Bronner v. Duggan , 249 F. Supp. 3d 27 ( 2017 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
SIMON BRONNER, et al., :
:
Plaintiffs, : Civil Action No.: 16-0740 (RC)
:
v. : Re Document No.: 21
:
LISA DUGGAN, et al., :
:
Defendants. :
MEMORANDUM OPINION
GRANTING IN PART AND DENYING IN PART DEFENDANTS’ RENEWED MOTION TO DISMISS
I. INTRODUCTION
Plaintiffs bring this suit in their individual capacities and derivatively on behalf of the
American Studies Association, alleging that a group of academic leaders improperly introduced
and implemented an academic boycott of Israel. Plaintiffs seek injunctive relief and damages
from the American Studies Association for alleged breach of fiduciary duty, ultra vires acts,
breach of contract, and violation of the D.C. Nonprofit Corporation Act. They seek recovery for
alleged ultra vires acts and waste against the pro-boycott leaders directly. Defendants move to
dismiss on several grounds, including lack of subject-matter jurisdiction, lack of personal
jurisdiction, the First Amendment, and failure to state a claim. With respect to their contention
that Plaintiffs do not state cognizable claims, Defendants’ argument does not extend to Plaintiffs’
claims for waste or violation of the D.C. Nonprofit Corporation Act.
Although the Court finds that it possesses jurisdiction and it would not violate the First
Amendment to rule against Defendants in this case, it also finds that Plaintiffs, in part, failed to
state cognizable claims. Although Plaintiffs allege plausible direct claims for breach of contract
and waste, their failure to adequately demand that the nonprofit corporation remedy the situation
internally makes them ineligible to proceed derivatively under District of Columbia law.
Additionally, because Plaintiffs do not allege facts suggesting that Defendants acted in violation
of an express prohibition in the bylaws, they fail to state cognizable ultra vires claims.
Accordingly, the Court will dismiss Plaintiffs’ derivative claims and ultra vires claim. The case
will proceed, however, with Plaintiffs’ direct claims for waste, breach of contract, and violation
of the D.C. Nonprofit Corporation Act, which survive dismissal.
II. FACTUAL BACKGROUND
Plaintiff Simon Bronner brings this action derivatively on behalf of the American Studies
Association (“ASA”) against Defendants Lisa Duggan, Curtis Marez, Avery Gordon, Neferti
Tadiar, Sunaina Maira, and Chandan Reddy (collectively “Individual Defendants”) for breach of
fiduciary duty, ultra vires acts, and waste. See Am. & Verified Compl. for Derivative and Direct
Claims (“Compl.”) at 1, ECF No. 19. Plaintiffs Bronner, Michael Rockland, Michael Barton,
and Charles Kupfer (collectively “Individual Plaintiffs”) bring this action directly against the
ASA for breach of contract and violation of the D.C. Nonprofit Corporation Act, and against all
Defendants for ultra vires acts and waste. Compl. at 1–2. Individual Plaintiffs are or were
members of the ASA during the time period at issue. See Compl. ¶¶ 11–14. Individual
Defendants were involved with the ASA in different capacities during the relevant time period.
See Compl. ¶¶ 16–21. Individual Plaintiffs are citizens of Pennsylvania and New Jersey.
Compl. ¶¶ 11–14. Individual Defendants are citizens of California, New York, and Washington.
Compl. ¶¶ 16–21. The ASA is organized under the District of Columbia’s nonprofit laws and
maintains its corporate headquarters there. Compl. ¶ 15.
2
A. The American Studies Association
The ASA is a nonprofit organization whose object is “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, Defs.’ Ex. 1, ECF No. 21-3.1 Founding documents of the
ASA provide that the society was “organized exclusively for education and academic purposes.”
Compl. ¶ 24. The president of the ASA 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. 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. There are 23 voting members of the National Council. Compl. ¶ 74; ASA Const. &
Bylaws, Const., Art. V § 1. Under the ASA’s bylaws, “[n]o substantial part of the activities of
the [ASA] shall be the carrying on of propaganda, or otherwise attempting, to influence
legislation, and the corporation shall nor participate in, or intervene in . . . any political campaign
on behalf of any candidate for public office.” Compl. ¶ 25. According to the complaint, the
ASA has conformed to these rules for decades and has established a “uniform practice” that
prevents the ASA from advocating for particular positions on U.S. government policy. Compl.
1
Because Plaintiffs specifically reference the ASA Constitution and Bylaws in their
complaint, see, e.g., Compl. ¶¶ 22, 32, the Court considers them in the context of this motion to
dismiss without converting the motion to one for summary judgment. See Banneker Ventures,
LLC v. Graham, 798 F.3d 1119, 1133 (D.C. Cir. 2015) (citing 5A Charles Alan Wright & Arthur
R. Miller, Federal Practice and Procedure § 1327 (4th ed. 2014)).
3
¶ 25. Based “solely on the condition and understanding that this practice would be followed,”
Individual Plaintiffs donated time and money to the ASA. Compl. ¶ 26.
The ASA bylaws provide that “[t]he Executive Committee [may] speak for the [ASA] on
public issues [that] directly affect” the scholarly work of the ASA’s members. See ASA Const.
& Bylaws, Bylaws, Art. XI § 1. These bylaws also provide that if “an issue arise[s] which, in the
opinion of the Executive Committee or Council, seems to require public action, speech[,] or
demonstration by the association at a particular annual meeting, . . . [t]he Council shall convene
an emergency meeting of the membership on the first full day of the annual meeting[] to
recommend a course of action [and] conduct a public discussion of the issue.” See ASA Const.
& Bylaws, Bylaws, Art. XI § 3. The votes of two-thirds of the members in attendance at the
emergency meeting are required for such a proposition to pass. See ASA Const. & Bylaws,
Bylaws, Art. XI § 3.
In 2013, the ASA elected Defendant Marez to be its president. Compl. ¶ 28. Mr. Marez
ran on a platform of campus openness and “making knowledge less privatized and more equally
distributed.” Compl. ¶ 28. He did not mention Israel or the concept of an academic boycott
during his campaign. See Compl. ¶ 28. According to the complaint, after he was elected, Mr.
Marez made Israel the “central focus” of the ASA under his leadership, and generally began
turning the ASA into a “social justice” organization. Compl. ¶ 29.
B. ASA’s Boycott Resolution
At the ASA’s annual meeting in November 2013, ASA leadership introduced a resolution
advocating for the boycott of Israeli academic institutions on the grounds that Israel restricted
academic activity in formerly Jordanian-occupied territory that came under Israeli control after
the Six Day War in 1967. See Compl. ¶ 41. The boycott resolution’s preambulatory clauses
4
stated that the ASA is devoted to “the struggle against all forms of racism,” that the United States
helps enable Israel to illegally occupy Palestine, that there is “no effective or substantive
academic freedom for Palestinian students and scholars under conditions of Israeli occupation,”
and that the ASA is dedicated to the rights of students and scholars in Israeli institutions. Compl.
¶ 31. The operative clause of the resolution read as follows:
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.
Compl. ¶ 31. During the presentations in support of the resolution, the proponents allegedly did
not present any data or research, did not address how the affected institutions were founded, and
did not specifically address “any . . . aspect of the actual state of academic freedom in the
[t]erritories at any time.” Compl. ¶ 45. Instead, the speakers’ “principal focus” was on an
alleged apartheid state in the territories at issue, and the need for the ASA to support the ending
of “the so-called settler-colonialist Zionist project” and America’s support for these policies.
Compl. ¶ 48. Plaintiffs allege that no speakers in opposition to the resolution were invited to
speak during the course of the discussion, Compl. ¶ 47, and that Defendants “actively prevented
an informed and methodical discussion of the Boycott resolution” in part by actively preventing
opponents of the measure from being heard. Compl. ¶ 46.
Individual Defendants were involved with the boycott resolution in varying degrees.
Defendants Marez and Gordon co-hosted the discussion of the resolution. Compl. ¶ 16–17.
Defendant Tadiar is alleged to have helped plan the 2013 convention. Compl. ¶ 18. Defendants
Maira, Duggan, and Reddy are alleged to have been members of the 2013 National Council and
Executive Committee. Compl. ¶¶ 19–21. Plaintiffs allege that Individual Defendants each
5
engaged in actions that were intended to, and did in fact, alter the nature and purpose of the
ASA. Compl. ¶ 30. Individual Defendants are alleged to have jointly led the campaign for the
ASA to adopt the boycott resolution. Compl. ¶ 2. Plaintiffs further allege that a majority of the
current National Council members are supporters of the boycott resolution, but do not
specifically plead facts showing that a majority actually participated in the adoption of the
resolution. Compl. ¶ 74.
According to the Amended Complaint, the ASA National Committee allowed ASA
members to vote at any time during a ten-day period in December, the month following the 2013
convention. Compl. ¶ 33. Plaintiffs allege that, although around 5,000 people were members of
the ASA at the time of the conference, Compl. ¶ 33, only 1,252 voted on the proposal, with 828
voting in favor of the resolution. Compl. ¶ 33. So, according to Plaintiffs, of the members who
voted on the resolution, just under two-thirds voted in favor. Compl. ¶ 33.
