Opinion ID: 4542780
Heading Depth: 2
Heading Rank: 2

Heading: Determining the Amount in Controversy

Text: The district court held that it was legally certain the Professors could not recover more than $75,000, accounting for their individual damages and the value of the requested injunctive and declaratory relief. See id. at 21. The Professors reject this assessment and maintain they adequately alleged an amount in controversy that exceeds the jurisdictional minimum. Specifically, they assert that the district court (1) erred in holding that the Professors could not seek damages on 18 behalf of the ASA, (2) incorrectly valued the claimed equitable relief and (3) failed to account for punitive damages. Their arguments are unavailing.
The second amended complaint seeks “[a]ctual damages on behalf of” the ASA, J.A. 190, and the Professors concede that “[t]hese damages are intended to make the ASA whole,” Professors’ Br. 38. Their attempt to recover monetary damages, not for injuries they have suffered personally, but for harms allegedly inflicted on the ASA by the individual defendants, would typically end our inquiry. Corporate shareholders are “generally prohibit[ed] . . . from initiating actions to enforce the rights of the corporation unless the corporation’s management has refused to pursue the same action for reasons other than good-faith business judgment.” Franchise Tax Bd. of Cal. v. Alcan Aluminum Ltd., 493 U.S. 331, 336 (1990). Instead, “[c]laims of corporate mismanagement must be brought on a derivative basis because no shareholder suffers a harm independent of that visited upon the corporation and the other shareholders.” Cowin v. Bresler, 741 F.2d 410, 414 (D.C. Cir. 1984). This “so-called shareholder standing rule . . . is a longstanding equitable restriction,” Franchise Tax Bd., 493 U.S. at 336, reflecting the established tenet that “plaintiffs must demonstrate Article III standing by asserting their ‘own legal rights and interests’ rather than resting ‘claim[s] to relief on the legal rights or interests of third parties,’” Helmerich & Payne Int’l Drilling Co. v. Bolivarian Republic of Venezuela, 784 F.3d 804, 814 (D.C. Cir. 2015) (alteration in original) (quoting Warth v. Seldin, 422 U.S. 490, 499 (1975)), vacated on other grounds, 137 S. Ct. 1312 (2017). District of Columbia law applies the derivative-suit requirement to nonprofit corporations like the ASA. See D.C. 19 CODE §§ 29-411.01 et seq. It would appear, then, that the Professors are in a bind. They request damages for injuries incurred by the ASA yet, at the same time, maintain that the second amended complaint contains no derivative claims. In a “clever attempt to avoid this straightforward conclusion,” Bronner IV, 364 F. Supp. 3d at 20, the Professors argue that they have nevertheless alleged cognizable direct claims. They principally rely on two District of Columbia cases—Daley v. Alpha Kappa Alpha Sorority, Inc., 26 A.3d 723 (D.C. 2011), and Jackson v. George, 146 A.3d 405 (D.C. 2016)—that recognize “non-profit members may directly suffer certain injuries from organizational mismanagement that for-profit shareholders do not.” Bronner IV, 364 F. Supp. 3d. at 21. But by framing Daley and Jackson as “hold[ing] that third-party and shareholder standing rules do not apply,” Professors’ Br. 42, the Professors stretch those decisions too far. In Daley, members of the Alpha Kappa Alpha sorority sued the sorority, its affiliate foundation and certain officials, alleging that the officials had violated the organization’s constitution and bylaws by making several large expenditures without first obtaining approval from the sorority’s legislative body. 26 A.3d at 726. The plaintiffs sought to “restore those funds, enjoin the [officials] from taking any further action that would harm [the sorority], and restore their membership privileges.” Id. at 727. The D.C. Court of Appeals declined to sanction an expansive application of the derivative-suit requirement in that context, noting the “uneasy fit” between nonprofit members, who fund the organization and are united by a shared social or charitable purpose, and traditional shareholders in for-profit corporations. Id. at 729. Indeed, certain of the court’s language can be read to suggest that the payment of membership fees confers a personal stake sufficient to overcome third-party standing limitations: 20 On its face, it would seem almost self-evident that members of a nonprofit organization whose revenue depends in large part upon the regular recurring annual payment of dues by its members have standing to complain when allegedly the organization and its management do not expend those funds in accordance with the requirements of the constitution and by-laws of that organization. Id. At the same time, however, the court continued to emphasize that the plaintiffs must suffer individualized injuries entitling them to personalized relief. The plaintiffs could therefore directly bring breach of fiduciary duties, ultra vires and breach of contract claims because their “individual rights . . . were affected by the alleged failure to follow the dictates of the constitution and by-laws and they thus had a ‘direct, personal interest’ in the cause of action, even if ‘the corporation’s rights [were] also implicated.’” Id. (quoting Franchise Tax Bd., 493 U.S. at 336). The D.C. Court of Appeals revisited the issue in Jackson. There, the plaintiffs alleged that they were singled out for unfair treatment after a power struggle divided the trustees of Jericho Baptist Church Ministries, Inc. Specifically, they were barred from church property and from attending services and their tithes and offerings were purportedly used without authorization. 146 A.3d at 415. In affirming the trial court’s holding that the plaintiffs had standing “to proceed on the claims they brought on their own behalves,” the appellate court again highlighted the personalized nature of the plaintiffs’ injuries, emphasizing the lower court’s conclusion that the plaintiffs had “alleged an injury particularized to them and [had] a personal financial stake.” Id. (quotation marks omitted). 