Hicks v. Wilson

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
JAMES HICKS; RAY EDMONDS; LUTHER
GORE; MCKINLEY JORDAN; SAM
STOKES; MALCOLM THOMAS; JOHN
JONES; JAMES STEELE; FELIX SIMMS,
on their behalf and on the behalf of
others similarly situated,
Plaintiffs-Appellants,
v.
No. 95-2385
DONALD P. WILSON, individually and
as Grand Exalted Ruler of Improved
Benevolent Protective Order of Elks
of the World; IMPROVED BENEVOLENT
PROTECTIVE ORDER OF ELKS OF THE
WORLD, INCORPORATED, a non-profit
corporation,
Defendants-Appellees.
Appeal from the United States District Court
for the Eastern District of North Carolina at Elizabeth City.
Terrence W. Boyle, District Judge.
(CA-95-22-2-BO)
Argued: March 7, 1996
Decided: May 20, 1996
Before NIEMEYER and MOTZ, Circuit Judges, and YOUNG,
Senior United States District Judge for the District of Maryland,
sitting by designation.
_________________________________________________________________
Affirmed by unpublished per curiam opinion.
COUNSEL
ARGUED: Clarence C. Malone, Jr., Durham, North Carolina, for
Appellants. Mark William Merritt, ROBINSON, BRADSHAW &
HINSON, P.A., Charlotte, North Carolina, for Appellees. ON
BRIEF: David C. Wright, III, J. Daniel Bishop, ROBINSON,
BRADSHAW & HINSON, P.A., Charlotte, North Carolina, for
Appellees.
_________________________________________________________________
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
_________________________________________________________________
OPINION
PER CURIAM:
At the August 1994 Annual Session of the Grand Lodge of the
Improved Benevolent Protective Order of Elks of the World, Inc. (the
Elks), which took place in Chicago, Donald Wilson was reelected to
the office of Grand Exalted Ruler. A group of Elks' members who
were unsuccessful in placing the name of their candidate in nomina-
tion for Grand Exalted Ruler filed this class action, challenging under
the Elks' constitution and bylaws Wilson's conduct of the Annual
Session and his use of Elks' funds.
The plaintiffs filed this action in North Carolina, originally against
Wilson and the Elks, alleging diversity jurisdiction. The representa-
tive parties plaintiff are citizens of North Carolina, Virginia, and Ala-
bama. The defendant Wilson is a citizen of Pennsylvania, and the
Elks is a nonprofit corporation created under the laws of New Jersey
with its principal place of business in North Carolina.
When the defendants filed a motion to dismiss the complaint
because of a lack of complete diversity (three plaintiffs and the corpo-
rate defendant are, for diversity purposes, citizens of North Carolina),
the plaintiffs filed an amended complaint without leave of court, in
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which they dropped the Elks as a defendant. The district court dis-
missed the original complaint because of a lack of subject matter
jurisdiction and treated the amended complaint as a motion to amend
the complaint pursuant to Federal Rule of Civil Procedure 15(a) on
the ground that the defendants' motion to dismiss precluded the plain-
tiffs from amending their complaint as a matter of right. The court
then denied the motion to amend on grounds of futility, concluding
that the Elks was an indispensable party to the relief demanded in the
proposed complaint.
In treating the plaintiffs' amended complaint as a motion to amend,
the court erred. Rule 15(a) provides that "[a] party may amend the
party's pleading once as a matter of course at any time before a
responsive pleading is served." Fed. R. Civ. P. 15(a) (emphasis
added). While the defendants did respond to the original complaint
with a motion to dismiss under Rule 12(b)(1), that motion is not a
pleading. See Fed. R. Civ. P. 7(a); Smith v. Blackledge, 451 F.2d
1201, 1203 n.2 (4th Cir. 1971). Accordingly, the plaintiffs were enti-
tled as a matter of right to file their amended complaint, dropping the
Elks as a party defendant. Nonetheless, the district court properly
ruled that the Elks was an indispensable party, see Fed. R. Civ. P. 19,
and therefore dismissal of the case was appropriate.
The core of plaintiffs' complaint is that Wilson violated the Elks'
constitution and bylaws in orchestrating his own reelection and in
denying plaintiffs their rights granted by the constitution and bylaws.
The plaintiffs also allege that Wilson violated the Elks' constitution
and bylaws by commingling an established burial fund with general
Grand Lodge funds, thus using the combined funds for purposes not
permitted under the constitution and bylaws. All of these claims are
essentially the corporation's claims against its management and not
the proper claims of any of the corporation's members. Indeed, some
members of the Elks obviously approved Wilson's actions. If the
plaintiffs as dissenting members believe that the corporation's consti-
tution and bylaws were violated, they must demand that the corpora-
tion file a suit against Wilson and, should it fail to do so, file a
derivative action, following presumably the law of New Jersey where
the Elks is incorporated. See Escoett v. Aldecress Country Club, 109
A.2d 277 (N.J. 1954). But in any such derivative action, the corpora-
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tion would be an indispensable party. See Buckley v. Control Data
Corp., 923 F.2d 96, 98 (8th Cir. 1991).
In sum, plaintiffs' claims arise out of an intra-corporate dispute
among members of a nonprofit corporation, and it is clear that the
corporation representing all its members must be a party; in its
absence, complete relief cannot be accorded. Since the corporation
has taken a position antagonistic to the plaintiffs, it could only be
joined as a party defendant, thus destroying diversity jurisdiction.
Accordingly, the district court properly dismissed this case. The dis-
missal, however, is without prejudice to the plaintiffs' proceeding in
an appropriate state court.
AFFIRMED.
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