Plaintiffs also suggest that Defendants manipulated the vote. According to the complaint,
members of the ASA who supported the resolution encouraged their students to join the ASA
because they knew the students would vote in favor of the resolution. Compl. ¶ 40. Around the
same time, at least one Individual Plaintiff attempted to vote but was told by ASA leadership that
he could not vote on the resolution “ostensibly because he renewed [his ASA membership] too
late to vote.” Compl. ¶ 35. Plaintiffs allege that at least one other person who renewed his
membership just before the vote was allowed to vote despite the individual plaintiff being barred
from doing so under similar circumstances. Compl. ¶ 38. At the end of voting, the ASA
asserted that the resolution passed. Compl. ¶ 33.
Plaintiffs allege that since the boycott, several members of the ASA have resigned in
protest of the boycott, financially depriving the ASA of membership dues for years to come.
6
Compl. ¶ 60. Moreover, Plaintiffs allege that the ASA has experienced a significant decline in
reputation because of the boycott. The ASA is alleged to have suffered financial harm as a result
of the boycott because of an alleged decrease in donations and an increase in public-relations
spending required by the need to deal with the public backlash resulting from the boycott.
Compl. ¶ 61. Although Plaintiffs do not allege any specific amounts of damages in their
complaint, they do, in their “Jurisdiction and Venue” section, assert that “the amount in
controversy exceeds $75,000.” Compl. ¶ 9.
The ASA, through its Executive Director, has countered that the ASA’s membership dues
actually increased in the year following the boycott and have not significantly changed since
then. See Decl. of John Stephens (“Stephens Decl.”) ¶¶ 5–8, ECF No. 21-2. The ASA also
claims that it received an increase in grants and contributions following the boycott. This
increase is alleged to have amounted to almost $40,000 in the first year, with a total of $49,000
specifically designated by donors for support of the boycott resolution. Stephens Decl. ¶ 9.
However, the ASA acknowledges that it spent $20,000 of the funds received in support of the
boycott resolution on a media strategist, and spent over $15,000 on boycott-related expenses
during annual meetings. Stephens Decl. ¶¶ 10–14. All said, according to the Executive Director
of the ASA, “there has been no financial loss on ASA’s part as a result of the Resolution[, and]
[i]f anything, there has been a net gain of at least $11,770[].” Stephens Decl. ¶ 16.
Prior to filing this suit, some Individual Plaintiffs allege that they attempted to get the
ASA to rescind the resolution and reorient its focus away from Israel. Compl. ¶ 8. According to
the complaint, two Individual Plaintiffs, one of whom was an officer and member of the ASA
governing council, “repeatedly attempted to have the Defendant ASA usurpers abide by the rules
and procedures set forth in [the] ASA’s [c]onstitution.” Compl. ¶ 8.
7
But the complaint does not further specify what actions Plaintiffs took to resolve these
issues short of filing this suit. According to the Complaint, “Plaintiff Bronner has issued a
written Demand to the Council that it investigate these claims and that it cause the ASA to
prosecute such claims.” Compl. ¶ 75. Although the complaint does not indicate when this
demand was made, Defendants attach the demand letter as an exhibit to their motion to dismiss.
Defs.’ Mot. Dismiss Ex. 2, ECF No. 21-4. It is dated April 18, 2016, two days before Plaintiffs
filed their complaint in this case, and apparently attached a copy of the original complaint.
Defs.’ Mot. Dismiss Ex. 2, ECF No. 21-4. Plaintiffs do not contest the authenticity of the
demand document. Pls.’ Mem. Opp’n Defs.’ Renewed Partial Mot. Dismiss (“Pls.’ Opp’n”) at
19–25, ECF No. 23.
Plaintiffs allege that, despite their pre-suit efforts to resolve these issues and their written
demand, Defendants have allegedly “made clear that they will not voluntarily redress Plaintiffs’
concerns.” Compl. ¶ 8. Plaintiffs support this contention by citing the ASA’s expenditures on
public relations, continued efforts to turn the ASA into a “social justice” organization, and their
publicly-stated positions in favor of the boycott and efforts to defend the boycott in publications.
Pls.’ Opp’n at 22.
III. LEGAL STANDARDS
A. 12(b)(1)
Plaintiffs have the burden of showing subject-matter jurisdiction, and their allegations are
not presumed to be truthful. Carmona v. Snow, 2007 WL 915220, at *2 (D.D.C. Mar. 26, 2007)
(quoting Mortensen v. First Fed. Sav. & Loan Ass’n, 549 F.2d 884, 891 n.16 (3d Cir. 1977)).
Indeed, the Court must give the plaintiff’s allegations “closer scrutiny when resolving a Rule
12(b)(1) motion than would be required for a Rule 12(b)(6) motion for failure to state a claim.”
8
Ludvigson v. United States, 525 F. Supp. 2d 55, 56–57 (D.D.C. 2007). In doing so, the Court
may consider evidence outside of the pleadings. Herbert v. Nat’l Acad. of Scis., 974 F.2d 192,
197 (D.C. Cir. 1992); Al-Owhali v. Ashcroft, 279 F. Supp. 2d 13, 21 (D.D.C. 2003).
B. 12(b)(2)
The plaintiff bears the burden of establishing personal jurisdiction over each defendant.
Crane v. N.Y. Zoological Soc’y, 894 F.2d 454, 456 (D.C. Cir. 1990). And, although the court
must resolve any factual discrepancies in favor of the plaintiff, Crane, 894 F.2d at 456, “[b]are
allegations and conclusory statements are insufficient,” Johns v. Newsmax Media, Inc., 887 F.
Supp. 2d 90, 95 (D.D.C. 2012). See also Second Amendment Found. v. U.S. Conference of
Mayors, 274 F.3d 521, 524 (D.C. Cir. 2001). A court may consider evidence outside of the
pleadings to resolve questions of personal jurisdiction. See Mwani v. bin Laden, 417 F.3d 1, 7
(D.C. Cir. 2005).
C. 12(b)(6)
To survive a motion to dismiss for failure to state a claim under Federal Rule of Civil
Procedure 12(b)(6), a complaint must contain sufficient factual allegations that, if accepted as
true, would state a plausible claim to relief. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
“Threadbare recitals of the elements of a cause of action, supported by mere conclusory
statements, do not suffice.” Id. Instead, plaintiffs must “nudge[] their claims across the line
from conceivable to plausible.” See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “In
evaluating a Rule 12(b)(6) motion to dismiss, a court may consider the facts alleged in the
complaint, documents attached as exhibits or incorporated by reference in the complaint, or
documents upon which the plaintiff’s complaint necessarily relies even if the document is
9
produced not by [the parties].” Busby v. Capital One, N.A., 932 F. Supp. 2d 114, 133–34
(D.D.C. 2013) (alteration in original) (internal citations and quotation marks omitted).
IV. ANALYSIS
Defendants move to dismiss on several grounds. First, they contend that the Court lacks
subject-matter jurisdiction because Plaintiffs do not meet the amount-in-controversy requirement
to maintain this diversity suit. Second, they argue that the Court lacks personal jurisdiction over
Individual Defendants because their only alleged connection with the District of Columbia was
the fortuitous location of the ASA’s annual meeting. Third, Defendants argue that a ruling in
favor of Plaintiffs—and thus against the boycott resolution—would constitute state action
infringing on their First Amendment rights. As their fourth grounds for dismissal, Defendants
argue that Plaintiffs failed to make an adequate pre-suit demand on the ASA because the demand
was made only two days prior to the commencement of this lawsuit, and that the demand would
not have been futile. Fifth, Defendants contend that, because the ASA had the authority to pass
the boycott resolution, it did not act ultra vires. Sixth, Defendants argue that they did not breach
any contractual obligations owed to the ASA membership—in other words, that they did not
violate the bylaws. Finally, Defendants argue that the D.C. Nonprofit Corporation Act does not
allow Plaintiffs’ claims to proceed against Individual Defendants.
For the reasons set forth below, the Court grants Defendants’ Motion to Dismiss in part
and denies it in part. The Court concludes that it has both subject-matter and personal
jurisdiction. It has subject-matter jurisdiction because Plaintiffs have shown, beyond the low
standard of legal possibility, that they could recover more than $75,000 if they prevailed. The
Court has personal jurisdiction over the Individual Defendants because they voluntarily served as
directors of a nonprofit registered in D.C. and attended an annual meeting in D.C. and, thus, have
10
purposefully availed themselves of the laws and protections of the District of Columbia.
Moreover, because a judgment against Defendants would be based on generally-applicable laws
with only incidental effects on expression, it would not violate the First Amendment. But
Plaintiffs’ claims begin to falter when the Court moves to their substantive claims. Because
Plaintiffs bring a derivative claim, they were required to make a demand of the ASA before
bringing suit. But Plaintiffs failed to wait the required time after making their demand—which
would not necessarily have been futile—to maintain their derivative claims. Plaintiffs also fail to
show that Defendants acted contrary to any express prohibitions in the bylaws, and thus do not
state an ultra vires claim. Plaintiffs do, however, state a cognizable claim for breach of contract
and Defendants do not move to dismiss their claim for waste. Accordingly, the Court will
dismiss Counts I and II in their entirety, and Count III insofar as it seeks derivative relief on
behalf of the ASA.