21 Distilling Daley and Jackson, we believe members of D.C. nonprofit corporations may be able to assert certain direct claims that shareholders in for-profit corporations must pursue derivatively. That said, traditional third-party standing rules are not entirely displaced. Otherwise, D.C. Code §§ 29-411.01 et seq., which outline the derivative-suit requirement for nonprofit corporations, would be rendered almost entirely meaningless. Rather, as the district court noted, the focus on individualized harms counsels that “Daley and Jackson concern a non-profit member’s standing to seek relief based on the member’s injuries, but not a non-profit member’s standing to seek relief based on the non-profit’s injuries.” Bronner IV, 364 F. Supp. 3d at 21. Indeed, the district court held only that the Professors could not “collect the damages they claim ASA is owed,” saying nothing about their ability to recover damages to themselves. Bronner IV, 364 F. Supp. 3d at 21 (emphasis added). On the contrary, it explicitly recognized that, under Daley and Jackson, they “may assert their claims directly and seek damages and injunctive relief for their individual injuries.” Id. The issue, then, is that the Professors appear to believe that, once they have standing to litigate a direct claim, they may thereafter rely on injuries to the ASA to satisfy the amount-incontroversy requirement. Not so. Despite the Professors’ contention that their inability to recover on the ASA’s behalf implicates the calculation of damages, not standing, the fact remains that they are attempting to rely on an exception to the more general rule that individuals lack standing to seek relief owed to a third party. And if a claim falls outside that exception, it is subject to the longstanding rule that shareholders may not enforce a corporation’s rights absent “a direct, personal interest in [the] cause of action.” Franchise Tax Bd., 493 U.S. at 336. That nonprofit members have standing to press a suit to protect their own interests does not, in turn, 22 entitle them to vindicate interests held solely by the non-profit. See Town of Chester v. Laroe Estates, Inc., 137 S. Ct. 1645, 1650 (2017) (“[P]laintiff must demonstrate standing . . . for each form of relief that is sought.” (quoting Davis v. Fed. Election Comm’n, 554 U.S. 724, 734 (2008)). It is clear, then, that the Professors may assert direct claims for personalized injuries allegedly inflicted by the individual defendants. They may not, however, utilize a direct claim as a Trojan horse to sneak derivative claims past the bulwarks of the federal courts. We briefly note that the Professors cite the D.C. Superior Court’s determination, in parallel litigation, that their claims are direct, not derivative. See Amended Order Granting in Part Motions to Dismiss at 25–28, Bronner v. Duggan, No. 2019 CA 1712 B (D.C. Super. Ct. Dec. 12, 2019). This ruling is not incompatible with the district court’s decision, which found that the second amended complaint contains direct claims. Quite the opposite, it undercuts the Professors’ argument by acknowledging that they “inappropriately seek derivative damages” and “may only proceed on the damages that they have personally suffered.” Id. at 34. In sum, we find no error in the district court’s conclusion that it is “a legal certainty that [the Professors] cannot collect the damages they claim ASA is owed.” Bronner IV, 364 F. Supp. 3d at 21. As for the Professors’ individual injuries, it is evident that their resulting damages do not exceed the $75,000 jurisdictional threshold. They vaguely assert several personalized injuries: economic and reputational damage; manipulation of voting rights, both generally and against Barton; and, reading between the lines, mismanagement of membership fees and increased dues. This latter contention does not get them very far. Bronner and Rockland, as honorary lifetime members, do not owe dues and Kupfer has not paid dues since 2014. Moreover, as the district court pointed out, 23 even “[i]f Defendants misappropriated every dollar that [the Professors] contributed to ASA in annual dues, it would take each [Professor] 625 years to reach $75,000 in damages.” Bronner IV, 364 F. Supp. 3d at 22. Their other claims fare no better. The Professors nowhere explain how they have suffered economic or reputational damage. They assert no loss of standing within their universities. They do not purport to have been denied tenure, promotions or other prestigious honors. Nor do they claim to have had their writings rejected by academic journals. It is true that a plaintiff need not provide an exact valuation or detailed breakdown of damages at the outset of litigation, as the claimed sum controls if “apparently made in good faith.” St. Paul Mercury, 303 U.S. at 288. But it does not follow that any unsupported claim will suffice. “While the ‘legal certainty’ test is an exacting one,” Martin v. Gibson, 723 F.2d 989, 991 (D.C. Cir. 1983) (per curiam) (citing King, 520 F.2d at 1145), “we have emphasized that . . . the party asserting jurisdiction always bears the burden of establishing the amount in controversy once it has been put in question,” Rosenboro v. Kim, 994 F.2d 13, 17 (D.C. Cir. 1993) (citing Martin, 723 F.2d at 991, 993); see also Dep’t of Recreation & Sports of P.R. v. World Boxing Ass’n, 942 F.2d 84, 88 (1st Cir. 1991) (“Once challenged, . . . the party seeking to invoke jurisdiction has the burden of alleging with sufficient particularity facts indicating that it is not a legal certainty that the claim involves less than the jurisdictional amount.”). Although “the 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,” dismissal is warranted if, for example, the plaintiffs “submit[] no . . . evidence” supporting their alleged injury. Rosenboro, 994 F.2d at 17. The Professors have provided nothing beyond a bare-bones assertion of jurisdictional sufficiency to suggest that the monetary damages 24 arising from their direct claims even remotely approach $75,000. This is not enough to carry their burden and therefore the district court did not err in finding the Professors’ claimed damages inadequate to satisfy the amount-in-controversy requirement.
