Bronner v. Duggan ( 2019 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
SIMON BRONNER, et al., :
:
Plaintiffs, : Civil Action No.: 16-0740 (RC)
:
v. : Re Document Nos.: 35, 40, 106, 107,
: 108, 109, 110, 111
LISA DUGGAN, et al., :
:
Defendants. :
MEMORANDUM OPINION
GRANTING DEFENDANTS’ MOTIONS TO DISMISS; DENYING DEFENDANTS’ MOTIONS TO STAY
I. INTRODUCTION
This diversity action concerns a controversial topic in American academia: The
movement to boycott Israeli academic institutions. Plaintiffs are current and former members of
the American Studies Association (“ASA”), a nonprofit, charitable corporation dedicated to
promoting the study of American culture. They have sued ASA and several of its current and
former leaders, 1 alleging that Defendants coopted an apolitical educational organization and,
against its members’ wishes, turned that organization into a mouthpiece of the Israel boycott
movement. More specifically, Plaintiffs contend that Defendants acted unlawfully in securing
the membership vote authorizing ASA to endorse the boycott, and that Defendants unlawfully
expended ASA funds supporting the boycott. They seek damages, declaratory relief, and
injunctive relief, some of that relief on behalf of ASA itself.
1
The Individual Defendants are Lisa Duggan, Curtis Marez, Avery Gordon, Neferti
Tadiar, Sunaina Maira, Chandan Reddy, Jasbir Puar, J. Kehaulani Kauanui, Steven Salaita, and
John Stephens.
Currently before the Court are Defendants’ motions to dismiss the action, along with
other miscellaneous motions. Having reviewed the briefing, the Court concludes that Plaintiffs
may have meritorious claims arising from their individual injuries as ASA members. However,
the Court also concludes that Plaintiffs cannot seek relief for ASA’s injuries, because ASA is not
a plaintiff and Plaintiffs do not and cannot assert derivative claims on its behalf. Without that
relief, Plaintiffs cannot meet the amount-in-controversy necessary to pursue their action in
federal court. Accordingly, and for the reasons stated below, the Court will grant Defendants’
motion to dismiss without prejudice.
II. BACKGROUND 2
A. ASA
ASA is a nonprofit organization in service of “the promotion of the study of American
culture through the encouragement of research, teaching, publication, the strengthening of
relations among persons and institutions in this country and abroad devoted to such studies, and
the broadening of knowledge among the general public about American culture in all its diversity
and complexity.” See ASA Const. & Bylaws, Art. I § 2, ECF No. 21-3. ASA’s founding
documents provide that it was “organized exclusively for education and academic purposes.”
Pls.’ Sec. Am. Compl. (“SAC”) ¶ 30, ECF No. 81. Its Statement of Election further states that
“[n]o substantial part of [its] activities . . . shall be the carrying on of propaganda, or otherwise
attempting, to influence legislation . . . .” ASA Statement of Election ¶ 3(4), ECF No. 21-5. Its
priorities and general direction are dictated by its “National Council”; essentially its board of
2
Three prior Memorandum Opinions in this action contain additional details regarding
ASA, the resolution at issue, and this case’s procedural history. See Bronner v. Duggan
(“Bronner III”), 317 F. Supp. 3d 284 (D.D.C. 2018); Bronner v. Duggan (“Bronner II”), 324
F.R.D. 285 (D.D.C. 2018); Bronner v. Duggan (“Bronner I”), 249 F. Supp. 3d 27 (D.D.C.
2017).
2
directors. Officially, the National Council is charged with “conduct[ing] the business, set[ting]
fiscal policy, and oversee[ing] the general interests of the [ASA].” ASA Const. & Bylaws, Art.
V § 2.
ASA was incorporated in the District of Columbia as a private, nonprofit corporation
governed by District of Columbia law. SAC ¶ 17. Moreover, the Internal Revenue Service has
designated ASA as a tax-exempt, charitable organization under the Internal Revenue Code, 26
U.S.C. § 501(c)(3). Id. Because ASA is exempt from taxation under § 501(c)(3), it is
considered to be a “charitable corporation” under the District of Columbia statutory framework
governing nonprofit corporations. D.C. Code § 29-401.02(3), (4).
B. ASA’s Boycott Resolution
Plaintiffs contend that beginning in 2012, the Individual Defendants launched a scheme
to co-opt ASA’s National Council and key ASA committees, with the purpose of causing ASA to
officially endorse a boycott of Israeli academic institutions (the “Resolution”). See SAC ¶¶ 45,
47–77. First, the Individual Defendants allegedly caused only boycott supporters to be
nominated for National Council elections—without disclosing their boycott support to ASA’s
general membership—to “pack” the National Council. See id. ¶¶ 53–54. Next, having secured
the necessary decision-making power, the Individual Defendants made the Resolution’s passage
a priority for 2013. See id. ¶¶ 87–89. In furtherance of that goal, the Individual Defendants
allegedly expended ASA resources and manpower promoting the boycott to ASA’s general
membership. See id. ¶¶ 82–101. According to Plaintiffs, the Individual Defendants also
suppressed dissenting opinions and information unfavorable to the boycott, preventing such
materials from being widely distributed to the membership. See id. ¶¶ 105–116. Then, around
the time that ASA announced that a membership vote would be held on the Resolution, the
3
Individual Defendants allegedly froze ASA’s membership rolls to prevent individuals adverse to
the Resolution from paying their dues and voting against it. See id. ¶¶ 123–26. Finally, ASA
allegedly conducted the Resolution vote in a manner violating ASA’s bylaws and District of
Columbia law. See id. ¶¶ 138–41. The Resolution passed. Id. ¶ 139.
