Residents of two Kansas University scholarship halls who are suing over the use of their trust fund have scored a victory in court.
Douglas County District Court Judge Jack Murphy on Friday ruled that KU and Bank of America, which administers the trust left by Elizabeth Miller Watkins, have been mishandling money in the trust fund.
David Brown, the Lawrence attorney who is representing 26 current and former residents of Miller and Watkins women's scholarship halls, called the ruling "a phenomenal victory for the students."
"That is really the foundation of the entire case," Brown said. "If he ruled what the university and Bank of America were doing was OK, the rest of my lawsuit would have crumbled. What he said was, 'Students, you're right, the fund was mismanaged.'"
The residents filed suit in March 2001, saying interest on Watkins' trust should have been spent on maintenance at the halls or returned to the principal. Instead, they said it was being transferred to an account at the KU Endowment Association and held over from year to year.
That account, Brown said, had about $1 million in it when the suit was filed. He said the trust earned about $75,000 in interest annually.
Bank and university officials said they were accumulating income from multiple years to fund major renovations. But Murphy's ruling said transferring all the money to the Endowment Association violated Watkins' wishes.
"Once the funds are paid over to the university and then delivered to KUEA, the trustee bank has no control over their expenditure, nor the ability to control their use for the maintenance, upkeep and operation on the halls," Murphy wrote.
His ruling means the university will have to provide the bank with documentation of costs and needed repairs each year, and then the bank will decide whether to approve funding and issue a check, Brown said.
Lynn Bretz, KU's director of university relations, declined to comment on the ruling Saturday.
"It would be inappropriate for us to comment without first reviewing the documents," she said.
Eric Zahnd, the attorney representing Bank of America, couldn't be reached for comment Saturday.
The suit asks the bank to repay "more than $75,000" to the trust fund. It alleges breach of duty, fraud and conversion the rough equivalent of theft but Brown said, "Those issues are not as important to us as simply seeing that the trust is managed properly from now on."
A trial is set for this summer, though Brown said he hoped the decision would prompt settlement talks between the two sides.
"We have tried a number of times to settle this case, and the university and Bank of America have essentially said no dice," he said.
Olga Ramm, one of the original petitioners and now a first-year medical student at KU School of Medicine, said the ruling substantiated the women's belief that the university and the bank were blatantly disregarding the will of Elizabeth Miller Watkins.
"As long as the bank was taking to get to the trial itself, and with all the stalling tactics that it seemed to me they were using, I was kind of getting pessimistic about the whole legal process," she said. "It seemed like whoever had the most money was going to win. It's just nice to see that that's not the case."