Can a Donor Stop Paying Their Pledge and Get a Refund of Amounts Already Paid?

An interesting case has hit the press recently. Chapman University in Orange County, California was being sued by a donor who not only wants to discontinue making payments on his $12 million pledge, but also wants a refund of the $3 million he has paid thus far.

Philanthropists James and Catherine Emmi have filed a lawsuit alleging that the university, and specifically its president, applied undue pressure on them to sign an irrevocable pledge contract. The lawsuit alleges fraud, deceit and elder abuse. Mr. Emmi was 96 when he signed the pledge and his wife was 82. The law in California requires Mrs. Emmi's signaure consenting to the donation, but she did not provide that. She did sign as a witness to her husband’s pledge signature.

In addition to the return of the $3 million in pledge payments already made, the lawsuit also requests an additional $3 million in compensation for the alleged fraud, deceit and elder abuse. The university has indicated it will vigorously defend its contract.

Further complicating this case is the fact that the university failed to follow through with promises in the pledge, especially those in regard to publicity for the donation. In addition, the building to be named for the Emmis was to be completed by 2016 and now is not slated to begin construction until 2017 with a projected completion of 2018.

At the time the lawsuit was filed, Chapman officials vowed to fight, alleging numerous misstatements in the complaint filed by the Emmis.

In 2012, at age 96, James Emmi rebuffed a request to donate a minimum of $5 million to have his name on a building because of concerns about his health and financial considerations, the suit says.

The lawsuit, filed last week, alleges Chapman officials continued to “prey” on James Emmi, knowing that he was “more susceptible to inducement and confusion.”

On Chapman University’s website is a Dec. 13, 2013, story reporting that the couple had made a donation of more than $10 million and that Doti announced it during Chapman’s annual “Christmas at the Ritz” event. Next to the story, which says James Emmi is on the Chapman University Board of Trustees, is a portrait of Doti and the couple with what appears to be Christmas decorations in the background.

Chapman officials failed to follow through with promises in the pledge: Instead of publicity for his donation, Chapman officials instead celebrated another donor who gave $15 million and ignored the Emmis at an event, the suit says.

Yesterday, February 25, 2015, the Orange County Register announced that Chapman University and the Emmis have reached an agreement. The university will keep the $3 million already donated and create a scholarship fund for engineering students in the Emmis' name and will forgo the remainder of the $12 million pledge.

The university quickly pivoted from its vow to fight, instead negotiating a settlement. What do you think this means? Perhaps they simply wanted to stop the negative publicity. Perhaps the donors’ suit had more to it than the university first wanted to admit. The primary point for The Gift Advisor readers is that restricted gifts are serious business. Both parties have specific legal rights and remedies in the courts when the deal does not unfold as intended.