Donor standing to enforce charitable gifts: Civil society vs. donor empowerment

Philanthropy has a dirty little secret-that a gift to public charity restricted to a specific purpose is often used in ways not intended by the donor. In most states, the attorney general is the agent for enforcement of such gifts (an arrangement that recognizes the public's role as the ultimate beneficiary of any public charity). But attorney general offices are beset with difficulties that make it impossible to monitor how each charity administers restricted gifts. Donors-whose restricted gifts play a vital role in the charitable sector as a source not only of funding but also mission-are increasingly aware that their restrictions are ignored. Frustrated by lax enforcement, donors are pursuing standing to enforce their restrictions. In Smithers v. St. Luke's/Roosevelt Hospital, the donor's widow succeeded in obtaining standing, even after the Attorney General had entered into a settlement agreement with the hospital. Donors with their restricted gifts (often representing personal beliefs and social agenda) keep the charitable sector vital and ensure its diversity. Nevertheless, such restrictions exist in perpetuity and can result in an effective privatization of a charity's mission, especially if the charity is not free to interpret a restriction in response to change. Even though such restrictions are legally binding on the charity, the Attorney General in the exercise of her prosecutorial discretion can effectively allow certain restrictions to lapse, preserving thereby the autonomy of the charity. Thus, Smithers has enormous implications for the autonomy of charitable organizations and their capacity to respond independently to change. Public charity occupies a large part of what is termed "civil society." As a background to evaluate the trade-offs inherent in Smithers, Professor Goodwin examines the conclusions of recent studies documenting the problem of participation in all areas of American life (including, for example, Robert Putnam's "Bowling Alone") to argue that, given the fragile state of civil society, a liberalization of the standing rules is an important incentive to continued participation by donors-and a boon to the vitality of civil society. She also proposes, again for the sake of civil society, certain changes in the doctrines governing fiduciary duty to allow the charity more autonomy in interpreting restrictions.