COMMONWEALTH OF MASSACHUSETTS BERKSHIRE COUNTY, ss. SUPERIOR COURT C.A. NO. 1776CV00253 ‘THOMAS ROCKWELL, JARVIS ROCKWELL, PETER ROCKWELL, TOM PATTI, TOM PATTI DESIGN LLC, JAMES. LAMME, DONALD MACGILLIS, JONAS DOVYDENAS, and JEAN ROUSSEAU, Plaintiffs, v. ‘TRUSTEES OF THE BERKSHIRE MUSEUM AND MAURA HEALEY, in her capacity as Attorney General of the ‘Commonwealth of Massachusetts, Defendants. ATTORNEY GENERAL’S RESPONSE TO PLAINTIFFS* MOTION FOR TEMPORARY RESTRAINING ORDER Maura Healey, as she is Attorney General of the Commonwealth of Massachusetts, respectfully submits this Response to Plaintiffs’ Motion for Temporary Restraining Order and joins the Plaintiffs’ request for a delay in the proposed sale of 40 works of att by the Trustees of the Berkshire Museum (“Museum”). The Attomey General’s Office’s (“AGO”) prescribed review of whether the Board’s proposed sale is prohibited by statute or other legal restriction and whether court approval of any permissible sale is required, is ongoing, Any sale of the art in question in violation of law would result in irreparable harm to the public interest, Issuance of a ‘Temporary Restraining Order (“TRO”) or Preliminary Injunction (“PI”) will serve the public interest by (1) enabling the AGO to exercise its duty to proteot charitable assets and complete its investigation of the questions outlined in both the Plaintiffs’ petition and in this Response; and(2) preventing a violation of laws governing charitable assets given that, based on the information presented infra, the AGO believes there is sufficient evidence to support Plaintifis? claims. ‘The AGO is in the process of reviewing, pursuant to G.L. ¢. 12, § 8 and G.L.c. 180, § 8A(0), the plans of the Board to sell 40 pieces of art from its permanent collection in order to fund 2 “New Vision” for the Museum. ‘The AGO recognizes that bold visions can be essential to implementing charitable purposes in the long term, and the AGO supports creative and proactive Jeadership in charitable organizations. A( the same time, it is the AGO’s duty to ensure that charities further their purposes in a manner that abides by any restrictions on assets they hold, and that charitable organization leaders and fiduciaries exercise due care in coming to major decisions, Given the unprecedented magnitude of the planned sale,! the importance of the itable Muscum to the local, regional and national community, and the importance of cha museums to the Commonwealth, it is paramount that the AGO be allowed to complete its investigation, See Dillaway v. Burton, 256 Mass. 568, 573 (1926) (“It is [the AGO’s] duty to see that the public interests are protected and to proceed in the prosecution or to decline to proceed as those interests may require.”) Although the AGO has not yet completed its review, there are a number of aspects of the Muscum’s plans that raise concerns, some of which the Plaintififs have detailed in their Complaint and others of which have arisen in the course of the AGO’s investigation. ‘This Response does not represent the AGO’s final position on those concems. Rather, in order for the AGO to ensure the due application of charitable assets and the proper fiduciary administration "the Berkshire Museum sale is unprecedented in ferms of the number, value and prominence ofthe works being propose, the centrality of these work fo the Berkshire Museum's collection, and the process the Berkshire ‘Museum employed to select and dispose ofthe deacessioned items.” (Affidavit of Lori Fogarty, 1.) 2thereof, the AGO joins the Motion for Temporary Restraining Order to preserve the status quo and bar the Museum from selling these 40 works during the pendency of the AGO’s investigation and these proceedings. Allowing the sale of these 40 Museum items to proceed before the AGO completes its investigation and before the Court has the opportunity to consider fully the question whether the sale is legally permissible would interfere irreparably with the AGO’s duty ta protect charitable assets and the public interest, as many of these valuable pieces of art could be sold to private buyers outside of Massachusetts beyond the reach of this Court, 1 Background A. The AGO’s Role in Public Charities Oversight ‘The AGO is charged with ensuring the due application of charitable assets and preventing breuches of trust in their administration. G.L. ¢. 12, § 8; Weaver v, Wood, 425 Mass, 270, 275 (1997) (the AGO is charged, inter alia, with enforcing the rights of a charity’s beneficiaries to correct abuses in the administration of @ public charity and “ensuring that [charitable funds} are used in accordance with the donor’s wishes. Charitable corporations are subject to the AGO"s oversight as they hold all assets in trust for charitable purposes. Mass. Charitable Mechanic Association v. Bede, 320 Mass, 601, 610 (1947); Wellesley College v. Attorney General, 313 Mass. 722, 724 (1943); Animal Rescue League v. Assessors of Bourne, 310 Mass. 330, 334 (1940). A charitable corporation organized under our General Laws is required to notify the AGO of certain types of transactions, including the sale of all or substantially all of its property (an “8A(¢) Transaction”). G-L. c, 180, s. 8A(@). Notice of transactions that trigger 8A(c) and certain other transactions allows the AGO the opportunity to review the transaction and assess whether court approval may be required, such as when a charity is going to materially change the nature of aetivities it conducts and apply proceeds from its sale to a new purpose.Generally speaking, if the AGO determines that court approval may be required to change ihe purposes of or otherwise deviate from restrictions on assets a charitable trust or corporation holds, the AGO works with the charitable trust or corporation in an effort to reach an agreement and submit an assented-to petition for deviation or cy pres to the court. See, Conservation Services Group, Inc. v. Attorney General, No. $J-2015-0230 (following the sale of substantially all its assets, charity with assent from AGO sought equitable relief from court via principles of cy pres to apply proceeds from sale of primary activity assets to activity that, while permissible under broad corporate purposes clauses, the charity had not previously undertaken). In the absence of such a consensual petition, an adversary proceeding between the charity and the AGO, resulting in a court determination as to the transaction, is available. B. The AGO Is Undertaking Review of the Museum’s Plans to Deaccession 40 Pieces of Art in Accordance with Its Duties in Overseeing Charitable Assets. i, The Museum’s Proposed Transaction ‘The Museum was founded in Pittsfield, Massachusetts in 1903 by Zenas Crane (“Crane”), who gifted a variety of Fine ar, sculpture, natural science specimens