Princeton University is fighting to keep an endowment worth more than $500 million (£300 million) after the donor demanded it be returned to his family's foundation.
William Robertson, heir to a supermarket fortune, says that the university has not done enough to encourage students to go into public service.
This was the original aim of Princeton's Woodrow Wilson School of Public and International Affairs, which has benefited to the tune of $550 million from Mr Robertson's family foundation.
Princeton says it never made the donor any promises, and that the university alone, not benefactors, controls educational policy.
This is not the first time that an unhappy donor has asked a university for their money back.
Actress Jane Fonda gave Harvard University $12.5 million for a new gender studies centre, then demanded it be returned when the university moved too slowly.
In 1995, Yale University returned $2 million to billionaire Lee Bass when he demanded a say in selecting faculty for a proposed western civilisation programme.
The latest dispute has been ordered into mediation before a retired justice of the Supreme Court of New Jersey, where Princeton is located.
Negotiations will begin next month.
The foundation has given $200 million to the school since 1961. The money has been placed in an endowment that is now worth $550 million, the largest of any graduate school of public administration in the US. It pays for student tuition, faculty salaries and the building that houses the school.
Mr Robertson, who attended Princeton, says his pleas for the school to send more students into public service in line with its mission have been ignored. The university states that over the past five years, between 37 and 55 per cent of its graduates who entered the job market went into government service or worked for international organisations. Mr Robertson says that these numbers are exaggerated.
The school insists that public service is no longer considered the noble calling that it was when the family began its financial support, during the Kennedy era. Harvard's John F. Kennedy School of Government, among other similar graduate programme, has also been criticised - in its case, by its own dean - for sending too few students on to government jobs.
But Princeton prefers to dwell on the legal agreement between the university and the Robertson Foundation, under which three of the four trustees are appointed by the university.
Douglas Eakeley, the university's attorney, said Princeton "would have much preferred that family members' concerns be addressed and resolved within the foundation board, not tried in the courts or in the press".
He said Mr Robertson had been unfair to make his attack when president Shirley Tilghman had just completed her first year and Anne-Marie Slaughter was just beginning her job as dean of the Wilson School. He added that the university should be given a chance to live up to Mr Robertson's goals.