The following statement of facts is taken directly from the Minnesota Court of Appeals decision re SaveWCAL's Petition To Redress Breach Of Trust. (See also SaveWCAL's Brief Overview.)
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The parties agree that the relevant facts are undisputed. St. Olaf, a long-established and widely respected liberal-arts college located in Northfield, 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 (WCAL). When the Federal Radio Commission was created in 1927, one of the first 27 licenses granted was to St. Olaf to operate WCAL on an AM broadcasting frequency. In 1968, the Federal Communications Commission (FCC) issued a license to St. Olaf to operate WCAL 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 ratio 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 were located in the Skifter Building on the St. Olaf campus. The building was built in stages from 1931 through 1991. The costs of construction were paid with charitable contributions from WCAL donors. In 1991, a new broadcasting tower was constructed to transmit the WCAL signal, at a cost of more than $1 million, on land leased from the University of Minnesota in Rosemount. The cost of construction was paid with charitable contributions from WCAL donors and with a loan from St. Olaf, which was repaid with interest at the rate of seven percent per annum by charitable contributions.
At periodic intervals, St. Olaf renewed its broadcast licenses for WCAL pursuant to the requirements of federal law. In order to renew the 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. Their charitable contributions enabled St. Olaf to serve the public interest, the prerequisite for the renewal of its licenses for WCAL. The individual donors financially supported the radio station and enabled St. Olaf to continue its possession of 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 (CPB), St. Olaf itself, and tens of thousands of individuals. St. Olaf solicited donations based on its representation that charitable gifts would "help guarantee the future of Classical 89.3 for generations to come."
In 2004, WCAL had 8,000 devoted 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 WCAL programming with a radio. At the same time, St. Olaf considered the station‘s relevance to the college‘s educational mission to have become increasingly tenuous. After 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 interest. 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 primary 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. 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; the purchase of the Rosemount broadcasting tower; the assignment of the lease on which the tower is located; all other real property used in connection with the operation of WCAL; the purchase of personal property, including most of the music library used in connection with the operation of the station; and the goodwill and going-concern value of the station.
MPR communicated the offer to the president of St. Olaf. The president turned the offer over to a vice president of St. Olaf and the chair of the finance committee of the board of regents of St. Olaf for evaluation. The finance committee chair was also a member of the board of trustees of MPR and the board of directors of Piper Jaffray & Co. St. Olaf and MPR did not notify the Attorney General of the State of Minnesota of the offer, nor did either party seek 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 of the MPR offer for the first time. The WCAL board of directors was 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 also members of the board of regents of St. Olaf. Neither director informed his or her fellow directors on the WCAL board of the MPR offer prior to August 9.
On August 30, 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. After St. Olaf announced the sale of WCAL to MPR on August 10, SaveWCAL posted an electronic petition to demonstrate the listeners‘ fervent support for preservation of the radio station. More than 5,500 persons signed the petition by the end of 2004.
On October 5, the general counsel for SaveWCAL submitted a request to the attorney general of the State of Minnesota to exercise his statutory responsibility for supervision of charitable trusts by investigating the St. Olaf–MPR transaction. The request stated, 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 dated October 19, 2004, the attorney general refused to commence an investigation.
On November 15, the FCC approved the assignment of the broadcast licenses for 89.3 FM and 88.7 FM to MPR, and on November 19, 2004, the St. Olaf–MPR transaction closed. St. Olaf received $10.5 million in cash from MPR plus promotional announcements for the college, to be 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 received from MPR 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 college 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 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 a senior regent valued at $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, valued at approximately $401,600 as of April 2006; (2) restricted non-endowment gifts, valued at approximately $651,000 as of April 2006; and (3) undocumented gifts, valued at approximately $230,000 as of April 2006. St. Olaf requested the district court to approve the use of the restricted endowment gifts for activities it defined as "core WCAL activities." St. Olaf also requested the district court to declare that there were no longer any restrictions on 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, but SaveWCAL did not file a petition or cross-petition. Hearings on the petition were held in Rice County District Court in March, April, and May 2007. On June 20, the attorney general filed a memorandum of law expressing her official position. In July, the district court appointed a senior district court judge as a special master.
St. Olaf represented to the district 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. The senior regent whose gift was valued at $1 million denied this representation in a letter submitted to the court, in which he declared that St. Olaf had never contacted him about withdrawal of his gift and had not obtained his consent.
In March 2008, the special master submitted his report. On June 10, the district court issued its order regarding St. Olaf‘s petition. The order granted St. Olaf‘s request to use the restricted endowment gifts for "core WCAL activities." The order restricted the use of the senior regent‘s gift that is valued at $1 million to the same purpose. The order denied the petition with respect to the restricted non-endowment gifts and the undocumented gifts.
On September 24, 2008, nearly four years after the sale closed, SaveWCAL filed a petition pursuant to Minn. Stat. § 501B.16, subd. 19 (2008) and Minn. Stat. § 501B.31 (2008) "to redress a breach of a charitable trust" by St. Olaf, concerning its sale of WCAL to MPR. In its petition, SaveWCAL asserted that individual and corporate donors contributed millions of dollars to support WCAL and that those donations were for a charitable purpose: "the operation and perpetuation of a public radio station." SaveWCAL contended that the act of making those donations created a charitable trust under Minnesota law. SaveWCAL alleged that St. Olaf and MPR breached the alleged charitable trust and requested that the district court issue a judgment declaring the sale of WCAL void. In the alternative, SaveWCAL requested a judgment declaring that the sale did not terminate the "WCAL Charitable Trust" and that the assets of the trust include the current value of the $10.5 million cash payment received from MPR, the current value of the $2.96 million WCAL endowment, and the Skifter Building. SaveWCAL also requested that the district court remove St. Olaf as trustee based on "its attempt to liquidate the WCAL Charitable Trust without notice and without judicial approval and for its attempt to convert the assets of the trust to its own purposes." SaveWCAL stated that monetary damages were an inadequate remedy for the alleged breach and that "[a] judicial declaration that the St. Olaf–MPR transaction is void is the only adequate remedy for the breach of the WCAL Charitable Trust."
On October 20, St. Olaf filed a motion for dismissal for failure to state a claim pursuant to Minn. R. Civ. P. 12.02(e), or, in the alternative, a motion for summary judgment pursuant to Minn. R. Civ. P. 56. On October 21, MPR filed a similar motion for dismissal or, in the alternative, for summary judgment. The district court granted the motions for summary judgment and dismissed SaveWCAL‘s petition on the merits.
