Smithsonian Institution Goes to Court Seeking to Modify Donor Restrictions

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by Richard L. Fox, Esq.

Nearly fifty years ago, entomologist and Smithsonian Institution researcher Dr. Carl Drake left the Smithsonian Institution a charitable bequest of a scientifically significant private collection of Hempitera-Heterptera, the scientific name of an order of insects also known as “true bugs.”  The Hempitera-Heterptera collection is one of the most scientifically valuable collections in the world in terms of size and representations of species.  The collection, known as the “Drake Collection,” was given to the Smithsonian upon Dr. Drake’s death in 1965 and his Will specifically provided that the bequest was given “on the condition, however, that the said collection shall be kept intact as a separate unit, and that the specimens therein shall not be loaned out or sold to other institutions or individuals.  The entire collection, however, shall be available for scientific study by institutions or individuals accredited for that purposes by the Smithsonian Institution.”   In addition to his Will, Dr. Drake signed an “Agreement” that provided, in relevant part, that Dr. Drake’s Hempitera-Heterptera collection would “be presented to the Smithsonian Institution as a permanent deposit” and that “unrestricted title will vest in the Smithsonian Institution” upon Dr. Drake’s death, “subject to the provisions concerning use and further development of said collection as are provided in Dr. Drake’s will, the provisions of this will being fully known to both parties.”

Dr. Drake made certain individual dollar bequests under his Will, with the remainder of his estate to be placed in a trust fund known as the Drake Foundation.  In 1969, the Drake Foundation was worth about $250,000, which has grown to close to $4 million today.  According to Dr. Drake’s Will, the “Directors” of the Smithsonian are to have full control of the management and investment of the funds.  The income from the Drake Endowment is required to be used for the purchase of specimens and collections of Hempitera-Heterptera, to be added to Dr. Drake’s collection at the Smithsonian.  During the first 10 years, 50% of the income was to be used for this purpose and the balance added to principal.  After the first 10 years, 75% of the income was to be used for such purpose and the balance added to principal.  The Will did not provide for any reversion under any circumstances.  The Smithsonian accepted all legacies as specified in Dr. Drake’s Will.   The Smithsonian’s spending rule on its endowment is 5%, so that currently, under the terms of Dr. Drake’s Will, it is supposed to pay 3.75% (5% x 75%) of the approximately $4 million Drake Foundation (or $150,000) per year for the purchase of specimens and collections of Hempitera-Heterptera, to be added to Dr. Drake’s collection at the Smithsonian.

On December 30, 2013, the Smithsonian Institution filed a petition in the U.S. District Court for the District of Columbia seeking the modification of the terms of restricted collection and related endowment fund left to the Smithsonian by Dr. Drake.  In its petition, the Smithsonian stated that “In recent years, the Smithsonian has been unable to spend most of the annual payout from the Drake Foundation “because the payout from the fund greatly exceeds the amount that can practically be spent on purchase of Hempitera-Heterptera.  For most of the years over the like of the fund, the majority of the payout has been reinvested in the endowment.”   According to the petition, this was the case for several reasons.  First, significant collections of Hempitera-Heterptera rarely come up for sale.  In recent years, the number of private collections has decreased further because regulatory and permitted requirements related to collecting have increased, both within and outside the United States.  According to the petition, the “Smithsonian has been able to use Drake Foundation funds to purchase a significant Hempitera-Heterptera collection approximately twelve times in the last forty-play years.”

The Smithsonian has also interpreted the term “purchase” in Dr. Drake’s Will to include the acquisition of insects through field collection, and the petition indicates that most of the Drake Foundation funds that have been spent over the years have been spent on field collecting, particularly during the period 1994 through 2005. The Smithsonian Department of Entomology has not engaged in the same level of field collecting of Hempitera-Heterptera since 2005, and the petition indicated that it “does not anticipate doing so in the future” as “fieldwork is also becoming increasingly difficult due to the same regulatory and permitting hurdles that have hindered private collecting.”  The petition states that the amounts expended from the Drake Foundation have declined substantially since 2005 and only a small percentage of the available income distributions have actually been used for the purposes specified by Dr. Drake, with most of the income added back to the principal of the endowment and simply accumulated.

