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Abulhawa v. United States Department of Treasury

United States District Court, District of Columbia

March 4, 2017

SUSAN ABULHAWA, et al., Plaintiffs,
v.
UNITED STATES DEPARTMENT OF THE TREASURY, et al., Defendants.

          MEMORANDUM OPINION

          RANDOLPH D. MOSS United States District Judge.

         Plaintiffs, a group of individuals sharing “mutual concerns” about Israeli settlements in the West Bank and East Jerusalem, bring this “declaratory judgment” action against the Department of the Treasury and Secretary of the Treasury Steven Mnuchin.[1] They allege that the Treasury Department has granted tax-exempt status under 26 U.S.C. § 501(c)(3) to “approximately 200 U.S. pro-Israeli-settlement” organizations that “either fund[] or engag[e] in . . . criminal activities abroad, ” and that, despite this “criminal conduct, ” the Department has failed to “challeng[e] or [to] revok[e] [the organizations'] tax-exempt status.” Dkt. 7 at 4-5 (Am. Compl.). According to Plaintiffs, this failure by the Treasury Department has led to-and, absent correction, will continue to lead to-the infliction of an array of wrongs against the Palestinian people. Id. As a remedy, Plaintiffs seek an order requiring the Treasury Department “to . . . initiate an investigation into any and all tax-exempt entities based in America which transmit $20, 000 or more on an annual basis to any country in the world;” to “revoke the entit[ies'] tax-exempt status” where “appropriate;” and to “refer all tax fraud and money laundering findings to the [Internal Revenue Service] and/or U.S. Department of Justice for criminal prosecution.” Id. at 74-75.

         Three motions are currently before the Court. First, Defendants move to dismiss the first amended complaint for lack of Article III standing and for failure to state a claim. Dkt. 10 at 1- 2. Second, Plaintiffs seek leave to file a second amended complaint, which would join five additional plaintiffs and detail the harms that they have allegedly suffered (or will allegedly suffer) due to Defendants' failure to monitor the actions of the U.S.-based tax-exempt entities. Dkt. 18. Finally, Sam Abrams, a U.S. taxpayer and resident of New York State, moves to intervene, asserting that, if the Treasury Department is required “to investigate pro-Israel charities, ” it should “also investigate . . . charities . . . hostile to Israel.” Dkt. 13 at 2-3. In opposing the latter two motions, Defendants extend their jurisdictional defense to the claims that the five additional putative plaintiffs and Abrams seek to assert.

         As explained below, the Court agrees that the existing Plaintiffs, the five additional putative plaintiffs, and Abrams all lack Article III standing. The Court, accordingly, will grant Defendants' motion to dismiss the first amended complaint for lack of jurisdiction, will deny Plaintiffs' motion to file a second amended complaint as futile, and will deny Abrams' motion for leave to intervene on the ground that neither he nor any other party has standing to assert his proposed claim.

         I. BACKGROUND

         Because Defendants “challenge[] the adequacy of [the first amended] complaint and [exhibits] to support [Plaintiffs'] standing, ” the Court “accept[s] [their] well-pleaded factual allegations as true and draw[s] all reasonable inferences from those allegations in [Plaintiffs'] favor.” Arpaio v. Obama, 797 F.3d 11, 19 (D.C. Cir. 2015); see also West v. Lynch, 845 F.3d 1228, 1231 (D.C. Cir. 2017). The same standard applies, moreover, to the Court's consideration of whether Plaintiffs' proposed second amended complaint contains allegations sufficient to establish Article III standing, or whether, instead, the proposed amendment is futile. See Williams v. Lew, 819 F.3d 466, 471-73 (D.C. Cir. 2016). Because the issues presented in Defendants' motion to dismiss and in their opposition to Plaintiffs' motion for leave to amend overlap, and because the proposed second amended complaint is identical to the first amended complaint, save for the addition of one paragraph that details the allegations of the five plaintiffs seeking to join the suit, compare Dkt. 7 with Dkt. 18-2, the Court will focus on (and cite to) the factual allegations set forth in the proposed second amended complaint.