A. The Court Has Subject-Matter Jurisdiction, Because It is Not
Legally Impossible for Plaintiffs to Recover More than $75,000
The court first addresses Defendants’ argument that Plaintiffs do not exceed the $75,000
amount-in-controversy requirement to maintain this diversity suit. See Defs.’ Mem. Supp.
Renewed Mot. Dismiss (“Defs.’ Mot. Dismiss”) at 8–11, ECF No. 21. Defendants contend that
Plaintiffs do not allege any specific losses to the ASA as a result of the boycott, and thus have
not adequately shown that the Court possesses subject-matter jurisdiction. The Court concludes
that Plaintiffs have shown, beyond the low standard of legal possibility, that they could recover
more than $75,000 if they were to prevail.
“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 (1994). Congress has the “prerogative to restrict the subject-matter jurisdiction of
11
federal district courts” based on the types of claims brought by particular plaintiffs. Arbaugh v.
Y & H Corp., 546 U.S. 500, 515 n.11 (2006). Congress has limited the Court’s Article III
jurisdiction over diversity cases to matters where the amount in controversy exceeds $75,000.
See 28 U.S.C. § 1332(a). The parties here do not dispute diversity of citizenship.
In general, “the sum claimed by the plaintiff controls if the claim is apparently made in
good faith.” St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288 (1938) (footnote
omitted). For a court to reject the amount claimed by the plaintiff, “[i]t must appear to a legal
certainty that the claim is really for less than the jurisdictional amount.” Id. at 289. This means
that a court should find jurisdiction at this motion-to-dismiss stage of the proceedings even if it
has serious doubts as to the bases for establishing the amount in controversy. See Compton v.
Alpha Kappa Alpha Sorority, Inc., 64 F. Supp. 3d 1, 14 (D.D.C. 2014), aff’d, 639 F. App’x 3
(D.C. Cir. 2016). Even a “cursory” allegation of the amount in controversy, if it exceeds the
jurisdictional requirement, is sufficient to survive a motion to dismiss. 14AA C. Wright, A.
Miller & E. Cooper, Federal Practice and Procedure § 3702, p. 314 (4th ed. 2011); see also
Rosenboro v. Kim, 994 F.2d 13, 17 (D.C. Cir.1993) (“[T]he Supreme Court’s yardstick demands
that courts be very confident that a party cannot recover the jurisdictional amount before
dismissing the case for want of jurisdiction.”); Martin v. Gibson, 723 F.2d 989, 991, 993 (D.C.
Cir. 1983) (characterizing the St. Paul Mercury test as “exacting” and “stringent” in favor of the
plaintiff).
Plaintiffs’ claims plainly meet the low standard for establishing a sufficient amount in
controversy. The complaint asserts that over $75,000 is in controversy in the case, albeit in a
cursory fashion. See Compl. ¶ 9. It is far from legally certain that Plaintiffs could not recover
over $75,000. The complaint seeks monetary, injunctive, and declarative relief for waste, breach
12
of contract, breach of fiduciary duties, ultra vires acts, and violation of the D.C. Nonprofit
Corporation Act. See Compl. at 25–31. It specifically alleges that the ASA will lose
membership dues from many former members for years to come. Compl. ¶ 60. The complaint
also specifically states that the boycott resolution has “resulted in the improper expenditure of
ASA funds related to membership dealings, public relations, legal matters, and . . . employee
time and effort,” and that Individual Defendants are “consciously attempting to appropriate the
assets and reputation of the ASA to achieve purposes . . . at odds with[] [the] purposes and
mission . . . [of] the ASA.” Compl. ¶¶ 80, 84.
Defendants’ evidence allegedly showing that the ASA has profited because of the boycott
resolution is irrelevant at this stage. Even if the ASA has experienced a short-term increase in
revenues, it is possible that the long-term losses could surpass the short-term financial benefits of
the boycott resolution. At this stage of the litigation, before any discovery has been taken and
Defendants’ rosy financial assertions have been tested, Plaintiffs’ allegations are sufficient to
overcome the low bar of “legal impossibility.” The Court accordingly finds that the amount-in-
controversy requirement is satisfied.
B. The Court Has Personal Jurisdiction Over Individual Defendants Because They
Voluntarily Assented to the Laws and Protections of the District of Columbia
Defendants also move to dismiss the claims against Individual Defendants for lack of
personal jurisdiction. See Defs.’ Mot. Dismiss at 11–14. Defendants argue that the only alleged
connection between Individual Defendants and the District of Columbia is that they attended the
ASA annual meeting in the District of Columbia, where the ASA debated and voted on the
boycott resolution. The Court concludes that Individual Defendants have sufficient contacts with
this jurisdiction related to the claims for this Court to assert personal jurisdiction against them.
13
“A personal jurisdiction analysis requires that a court determine whether jurisdiction over
a party is proper under the applicable local long-arm statute and whether it accords with the
demands of due process.” United States v. Ferrara, 54 F.3d 825, 828 (D.C. Cir. 1995); accord
GTE New Media Servs. Inc. v. BellSouth Corp., 199 F.3d 1343, 1347 (D.C. Cir. 2000). There are
two distinct types of personal jurisdiction: general jurisdiction, whereby a court can entertain
claims against the defendant regardless of the claim’s relationship to the forum, and specific
jurisdiction, where jurisdiction is based on acts by the defendant that touch and concern the
forum. See D’Onofrio v. SFX Sports Grp., Inc., 534 F. Supp. 2d 86, 90 (D.D.C. 2008). General
jurisdiction “sets a high bar,” requiring that the defendant have “continuous and systematic”
contacts with the forum state. Id. Specific jurisdiction, in comparison, requires only sufficient
“‘minimum contacts’ with [the forum],” but requires that the plaintiffs’ claims arise from those
contacts. See Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 (1984)
(quoting Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). For claims brought pursuant
to a court’s specific jurisdiction, the relationship between the defendant, the forum, and the
litigation “is the essential foundation of [personal] jurisdiction.” Id. In a diversity-jurisdiction
case, “the federal district court’s personal jurisdiction over the defendant is coextensive with that
of a District of Columbia court.” Helmer v. Doletskaya, 393 F.3d 201, 205 (D.C. Cir. 2004).
Accordingly, an assertion of personal jurisdiction here must comply with due process and
District of Columbia law. Courts give District of Columbia law concerning specific jurisdiction
an expansive reading, making D.C.’s long-arm statute coextensive with the Due Process Clause
with respect to defendants transacting business in the District of Columbia. See id.; see also
D.C. Code § 13-423.
14
In determining whether specific jurisdiction over an individual defendant exists, the court
looks to whether “there [is] some act by which the defendant purposefully avails itself to the
privilege of conducting activities within the forum State, thus invoking the benefits and
protections of its laws.” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985) (quoting
Hanson v. Denckla, 357 U.S. 235, 253 (1958)); accord Heller v. Nicholas Applegate Capital
Mgmt., LLC, 498 F. Supp. 2d 100, 109 (D.D.C. 2007). The “purposeful availment” requirement
exists to ensure that a court does not exercise personal jurisdiction over parties who have only
“random, fortuitous, or attenuated contacts” with the forum state. Heller, 498 F. Supp. 2d at 109
(quoting Burger King Corp., 471 U.S. at 475). A single act by the defendant that creates a
“substantial connection” to the forum is sufficient for a court to assert specific jurisdiction. Id.
(quoting Burger King Corp., 471 U.S. at 475 n.18).
Because the District of Columbia has not adopted an “absolute fiduciary doctrine”—that
is, a rule that an employee’s actions taken on behalf of a corporation cannot give rise to specific
jurisdiction over that employee—under certain circumstances, individual defendants can fairly
be haled into court based on actions they took on behalf of their business organization. See
Family Fed’n for World Peace v. Hyun Jin Moon, 129 A.3d 234, 243 (D.C. 2015). There is no
“mechanical test” for determining whether a court has personal jurisdiction over an individual
defendant who acted on behalf of an organization; courts “weigh the facts of each case.” Id.
(citing Holder v. Haarmann & Reimer Corp., 779 A.2d 264, 270–71 (D.C. 2001)).
In Family Federation for World Peace, the individual defendants, who were directors of
a nonprofit corporation, allegedly enriched themselves without proper authority. Id. at 243. The
nonprofit was organized under District of Columbia law. Id. at 238. However, none of the
individual defendants were D.C. residents. Id. at 242. Nonetheless, because the directors
15
voluntarily served as the governing body that was “in total control of the [D.C.] corporation,”
and participated in at least one wrong that went “to the very essence of th[e] corporation’s
existence” in the District of Columbia, the D.C. Court of Appeals “ha[d] little difficulty in
concluding [that the] directors clearly could anticipate being hauled into [a District of Columbia]
court to account for their activities.” Id. at 243–44 (third alteration in original).
