The New Jersey Appellate Division has reversed Mercer County Superior Court Judge Robert Lougy’s dismissal of a lawsuit seeking to block Rider Unversity from closing and selling Westminster Choir College, the century-old music college in Princeton, and moving the choir college to the university’s Lawrenceville campus.
In a unanimous decision last week, the court ordered that the lawsuits brought by more than 70 faculty members, students, and alumni seeking to block the closing of Westminster Choir College be returned to the trial court.
Holding that the plaintiffs adequately pleaded “bad faith” and “arbitrariness” against Rider University for its attempts to monetize Westminster for Rider’s financial benefit, the three-judge appellate panel reversed Lougy’s dismissal.
The Appellate Division ruled that the allegations made by the plaintiffs satisfy the standard for pleading Rider has acted arbitrarily and in bad faith. The Appellate Division also held that the students, faculty, and alumni had the right to enforce the 1991 merger agreement that resulted in Rider University acquiring the famed music school.
Bruce Afran, the lawyer for the plaintiffs, told Planet Princeton Thursday that the agreement made when Rider University took over Westminster Choir College was intended to protect Westminster Choir College.
“The 1991 agreement provided that Rider must respect Westminster’s independent existence and its separate educational program and could not close Westminster except in extraordinary circumstances,” Afran said. “The court held that the students, faculty, and alumni are the intended beneficiaries of the 1991 agreement and have the right to go to court to prevent Rider from destroying or closing Westminster.”
Plaintiffs in the case have been seeking an injunction ordering that Rider either continue operating Westminster Choir College on its Princeton campus as required under the 1991 agreement or make the college an independent institution again, supported by an independent foundation.
“This case will now return to the trial court, where Rider will be forced to prove a necessity to close Westminster, a nearly impossible burden since Westminster was profitable and bringing in millions in annual revenue to Rider,” Afran said.
Pre-trial proceedings are expected to begin in the next few weeks, Afran said.
The Westminster Foundation, the group leading the lawsuits, has already presented a buyout proposal to Rider University, said Constance Fee, president of the Westminster Foundation.
“We hope that Rider will now enter seriously into negotiations with the foundation since it will otherwise face years of difficult and expensive litigation,” Fee said.
The court decision details
The plaintiffs in the case alleged that Rider University caused the destruction of Westminster Choir College “through an illegal and ill-conceived plan” to alleviate Rider’s financial distress by selling Westminster, its Princeton campus, and nearly $20 million endowment to a foreign for-profit company with no experience leading a conservatory or any institution of higher learning that could end Westminster’s existence at any time. The plaintiffs also alleged that Rider’s efforts to sell Westminster Choir College decimated its enrollment, dried up its fundraising, and damaged its reputation and goodwill. The plaintiffs also claimed that the economic conditions at Westminster did not exist to substantiate Rider’s more recent plan to abandon the Westminster campus and its specialized facilities, including the recently completed $13 million Cullen Center, which Rider has “no plan and. . . no capacity” to replicate in Lawrenceville. The plaintiffs have claimed moving Westminster and selling the Princeton campus is being done to monetize the campus for Rider’s own purposes, which they argue is an abandonment of its obligations as the charitable steward and trustee of Westminster.
In March of 2020, the superior court judge ruled that the students, faculty members, and alumni who were plaintiffs in the case lacked standing to enforce deeds gifting the land for the Princeton campus to Westminster Choir College, as well as to enforce agreements between Westminster Choir College and Princeton Theological Seminary, the Seminary and Rider, and the 1991 agreement governing the merger of the Choir College into Rider. Lougy ruled that claims premised on Westminster Choir College being a charitable trust failed and that former board, donor, and alumni plaintiffs had no standing to pursue any claims against Rider, including the appointing of a receiver for Westminster. He also ruled that while students and faculty had standing to contest the relocation of Westminster Choir College under the common law and the Nonprofit Corporation Act, their failure to allege Rider did so arbitrarily or in bad faith required the dismissal of those claims. He also ruled that the plaintiffs’ claims for an accounting, reinstatement of the Westminster Choir College Corporation, and for declaratory judgment and injunctive relief were only claims for relief and failed to state causes of action to justify injunctive relief.
The Appellate Division affirmed Lougy’s decision with the exception of two major issues that allow the suit to go forward.
“The Vazquez student plaintiffs and the McMorris faculty plaintiffs have easily demonstrated their stake in Westminster’s fate and the harm they would suffer should they be deprived of access to the Choir College’s conservatory campus in Princeton for their studies and professional work,” reads the New Jersey Appellate Court decision.
“We conclude a generous reading of the complaints filed by the Vazquez and the McMorris faculty plaintiffs reveals they allege Rider acted arbitrarily and in bad faith in first entering into an agreement to sell the Choir College to a Chinese construction company with no experience running a college, and when that fell through, announcing the abandonment of Westminster’s conservatory campus in Princeton and the relocation of the Choir College to Rider’s Lawrenceville campus, which lacks the facilities necessary for conservatory training of Westminster’s students,” reads the decision. “We also conclude both the Vazquez and McMorris faculty plaintiffs may sue to enforce the obligations Rider specifically agreed would survive post-merger in the 1991 Merger Agreement. We thus vacate dismissal of those claims and remand to permit plaintiffs to pursue them in the trial court. We affirm the dismissal of all other claims in both cases.”
