Richard Doermer, both individually and derivatively on behalf of the Doermer Family Foundation, Inc., Plaintiff-Appellant,
Kathryn Callen, et al., Defendants-Appellees.
December 9, 2016
from the United States District Court for the Northern
District of Indiana, Hammond Division. No.
2:15-cv-00154-JVB-JEM - Joseph S. Van Bokkelen, Judge.
Williams and Hamilton, Circuit Judges, and Chang, District
Hamilton, Circuit Judge.
case poses several questions under the Indiana Nonprofit
Corporation Act of 1991 about the governance of nonprofit
corporations in Indiana. The case pits brother against sister
in a long-running dispute over control of a small family
foundation established by their parents. Plaintiff Richard
Doermer is a member of the board of directors of the Doermer
Family Foundation, Inc. ("the Corporation"). He
asserts claims in his individual capacity and derivatively on
behalf of the Corporation. The defendants include his fellow
board members Kathryn Callen (his sister), John Callen (his
nephew), and Phyllis Alberts. Richard also named as a
defendant the University of Saint Francis of Fort Wayne,
Indiana, Inc. Richard seeks injunctive relief against all
other board members and a money judgment for the Corporation
against Kathryn and Saint Francis.
district court granted defendants' motions to dismiss,
and we affirm. Under Indiana law, only a shareholder or
member of a corporation may bring a derivative action on the
corporation's behalf. Richard lacks standing to bring a
derivative claim because he is neither a shareholder nor a
member. In fact, the Corporation's articles of
incorporation provide that it "shall have no
members." Richard's individual claims for money
judgment likewise fail. They are properly understood as
belonging to the Corporation (and so derivative in nature).
Finally, all of Richard's individual claims fail as a
matter of law on their merits.
Factual and Procedural Background
recount the key factual allegations in the complaint, which
we accept as true and construe in the light most favorable to
plaintiff Richard Doermer. See Huon v. Denton, 841
F.3d 733, 738 (7th Cir. 2016). We have also considered the
Corporation's articles of incorporation and bylaws and
the resolution first appointing defendant Phyllis Alberts to
the board. The Corporation appended these documents to its
motion to dismiss: the documents are "central to the
complaint and are referred to in it/' Williamson v.
Curran, 714 F.3d 432, 436 (7th Cir. 2013), and Richard
has not challenged their authenticity.
father formed the Corporation in 1990 along with Richard;
Richard's mother; and Richard's sister, defendant
Kathryn Callen. Pursuant to the Corporation's articles of
incorporation and bylaws, each family member served as a
lifetime director. Richard's mother died in 2000. A
decade later, the remaining family members elected defendant
Phyllis Alberts to a three-year term on the board.
Richard's father died in October 2010, leaving three
directors: Richard, Kathryn, and Phyllis. Phyllis's term
expired on January 28, 2013.
Indiana law, a nonprofit corporation must be governed at all
times by at least three directors. See Ind. Code §
23-17-12-3. In Richard's view, when Phyllis's term
expired, the Corporation was no longer lawfully constituted
and the two remaining board members (he and his sister
Kathryn) could not act on the Corporation's behalf or
exercise its corporate powers. However, Indiana law provides
a safety valve when a nonprofit director's term expires
without further action by the board. Despite the expiration,
"the director continues to serve until ... a successor
is elected, designated, or appointed and qualifies."
§ 23-17-12-5(d). That language is reflected in the
Corporation's bylaws and in the 2010 resolution first
appointing Phyllis to the board. The bylaws stipulate that
any director other than one of the surviving founders
"shall serve for three (3) years ... and until
her or his successor is elected and qualified" (emphasis
added). The resolution confirmed that Phyllis would serve
"for a term of three (3) years, or until such
time as her successor shall be elected and qualified"
pursuant to the resolution and bylaws, Kathryn and Phyllis
voted in September 2013 to elect Phyllis to a second term.
Richard opposed Phyllis's reelection. The board then took
a series of actions over Richard's objections, including
authorizing gifts to Saint Francis (on whose board Kathryn
also serves) and electing Kathryn's son, defendant John
Callen, as a fourth board member.