and ancient artifacts to the Museam. (Aff. of Emily Gabrault (attached hereto), Exh. A). At the time, the Museum was part of the Trustees of the Berkshire Athenaeum and Museum ("Athenaeum") and subject to a restriction in the Athenacum’s 1871 charter that “no part of such real and personal property, or such gifts, devises or bequests, shall ever be removed from the town of Pittsfield.” See An Act Relative To The Trustees Of The Berkshire Athenaeum, 1903 Mass Acts & Resolves Ch. 131 (Mar. 6, 1903) (“1903 Act”) (changing the name of the Athenaeum to the Berkshire Athenaeum and Museum); An Act To Incorporate The Trustees Of The Berkshire Athenaeum, 1871 Mass. Acts & Resolves Ch. 129 (“1871 Act”), On or about April 2, 1903,Crane deeded the land where the Museum now stands to the Athenaeum “for the purpose of cstablishing a Museum of Natural History and Art in connection with the Berkshire Athenaeum.” (James Hatt, etal v. Trustees of the Berkshire Museum, Suffolk Super. Civ. A. No. 1784CV03439 (Sept. 25, 2017) (Hatt Litigation), Verified Complaint 4] 36, Exh. C). In 1932, the citizens of Pittsfield petitioned the Legislature “to separate the library and the museum, both of which are now held under one title by the ‘Trustees of the Berkshire Athenaeum and Museum.” Compl. 22. Thereafter, the Legislature enacted a statute to separate the Museum from the Athenaeum, An Act Changing The Name Of The Trustees Of The Berkshire Athenaeum And Museum To Trustees Of The Berkshire Athenaeum, And Incorporating The Trustees Of The Berkshire Museum And Authorizing The Transfer To It Of Museum Property, 1932 Mass, Acts & Resolves Ch. 134 (1932 Act”), Since 1932, the Museum’s purposes have been, “for establishing and maintaining in the city of Pittsfield an institution to aid in promoting for the people of Berkshire county and the ‘general public the study of art, natural science, the culture history of mankind and kindred subjects by means of museums and collections...” Jd. In addition to being a “repository” for objects and maintaining a diverse collection of objects and artwork, the Museum presents exhibitions, educational programs, and events throughout the year. (Garlington Aff., 14). As part ofits visual arts collection, the Museum owns and displays paintings, photographs, sculptures, and tapestries from many centuries. ([d). Additionally, as highlighted on its website: [The] Museum has exhibited works by some of the most accomplished artists from the ‘United States and abroad: Rembrandt Peale . .. Paul Cézanne :. . and John Singer Sargent. [T]he Museum was the first to commission two site-specific mobiles... from Alexander Calder, who became one of the most significant artists of the 20" century... In the 1950s, the Museum was the first to display the work of Norman RockwellIn the 21st-century, acquisitions have focused on artists with national and international reputations who have strong connections to the Berkshires ‘Well-known institutions such as the Metropolitan Museum of Art, Mystic Seaport, the Smithsonian Institution, the Guggenheim, and the Tate Gallery have all borrowed objects from Berkshire Museum's fine collections. (Gabrault Aff., Exh. A). In 1993, the Museum became of member of the American Alliance of Museums (“AAM"). Asa condition of membership, the AAM requires that museums “respect the Alliance's code of ethics,” which dictates that the proceeds from deaccessioning be used to purchase new art or for the direct care of collections (Jit, Exh. B). Though the Museum’s written collections policy dates back to at least 2006, at least one prior deaccessioning that predated the written policy employed similar deaccession practices. (id., Exh, C). In 1935, the Museum deaecessioned a painting by George Caleb Bingham. (Garlington Aff., Exh. B). The director at the time, Laura Bragg, noted that (1) the artwork did not fit with the Museum's collection goals; (2) the sale was done with the consent of the donor; (3) the painting was sold to the City Museum of St, Louis; and (4) proceeds of the sale were placed in a special fund “to purchase works ‘more sorely needed.” (J). From 2006 until July 12, 2017, the Museum’s written collection policy included the 10.a, Criteria for Deaecession and Disposal 1, That the work does not represent the standard of quality which the Museum seeks to maintain for exhibition or scholarly purposes, 2. That the object is no longer relevant or the object is clearly outside the scope of the museum's mission 3. That the work is in poor condition . 4, That the work is 4 duplicate of another work in the collection . .. 5... [T]he work is found to be a[n] . . . unauthentic work. 610,b. Disposal of Works Ifanother museum expresses interest in any work being considered for deaccession, that museum will be given first option to purchase the work at fair market value or in exchange for a work or works of art of comparable value. Funds realized from the sale of all work would be applied to the Acquisition and/or Preservation fund. ‘The preservation {und is to only be applied to the conservation of objects. 10.c. Deacces 3. Atal times the original donor's wishes will be considered . 4. The Museum Executive Director and Advisory Committee must realize that they have a public accountahility for their decision to deaccession and the method by which they choose to dispose of an object. There should be no expectation of concealing the transaction, (Gabrault Aff., Exh. D). In 2015, in response to financial challenges, the Museum engaged with a nonprofit consulting fim ~ TDC —to explore a possible merger with Hancock Shaker Village. (Klepetar Aff. 20), Following TDC’s recommendation against the merger and suggestion that the ‘Museum engage in a master planning process, the then-President of the Museum Board reported ‘hat the master planning process may lead to consideration of deaecessioning to address the “Museum's long-term sustainability. (Id. 4 22-23). ‘The Museum then asked two auction houses ~ Sotheby's and Christie's —to value the Museum’s collection. (Id. 23). The Museum’s master planning process included hiring a nonprofit consultant, convening advisory and focus groups, and holding a number of all-day Board retreats to plan for the future of the Museum, (Jd. 916-17), An April 13, 2016 Memorandum from TDC to the Board reflects that TDC identifica [EJ as the total new funds needed for the Museum to stabilize its operations.’ (Gabranlt Aff, Exh E). Ata May 6-7, 2016 Board retreat, the Board received valuations that Christie's and Sotheby's had provided for almost 600 objects in the Museums * This value excluded “pledges from the Museum's current ongoing capital campaign.” (Gabraatt Aft, Exh.) 7collection. (Klepetar Aff,, 32-33; Gabrault Aff,, Exh. P), ‘The auction houses placed a value on these items in the range of EE. identifying the top 40 pieces as being valued at SR Gebrcault Att, Exh. F), After additional planning and d ration, on July 29-30, 2016, the Board voted to advance plans to select a new business model. (Klepetar Aff, §§ 16, 38). The Board set out to determine the appropriste level of “one-time investment” for the Museum to attain financial sustainability. (Jd. § 39). This included considering TDC’s recoramendation that such plans would require the sale of 20 to 40 objects in the Museum’s collection. (Id. 4140). Ultimately, the board selected a plan to revitalize the Museum that would cost at least $60 million (820 million for facilities upgrades and $40 million for endowment). (Gabrault Aff, Exh, G). After further planning and deliberation, on May 22, 2017, the Board authorized its Board President and Executive Director to execute a consignment agreement with Sotheby's. (Klepetar AMT. 949). ‘The Museum and Sotheby's executed an agreement on June 13, 2017 for the sale of the 40 most valuable pieces of art that Sotheby’s had identified in the Museum’s permanent collection, with an estimated valuc of. Gabrault AfT., Exh. H). On July 12, 2017, the Board voted to remove the following requirements from the Museum's Collections Management Policy: 10.b. Disposal of Works Tfanother museum expresses interest in any work being considered for deaccession, that museum will be given first option to purchase the work at fair market value or in exchange for a work or works of art of comparable value, . Funds realized from the sale of all work would be applied to the Acquisition and/or Preservation find. ‘The preservation fund is to only be applied to the conservation of objects.(Klepetar Aff. 51, Exh. P), The remainder of the Collections Management Policy provisions remained unchanged. Supra at 6-7. ‘That same day, the Board voted to deaccession 40 items from its collection. (Klepetar Aff. 52). ii, Notice by the Museum and the AGO’s Investigation This summer, the Museum notified the AGO of its intent to sell 40 pieces of art through an auction at Sotheby's and apply proceeds to finance a “New Vision” and fund its endowment. (id., Exh. E, (the “Museum’s Notice”)). Consistent with the process outlined in Section LA supra, the AGO, through the Non-Profit Organizations/Public Charities Division, began a review of the background of the Museum and the representations in the Museum's Notice. As part of this review, the AGO requested and reviewed documents from the Museum in an iterative process, conducted over 20 informational interviews, met with Museum officials in Pittsfield, held no fewer than 20 conference calls with Museum counsel, and fielded more than 400 contacts by individuals interested in the proposed transaction, some of whom brought forth related evidence. For example, on September 1, a community member was the first to alert the AGO of the Museum’s historical relationship with the Athenaeum, whose 1871 Charter the AGO believes restricts the Museum’s ability to sell 19 of the 40 pieces of art planned for auction. See infra Section ILA. ‘The Museum’s most recent production of documents, consisting in part of documents that the AGO had originally requested on August 18, 2017, occurred as recently as October 24, and included a number of boxes of documents made available to the AGO for review in its counsel’s office due to their fragile nature. The AGO is still in the midst of completing that document inspection. In addition, witnesses such as Thomas Smith, whose affidavit is appended hereto, have come forward in the last couple of weeks. We were in the process of discussing various alternatives . ey pres petition) with the Museum when this 9suit was filed. The AGO has also been reviewing and considering additional materials from this proceeding and the Hatt litigation, both filed in the last two weeks. Asa result of this ongoing investigation, the AGO has significant questions and concerns that relate to the Board’s decision to sell the 40 works of art, the Board’s authority to make any such sale, and whether court review of any possible sale would be required. As such, the AGO requires additional time to finalize its review and investigate these questions in order to ensure the due application of the Museum’s charitable assets. Should there be any restrictions on the Museum’s authority to sell any of the 40 pieces, the Museum would need to seek relief from the court under the charitable trust doctrine of cy pres, after proving that compliance with those restrictions has become impossible or impracticable. The AGO’s concerns are detailed below. Il. The Museum Does Not Have the Authority to Sell the 40 Pieces of Art Absent Court Review. A. The Original Charter Prohibits the Museum from Selling Artwork Acquired Before 1932 Outside Pittsfield. ILis well-settled that charities that are corporations hold and must apply property for the purposes for which they are incorporated. Wellesley College v. Attorney General, 313 Mass. 722, 724 (1943) (general assets of a charitable corporation, including donations not restricted to ‘more specific purposes, must be applied to the stated purposes of the charitable corporation.) Additionally, donors are presumed to know the extent of a charity's powers. Boston Athletic Assn. v. International Marathons, Inc., 392 Mass. 356, 367 (1984); Trustees of Andover Theological Seminary v. Visitors of the Theological Inst. Of Phillips Academy, 253 Mass. 256, 273 (1925) ("subsequent donors presumably ‘knew on what trusts the library was established and The AGO supports the Museum’s Motion to Consolidate the Hatt litigation with this proceeding. The AGO shares the Museum's interest in resolving these proceedings as quickly as possible. 10‘was to be managed, and that they made their gifts to be held under the same trusts.”") (citing Cary Library v, Bliss, 151 Mass, 364, 377 (1890))4 The 1871 Act, which incorporated the Athenaeum, stated that “no part” of any gifts the Athenaeum may hold “shall ever be removed from the town of Pittsfield.” When the Museum. was founded as part of the Athenaeum, reflected in the 1903 Act, gifts given to the Athenaeum remained subject to the geographic restriction in the 1871 Act. Although the 1932 Act separately incorporated the Museum, the Act did not remove the restriction on gifts the Athenaeum had acquired prior to 1932.5 ‘The Museum acquired 19 of the 40 items slated for sale before 1932. (Gabrault Aft. 22). Donors of any of these 19 pieces can be presumed to have known the extent of the Museum’s powers, including the geographic limitation in the 1871 charter. The geographic restriction attached to all pieces the Athenacum acquired prior to the 1932 Act. Although the 1932 Act permits the Athenaeum to transfer of certain