would serve Northern California school districts by placing carefully trained teacher residents in high-need schools. While the restriction identifies a specific program — BATRI — as the vehicle for the charitable gift, the broader charitable purpose underlying the restriction was the advancement of educational quality and equity in Northern California.
16. Section 7.2 of the Gift Instrument addresses the disposition of funds in the event BATRI is discontinued prior to the expiration of the grant period. Section 7.2 provides, in relevant part:
"In the event the Program is discontinued prior to the expiration of the Grant Period, any unexpended Grant Funds shall, at the election of Grantor, be returned to Grantor within ninety (90) days of written demand."
As set forth more fully below, EF contends that Section 7.2 does not operate as a condition subsequent that automatically divests EF of the restricted funds upon the discontinuation of BATRI. Rather, Section 7.2 is discretionary in nature, as indicated by the phrase "at the election of Grantor," and in any event is subject to the overriding equitable authority of this Court to modify charitable gift restrictions under the doctrines of cy pres and equitable deviation. EF further contends that enforcing the reversion clause under the circumstances presented here — where the specific charitable purpose has become impracticable through no fault of the donee, and the donor's general charitable intent can be fulfilled through alternative means — would frustrate the fundamental purposes of the cy pres doctrine and undermine the public interest in the effective deployment of charitable resources.
D. The Bay Area Teacher Residency Initiative ("BATRI")
17. In September 2018, following receipt of the first tranche of WGFT grant funds, EF launched BATRI with a cohort of 24 teacher residents placed across six partner schools in San Francisco Unified School District ("SFUSD") and Oakland Unified School District ("OUSD"). BATRI was designed as an intensive, clinically oriented teacher residency program providing aspiring educators with sustained, mentored clinical training experiences in high-need schools. The program model drew on best practices identified by the National Center for Teacher Residencies and was tailored to address the specific teacher recruitment and retention challenges facing Bay Area school districts. Teacher residents participated in a full-year clinical placement alongside an experienced mentor teacher, received concurrent coursework and professional development, and were supported through a comprehensive program of coaching, feedback, and community building.
18. In June 2019, the first cohort of BATRI residents completed the residency program. Of the 24 residents who began the program, 22 successfully completed all program requirements and were placed in full-time teaching positions in SFUSD and OUSD schools. The completion and placement rate of approximately 92% exceeded national benchmarks for teacher residency programs and demonstrated both the efficacy of the BATRI model and the viability of the teacher residency approach in the Bay Area context. The first cohort's success was cited in EF's annual report and was shared with WGFT and other BATRI funders.
19. In September 2019, a second cohort of 30 residents began the BATRI program, reflecting the program's expansion and the growing interest among prospective educators. The second cohort was placed across eight partner schools in SFUSD and OUSD. Program operations continued normally through early 2020, and the second cohort was on track to complete the residency in June 2020.
20. In March 2020, the COVID-19 pandemic struck the San Francisco Bay Area, and Governor Gavin Newsom issued executive orders requiring the closure of schools and the transition to remote instruction. The pandemic fundamentally altered the operating environment for school-based teacher residency programs, disrupting in-person mentorship arrangements, clinical training placements, and school-site coordination that were essential to the BATRI model. While EF made every reasonable effort to adapt the program to remote and hybrid formats, the clinical and experiential dimensions of the residency model were severely compromised. The second cohort completed the program in a modified format in August 2020, with 25 of 30 residents completing all program requirements.
21. In August 2020, OUSD formally terminated its partnership agreement with EF for the BATRI program, citing severe budget constraints exacerbated by the pandemic and the resulting decline in state and local revenues. The loss of OUSD as a partner district was a significant blow to the BATRI program. OUSD had hosted approximately half of the program's partner school placements, and its withdrawal reduced BATRI's partner school network by approximately half. EF made diligent efforts to identify replacement partner districts, but the widespread disruption caused by the pandemic, combined with the budgetary pressures facing school districts throughout the region, made it impossible to secure alternative partnerships on a timeline consistent with the BATRI program's needs.
