The opinion of the court was delivered by: ROYCE LAMBERTH, District Judge
Now before the Court are the defense motions to dismiss the
Plaintiffs' Amended Complaint.*fn1 Specifically before the Court are
Defendants Democratic National Committee (hereinafter "DNC"), DNC
Services Corporation (hereinafter "DNC Services"), Democratic Senatorial
Campaign Committee, Inc. (hereinafter "DSCC"), and Democratic
Congressional Campaign Committee, Inc's (hereinafter "DCCC") Motion To
Dismiss For Failure To State a Claim Upon Which Relief Can Be Granted;
Defendants Albert Gore, Jr., Samuel R. Berger, Alexis Herman, Harold
Ickes and Melissa Moss' Motion To Dismiss; Defendant John Huang's Motion
To Dismiss the Amended Complaint; Defendant Marvin Rosen's Motion To
Dismiss the Amended Complaint; Defendants William J. Clinton and Hillary
R. Clinton's Motion To Dismiss
the Amended Complaint; and defendant Bernard Schwartz's Motion to
Dismiss the Amended Complaint. Also before the Court are the Plaintiffs'
Oppositions To All Motions To Dismiss and the Defendants' Reply Memoranda
to the Plaintiffs' Oppositions.
Upon consideration of the foregoing motions, the applicable law, and
the record in this case, the Court will GRANT the Defendants' Motions to
Dismiss for the reasons stated herein.
The plaintiffs are shareholders of defendant Loral Space and
Communications, Ltd. (hereinafter "Loral Space"), and respectively reside
in Virginia and Maryland. The plaintiffs allege that defendant Bernard
Schwartz, Chairman of the Board and Chief Executive Officer of defendant
Loral Space, made unlawful campaign contributions to the Clinton
Administration and various democratic organizations in exchange for
favorable trade policies, and then sought and obtained reimbursement from
Loral Space for the amount of the unlawful contributions. The plaintiffs
maintain that this conduct gives rise to four causes of action, namely:
(1) breach of fiduciary duty; (2) negligence; (3) civil conspiracy; and
(4) unjust enrichment.
The plaintiffs first made allegations similar to those in the instant
complaint in a prior action filed on November 24, 1998 (hereinafter "Meng
I"). The Meng I complaint named over fifteen defendants, including Loral
Space, Loral Space CEO Bernard Schwartz, President Bill Clinton, Vice
President Al Gore, the Democratic National Committee, Hillary Rodham
Clinton, Harold Ickes, Melissa Moss, Alexis Herman, Marvin Rosen, Samuel
Berger, John Huang, the Democratic Senatorial Campaign Committee, the
Democratic Congressional Campaign Committee, several John and Jane Does,
and Terrence R. McAuliffe.
Based on the same conduct alleged in the instant complaint, the Meng I
invoked the Court's federal question jurisdiction, alleging a count
under the federal civil Racketeer Influenced Corrupt Organization statute
(hereinafter "RICO") and attaching four pendant state law claims of
breach of fiduciary duty, negligence, civil conspiracy, and unjust
enrichment. In response to the Meng I complaint, the defendants filed
motions to dismiss, essentially maintaining that even if the defendants
committed the alleged RICO violations, the plaintiffs could not prove,
under any set of facts, that those violations proximately caused their
On September 25, 2000, relying on the RICO statute requirements, the
Supreme Court's interpretation of the RICO causation standard in
Holmes v. Security Investor Protection Corp.*fn2 and the
Second Circuit's distillation of Holmes.*fn3 this Court
dismissed the plaintiffs' federal RICO count for failure to state a claim
pursuant to Rule 12(b)(6) upon finding that the defendants' alleged RICO
violations were not the proximate cause of the plaintiffs' alleged
injuries. See Meng v. Schwartz. 116 F. Supp.2d 92, 97 (D.D.C.
2000). The Court then dismissed the remaining supplemental claims for
lack of subject matter jurisdiction, without prejudice, pursuant to Fed.
R. Civ. P. 12(b)(1) and 28 U.S.C. § 1367(c). See id. See
also Meng v. Schwartz. 98-2589 (D.D.C. September 25, 2000)
On October 10, 2000, the plaintiffs moved, pursuant to Fed.R.Civ.P.
59(e) and Fed.R.Civ.P. 60(b), to alter or amend the Court's judgment,
attempting to dismiss Terence R. McAuliffe in an effort to establish
diversity jurisdiction. On July 9, 2001, the Court denied the
Plaintiffs' 59(e) and 60(b) motions upon finding that the prior
judgment was neither incorrect nor unjust as required under the rules.
The Court also noted that despite the pragmatic arguments propounded by
the plaintiffs in support of their decision to file Rule 59(e) and
Rule 60(b) motions, the plaintiffs could have simply invoked the Court's
jurisdiction over its state law claims by omitting Terrence R. McAuliffe
from a newly filed complaint and otherwise properly pleading diversity
jurisdiction. See Meng v. Schwartz, 98-2589 (B.B.C. July 9,
2001) (Memorandum and Order). On September 10, 2001, the plaintiffs filed
the instant case against the same group of defendants, save Terry R.
