Below is the Statement of Facts from the Rice County District Court Order entered on February 26, 2009.
These findings made by Judge Bernard Borene are consistent with the information that SaveWCAL has presented to the court from the very beginning of the case.
These facts provide the foundation for the correct application of the law on charitable trusts and will provide the basis upon which the Minnesota Court of Appeals will make its decision.
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St. Olaf, a liberal arts college located in Northfield, Minnesota, is a non-profit corporation organized under the laws of the State of Minnesota. It is also a tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code.
In 1922 the federal government issued a broadcasting license to St. Olaf to operate WCAL Radio. When the Federal Radio Commission was created in 1927, one of the first 27 licenses was to St. Olaf to operate WCAL Radio on an AM broadcasting frequency. In 1968 the Federal Communications Commission ("FCC") issued a license to St. Olaf to operate WCAL Radio at the 89.3 FM broadcasting frequency. In 1998 the FCC issued a license to St. Olaf to operate a translator station at the 88.7 broadcasting frequency to transmit the WCAL signal to southeastern Minnesota.
WCAL was the first listener supported radio station in the nation. WCAL was a public radio service that was designed to broadcast classical music, public affairs programs, and religious services to a large metropolitan community outside the academe in a manner that would reflect the intellectual, spiritual, and cultural traditions of St. Olaf.
The broadcasting studios and offices of WCAL Radio were located in Skifter Building on the campus of St. Olaf. The building was built in stages from 1931 through 1991. The costs of the construction of the building were paid with charitable contributions from WCAL donors.
In 1991 a new broadcasting tower to transmit the WCAL signal was constructed at a cost of more than $1 million on land leased from the University of Minnesota in Rosemount, Minnesota. The cost of the construction of the tower was paid by charitable contributions from WCAL donors. The contribution from St. Olaf was a loan for part of the cost of construction that was repaid with interest at the rate of 7% per annum by charitable contributions.
At periodic intervals St. Olaf renewed its broadcast licenses for WCAL Radio pursuant to the requirements of federal law. In order to renew its licenses St. Olaf had to demonstrate to the FCC that it was serving the public interest, convenience, and necessity.
Over more than 80 years, tens of thousands of individual WCAL donors contributed millions of dollars to support WCAL Radio. Their charitable contributions enabled St. Olaf College to serve the public interest, the prerequisite for the renewal of its licenses for WCAL Radio. The support of the individual donors financially supported the radio station, and financially enabled St. Olaf to continue possessing the licenses and other assets. The support of the individual donors also enabled the college to obtain donations and grants from additional sources.
St. Olaf solicited donations and grants to provide for the operating costs, the capital assets, and the WCAL endowment. The donors to WCAL included corporations, foundations, the Corporation for Public Broadcasting, St. Olaf itself, and tens of thousands of individuals. St. Olaf solicited donations on the basis that charitable gifts would "help guarantee the future of Classical 89.3 for generations to come."
In 2004 WCAL had 8,000 listener-members and a weekly audience of 80,000 listeners. The broadcast signal reached the Twin Cities metropolitan area and southeastern Minnesota. More than three million listeners could access the WCAL programming with a radio. At the same time, St. Olaf considered the station's relevance to the college's educational mission had become increasingly tenuous. Evaluating WCAL against other programs more directly related to St. Olaf's educational mission, the Board of Regents questioned whether continued operation of the radio station was in the College's best interests. When the opportunity arose to sell St. Olaf's FCC license and associated equipment for a reasonable price and to use the proceeds to advance St. Olaf's mission of educating students, the Board of Regents determined that closing the radio station and selling the associated assets was in the best interests of St. Olaf and its students.
MPR is a non-profit corporation organized under the laws of the State of Minnesota. It is also a tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code. Its principal place of business is in St. Paul, Minnesota.
In November 2003 MPR submitted a multi-million dollar offer to St. Olaf for the assignment of the broadcasting licenses for 89.3 FM and 88.7 FM, for the purchase of the Rosemount broadcasting tower, for the assignment of the lease on which the tower is located, for all other real property used in connection with the operation of WCAL Radio, for the purchase of personal property, including most of the music library, used in connection with the operation of the station, and for the good will and the going concern value of the station.
MPR communicated the offer to Christopher Thomforde, who was the president of St. Olaf at that time. In turn, Thomforde turned the offer over to Jan McDaniel and to Addison (Tad) Piper for evaluation. At that time McDaniel was a vice president of St. Olaf. Piper was a member of the Board of Regents of St. Olaf and the chair of its finance committee. At the same time Piper was a member of the Board of Trustees of MPR and a member of the Board of Directors of Piper Jaffray & Co.
St. Olaf and MPR did not give notice of the transaction to the Attorney of the State of Minnesota nor did either party obtain judicial approval for the sale.
On August 9, 2004, four days after St. Olaf accepted the MPR offer, the college informed the Board of Directors of WCAL Radio of the MPR offer for the first time. The WCAL Board of Directors had been established in 1979. The Board was intended to serve as the community advisory board required by federal law as a condition to the receipt of federal funds. The purpose of the community advisory board is to enable the public to participate in significant policy decisions.
Two of the WCAL directors were Jan McDaniel and Walter Ringer III, who was also a member of the Board of Regents of St. Olaf College. Neither director informed his or her fellow directors on the WCAL board of the MPR offer prior to August 9, 2004.