Plaintiffs contend that once the Resolution passed, the Individual Defendants improperly
diverted ASA’s resources to defending and promoting it. For instance, they claim that the
Individual Defendants “invade[d]” ASA’s Trust and Development fund to pay for Resolution-
related insurance, public relations and legal fees. See id. ¶¶ 162–171, 182–91. They also claim
that ASA’s revenues from donations and membership dues dropped precipitously after the
Resolution, because the Resolution offended current and potential contributors and members.
See id. ¶¶ 172–81. And they claim that to offset Resolution-related expenses, ASA raised
membership dues from, at most, $120 to $275. See id. ¶ 185.
Plaintiffs assert several common law claims arising from the Individual Defendants’
alleged scheme. 3 They claim that the Individual Defendants breached their fiduciary duties to
ASA and its membership by (1) misrepresenting their intentions to the membership and failing to
disclose the Resolution’s costs; and (2) misappropriating ASA resources and manipulating
ASA’s voting processes for their own interests, at ASA’s expense. Id. ¶¶ 192–97. They claim
that Defendants acted ultra vires and breached their contract with ASA’s members by (1) failing
to nominate diverse candidates for National Council elections; (2) freezing ASA’s membership
rolls so that certain members, including Plaintiff Michael Barton, could not vote on the
3
To the extent the Court considers the merits of these claims, it must apply District of
Columbia law. See A.I. Trade Fin. Inc. v. Petra Int’l Banking Corp., 62 F.3d 1454, 1458 (D.C.
Cir. 1995) (“A federal court sitting in diversity must apply state law to the substantive issues
before it.” (citing Erie Railroad Co. v. Tompkins, 304 U.S. 64, 78 (1938))).
4
Resolution; (3) improperly conducting and certifying the Resolution vote; and (4) devoting a
“substantial part” of ASA’s activities to attempting to influence United States and Israeli
legislation, all in violation of ASA’s bylaws, ASA’s constitution, and potentially District of
Columbia law. Id. ¶¶ 198–240. Finally, they claim that Defendants engaged in corporate waste
by devoting ASA resources to supporting the Resolution. Id. ¶¶ 241–44. Plaintiffs seek
damages, declaratory relief, and injunctive relief. Id. at 82.
C. Relevant Procedural History
Plaintiffs filed suit in April 2016, see Compl., ECF No. 1, and amended their complaint
for the first time in June 2016, see First Am. Compl. (“FAC”), ECF No. 19. That complaint
asserted both direct claims based on Plaintiffs’ individual injuries and derivative claims on
behalf of ASA. See generally id. It also asserted—as does Plaintiffs’ Second Amended
Complaint—that the Court has subject matter jurisdiction under 28 U.S.C. § 1332(a). FAC ¶ 9;
SAC ¶ 11.
Shortly after Plaintiffs amended their complaint, Defendants first moved to dismiss the
action. 4 They argued in part that (1) the Court lacked subject matter jurisdiction because
Plaintiffs failed to satisfy the $75,000 amount-in-controversy required to maintain a diversity suit
under 28 U.S.C. § 1332(a); and (2) Plaintiffs failed to meet the statutory requirements for
bringing a derivative action. See Bronner I, 249 F. Supp. 3d at 36. Reviewing the complaint for
the first time, the Court concluded that it was not legally impossible for Plaintiffs to receive a
judgment of at least $75,000, and thus that the amount-in-controversy requirement was satisfied.
4
At this stage of the litigation, Defendants were ASA, Curtis Marez, Avery Gordon,
Neferti Tadiar, Sunaina Maira, Lisa Duggan, and Chandan Reddy (the “Original Defendants”).
FAC ¶¶ 15–21. Defendants J. Kehaulani Kauanui, Jasbir Puar, Steven Salaita, and John
Stephens were added in Plaintiffs’ Second Amended Complaint. SAC ¶¶ 24–26.
5
Id. at 38. The Court also concluded, however, that Plaintiffs failed to satisfy the District of
Columbia’s procedural requirements for bringing a derivative action on ASA’s behalf. Id. at 43
(citing D.C. Code § 29-411.03(2)). The Court thus dismissed Plaintiffs’ derivative claims. Id. at
47.