McAuliffe, invoking the Court's diversity jurisdiction.
The plaintiffs also appealed Meng I, and the B.C. Circuit upheld the
decision in Meng I for substantially the same reasons given by this
Court. See Meng v. Schwartz, 48 Fed. Appx. 1, 2-3 (B.C. Cir.
2002). In upholding this Court's decision in Meng I, the B.C. Cir. agreed
that the plaintiffs failed to state a claim upon which relief could be
granted because they could not establish that the defendants' alleged
activities proximately caused their injuries. See Meng, 48 Fed.
Appx. at 2-3. In addition, the B.C. Cir. held that prior litigation
before a New York State court,*fn4 which fully and fairly litigated the
bonus payment issue, precluded relitigation of the bonus
payment/reimbursement issue in the plaintiffs' case. See id. On
November 21, 2002, the plaintiffs petitioned for a rehearing, which the
B.C. Cir. denied on December 23, 2002.
As just mentioned, on September 10, 2001,*fn5 the plaintiffs filed the
derivative action pursuant to Rule 23.1 for recovery by and on
behalf of Loral Space. With the exception of the federal RICO claim and
the naming of Terrence McAuliffe as a defendant, the instant action was
filed by the same plaintiffs, asserts the same facts, alleges the same
counts and names the same parties as in Meng I.
Specifically, the four counts alleged in the instant complaint are: (1)
breach of fiduciary duty as to defendant Schwartz; (2) negligence as to
defendant Schwartz; (3) unjust enrichment as to defendants DNC, DSCC, and
DCCC; and 4) civil conspiracy as to all of the defendants. In aggregate,
the defendants move to dismiss the instant action pursuant to
Rule 12(b)(1), maintaining that this Court does not have subject matter
jurisdiction over the instant action because the plaintiffs have failed
to establish complete diversity. The defendants also move to dismiss the
plaintiffs' action pursuant to Rule 12(b)(6), maintaining that: (1) res
judicata bars the action in its entirety; (2) collateral estoppel
precludes relitigation of each count alleged in the complaint; (3) the
counts alleged in the action are time-barred; and (4) the plaintiffs fail
to meet the requirements of Rule 23.1 certification.
I. Dismissal For Lack Of Subject Matter Jurisdiction
For the reasons stated below, the Court dismisses the plaintiffs'
action for lack of subject matter jurisdiction pursuant to Rule 12(b)(1).
The plaintiffs assert that this Court has subject matter jurisdiction
over their claims pursuant to 28 U.S.C. § 1332, which permits federal
district courts to exercise jurisdiction over actions that lie in
diversity. See 28 U.S.C. § 1332. The defendants maintain
that the Court lacks subject matter jurisdiction because the plaintiffs
have failed to demonstrate complete diversity of
citizenship, and, therefore, move to dismiss the plaintiffs'
complaint for lack of subject matter jurisdiction.
Pursuant to Rule 12(b)(1), a district court should dismiss an action
for lack of subject matter jurisdiction when the facts and allegations
before the court belie the plaintiffs' averment that federal jurisdiction
exists. See Fed.R.Civ.P. 12(b)(1). In the case of an action
invoking a court's diversity jurisdiction under § 1332, it is the
invoking party's burden to show that: (1) complete diversity exists; and
(2) the claim in good faith exceeds $75,000. See Tavoulareas v.
Comnas. 720 F.2d 192, 195 (B.C. Cir. 1983.); Group
Hospitalization and Medical Services. Inc. v. Richardson.
946 F. Supp. 50, 52 (D.D.C. 1996) (citing Cameron v. Hodges.
127 U.S. 322 (1888)). The requisite jurisdictional amount must be met by each
plaintiff, and complete diversity must be established upon a showing that
each plaintiff has a different citizenship from each defendant. See
Owen Equipment & Erection Co. v. Kroger. 437 U.S. 365. 374
(1978). For the purposes of establishing complete diversity under
§ 1332, the citizenship of every party to the action must be
distinctly alleged and cannot be established presumptively or by mere
inference. See Charles A. Wright, Miller & Cooper, Federal
Practice and Procedure § 3605 (3d ed. 1984). Currently in dispute is
whether the plaintiffs have demonstrated complete diversity in
satisfaction of 28 U.S.C. § 1332.
