Bronner ex rel. Nominal v. Duggan

962 F.3d 596

Simon BRONNER, Derivatively ON BEHALF OF Nominal Defendant The AMERICAN STUDIES ASSOCIATION, et al., Appellants

v.Lisa DUGGAN, et al., Appellees

No. 19-7017

United States Court of Appeals, District of Columbia Circuit.

Argued March 9, 2020

Decided June 19, 2020

Rehearing En Banc Denied August 6, 2020

Jerome M. Marcus argued the cause for appellants. With him on the briefs was Jennifer Gross. Aviva Vogelstein entered an appearance.

Thomas C. Mugavero argued the cause for appellees. With him on the joint brief was Mark Allen Kleiman, Maria C. LaHood and Shayana D. Kadidal. John J. Hathway entered an appearance.

Before: Henderson, Griffith and Wilkins, Circuit Judges.

Karen LeCraft Henderson, Circuit Judge:

Four professors of American studies—Simon Bronner, Michael Rockland, Michael Barton and Charles Kupfer (collectively, Professors)—sued the American Studies Association (ASA) and individual ASA leaders after the ASA endorsed a boycott of Israeli academic institutions. They allege that the individual defendants breached various statutory, contractual and fiduciary duties in connection with the boycott. After the district court dismissed their ultra vires claim and all derivative claims brought on the ASA's behalf, the Professors filed a second amended complaint. Although the district court initially ruled that the amount in controversy supported federal diversity jurisdiction, it ordered additional briefing to address lingering concerns and, nearly three years after the suit was filed, concluded to a legal certainty that the Professors could not in fact satisfy the amount-in-controversy requirement. The court therefore dismissed the action for want of subject-matter jurisdiction. For the reasons that follow, the district court did not err in revisiting its jurisdictional determination, applying the legal certainty test or valuing the amount in controversy. Accordingly, we affirm.

I. Background

The ASA, a nonprofit organization incorporated in the District of Columbia (D.C.), "is the nation's largest and oldest organization dedicated to the promotion of the study of American culture." J.A. 115. Primarily comprised of professors and scholars, the ASA facilitates intellectual discourse by, among other things, hosting conferences and sponsoring academic publications. It has also long advocated for its members and for American studies in general by adopting public positions on important issues, many of which are politically charged. For example, the ASA has taken a stance on such topics as the Iraq War, wealth inequality and unionized hotels, to name a few.

At the ASA's annual meeting in November 2013, ASA leadership introduced a resolution to involve the ASA in a boycott of Israeli academic institutions.¹ According to the Professors, the boycott movement politicized the ASA and "subvert[ed] ... [its] scholarly purpose." J.A. 109. Despite their strong opposition, the resolution was deemed approved following a vote of the ASA membership.

The Professors allege that, starting in 2012, over one year before the November 2013 meeting, the individual defendants—all current or former members of the ASA National Council² or key ASA committees—perpetrated a scheme to push the resolution through the ASA. They contend the defendants are leaders of, or at least sympathetic to, the United States Campaign for the Academic and Cultural Boycott of Israel and engaged in a coordinated effort to place boycott sympathizers in ASA leadership positions, all the while concealing their agenda from the general membership. But when the National Council failed to unanimously adopt the boycott resolution, the measure was put to a vote of the membership at large. The defendants then purportedly took steps to manipulate the vote in their favor. They recruited students to join the ASA—ostensibly to vote in favor of the boycott—but froze the ASA membership rolls before the vote was publicly announced, which prevented some members, including plaintiff Barton, from voting on the resolution.³

Finally, the resolution was treated as if it passed, despite failing to garner the requisite two-thirds vote.

According to the Professors, the ASA has suffered myriad economic and reputational harms as a consequence of the boycott resolution. Specifically, they contend the ASA incurred substantial expenses promoting and defending the boycott while, at the same time, revenue from donations and membership fees declined following its adoption. Dues were thereafter raised by, at most, $155 per year, J.A. 173–74, and, to cover the remaining shortfall, the Professors claim the individual defendants improperly invaded the ASA's Trust and Development Fund to pay for boycott-related public relations and legal fees,⁴ see Professors’ Br. 10–11.

The Professors’ attempts to obtain voluntary redress proved unsuccessful and they filed suit in the United States District Court for the District of Columbia on April 20, 2016. Their first amended complaint brought derivative claims, on behalf of the ASA, against the individual defendants for breach of fiduciary duties, ultra vires acts and corporate waste, and direct claims for ultra vires acts, corporate waste, breach of the District of Columbia Nonprofit Corporations Act of 2010, D.C. CODE §§ 29-401.01 et seq. , and breach of contract. The Professors sought damages as well as declaratory and injunctive relief.