In November 2017, Plaintiffs moved for leave to amend their complaint for a second
time. See generally Pls.’ Mot. Leave File Sec. Am. Compl., ECF No. 59. The Court granted this
motion but sought supplemental briefing from the parties regarding whether the District of
Columbia Nonprofit Corporations Act immunized the Individual Defendants from money
damages. Bronner II, 324 F.R.D. at 294–95. The Court recognized that Plaintiffs’ inability to
collect money damages from the Individual Defendants would raise serious doubts regarding the
Court’s jurisdiction under 28 U.S.C. § 1332(a). Id. at 294.
The Court considered the parties’ supplemental briefing and held that it could not
conclude, at the pleadings stage, that District of Columbia law immunized the Individual
Defendants from money damages. Bronner III, 317 F. Supp. 3d at 293–94. The Court declined,
however, to address whether Plaintiffs’ Second Amended Complaint otherwise satisfied 28
U.S.C. § 1332(a)’s amount-in-controversy requirement. See id. at 289 n.2, 290 n.5. Instead, it
encouraged Defendants to submit a “well-fashioned motion to dismiss” raising that question. Id.
at 290 n.5.
That motion to dismiss has now been submitted. See Original Defs.’ Mot. to Dismiss,
ECF No. 106; Def. Steven Salaita’s Mot. to Dismiss, ECF No. 108; Defs. J. Kehaulani Kauanui’s
& Jasbir Puar’s Mot. to Dismiss, ECF No. 109. Defendants argue that Plaintiffs’ action should
be dismissed in its entirety under Federal Rule of Civil Procedure 12(b)(1) for lack of subject
matter jurisdiction, see Original Defs.’ Mot. at 1, and in the alternative that certain of Plaintiffs’
6
claims should be dismissed under Federal Rule of Civil Procedure 12(b)(6), see id. at 14, 21–22.
Defendants have also asked the Court to stay discovery pending its consideration of their
motions to dismiss. See Original Defs.’ Mot. to Stay, ECF No. 107; Def. Steven Salaita’s Mot.
to Stay, ECF No. 110; Defs. J. Kehaulani Kauanui’s & Jasbir Puar’s Mot. to Stay, ECF No. 111. 5
Briefing on these motions has concluded, and they are ripe for the Court’s consideration.
III. LEGAL STANDARDS
A. Federal Rule of Civil Procedure 12(b)(1)
A Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction “presents a
threshold challenge to the Court’s jurisdiction . . . .” Curran v. Holder, 626 F. Supp. 2d 30, 32
(D.D.C. 2009) (quoting Agrocomplect, AD v. Republic of Iraq, 524 F. Supp. 2d 16, 21 (D.D.C.
2007)). In evaluating this challenge, a court must “presume[] that a cause lies outside [the
federal courts’] limited jurisdiction” and place “the burden of establishing the contrary . . . upon
the party asserting jurisdiction.” Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377
(1994) (citing McNutt v. Gen. Motors Acceptance Corp., 298 U.S. 178, 182–83 (1936); Turner v.
Bank of N.A., 4 U.S. 8, 11 (1799)). The court must also accept “the allegations of the complaint
as true,” Banneker Ventures, LLC v. Graham, 798 F.3d 1119, 1129 (D.C. Cir. 2015), and
“construe the complaint ‘liberally,’ granting the plaintiff ‘the benefit of all inferences that can be
derived from the facts alleged,’” Barr v. Clinton, 370 F.3d 1196, 1199 (D.C. Cir. 2004) (quoting
Kowal v. MCI Commc’ns. Corp., 16 F.3d 1271, 1276 (D.C. Cir.1994)). However, “‘the
[p]laintiff’s factual allegations in the complaint . . . will bear closer scrutiny in resolving a
12(b)(1) motion’ than in resolving a 12(b)(6) motion for failure to state a claim.” Grand Lodge
5
Also pending are Defendants’ previously-filed Motion for Partial Judgment on the
Pleadings, ECF No. 35, and Plaintiffs’ motion for leave to file a sur-reply to that motion, ECF
No. 40.
7
of Fraternal Order of Police v. Ashcroft, 185 F. Supp. 2d 9, 13–14 (D.D.C. 2001) (alterations in
original) (quoting 5A Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure §
1350 (2d ed. 1987)).
B. Federal Rule of Civil Procedure 12(b)(6)
To survive a Rule 12(b)(6) motion to dismiss for failure to state a claim, a complaint
must contain sufficient factual allegations that, if accepted as true, would state a plausible claim
to relief. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “Threadbare recitals of the elements of a
cause of action, supported by mere conclusory statements, do not suffice.” Id. Instead, plaintiffs
must “nudge[] their claims across the line from conceivable to plausible.” See Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007). The Court “may consider ‘the facts alleged in the
complaint, documents attached as exhibits or incorporated by reference in the complaint,’ or
‘documents upon which the plaintiff’s complaint necessarily relies even if the document is
produced not by [the parties].’” Busby v. Capital One, N.A., 932 F. Supp. 2d 114, 133–34
(D.D.C. 2013) (alteration in original) (quoting Ward v. D.C. Dep’t of Youth Rehab. Servs., 768 F.
Supp. 2d 117, 119 (D.D.C. 2011)).