The history of Westminster Choir College
The choir college was founded in 1920 by John Finley Williamson as the Westminster Choir of the Westminster Presbyterian Church, in Dayton, Ohio. It began offering a four-year bachelor’s degree in music after relocating to New York in 1929. The college moved to its Princeton campus in 1935 when Sophia Strong Taylor, a philanthropist and devout Presbyterian, donated the land to advance the “training of ministers of music of evangelical churches.”
Taylor’s gift came with a significant restriction. She stipulated that the land must be used “for the purpose of training ministers of music of evangelical churches…This covenant shall run with the land and be binding upon [Westminster], its successors, and assigns.”
Taylor also included a mechanism for enforcing the restriction — a shifting executory interest that reads as follows: “Should [Westminster] at any time violate its covenant with respect to the use of any part or all of said premises, then the title to all of such premises, including those heretofore conveyed, shall be forfeited by [Westminster] and such title shall thereupon pass to and vest in the Theological Seminary of the Presbyterian Church [now known as Princeton Theological Seminary].”
Although Westminster operated independently for decades and had a sizeable endowment, it found itself in severe financial straits in 1991, with one semester left before it would have to close its doors. After the seminary said it could not commit to operating Westminster Choir College, Westminster entered into negotiations with Rider, which was a college of about 5,000 students at the time. Rider was anxious to acquire the academic and educational benefits of Westminster with its superior music, religion, and arts programs.
The seminary agreed to release its shifting executory interest in a quitclaim deed to Westminster Choir College pursuant to the terms of a May 1991 agreement with Westminster. In return, Westminster agreed to execute a promissory note secured by a mortgage on the Taylor Property that would later become the responsibility of the merger entity. Rider assumed Westminster’s obligations under the note and mortgage in an assumption agreement entered into in
June 1992 when it merged with Westminster.
The merger agreement between Westminster and Rider states that its express purpose was to preserve, promote, and enhance the existing missions, purposes, programs, and traditions of Westminster. The agreement provides that Westminster “shall merge into Rider pursuant to the
New Jersey Nonprofit Corporation Act . . . with the intention of continuing the purposes of [Westminster], in accordance with this agreement.”
Under the agreement, Rider promised to:
- Preserve, promote, and enhance the existing missions, purposes, programs, and traditions of
Westminster, including the continuation of the mission of Westminster through its emphasis on instruction in sacred music, training of ministers of music, choral, vocal, and instrumental performance, and the preparation of music teachers.
- Ensure that the separate identity of Westminster, its programs and activities, and its faculty will be recognized, and the current and future Westminster alumni will continue to be so identified.
- Utilize Westminster’s resources in support of Westminster’s programs and provide additional funds to accomplish the obligations of Rider, including but not limited to the right to cause the Westminster campus to be pledged as collateral for loans the proceeds of which are used for these purposes.
- Assume the responsibilities for the obligations, financial liabilities, and daily management of affairs of Westminster including the supervision and management of all of Westminster’s real and personal property.
Under the 1991 agreement, Rider was not obligated to continue specific programs or to continue to operate or maintain the existing Westminster campus if it determines, in good faith, that it would be “substantially impracticable” or would “substantially adversely affect” the merged institutions.
In a lawsuit that is still pending that was filed in 2018, Princeton Theological Seminary claimed it agreed to assist Westminster in its 1991 affiliation and subsequent merger with Rider “with the express understanding that Westminster, including any successor, would operate and perpetuate Westminster Choir College at [its Princeton] campus, subject to Westminster’s promise that its campus would be used to continue the general purpose of the covenant and the intent of the grantor.”
The seminary lawsuit also alleged that Westminster and Rider never sought judicial approval for the 1991 agreement in which the seminary agreed to release its shifting executory interest of Westminster Choir College. The seminary’s lawsuit seeks a declaration of the seminary’s rights with respect to the promissory note it took from Westminster in exchange for the quit claim deed or a declaration that the restrictive covenant contained in the Taylor deed remains in effect.
The seminary also alleged that Rider’s 2017 announcement about selling or closing Westminster “advised the public that [Rider] required an infusion of capital to further its own mission that no longer would include Westminster, and that it intended to monetize the [Westminster] campus created by the grant for this purpose that was wholly unrelated to the grantor’s reasons for making the grant in the first instance.” The seminary claimed Rider’s expressed intent to sell the Westminster campus and use the proceeds to fund Rider’s operations “unrelated to the continued operation of Westminster” violates the 1991 agreement and public policy.
Rider University claimed in the court proceedings that the plaintiffs’ lawsuit is moot because the choir college programs have already been moved to Lawrenceville. The Appellate Division disagreed.
“Rider has not, however, identified any impediment to its ability to comply with an order directing it to move the Choir College back to Princeton should plaintiffs succeed on their claims,” reads the Appellate decision. “As that order would undoubtedly have a practical effect on the controversy, we cannot accept Rider’s contention the case is moot, leaving aside that the questions presented concern matters of considerable public interest.”
In June, a Mercer County Superior Court judge ruled in favor of the seminary and said Rider University forefeited the Westminster property to the seminary, but that decision was stayed a week later.