Similarly, in Daley v. Alpha Kappa Alpha Sorority, Inc., members of a sorority brought
claims of breach of fiduciary duty, breach of contract, fraud, unjust enrichment, corporate waste,
and ultra vires acts against several sorority officials alleging that they mismanaged the sorority’s
finances. 26 A.3d 723, 726 (D.C. 2011). The plaintiffs contended that the directors made
several expenditures without authorization from the sorority’s legislative body, which the
sorority’s constitution and bylaws vested with the power to run the sorority. See id. at 726–27.
The plaintiffs specifically alleged that the directors failed to put the expenditures on the
legislative agenda at a biannual meeting in the District of Columbia, and “suppress[ed] any
discussion of the[] expenditures.” See id. at 728 (also reasoning that the case “focus[es] in large
part on wrongdoing with respect to the [biannual meeting]”). None of the individual defendants
were D.C. citizens and the sorority itself was a foreign corporation. Id. at 727. The only
apparent connection between the individual defendants and this jurisdiction was that they
participated in the legislative sessions—which allegedly involved the suppression of dissenting
opinions and resulted in unauthorized spending—in the District of Columbia. The D.C. Court of
Appeals found that “in th[o]se circumstances, the participants could reasonably anticipate being
required to defend their actions in the District without offending traditional notions of fair play
and substantial justice,” rejecting the notion that such contacts were “random [or] fortuitous.”
Id. at 727–28. That court added that once the court had personal jurisdiction over the parties, the
16
plaintiffs’ claims need not be limited to the scope of the activity that occurred in the District of
Columbia. Id. (citing D.C. Code § 13-423).
This case falls squarely within the holdings in Family Federation for World Peace and
Daley and leads the Court to the conclusion that, taken together, the facts weigh in favor of
finding personal jurisdiction. Individual Defendants all voluntarily served as officers of the ASA
which is a District of Columbia nonprofit corporation located in the District of Columbia and
organized under District of Columbia law. Compl. ¶¶ 15–21. Their respective positions charged
them with leading the ASA. See ASA Const. & Bylaws, Const., Art. IV (outlining the governing
structure of the ASA); Compl. ¶ 28 (noting that Defendant Marez was the president of the ASA).
Individual Defendants also voluntarily participated in the 2013 annual meeting in the District of
Columbia. Compl. ¶ 30. Each Individual Defendant allegedly took part in the purportedly
injurious activities of the ASA in the District of Columbia: Defendants Marez and Gordon co-
hosted the discussion of the resolution where dissenting ideas were allegedly suppressed, as in
Daley; Defendant Tadiar helped organize the programming of the 2013 convention, which
included the allegedly ultra vires act of introducing, debating, and voting on the boycott
resolution; Defendants Maira, Duggan, and Reddy were members of the National Council and
Executive Committee at the time. See Compl. ¶¶ 16–21. Moreover, Individual Defendants
together led the effort to adopt the allegedly inappropriate boycott resolution, and allegedly did
so with the intent to alter the nature and purpose of the ASA, a District of Columbia entity, as in
Family Federation for World Peace. Compl. ¶¶ 2, 30.
As the D.C. Court of Appeals concluded in Daley, Individual Defendants’ attendance at
the meeting in D.C. where they allegedly suppressed ideas and mismanaged the ASA was not
“fortuitous.” See 26 A.3d at 728. Nor was it fortuitous that Individual Defendants assumed
17
leadership positions in the D.C. nonprofit organization. See Family Federation for World Peace,
129 A.3d at 243. Taken together, given that the allegedly injurious acts occurred at a meeting in
the District of Columbia and Individual Defendants voluntarily assumed leadership roles in the
District of Columbia organization they allegedly injured, the Court finds that each Individual
Defendant could reasonably anticipate being haled into a District of Columbia court to answer
for alleged wrongdoing in connection with their roles in the boycott resolution. And, because the
Court finds specific jurisdiction over each defendant, the Court need not limit its analysis of
Plaintiffs’ claims to activity that took place within the District of Columbia. See Daley, 26 A.3d
at 728 (citing D.C. Code § 13-423).
C. Ruling Against Defendants would not Violate the First Amendment, Because the Laws
at Issue are Generally Applicable and Defendants Voluntarily Agreed to Them
With the jurisdictional issues resolved, the Court moves to Defendants’ claim that
judicial enforcement of the laws under which Plaintiffs seek redress would violate Defendants’
First Amendment rights.2 See Defs.’ Mot. Dismiss at 19–21. In essence, Defendants argue that
they have a First Amendment right to engage in a boycott, and that enforcing District of
Columbia law to suppress that right would constitute unconstitutional action by the Court. See
Defs.’ Mot Dismiss 19–20. Defendants cite to New York Times Co. v. Sullivan, a case in which
the Supreme Court held that “[w]hat a State may not constitutionally bring about by means of a
criminal statute is likewise beyond the reach of its civil law of libel.” 376 U.S. 254, 277 (1964).
2
For the first time in their reply, Defendants argue that this case falls within the purview
of the District of Columbia’s Anti-SLAPP statute, yet puzzlingly concede that “the statute does
not apply in diversity cases.” See Defs.’ Reply Br. at 3 & n.1, ECF No. 25. Defendants are
correct that the D.C. Circuit has held that the D.C. Anti-SLAPP Act does not apply under Erie
principles, see Abbas v. Foreign Policy Grp., LLC, 783 F.3d 1328, 1337 (D.C. Cir. 2015), so it is
unclear how the argument applies here. At any rate, because Defendants first raise this argument
in their reply, the Court will not consider it. See Walker v. Pharm. Research & Mfrs. of Am., 461
F. Supp. 2d 52, 58 n.9 (D.D.C. 2006).
18
Although it is true that the courts cannot serve as conduits for certain private actions that
deprive others of constitutionally-protected rights, see, e.g., Shelley v. Kraemer, 334 U.S. 1, 13–
14, 18–20 (1948), there is a “well-established line of decisions holding that generally applicable
laws do not offend the First Amendment simply because their enforcement . . . has incidental
effects on” expression, see Cohen v. Cowles Media Co., 501 U.S. 663, 669 (1991). To trigger
First Amendment protection, the infringement upon speech must have arisen from state action of
some kind. See Blum v. Yaretsky, 457 U.S. 991, 1002–03 (1982). “Mere approval of or
acquiescence in the initiatives of a private party” does not constitute state action in the First
Amendment context. See id. at 1004–05; see also Edwards v. Habib, 397 F.2d 687, 691 (D.C.
Cir. 1968) (“[I]f, for constitutional purposes, every private right were transformed into
governmental action by the mere fact of court enforcement of it, the distinction between private
and governmental action would be obliterated.”). Thus, when a court merely enforces
obligations explicitly assumed by the parties, there is no state action. See Cohen, 501 U.S. at
669–70. To hold otherwise would mean that courts could never enforce non-disclosure
agreements. See United Egg Producers v. Standard Brands, Inc., 44 F.3d 940, 943 (11th Cir.
1995) (holding that court enforcement of a settlement agreement is not state action for
constitutional purposes). Formal constitutions and bylaws of organizations are construed by
courts as contracts between the organization and its members. See Meshel v. Ohev Sholom
Talmud Torah, 869 A.2d 343, 361 (D.C. 2005).
This case does not present a First Amendment issue because the Court’s passive
enforcement of the obligations expressly assumed by the parties does not constitute state action.
Plaintiffs take issue with actions by Defendants that were allegedly inconsistent with the ASA’s
organizational purpose, constitution, and bylaws. See Compl. ¶ 1 (“An academic boycott of a
19
foreign country is simply outside of the ASA’s authority to act.”). Thus, Plaintiffs ask the Court
to enforce the contract that the Plaintiffs and Defendants freely entered into when they
voluntarily subjected themselves to the constitution and bylaws of the ASA. See Meshel, 869
A.2d at 361. Defendants, Plaintiffs argue, voluntarily assumed certain obligations toward the
ASA when they took on leadership positions within the organization, and that they violated those
obligations through their roles in passage of the boycott resolution. See Compl. ¶¶ 79–80, 83–
84, 88–89, 92–93.
Plaintiffs’ claims all arise under generally-applicable laws. See Armenian Genocide
Museum & Mem’l, Inc. v. Cafesjian Family Found., Inc., 607 F. Supp. 2d 185, 190–91 (D.D.C.
2009) (setting forth the elements of breach of fiduciary duty); Adamski v. McHugh, No. 14-cv-
0094 (KBJ), 2015 WL 4624007, at *6 (D.D.C. July 31, 2015) (describing the law governing
ultra vires claims); Daley, 26 A.3d at 730 (describing the doctrine of waste); Compton v. Alpha
Kappa Alpha Sorority, Inc., 64 F. Supp. 3d 1, 16 (D.D.C. 2014) (setting forth the elements of
breach of contract), aff’d, 639 F. App’x 3 (D.C. Cir. 2016); D.C. Code § 29-405.24 (outlining the
procedures all nonprofit organizations must follow). They also only seek to enforce rights
created at the initiation of private parties; Individual Defendants voluntarily assumed roles where
their right to expression would be limited by bylaws, the common law, and statute. Because
Defendants voluntarily assented to these laws and the ASA’s constitution and bylaws, the
Court’s interference with speech is passive and incidental to enforcement of a contract. Thus,
enforcement of Plaintiffs’ rights derived from that contract would not constitute state action as
contemplated under Sullivan and Shelley, meaning there would be no First Amendment issue
with a judgment for Plaintiffs in this case.