IV. ANALYSIS
As noted, Plaintiffs contend that this Court has subject matter jurisdiction under 28
U.S.C. § 1332(a). SAC ¶ 11. That statute provides that “district courts shall have original
jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of
$75,000, exclusive of interest and costs, and is between,” among others, “citizens of different
states.” 28 U.S.C. § 1332(a). Defendants argue that the Court’s previous holdings have made it
legally impossible for Plaintiffs’ claims to exceed the $75,000 amount-in-controversy required to
8
maintain this action under § 1332(a). 6 More specifically, Defendants argue that Plaintiffs cannot
seek remedies arising from injuries to ASA, and that in the absence of those remedies the
damages, declaratory relief, and injunctive relief that Plaintiffs seek cannot be valued at greater
than $75,000. See Original Defs.’ Mot. at 1. Defendants thus move to dismiss the action in its
entirety for lack of jurisdiction. See id.
Federal courts are courts of limited jurisdiction. “They possess only that power
authorized by Constitution and statute.” Kokkonen, 511 U.S. at 377. Therefore, Congress has
the “prerogative to restrict the subject-matter jurisdiction of federal district courts” based on the
types of claims brought by particular plaintiffs. Arbaugh v. Y & H Corp., 546 U.S. 500, 515 n.11
(2006). Under this prerogative, Congress authorized federal district courts to hear cases meeting
the amount-in-controversy and diversity requirements established by 28 U.S.C. § 1332(a).
In determining whether an action meets § 1332(a)’s jurisdictional requirements, “the sum
claimed by the plaintiff controls if the claim is apparently made in good faith.” St. Paul Mercury
Indem. Co. v. Red Cab Co., 303 U.S. 283, 288 (1938) (citations omitted). Thus, for the Court to
dismiss Plaintiffs’ action for failure to satisfy § 1332(a)’s requirements, “[i]t must appear to a
legal certainty that [Plaintiffs’] claim[s] [are] really for less than the jurisdictional amount.” Id.
at 289. This means that the Court should find jurisdiction at this motion-to-dismiss stage even if
it has serious doubts as to the bases for establishing the amount-in-controversy. See Compton v.
Alpha Kappa Alpha Sorority, Inc., 64 F. Supp. 3d 1, 14–15 (D.D.C. 2014) (concluding that it
was not a “legal certainty” that the plaintiffs could not collect more than $75,000, though their
“allegations [left] much to be desired”), aff’d, 639 F. App’x 3 (D.C. Cir. 2016). That said
“[w]hile the ‘legal certainty’ test is an exacting one, the burden of establishing the amount in
6
Defendants do not contest diversity of citizenship.
9
controversy . . . rests squarely with the litigant asserting jurisdiction.” Martin v. Gibson, 723
F.2d 989, 991 (D.C. Cir. 1983) (quoting King v. Morton, 520 F.2d 1140, 1145 (D.C. Cir. 1975)).
Plaintiffs seek three categories of relief. First, Plaintiffs continue to seek damages on
behalf of ASA. SAC at 82. Second, without explicitly stating so, Plaintiffs appear to seek
damages arising from their own injuries. Id. ¶ 206. Third, Plaintiffs seek declaratory and
injunctive relief. Id. at 82.
Plaintiffs assert that these requests for relief “clearly satisf[y] the $75,000 requirement.”
Pls.’ Opp’n to Original Defs.’ Mot. (“Pls.’ Opp’n”) at 37, ECF No. 114. They also protest that
this Court has already thrice concluded that it has subject matter jurisdiction over this action. Id.
at 1–2. That second point is, however, of little significance because the Court has an “ongoing
obligation to ensure that ‘it is acting within the scope of its jurisdictional authority.’” Hardy v.
N. Leasing Sys., Inc., 953 F. Supp. 2d 150, 155 (D.D.C. 2013) (quoting Ha v. U.S. Dep’t of
Educ., 680 F. Supp. 2d 45, 46 (D.D.C. 2010)); see also Henderson ex rel. Henderson v. Shinseki,
562 U.S. 428, 434 (2011) (“[F]ederal courts have an independent obligation to ensure that they
do not exceed the scope of their jurisdiction, and therefore they must raise and decide
jurisdictional questions that the parties either overlook or elect not to press.”). The Court shall
thus revisit its subject matter jurisdiction yet again.
As Plaintiffs note, the parties and the Court have danced around the key issue—Plaintiffs’
ability to satisfy the amount-in-controversy required by § 1332(a)—for multiple rounds of
briefing and opinions. See Bronner III, 317 F. Supp. 3d at 289; Bronner I, 249 F. Supp. 3d at
37–38. The waltz has now reached its crescendo, and Plaintiffs have been found wanting. As
explained below, having evaluated the parties’ arguments, the Court concludes that Plaintiffs
lack standing to seek damages arising from ASA’s alleged injuries. Although Plaintiffs may
10
seek damages arising from injuries they suffered directly, those damages do not approach
$75,000. And Plaintiffs have failed to demonstrate that the value of the injunctive and
declaratory relief they seek, combined with those damages, exceeds $75,000. Thus, because it
appears to a legal certainty that Plaintiffs cannot meet 28 U.S.C. § 1332(a)’s requirements if they
prevail, the Court must dismiss this action without prejudice for lack of subject matter
jurisdiction.
