Depu v. Yahoo! Inc.
Depu v. Yahoo! Inc.
Opinion of the Court
JOHN D. BATES, United States District Judge *317Before the Court is [42] plaintiffs' motion to alter or amend this Court's judgment of March 30, 2018 and for leave to amend their first amended complaint, both of which defendants oppose. Plaintiffs' first amended complaint alleged that a settlement agreement arising from a 2007 lawsuit brought by imprisoned Chinese activists against Yahoo established a charitable trust of which plaintiffs are beneficiaries and that defendants, all of whom are allegedly trustees, improperly depleted the trust's assets and unlawfully terminated the trust's humanitarian purpose. See Depu v. Yahoo! Inc.,
BACKGROUND
The full facts and procedural history of this case are laid out in this Court's earlier memorandum opinion. See Depu,
*318The Court granted defendants' subsequent motions to dismiss the trust-based claims under Federal Rules of Civil Procedure 12(b)(6) and 12(b)(1). First, the Court held that plaintiffs failed to allege plausibly that the Wang Settlement created a charitable trust. See Depu,
LEGAL STANDARD
Plaintiffs may move to "amend their complaint after it was dismissed with prejudice 'only by filing ... a [Federal Rule of Civil Procedure] 59(e) motion to alter or amend the judgment combined with a [Federal Rule of Civil Procedure] 15(a) motion requesting leave of court to amend their complaint.' " Brink v. Cont'l Ins. Co.,
Rule 59(e) motions to amend or alter a judgment provide "a limited exception to the rule that judgments are to remain final" and, because they "are aimed at 'reconsideration, not initial consideration,' " "may not be used to relitigate old matters, or to raise arguments or present evidence that could have been raised prior to the entry of judgment." Leidos, Inc. v. Hellenic Republic,
Rule 15(a)(2), by contrast, is a flexible measure by which plaintiffs may request leave to amend their complaint. "The Supreme Court has explained that 'the grant or denial of an opportunity to amend [under Rule 15 ] is within the discretion of the District Court,' but leave to amend should be freely given '[i]n the absence of any apparent or declared reason-such as ... repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, [or] futility of amendment." In re McCormick & Co., Pepper Prods. Mktg. & Sales Practices Litig.,
*319Because the Court may not consider leave to amend an inoperative complaint, the Court turns first to plaintiffs' Rule 59(e) motion seeking to alter or amend the Court's order dismissing plaintiffs' trust claims with prejudice.
DISCUSSION
I. THE COURT DID NOT "CLEARLY ERR" BY DISMISSING PLAINTIFFS' COMPLAINT WITH PREJUDICE
Plaintiffs assert that the Court committed "clear error" within the meaning of Rule 59(e) by dismissing plaintiffs' complaint with prejudice. Pls.' Mot. to Amend at 3-4. In Firestone, the D.C. Circuit instructed that "dismissal with prejudice is warranted only when a trial court 'determines that the allegation of other facts consistent with the challenged pleading could not possibly cure the deficiency.' "
According to plaintiffs, the Court failed to clear that high bar here, dismissing the FAC with prejudice absent any clear determination that plaintiffs "could not possibly cure the deficienc[ies]" in its trust claims. Pls.' Mot. to Amend at 4 (quoting Firestone,
The Court agrees with defendants, conceiving of no additional allegations "consistent with" the FAC that might save plaintiffs' trust claims. As the Court's prior opinion explained, plaintiffs' trust claims were "founded on the proposition that [plaintiffs] are beneficiaries of [an] alleged charitable trust" established "through the Wang Settlement." Depu,
Unlike a dismissal based on a complaint's omission of "certain essential facts," Belizan v. Hershon,
In reply, plaintiffs suggest that alleging the creation of a charitable trust through "conduct" might resuscitate their trust claims. Pls. Reply at 4. And the proposed SAC accomplishes just that, plaintiffs say, because the payments Yahoo made under the Wang Settlement, considered as conduct, are sufficient to "provide an independent basis for the existence of a charitable trust." Pls.' Mot. to Amend at 5; see id. at 5-8. But as already mentioned, plaintiffs' FAC was centrally predicated on alleging that the language in the Wang Settlement created a charitable trust, and instead of proposing "other facts consistent with" the FAC "cur[ing] [its] deficiency," Firestone,
Hence, the Court's dismissal of plaintiffs' trust claims, as alleged, was "on the merits," Rudder,
II. PLAINTIFFS' PROPOSED SECOND AMENDED COMPLAINT IS FUTILE
Because the Court will deny plaintiffs Rule 59(e) motion, plaintiffs' complaint remains dismissed with prejudice and the Court may deny plaintiffs' Rule 15(a)(2) motion for leave to amend on that basis. Moreover, the Court would in any event deny plaintiffs' Rule 15(a)(2) motion. As the D.C. Circuit has explained, the Court "has discretion to deny a motion to amend on grounds of futility where the proposed pleading would not survive a motion to dismiss." In re Interbank Funding Corp. Sec. Litig.,