22. In light of OUSD's withdrawal, EF launched a substantially reduced third cohort in September 2020, consisting of 15 residents placed exclusively in SFUSD partner schools. While the third cohort proceeded under challenging circumstances, EF remained committed to delivering the highest quality clinical training experience possible.
23. On or about March 15, 2021, SFUSD notified EF in writing that it would not renew the BATRI partnership agreement for the 2021-2022 academic year. SFUSD cited district-wide program consolidation and a strategic decision to focus its limited resources on internally administered teacher development programs. The withdrawal of SFUSD — BATRI's sole remaining partner school district — rendered the continuation of the BATRI program impossible as a practical matter. Without partner school districts willing to host teacher residents and provide the clinical training placements that were the core of the residency model, BATRI could not function.
24. In June 2021, the third and final cohort of BATRI residents graduated the program. Twelve of the fifteen residents completed all program requirements and were placed in teaching positions. EF is proud of the accomplishments of all three BATRI cohorts and the positive impact the program had on the schools and communities it served during its three years of operation.
25. On December 31, 2021, EF's Board of Directors held a special meeting at which it formally voted to wind down the BATRI program. The Board's resolution recognized that the program could not be sustained without partner school district participation, that EF's diligent efforts to secure replacement partnerships had been unsuccessful, and that the circumstances giving rise to BATRI's discontinuation were wholly beyond EF's control. The Board's resolution further expressed EF's intent to seek the reallocation of remaining restricted BATRI funds to EF's broader educational mission, subject to donor consent where obtainable and judicial approval where necessary. A true and correct copy of the Board resolution is attached hereto as Exhibit D and is incorporated herein by reference.
E. BATRI Expenditures and Remaining Restricted Funds
26. Between the launch of BATRI in 2018 and the program's formal wind-down in December 2021, EF expended a total of approximately $3,300,000 in BATRI program costs. These expenditures included, but were not limited to, teacher resident stipends and benefits, partner school coordination costs, curriculum development, mentor teacher compensation, program administration and staff salaries, evaluation and assessment, and allocable administrative overhead. All expenditures were made in furtherance of the BATRI program's objectives and were consistent with the terms of the Gift Instrument and the applicable donor restrictions.
27. Of the $4,000,000 disbursed by WGFT to EF under the Gift Instrument, $700,000 remains unexpended and is currently held by EF in a restricted account maintained in accordance with EF's standard accounting practices and applicable nonprofit accounting standards. Tranche 4 of the Gift Instrument, in the amount of $1,000,000, was never disbursed by WGFT to EF and, on information and belief, remains held by WGFT. Accordingly, the total WGFT funds in dispute are $1,700,000, consisting of $700,000 in unexpended disbursed funds currently held by EF and $1,000,000 in undisbursed Tranche 4 funds currently held by WGFT.
F. Additional Restricted BATRI Funds from Other Donors
28. In addition to the WGFT grant, EF received restricted contributions from two other donors for the operation of BATRI. In 2019, the Cascabel Education Fund ("Cascabel"), a California nonprofit public benefit corporation, contributed $2,000,000 to EF, restricted to the operation of the BATRI program. Cascabel made this contribution based on the program's demonstrated success with its first cohort and the shared goal of expanding teacher residency opportunities in the Bay Area. Following the wind-down of BATRI, Cascabel has provided written consent to the reallocation of its restricted funds to EF's broader educational mission. A true and correct copy of Cascabel's written consent is attached hereto as Exhibit E and is incorporated herein by reference.
29. In 2020, the Newhall-Sievert Foundation ("Newhall-Sievert"), a California private foundation, contributed $1,000,000 to EF, restricted to the operation of the BATRI program. Newhall-Sievert's contribution was made to support the continuation of BATRI during a period of financial uncertainty caused by the COVID-19 pandemic. Following the wind-down of BATRI, Newhall-Sievert has provided written consent to the reallocation of its restricted funds to EF's broader educational mission. A true and correct copy of Newhall-Sievert's written consent is attached hereto as Exhibit F and is incorporated herein by reference.
30. The total restricted funds designated for BATRI that remain at issue in this action are approximately $4,700,000, calculated as follows:
(a) WGFT unexpended disbursed funds: $700,000;
(b) WGFT undisbursed Tranche 4: $1,000,000;
(c) Cascabel Education Fund restricted funds: $2,000,000;
(d) Newhall-Sievert Foundation restricted funds: $1,000,000;
