Who Should Decide Whether a Nonprofit Can Change its Name?

In the middle of July—is there a slower time in the academic industry?—a small college in upstate New York announces that it wants to change its name. What is behind this move? Was it purposefully made during a slow news cycle?  

A $20 million gift is attached to the process.

I've written before about name changes at nonprofit charities and have written extensively about what happens when a charity board wants to make a substantive change to something created by a previous gift instrument. This current situation appears to be proceeding almost correctly, however. This was not the case in other examples. Let’s look at the facts here.

Paul Smith College is a private, four-year college in the Adirondacks of New York state. It was founded nearly 70 years ago through the leadership and generosity of the Smith family. Paul Smith was an Adirondack guide and established one of the area’s first hotels. In 1937, his son Phelps Smith left $7 million (much of it in land) in trust to start the college in honor of his father. One of Phelps' requirements was that the college bear his father’s name.

Now Joan and Sanford Weill (former Citigroup chief) are donating $20 million to the college and the college would like to change the name to the Joan Weill-Paul Smith College. The college has requested and received approval from the New York State Board of Regents. The next hurdle, per the college, is to obtain permission from a Franklin County, N.Y. court, which must determine if the name change breaches the terms of the Phelps Smith gift and the founding of the college in 1946.

In other cases that I've discussed, the nonprofit charity did not request permission of the courts, a practice that we consider contrary to the law. So we are pleased to see that the board of Paul Smith College recognizes the role of the state in matters affecting restricted gifts to charity. Recently, the Virginia Supreme Court affirmed the role of trust law in reviewing changes requested by a nonprofit to the original trust instrument that established the charity. Thus, the terms of Phelps Smith’s trust are important to this decision. While we are pleased to see the college seek the court’s approval, we question whether the Franklin County court in upstate New York is the appropriate authority to decide this issue.

Under New York’s nonprofit statute, it is the state attorney general who has oversight responsibility and jurisdiction over nonprofit charities. Recently, the New York AG has become more active in nonprofit issues, and we believe the AG’s charities bureau should look into the Paul Smith College name change, rather than the Franklin County court.

If the Phelps Smith Trust is unambiguous as to the name of the college, I am not sure that adding a name is acceptable (at least they are not ditching the Smith name entirely). I am sure that the $20 million gift is needed by the college and will be put to good use. The college may have to find an alternative way of recognizing the Weill’s generosity. Perhaps it should be the Joan Weill Campus of Paul Smiths College.