property it held to the Museum, the 1932 Act does not modify the restriction on gifts donated to the Athenaeum prior to 1932. The Museum’s argument that works donated prior to 1932 were never “acquired by the Athenacum,” instead donated directly to the Museum, fails to account for the structure of the organization to which the Museum belonged prior to its separate incorporation in 1932. Museum Opp. at 12. ‘The statutory history makes clear that the “Trustees of the Berkshire Athenaeum and Museum™ ‘was one institution, and despite the institution recording acquisitions in different ledgers, the 4 See also Hubbard v. Worcester Art Museum, 194 Mass. 280, 290 (1907) (“The charitable purpose may be implied in the name or object ofthe devisee .. The object of a devise, as « legally established public charity, was well known tothe testator... an implication to create a public charity may arse from the character of the body to which the gift is made, or fiom publicly avowed purposes of its organization and action.”) 5 Only a court can remove restrictions placed on a gif, See Trustees of Dartmouth College v. City of Ouiney, 357 Mass, 521, 529-34 (1970); In re Opinion of the Justices, 237 Mass. 613, 617, 131 N.E. 31, 32 (1921) (kis not within the power of tne Legislature to torminate a charitable trust, to change its administration on grounds of expediency, or to eek to control its disposition under the doctrine of ey pres. antAthenaeum and Museum operated akin to two departments within the same organization, Therefore, any gifts that the Museum received prior to 1932 are subject to the geographic restriction in the 1871 charter." The Museum may not sell pieces acquired prior to 1932 absent court approval. B. Norman Rockwell Appears to Have Intended that His Donations Remain im the Museum's Permanent Collection, Based in part on documents the Museum produced in the past week and the recent affidavit if Thomas Smith, the AGO has substantial questions as to whether the Museum has the authority to sell the two pieces of art that Norman Rockwell (“Rockwell”) donated — Shufileton’s Barbershop in 1958 and Shaftsbury Blacksmith Shop in 1966, Even if such sales are permissible, the question of whether the Museum could apply the proceeds of any such sale to finance the Museum's New Vision and fund the Museums endowment or whether such proceeds would need to be used to benefit the permanent collection requires court review pursuant to principles of ey pres. First, as the Plaintiffs allege, following Rockwell’s 1958 donation of Shuffleton’s Barbershop, Museum Director Stuart Henry (“Director Henry”) sent Rockwell a leter stating the following: I send to you the thanks of all of our Trustees for your generous gift of the painting, “Shuffleton’s Bather Shop”. We are delighted to have it for our permanent collection. Compl. Exh. A, There is a genuine question as to whether, as the Plaintiffs allege, this writing reflects an agreement between the Museum and Rockwell that Shuffleton’s Barbershop would remain part of the permanent collection of the museum, In the alternative, the language appears ©The Plaintiffs argue thatthe absence ofa power to sellin the 1932 charter prohibits the Museum from selling any artwork acquired prior to 2016, when the Museum amended its articles and added the power to sell pursuant to GL. «180, § 6 and G.L. e,156B, §9(). The Attomey General takes no postion at this time on whether the absence of a permissive power such asthe power to sell would inherently restrict gifs,to indicate an agreement between the Museum and Rockwell that the Museum may only use Shuffleton’s Barbershop to benefit its permanent collection, thereby limiting the use of proceeds from any sale of the painting to collections purposes as opposed to general operating expenses of the museum, See Newhall v. Second Church and Soc. of Boston, 349 Mass, 493 (1965) (*That these three vessels were appropriate for covenanted church use distinguished from general parish use should guide the disposition on the proceeds should they be sold.” Additionally, there are documents and evidence that suggest that Rockwell intended for the Museum (0 retain both Shuflleton’s Barbershop and Shafisbury Blacksmith Shop in its permanent collection for public viewing in the Berkshires. The nature of this type of transaction and the circumstances surrounding the donation may impose an implied trust on the paintings and therefore restrict the ability of the Museum to sell or transfer them. See, ¢.z,, In re Opinion Of the Justices, 237 Mass. at 617 (“Gifts to trustees . .. accepted by them to be held upon trusts expressed in writing or necessarily implied from the nature of the transaction, constitute obligations which ought to be enforced and held sacred under the Constitution.”). Here, Rockwell’s intimate relationship with the Museum, his long-term friendship with Director Henry, Director Henry’s continued deference to Rockwell’s wishes about the use of his paintings after he donated them, and other circumstances — including those outlined below — may evidence an implied trust: that Rockwell intended both of the works he donated to the Museum to remain permanently with the Museum. Iis well documented that Rockwell had an affinity for the Museum and a long-standing friendship with Director Henry that predated Rockwell's gifts to the Museum. (Affidavit of Smith Aff, (attached hereto) {3; Gabrault Aft, Exh. 1). In fact, the Museum was the first to exhibit Rockwell's work. (Gabrault Aff, xh. A). Rockwell used to spend considerable timewith Director Henry at the Museum, interacting with Museum staff regularly and checking in on. some of his other works of art which he stored at the Museum, (Smith Aff. 4¥4-6; see Gabrault Aff., Exh. J (wherein Rockwell describes Director Henry as his “favorite director of [his] favorite art museum”). Further, in addition to Rockwell's wo paintings, records reflect that Rockwell donated cash to the Museum and was a member, (Gabrault Aff., Exh. K, L and M).” Rockwell's relationship with Director Henry and the Museum likely helps explain why Rockwell did not execute formal gift instruments when donating Shuffleton's Barbershop and Shafisbury Blacksmith Shop. Indeed, evidence suggests that the Museum understood at the time Rockwell donated the art that the pieces were his favorite oil paintings and that he gifted them to the Museum so that they would remain on view in the Berkshires. (Smith Aff. ] 8). Director Henry and the Museum acted as agents on behalf of Rockwell to arrange for loan agreements, transportation, and insurance for Rockwell's paintings, including the works he donated to the Museum, (Gabrault Aff,, Exh. N). The correspondence between Rockwell and the Museum arranging for loans to other institutions appears to treat both sets of works — those Rockwell had given to the Museum, and those that the Museum was only storing — interchangeably, evidencing that the Museum was careful to meet Rockwell's wishes by granting him some control over the use of his donated paintings, (Jd., Exh, 0), For example, Director Henry's secretary wrote to Martin Stewart of Bamberger’s: Mr. Rockwell has suggested that he would like to have “the Blacksmith Shop’, which is ‘owned by the Berkshire Museum in your Exhibition. ... If you would let us know when you would like this picture delivered we will send it down by station wagon, under the care of Mr. Fred Holden of our staff. 