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In Re Milton Hershey School Trust

Commonwealth Court of Pennsylvania
807 A.2d 324 (2002)
ELI5:

Rule of Law:

An appellate court will affirm a trial court's grant of a preliminary injunction if there were any apparently reasonable grounds for the trial court's action, and will reverse only if no such grounds exist.


Facts:

  • In 1909, Milton and Catherine Hershey established a trust to endow the Milton Hershey School for orphans.
  • In 1918, Milton Hershey gifted the trust his controlling shares of stock in the Hershey Chocolate Company, now Hershey Foods Corporation.
  • The Hershey Trust Company has served as the trustee for the School Trust, and the trust's corpus has consisted primarily of the controlling interest in Hershey Foods since 1918.
  • The Trust has historically generated more than enough income to perpetually operate the School.
  • The Board of Managers of the Milton Hershey School and the Hershey Trust Company proposed to sell the trust's controlling interest in Hershey Foods Corporation, representing 77% of the voting power.
  • The stated purpose for the proposed sale was to diversify the trust's portfolio of assets.
  • The proposal raised concerns about adverse economic and social impacts on the community of Hershey, Pennsylvania, including potential workforce reductions and plant relocations.

Procedural Posture:

  • The Pennsylvania Attorney General filed a Petition for Citation in the Dauphin County Orphan's Court, a court of first instance, seeking to condition any sale of Hershey Foods by the Hershey Trust on court approval.
  • The Attorney General then filed a petition in the same court for a special preliminary injunction to prohibit the Trust from committing to a sale while the citation was pending.
  • After a hearing, the Orphan's Court granted the Attorney General's petition for a special injunction.
  • The Hershey Trust Company and Milton Hershey School (the Trust), as respondents, appealed the grant of the injunction to the Commonwealth Court of Pennsylvania, an intermediate appellate court.
  • The Trust, as appellant, filed an emergency application with the Commonwealth Court for an expedited ruling on the merits of the appeal against the Attorney General, the appellee.

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Issue:

Did the Orphan's Court have any reasonable grounds to grant a preliminary injunction prohibiting the Hershey Trust from committing to a sale of its controlling interest in Hershey Foods Corporation pending a full hearing on the matter?


Opinions:

Majority - President Judge Colins

Yes. The Orphan's Court had reasonable grounds to grant the preliminary injunction because it was necessary to preserve the status quo and prevent irreparable harm pending a resolution of substantial legal questions. The appellate court's review is limited to determining whether the trial court had 'any reasonable grounds' for its action. Here, the lower court reasonably concluded that a consummated sale of Hershey Foods would be irreversible, constituting irreparable harm. The Attorney General, acting under his parens patriae power, raised substantial questions regarding the trustees' potential abuse of discretion and the sale's impact on the public interest. Given these factors, and weighing the greater injury that would result from refusing the injunction, the trial court had apparently reasonable grounds to grant the temporary relief to allow for a full adjudication on the merits.


Dissenting - Judge Pellegrini

No. The Orphan's Court did not have reasonable grounds because it committed an error of law by allowing the Attorney General to intervene before the trustees had made a final decision. The appellate scope of review includes correcting errors of law. The Attorney General's parens patriae powers do not grant him the authority to act as a co-trustee or become involved in the internal decision-making process of a charitable trust. Pennsylvania's Probate, Estate, and Fiduciaries Code limits a court's authority to restrain a sale that is permitted by the trust instrument. The Attorney General can only challenge a finalized agreement that violates the terms of the trust; he cannot preemptively block the trustees from exploring their options or negotiating a potential deal.



Analysis:

This decision reinforces the highly deferential standard of appellate review for preliminary injunctions, making them difficult to overturn. It also significantly affirms the broad scope of the Attorney General's parens patriae power to protect the public interest in matters concerning charitable trusts. The ruling suggests that courts may consider the wider socio-economic impact of a trust's administrative decisions, not merely the financial benefit to its direct beneficiaries. This precedent emboldens state attorneys general to scrutinize major actions by large charitable foundations, particularly those with a substantial economic footprint in a specific community.

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