Bronner v. Duggan

317 F.Supp.3d 284

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 July 6, 2018

Aviva Jacqueline Vogelstein, Jennifer Gross, Kenneth Lawrence Marcus, The Louis D. Brandeis Center Inc., Scott Neal Godes, Devin J. Stone, Barnes & Thornburg LLP, Washington, DC, 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., Wilmington, DE, for Plaintiffs.

Jeffrey C. Seaman, Whiteford, Taylor & Preston, LLP, Bethesda, MD, John J. Hathway, Whiteford, Taylor & Preston L.L.P., Washington, DC, Thomas C. Mugavero, Whiteford, Taylor & Preston, LLP, Falls Church, VA, for Defendants.

MEMORANDUM OPINION

RUDOLPH CONTRERAS, United States District Judge

CONFIRMING THE COURT'S SUBJECT MATTER JURISDICTION

I. INTRODUCTION

This Memorandum Opinion addresses a specific, narrow issue: The impact of District of Columbia ("D.C.") Code § 29–406.31(d), which shields directors of charitable corporations from damages except in specific circumstances, on this Court's subject matter jurisdiction.

While the issue here is narrow, the underlying lawsuit to which this issue relates arose from a much broader dispute over the extent to which an exclusively academic organization should involve itself in political issues. Plaintiffs are current and former members of the American Studies Association ("ASA"), a nonprofit, charitable corporation dedicated to the promotion of the study of American culture. They have sued the ASA and several of its current and former leaders, including Defendants Lisa Duggan, Curtis Marez, Avery Gordon, Neferti Tadiar, Sunaina Maira, Chandan Reddy, Jasbir Puar, J. Kehaulani, Kauanui, Steven Salaita, and John Stephens ("Individual Defendants"), alleging that the Individual Defendants improperly introduced and implemented a resolution calling for the academic boycott of Israel.

During recent briefing regarding whether Plaintiffs could amend their complaint, D.C. Code § 29–406.31(d) emerged as a possible impediment to the Court's subject matter jurisdiction. For the reasons stated below, the Court, concludes that § 29–406.31(d) does not defeat its jurisdiction at this stage in the litigation.

II. BACKGROUND¹

A. The American Studies Association

The 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 Const. & Bylaws of the Am. Studies Ass'n ("ASA Const. & Bylaws"), Const., Art. I, § 2, ECF No. 21–3. The ASA's founding documents provide that the society was "organized exclusively for education and academic purposes." Pls.' Sec. Am. Compl. ("SAC") ¶ 30, ECF No. 81.

The ASA was incorporated in D.C. as a private, nonprofit corporation, and is therefore governed by D.C. law. SAC ¶ 17. Moreover, it has been designated by the Internal Revenue Service as a tax-exempt, charitable organization under the Internal Revenue Code, 26 U.S.C. § 501(c)(3). Id. Because it is exempt from taxation under § 501(c)(3), it is considered to be a "charitable corporation" under D.C.'s statutory framework governing nonprofit corporations. D.C. Code § 29–401.02(3), (4).

The ASA is overseen by a "National Council" and a President. 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, Const., Art. V, § 2. It consists of thirteen voting members. ASA Const. & Bylaws, Const., Art. V, § 1. The ASA's President presides over the National Council and has a duty to "fulfill the chartered obligations and purposes of the [ASA]." ASA Const. & Bylaws, Const., Art. IV, § 2.

B. ASA's Boycott Resolution

In November 2013, at the ASA's annual meeting, ASA leadership introduced a resolution advocating for the boycott of Israeli academic institutions (the "Resolution"), in response to the allegation that Israel restricts academic activity in formerly Jordanian territory currently under Israeli control. See SAC ¶¶ 89, 98. The Resolution's operative clause states:

It is resolved that the American Studies Association (ASA) endorses and will honor the call of the Palestinian civil society for a boycott of Israeli academic institutions. It is also resolved that the ASA supports the protected rights of students and scholars everywhere to engage in research and public speaking about Israel–Palestine and in support of the boycott, divestment, and sanctions (BDS) movement.