(e) Total: $4,700,000.
While Cascabel and Newhall-Sievert have each provided written consent to the reallocation of their respective restricted contributions, EF seeks a judicial declaration encompassing all $4,700,000 in restricted BATRI funds. This comprehensive approach is necessary to establish a uniform legal framework governing the disposition of these funds, to ensure that EF's stewardship of the funds is consistent with applicable law, and to provide certainty and finality regarding the rights and duties of all parties.
G. WGFT's Demand and EF's Response
31. On January 28, 2022, counsel for WGFT — the law firm of Pratchett, Huang & Solano LLP, through lead partner Victoria Huang — sent a demand letter to EF (the "Demand Letter"). The Demand Letter asserted that the discontinuation of BATRI prior to the expiration of the five-year grant period triggered the reversion clause set forth in Section 7.2 of the Gift Instrument. The Demand Letter requested that EF return $1,700,000 to WGFT within ninety (90) days of the date of the letter — that is, by no later than April 28, 2022. The Demand Letter further asserted that the reversion clause constituted a binding contractual obligation and that EF's failure to comply would constitute a breach of the Gift Instrument. A true and correct copy of the Demand Letter is attached hereto as Exhibit B and is incorporated herein by reference.
32. On March 3, 2022, EF, through its counsel Calderwood & Harkness LLP and responsible partner Douglas Carmichael, sent a detailed written response to WGFT's Demand Letter (the "Response Letter"). The Response Letter respectfully declined WGFT's demand for the return of $1,700,000 and set forth EF's legal position. Specifically, EF asserted that the restriction on the BATRI funds should be modified under the doctrines of cy pres and equitable deviation, as codified in California Probate Code Sections 15409 and 15403. EF's Response Letter explained that the specific charitable purpose of the BATRI program had become impracticable due to circumstances beyond EF's control — namely, the withdrawal of both partner school districts — and that the donor's general charitable intent to support education in Northern California could and should be honored by redirecting the funds to EF's broader educational mission. The Response Letter further asserted that the reversion clause in Section 7.2 did not preclude judicial modification of the restriction and that EF intended to seek judicial guidance if the parties were unable to reach a negotiated resolution. A true and correct copy of the Response Letter is attached hereto as Exhibit C and is incorporated herein by reference.
33. On April 15, 2022, counsel for EF and WGFT conducted a final pre-suit meet-and-confer telephonic conference in an effort to resolve the dispute without litigation. During the conference, EF reiterated its position that the cy pres and equitable deviation doctrines authorized the modification of the gift restriction, and WGFT reiterated its position that the reversion clause controlled and that EF was obligated to return $1,700,000. The parties explored potential compromise arrangements, including the possibility of WGFT agreeing to a partial reallocation of funds or designating alternative educational programs for the application of the restricted funds, but the parties were ultimately unable to reach a resolution. Following the unsuccessful meet-and-confer, EF determined that judicial intervention was necessary to resolve the dispute and to establish the rights and duties of the parties with respect to the restricted BATRI funds.
H. The Dispute Between the Parties
34. WGFT contends that the unexpended and undisbursed funds totaling $1,700,000 must be returned to the Trust. Specifically, WGFT asserts that Section 7.2 of the Gift Instrument creates a condition subsequent, and that EF's failure to operate BATRI through the expiration of the five-year grant period in 2023 triggers an automatic reversion right in favor of WGFT. WGFT maintains that Section 7.2 constitutes an express contractual remedy that supersedes any equitable modification that might otherwise be available under the cy pres or equitable deviation doctrines. On information and belief, WGFT's position is that the reversion clause reflects the settlors' specific intent that the funds be used exclusively for the BATRI program, and that in the absence of BATRI, the funds should revert to the Trust so that WGFT may direct them to other charitable purposes of its choosing.
