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Depu v. Yahoo! Inc.

United States District Court, District of Columbia

September 24, 2018

HE DEPU, et al., Plaintiffs,
v.
YAHOO! INC., et al. Defendants.

          MEMORANDUM OPINION

          JOHN D. BATES UNITED STATES DISTRICT JUDGE

         Before 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.. 306 F.Supp.3d 181, 185 (D.D.C. 2018). Defendants moved to dismiss the complaint, arguing that the settlement agreement did not establish a charitable trust and that plaintiffs lack standing to enforce any trust. Id. This Court dismissed the complaint with prejudice, holding that the settlement did not establish a trust and that even if it had, plaintiffs lack standing to enforce it. Id. at 189, 191. Now, plaintiffs move the Court to set aside the judgment and for leave to file a second amended complaint that, they assert, will cure some of the first amended complaint's defects, allowing some of plaintiffs' claims to survive a motion under Rule 12(b)(6). For the reasons explained below, the Court will deny plaintiffs' motion to alter or amend the March 30, 2018 judgment and will deny plaintiffs' motion for leave to amend their complaint.

         BACKGROUND

         The full facts and procedural history of this case are laid out in this Court's earlier memorandum opinion. See Depu, 306 F.Supp.3d at 185-87. In short, as part of a settlement agreement to end a 2007 lawsuit filed by Chinese political activists (the "Wang Settlement"), Yahoo agreed to pay $17.3 million to the Laogai Research Foundation ("LRF"), a non-profit corporation founded by Harry Wu, to establish the Yahoo Human Rights Fund ("YHRF" or "YHR Fund"). See Id. at 185. In 2017, plaintiffs[1] filed a lawsuit alleging that the YHRF is a charitable trust established for plaintiffs' benefit and contending that defendants[2]-all of whom are allegedly trustees-unlawfully breached and modified the purported trust under D.C. law. See id. at 186-87; FAC ¶¶ 125-130, 135-41.[3]

         The 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, 306 F.Supp.3d at 187-89. Second, the Court held that even if the Wang Settlement had somehow established a charitable trust, plaintiffs failed to allege plausibly that they had standing to enforce the trust, both under the principles of trust law and, as to six of seven plaintiffs, under Article III. See Id. at 189-91 & n.9. Because the Court's order dismissing the FAC did not specify whether the complaint was dismissed with or without prejudice, the claims were dismissed with prejudice under Federal Rule of Civil Procedure 41(b). See Rollins v. Wackenhut Servs., Inc., 703 F.3d 122, 131 (D.C. Cir. 2012) ("[Rule] 41(b) provides, in part, that '[u]nless the dismissal order states otherwise, [an involuntary dismissal]-except one for lack of jurisdiction, improper venue, or failure to join a party under Rule 19-operates as an adjudication on the merits."). Plaintiffs now move to set aside the judgment and for leave to amend their trust claims in a proposed second amended complaint that they claim will survive. See Rule 59(e) Mot. to Alter J. from Dismissal With Prejudice to Dismissal Without Prejudice, Rule 15(a) Mot. for Leave to Amend, and Mem. of P. & A. in Support Thereof ("Pls.' Mot. to Amend") [ECF No. 42].

         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., 787 F.3d 1120, 1128 (D.C. Cir. 2015) (quoting Firestone v. Firestone, 76 F.3d 1205, 1208 (D.C. Cir. 1996) (per curiam)). Plaintiffs followed that procedure here, filing a combined Rule 59(e) and Rule 15(a)(2) motion requesting that the Court grant leave to amend. See Pls.' Mot. to Amend at 3.

         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, 881 F.3d 213, 217 (D.C. Cir. 2018) (citations omitted). Instead, a Rule 59(e) motion may be granted "under three circumstances only: (1) if there is an 'intervening change of controlling law'; (2) if new evidence becomes available; or (3) if the judgment should be amended in order to 'correct a clear error or prevent manifest injustice.'" Id. (citation omitted).

         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, 275 F.Supp.3d 218, 224 (D.D.C. 2017) (quoting Foman v. Davis, 371 U.S. 178, 182 (1962)).

         Because 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.'" 76 F.3d at 1209 (second emphasis added) (citation omitted). And because dismissal with prejudice "operates as a rejection of the plaintiff[s'] claims on the merits and precludes further litigation of them," Rudder v. Williams, 666 F.3d 790, 794 (D.C. Cir. 2012) (alteration and citation omitted), the D.C. Circuit has since observed that the standard for dismissing a complaint with prejudice is "high," Brink, 787 F.3d at 1129.

         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, 76 F.3d at 1209). For their part, defendants respond that the Court met the Firestone standard because plaintiffs' trust claims were "predicated on whether the Wang Settlement created a charitable trust," and the Court's opinion was sufficiently clear that "new factual allegations" could not "change the plain language of the Wang Settlement, which disclaims any intention to create a ...


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