Cori et al v. Phyllis Schlafly's American Eagles et al
Filing
187
ORDER GRANTING 155 Motion for Judgment on the Pleadings. Anne Schlafly Cori, Eunie Smith, Cathie Adams, Carolyn McLarty, Rosina Kovar, and Shirley Curry are DISMISSED from this case for misjoinder under Rule 21. Signed by Chief Judge Nancy J. Rosenstengel on 6/17/2019. (jmp2)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ILLINOIS
EAGLE FORUM, an Illinois Not for Profit )
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Corporation,
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and
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ANNE SCHLAFLY CORI, on behalf of
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EAGLE FORUM, et al.,
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Plaintiffs,
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vs.
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PHYLLIS SCHLAFLY’S AMERICAN
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EAGLES, a Virginia Not for Profit
Corporation,
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Defendant.
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Case No. 3:16-CV-946-NJR-RJD
MEMORANDUM AND ORDER
ROSENSTENGEL, Chief Judge:
On August 24, 2016, Anne Schlafly Cori, Eunie Smith, Cathie Adams, Carolyn
McLarty, Rosina Kovar, and Shirley Curry (“the Cori Plaintiffs”) commenced this suit against
Phyllis Schlafly’s American Eagles (“PSAE”), as a derivative action on behalf of Eagle Forum,
an Illinois not-for-profit corporation (Doc. 1). At all relevant times, the Cori Plaintiffs were
members of Eagle Forum’s Board of Directors (Id. at pp. 2-3). They alleged that a faction
within Eagle Forum’s leadership formed an alliance to replace the corporation by forming
PSAE, a Virginia not-for-profit corporation (Id. at pp. 9-12). According to the Cori Plaintiffs,
PSAE unlawfully appropriated and utilized Eagle Forum’s assets and resources, but Eagle
Forum was averse to bringing suit because four members of its Board of Directors were also
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members of PSAE’s Board of Directors (Id.). Accordingly, Eagle Forum was named as a
nominal defendant (See Id.).
On January 23, 2017, the Cori Plaintiffs filed a First Amended Complaint that realigned Eagle Forum as a plaintiff (Doc. 40). The re-alignment was a result of “a number of
events . . . including a board vacancy, the removal of certain officers, and rulings in ancillary
litigation regarding the control and function of Eagle Forum” that led to Eagle Forum “fully
support[ing]” the pursuit of this action (Doc. 32, p. 2).
On December 12, 2018, PSAE filed a Motion for Judgment on the Pleadings (Doc. 155),
arguing the Cori Plaintiffs lack standing to bring this suit or, alternatively, should be
dismissed as dispensable parties under Federal Rule of Civil Procedure 23.1 (Doc. 156). PSAE
also notes,
PSAE has previously argued that [the] directorial changes violated Eagle
Forum’s By-Laws and are thus invalid. For the sake of brevity, PSAE does not
address the validity of such changes for the limited purpose of this motion.
However, PSAE does not waive its rights to re-raise such argument in the
future
(Id. at p. 2 n.1).
The Cori Plaintiffs argue the motion is procedurally defective, but fails nonetheless,
because PSAE disputes the validity of the Cori Plaintiffs’ control of Eagle Forum (Doc. 165).
Thus, the Cori Plaintiffs contend they are “proper alternative plaintiffs” (Id.).
JUDGMENT ON THE PLEADINGS STANDARD
Federal Rule of Civil Procedure 12(c) permits a party to move for judgment on the
pleadings after the plaintiff’s complaint and the defendant’s answer have been filed. FED. R.
CIV. P. 12(c); Moss v. Martin, 473 F.3d 694, 698 (7th Cir. 2007). A Rule 12(c) motion for
judgment on the pleadings is governed by the same standard as a Rule 12(b)(6) motion to
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dismiss for failure to state a claim. Lodholtz v. York Risk Service Group, Inc., 778 F.3d 635, 639
(7th Cir. 2015). In order to survive a motion to dismiss under Rule 12(b)(6), a complaint must
“state a claim to relief that is plausible on its face.” Id. (quoting Bell Atl. Corp. v. Twombly, 550
U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content
that allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Lodholtz, 778 F.3d at 639 (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009)). In making this determination, the court must construe all facts in the pleadings and
draw all reasonable inferences in favor of the non-moving party. Lodholtz, 778 F.3d at 639.
Judgment on the pleadings should be granted if the “facts are uncontested” and reveal that
relief for the plaintiff is no longer plausible. See Richards v. Mitcheff, 696 F.3d 635, 637–38 (7th
Cir. 2012).
DISCUSSION
The Cori Plaintiffs argue that PSAE’s motion fails because Rule 12(c) does not allow
piecemeal dismissal of claims and because PSAE cites matters outside the pleadings. But is
well-established that the Court can address standing on its own, even when a party fails to
raise the issue. Rawoof v. Texor Petroleum Co., Inc., 521 F.3d 750, 757 (7th Cir. 2008). Similarly,
the Court can sua sponte drop parties under Rule 21 as improperly joined. FED. R. CIV. P. 21.
Thus, any procedural defect in PSAE’s motion does not prevent the Court from considering
the issues before it.
I.
