Princeton Faces Trial Over Use of Gift Now Worth $880 Million

In a legal battle watched nervously by universities around the country, a New Jersey judge yesterday sent to trial a dispute between Princeton University and the heirs of a supermarket fortune and left open the possibility that Princeton could lose a donation that is now worth $880 million.

In a set of rulings, the judge, Neil H. Shuster of Superior Court, established the ground rules for one of the largest lawsuits ever filed exploring how closely colleges must adhere to the original intent of donors.

The struggle has already cost Princeton and the descendants of Charles and Marie Robertson more than $20 million each, and will cost more when it comes to trial, possibly sometime next year.

The dispute centers on whether Princeton University has adhered to the Robertsons’ wishes; Mrs. Robertson, an heir to the A.&P. supermarket fortune, gave Princeton $35 million in 1961 for its Woodrow Wilson School of Public and International Affairs. Her children say the money was intended to prepare students for work in federal government, especially in international affairs. They say, though, that few graduates have taken such jobs and that Princeton has used the money for many of its other needs.

Princeton says that the family narrowly interpreted the terms of the gift, which they say was intended to support the Wilson school in providing a broad education for graduate students.

Some of Judge Shuster’s rulings favored the Robertsons and some the university. He supported Princeton in ruling out a jury trial and in finding that it was within its rights to spend not only interest and dividends earned on the gift, but also gains realized on investments.

He sided with the Robertsons in saying that Princeton’s role as sole beneficiary of the gift should be decided in the trial. That opens the possibility that Princeton could lose the whole gift, although the judge said he would take the Robertson Foundation away from Princeton only under “the most egregious and nefarious of circumstances.”

He also said he would allow the family to reach back many years in its questioning to determine whether Princeton’s spending was appropriate; Princeton had hoped to limit the questioning to just a few years.

Both sides said they believed they would ultimately triumph.

“Even if things stopped right now, this is a huge victory for donors everywhere,” Ronald H. Malone, the lead lawyer for the Robertson family, said yesterday. “It shows that no matter how high and mighty a university might be, the law imposes on them a moral and legal obligation to use the money only for the purpose to which it was given.”

Kenneth R. Logan, a lawyer for the university, said, “We are very confident that once the evidence is presented, he will decide our way.”

The case has already affected how colleges and graduates approach fund-raising, prompting donors to be more vigilant and colleges to be more careful about gift restrictions at a time when they are hungry for contributions. Colleges and donors these days are drawing up detailed agreements to prevent disputes over how money should be spent.

Anne D. Neal, president of the American Council of Trustees and Alumni and an author of “The Intelligent Donor’s Guide to College Giving,” said in a statement that the rulings were “a resounding victory for all who believe that colleges must be accountable to the people on whose dollars they rely.”

Joseph Nye, a former dean of the Kennedy School of Government at Harvard who was a witness for Princeton, said, “If the heirs of donors are allowed to micromanage an academic institution a generation after a gift has been given, it will seriously curtail the creativity and initiative that has marked the recent administration of the Wilson school as well as set a bad precedent for other academic institutions.”

Yale is among the universities that have faced similar disputes. It returned $20 million to Lee M. Bass, a billionaire alumnus, after he said the university had not created the classes he had requested in its Western civilization curriculum.

The Robertson children, led by William Robertson, who has served on the foundation board and helped oversee the investment of funds, originally filed their suit in 2002 to protest the handling of the investments after the university sought to change the management of the funds. The family later expanded the suit. Looking back to the cold war in making their case, they said that the donation made by their mother and shaped by their father, a Princeton graduate, was intended to benefit the American people by helping Princeton send students into the foreign service and other government jobs.

William Robertson said he hoped the court would return control of the money to the family. He said he has already talked to six or seven other colleges to learn “more about their programs and about their potential plans if they were to be recipients of the foundation’s funds.”

He said that he had talked to George Washington University, Tufts, Johns Hopkins, Syracuse and Indiana, and that Harvard and Duke refused to talk to him.

He said he would not structure future gifts the way his parents had structured theirs, giving it all to one university or relinquishing control of the money.

“We propose to have it operated by the family and outside experts,” he said. “And we would be more careful in looking for performance measures.”

Princeton argues that the original gift says students “may prepare” for careers in government service but does not require it and that the Wilson school has never been a narrowly focused vocational school. It notes that its graduates include Anthony Lake, a former national security adviser to President Bill Clinton, and Gen. David H. Petraeus.

Douglas S. Eakely, another lawyer for Princeton, said that under the university’s stewardship, the Robertson Foundation “has achieved extraordinary success” and that the Wilson school today is “one the pre-eminent schools of public and international affairs” where “students may, and do, prepare for positions of leadership in government and related fields.”