Schlafly v. Eagle Forum et al
Filing
30
MEMORANDUM AND ORDER : IT IS HEREBY ORDERED that Plaintiff's Motion to Remand 27 is DENIED.. Signed by District Judge John A. Ross on 9/7/17. (KKS)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
ANDREW L. SCHLAFLY,
)
)
)
Plaintiff,
)
v.
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No. 4:17-CV-00283-JAR
)
)
)
)
EAGLE FORUM, et al,
Defendants.
MEMORANDUM AND ORDER
This matter is before the Court on Plaintiff Andrew Schlafly's motion to remand (Doc.
27). Defendant Eagle Forum opposes the motion. The matter is fully briefed and ready for
disposition. For the reasons set forth below, the Court will deny the motion.
I.
Background
Plaintiff filed this action seeking injunctive and declaratory relief in St. Louis County on
January 19, 2017. At issue in the complaint1 is a Board meeting called in alleged violation of
Eagle Forum's Bylaws with the purpose of removing three Board members, including Plaintiff.
(Doc. 8, Complaint ("Compl. "), at
'if
9).
Plaintiff seeks a court order issuing a temporary
restraining order and preliminary injunction enjoining the individual Defendants from taking any
action not authorized by the Bylaws, and specifically enjoining the individual Defendants from
holding or participating in a special meeting on January 28, 2017, or at any time other than the
annual meeting of membership if the meeting is for the purpose of removing a Board member.
Id. at 'if'il 23-51). He also seeks a declaratory judgment providing that the planned special
The Court will refer to Plaintiffs Verified Petition as a "complaint" throughout this
op1mon.
1
meeting scheduled for January 28, 2017, is (now was) in violation of the Bylaws and is ultra
vires, and that the individual Defendants are acting in bad faith. (Id
at~~
52-57).
On January 25, 2017, Defendants removed the action to this Court on the basis of
diversity jurisdiction, 28 U.S.C. § 1332. In support, Defendants claim that the parties are diverse
in citizenship and that the object of the litigation, the value of Eagle Forum, exceeds $75,000.
(Doc. 1 at~~ 10-12). Plaintiff moves to remand the case to state court, arguing that the value of
the relief sought by Plaintiff is significantly less than $75,000 because he does not seek monetary
damages, nor does he seek the assets of Eagle Forum. (Doc. 27-1 at 3-4).
II.
Legal standard
An action is removable to federal court if the claims originally could have been filed in
federal court. 28 U.S.C. § 1441; In re Prempro Products Liability Litigation, 591 F.3d 613, 619
(8th Cir. 2010). The defendant bears the burden of establishing federal jurisdiction by a
preponderance of the evidence. Altimore v. Mount Mercy Coll., 420 F.3d 763, 768 (8th Cir.
2005). A case must be remanded if, at any time, it appears that the district court lacks subjectmatter jurisdiction.
28 U.S.C. § 1447(c); Fed. R. Civ. P. 12(h)(3). Any doubts about the
propriety of removal are resolved in favor of remand. Wilkinson v. Shackelford, 4 78 F .3d 957,
963 (8th Cir. 2007).
III.
Discussion
Removal in this case was premised on diversity jurisdiction, which requires an amount in
controversy greater than $75,000 and complete diversity of citizenship among the litigants. 28
U.S.C. § 1332(a). "'In actions seeking declaratory or injunctive relief, it is well established that
the amount in controversy is measured by the value of the object of the litigation."' James Neff
Kramper Family Farm P'ship v. IBP, Inc., 393 F.3d 828, 833 (8th Cir. 2005) (quoting Hunt v.
2
Wash. State Apple Adver. Comm 'n, 432 U.S. 333, 347 (1977)); see Usery v. Anadarko Petroleum
Corp., 606 F.3d 1017, 1018 (8th Cir. 2010) ("We have held repeatedly that in a suit for
declaratory or injunctive relief the amount in controversy is the value to the plaintiff of the right
that is in issue.").
Here, Plaintiff seeks both injunctive and declaratory relief. Specifically, Plaintiff seeks
an order from the Court enjoining Defendants from taking any actions not authorized by the
Bylaws; from removing Board members at any time other than the annual meeting of
membership; and from holding a special meeting on January 28, 2017 (now moot). (Compl. at
pg. 10). Plaintiff also requests that the Court enter a declaratory judgment that the January 28,
2017 meeting is (now was) in violation of the Bylaws and applicable law and is ultra vires; and
that the individual Defendants were acting in bad faith. (Id at pg. 11 ). Therefore, the Court
must determine the value of the object of the litigation for the purpose of determining whether it
has subject matter jurisdiction over this action.
This matter presents an issue of first impression, as the Court has not found, nor have the
parties identified, case law directly on point.
However, the Court finds instructive general
principles underlying suits filed by corporate stockholders to enjoin acts by the board or
corporate management.