Standing
Article III of the Constitution limits the judicial power of the federal courts to
adjudicating “cases” and “controversies.” Hein v. Freedom From Religion Foundation, Inc., 551
U.S. 587, 597 (2007). “One of the controlling elements in the definition of a case or controversy
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under Article III is standing.” Id. (internal quotations, citations, and alterations omitted).
“[T]he irreducible constitutional minimum of standing consists of three elements.” Spokeo,
Inc. v. Robins, 136 S.Ct. 1540, 1547 (2016). The plaintiff must have (1) suffered an injury in fact,
(2) that is fairly traceable to the defendant’s challenged conduct, and (3) is redressable by the
Court. Id. As the party invoking the federal court’s jurisdiction, the plaintiff bears the burden
of establishing these elements. Id.
Here, the First Amended Complaint alleges PSAE violated a number of federal and
state laws by appropriating Eagle Forum’s assets and resources, including money,
intellectual property, mailing lists, real and personal property, and a P.O. Box, and that as a
result of PSAE’s unlawful actions, Eagle Forum has suffered irreparable harm to its business
(Doc. 40, p. 9). These allegations easily satisfy Article III’s standing requirements for Eagle
Forum. But the parties disagree as to whether the Cori Plaintiffs also have standing to pursue
this action. “Where at least one plaintiff has standing, jurisdiction is secure and the court will
adjudicate the case whether the additional plaintiffs have standing or not.” Ezell v. City of
Chicago, 651 F.3d 684, 696 n.7 (7th Cir. 2011). Accordingly, whether or not the Cori Plaintiffs
have standing makes no difference to the merits of the case and will not be addressed. See,
e.g., Rumsfeld v. Forum for Academic and Institutional Rights, Inc., 547 U.S. 47, 52 n.2 (2006) (“The
Court of Appeals did not determine whether the other plaintiffs have standing because the
presence of one party with standing is sufficient to satisfy Article III’s case-or-controversy
requirement); Arlington Heights v. Metropolitan Housing Development Corp., 429 U.S. 252, 264,
and n.9 (1977) (“[W]e have at least one individual plaintiff who has demonstrated standing .
. . . Because of the presence of this plaintiff, we need not consider whether the other individual
and corporate plaintiffs have standing to maintain the suit.”).
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II.
Misjoinder
In truth, PSAE is arguing misjoinder under Rule 20, which provides that
[p]ersons may join in one action as plaintiffs if . . . they assert any right to relief
jointly, severally, or in the alternative in respect to or arising out of the same
transaction, occurrence, or series of transactions or occurrences . . .and . . . if
any question of law or fact common to all these persons will arise in the action.
If a party is not properly joined under Rule 20, “[o]n motion or on its own, the court may at
any time, on just terms, add or drop a party.” FED. R. CIV. P. 21.
Here, the Cori Plaintiffs do not assert any claims as individuals. Instead, they argue
they are proper plaintiffs because they bring this suit derivatively, on behalf of Eagle Forum.
Generally, shareholders of a corporation cannot sue to enforce the rights of the corporation,
because the cause of action belongs to the corporation, itself. Nocula v. UGS Corp., 520 F.3d
719, 726 (7th Cir. 2008). But if the corporation refuses to enforce a right, shareholders may
step into its shoes and bring a derivative action on its behalf. FED. R. CIV. P. 23.1. “[T]he
shareholder derives the power to sue from the unexercised authority of the corporation.” In
re DeMert & Dougherty, Inc., Bankruptcy No. 98 B 38160, Adversary No. 00 A 117, 271 B.R.
821, 840 (N.D. Ill. Aug. 10, 2011).
When the Cori Plaintiffs commenced this suit, they named Eagle Forum as a nominal
defendant and alleged the corporation would not assert its own rights because of the conflict
within its Board of Directors (Id.). But the First Amended Complaint re-aligned Eagle Forum
as a plaintiff and the corporation is obviously no longer averse to this action (Doc. 40). Thus,
there is no unexercised right to provide a basis for derivative standing. See In re Automotive
Professionals, Inc., Bankruptcy No. 07 B 06720, Adversary No. 08 A 00089, 389 B.R. 630, 635
(N.D. Ill. June 17, 2008).
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The Cori Plaintiffs also argue they are “proper alternative plaintiffs” because PSAE
might challenge their legitimacy as members of Eagle Forum’s Board of Directors. The Cori
Plaintiffs do not cite any authority for a “proper alternative plaintiffs” theory. It appears they
rely on Rule 20, which permits parties to join an action if “they assert any right to relief jointly,
severally, or in the alternative. . .” (emphasis added). But the Cori Plaintiffs do not assert a right
to relief, at all. They do not allege individual claims, and, as just explained, they have no right
to assert Eagle Forum’s claims on its behalf. Thus, the Cori Plaintiffs are not properly joined
in this action under Rule 20 and shall be dismissed from this case pursuant to Rule 21.
CONCLUSION
For these reasons, the Motion for Judgment on the Pleadings (Doc. 155) filed by PSAE,
is GRANTED. Anne Schlafly Cori, Eunie Smith, Cathie Adams, Carolyn McLarty, Rosina
Kovar, and Shirley Curry are DISMISSED from this action for misjoinder under Rule 21.
IT IS SO ORDERED.
DATED: June 17, 2019
____________________________
NANCY J. ROSENSTENGEL
Chief U.S. District Judge
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