7 In fact, in enclosing a cash donation to the Museum in a lelter to Director Henry, Rockwell expressed his gratitude for the Museum, stating that [{Jhe Museum, and you personally, have been most kind, thoughtful and courtedus, and I sineerely thank you.” (Gabrault Aft, Exh. M). 4(id. Exh. P). In addition, on ai least one oceasion, the Museum refused to loan out Rockwell's paintings, both those that the Museum owned and those that Rockwell owned and the Museum stored for him, without Rockwell's express prior approval. (/d., Exh. Q). Purther, the timing of Rockwell’s gi is important to consider, At the time Rockwell donated his works of art, it was “accepted as a ‘given’ that the works would be permanently retained in the collection.” (Jd., Exh. R12). Scholarly articles also recount that deaccessioning first caught the public’s attention in 1972 following the New York Metropolitan Museum of Art's decision to deaccession of a number of valuable paintings. See, e.g, Stephen K. Urice, “Deaccessioning: A Few Observations,” American Law Institute ~ ABA CLE, Legal Issues in Museum Administration (2010). ‘This sale and subsequent publ outery substantially changed the landscape around what donors understood about the potential use of their gifts to museums.* After this widely publicized 1972 deaccession, Rockwell looked to formalize his intentions that his artwork remain on public view when he made subsequent gifts. In 1973, Rockwell took steps to secure his art for the public in his creation of the Norman Rockwell Art Collection Trust (the “Rockwell Trust”), as distinct from when he gave gifts toa ‘rusted friend and favorite museum in 1958 and 1966. The Rockwell Trust provides: ‘The Trustees shall not permit the SOCIETY to exhibit the collection unless such organization: .., (3) agrees in writing to exhibit, and in fact exhibits, the Collection in a ‘manner, at a time, and in physical surroundings satisfactory to the Trustees. "Though the New York Attomey General concluded that there were no restrictions limiting the Met's authority to sell these paintings, which constituted 2 small portion of the Met's permanent collection and proceeds from which were to be applied to purchase new art the aftermath ofthe Met's deaccession included the New York Atiomey General calling a conference of museum representatives to discuss disposition procedures. Harry Weintraub, “Museums With Well,” Art & The Law (Fall 1975)(Gabrault Aff Exh. $ FIFTH (D)). These terms seem to be consistent with Rockwell's apparent overall intention and understanding at the time of his gifs to the Museum that the Museum would retain his art donations for public viewing. Further, the Rockwell Trust provided that Rockwell's art would transfer to the Museum if the Society should no longer be able to fulfill the terms of the Rockwell Trust. (Gabrault Aff. Exh. $4 FIFTH (C)). This provision makes clear that Rockwell held the Museum in high regard and considered it a safe alternative to the new Society. The different circumstances surrounding Rockwell's gifts to the Museum and Rockwell's gifts to the Rockwell Trust are important. Rockwell gave his gifts to the Museum at a time when he had an ongoing personal relationship with Director Henry that clearly included deep trust in the care Director Henry exercised over his paintings and at a time hefore the possibility of deaceessioning was widely recognized." In contrast, Rockwell donated art through the Rockwell Trust to a new Society at a time when concerns regarding deaccessioning art had become part of the public discourse, The extent to which any explicit or implied restrictions exist is a question that is central to whether or not the Museu may legally sell Shuffleton’s Barbershop or Shaflsbury Blacksmith Shop and/or how it may apply proceeds from any such sale. ‘These issues are fact- intensive, and the AGO has been a ely gathering new facts related to this issue as recently as this week. The Museum did not present all relevant facts and circumstances to the AGO when it sent its Notice. A number of important facts have only come to light through multiple inquiries The Society is now known as the Norman Rockwell Museum. °" Christine McCarthy, Director ofthe Provincetown Art Association and Museum (*PAAM™) further explains that “there were few existing deaccessioning guidelines or gift instruments prior to the 1970s. . . [and] many gifts of art ‘were intended to remain in permanent collections based on a handshake, .. The more long-standing the relationship of trast between a donor and the museum, the stronger the indication that the donor and museum had mutually intended a gift of at to be part of the muscumn’s permanent collection.” (McCarthy Aff, $10). 16and research, Indeed, as noted above, the Museum has made available additional documents ‘within the last several days which bear upon this issue. The AGO requires additional time to complete this investigation, come to a considered conclusion regarding any restrictions that may exist on the paintings, and present the matter thoroughly to the Court should that be required. C. The Museum’s Plans to Sell 40 Works of Art and Apply Proceeds to a New Vision Are So Transformative That They Require Court Review. The Museum’s overall plans are so transformative as to require court approval to proceed. The Museum is selfing its 40 most valuable picves of art, most uf which have a deep connection to the Museum’s fine arts legacy, and are valued af as much as of the mm valuable art the Museum has in its permanent collection. The Museum’s: unprecedented deaccession and planned use of proceeds has resulted in the severing of its relationship with several prominent institutions and could impede (1) other museums? lingness to loan items to the Museum and (2) donors’ willingness to donate artwork to the Museum. (Fogarty Af, 5). It is clear from the Muscum’s own materials that many of the pieces it plans to sell are part ofits legacy, including the Calder mobiles and the Rockwells. (Gabrault Aff, Exh, A), In addition, exhibiting fine works on foan from other institutions has been a key component of the Museum’s