20
D. Failure to State a Claim
Defendants move to dismiss several of Plaintiffs’ claims under Federal Rule of Procedure
12(b)(6). Specifically, Defendants argue that all of Plaintiffs’ derivative claims fail because they
did not make an adequate pre-lawsuit demand, that Plaintiffs did not act ultra vires, that they did
not breach any contract, and that Individual Defendants cannot be sued for acting outside the
scope of their corporate positions. See Defs.’ Mot. Dismiss at 14–19, 21–29. Defendants do not
specifically move to dismiss Plaintiffs’ waste or D.C. Nonprofit Act claims under Rule 12(b)(6).
See generally Defs.’ Mot. Dismiss. For the reasons set forth below, the Court will dismiss all of
Plaintiffs’ derivative claims and Plaintiffs’ ultra vires claim, but allow the case to proceed to
discovery on their other claims.
1. Plaintiffs Failed to Make an Adequate Pre-Suit Demand
The Court first addresses Defendants’ contention that Plaintiffs’ derivative claims must
be dismissed because Plaintiffs failed to make a proper pre-lawsuit demand, as required by the
D.C. Nonprofit Corporation Act. See Defs.’ Mot. Dismiss at 14–19. Defendants’ contention has
merit.
A derivative action is a lawsuit brought by members of a corporation, on behalf of the
corporation to remedy injuries done to the corporation. 18 C.J.S. Corporations § 482. Derivative
suits are often brought against members of the corporation’s board of directors, and allege that a
member or members either disregarded their duties or put their personal interests ahead of the
corporation’s. Id. The corporation itself is included as a nominal defendant for reasons of issue
preclusion. Knop v. Mackall, 640 F. Supp. 2d 58, 61 (D.D.C. 2009), rev’d in part on other
grounds, 645 F.3d 381 (D.C. Cir. 2011). In many cases, before filing a derivative suit against a
corporation to remedy injuries to the corporation, a member must attempt to have the
21
corporation’s board of directors remedy the problem itself. See 7C Wright, A. Miller & E.
Cooper, Federal Practice and Procedure § 1831 (3d ed.). D.C. law requires a member of a
nonprofit organization to make a demand on its directors ninety days before initiating a lawsuit.
See D.C. Code § 29-411.03(2). Demand requirements arise from the concept of corporate self-
governance. See Wright & Miller § 1831. Demand statutes are rooted in “the basic principle of
corporate governance that the decisions of a corporation—including the decision to initiate
litigation—should be made by the board of directors or the majority of shareholders.” Kamen v.
Kemper Fin. Servs., Inc., 500 U.S. 90, 101 (1991) (quoting Daily Income Fund, Inc. v. Fox, 464
U.S. 523, 530 (1984)). In comparison, demand requirements do not exist in direct claims by
shareholders against a corporation, because in that situation the plaintiff alleges harm to himself
as an individual, not the corporation.
Defendants claim that Plaintiffs failed to make a proper demand because they did so only
two days before filing the instant lawsuit, not having waited the ninety days required by statute.
See Defs.’ Mot. Dismiss at 14–19; Defs.’ Mot. Dismiss Ex. 2, ECF No. 21-4. Plaintiffs respond
that their demand was sufficient because over ninety days have now passed since the demand
was made, even if only two days passed before they filed this lawsuit. Pls.’ Opp’n at 19. In the
alternative, Plaintiffs argue that even if their demand was deficient, the lack of demand should be
excused because a demand would have been futile. See Pls.’ Opp’n at 19–25. The Court will
first address the sufficiency of the demand made before analyzing the futility argument.
a. Plaintiffs Failed to Wait Ninety Days after Making a Pre-Suit Demand
At issue under the D.C. Code is whether a plaintiff may file a derivative lawsuit
less than ninety days after formally demanding a nonprofit corporation to take the
plaintiff’s desired action, so long as ninety days have passed between the demand and the
22
court’s order on the motion to dismiss. Plaintiffs do not dispute that they filed the instant
suit a mere two days after serving their formal demand. See Pls.’ Opp’n at 19.
Despite Defendants’ argument that Federal Rule of Civil Procedure 23.1
“require[s] that a demand be made before suit,” see Defs.’ Mot. Dismiss at 14, the federal
rule concerns only the form pleadings must take, see Fed. R. Civ. P. 23.1; see also
Kamen, 500 U.S. at 96. It does not impose legally substantive requirements any more
than Rule 8 does with respect to ordinary complaints. See id. Because this is a diversity
case applying D.C. law, Rule 23.1 is animated by the District of Columbia’s substantive
law requiring a pre-suit demand, D.C. Code § 29-411.03. The text of the D.C. law leads
the Court to an easy answer to the Court’s inquiry—with certain exceptions, after
submitting a demand, a party must wait ninety days before filing suit.
Under District of Columbia Code § 29-411.03,
A person shall not commence a derivative proceeding until:
(1) A demand in the form of a record has been delivered to the nonprofit
corporation to take suitable action; and
(2) Ninety days have expired from the date the demand was effective unless:
(A) The person has earlier been notified that the demand has been rejected by the
corporation; or
(B) Irreparable injury to the corporation would result by waiting for the expiration
of the 90-day period.3
The Court’s interpretation of this provision “begins with the statutory text, and ends there as well
if the text is unambiguous.” BedRoc Ltd., LLC v. United States, 541 U.S. 176, 183 (2004).
Abridged, the statute provides that “[a] person shall not commence a derivative proceeding until .
. . [a] demand . . . has been delivered to the nonprofit corporation. . . and . . . [n]inety days have
3
The D.C. nonprofit corporation demand statute is identical to the demand statute for for-
profit corporations. Compare D.C. Code § 29-411.03 with D.C. Code § 29-305.52.
23
expired from the date the demand was effective” unless the exceptions apply.4 D.C. Code § 29-
411.03 (emphasis added). The statute defines “derivative proceeding” as “a civil action in the
right of a domestic nonprofit corporation.” Id. § 29-411.01. Under both the D.C. and federal
rules of civil procedure, “[a] civil action is commenced by filing a complaint with the court.”
See D.C. Super. Ct. R. Civ. P. 3; Fed. R. Civ. P. 3. Thus, D.C. nonprofit corporation law
provides that a person is precluded from filing a civil derivative action until the demand has been
delivered to the nonprofit corporation and ninety days have actually expired (unless a rejection is
received earlier or irreparable harm will occur in the interim). Thus, the act of filing the lawsuit
before waiting ninety days is improper under D.C. law, unless some exception to the demand
requirement applies.
In Arkansas Teacher Retirement System ex rel. Progress Software Corp. v. Alsop, the
District of Massachusetts reached the same result with a nearly identical statute. There, the
plaintiff filed its original complaint before making a formal demand, but filed an amended
4
In a cursory fashion, Plaintiffs assert in their complaint that waiting the ninety-day
period would have brought about irreparable harm to the ASA, because “[e]ach day without
redress is a day when the scholarly goals for the ASA . . . are not pursued . . . a[t] the expense of
the ASA itself and its scholar members.” Compl. ¶ 76. This argument can be rejected out of
hand for three reasons. First, this claim is conclusory and fails to meet the heightened pleading
standards of Rule 23.1, as explained below. Plaintiff in no way articulates what harms flow from
scholarly goals not being pursued on a daily basis, other than the ambiguous “expense[s]” that it
is costing the ASA and its members. Compl. ¶ 76. Second, assuming the plaintiffs had literal
financial expenses in mind, “economic loss does not, in and of itself, constitute irreparable
harm.” Mexichem Specialty Resins, Inc. v. EPA, 787 F.3d 544, 555 (D.C. Cir. 2015) (quoting
Wis. Gas Co. v. FERC, 758 F.2d 669, 674 (D.C. Cir. 1985)). Third, with full knowledge of the
resolution that was allegedly causing irreparable injury each and every day, Plaintiffs waited
over two years to file a lawsuit. This significantly undermines Plaintiffs’ claims that waiting an
additional 88 days would have caused irreparable harm. See Hispanic Affairs Project v. Perez,
141 F. Supp. 3d 60, 68 (D.D.C. 2015) (noting that the “[t]he D.C. Circuit has found that a delay
of even forty-four days before bringing action” was “inexcusable,” and “bolstered the conclusion
that” irreparable harm did not exist in the context of a motion for a preliminary injunction
(quoting Fund for Animals v. Frizzell, 530 F.2d 982, 987 (D.C. Cir. 1975))).