To start, plaintiffs contend that "new factual allegations" and "objective indicators" provide an "independent basis" for finding that plaintiffs adequately alleged the creation of a charitable trust. Pls. Mot. to Amend at 5-8. Specifically, plaintiffs point to the transfer of funds to the LRF, that its purpose was to provide humanitarian assistance to imprisoned Chinese dissidents, that the funds were segregated for that purpose, and that Yahoo and others levied objections about the use of the funds. See
As an initial matter, beyond slight wording differences, the factual allegation that the Wang Settlement required transferring money to the LRF is not "new." See *322FAC ¶¶ 36 & n.3, 40 (alleging that "[p]ayments establishing the Trust were made ... to the LRF" and the "purpose [of the trust was to] provid[e] humanitarian and legal aid to Chinese dissidents"); Pls.' Opp'n at 10 (contending "payments (i.e. trust property) were made 'in trust' ... to the LRF (i.e. trustee) and charitable beneficiaries and purposes were identified ... that is all that is needed to allege a trust" (citation omitted) ). And, except for substituting the words "YHR Fund" for "Trust assets," none of plaintiffs' "additional" objective indicators of an intention to create a trust are new either. Compare SAC ¶¶ 41-42, 107 (alleging as "new" facts evincing intent to establish a trust that "[YHR Fund payments] [were] 'maintained separately from other [LRF] funds,' " that a "portion of the YHR Fund was transferred to the LHRO," that Yahoo's then-General Counsel Ronald Bell and others "objected to LRF's use of YHR Fund assets," and that Yahoo's stated motive for payments to the YHR Fund was to "mak[e] sure [Yahoo's] actions match [its] values," not to settle claims) (emphasis added), with FAC ¶¶ 36 n.3, 40-41, 52-54, 94-100 & n.11 (alleging that "Trust assets be maintained separately from LRF's funds," Yahoo "orchestrated the transfer of some ... [Trust] assets " into "a newly created non-profit corporation, the [LHRO]," General Counsel Bell and others "repeatedly and directly warned" that "Trust assets were being unlawfully depleted by ... LRF," and that Yahoo's stated motive for spending "Trust assets " was to "mak[e] sure [Yahoo's] actions match [its] values," not to settle claims) (emphasis added).
Even if the Court viewed the identical facts through the new lens of "conduct" as plaintiffs propose, however, it would not be sufficient, without more, to establish a trust. Critically, despite plaintiffs' considerable emphasis on Yahoo's conveyance of funds to the LRF for a specific humanitarian purpose, they fail adequately to allege any intention to create a trust as opposed to an intention to settle claims and confer a benefit on society.
Even were the Court to assume that the proposed SAC sufficiently alleges a charitable trust, that would still not cure the FAC's independent deficiency-that plaintiffs lack standing to enforce any trust. As the Court has explained, given the "impossibility of establishing a distinct justiciable interest on the part of a member of a large and constantly shifting benefited class," the general rule is that "only a public officer ... has standing" to enforce a charitable trust. Depu,
Plaintiffs argue that the proposed SAC cures that deficiency by "includ[ing] plausible, non-conclusory allegations that the beneficiary class consists of between 800 and 1,200 individuals, which is indisputably small enough for charitable beneficiary standing." Pls.' Mot. to Amend at 14. Specifically, the proposed SAC alleges that the putative trust is intended only "to benefit: (1) Chinese persons (2) who are imprisoned in China (3) for exercising their freedom of expression (4) online," and that plaintiffs' query of a database maintained by the U.S. Congressional-Executive Committee on China ("CECC") for Chinese prisoners yields a "conservative estimate" of 800 to 1,200 individuals meeting those criteria. See SAC ¶¶ 136-44 (emphasis added).
But the relevant expression of an intent to benefit a particular, defined, group remains the language in the Wang Settlement creating the YHRF, see SAC ¶ 41, and plaintiffs cite nothing in that document to support their conclusory allegation that putative charitable beneficiaries are limited to the (slightly) narrower parameters they propose. Instead, as defendants point out, "[p]laintiffs simply ignore the Court's finding that the proposed class, as defined by the Wang Settlement language upon which [p]laintiffs rely," is neither exclusively limited to Chinese individuals nor temporally limited. Laogai Opp'n at 5-6 (emphasis added); see Yahoo Opp'n at 9. Indeed, just as with the FAC, the proposed SAC does not allege that the intended beneficiaries are limited to Chinese dissidents imprisoned in China, as plaintiffs themselves acknowledge. See Pls.' Reply at 14 ("[T]he [ Wang ] Settlement Agreement ... mak[es] clear that the YHR Fund was intended to 'primarily' "-but not exclusively-"benefit imprisoned dissidents 'in or from ... China.' ").