activities. (/d.) As such, the transaction may be so transformative that the Museum should not be able to proceed with the sale and planned ‘application of proceeds absent court review under principles of cy pres. See Attorney General v. Hahnemann Hospital, 397 Mass. 820, 823-25 (1986) (trustee's sale of hospital constituted an abandonment of purposes) Apart from disposing of its most valuable artwork, the planned sale and New Vision would alter how the Museum fulfills its purposes in such a radical way that court approval is required. The Museum is disposing of its art-related mission and legacy, an act that is, 17inconsistent with its charter purpose requiring that it promote the study of art by means of “museums and collections.”'' The Museum argues, counter to its long-established history and the plain meaning of “museum,” that the Museum’s charter does not require it to publicly display fine art, (Opp. at 15). Yet, the proposed sale would de; the public of access to the ‘exceptional art entrusted to the Museum to benefit the public. (Gabrault Aff. Exh. R914).'? The Museum argues that it is still retaining most of its collection of 40,000 objects, including 5,000 pieces of fine and decorative art, and its building. (Opp. at 16-17). The Museum further argues that it will be able to display more art under its New Vision, and more effectively, by utilizing interactive art exhibits integrated with science and history exhibits. (Jd, at 15-17) However, the Museum's argument mistakenly equates the quantity of art it owns with the significance and value of that art. See In re Wilstasch's Estate, 1 Pa. D. & C 2d 197, 2010 (1955) (commenting that high quality paintings are most likely to attract public interest).!? Moreover, the survival of the Museum's ability to fulfill its art purposes is seriously called into question because the proposed sale seemingly has injured, and if consummated will further impair, the Museum's reputation in the art world. ‘The decision has resulted in a violation of AAM'’s ethical guidelines, severance of the Museum’s relationship with the Smithsonian Institute, and significant damage to its relationship with the AM, the American Alliance of Muscum Directors (“AAMD"), and the Massachusetts Cultural Council (“MCC”), Indeed, the violation of ethical principles could prevent future loans of art and shared exhibitions with other museums, The Museum argues that artis not the Museum's sole purpose, but the existence of other charter purposes does not justify relegating the Museum's rich art museum tradition to an inconsequential status or eliminating art altogether. Opp. at 2-4 "2A sale ofthe fourten paintings would be the antithesis of [the donors] intent because the sale could deprive the public of any opportunity to view them.” Museum of Fine Arts v. Beland, 432 Mass. $40, 544-45 (2000) (rejecting Fequest to sel certain valuable paintings held in trust for exhibition purposes). ® Further, in the opinion af the long-time head of the Peabody Essex Museum in Salem, interactive exhibits quickly ‘become dated, appeal to a limited audience, and seldom generate repeat visitation. (Gabrault Aft, Exh. R). 18discourage fulure donations of art, and ireparably harm the Museum's ability to meet the art component of its mission.'* ‘This unprecedented sale of att that is part of the Museum’s legacy and bas been central to the Museum’s art mission is tantamount to the Museum abandoning its essence, one of its principal activities of promoting art, The proposed sale and use of proceeds constitutes a substantial change in the museum's purposes, and as such it will require court review pursuant to ey pres. See Attorney General v. Hahnemann Hospital, 397 Mass. at 823-25 (1986) (trustee’s sale of hospital constituted an abandonment of purposes).'* III. Board Actions Raise Questions About Its Exereise of Fiduciary Obligations, Fiduciaries must exercise the degree of care that a prudent person ordinarily would use in alike position and act with reasonable intelligence. G. L. ¢. 180, § 6C (setting forth duty of fiduciaries to a charitable corporation)."* ‘The basic standard of care is one of “complete good faith plus the exercise of reasonable intelligence.” Boston Children’s Heart Foundation v. Nadal Ginard, 73 F.3d at 33-34 (1996). A fiduciary who consciously distegards applicable fiduciary responsibilities is acting in bad faith. Blake v, Smith, 2006 WL 4114305 (Mass. Superior Ct. 2006) (citing Stone v. Ritter, 911 A.2d 362, 369 (Del. 2006)). See Trs, ofthe Corcoran Gallery of Art v. District of Columbia, 2014 D.C. Supet. Lexis 17, 54 (2014) (court rejected a proposal that included raising finds through deaccessioning because it would likely result in AAMD sanctions and would pose substantial risks). ©The Museum cites Dennis v, Buffalo Fine Arts Academy, 836 N.Y S.2d 498 (N.Y. Sup. Ct. 2007) to angue that its deaeeessioning does not constitute a departure from its corporate purposes. But, unlike here, Denis involved a sale of only a small portion of is collection, unrestrained by any express or implied donor restrictions, with the museum retaining similar pieces of art from the Same historic period for public benefit and education, 1 ‘The Massachusetts legislature has prescribed comporate fiduciary standards at G. L. ¢. 180, § 6C (1989), which provides: ‘A director, officer, or incorporator of a corporation shall perform his duties as such, ... in good faith and in a manner he reesonably believes tobe in the best interests of the corporation, and with such care as an ordinarily prudent person in alike position with respect toa similar corporation ‘organized under this chapter would use under similar circumstances, 19Affirmative malfeasance by a fiduciary is not necessary to constitute a breach of the duty of care. “[MJere passivity can rise to the level of negligence if the director does not ‘exereise the degree of care which a prudent person ordinarily would use asa ditector."” Robinson v. Waits Detective Agency, Inc., 685 F.2d 729, 736 (1* Cir, 1982) (citation omitted), A fiduciary could be liable for a breach of good faith for an action serving a legitimate business purpose if that purpose “could have been achieved through a less harmful, reasonably practicable, alternative mode of action.” Zimmerman v. Bogoff, 402 Mass. 650, 657 (1988). In fact, though the Museum cites the First Circuit, there are no reported Massachusetts decisions applying the for-profit business judgment doctrine to fiduciaries of chatitable corporations, and it is unlikely that a ‘Massachusetts court could reconcile the doctrine’s presumption of propriety for rational behavior with the “heightened scrutiny” standard articulated for charities. Boston Athletic Ass'n at 362." ‘The for-profit business judgment doctrine is particularly