A. Plaintiffs May Not Seek Damages for ASA’s Injuries
The parties’ briefing raises a simple but crucial question: May Plaintiffs collect damages
for ASA’s injuries without bringing a derivative action? Basic constitutional, prudential, and
state law concerns dictate that the answer is no.
The Constitution empowers the federal judiciary to adjudicate only cases or
controversies. U.S. Const. art. III, § 2, cl. 1. The doctrine of Article III standing, which requires
a plaintiff to allege that the defendant injured the plaintiff in a judicially redressable manner,
enforces this limitation. Summers v. Earth Island Inst., 555 U.S. 488, 492 (2009). To have
Article III standing, the plaintiff “must have suffered or be imminently threatened with a
concrete and particularized ‘injury in fact’ that is fairly traceable to the challenged action of the
defendant and likely to be redressed by a favorable judicial decision.” Lexmark Int’l, Inc. v.
Static Control Components, Inc., 572 U.S. 118, 125 (2014) (citing Lujan v. Defs. of Wildlife, 504
U.S. 555, 560 (1992)).
Arising from this basic principle is the well-established rule that “plaintiffs must
demonstrate Article III standing by asserting their ‘own legal rights and interests’ rather than
resting ‘claim[s] to relief on the legal rights or interests of third parties.’” Helmerich & Payne
Int’l Drilling Co. v. Bolivarian Republic of Venez., 784 F.3d 804, 814 (D.C. Cir. 2015) (quoting
11
Warth v. Seldin, 422 U.S. 490, 499 (1975)), vacated and remanded on other grounds, 137 S. Ct.
1312 (2017); see also Kowalski v. Tesmer, 543 U.S. 125, 129 (2004). This principle—labeled
“third-party standing”—helps ensure that plaintiffs have “the appropriate incentive” to litigate,
and that they assert their claims “with the necessary zeal and appropriate presentation.” Id. at
129. 7 It may be relaxed only where “the party asserting the right has a ‘close’ relationship with
the person who possesses the right” and “there is a ‘hindrance’ to the possessor’s ability to
protect his own interests.” Id. at 130 (quoting Powers v. Ohio, 499 U.S. 400, 411 (1991)). This
principle governs cases brought under District of Columbia and federal law alike. See Riverside
Hosp. v. D.C. Dep’t of Health, 944 A.2d 1098, 1104–06 (D.C. 2008) (stating that District of
Columbia courts “adhere to the case and controversy requirement of Article III as well as
7
Courts have in the past referred to this principle as a species of “prudential standing.”
See, e.g., Franchise Tax Bd. of Cal. v. Alcan Aluminium Ltd., 493 U.S. 331, 336 (1990); Williams
v. Lew, 819 F.3d 466, 475 (D.C. Cir. 2016); Hand v. Perez, No. 14-0880, 2015 WL 3534162, at
*5–6 (D.D.C. June 5, 2015). “Unlike Article III standing, the prudential standing doctrine
involves ‘judicially self-imposed limits on the exercise of federal jurisdiction.’” Heyer v.
Schwartz & Assocs. PLLC, 319 F. Supp. 3d 299, 304 (D.D.C. 2018) (quoting Bennett v. Spear,
520 U.S. 154, 162 (1997)). The Supreme Court recently cast doubt on prudential standing,
stating that a court “cannot limit a cause of action that Congress has created merely because
‘prudence’ dictates.” Lexmark, 572 U.S. at 128. That said, the Court in Lexmark expressly
reserved the question of whether third-party standing is a form of prudential standing or is bound
up in Article III standing. Id. at 127 n.3. And although the D.C. Circuit has traditionally
characterized third-party standing as “prudential,” it has also indicated that third-party standing
may be an Article III, rather than prudential, issue. See United States v. TDC Mgmt. Corp., 827
F.3d 1127, 1133 (D.C. Cir. 2016) (declining to decide whether, after Lexmark, the limitations on
third-party standing are prudential); Helmerich, 784 F.3d at 814; Schum v. FCC, 617 Fed. App’x
5, 6 (D.C. Cir. 2015) (per curiam). Fortunately, for purposes of this action, the Court need not
enter the thicket of prudential versus Article III standing. In the absence of additional guidance
from the Supreme Court, this Court will adhere to the simple principle that a plaintiff may not
assert a third-party’s rights outside of the narrow exceptions discussed infra. See Deutsche Bank
Nat. Tr. Co. v. FDIC, 717 F.3d 189, 194 n.4 (D.C. Cir. 2013) (noting that prudential standing is a
threshold, jurisdictional issue that may warrant an action’s dismissal regardless of Article III
standing).
12
prudential principles of standing,” and applying the third-party standing doctrine to dismiss
certain claims).
