Bronner v. Duggan

364 F.Supp.3d 9

Simon BRONNER, et al., Plaintiffs,

v.Lisa DUGGAN, et al., Defendants.

Civil Action No.: 16-0740 (RC)

United States District Court, District of Columbia.

Signed February 4, 2019

Aviva Jacqueline Vogelstein, Jennifer Gross, Louis D. Brandeis Center, Inc., Eric Roiter, Pro Hac Vice, Boston University School of Law, Boston, MA, Jerome M. Marcus, Pro Hac Vice, Jonathan Auerbach, Pro Hac Vice, Marcus & Auerbach LLC, Spring House, PA, L. Rachel Lerman, Pro Hac Vice, Barnes & Thornburg, LLP, Los Angeles, CA, Joel Friedlander, Pro Hac Vice, Friedlander & Gorris, P.A., for Plaintiffs.

Jeffrey C. Seaman, Whiteford, Taylor & Preston, LLP, Bethesda, MD, John J. Hathway, Whiteford, Taylor & Preston L.L.P., Richard Randolph Renner, Kalijarvi, Chuzi & Newman & Fitch, P.C., Washington, DC, Thomas C. Mugavero, Whiteford, Taylor & Preston, LLP, Falls Church, VA, Mark Allen Kleiman, Pro Hac Vice, Law Offices of Mark Allen Kleiman, Venice, CA, Maria C. LaHood, Shayana Devendra Kadidal, Center for Constitutional Rights, New York, NY, for Defendants.

MEMORANDUM OPINION

GRANTING DEFENDANTS' MOTIONS TO DISMISS; DENYING DEFENDANTS' MOTIONS TO STAY

RUDOLPH CONTRERAS, United States District Judge

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.

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. BACKGROUND²

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 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 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 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. 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...