Am. Verified Compl. ("FAC") ¶ 31, ECF No. 19. Plaintiffs allege that the Individual Defendants engaged in improper conduct, in contravention of their duties to the ASA and its members, and in violation of the ASA's bylaws and D.C. law, to ensure that the Resolution was formally endorsed by the ASA. See generally SAC. They also allege that the Individual Defendants improperly utilized ASA funds to defend the Resolution after its passage. Id.

Additionally, Plaintiffs allege that the Resolution has harmed ASA in multiple ways. First, Plaintiffs claim that, since the Resolution, several members of the ASA have resigned in protest, depriving the ASA of membership dues. See SAC ¶ 174. Second, Plaintiffs claim that the ASA has experienced reputational harm because of the reaction to the Resolution by the academic community and the general public. See SAC ¶ 154–55, 176. And third, Plaintiffs claim that the ASA has suffered financial harm because of an alleged decrease in donations and an increase in public-relations and legal spending in response to the public backlash resulting from the Resolution. See SAC ¶ 171, 175, 185. Although the complaint does not specify an amount of damages sought, it does state that "the amount in controversy exceeds $75,000." SAC ¶ 11.

C. Relevant Procedural History

Plaintiffs filed suit in this Court in April 2016, ECF No. 1, and later amended their complaint in June 2016, ECF No. 19, and in March 2018, ECF No. 81. They challenge various acts relating to the passage of the Resolution and its aftermath, seeking damages, declaratory relief, and injunctive relief for alleged breaches of fiduciary duties, ultra vires acts, breaches of contract, violations of the D.C. Nonprofit Corporation Act, and corporate waste. See generally SAC. They claim that the Court has subject matter jurisdiction under 28 U.S.C. § 1332, "inasmuch as there exists complete diversity of citizenship between Plaintiffs and Defendants and the amount in controversy exceeds $75,000." SAC ¶ 11.

Soon after the First Amended Complaint's filing, Defendants moved to dismiss it. Among other arguments, Defendants argued that the Court lacked subject matter jurisdiction because Plaintiffs failed to satisfy the amount-in-controversy requirement—$75,000—necessary to maintain a diversity suit under 28 U.S.C. § 1332. See Defs.' Mot. Dismiss at 7–11, ECF No. 21. The Court disagreed, holding that because it was not legally impossible for Plaintiffs to receive a judgment of at least $75,000, the amount-in-controversy requirement was satisfied. Bronner v. Duggan , 249 F.Supp.3d 27, 38 (D.D.C. 2017).

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. In their opposition to the Plaintiffs' motion for leave to amend, Defendants argued that Plaintiffs did not "attempt to satisfy the requirements under the D.C. Nonprofit Corporations Act to hold the individual defendants liable." Defs.' Opp'n Pls.' Mot. Leave File Sec. Am. Compl. at 5, ECF No. 66. Specifically, they argued that "Plaintiffs' proposed second amended complaint alleges none of [the] exceptions [to D.C. Code § 29–406.31(d) ], nor could it." Id.

The Court allowed Plaintiffs to amend the complaint, but it also recognized that "[b]ecause Plaintiffs are only seeking money damages from the Individual Defendants, if the D.C. Nonprofit Corporations Act precludes them from doing so, then it would in fact be legally impossible for them to recover $75,000 in this action." Bronner v. Duggan , 324 F.R.D. 285, 294 (D.D.C. 2018). "Such a finding would necessarily mean that this Court's subject matter jurisdiction could not be founded on 28 U.S.C. § 1332." Id. Discharging its duty to reexamine its subject matter jurisdiction when that jurisdiction comes into doubt, the Court ordered the parties to provide supplemental briefing addressing the impact of D.C. Code § 29–406.31(d) on the Court's jurisdiction. Id. at 295. That briefing has concluded, and the issue is ripe for the Court's evaluation.

III. ANALYSIS

As noted above, Plaintiffs claim that this court has subject matter jurisdiction under 28 U.S.C. § 1332. 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). The parties do not dispute diversity of citizenship, so the only issue before the Court at this stage of the litigation is whether, in light of D.C. Code § 29–406.31(d), Plaintiffs' claims legally cannot exceed the $75,000 amount-in-controversy required to maintain this action.

"Federal courts are courts of limited jurisdiction. They possess only that power authorized by Constitution and statute." Kokkonen v. Guardian Life Ins. Co. of Am. , 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994). Therefore, Congress has the ...