In the instant case, this Court does not have subject matter
jurisdiction over the action because the plaintiffs have failed to show
complete diversity of citizenship. The complaint alleges that the
plaintiffs reside in Virginia and Maryland, while the named defendants
reside and/or have their principle place of business in New York,
Tennessee, California, Florida or Washington, B.C. The plaintiffs also
name unknown "John and Jane Does 1-10" as defendants,
but fatally fail to plead their places of citizenship. Nowhere in
the complaint do the plaintiffs make a distinct or affirmative statement
that establishes the citizenship of the John and Jane Does. Although, the
plaintiffs maintain in subsequent pleadings that the Court should infer
the diverse citizenship of the John and Jane Does because plaintiffs
would not name non-diverse John and Jane Does so as to destroy their own
basis of jurisdiction, this type of backdoor pleading is insufficient to
establish diversity because it would require the Court to draw the
precise type of inference that the rules of diversity under § 1332
The plaintiffs' contention that 28 U.S.C. § 1441, the removal
statute, some how saves the day is also unavailing. The plaintiffs
maintain that § 1441(a), which permits the citizenship of fictitious
defendants to be disregarded when assessing whether complete diversity
exists, applies to the instant case. However, the plaintiffs fail to note
that § 1441(a)'s permissive diversity standard only applies to cases
that have been removed from state court to federal court pursuant to
28 U.S.C. § 1441. See Howell v. Tribune Entertainment Co.,
106 F.3d 215, 218 (7th Cir. 1997) (holding that "because the existence of
diversity jurisdiction cannot be determined without knowledge of every
defendant's place of citizenship, `John Doe' defendants are not permitted
in federal diversity suits."). Prior to § 1441(a)'s amendment in
1988, it was common practice for plaintiffs to name fictitious defendants
in state court actions in order to destroy diversity and prevent
defendants from exercising their right to remove cases to federal court.
See Charles A. Wright, Miller & Cooper, 14 Federal Practice
& Procedure § 3642 (3d ed. 1998) (citing Judicial Improvements
and Access to Justice Act of 1988, Pub.L. 100-702 § 1016(a), 10
Stat. 4669 (1988)). As noted in Wright and Miller, "[t]he Judicial
Improvements and Access to Justice Act was limited to removal
jurisdiction, however, and it did not address the effect of the presence
Doe defendants on the original subject matter jurisdiction of
federal courts." Id. If Congress had intended for
§ 1441(a)'s type of permissive diversity standard to apply to cases
brought under § 1332, it could have expressly stated so in the 1988
amendments. However, Congress took no such action. Although this Court
can pontificate on why Congress did not take such action, perhaps because
the policy concerns underlying the § 1441(a) amendment are not at
issue in cases originally brought in federal court under § 1332, this
Court is powerless to extend § 1441(a)'s permissiveness to actions
brought under § 1332 and will deny the plaintiffs' request to do so.
Equally unavailing is the plaintiffs' argument that voluntary dismissal
at a later date of a John or Jane Doe who is found to be non-diverse
would cure the current jurisdictional defect. The plaintiffs cannot win
on this argument because diversity must exist at the time that the action
is commenced. See Richardson. 946 F. Supp. at 52 (citing
Freeport-McMoran, Inc. v. KN Energy. Inc., 498 U.S. 426, 428
(1991)). Moreover, the Court has no assurances that the plaintiffs would
be able to dismiss a non-diverse John or Jane Doe at a later date without
otherwise destroying the action because the plaintiffs' complaint fails
to aver whether the John and Jane Does are necessary and indispensable
parties to the suit. See Fed.R.Civ.P. 19(a)-(b). If the John
and Jane Does are not necessary parties to the suit, then their later
dismissal would not adversely impact the posture of the action. However,
if they are necessary parties, then their later dismissal would adversely
impact the preservation and perfection of the diversity claim and destroy
the action in any event. See Fed.R.Civ.P. 19(b). The
plaintiffs' total failure to address this issue, leaves the Court with no
basis on which to seriously entertain this point.
For these reasons, the Court finds that plaintiffs have failed to
demonstrate complete diversity as required by 28 U.S.C. § 1332,
thereby, failing to establish this Court's subject matter
jurisdiction over this action. The Court, therefore, will dismiss
this action for lack of subject matter jurisdiction pursuant to
II. Dismissal For Failure To State a Claim Upon Which Relief Can
Even if it were found that this Court has subject matter jurisdiction
over the plaintiffs' claims, all four counts of the action would still be
subject to dismissal pursuant to Rule 12(b)(6) for failure to state a
claim upon which relief can be granted.
Pursuant to Rule 12(b)(6), a district court should dismiss a complaint
for failure to state a claim when it is clear that no relief could be
granted under any set of facts that could be proved consistent with the
complaint's allegations. See Hishon v. King Spalding.
476 U.S. 69, 73 (1984): EEOC v. St. Francis Xavier Parochial Sch.,
117 F.3d 621, 624 (D.C. Cir. 1997). For the purposes of a Rule 12(b)(6)
motion, all well-pleaded allegations are presumed to be true, and all
doubts and inferences are resolved in the pleader's favor and drawn in
the light most favorable to the pleader. See Phillips v. Bureau of
Prisons. 591 F.2d 966, 968 (D.C. Cir. 1979). However, the court need
not accept bald or controverted statements as true. See Wiggins v.
Kitchens. 853 F. Supp. 505, 508 (D.D.C. 1994). ...