Like many Washingtonians, I’m distraught about what’s happened to the Kennedy Center. It’s the cultural heart of the District, and it’s being destroyed by gross mismanagement that threatens not only the Kennedy Center itself, but also the incredible National Symphony Orchestra (with the Washington National Opera already having cut ties). But maybe there’s a solution: a receivership.
The Kennedy Center is a enormous operation with a huge physical plant–the main building plus the recently constructed Reach annex contain three large concert theaters, three smaller ones, a number of flexible stages, restaurants and staff cafeterias, tons of rehearsal rooms and backstage spaces, administrative offices, and a giant parking garage. It also has an impressive art collection. It previously housed both the National Symphony Orchestra (which it financially guaranties) and the Washington National Opera, and ran a combined fundraising operation for them. While it hosts some national-level events, like the Kennedy Center Honors, it is also very much a DC performing arts venue.
The Kennedy Center Board of Trustees is chaired by the President and contains a mix of Presidential nominees and members designated by an act of Congress. After President Trump’s reelection, he appointed Richard Grennell, the former ambassador to Germany, to serve as the impresario to run the Kennedy Center. Grennell fired or pushed out most of the fundraising staff (and lots of other program staff), which resulted in a loss of donor relations and a drop in fundraising and after the lickspittle Board of Trustees voted to rename the center as the Trump-Kennedy Center, both ticket sales and donations fell precipitously.
Now, we hear that the Kennedy Center is on the brink of bankruptcy and facing “certain financial collapse,” and that the only way to avert it is to inscribe the President’s name on the building, for only such an act will unleash the Presidentially associated largess. Apparently the Chairman of the Board of Trustees won’t act unless he’s duly recognized for his heroic contributions.
The bankruptcy claim is probably a bit misleading, but it does tee up a more interesting possibility, namely receivership. To understand what’s possible, it helps to understand what the Kennedy Center is legally. Frankly, I’m not sure I or anyone else does; the Kennedy Center is legally a very odd duck. It is a “Bureau” in the Smithsonian Institute, whatever that means. It operates with its own board of trustees and has no budgetary connection to the Smithsonian. The Smithsonian in turn is itself an odd duck. It is a “trust instrumentality” of the U.S. government that pre-dates the categories of the modern administrative state. It doesn’t exercise any executive or judicial authority, but it gets federal appropriations and is considered a federal agency for some limited purposes (e.g., tort claims and certain aspects of property management); it’s both part of and separate from the federal government.
However we categorize the Kennedy Center legally, bankruptcy is unlikely to be in its future. Generally, one needs to be a “person” to file for bankruptcy, and “person” is defined by the Bankruptcy Code as excluding governmental units. (Chapter 9 bankruptcy eligibility is keyed to “entity,” which is defined as including governmental units, but Chapter 9 is limited to municipalities, a term that includes subdivisions of states and the District of Columbia, but not the federal government.) It’s not entirely clear what the Kennedy Center is, but it seems unlikely that would be eligible to file for bankruptcy, even if it wanted to do so (and the current board would never authorize such a filing).
That doesn’t end the story, however. Bankruptcy is only one method of dealing with financial distress. Federal law provides another route: receivership. The Federal Rules of Civil Procedure allow federal district courts to appoint receivers. A receiver is an independent party who takes over the management of the assets of the party under receivership. The point of a receivership is to preserve the assets, stabilize operations, provide transparency, and formulate some sort of exit strategy. Receivers get appointed under a lot of different circumstances ranging from fraud to ownership deadlocks, but the overriding goal is to preserve the value of the assets placed in receivership. The precise powers of a receiver depend on the court order appointing the receiver; it’s a much more ad hoc remedy than bankruptcy. That means it is extremely flexible, but also less predictable. Critically, however, a receiver effectively replaces the management of the firm placed in receivership–they might still keep their titles, etc., but all decision-making power shifts to the receiver.
Unlike bankruptcy, which is generally voluntary, receiverships require someone to petition the court for appointment of a receiver, and the issue of whether a receiver should be appointed then gets litigated. Unlike with bankruptcy, however, there is no statutory eligibility requirement for a receivership. There would still be questions about whether the Kennedy Center is too much of a federal government entity for a court to appoint a receiver for it—a court couldn’t appoint a receiver for the Departments of Defense or Health and Human Services, but given that the Kennedy Center exercises no executive, legislative, or judicial power, but is basically just some assets held in memorial trust for President Kennedy, a receivership seems entirely appropriate and not a violation of the separation of powers.
A receiver could (1) ascertain the true financial condition of the Kennedy Center, (2) take over operational control and revive its fundraising operations and create clarity about when and whether it will be open so that organizations like the National Symphony, which needs to plan its rehearsals and concert season substantially in advance, can plan accordingly, (3) handle any repairs that need to be made without resorting to begging for Presidential favors. All of this suggests to me that a federal equity receivership might be the best course forward for preserving the Kennedy Center and saving it from a feckless board that has committed shameful mismanagement of a national treasure.