TALLAHASSEE — After years of legal wrangling, the state Supreme Court on Thursday backed Florida Atlantic University in a dispute about approving board members and controlling the budget of an affiliated foundation.
The dispute involved the university, the Harbor Branch Oceanographic Institute Foundation, a 2018 state law and a state-university system regulation. Harbor Branch is a research institute, and the foundation is what is known as a “direct support organization” of the university.
In 2007, the foundation reached a memorandum of understanding, a type of contract, to become an FAU direct-support organization, according to Thursday’s opinion. The agreement said the foundation’s board of directors would have two members appointed by FAU and that foundation “distributions” of money would be made at the discretion of the board.
But in 2009, the state university system’s Board of Governors changed a regulation to require that direct-support organization budgets get approval from university boards of trustees. In 2017, FAU moved to take control of the foundation’s budget, the opinion said. Also, it did away with the foundation’s CEO, replacing the position with the university’s vice president for research.
The foundation filed a lawsuit contending that the university could not impose a budget on the organization. While that lawsuit was pending, the Legislature in 2018 passed a law that required university boards of trustees to approve appointments to the boards of direct-support organizations, the opinion, written by Justice John Couriel, said.
In 2019, FAU sought a judgment on the budget dispute and a declaration that the state law required the foundation to get approval from the university for board appointees.
The foundation argued, at least in part, that application of the state regulation and the law violated terms of its memorandum of understanding with the university — an argument centered on a constitutional prohibition against “impairment of contracts.”
A circuit judge and the 4th District Court of Appeal agreed with the foundation on the board-appointment issue but with the university on the budget issue.
But the Supreme Court sided with the university on both issues, with a main opinion saying contractual rights had not been violated. As an example, the opinion said the memorandum of understanding did not address the issue of approving foundation board members — only the issue of FAU being able to appoint two board members.
“No other provision of the MOU (the memorandum of understanding) discusses board appointments, composition or membership,” Couriel wrote. “From its face then, the MOU only discusses FAU’s appointment of two directors. It says nothing about the extent of any party’s discretion in making appointments, or whether the parties had an agreement as to the subsequent approval of board members. … Approval and appointment are distinct.”
Couriel was joined in the main opinion by Justices Jorge Labarga, Jamie Grosshans, Renatha Francis and Meredith Sasso.
Chief Justice Carlos Muniz, in a concurring opinion joined by Justice Charles Canady, wrote that he was “not as sure as the majority that, under our court’s precedent, the act (the state law) and the regulation did not impair the contract between the foundation and the university.”
But he pointed to the role that the foundation plays as a direct-support organization to the university.
“At the time it agreed to become a DSO (direct support organization), the foundation could not have reasonably expected that its arrangement with the university would trump subsequent changes to laws and regulations governing the relationship between universities and DSOs generally,” Muniz wrote. “The foundation signed up to become an entity whose animating purpose (as a DSO) would be to hold and spend money exclusively for the benefit of its sponsoring school.”