The prohibition on seeking relief for a third-party has long limited the ability of
shareholders in a corporation to vindicate the corporation’s rights, except in specific
circumstances. This variation of the third-party standing rule “generally prohibits shareholders
from initiating actions to enforce the rights of the corporation unless the corporation’s
management has refused to pursue the same action for reasons other than good-faith business
judgment.” Franchise Tax Bd. of Cal. v. Alcan Aluminium Ltd., 493 U.S. 331, 336 (1990). The
D.C. Circuit delineated this rule in Cowin v. Bresler, 741 F.2d 410 (D.C. Cir. 1984), a case cited
heavily by the parties. In that case the Circuit held, applying Delaware law, that common law
damages claims brought against corporate directors for mismanaging the corporation and its
funds must be “pursued, if at all, on a derivative basis.” Id. at 414. The Circuit’s conclusion was
dictated by “case law and sound policy,” because in such circumstances “no shareholder suffers
a harm independent of that visited upon the corporation and the other shareholders,” and
requiring a derivative action “prevents an individual shareholder from incurring a benefit at the
expense of other shareholders similarly situated.” Id; see also Burman v. Phoenix Worldwide
Indus., Inc., 384 F. Supp. 2d 316, 338 (D.D.C. 2005) (holding that “allegations of failure to
secure revenue represent injury to the corporation as a whole, as opposed to an individual
shareholder,” and therefore “they are clearly claims that must be alleged in a shareholder
derivative suit.”). Again, District of Columbia law recognizes this rule. See Wash. Tennis &
Educ. Found., Inc. v. Clark Nexsen, Inc., 270 F. Supp. 3d 158, 163–64 (D.D.C. 2017); Jackson v.
George, 146 A.3d 405, 415 n.6 (D.C. 2016) (discussing an “exception to the requirement that
suits alleging wrongs against a corporation be brought derivatively”); Estate of Raleigh v.
13
Mitchell, 947 A.2d 464, 470 (D.C. 2008) (“Since the [plaintiff] estate had no legal interest in the
real property belonging to the corporation, it could not sue individually to redress any alleged
wrongs against the corporation’s property interests.”).
These principles limit the relief Plaintiffs may obtain because Plaintiffs’ claims arise, in
part, from ASA’s injuries rather than their own. For instance, Plaintiffs assert that the Individual
Defendants improperly “[i]nvaded the ASA’s Trust and Development Fund” in support of the
Resolution, and have accrued additional Resolution-related expenses to the detriment of “ASA’s
financial health.” Pls.’ Opp’n at 30–31 (emphasis added); see also SAC ¶¶ 162-71, 185–86.
They also claim that the Resolution negatively impacted ASA’s revenues from charitable
contributions and membership fees. Pls.’ Opp’n at 31; see also SAC ¶¶ 172–81. And their
complaint expressly seeks damages “on behalf of the [ASA] from the Individual Defendants,
jointly and severally . . . representing the amounts of all money expended, and the value of all
[ASA] assets appropriated” in support of the Resolution. SAC at 82 (emphasis added); see also
id. ¶ 194 (“Plaintiffs are entitled to recover damages from the [i]ndividual Defendants that the
[ASA] incurred as a result of this breach of fiduciary duty.” (emphasis added)).
Plaintiffs cannot claim relief for ASA’s injuries unless ASA is made a plaintiff through a
derivative action, or unless another exception to the third-party or shareholder standing doctrines
applies. Plaintiffs do not, and cannot, bring a derivative action on ASA’s behalf under District of
Columbia law. See Bronner I, 249 F. Supp. 3d at 47. They have failed to identify any other
District of Columbia cause of action by which they can assert ASA’s claims. And they have
failed to otherwise demonstrate a “‘hindrance’ to [ASA’s] ability to protect [its] own interests.”
14
Kowalski, 543 U.S. at 130 (quoting Powers, 499 U.S. at 411). Accordingly, to the extent the
Individual Defendants injured ASA, only ASA may seek damages for those injuries. 8
Plaintiffs mount a clever attempt to avoid this straightforward conclusion, but they fail to
show that the third-party standing rule should not apply here. Relying on two recent District of
Columbia Court of Appeals cases, Daley v. Alpha Kappa Alpha Sorority, Inc. and Jackson,
Plaintiffs contend that traditional analyses of for-profit shareholder standing should not apply to
them as members of a non-profit corporation. 9 See Pls.’ Opp’n at 4. Those cases suggest that
dues-paying non-profit members have a broader suite of direct claims available to them under
District of Columbia law than shareholders in a for-profit corporation. The Daley plaintiffs,
dues-paying members of a sorority incorporated as a charitable corporation, sued the
organization and certain members of its leadership directly, rather than on behalf of the
organization, for breach of fiduciary duty, breach of contract, ultra vires actions, and waste. 26
A.3d 723, 726 (D.C. 2011). They claimed that the Individual defendants mismanaged the
organization and improperly spent its resources compensating its president. Id. at 727. The
8
This conclusion aligns with the policy considerations underlying the shareholder
standing doctrine. Plaintiffs claim that—merely by their position as ASA members—they are
entitled to collect hundreds of thousands of dollars allegedly misappropriated from ASA’s trust
fund. If the Court agreed, it would be opening the floodgates to duplicative litigation as other
ASA members rushed to collect the same damages. See Cowin, 741 F.2d at 414 (recognizing a
concern with “multitudinous litigation” in the doctrine’s absence (quoting Sutter v. Gen.