*324Moreover, even if the SAC did plausibly allege that Yahoo intended to benefit only "Chinese persons ... imprisoned [in China] ... for exercising their freedom of expression ... online," SAC ¶ 136, such a beneficiary class remains "limitless and uncertain," Depu,
Finally, plaintiffs separately argue that the proposed SAC avoids futility "because it asserts a [new] standalone claim for the imposition of a constructive charitable trust." Pls.' Mot. to Amend at 14-16; see SAC ¶¶ 167-68. But that argument is meritless. The imposition of a constructive trust is an equitable remedy, not a separate cause of action. See Ross v. Hacienda Co-op., Inc.,
Because plaintiffs' proposed amendments would be futile for the reasons explained, the Court will thus deny plaintiffs' motion to amend under Rule 15(a)(2).
CONCLUSION
For the foregoing reasons, and upon consideration of plaintiffs' motions, the parties' briefing, applicable law, and the entire record herein, plaintiffs' motions to alter or amend the judgment and for leave to amend the complaint will be denied. A separate order will issue.
Plaintiffs are Chinese citizens alleging they or their family were imprisoned in China for online speech, and include Ling Yu, He Depu, Yang Zili, Li Dawei, Wang Jinbo, Ouyang Yi, Xu Yonghai, and Xu Wangping (collectively the "Beneficiary Plaintiffs"). Am. Compl. [ECF No. 26]¶¶ 10-18 [hereinafter "FAC"].
Defendants are Yahoo! Inc. and two of its executives, the Estate of Harry Wu, the LRF, the aogai Human Rights Organization ("LHRO"), the "Yahoo Human Rights Fund Trust," and unknown Doe defendants who are allegedly current and former employees, officers, and directors of the defendants. FAC ¶¶ 19-27.
Plaintiffs also brought various contract and civil conspiracy claims, see FAC ¶¶ 132-34, 142-49, but do not argue in the instant motions that the Court erred in dismissing those claims with prejudice. See Proposed Second Am. Compl. [ECF No. 32-1] [hereinafter "SAC").
See also Defs. LRF's and LHRO's Mem. in Opp'n to Pls.' Mot. to Alter the J. and Pls.' Mot. to Amend the Compl. ("Laogai Opp'n") [ECF No. 45] at 8-10; Opp'n to Pls.' Rule 59(e) Mot. to Alter J. from Dismissal with Prejudice to Dismissal Without Prejudice, and Opp'n to Rule 15(a) Mot. for Leave to Amend [ECF No. at 46] at 2, 5.
See also Pls.' Mem. of P & A in Opp'n to Defs.' Mot. to Dismiss ("Pls.' Opp'n to Defs.' MTD") [ECF No. 32] at 1-2, 10-12 (arguing that the Wang litigants "settled their lawsuit in exchange for ... the establishment of a charitable trust" established "[p]ursuant to a confidential settlement agreement" and quoting provisions in the Wang Settlement as "evidencing intention to create a trust" (emphasis added) ).
The Court independently held that plaintiffs lack standing under charitable trust law principles and, as to six of seven plaintiffs, under Article III to enforce any purported charitable trust. Depu,
The Court would also find plaintiffs' new theory-which repackages identical facts to support a largely similar legal argument-meritless, but that is not the question the Court must answer in this context; instead, at least for purposes of plaintiffs' Rule 59(e) motion, the Court must determine whether any additional, consistent, factual allegations, even if not in the proposed SAC, could have cured the defect. See Firestone,
Plaintiffs also argue that the Court's observation in its prior opinion that "Yahoo has never publicly or privately referred to the YHRF as a trust," Depu,
Plaintiffs cite authority for the proposition that a gift donated subject to a specific restriction "creates a charitable trust" entitling the donor "to enforce th[at] restriction" against the donee. Family Fed'n for World Peace v. Hyun Jin Moon,
Plaintiffs also attempt to relitigate the language used in the Wang Settlement, insisting that it can be construed to reflect an intention to establish a charitable trust. See Pls.' Mot. to Amend at 10-13 & nn.9-10. But in doing so, plaintiffs offer no proposed amendment to the FAC and-reflecting the reality that no such amendment can cure the FAC's deficiency-instead use Rule 15(a)(2) effectively as a chance to appeal the Court's ruling, doubling-down on the same already-rejected arguments.
See PPD Frequently Asked Questions (FAQs), Congressional-Executive Commission on China, https://www.cecc.gov/ppd-frequently-asked-questions-faqs (last visited Sep. 12, 2018) ("Reliable up-to-date information about Chinese political prisoners is not easy to acquire. The Chinese government generally does not provide information on such prisoners .... By necessity, therefore, much of the prisoner information in the [CECC's political prisoner database] is unofficial. The content of unofficial reports varies widely.... [A]s a result of the difficulty of obtaining information, reports may be incomplete, flawed, or contradictory, and sometimes represent informed conjecture.").
Reference
- Full Case Name
- HE DEPU v. YAHOO! INC.
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- 4 cases
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- Published