24
complaint ninety after the demand, and thus argued that the motion to dismiss for failure to make
a demand was moot. 2007 WL 7069609, at *5 (D. Mass. 2007). The relevant statute provided
that “[n]o shareholder may commence a derivative proceeding until . . . a written demand has
been made upon the corporation to take suitable action[] and . . . 90 days have elapsed from the
date the demand was made.” Id. at *7 (emphasis removed). That court concluded that “[t]he
plain language requires a demand prior to commencing suit.” Id. at *8.
As noted above, Federal Rule of Civil Procedure 23.1 outlines the pleading requirements
for derivative actions brought in federal court. See Weiner v. Winters, 50 F.R.D. 306, 309
(S.D.N.Y. 1970). As a rule of procedure, it instructs parties how to demonstrate that they have
complied with a substantive demand requirement. See Fed. R. Civ. P. 23.1. Rule 23.1 requires
plaintiffs to submit a verified complaint stating, with specificity, any effort by the plaintiff to
comply with the substantive demand statute—in this case, D.C. nonprofit law—or the reasons for
not making any such efforts, assuming that the substantive law allows plaintiffs to avoid making
such a demand. Rule 23.1 requires plaintiffs to be substantially more thorough than does Rule 8.
See Gaubert v. Fed. Home Loan Bank Bd., 863 F.2d 59, 68 (D.C. Cir. 1988).
Plaintiffs plainly did not make an adequate pre-suit demand. They delivered a formal
demand letter, with their original complaint attached, to the ASA National Council on April 18,
2016.5 Then, two days later, Plaintiffs filed a civil derivative action in federal court. See
Original Compl., at 31, ECF No. 1. Under the plain text of the D.C. demand statute, this was too
5
The Court considers this letter because Plaintiffs explicitly relied upon it in their
complaint. See Compl. ¶ 75; Busby, 932 F. Supp. 2d at 133–34.
25
early. Because Plaintiffs did not make an adequate pre-suit demand, the Court next addresses
whether plaintiff’s lack of demand can be excused as futile.6
b. Demand was not Futile as a Matter of Law
Plaintiffs argue that the demand requirement should be excused as futile because
Defendants could not reasonably have been expected to fairly judge whether to bring this action
themselves. Pls.’ Opp’n at 20–22. Defendants respond that Plaintiffs have not adequately pled
futility. Reply Br. Supp. Mot. Dismiss at 8–15, ECF No. 25. Because Plaintiffs have not shown
that a majority of the members on the National Council at the time of filing had bias against the
corporation to the point of being unable to independently evaluate the merits of the suit, the
Court concludes that demand would not have been futile.
In determining whether pre-suit demand would have been futile, the court focuses on
whether the complaint alleges enough particularized facts to create a reasonable doubt as to
whether a majority of the officers responsible for bringing such an action could have made an
independent and disinterested response to the demand. See Behradrezaee v. Dashtara, 910 A.2d
349, 358 (D.C. 2006). Under Federal Rule of Civil Procedure 23.1, “mere allegations or
conclusory statements regarding directors’ dual allegiances, self-interest, or control by others is
insufficient.” Gaubert, 863 F.2d at 68. Indeed, “[m]ere allegations of improper motives” are
inadequate, and showing “mere participation or acquiescence by the directors” is not enough. Id.
(quotation marks omitted).
6
The complaint also vaguely suggests that some Individual Plaintiffs made efforts to stop
the Israel boycott and force plaintiffs to adhere to the ASA rules. Compl. ¶ 8. However, those
allegations are far from sufficient to show that Plaintiffs “delivered” the demand to take “suitable
action,” let alone that it did so more than ninety days before filing this suit.
26
Instead, the plaintiff must allege specific facts demonstrating an “unmistakable link”
between the alleged wrongdoing and directors’ self-interest or other form of personal bias that
could get in the way of correction. See In re Kauffman Mut. Fund Actions, 479 F.2d 257, 264
(1st Cir. 1973); Gaubert, 863 F.2d at 68. “The predominant federal view is that the board of
directors must have been actively involved in the alleged wrongdoing for demand to be
excused.” Gaubert, 863 F.2d at 65. Because “rare is the significant corporate act that has not in
one way or another been ‘approved of,’” it is not enough for a party to simply show that a
director supported a particular action that allegedly harmed the corporation. See id. (quoting In
re Kauffman Mut. Fund Actions, 479 F.2d at 265). Plaintiffs have not adequately pleaded facts
showing that pre-suit demand would have been futile for four independently-sufficient reasons.
First, the conclusory allegation that Individual Defendants7 “have made clear that they
will not voluntarily redress Plaintiffs’ concerns,” Compl. ¶ 8, is not only conclusory, see
Gaubert, 863 F.2d at 68, but it is inapposite. It is not Defendants who must have been open to
voluntary redress, but the members of the ASA’s National Council at the time the suit was filed.
See Behradrezaee, 910 A.2d at 358. This is because it was the Council at the time of demand
that was charged with determining whether the corporation would remedy the situation
internally. See ASA Const. & Bylaws Const. Art. V § 2. Plaintiffs acknowledge in their
complaint that only two Individual Defendants were members of the National Council when
Defendants filed this suit. See Compl. ¶ 74.
7
The most natural reading of paragraph 8 of Plaintiffs’ complaint suggests that only
Individual Defendants have “made clear that they will not voluntarily redress Plaintiffs’
concerns. See Compl. ¶ 8. In the preceding sentence, Plaintiffs refer to their attempts to get “the
Defendant ASA usurpers” to abide by the ASA’s rules. See Compl. ¶ 8. Moreover, as noted
above, the organizational defendant in a derivative action is nominal only. Knop, 640 F. Supp.
2d at 61.
27
Second, Plaintiffs’ argument would not be salient even if Defendants were a majority of
the National Council. Their argument confuses bias with support for the actions underlying the
suit. Plaintiffs, in essence, argue that Defendants have shown that they could not independently
evaluate a demand because of their passion for the boycott resolution. See Pls.’ Opp’n at 22.
This is insufficient under Gaubert, which notes that one could rarely find a major corporate
action that has not been approved by a majority of directors. 863 F.2d at 65. If shareholders
could skirt the demand requirement by showing that directors believed in their own actions,
shareholders would almost never have to make a demand at all. As Plaintiffs themselves assert
in their complaint, this lawsuit is not about the substance of the boycott resolution, but rather
“turns on straightforward legal questions: whether . . . an academic boycott of Israel is an act that
falls under the ASA’s ‘exempt purpose.’” Compl. ¶ 2. Plaintiffs do not show that any single
Individual Defendant would be unable to independently analyze whether the actions of the ASA
were in line with that exempt purpose. Nor do they show that all of the Individual Defendants
were more than “mere participants” in the boycott resolution.
Third, and perhaps most obviously, Plaintiffs have not shown that a majority of the 23-
member National Council—which is expressly charged with the governance of the ASA and
changes every year, see ASA Const. & Bylaws, Const., Art. V §§ 1, 2—as composed at the time
of filing, even contributed to the actions at issue. Without that showing, Plaintiffs have not
pleaded facts demonstrating that a majority of the ASA board members participated in or
acquiesced to the boycott resolution, a standard below the requirement articulated in Gaubert,
which requires active involvement in the alleged wrongdoing. See 863 F.2d at 68.
Finally, even assuming that being in favor of a past Council’s actions could demonstrate
bias, Plaintiffs have not shown anything more than “mere allegations of improper motives” by
28
citing to piecemeal statements of support by current councilmembers. See id.; Compl. ¶ 74.
Thus, Plaintiffs have not adequately pleaded facts supporting its claim of futility. Accordingly,
the Court will dismiss Plaintiffs’ derivative claims pursuant to Federal Rule of Civil Procedure
23.1.
2. Defendants Did Not Act Ultra Vires
Plaintiffs’ ultra vires claim hinges on the idea that the boycott resolution falls outside the
scope of the purpose of the ASA, and that Defendants are operating the ASA as a “social justice
organization” instead of as an academic organization.8 See Compl. ¶¶ 82–83. Plaintiffs
primarily cite the purpose of the ASA—which is the “promotion of the study of American
culture through the encouragement of research, teaching, publication, and the strengthening of
relations among persons and institutions in this country and abroad devoted to such studies”—
and the bylaw prohibiting the carrying on of propaganda. See Compl. ¶¶ 22, 82. Defendants
contend that the boycott resolution was within the ASA’s authority to “engage in any and all
lawful activities incidental to” the purpose of the organization. Defs.’ Mot. Dismiss at 22; see
also ASA Const. & Bylaws, Const., Art. I § 2. Defendants further argue that the ASA
constitution requires the organization to promote the study of American culture both
domestically and abroad, and that no particular provision precluded the adoption of the boycott
resolution. Defs.’ Mot. Dismiss at 22–23. Because Plaintiffs have not pleaded facts showing
that the boycott resolution was expressly prohibited by any statute or ASA bylaw, their ultra
vires claim must be dismissed.
8
Plaintiffs devote much of their complaint and opposition to the idea that Individual
Defendants hijacked the ASA for the improper purpose of turning it into a social justice
organization. See Compl. ¶¶ 26, 59, 64. This alleged hijacking is not a discrete cause of action,
but does tangentially relate to Plaintiffs’ ultra vires claim. See Compl. at 25–31.