Petroleum Corp. 28 Cal. 2d 525, 530 (1946))).
9
Plaintiffs also rely on In re G-I Holdings, in which the Third Circuit held that the
plaintiff corporations could sue the defendant corporation directly for breach of contract, rather
than derivatively through a non-profit organization to which the plaintiffs belonged, because the
parties were “in contractual privity with one another but not with the [organization].” 755 F.3d
195, 208 (3d Cir. 2014). That case stands for the basic proposition that a party can sue to enforce
its own contractual rights, regardless of any potential derivative action. It does not address the
question raised here: Whether a party can sue to enforce a third-party’s rights.
15
Daley trial court dismissed most of the plaintiffs for lack of standing, concluding that their
claims could only be brought derivatively. Id. at 728–29.
In reversing this decision, the Court of Appeals held that
members of a nonprofit organization whose revenue depends in large part upon the
regularly recurring annual payment of dues by its members have standing to
complain when allegedly the organization and its management do not expend those
funds in accordance with the requirements of the constitution and by-laws of that
organization.
Id. at 729. Because the plaintiffs had a “direct, personal interest” in the action by virtue of their
ongoing financial and emotional relationship with the organization, they had standing to bring
their claims directly. Id. (quoting Franchise Tax, 493 U.S. at 336). The Court of Appeals issued
a similar holding in Jackson, which involved a group of former church trustees who claimed that
the defendants improperly ejected them from the church and mismanaged their tithes and
offerings to the church. 146 A.3d at 415. The court held that the plaintiffs’ “personal financial
stake” in the action—their donations to the church—conferred standing to assert their claims
directly rather than derivatively. Id.
Daley and Jackson indicate that non-profit members may directly suffer certain injuries
from organizational mismanagement that for-profit shareholders do not. Those cases do not,
however, speak to whether non-profit members may ultimately secure relief for the
organization’s injuries rather than their own, without bringing derivative claims. In other words,
Daley and Jackson concern a non-profit member’s standing to seek relief based on the member’s
injuries, but not a non-profit member’s standing to seek relief based on the non-profit’s injuries.
Nor did they need to grapple with the latter issue. District of Columbia courts are not bound by
the amount-in-controversy requirement constraining federal courts, and there were no concerns
in Daley or Jackson regarding whether the plaintiffs’ direct claims met a jurisdictional threshold
requirement. Thus, this Court does not read Daley and Jackson as narrowing the rule that a party
16
may not typically seek relief owed to a third-party. 10 See Daley, 26 A.3d at 729 (“Although not
an Article III court, ‘we nonetheless apply in every case the constitutional requirements of a case
or controversy and the prudential prerequisites of standing.’” (quoting Friends of Tilden Park,
Inc. v. District of Columbia, 806 A.2d 1201, 1206 (D.C. 2002))). It is therefore a legal certainty
that Plaintiffs cannot collect the damages they claim ASA is owed. That conclusion, however,
does not end the Court’s jurisdictional analysis.
B. Plaintiffs’ Remaining Claims Fail to Meet the Amount-In-Controversy Requirement
Jackson and Daley suggest that Plaintiffs may assert their claims directly and seek
damages and injunctive relief for their individual injuries. The Court must determine, then,
whether those direct claims meet 28 U.S.C. § 1332(a)’s amount-in-controversy requirement. The
answer, again, is no.
First, although Plaintiffs only explicitly seek damages “on behalf of the [ASA],” SAC at
82, they state that they individually have “suffered significant economic and reputational
damage” because of “Defendants’ abuses of power and disregard for [ASA’s] foundational
documents.” Id. ¶ 206. However, nowhere in Plaintiffs’ complaint or briefing do they explain
what that damage is. Their complaint does indicate that ASA mismanaged their membership
dues and increased those dues to cover Resolution-related expenses. See id. ¶ 185 (stating that
ASA’s Resolution-related expenses were covered by ASA’s trust fund, and that ASA increased
10
Those cases’ ultimate dispositions support the Court’s reading. On remand, the Daley
trial court held that the plaintiffs were “not entitled to actual or punitive damages for any of their
claims because they [did] not provide[] admissible evidence of any compensable injury to
themselves,” and they failed to comply with the procedural requirements to bring a derivative
action on behalf of the organization. See Daley v. Alpha Kappa Alpha Sorority, Inc., No. 2009
CA 04456 B, slip op. at 45–46, 58 (D.C. Super. Ct. May 14, 2013). Similarly, though the
Jackson plaintiffs sought damages, the trial court allowed the case to proceed to trial only on the
plaintiffs’ claims for declaratory and injunctive relief. See Jackson, 146 A.3d at 411–12.