35. EF disagrees with WGFT's position. EF contends that the doctrines of cy pres and equitable deviation, as codified in California Probate Code Sections 15409 and 15403, authorize this Court to modify the restriction in the Gift Instrument to permit the use of the restricted funds for EF's broader educational mission. EF's position rests on several independent grounds. First, the specific charitable purpose for which the funds were restricted — the operation of BATRI — has become impracticable due to circumstances beyond EF's control, including the COVID-19 pandemic and the withdrawal of both OUSD and SFUSD as partner school districts. Second, the general charitable intent of the original gift — to support education in Northern California — is evident from the four corners of the Gift Instrument and from WGFT's long and well-documented history of philanthropic support for educational causes. Third, the reversion clause in Section 7.2 does not divest this Court of its equitable jurisdiction to modify the restriction. The cy pres doctrine and the equitable deviation doctrine are rooted in the Court's inherent equitable powers and in the state's sovereign interest in the effective administration of charitable resources. These equitable powers cannot be contracted away by a reversion clause, particularly where the impracticability of the specific charitable purpose has arisen through no fault of the donee and the donor's general charitable intent can be served through alternative means.
FIRST CAUSE OF ACTION
Declaratory Relief — Modification of Restriction Under Cy Pres Doctrine
(Against Defendant The Whitfield-Garner Family Trust)
36. EF re-alleges and incorporates by reference each and every allegation contained in Paragraphs 1 through 35 above, inclusive, as though fully set forth herein.
37. An actual, present, and justiciable controversy has arisen and now exists between EF and WGFT concerning the rights and duties of the parties with respect to approximately $4,700,000 in restricted grant funds originally designated for the BATRI program. EF contends that the specific charitable purpose for which the funds were restricted — the establishment, operation, and support of BATRI — has become impracticable, and that the restriction may and should be modified under the cy pres doctrine, as codified in California Probate Code Section 15409, to permit the use of the funds for EF's broader educational mission — a charitable purpose as near as possible to the original charitable purpose of the gift. WGFT contends that the restriction language and the reversion clause in the Gift Instrument require the return of $1,700,000 in WGFT funds to the Trust and preclude any judicial modification of the restriction. This controversy requires judicial resolution.
38. Under the cy pres doctrine, where property is given in trust or under a gift instrument for a specific charitable purpose and that purpose becomes illegal, impossible, or impracticable, the court may direct the application of the property to a charitable purpose as near as possible to the original purpose, provided the donor manifested a general charitable intent. California Probate Code Section 15409 codifies this doctrine and authorizes the court to modify or terminate a trust where the particular charitable purpose or restriction has become unlawful, impracticable, impossible to achieve, or wasteful. The cy pres doctrine serves the vital public policy of preserving charitable gifts for charitable purposes, rather than permitting them to revert to the donor or to be diverted from charitable use, whenever the donor's general charitable intent can be identified and honored.
39. EF submits that the Gift Instrument, read as a whole and in the context of the parties' course of dealing, demonstrates WGFT's general charitable intent to support education in Northern California. The BATRI program was the specific vehicle chosen to effectuate that broader charitable intent, but BATRI was not the totality of that intent. The Gift Instrument's recitals, the detailed description of the BATRI program's educational objectives, and the focus on improving teacher quality and educational equity in underserved communities all reflect a general charitable intent that transcends the specific program. Moreover, WGFT's long history of philanthropic giving to educational organizations throughout California — a history spanning nearly two decades and involving contributions in excess of $20,000,000, on information and belief — further evidences the settlors' and the Trust's general charitable intent to advance education.
40. The impracticability of the BATRI program has been conclusively demonstrated by the following circumstances, none of which was within EF's control or reasonably foreseeable at the time the Gift Instrument was executed:
(a) The COVID-19 pandemic, which struck the San Francisco Bay Area in March 2020, resulting in the closure of schools and the disruption of in-person clinical training placements that were essential to the BATRI model;
(b) OUSD's formal termination of its partnership with BATRI in August 2020, citing pandemic-related budget constraints, which eliminated approximately half of BATRI's partner school placements;
(c) SFUSD's refusal to renew its partnership with BATRI for the 2021-2022 academic year, communicated in March 2021, which eliminated BATRI's sole remaining partner school district; and
(d) The resulting inability to recruit replacement partner school districts or otherwise sustain the teacher residency model, despite EF's diligent efforts to identify alternative partnerships.