After finding that the Professors’ "claims plainly me[t] the low standard for establishing a sufficient amount in controversy," Bronner v. Duggan (Bronner I ), 249 F. Supp. 3d 27, 38 (D.D.C. 2017),⁵ thus satisfying the requirements for federal diversity jurisdiction,⁶ the district court granted in part the defendants’ motion to dismiss. First, the court dismissed all derivative claims. Id. at 37. Under D.C. Code § 29-411.03, a derivative proceeding may be commenced only after a demand to take suitable action has been made on the nonprofit corporation and ninety days have expired from the demand's effective date. The Professors, however, filed suit only two days after delivering a formal demand letter and did not demonstrate that a pre-suit demand would have been futile. Bronner I , 249 F. Supp. 3d at 45. Next, the district court dismissed the direct ultra vires claim under Federal Rule of Civil Procedure 12(b)(6) because the Professors had not pleaded facts showing that the boycott resolution was contrary to the ASA's express purposes or otherwise violated any D.C. statute or ASA bylaw. Id. at 47–50.

The Professors moved for leave to file a second amended complaint, asserting several new claims and adding four defendants who held senior ASA leadership roles. In total, they alleged nine counts based on breach of fiduciary duties, ultra vires acts, breach of contract, corporate waste and breach of the D.C. Nonprofit Corporations Act. The district court granted leave to file on March 6, 2018, and simultaneously invoked the "continuing duty to examine its subject matter jurisdiction." Bronner v. Duggan (Bronner II ), 324 F.R.D. 285, 294 (D.D.C. 2018) (citing Henderson ex rel. Henderson v. Shinseki , 562 U.S. 428, 434, 131 S.Ct. 1197, 179 L.Ed.2d 159 (2011) ). The court noted that, notwithstanding the parties did "not explicitly readdress[ ] subject matter jurisdiction in their latest round of motions," the filings nevertheless "raised certain issues" implicating the amount in controversy, namely, whether the individual defendants could be held liable for damages. Id. The D.C. Nonprofit Corporations Act provides that directors⁷ of a charitable corporation are not liable to the corporation or its members for money damages when acting in an official capacity, except in four specific instances.⁸ See D.C. CODE § 29-406.31(d). Thus, if the individual defendants are immune from damages liability, "it would in fact be legally impossible for [the Professors] to recover $75,000." Bronner II , 324 F.R.D. at 294.

The district court reaffirmed its jurisdiction following supplemental briefing. See Bronner v. Duggan (Bronner III ), 317 F. Supp. 3d 284, 289 (D.D.C. 2018). Because the Professors sufficiently alleged that the challenged conduct constituted "[a]n intentional infliction of harm," id. at 291 (quoting D.C. CODE § 29-406.31(d)(2) ), the individual defendants were "not shielded from damages by D.C. Code § 29-406 -31(d)," id. at 294. But the court itself acknowledged that the ruling was not necessarily final, concluding that "jurisdiction remain[ed] intact, for now ." Id. at 289 (emphasis added). On the contrary, the district court teed up future jurisdictional challenges, declaring that if it is "true as a matter of law that [the Professors] ... cannot seek damages on behalf of the ASA," id. at 290 n.5, their failure "to explain how they have individually suffered more than $75,000 in damages, or why complying with an injunction would cost the ASA more than that amount," was all the more problematic, id. at 289 n.2. Given these concerns, the court committed to "again reexamine its subject matter jurisdiction" if properly "raised in a well-fashioned motion to dismiss or motion for summary judgment." Id. at 290 n.5.

Heeding this invitation, the defendants filed a motion to dismiss, which was granted on February 4, 2019. See Bronner v. Duggan (Bronner IV ), 364 F. Supp. 3d 9, 23 (D.D.C. 2019). The Professors’ inability to "bring a derivative action on ASA's behalf under District of Columbia law," id. at 20, did not foreclose the recovery of "damages arising from injuries they suffered directly," id. at 17. But because the Professors had "failed to demonstrate that the value of the injunctive and declaratory relief they seek, combined with those damages, exceeds $75,000," it "appear[ed] to a legal certainty" that they could not satisfy the amount-in-controversy requirement.

Id. The action was therefore dismissed for lack of subject-matter jurisdiction and the Professors timely appealed.

Although they also challenge the dismissal of...