Dell'Aquila v. Lapierre

491 F.Supp.3d 320

David DELL'AQUILA, Lorannda Borja, Todd Chesney, and Brent Weber, on behalf of themselves and all others similarly situated, Plaintiffs,

v.Wayne LAPIERRE, National Rifle Association of America, and NRA Foundation, Inc., Defendants.

No. 3:19-cv-00679

United States District Court, M.D. Tennessee, Nashville Division.

Filed September 30, 2020

Elliott J. Schuchardt, Schuchardt Law Firm, Knoxville, TN, for Plaintiffs.

Wallace A. McDonald, Lacy, Price & Wagner, P.C., Knoxville, TN, William A. Brewer, Brewer, Attorneys & Counselors, New York, NY, for Defendants.

MEMORANDUM

WILLIAM L. CAMPBELL, JR., UNITED STATES DISTRICT JUDGE

Pending before the Court are motions to dismiss the Second Amended Complaint (Doc. No. 43) filed separately by each of the three defendants: the National Rifle Association of America ("NRA"), the NRA Foundation, Inc., and Wayne LaPierre (Doc. Nos. 46, 48, 50). Plaintiffs filed a consolidated response. (Doc. No. 53). Defendants each filed a separate reply. (Doc. Nos. 60, 61, 62). For the reasons stated below, the NRA Foundation's and Wayne LaPierre's motions to dismiss will be GRANTED ; and the NRA's motion to dismiss will be GRANTED in part, DENIED in part.

I. BACKGROUND

Plaintiffs allege the NRA, NRA Foundation, and NRA CEO Wayne LaPierre, fraudulently solicited membership and donations by claiming membership fees and donations would be used to advance the mission of the NRA, and that the organizations used a significant portion of the funds for purposes unrelated to that mission. Plaintiffs bring claims for fraud and violation of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961, et seq.

Defendants seek to dismiss all claims, arguing that Plaintiffs lack standing to challenge internal administration of unrestricted funds, have not pleaded the claims with sufficient particularity to satisfy the requirements of Rule 9 of the Federal Rules of Civil Procedure, and have not plausibly alleged the elements of the fraud and RICO claims.

II. STANDARD OF REVIEW

For purposes of a motion to dismiss, the Court must take all of the factual allegations in the complaint as true as the Court has done above. Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face. Id. A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Id. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice. Id. When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief. Id. at 679, 129 S.Ct. 1937. A legal conclusion, including one couched as a factual allegation, need not be accepted as true on a motion to dismiss, nor are mere recitations of the elements of a cause of action sufficient. Id. at 678, 129 S.Ct. 1937 ; Fritz v. Charter Twp. of Comstock , 592 F.3d 718, 722 (6th Cir. 2010) ; Abriq v. Hall , 295 F. Supp. 3d 874, 877 (M.D. Tenn. 2018). Moreover, factual allegations that are merely consistent with the defendant's liability do not satisfy the claimant's burden, as mere consistency does not establish plausibility of entitlement to relief even if it supports the possibility of relief. Iqbal , 556 U.S. at 678, 129 S.Ct. 1937.

In determining whether a complaint is sufficient under the standards of Iqbal and its predecessor and complementary case, Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), it may be appropriate to "begin [the] analysis by identifying the allegations in the complaint that are not entitled to the assumption of truth." Iqbal , 556 U.S. at 680, 129 S.Ct. 1937. Identifying and setting aside such allegations is crucial, because they simply do not count toward the plaintiff's goal of showing plausibility of entitlement to relief. As suggested above, such allegations include "bare assertions," formulaic recitation of the elements, and "conclusory" or "bald" allegations. Id. at 681, 129 S.Ct. 1937. The question is whether the remaining allegations – factual allegations, i.e. , allegations of factual matter – plausibly suggest an entitlement to relief. Id. If not, the pleading fails to meet the standard of Fed. R. Civ. P. 8 and thus must be dismissed under Rule 12(b)(6). Id. at 683, 129 S.Ct. 1937.