41. EF seeks a judicial declaration that the restriction set forth in Section 3.1 of the Gift Instrument may be modified under the cy pres doctrine to permit EF to use the approximately $4,700,000 in restricted BATRI funds for its broader educational mission, including teacher development, school partnerships, and community-based learning initiatives in Northern California. Such a modification would honor the donor's general charitable intent, preserve the funds for charitable use, and serve the public interest in the effective deployment of charitable resources.
SECOND CAUSE OF ACTION
Declaratory Relief — Equitable Deviation
(Against Defendant The Whitfield-Garner Family Trust)
42. EF re-alleges and incorporates by reference each and every allegation contained in Paragraphs 1 through 41 above, inclusive, as though fully set forth herein.
43. In the alternative to, or in addition to, modification under the cy pres doctrine, EF seeks a declaration that it is entitled to equitable deviation from the terms of the Gift Instrument under the doctrine of equitable deviation, as codified in California Probate Code Section 15403. Under the doctrine of equitable deviation, where compliance with the administrative or distributive terms of a trust or gift instrument has become impracticable, or where adherence to such terms would substantially impair the accomplishment of the trust's charitable purposes, the court may modify the administrative or distributive terms to further the purposes of the trust or gift in a manner consistent with the donor's probable intention.
44. Compliance with the specific restriction in Section 3.1 of the Gift Instrument — that the grant funds be used "solely and exclusively" for the establishment, operation, and support of the BATRI program — has become impracticable. The BATRI program cannot be operated in the absence of partner school district participation, and both OUSD and SFUSD have declined to continue or renew their partnerships with the program. EF made diligent and good-faith efforts to identify replacement partner districts, but these efforts were unsuccessful. The circumstances that rendered the specific restriction impracticable — the COVID-19 pandemic and the resulting financial and operational pressures on Bay Area school districts — were extraordinary, unforeseen, and wholly beyond EF's control.
45. Strict adherence to the restriction in Section 3.1 would result in the indefinite encumbrance of approximately $4,700,000 in charitable funds that cannot be deployed for their restricted purpose. Such an outcome would be contrary to the donors' general intent to support education, contrary to the public interest in the effective use of charitable resources, and contrary to the policy underlying the doctrine of equitable deviation. The indefinite warehousing of charitable funds serves no one — not the donors, not EF, not the students and educators who would benefit from the application of these resources to viable educational programs, and not the public.
46. EF seeks a judicial declaration that equitable deviation from the restriction in Section 3.1 of the Gift Instrument is warranted under the circumstances, and that EF may use the restricted funds for educational programs consistent with its mission, including teacher development, school partnerships, and community-based learning initiatives in Northern California.
THIRD CAUSE OF ACTION
Declaratory Relief — Invalidity or Inapplicability of Reversion Clause
(Against Defendant The Whitfield-Garner Family Trust)
47. EF re-alleges and incorporates by reference each and every allegation contained in Paragraphs 1 through 46 above, inclusive, as though fully set forth herein.
48. An actual, present, and justiciable controversy has arisen and now exists between EF and WGFT as to the enforceability, proper interpretation, and legal effect of Section 7.2 of the Gift Instrument (the "reversion clause"). WGFT asserts that Section 7.2 operates as a condition subsequent that automatically entitles WGFT to the return of $1,700,000 in unexpended and undisbursed grant funds upon written demand. EF contends that Section 7.2 does not preclude the exercise of this Court's equitable jurisdiction under the cy pres doctrine or the doctrine of equitable deviation, and that the reversion clause is subject to judicial modification where the specific charitable purpose has become impracticable due to circumstances beyond the donee's control.
49. EF further contends that Section 7.2, by its express terms, is discretionary rather than automatic. The clause provides that unexpended funds shall be returned "at the election of Grantor," indicating that the reversion is not self-executing but rather is contingent upon an affirmative election by WGFT. The discretionary nature of the clause undermines WGFT's characterization of it as an automatic condition subsequent. Moreover, even assuming arguendo that WGFT has validly exercised its election under Section 7.2, EF contends that the Court's equitable powers under the cy pres doctrine and California Probate Code Sections 15409 and 15403 supersede contractual reversion provisions in charitable gift instruments. The cy pres doctrine exists precisely to address the situation where a donor's specific charitable purpose has failed, and where the enforcement of reversion or reverter provisions would divert charitable funds from charitable use notwithstanding the donor's general charitable intent. To hold that a reversion clause could categorically bar the application of cy pres or equitable deviation would be to permit donors to contract around the equitable jurisdiction of the courts and the public interest in the preservation of charitable assets — a result inconsistent with the policy and purpose of the cy pres doctrine as codified in California law.