         A. Factual Allegations

         Plaintiffs, a group of thirty-seven individuals, “join[ed] in this litigation” due to their “concerns” over the “explosive settlement expansion” by Israelis in the West Bank and East Jerusalem. Dkt. 18-2 at 1-3, 8 (Second Am. Compl. ¶ 6). They allege that organizations in the United States that were granted tax-exempt status under 26 U.S.C. § 501(c)(3) based on their “‘charitable' or ‘educational' . . . nature[s]” actually serve as “financial ‘pass-throughs'” from “wealthy U.S. donors” to Israeli entities committed to “the forcible expulsion of indigenous non-Jewish Palestinians, ” the “theft of private property, ” the malicious destruction of private property, and the “murder[]” of Palestinians. Id. at 4-5. Plaintiffs allege that the actions of these U.S. nonprofit organizations “violate[] numerous . . . [§] 501(c)(3) regulations” and “at least eight federal criminal statutes.” Id. at 5-6. Plaintiffs also allege that, [d]espite the[se] rampant” violations of law, the Treasury Department has “not challenged or revoked the[] tax-exempt status” of the “approximately 200 U.S. pro-Israeli-settlement [§] 501(c)(3) [organizations].” Id. mat 4-5. And Plaintiffs further allege that, because the Treasury Department has failed to “investigate the criminal activities that these tax-exempt entities have been funding or engaging in for at least the last [forty] years, ” the entities continue “to openly solicit[] tax-deductible contributions” in order to fund “the various settlements they have chosen to adopt.” Id. at 6.

         Of the thirty-seven plaintiffs, the proposed second amended complaint contains specific allegations about only eight of them. As they also alleged in the first amended complaint, Plaintiffs allege that “John Doe” “has been concerned about [the Treasury Department's] failure to monitor” the § 501(c)(3) organizations described above “for a number of years” and has “heard from various Palestinian friends and neighbors” about “the atrocities that are being committed” which, he asserts, are being “largely subsidized by the American taxpayer.” Id. at 9 (Second Am. Compl. ¶ 7). Plaintiffs allege that Susan Abulhawa is also “concerned about [the Treasury Department's] ongoing failure to . . . prevent the criminal activities engaged in by th[e] pro-settlement tax-exempt entities, ” and, more significantly, that Israel “[has] dislocat[ed]” her from the “patch of earth” in Jerusalem “where [her] family ha[d] dwelt for centuries.” Id. at 10 (Second Am. Compl. ¶ 9). They further allege that Michael Several “has visited Israel on many occasions and [has] seen first-hand what settlement expansion has meant to the ordinary Palestinian citizen.” Id. (Second Am. Compl. ¶ 10). And, they allege that Several, who has performed “significant research on U.S. donors and pro-settlement tax-exempt entities, ” “firmly believes that financial support rendered by” those entities has “promoted widespread violence against Palestinians” and has “perpetuated the environment and conditions that give[] rise to violent resistance to the Israeli occupation.” Id. at 10-11 (Second Am. Compl. ¶¶ 10-11).

         The proposed second amended complaint would add allegations about five more plaintiffs who seek to join the litigation. Most notably, Plaintiffs allege (or, more precisely, seek leave to allege) that putative plaintiff Linda Kateeb “owns six plots of land in the West Bank;” that an “Israeli settler organization . . . supported by funds provided by U.S. tax-exempt entities” recently “purported to purchase two” of her plots from “violent Israeli settlers who had set up outposts on [her] land;” and that she “is worried that if [the Treasury Department] continues to allow so-called tax-exempt funds to flow to the organization, she will lose her remaining four plots of land.” Dkt. 18-2 at 11 (Second Am. Compl. ¶ 13(a)). Plaintiffs also seek leave to allege that Abbas Hamideh “similarly has lost, and fears that he will continue to lose, . . . family land in the West Bank” if U.S.-based nonprofits “are permitted to provide funds to violent settlers.” Id. They seek leave to allege that Doa'a Abu Amer “lost fourteen family members when the Israeli army bombed the daycare center [in Gaza] in which they sought refuge, ” id. at 12 (Second Am. Compl. ¶ 13(b)), and that Ahmed Al-Zeer was “beaten by violent settlers while on his own property outside [of a] segregated settlement” in the West Bank, id. (Second Am. Compl. ¶ 13(c)). Finally, Plaintiffs seek leave to allege that Danny Awad “lost the Christian center” he managed in the West Bank due to an “illegal transaction” involving “a settler organization and its U.S. backers.” Id. at 12-13 (Second Am. Compl. ¶ 13(d)).