29
A member of an organization may directly sue that organization to enjoin actions that the
organization did not have power to execute. See D.C. Code § 29-403.04(b)(1); see also Daley v.
Alpha Kappa Alpha Sorority, Inc., 26 A.3d 723, 729 (D.C. 2011). Actions taken by the
organization that are “expressly prohibited by statute or by-law” or outside the powers conferred
upon it by its articles of incorporation are ultra vires. Compton v. Alpha Kappa Alpha Sorority,
Inc., 64 F. Supp. 3d 1, 18 (D.D.C. 2014), aff’d, 639 F. App’x 3 (D.C. Cir. 2016); see also Daley,
26 A.3d at 730 (emphasis omitted) (quoting Columbia Hosp. for Women Found., Inc. v. Bank of
Tokyo-Mitsubishi Ltd., 15 F. Supp. 2d 1, 7 (D.D.C. 1997), aff’d, 159 F.3d 636 (D.C. Cir. 1998)).
“In certain circumstances, a long-standing pattern or practice of corporate behavior may give rise
to a by-law.” Family Fed’n for World Peace, 129 A.3d at 251. Interpretation of an
organization’s constitution and bylaws, including whether they are ambiguous, presents legal
questions to be resolved by the text of the documents, unless that text is fairly susceptible to
different interpretations. See Bazarian Int’l Fin. Assocs., LLC v. Desarrollos Aerohotelco, C.A.,
168 F. Supp. 3d 1, 20 (D.D.C. 2016) (using such a rule in the context of D.C. contract law).
Where there is ambiguity in the text of the articles of incorporation, the Court determines
whether the action is reasonably in furtherance of the objects of the organization. See Hollar v.
Gov’t of the Virgin Islands, 857 F.2d 163, 169 (3d Cir. 1988) (cting 6 Am. Jur. 2d, Associations
and Clubs § 11 (1963)).
Plaintiffs advance three theories to support their claim that ASA’s adoption of the boycott
resolution was an ultra vires act. First, Plaintiffs contend that the adoption of the boycott
resolution violated the express purpose of the ASA. Second, Plaintiffs argue that it violated the
Article of Incorporation banning the carrying on of propaganda. And third, Plaintiffs assert that
30
it violated a bylaw created by a longstanding practice of not becoming involved with American
political issues. See Compl. ¶¶ 81–85. None of these theories are sufficient to state a claim.
In support of their first theory—that the adoption of the boycott resolution was an ultra
vires act because it violated the express purpose of the ASA—Plaintiffs cite to the ASA’s
“organic documents” that allegedly provide that “[t]he corporation is organized exclusively for
education and academic purposes,” and Article I § 29 of the ASA Constitution, which provides
that “[t]he object of the association shall be 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.” Compl. ¶¶ 22, 24. Neither of these provisions “expressly prohibited” the
boycott resolution, and the ASA was within its powers to do so. See Daley, 26 A.3d at 730. The
boycott resolution “endorse[d] and . . . honor[ed] the call of Palestinian civil society [to] boycott
. . . Israeli academic institutions.”10 Compl. ¶ 31. As shown by the preamble of the resolution,
the ASA passed the boycott resolution because, in its view, Israel suppresses the academic
freedom of Palestinian scholars and students, and the United States “plays a significant role in
enabling” that suppression. Compl. ¶ 31. The ASA also did so as a show of solidarity with
9
Later in their complaint, Plaintiffs cite to “Article II” to establish the ASA’s purpose.
See Compl. ¶ 82. Based on earlier citations in the complaint and the ASA Constitution &
Bylaws attached to Defendants’ motion to dismiss, it seems apparent that Plaintiffs intended to
cite to Article I § 2. See Compl. ¶ 22.
10
To the extent Plaintiffs argue that Defendants’ true purpose was different from the
stated purpose in the resolution—and it is far from clear that they do—those ulterior motives do
not matter. “The power of a corporation to do an act is not affected by the motives or intent with
which the act is done.” 6 Fletcher Cyc. Corp. § 2477; see also 18B Am. Jur. 2d Corporations
§ 1716 (noting that an act is “not rendered ultra vires by the mere fact that the corporation
intends to use the proceeds [of the act] for an ultra vires purpose”).
31
those scholars. Compl. ¶ 31. The boycott resolution was, therefore, enacted for “academic
purposes,” at least to a point where it was not in violation of the ASA’s founding documents.
See Daley, 26 A.3d at 730. It also was reasonably in furtherance of the ASA’s purpose of
advancing education and the promotion of the study of American culture through encouraging
research, teaching, and strengthening relations among persons and institutions in the United
States and abroad. See Hollar, 857 F.2d at 169. The boycott resolution was aimed both at
encouraging academic freedom for Palestinians and strengthening relations between American
institutions and Palestinians. At the very least, it was “reasonably in furtherance of the objects”
of the ASA. See id. Thus, it was not contrary to the ASA’s express purposes.
Plaintiffs’ second theory—that the adoption of the boycott resolution was an ultra vires
act because it violated the Articles of Incorporation banning the carrying on of propaganda—also
comes up short. According to the ASA’s bylaws, “[n]o substantial part of the activities of the
corporation shall be the carrying on of propaganda, or otherwise attempting, to influence
legislation, and the corporation shall not participate in . . . any political campaign on behalf of
any candidate for public office.” Compl. ¶ 25. Without the phrase offset by commas (“or
otherwise attempting”), the bylaw plainly reads as a restriction only on using propaganda to
influence legislation: “[n]o substantial part of the activities of the corporation shall be the
carrying on of propaganda . . . to influence legislation.”11 Compl. ¶ 25. The boycott resolution
11
Plaintiffs disregard this caveat in their opposition, suggesting that there is both “an
absolute ban on ‘propaganda’ and [on] efforts ‘to influence legislation.’” See Pls.’ Opp’n at 5.
This is plainly not the case. At least one other court has reached the same conclusion
interpreting similar text. See Williamson v. S. Reg’l Council, Inc., 154 S.E.2d 21, 25 (Ga. 1967).
The statute at issue in Williamson restricted the “carrying on propaganda, or otherwise
attempting to influence legislation.’” 154 S.E.2d at 24. Despite the absence of a comma after
“attempting,” the Georgia Supreme Court concluded that “[t]he use of the word ‘otherwise’
indicates that ‘carrying on propaganda’ relates to ‘attempting to influence legislation.” Id. at 25.
32
was not an attempt to influence legislation in any meaningful sense of the term. See Haswell v.
United States, 500 F.2d 1133, 1140 (Ct. Cl. 1974) (citing Cammarano v. United States, 358 U.S.
498, 512 (1959)) (tracing “the development of the congressional policy against an exemption for
organizations that attempt to promote or defeat legislation” (emphasis added)). Plaintiffs have
not pointed to any existing, proposed, or pending legislation that the ASA may have been
targeting with the resolution. Although one may be able to draw an indirect link between any
resolution and some potential piece of legislation in that it calls attention to a public issue, that
connection is far too attenuated to make the boycott resolution “expressly prohibited” by the
bylaw. See id.; Daley, 26 A.3d at 730.
Plaintiffs’ final theory—that the boycott resolution was a violation of longstanding
practice—also falls short of stating a plausible claim of ultra vires acts. As noted above, in
certain circumstances, longstanding practice can give rise to a bylaw. Family Fed’n for World
Peace, 129 A.3d at 251. The complaint alleges that a “long record of uniform practice prevent[s]
the ASA from taking action to advance a particular position on questions of U.S. government
policy.” Compl.¶ 25. The boycott resolution was passed, at least in part, because the ASA
believed that the United States’ policies toward Israel “play[] a significant role in enabling”
Israeli suppression of academic freedom for Palestinians. See Compl. ¶ 31. However, ultra vires
acts are those that are “expressly prohibited by statute or by-law.” Daley, 26 A.3d at 730
(emphasis added and omitted) (quoting Columbia Hosp. for Women Found., Inc., 15 F. Supp. at
7). For a bylaw to “expressly” prohibit an action, the prohibition must be “[c]learly and
unmistakably communicated,” or, in other words, “stated with directness and clarity.” Express,
Black’s Law Dictionary (10th ed. 2014); accord Threshold Techs., Inc. v. United States, 117
Fed. Cl. 681, 697 (Ct. Fed. Cl. 2014). An “express” bylaw is one “whose terms [are] explicitly
33
set out.” See Threshold Techs., Inc., 117 Fed. Cl. at 697 (quoting Express Contract, Black’s Law
Dictionary (10th ed. 2014)).
Plaintiffs do not in any way allege that the “long record of uniform practice” actually
functioned as a prospective, affirmative prohibition on taking a position on U.S. government
policy. See Compl. ¶ 25. Even if the Court were to read such a rule into the complaint, Plaintiff
does not suggest that the rule was in any way “set out” by the ASA itself, its membership, its
past National Council members, or any other relevant party. See Compl. ¶ 25; Threshold Techs.,
Inc., 117 Fed. Cl. at 697. Still further, there is no indication that the rule was clearly and directly
set out in explicit terms. See Compl. ¶ 25. Without pointing to some express form of a rule that
Defendants could have violated as a result of the “longstanding practice” of not involving the
ASA in U.S. government policy, Plaintiffs have not stated a cognizable ultra vires claim. Thus,
the Court dismisses Plaintiffs’ ultra vires claim.