inapposite because, unlike for-profit corporutions, “the nonprofit board is less vulnerable to close non-judicial scrutiny by other interested parties.” Frances Budig, Pledges to Nonprofit Organizations: Are They Enforceable and Must They Be Brforced?, 27 U.S.P. L. Rev. 47, 100 (1992). Therefore, itis entirely appropriate and necessary that the Attorney General and Court look beyond the business judgment rule and behind the Board's reasoning, including the Board’s consideration of alternatives to deaceessioning ‘The Board spent considerable time trying to develop a new business plan for the Museum to meet the needs of the residents of the Berkshires and sustain itself in the long-term, In the short term, the Museum imposed a hiring freeze and contemplated limiting the daily hours and/or closing the Muscum one or two days each week. (Klepetar Aff, 4925, 35). ‘The Board also " See Official Commentary to Seetion 8.30 of the Revised Model Nonprofit Corporation Act (1987): “Application of the business judgment rule to directors of nonprofit corporations is not firmly established by the ease law.” 20explored a possible merger with the Hancock Shaker Village Museum. (Id. $20). However, when the merger proved not to be in the Museum's best interest, the Board looked towards alternative long-term options for the Museum, choosing to identify a New Vision. (Id. $¥21-23), The process for designing the New Vision included careful planning and consideration, and a significant investment of time on the part of many Board members. The Board also hired TDC, a Boston based consulting group, to favilitate the New Vision planning and conduct an assessment of the financial condition and needs of the Museum. (Id. 426-52). Notwithstanding this process, we have significant concerns about the Board's decision to sell the 40 pieces of art that warrant further consideration and investigation. First, the Board set a financial goal through its Master Planning Process that was so grand it could only be funded through wholesale deaccessioning of the Museum’s most significant art, ‘The board selected a plan to revitalize the Museum that would cost at least $60 million ($20 million for facilities upgrades and $40 million for endowment), (Gabrault Aff, Exh. G). This amount exceeded other options presented to the Museum and far-exceeded the I the Museum's own consultant identified as necessary for the Museum to stabilize its operations. (/d., Exh. E and T). Second, the B oard authorized Museum leadership to enter into a contract with Sotheby's in violation of (1) @ longstanding Collections Management Policy that governs deaccession criteria, requires other museums to have a first option to purchase, and requites proceeds to be applied to acquire or conserve objects; and (2) AAM’s code of ethies, which the Museum had ‘agreed to respect through its membership in AM since 1993. (Id., Exh. B, D,H). This contract ‘was for the Museum’s inost valuable 40 pieces of art, valucd at I. which constitutes the vast majority of the value of the almost 600 pieces of art that the auction houses had assessed (ranging from EE). (/d., Exh. F). In fact, based on these auction estimates, if the ausale were permitted to proceed, the Museum could raise more than [EEE what TDC had identified it needed to stabilize its operations. Only after the contract with Sotheby's was executed did the Board notify the AGO of the intended sale and vote to deaccession and sell the items. All of this was done while the Museum was already committed to a contract that carried with it the threat of significant financial penalties should the Museum withdraw any pieces of ar. Even though the Board voted to change its Collections Management Policy prior to voting to deaccessioning the 40 items, the Board still seems to have violated its current policy. ‘The Board selected artwork for deaecession and sale based solely on auction value, in violation of its past and current Collections Management Policies, (Gabrault Aff, Exh, D; Klepetar Aff., $ 51, Exh. F) (identifying criteria for deaccessioning, none of which include the monetary value of the artwork). ‘The Board also appears to have fallen short in its due diligence as it relates to pieces of art that were acquired by the Museum prior to 1932, when all of the Museum art was subject to a statutory restriction to remain in the town of Pittsfield, The Board at no time considered this resiriction before it voted to deaecession the works and to contract with Sotheby’s to do so, and it did not bring the restriction to the attention of the AGO. Finally, the Board’s actions have resulted in severance of the Museum’s relationship with the Smithsonian Institute, the AAM and MCC, and impaired the Museum’s reputation in the art world. ‘This could result in preventing future loans of art and shared exhibitions with other ‘museums, discourage future donations of art,'* and therefore ireparably harm the Museum’s ° For example, when Christine MeCarthy arrived at PAM in 2001 she still had to mansge donors who were hesitant to donate to PAM because the museum had deaccessioned a piece of rt inthe 1970s to address budgetary needs. (McCarthy Affidavit $8) 22ability continue to meet the art component of its mission. There does not appear to have been reasonable consideration of how the sale would impact the Museum’s future ability fulfill a key component of the Museum’s mission ~ to promote for the people of Berkshire county the study of art by means of collections and museums. While we appreciate the diligence with which the Museum approached its new visioning, ‘we are still concerned about these other circumstances surrounding the Museum's decision to use proceeds from the sale of its 40 preeminent works to fund its New Vision and endowment. We are considering what these identified issues mean in the context of the Board's fiduciary obligations.'