         Aside from these paragraphs detailing plaintiff-specific factual allegations, see Id. at 9-13 (Second Am. Compl. ¶¶ 7-13), the remaining 113 numbered paragraphs of the proposed second amended complaint include a litany of allegations of wrongdoing by the U.S.-based § 501(c)(3) entities that, Plaintiffs claim, the Treasury Department has failed to regulate. Among other allegations, the proposed second amended complaint addresses the “history of settlement expansion funded by U.S. donors and tax-exempt entities, ” id. at 15-25 (Second Am. Compl. ¶¶ 18-34); the “United States public policy regarding settlement expansion activity;” id. at 26- 30 (Second Am. Compl. ¶¶ 35-37), and the “statutory violations” that Plaintiffs contend that “U.S. tax-exempt entities and their donors have all conspired to” commit, including money laundering, wire fraud, racketeering, and “war crimes, ” id. at 42-50 (Second Am. Compl. ¶¶ 59- 73). Plaintiffs claim that scores of § 501(c)(3) organizations have engaged in these purported violations of law “with the express knowledge of” the Treasury Department and despite the Department's duty “to ensure that the perpetrators of [such] activities . . . [are] sanctioned to the fullest extent of the law.” Id. at 72-73 (Second Am. Compl. ¶¶ 111, 113).

         B. Procedural History

         Plaintiffs brought suit on December 16, 2015, Dkt. 1, and filed their first amended complaint on February 5, 2016, Dkt. 7. Then, on April 4, 2016-four days before Defendants moved to dismiss the first amended complaint-Plaintiffs purported to file a second amended complaint adding five plaintiffs. Dkt. 9. Plaintiffs did not seek leave of the Court or consent from Defendants before doing so. In their reply brief in support of their motion to dismiss, Defendants argued that the Court “should disregard the second amended complaint” for failure to comply with Federal Rule of Civil Procedure 15(a)(2), but, “[o]ut of an abundance of caution, ” they nevertheless addressed the merits, arguing that the additional plaintiffs and allegations would not cure the jurisdictional defects they had identified. Dkt. 16 at 3. Recognizing their procedural misstep, Plaintiffs then moved for leave to file their second amended complaint, arguing that granting them leave to file the proposed second amended complaint would not prejudice Defendants, would best serve judicial economy, and would be in the interest of justice. Dkt. 18.

         While the parties were briefing Defendants' motion to dismiss, Abrams moved to intervene. Dkt. 13. He argues that, in the event that the Court “open[s] the floodgates” to complaints like the one filed by Plaintiffs, he should be permitted to seek an order compelling Defendants to “investigate the tax status” of “charities that are hostile to Israel.” Id. at 2-3. The Court ordered Defendants to respond to Abrams's motion and, in particular, to address whether Abrams has standing to intervene. See Minute Order, May 21, 2016. In response, Defendants filed a memorandum arguing that Abrams lacks standing and that, accordingly, he should not be permitted to intervene. Dkt. 17 at 2.

         II. LEGAL STANDARD

         A. Motion to Dismiss Under 12(b)(1)

         Because “[f]ederal courts are courts of limited jurisdiction, possessing only that power authorized by Constitution and statute, ” Gunn v. Minton, 133 S.Ct. 1059, 1064 (2013) (quotation marks omitted), they have “an affirmative obligation to consider whether the constitutional and statutory authority exist for [them] to hear each dispute” brought before them, James Madison Ltd. ex rel. Hecht v. Ludwig, 82 F.3d 1085, 1092 (D.C. Cir. 1996) (quotation marks omitted). If the ...


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