In its petition, the Smithsonian stated that it would like to use the annual payout from the Drake Foundation for three purposes in addition to the purchasing of Hempitera-Heterptera collection to add to the Drake Collection: (1) to support scientific research on the entire Smithsonian Hempitera-Heterptera collection at the Smithsonian; to support Hempitera-Heterptera technicians to prepare specimens and help with other efforts related to the entire Smithsonian Hempitera-Heterptera collection; and (3) to purchase cabinets, drawers, and other standard entomological museum supplies needed to house and preserve the entire Smithsonian Hempitera-Heterptera collection.  Thus, Drake Foundation funds would be used to support the entire Smithsonian Hempitera-Heterptera collection, not just the Drake Collection, and the funds would be used for purposes beyond those specific by Dr. Drake. 

In addition to modifying the use of the Drake Foundation, the Smithsonian is also seeking to modify certain restrictions imposed on the Drake Collection under Dr. Drake’s Will. In particular, the Smithsonian would like to:

1. Integrate the specimens from the Drake Collection with the Smithson’s entire Hempitera-Heterptera collection, although the Smithsonian would continue to identify Drake’s specimens as coming from the Drake Collection, and

2. Loan specimens in the Drake Collection to qualified researchers.

In its petition, the Smithsonian has stated that “It has become impracticable, impossible and/or wasteful to strictly apply the terms of Dr. Drake’s Will that bequeathed his collection of Hempitera-Heterptera to the Smithsonian and created the Drake Foundation, at least partly due to circumstances not anticipated by Dr. Drake.”  The petition states that modifications sought would be consistent with Dr. Drake’s intentions in bequeathing the Drake Collection and the Drake Foundation funds to the Smithsonian.  As justification for the modification, the petition states as follows:

1.  It has become impossible and wasteful to use the annual payout from the Drake Foundation to purchase specimens and collections of Hempitera-Heterptera.  Dr. Drake likely could not have anticipated that it would become difficult for the Smithsonian to use a substantial amount of the annual payout from the Drake Foundation to purchase new Hempitera-Heterptera specimens or collections.  Dr. Drake also likely did not anticipate how large the endowment would grow.

2. Modifying the terms of Dr. Drake’s Will to permit the Smithsonian to use any “left-over funds” from the annual payout to support scientific research of Hempitera-Heterptera  would further the purposes of Dr. Drake’s gift.

3. Because the entirety of the yearly payout from the Drake Foundation cannot be spent solely for improvements to the Drake Collection, let along to purchase additional specimens, it is logical to conclude that Dr. Drake would have wanted any left-over funds from the annual payout to be used to benefit the larger collection of the Smithsonian’s entire Hempitera-Heterptera.

4. The restriction in Dr. Drake’s Will that the Drake Collection be kept intact as a separate unit apart from the Smithsonian’s entire Hempitera-Heterptera collection and that the specimens not be loaned out to other institutions has become impracticable and wasteful. 

In seeking the modifications to the terms of Dr. Drake’s Will, both with respect to the proposed modifications to the use of the payouts from the Drake Foundation and the use of the Drake Collection, the Smithsonian cited two legal principles, the doctrine of “equitable deviation” and “cy pres.”  The doctrine of “equitable deviation” permits a court to modify restrictions if, because of circumstances not anticipated by the donor, modification will further the donor’s purposes in making the restricted gift.”   Under the “cy pres” doctrine, if a particular charitable purpose is or becomes unlawful, impracticable, impossible, or wasteful, a court may apply cy pres to modify restrictions by directing that the restricted property be applied, in whole or in part, in a manner consistent with the donor’s charitable purposes.    

Comments: Courts are typically very protective of donor intent and generally won’t allow property committed to restricted charitable purposes by a donor to be diverted from those purposes.   These type of cases can become quite contentious when parties with standing object to changes sought by a donee charity to the terms of a restricted gift.  The Smithsonian's predicament is actually one routinely faced by many universities and museums and there are, many cases where the courts have allowed modifications to the terms of a restricted gift based upon, as the Smithsonian asserts, the doctrines of equitable deviation and cy pres.  In this case, approval seems likely as the Smithsonian has apparently purchased all of the specimens it can to add to the Drake Collection and the proposed modifications are close to Dr. Drake’s intent and appear to be more feasible based upon today’s circumstance. Judge Ketanji Brown Jackson is assigned to the case.

For a copy of the petition that was filed by the Smithsonian Institution, see: http://legaltimes.typepad.com/files/smithsonian-petition.pdf.