50. EF further notes that the original settlors of WGFT — Herbert R. Whitfield-Garner and Dorothy M. Garner — are both deceased, and that the current Trustees of WGFT are exercising the "election" under Section 7.2 on behalf of the Trust rather than on behalf of the original donors. The Court should consider whether the current Trustees' position is consistent with the original settlors' general charitable intent, and whether the enforcement of the reversion clause under these circumstances would serve or frustrate that intent.
51. EF seeks a judicial declaration that Section 7.2 of the Gift Instrument does not compel the return of $1,700,000 to WGFT, and that the reversion clause does not preclude this Court from exercising its equitable authority to modify the restriction and direct the application of the restricted funds to EF's broader educational mission consistent with the doctrines of cy pres and equitable deviation.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff Estuary Foundation respectfully prays for judgment against Defendant The Whitfield-Garner Family Trust as follows:
1. For a declaratory judgment that EF may lawfully redirect the approximately $4,700,000 in restricted grant funds originally designated for the Bay Area Teacher Residency Initiative to EF's broader educational mission, consistent with the doctrines of cy pres and equitable deviation under California Probate Code Sections 15409 and 15403;
2. For a declaratory judgment modifying the restriction set forth in Section 3.1 of the Gift Instrument and Grant Agreement dated June 15, 2018, to permit the use of the grant funds for EF's broader educational mission, including teacher development, school partnerships, and community-based learning initiatives in Northern California;
3. For a declaratory judgment that Section 7.2 of the Gift Instrument does not compel the return of $1,700,000 to WGFT, and that said clause is subject to the Court's equitable authority to modify the restriction under the doctrines of cy pres and equitable deviation;
4. For an award to EF of its costs of suit incurred herein; and
5. For such other and further relief as the Court deems just and proper.
VERIFICATION
I, Margot Ellison-Yee, declare as follows:
I am the Executive Director of Estuary Foundation, the Plaintiff in the above-entitled action. I am authorized to make this verification on behalf of Estuary Foundation. I have read the foregoing Verified Complaint for Declaratory Relief and know its contents. The facts stated therein are true of my own knowledge, except as to those matters which are stated on information and belief, and as to those matters, I believe them to be true.
I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct.
Executed in San Francisco, California, on April 25, 2022.
________________________________________
Margot Ellison-Yee Executive Director, Estuary Foundation
Dated: April 25, 2022
CALDERWOOD & HARKNESS LLP
By: ________
Douglas Carmichael (SBN 198462) Responsible Partner
One Market Plaza, Suite 3600 San Francisco, California 94105 Telephone: (415) 773-5000 Facsimile: (415) 773-5001
Email: dcarmichael@calderwoodharkness.com
Attorneys for Plaintiff Estuary Foundation
EXHIBIT LIST
The following exhibits are attached hereto and incorporated by reference into this Verified Complaint for Declaratory Relief:
Exhibit A: Gift Instrument and Grant Agreement Between the Whitfield-Garner Family Trust and Estuary Foundation for the Bay Area Teacher Residency Initiative, dated June 15, 2018.
Exhibit B: Demand Letter from Pratchett, Huang & Solano LLP (Victoria Huang) to Estuary Foundation, dated January 28, 2022.
Exhibit C: Response Letter from Calderwood & Harkness LLP (Douglas Carmichael) to Pratchett, Huang & Solano LLP, dated March 3, 2022.
Exhibit D: Estuary Foundation Board of Directors Resolution to Wind Down the Bay Area Teacher Residency Initiative, dated December 31, 2021.
Exhibit E: Written Consent of Cascabel Education Fund to Reallocation of Restricted BATRI Funds, undated.
Exhibit F: Written Consent of Newhall-Sievert Foundation to Reallocation of Restricted BATRI Funds, undated.
ESTUARY FOUNDATION, a California nonprofit public benefit corporation, | Case No. CGC-22-599481
Plaintiff, | Department 302
v. | Assigned for All Purposes to:
Hon. Patricia R. Wainwright
THE WHITFIELD-GARNER FAMILY TRUST, a California irrevocable trust,
VERIFIED COMPLAINT FOR
Defendant. | DECLARATORY RELIEF
Filed: April 25, 2022

SUPERIOR COURT OF THE STATE OF CALIFORNIA

COUNTY OF SAN FRANCISCO

VERIFIED COMPLAINT FOR DECLARATORY RELIEF

INTRODUCTION

THE PARTIES

JURISDICTION AND VENUE

FACTUAL ALLEGATIONS

FIRST CAUSE OF ACTION

SECOND CAUSE OF ACTION

THIRD CAUSE OF ACTION

PRAYER FOR RELIEF

VERIFICATION

CALDERWOOD & HARKNESS LLP

EXHIBIT LIST

VERIFIED COMPLAINT FOR

Record

Parties

Dates

Amounts