On August 30, 2004 St. Olaf and MPR submitted an application to the FCC for the assignment of the broadcast licenses for 89.3 FM and 88.7 FM.
SaveWCAL was organized on September 3, 2004 as a non-profit corporation under the laws of the State of Minnesota. It is also a tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code. The purpose of the corporation, as expressed in its Articles of Incorporation, is to preserve WCAL Radio.
After St. Olaf announced the sale of WCAL to MPR on August 10, 2004, SaveWCAL posted an electronic petition to demonstrate to St. Olaf the support of the listeners in the community to preserve the radio station. More than 5,500 persons signed the petition by the end of 2004.
On October 5, 2004, the general counsel for SaveWCAL submitted a request to the Attorney General of the State of Minnesota to exercise the statutory responsibility for the supervision of charitable trusts to investigate the St. Olaf-MPR transaction. The request states, in part, that "the proceedings before the FCC and the CPB will not provide a forum for the determination of compliance with the provisions of state law on charitable trusts." In a written response on October 19, 2004, the Attorney General refused to commence an investigation.
On November 15, 2004, the FCC approved the assignment of the broadcast licenses for 89.3 FM and 88.7 FM to MPR.
On November 19, 2004, the closing on the St. Olaf–MPR transaction was held. St. Olaf received $10.5 million in cash from MPR plus promotional announcements for the college broadcast on MPR. The parties agreed that the promotional announcements had a value of $1.3 million.
In December 2004 St. Olaf announced that the $10.5 million in cash would be added to the general endowment for the college. The income from that additional investment would be used to repair the organ in the chapel and to endow four faculty chairs.
MPR has used the assets of WCAL for its own purposes, including broadcasting its own programming (alternative rock music) on 89.3 FM since January 24, 2005.
Over the years St. Olaf had established an endowment for WCAL with some of the charitable contributions from the WCAL donors. In March 2004 the value of the endowment was approximately $2.94 million. Between November 2004 and December 2006 St. Olaf withdrew approximately $1.6 million from the WCAL endowment, including a gift from Senior Regent Leonard Hoeft with a value of $1 million. The value of the charitable gifts in the WCAL endowment after the withdrawals was approximately $1.36 million.
In December 2006 St. Olaf filed a petition in Rice County District Court requesting approval to use the charitable gifts remaining in the WCAL endowment. St. Olaf designated three major categories of donations: (1) restricted endowment gifts listed in exhibit A of its petition with a value of approximately $401,600.00 as of April 2006; (2) restricted non-endowment gifts listed in exhibit B of its petition with a value of approximately $651,000.00 as of April 2006; and (3) "undocumented gifts" listed in exhibit C of its petition with a value of approximately $230,000.00 as of April 2006. St. Olaf requested the court to approve the use of the restricted endowment gifts for activities it defined as "core WCAL activities." The college requested the court to declare that there were no longer any restrictions on its use of the restricted non-endowment gifts and the "undocumented gifts."
The Attorney General responded to the petition in the form of a letter memorandum. SaveWCAL also responded to the petition in the form of a letter memorandum. Hearings on the petition were held in Rice County District Court before Gerald J. Wolf, Judge of District Court, in March, April and May 2007.
On June 20, 2007, the Attorney General filed a memorandum of law in the proceeding. In the memorandum the Attorney General expressed her official position to the court. In July 2007 Judge Wolf appointed Senior District Court Judge Gary J. Meyer as a special master.
St. Olaf represented to the court that it had obtained the consent of living donors to withdraw the $1.6 million from the WCAL endowment between November 2004 and December 2006 and that therefore there were no longer any restrictions on the use of those donations. Senior Regent Leonard Hoeft denied this representation in a letter submitted to the court in which he declared that St. Olaf had never contacted him about the withdrawal of his gift, nor obtained his consent.
In March 2008 Judge Meyer submitted his report as special master. On June 10, 2008, Judge Wolf issued his order regarding the petition of St. Olaf. The Order grants the request of the college to use the restricted endowment gifts for "core WCAL activities." The Order restricts the use of the Hoeft gift to the same purpose. The Order denies the petition with respect to the restricted non-endowment gifts and the 'undocumented gifts."
On September 24, 2008, Petitioner SaveWCAL filed a Petition pursuant to Minn. Stat. §§ 501B.16 subd. 19 and 501B.31 "to redress a breach of a charitable trust" by St. Olaf College ("St. Olaf") concerning its sale of WCAL Radio to Minnesota Public Radio ("MPR") on August 5, 2004.
On October 20, 2008 St. Olaf filed a motion pursuant to Minn. R. Civ. P. 12 for dismissal for failure to state a claim or, in the alternative, a motion pursuant to Minn. R. Civ. P. 56 for summary judgment. On October 21, 2008, MPR filed a similar motion for dismissal or, in the alternative, for summary judgment.
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From an article titled "Judging Without Lawyers: Not Knowing Makes For Nightmares" by Hennepin County District Court Judge Jay Quam in the current issue of Bench & Bar, the monthly magazine of the Minnesota State Bar Association:
"Every judge wants to do the right thing. Every once in a while the law dictates what the "right thing" is (such as an otherwise meritorious claim being barred by a statute of limitations), but usually the law is permissive enough for the judge to rule for either party depending on what the facts are. So, in the very large majority of cases, the facts are what the judge needs to guide him or her to the right decision."
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