III. ANALYSIS

A. Standing

Defendants argue Plaintiffs lack standing to challenge the non-profits’ authority to act or administration of unrestricted donations.¹ Defendants characterize Plaintiffs’ claims as challenging the authority of the NRA or NRA Foundation to spend funds for purposes unrelated to the mission of the NRA. Defendant argue that state law limits those who can challenge nonprofit corporate action to the state attorney general or certain individuals filing suit on behalf of the corporation.²

Plaintiffs correctly argue that these state statutes do not govern the fraud claims asserted here against the corporations or LaPierre. Though the claims presented involve representations regarding the organizations’ use of funds, Plaintiffs are not, in fact, "challenging the administration of funds" or seeking to undo any other corporate act. The claims asserted here are that Plaintiffs’ donations and membership dues to the NRA and NRA Foundation were procured by fraudulent misrepresentations regarding the use of the donated funds and Plaintiffs seek to recover the funds that they personally donated. Moreover, Plaintiffs claim that they were personally defrauded meets the requirements for standing under Article III, which requires: (1) "an injury in fact"; (2) "a causal connection" between the alleged injury and the defendants’ conduct; and (3) redressability – that the injury will "likely ... be redressed by a favorable decision." Wall v. Mich. Rental , 852 F.3d 492, 495 (6th Cir. 2017) (citing Lujan v. Def. of Wildlife , 504 U.S. 555, 560-61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992) ).

Defendants cite Wilding v. DNC Servs. Corp. , No. 16-61511-CIV, 2017 WL 6345492 (S.D. Fla. Aug. 25, 2017), for the proposition that "donating to an organization does not, of itself, create a legally protected interest in the organization's operations." (Doc. No. 47 at 7; Doc. No. 49 at 7; Doc. No. 51 at 6). In Wilding , donors to the Democratic National Committee ("DNC") and Bernie Sanders's campaign brought claims of fraud alleging they donated to the DNC in reliance on the DNC's promise of neutrality in the presidential primaries and that the DNC was, in fact, not neutral because it favored Hillary Clinton over Bernie Sanders. Id. at *3. The Wilding court noted that the plaintiffs were not entitled to challenge DNC's conduct of its internal affairs by virtue of being donors. However, the court also recognized that a donor may suffer "cognizable injury from the violation of an independent duty, such as if the donation was procured by fraud." Id. at *5. In Wilding , the court ultimately held that plaintiffs did not have standing to assert their fraud claim because they had not alleged a causal connection between the defendant's statements and their injury – none of the plaintiffs claimed to have read or heard the promises of neutrality before making their donations. Id. at *4. Nothing in the court's reasoning in Wilding supports Defendants’ argument that the cited state statutes eliminate Plaintiffs’ standing to bring a claim for fraud.

B. Fraud

Without discussion, the parties assume Tennessee law applies to the fraud claims in this case. (See Doc. No. 47 at 10; Doc. No. 49 at 12; Doc. No. 51 at 12; Doc. No. 54 at 11). A federal court sitting in diversity applies the choice of law rules of the forum state. In re Air Crash Disaster , 86 F.3d 498, 540-41 (6th Cir. 1996) (citing Klaxon Co. v. Stentor Elec. Mfg. Co. , 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941) ). Tennessee applies the "most significant relationship" test of the Restatement (Second) Conflict of Laws to choice-of-law questions for tort claims. Orlowski v. Bates , 146 F.Supp. 3d 908, 921 (W.D. Tenn. 2015). The most significant relationship is determined by examining: (1) the place of the alleged injury; (2) the place where the conduct causing the injury occurred; (3) the domicile and/or place of business of the parties involved; and (4) the place where the relationship of the parties is centered. Glennon v. Dean Witter Reynolds, Inc. , 83 F.3d 132, 136 (6th Cir. 1996).

It is not readily apparent that Tennessee has the most significant relationship to the claims brought by residents of Tennessee, Kansas, and Arizona based on statements made by Defendants in New York and Washington, D.C. However, none of the parties has identified material differences between the law of Tennessee and that of the other states; nor have any of the parties argued that the Court should apply some law other than that of Tennessee to the fraud claim. Accordingly, the Court will not undertake such analysis sua sponte and will assume for purposes of the motion to dismiss that Tennessee law applies to the fraud claims.

To establish a claim for fraud in Tennessee, a plaintiff must allege facts showing that: (1) the defendant made a representation of an existing or past fact; (2) the representation was false when made; (3) the representation was in regard to a material fact; (4) the false representation was made either knowingly or without belief in its truth or recklessly; (5) plaintiff reasonably relied on the misrepresented material fact; and (6) plaintiff suffered damage as a result of the misrepresentation. Walker v. Sunrise Pontiac-GMC Truck, Inc. , 249 S.W.3d 301, 311 (Tenn. 2008). If the alleged fraudulent representation is with regard to a...