Case Study
Summary of Facts and Circumstances
Peter and his wife Catherine started to collect contemporary art in the 1970’s after she was forced to give up her legal career due to an illness. In June 1981 Peter was invited to join the MCA board of trustees. In 1989 Peter was elected the board chairman. He then devoted more time to managing the MCA with the hope that his business acumen could make MCA a more nationally prominent museum. At the start of 1989 Keith Schmidt was hired as MCA’s executive director. One of the first things he did was to set goals for the museum. He wanted it to be the best museum in the Midwest and among top five across the nation in five years. There was constant tension between Peter and Keith. It became visible to others by October in 1991. Peter and Keith were arguing about the direction and speed of MCA’s expansion. In November of 1991, the board decided to vote on whether to go with Smith’s conservative policy, to come with a backup plan in case the MCA’s expansion doesn’t work out, or with Schmidt’s advice to rapidly expand MCA. Even some of the board members were skeptical about the rapid expansion of the MCA they still decided to go with Schmidt’s plan. Smith was upset about the vote and soon after he disappeared with his wife from Chicago area. The board directed a new chairperson. In 1997 Peggy Fisher, the new chairperson, discovered that a $5 million pledge was not honored. They still went ahead with construction of the new building. In late 1997 MCA found itself in a financial crisis because of a high debt loan resulting from constructions, and Smith’s $5 million unfulfilled pledge.
Questions to be Answered
1. What is the legal status of the pledge?
2. What were the terms of the pledge agreement?
3. Will MCA seek to enforce the pledge?
4. If MCA does not seek to enforce the pledge, have the trustees breached their duties?
5. Will it scare off...
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