E-Alert Case Updates

Current Members have Standing to Bring Suit against Their Sorority

Joy E. Daley, et al. v. Alpha Kappa Alpha Sorority, Inc. et al.
Case No. 10-CV-220 (D.C. Court of Appeals, August 18, 2011)
by Eric M. Leppo, Associate
Semmes, Bowen & Semmes (www.semmes.com)

In this recently issued opinion from the Court of Appeals for the District of Columbia, the Court determined that the District of Columbia had jurisdiction over the individual Defendants; the Plaintiffs had standing as members to sue their sorority; and that Plaintiffs had successfully pled claims of ultra vires and breach of contract.

The Plaintiffs are members of Alpha Kappa Alpha (“AKA”) a primarily African-American sorority and a 501(c)(7) non-profit organization established under the laws of the District of Columbia. The Plaintiffs filed suit against AKA and numerous individuals who served as past and present members of the administrative branch/management of the sorority. The suit was a result of certain financial transactions that Plaintiffs contended were made without proper approval of AKA’s legislative body, most notably a $250,000 payment to AKA’s then-President and an agreement to pay her a continuing monthly stipend of $4,000.

Plaintiffs’ Complaint consisted of ten (10) counts including claims of breach of fiduciary duties, breach of contract, fraud, unjust enrichment, corporate waste, and ultra vires. The trial court dismissed the claims against the individual Defendants for lack of personal jurisdiction; dismissed all but one of the Plaintiffs’ claims for lack of standing; and found that under Rule 12(b)(6) Plaintiffs’ failed to state a claim of corporate waste, breach of contract, or ultra vires.

The Court of Appeals reversed the dismissals in large part, and has permitted the Plaintiffs’ case to proceed in most respects.

First the Court determined that personal jurisdiction existed over the individual Defendants. While none were residents of the District of Columbia, the long arm statute allows the court to “exercise personal jurisdiction over a person, who acts directly or by an agent, as to a claim for relief arising from the person’s "transacting any business in the District of Columbia.” D.C. CODE § 13-423 (a) (2001). The wrongdoing allegedly occurred at the 2008 meeting of AKA’s legislative body in the District of Columbia. The Court found that the individual Defendants each voluntarily participated in that legislative session, and therefore, they could reasonably anticipate being required to defend their actions there. As such, litigating against them in D.C. did not offend the traditional notions of justice and fair play under Constitutional personal jurisdiction analysis.

The Court also determined that as members of the sorority, the individual Plaintiffs did have standing to file suit against AKA. In order to establish standing, “a party must demonstrate (1) concrete injury, (2) that the injury is traceable to the defendant’s action, and (3) that the injury can be redressed.” Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992). The Court opined that it was almost self-evident that members who pay dues to a non-profit organization have standing to complain when the organization or management spend those funds in a manner not consistent with the organization’s constitution or bylaws. The Court held that the members need not bring a derivative suit in the organization’s name, but could take action against AKA on their own. Further, the Court determined that each Plaintiff alleged retaliatory action taken against them by AKA, and therefore they had direct actions capable of being redressed.

Finally, the Court held that it was too early to dismiss claims of breach of contract and ultra vires on grounds of failure to state a claim under Rule 12(b)(6). They considered the claim of corporate waste to have been properly dismissed. “An ultra vires claim can be brought where the corporate action is expressly prohibited by statute or bylaw.” Daley at *12. Since there was an allegation that AKA violated its by-laws, ultra vires was sufficiently alleged. The Court also noted that a breach of contract claim was pled as it is well established that formal bylaws present a contractual agreement between the organization and its members. Meshel v. Ohev Sholom Talmud Torah, 869 A.2d 343, 361 (D.C. 2005).