Generally, where a shareholder suit seeks the enforcement of a shareholder right, the
value of that shareholder's stock constitutes the amount in controversy. See Carey v.
Pennsylvania Enterprises, Inc., 876 F.2d 333, 337 (3d Cir. 1989) (action to enjoin the
implementation of a corporate election by stockholder entitled to vote); Weeks v. Am. Dredging
Co., 451 F. Supp. 464, 466 (E.D. Pa. 1978) (action seeking order enforcing the right of all
shareholders to obtain a shareholder list); Myers v. Long Island Lighting Co., 623 F. Supp. 1076,
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1077 (E.D.N.Y. 1985) (action by preferred stockholder to enforce bylaw provision requiring
special election by preferred stockholders).
However, in cases that do not involve the enforcement of individual shareholder rights,
courts have found that the value of the right of the corporation sought to be protected, not the
value of the shareholder's individual interest thereof, governs the jurisdictional amount. See
Coleman v. Two Guys from Harrison, Inc., 157 F. Supp. 224, 226 (E.D. Pa. 1957) (in suit
seeking injunction of ultra vires acts of the board that would impair the value of the corporation
and, in turn, impair the value of stock, the value of loss or damage to the corporation constitutes
the value of the litigation); Johnson v. Ingersoll, 63 F.2d 86, 87 (7th Cir. 1933) (holding that
where a stockholder brings suit in cases where corporate management refuses or fails to enforce
corporate rights, it was not necessary for the shareholder to show that his private interest or
damage satisfied the jurisdictional threshold); Walsh v. Boston & Maine R.R., 87 F. Supp. 934,
934-35 (D. Mass. 1950) (the amount in controversy was value of the railroad company itself
because the remedy sought in the action was to deprive the present board of directors of the right
to control the railroad company); Hill v. Glasgow R. Co., 41 F. 610, 613 (C.C.D. Ky. 1888) (the
potential financial impact of the board's misappropriation satisfied the jurisdictional threshold in
action to "enforce corporate rights to avert wrongs threatening the corporate interests"); cf
Walker v. Waller, 267 F. Supp. 2d 31, 33 (D.D.C. 2003) (in action seeking declaratory relief with
respect to the composition of the board and identification of the officers of the corporation, "the
right to govern a corporation" did not place the entire worth of the corporation in controversy).
On other words, where a shareholder brings a claim on behalf of a corporation, rather than to
enforce his individual shareholder rights, the courts use the value of the corporation as a whole to
determine the amount in controversy.
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Here, the value of the litigation is the value of the assets of Eagle Forum over which the
Board has control. Plaintiff brings this suit in his capacity as a Director2 and member of Eagle
Forum. (Compl.
at~
1). Plaintiff claims that he "sued to object to an improper Board meeting,
not to recover any [monetary] damages." (Doc. 27-1 at 2). However, although Plaintiff does not
seek monetary relief, his claims are similar to those brought by a shareholder challenging an
illegal board or illegal acts of a board. See Harris v. Brown, 6 F.2d 922, 924 (W.D. Ky. 1925)
(''the amount involved for the purpose of testing the jurisdiction of this court[] is the value of the
property and property rights of the defendant company for which the plaintiff seeks protection").
Plaintiff has, since the filing of this action, been removed from his position as a Board member at
a meeting he claims was called and held in violation of the Bylaws. He seeks to enjoin future
violations of the Bylaws, as well as a declaration by the Court that the actions of the Board were
ultra vires. In essence, Plaintiff is asserting a claim to enforce the right held by Eagle Forum to
have a Board that abides by its Bylaws. It follows then that the value of that right is measured by
the value of Eagle Forum itself.
Plaintiff argues that the value of this litigation is substantially less than $75,000 and
should not be determined solely on the basis of Eagle Forum's assets. He claims that there is no
monetary value to the action because he does not seek or assert damages. (Doc. 27-1 at 4).
He
claims he never received compensation as a member of the Board and that his interest in
challenging his improper removal from the Board was to prevent future misconduct by
Defendants. (Id at 3).
However, the question before the Court is not how a plaintiff subjectively values a right
or even what his or her good-faith estimate of its objective value is; instead, the question is the
2
Plaintiff is no longer a member of the Board of Directors. (Doc. 28 at 1).
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actual value of the object of the suit. Usery, 606 F.3d at 1019. Plaintiffs claims mirror those
brought by a shareholder to avert wrongs threatening the corporate, rather than individual,
interest. Most importantly, Plaintiffs complaint is directed at control of the Board. Therefore,
the amount in controversy is the value of Eagle Forum, which easily satisfies the jurisdictional
threshold.
IV.
Conclusion
Accordingly,
,IT IS HEREBY ORDERED that Plaintiffs Motion to Remand [27] is DENIED.
Dated this 7th day of September, 2017.
l\. ROSS
ED STATES DISTRICT JUDGE
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