The Professors requested an order declaring that the defendants breached their fiduciary duties and that the boycott vote was improper. They also asked the court to enjoin ASA leadership from (1) acting contrary to the ASA constitution; (2) taking any action to enforce the boycott; and (3) making any unauthorized payments, including in support of the boycott. As with monetary damages, a complaint seeking declaratory or injunctive relief should not be dismissed unless it appears “to a legal certainty” that the claims will not exceed the minimum amount in controversy. Hunt v. Wash. State Apple Advert. Comm’n, 432 U.S. 333, 346 (1977) (citing St. Paul Mercury, 303 U.S. at 288–89). “In assessing whether a complaint satisfies that standard, a court may look either to the value of the right that [the] plaintiff seeks to seeks to enforce or to protect or to the cost to the defendants to remedy the alleged denial.” Smith v. Washington, 593 F.2d 1097, 1099 (D.C. Cir. 1978) (quotation marks and footnote omitted). The district court held that, using either measuring stick, the Professors failed to satisfy the amount-in-controversy requirement. Bronner IV, 364 F. Supp. 3d at 22. There was “no indication” that “requir[ing] ASA to comply with its governing documents and halt improper payments . . . would cost ASA any money to implement.” Id. Moreover, the Professors “failed to explain how the right they seek to enforce—the right to be voluntary members of an apolitical, academic organization—is 25 worth $75,000.” Id. The Professors contend that the district court erred in valuing the requested relief. On appeal, their primary argument is that the amount in controversy includes “withdrawals from the ASA Trust Fund by the individual defendants and payments for improper purposes,” purportedly “exceeding $100,000 per year.” Professors’ Br. 31. They maintain, therefore, that “the value of the object of the litigation,” Hunt, 432 U.S. at 347, easily satisfies the jurisdictional minimum. But the Professors provide no record citation supporting this valuation, nor do they respond to the defendants’ assertion that this argument was not made in district court. The Professors needed to “anchor[] th[eir] claim in the record,” Angelex, Ltd. v. United States, 907 F.3d 612, 620 (D.C. Cir. 2018) (citing FED. R. APP. P. 28(a)(8)(A)), since we are neither “expected to be mindreaders,” Schneider v. Kissinger, 412 F.3d 190, 200 n.1 (D.C. Cir. 2005), nor required to “scour the . . . record ourselves,” Sierra Club v. EPA, 925 F.3d 490, 496 (D.C. Cir. 2019). They did not and have thus forfeited their insufficiently developed argument. See, e.g., Schneider, 412 F.3d at 200 n.1 (“[A] litigant has an obligation to spell out its arguments squarely and distinctly, or else forever hold its peace.”). Because the Professors otherwise fail to explain how the equitable relief they seek exceeds the $75,000 threshold, we find no error in the district court’s assessment.
Although “[i]t is clear that punitive damages should be considered in determining the jurisdictional amount in controversy,” Hartigh v. Latin, 485 F.2d 1068, 1071–72 (D.C. Cir. 1973) (per curiam), the Professors did not ask the district court to consider such damages, in the second amended 26 complaint or otherwise. Despite this inconvenient fact, they assert that the district court erred by failing to do so. Considering the Professors’ limited entitlement to compensatory damages, see supra at 22–24, they would have to rely almost entirely on punitive damages to satisfy the amount in controversy. “Liberal pleading rules are not a license for plaintiffs to shoehorn essentially local actions into federal court through extravagant . . . punitive damage claims.” 10 Kahal v. J.W. Wilson & Assocs., Inc., 673 F.2d 547, 549 (D.C. Cir. 1982) (per curiam). Thus, “[c]lose scrutiny” is necessary “where the availability of punitive damages is the sine qua non of federal jurisdiction.” Id. Additionally, the Professors could have sought such damages at any time during the lengthy litigation below and their attempt to do so for the first time on appeal is too little, too late. “The burden of establishing the amount in controversy is on the person claiming jurisdiction,” King, 520 F.2d at 1145, and “arguments in favor of subject matter jurisdiction can be waived by inattention or deliberate choice,” NetworkIP, LLC v. FCC, 548 F.3d 116, 120 (D.C. Cir. 2008). Faced with the Professors’ silence, the district court did not err in failing to assess sua sponte their potential to recover punitive damages.