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dues in response to those higher-than-expected expenses). However, at most, according to the
complaint, Plaintiffs paid $120 per year until 2017, when their dues increased to $275. Id. If
Defendants misappropriated every dollar that Plaintiffs contributed to ASA in annual dues, it
would take each Plaintiff 625 years to reach $75,000 in damages. 11 Because Plaintiffs have
otherwise provided no indication that they can prove $75,000 in damages, the Court concludes to
a legal certainty that their damages claims do not meet the amount-in-controversy threshold. See
Rosenboro v. Kim, 994 F.2d 13, 17 (D.C. Cir. 1993) (Concluding to a legal certainty that the
plaintiff’s claim did not satisfy the amount-in-controversy requirement, because of a “total lack
of medical findings” supporting her alleged injuries).
Second, Plaintiffs ask this Court to (1) enjoin ASA’s leadership from acting contrary to
ASA’s constitution; (2) enjoin ASA’s leadership from enforcing the Israel academic boycott; and
(3) enjoin ASA’s leadership from “making any payments or expenditures in violation of” ASA’s
constitution, “including in support of the Israel boycott.” SAC at 82. 12 When injunctive relief is
sought, the amount-in-controversy may be measured by (1) the value of the right that the
plaintiffs seek to enforce; or (2) the cost to the defendants to remedy the alleged denial of that
right. See Tatum v. Laird, 444 F.2d 947, 951 (D.C. Cir. 1971), rev’d on other grounds, 408 U.S.
1 (1972); Animal Legal Def. Fund v. Hormel Foods Corp., 249 F. Supp. 3d 53, 59 (D.D.C.
2017). Neither measure satisfies the amount-in-controversy requirement here. Plaintiffs seek to
require ASA to comply with its governing documents and halt improper payments; there is no
indication that such relief would cost ASA any money to implement. And Plaintiffs have failed
to explain how the right they seek to enforce—the right to be voluntary members of an apolitical,
11
Plaintiffs may not aggregate their individual claims to satisfy the amount-in-
controversy requirement. See Snyder v. Harris, 394 U.S. 332, 335 (1969).
12
As noted, Plaintiffs also seek declaratory relief. Id.
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academic organization—is worth $75,000, nor is that right of the sort courts typically hold to be
valuable. 13 See, e.g., Info. Strategies, Inc. v. Dumosch, 13 F. Supp. 3d 135, 142 (D.D.C. 2014)
(holding that the value of enforcing a non-compete agreement against the plaintiff’s former
employee exceeded $75,000 because of the potential revenue the plaintiff would lose to the
former employee in the agreement’s absence).
V. CONCLUSION
Plaintiffs lack standing to seek damages on behalf of ASA and it is clear, to a legal
certainty, that their remaining claims do not raise an amount-in-controversy exceeding $75,000.
Accordingly, the Court concludes that it lacks subject matter jurisdiction under 28 U.S.C. §
1332(a). 14 See St. Paul Mercury Indem. Co., 303 U.S. at 289. Plaintiffs have raised allegations
and presented evidence indicating that they may have meritorious claims, but they must assert
those claims before the proper tribunal.
It is hereby ORDERED that:
1. Defendants’ Motions to Dismiss (ECF Nos. 106, 108, and 109) are GRANTED.
13
Plaintiffs also seek the “costs and disbursements of this action, including attorneys’ and
experts’ fees.” SAC at 82. “Attorney fees are part of the amount in controversy if they are
provided for by statute or contract.” Animal Legal Def. Fund, 249 F. Supp. 3d at 62 (quoting
Zuckman v. Monster Beverage Corp., 958 F. Supp. 2d 293, 301 (D.D.C. 2013)). Plaintiffs,
however, have not identified a statutory or contractual basis for attorneys’ fees. Regardless, they
have provided no evidence that attorneys’ fees, if awarded, would equal more than $75,000 per
plaintiff.
14
Because the Court lacks subject matter jurisdiction, it declines to address the parties’
arguments regarding the merits of Plaintiffs’ ultra vires, fiduciary duty, and waste claims. See In
re Madison Guar. Sav. & Loan Ass’n, 173 F.3d 866, 870 (D.C. Cir. 1999) (“[I]t is not proper for
federal courts to proceed immediately to a merits question despite jurisdictional objections”
(citing Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 94 (1998)). The Court also declines
to address Defendants’ motions to stay and motion for partial judgment on the pleadings,
because its decision to dismiss the action moots those motions.
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2. Defendants’ Motions to Stay Discovery (ECF Nos. 107, 110, and 111) are DENIED
AS MOOT.
3. Defendants’ Motion for Judgment on the Pleadings (ECF No. 35) and Plaintiffs’
Motion for Leave to File a Surreply to that motion (ECF No. 40) are DENIED AS
MOOT.
It is FURTHER ORDERED that this action is DISMISSED WITHOUT PREJUDICE. An
order consistent with this Memorandum Opinion is separately and contemporaneously issued.
Dated: February 4, 2019 RUDOLPH CONTRERAS
United States District Judge
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