John's election, Richard brought this suit. He seeks to
assert claims on his own behalf and derivatively on behalf of
the Corporation. Richard requested a judgment against Kathryn
for the amount of charitable contributions made by the
Corporation following the expiration of Phyllis's
original term (Count I); he sought to recover the gifts
received by Saint Francis (Count III); and he sought
Kathryn's removal from the board (Count II), an
injunction barring Phyllis and John from acting as directors
(Count IV), and appointment of new directors (Count V). The
Corporation and Saint Francis each moved to dismiss, citing
Federal Rules of Civil Procedure 12(b)(6) and 23.1. The
individual defendants answered the complaint and then moved
for judgment on the pleadings and to join the
district court granted the defendants' motions and
dismissed the action. Doermer v. Callen, No.
2:15-CV-154 JVB, 2015 WL 6870580 (N.D. Ind. Nov. 9, 2015).
The court found that Richard lacked standing to bring a
derivative claim, id. at *2, and that his individual
claims failed because he lacked standing to bring them and,
even if he did have standing, because the claims were
meritless, id. at ""4-5. Richard has
review de novo the district court's dismissal of
Richard's claims for lack of standing to proceed in a
derivative capacity, see Westmoreland County Employee
Retirement System v. Parkinson, 727 F.3d 719, 724 (7th
Cir. 2013), and for failure to state a claim, see Rocha
v. Rudd, 826 F.3d 905, 909 (7th Cir. 2016). Our duty in
this diversity suit is to decide issues of Indiana state law
as we predict the Indiana Supreme Court would decide them
today. E.g., Frye v. Auto-Owners Ins. Co., No.
16-1677, __ F.3d __, __, 2017 WL 25481, at *3 (7th Cir. Jan.
3, 2017). The case presents questions about the meaning of
Indiana's Nonprofit Corporation Act, so we apply the
"basic tools of statutory interpretation" that the
Indiana Supreme Court has long recognized: statutes are
"read as a whole, and words are given their plain and
ordinary meaning." Id.; see also ESPN, Inc.
v. University of Notre Dame Police Dep't, 62 N.E.3d
1192, 1195 (Ind. 2016) ("Our first task when
interpreting a statute is to give its words their plain
meaning and consider the structure of the statute as a
whole."); Ind. Code § 1-1-4-1 (codifying the canon
that words "shall be taken in their plain, or ordinary
and usual, sense"). Conversely, "when a statute is
susceptible to more than one interpretation, it is deemed
ambiguous and is thus open to judicial construction."
In re Howell, 27 N.E.3d 723, 726 (Ind. 2015).
construing a statute, "our primary goal is to effectuate
legislative intent." Walczak v. Labor Works-Fort
Wayne LLC, 983 N.E.2d 1146, 1154 (Ind. 2013). We aim for
an interpretation that harmonizes all provisions so as to
give a consistent meaning to the whole without treating any
language as surplusage. See Klotz v. Hoyt, 900
N.E.2d 1, 5 (Ind. 2009); Corr v. American Family
Ins., 767 N.E.2d 535, 540 (Ind. 2002). We avoid
interpretations that depend on selective readings of
individual words, and we "do not presume that the
Legislature intended language used in a statute to be applied
illogically or to bring about an unjust or absurd
result." ESPN, Inc., 62 N.E.3d at 1196, quoting
Anderson v. Gaudin, 42 N.E.3d 82, 85 (Ind. 2015).
turning to the substantive issues on appeal, though, we
address a procedural point. In the final paragraph of his
brief in the district court, Richard asked for leave to amend
his complaint. He offered, however, no explanation as to any
revisions that might correct the deficiencies the defendants
had identified, nor did he ever submit a proposed amended
complaint or file a motion for leave to amend. On appeal, he
has not identified any proposed amendments to his complaint,
choosing instead to defend the complaint as pled. We
ordinarily hesitate before affirming a final judgment of
dismissal when the plaintiff seeks leave to amend, at least
where there has been no prior effort to amend. See, e.g.,
Runnion v. Girl Scouts of Greater Chicago & Northwest
Indiana,786 F.3d 510, 519-20 (7th Cir. 2015) (reversing
dismissal). In this case, however, it is clear that amendment
would be futile. Richard has identified no proposed
amendments that might save his case, and the law is clearly
on the defendants' side. See id. at 520 (where
amendment would be futile, ...