* * *
Plaintiffs have not pled facts plausibly showing that Defendants acted ultra vires. The
boycott resolution was, at the very least, reasonably in furtherance of the ASA’s organic
documents and Articles of Incorporation, which provide that the ASA was organized exclusively
for educational and academic purposes, and that the object of the ASA is the promotion of
American culture through, inter alia, “the encouragement of research, teaching, publication, [and
the] strengthening [of] relations among persons and institutions in this country and abroad
devoted to such studies.” See Compl. ¶¶ 22, 24. The boycott resolution was aimed at promoting
academic freedom abroad, solidarity with foreign institutions and scholars, and encouraging an
array of studies at foreign institutions. The boycott resolution did not violate the ASA bylaws’
restriction on “the carrying on of propaganda . . . to influence legislation,” see Compl. ¶ 25,
34
because Plaintiffs have not drawn the connection between the boycott resolution and any piece of
legislation. Finally, Plaintiffs have not shown that an implied bylaw exists that precludes
commentary of U.S. governmental policy. Even if they had, however, because that bylaw would
not be “express,” violation of it would not constitute ultra vires action.
3. Plaintiffs have Stated a Plausible Claim for Breach of Contract
Plaintiffs’ breach of contract claim assumes that even if the ASA had the authority to
adopt the boycott resolution, its authority was contractually bound by Article XI § 3 of the ASA
Bylaws, which requires the affirmative votes of two-thirds of voting members on the first full
day of the meeting, and the ASA failed to enact the resolution in accordance with those
procedures. See Compl. ¶¶ 90–94. Defendants argue that Article XI § 3 did not apply to the
boycott resolution, because the Committee itself had the power to speak on behalf of the ASA,
and that the vote on the resolution was simply a legitimizing act on the controversial measure.
Defs.’ Mot. Dismiss at 26–28. Because Plaintiffs have plausibly alleged that the boycott
resolution was enacted in violation of the ASA’s bylaws, the Court denies Defendants’ motion to
dismiss with respect to their breach of contract claim.
A nonprofit organization’s “Constitution and Bylaws form a contract between that
[organization] and its members.” See Compton v. Alpha Kappa Alpha Sorority, Inc., 64 F. Supp.
3d 1, 16 (D.D.C. 2014), aff’d, 639 F. App’x 3 (D.C. Cir. 2016). “Plaintiffs’ breach of contract
claims require (1) the existence of a valid contract, (2) an obligation or duty arising out of that
contract, (3) a breach of the contract . . . , and (4) damages suffered by Plaintiffs due to the
breach.” Id. Defendants only argue that they did not breach the contract by violating the ASA
bylaws, because no obligation or duty arose from the inapplicable provision of the bylaws. See
Defs.’ Mot. Dismiss at 26–28.
35
Article XI of the ASA Bylaws empowers the Executive Committee to speak for the ASA
on public issues that “directly affect [members’] work as scholars and teachers.” ASA Const. &
Bylaws, Bylaws, Art. XI § 1. That provision sets forth examples of the types of issues on which
the Executive Committee may speak for the ASA, including matters of academic freedom,
freedom of access to information, and policies concerning academic grants. ASA Const. &
Bylaws, Bylaws, Art. XI § 1. This provision extends only to issues directly affecting ASA
members. It seems based on the complaint—which contains the text of the boycott resolution
itself, including the preamble—that the purportedly oppressive practices by Israel do not
“directly” affect the scholarly work or teaching of current ASA members. As a result, it is
plausible that the ASA was not entitled to speak for the ASA on this issue.
Article XI also provides the following:
Sec. 3. Should an issue arise which, in the opinion of the Executive Committee or
Council, seems to require public action, speech or demonstration by the
association at a particular annual meeting, the Council shall meet to formulate a
response. The Council shall convene an emergency meeting of the membership on
the first full day of the annual meeting, to recommend a course of action, and
conduct a public discussion of the issue(s); and the vote of two-thirds of those in
attendance may approve the recommended action.
ASA Const. & Bylaws, Bylaws, Art. XI § 3. Breaking this provision down, anytime an issue
arises that the Executive Committee or Counsel feels requires (1) public action, speech, or
demonstration (2) by the association at a particular annual meeting, the Council shall comply
with the procedural requirements of Article XI § 3.
Because it is plausible that the Executive Committee saw the U.S.–Israeli policy issue as
the type “requir[ing] public action, speech, or demonstration by the association at [the 2013]
annual meeting,” Plaintiffs state a plausible claim for breach of contract. Plaintiffs have pleaded
multiple facts suggesting that the Executive Committee and Council felt that the ASA needed to
speak and demonstrate on the public issue of Israeli suppression of academic freedom as a matter
36
of social justice. See Compl. ¶¶ 26, 59, 64, 78. They also plead facts plausibly showing that the
Executive Committee felt the demonstration must take place by the ASA at the 2013 annual
meeting. At the annual meeting, the Executive Committee organized a variety of boycott-related
programming, including a town-hall meeting, to discuss the issue as an organization. See Compl.
¶¶ 30, 47. Moreover, the ASA Executive Committee appears to have attempted to follow some
procedural requirements of Article XI § 3—they “formulate[d] a response” in the form of the
boycott resolution, they “recommend[ed] a course of action,” they “conduct[ed] a public
discussion of the issue[],” and they held a vote. But the Executive Committee did not secure
“the vote of two-thirds of those in attendance” at the annual meeting before implementing the
resolution. See Compl. ¶ 33. Instead, the Executive Committee opened the vote to all ASA
members and conducted the vote during the course of ten days in December. See Compl. ¶ 33.
It is plausible that the Executive Committee attempted to follow some, but not all, of the Article
XI § 3 procedures because it saw the issue as the type described therein.
As noted above, if the Executive Committee or Council did indeed believe that Israeli
policies “require[d] public action, speech[,] or demonstration by the [ASA] at [the] annual
meeting,” the National Council was required to “meet to formulate a response,” “convene an
emergency meeting of the membership on the first full day of the annual meeting[] to
recommend a course of action,” “conduct a public discussion of the issue[],” and obtain votes
from two-thirds of those in attendance. At this stage, Defendants do not dispute that the National
Council did not follow all of these steps. See Defs.’ Mot. Dismiss at 26–28. Thus, if it is
established that this provision of the bylaws applies to the scenario at issue, Plaintiffs have
plausibly alleged that the ASA breached its contractual obligations to its members.
37
4. Defendants’ Substantive Ultra Vires Arguments are Moot
Defendants’ final argument is that, under the D.C. Nonprofit Corporation Act, Plaintiffs
cannot bring ultra vires claims directly against Individual Defendants. See Defs.’ Mot. Dismiss
at 28–29. Because the Court dismisses Plaintiffs’ ultra vires claims brought against both the
ASA and Individual Defendants, that argument appears to be moot. But Defendants assert, in
conclusory terms, that, in addition to applying to the now-dismissed ultra vires counts, this
statutory argument also pertains to Plaintiffs’ claim for waste. See Defs.’ Mot. Dismiss at 28–29.
Defendants are wrong.
The D.C. Nonprofit Corporation Act provides that individual members of the nonprofit
may only directly challenge an action as ultra vires by suing the corporation to enjoin the act.
D.C. Code § 29-403.04(b)(1). By virtue of this provision, Defendants claim that Plaintiffs
cannot bring waste claims against Individual Defendants. In contrast to ultra vires claims,
however, claims of corporate waste need only “articulate an ‘exchange of corporate assets for
consideration so disproportionately small as to lie beyond the range at which a reasonable person
might be willing to trade,’ and must be ‘egregious or irrational.’” Daley, 26 A.3d at 730
(quoting In re Greater Southeast Comty. Hosp. Corp., I, 333 B.R. 506, 524 (Bankr. D.D.C.
2005)). Plaintiffs cite to this rule in their Count for waste. See Compl. ¶ 87 (quoting 3A
Fletcher Cyc. Corp. § 1102 at 150–51) (2010)). Although Plaintiffs also assert that the
motivation for the allegedly wasteful use of corporate assets was a cause “beyond the purposes
established by its organic documents,” Compl. ¶ 88, that language is not essential to Plaintiffs’
claim for waste; improper motive is not an element, see Daley, 26 A.3d at 730. Thus, because
the D.C. Nonprofit Corporation Act does not prohibit Plaintiffs’ waste claim against Individual
Defendants, that claim survives dismissal.
38
V. CONCLUSION
For the foregoing reasons, Defendants’ Renewed Motion to Dismiss is GRANTED IN
PART and DENIED IN PART. An order consistent with this Memorandum Opinion is
separately and contemporaneously issued.
Dated: March 31, 2017 RUDOLPH CONTRERAS
United States District Judge
39