? Pursuant to that aspect of our investigation, the Museum produced additional documents on October 24. A TRO or PI halting the sale of the works of art would provide our office with the additional time we need to consider these important issues and what impact they may have on the ability of the Museum to sell the art. IV. The Court Should Issue a TRO or PI to Halt the Sale of the 40 Pieces of Art During the Pendency of the Attorney General’s Investigation and This Litigation. A. The Museum Has Acknowledged That the AGO Haas Standing. ‘There is no question that the AGO has standing in this matter. Ames v. Attorney General, 332 Mass. 246, 250 (1955). Although the AGO typically has exclusive standing in an action to allege the misuse of charitable assets or enforce donor restrictions, certain exceptions may apply where interests are distinot from those of the general public. Maffei v. Roman Catholic Archbishop of Boston, 449 Mass, 235, 245 (2007). For example, a donor or a donor's estate may "qf the museum's acquisitions policies, or the way in which they are carried out by professional staff, are such that they Iead to certain types of deaccessioning, then itis suggested that suich policies and their effectuation do, in fact, constitute a breach of tne museum fiducaries* duty of care.” Paty Gerstenblith, “Acquisition and Deacquisition of| ‘Museum Collections and the Fiduciary Obligations of Museums tothe Public,” 11 Cardozo J. Int'l & Comp. L. 409 2003), 23,have standing to allege a residuary interest based on specific charitable intent. Trustees of Putnam Free School v. Attorney General, 320 Mass. 94, 98 (1946). A member may have standing to enforce a member right to exercise a vote in connection with a charity's affairs. Lopez v. Medford Community Cir., Inc., 384 Mass. 163, 167-70 (1981). Finally, parties to a contract have standing to enforce contractual rights with a charity, Restatement (Second) of ‘Trusts § 403 (1959) Comment (2)(d). ‘Thomas Rockwell, Jarvis Rockwell, Peter Rockwell, Tom Patti, or Tom Patti Design LLC arguably have stronger arguments for standing on particular claims in the Complaint than the other Plaintiffs. Until its investigation is complete, the AGO respectflly defers on whether or not standing requirements are satisfied as to various plaintiffs. B, The AGO Is Entitled to the “Public Interest” Standard for Injunctive Relief. The Supreme Judicial Court set forth the standard to be applied for issuing injunctive relief to enforce the laws of the Commonwealth in Commonwealth v. Mass. CRINC, 392 Mass. 79 (1984), a case involving a preliminary injunction sought by the Attorney General. In CRINC, the Court held that when the AGO seeks a temporary injunction, the Court is to consider “whether there is a likelihood of statutory violations and how such violations affect the public interest.” Id, at 89, “Merely finding a likely statutory violation which adversely affected the public interest,” the Court has stated, “[is] sufficient” basis for ordering injunetive relief, Edwards v. City of Boston, 408 Mass. 643, 647 (1990). The core issue in this matter is whether the proposed sale would violate public charities law, and pursuant to G.L. ¢. 12, § 8, the AGO has undertaken an investigation to review this matter. Further, as explained supra, there is substantial evidence to show that if the Museum were to proceed with the proposed sale it may violate constructive trusts placed on these objects, which result from the 1871 Athenaeum Charter, the circumstances surrounding Rockwell's gifts to the Museum, and the abandonment of the Museum's art purpose. 24These restrictions cannot be unilaterally lifted, and arguably the Museum may not proceed to sell the objects without first demonstrating to the court that is impossible of impracticable for the Museum to continue operations without undertaking the New Vision, C. There Is a Likely Violation of the Law that Justifies the Imposition of a TRO or PI. Given the concems highlighted above, the AGO joins the Plaintiffs’ Motion for Temporary Restraining Order. Evidence received to date suggests that (1) the Museum does not have the authority to sell pieces of art that it acquired prior to 1932; (2) Shufleton’s Barbershop and Shaftsbury Blacksmith Shop are either (a) restricted to remaining in the Muscum’s permanent collection or (b) proceeds from their sale are restricted to benefiting the Museum’s permanent collection; and (3) the Museum may not have the authority to undertake this unprecedented sale and significant change in mission and activity absent court approval to deviate from its purposes." While the AGO has not reached a final position on these questions, ifit concludes that the proposed sale would violate legal restrictions and the Museum persists in pursuing the sale, « thorough presentation of the issues to the court will be required, D. Irreparable Harm Will Result If the Auction Proceeds on November 13, 2017. Finally, there is significant potential for irreparable harm should this sale take place before issues related to the potential restrictions on the 40 works of art are resolved. Specifically, it highly likely that the sale of these pieces of art will be to private purchasers, who are being, courted all over the world, There is a strong likelihood that if these objects are sold there may be xno opportunity to get them back even if the court finds that the Museum did not have the 2® 1 the court finds that charitable trust exists in such a way as to restrict the Muscum’s ability to sel any of the 40 pivees of art andlor apply proceeds to the New Vision or endowment, the Museum would need to seek court “approval should it wish to proceed with its plans. Only a court can modify a charitable trust following a finding that itis impracticable to implement the rust according to its terms. Museum of Fine Aris v. Beland, 432 Mass. 540, $44 (2000), 25authority to sell them in the first place. Further, this auction schedule and the potential harm the Museum argues it may incur if the auction is delayed are problems that were created by the Museum itself, The Museum entered into a contract with a fall auction date without first alerting the AGO of its plans or seeking court approval. ‘There is no indication that the Museum is in immediate financial crisis, and the decision to promote and keep the November auction date was made despite the Museum's knowledge that the Division was still undertaking its review and had already identified potential barriers to the sale. CONCLUSION For the foregoing reasons, the issuance of a TRO or PI will serve the public interest by preserving the status quo and facilitating the AGO’s exercise of its duty to protect charitable assets and investigate the Museum’s plans, especially in light of the important role the Museum, has in Berkshire county and in the state, ‘Therefore, the Commonwealth respectfully requests that this Court allow Plaintiffs’ Motion for Temporary Restraining Order. Respectfully submitted, MAURA HEALEY ATTORNEY GENERAL o» ANAL Couriney M. Aladto (BBO No. 671104) Emily T. Gabrault (BBO No. 682555) Andrew M. Batchelor (BBO No. 673248) Assistant Attomeys General Office of the Attorney General One Ashburton Place Boston, MA 02108 (617) 963-2545 Courtney. Aladro@state-ma.us Emily. Gabrauli@/statema.us Andrew.Batchelor(@state.ma.us Dated: October 30, 2017 26CERTIFICATE OF SERVICE, 1, Courtney M. Aladro, hereby certify that on October 30, 2017, I served a copy of the foregoing by first class mail, postage prepaid: Michael B. Keating Foley Hoag LLP 155 Seaport Boulevard Boston, MA 02210 William F. Lee WilmerHale 60 State Street Boston, MA 02109 Courtney M. Assistant Attorney General 27