United States District Court, E.D. Wisconsin
ISHAQ TUNIO and SINDHI ASSOCIATION OF NORTH AMERICA, Plaintiffs,
JAMIL DAUDI, et al., Defendants.
DECISION AND ORDER
ADELMAN UNITED STATES DISTRICT JUDGE.
Tunio has brought a derivative action in the name of the
Sindhi Association of North America (“SANA”), a
not-for-profit corporation organized under New York law. The
defendants are seven individuals who hold or held certain
management positions within SANA. Tunio also names himself as
a plaintiff and asserts his own claim for civil fraud against
the defendants. In a prior order, I found that the original
complaint did not properly allege a basis for federal
subject-matter jurisdiction, and I granted Tunio leave to
file an amended complaint that cured the deficiencies.
See ECF No. 20. Tunio has since filed such an
amended complaint. Five of the defendants who have appeared
now move to dismiss the amended complaint. In the present
order, I revisit the question of subject-matter jurisdiction
and address the defendants' motion to dismiss.
a society of individuals living in North America who are of
Sindhi descent. According to the allegations of the amended
complaint, SANA's purpose is “to work and cooperate
with other individuals and organizations for human rights,
social justice, world peace, cultural tolerance,
international brotherhood, global disarmament, the
eradication of world hunger, poverty and disease, and
conservation of ecology.” Am. Compl. ¶ 15. SANA is
organized as a New York not-for-profit corporation and has
its principal place of business in Maryland. Id.
¶ 5. Tunio, who is domiciled in Illinois, is a member of
SANA and has been for some time. Id. ¶ 1. The
amended complaint alleges that the seven defendants are,
respectively, citizens of Texas, California, Canada,
Missouri, Minnesota, Michigan, and Wisconsin. It further
alleges that these defendants, who at different times held
different positions within SANA, committed various breaches
of their duties to the corporation and its membership.
Although the complaint alleges that the defendants engaged a
wide array of misconduct, primarily it alleges that the
defendants attempted to manipulate the outcome of one of
SANA's elections and failed to maintain the
organization's status under § 501(c)(3) of the
Internal Revenue Code.
alleges that federal jurisdiction is proper under 28 U.S.C.
§ 1332, the diversity jurisdiction. In general, this
requires that the parties be citizens of different states and
that the amount in controversy exceed $75, 000, exclusive of
interest and costs. The amended complaint properly alleges
that the parties are diverse: neither of the plaintiffs is a
citizen of the same state as any defendant, and the presence
of the Canadian defendant is permitted under §
1332(a)(3). The amended complaint also alleges, under the
heading “jurisdiction and venue, ” that
“the matter in controversy exceeds $75, 000.” Am.
Compl. at p. 3 (unnumbered paragraph). However, as I noted in
my last order, this allegation does not satisfy the
amount-in-controversy requirement because this case includes
the claims of multiple plaintiffs against multiple
defendants. The value of these separate claims cannot be
aggregated; instead, at least one plaintiff, on its own, must
have a claim against a defendant that exceeds $75, 000.
See Travelers Property Cas. v. Good, 689 F.3d 714,
717-19 (7th Cir. 2012). Thus, to properly allege that the
amount-in-controversy requirement is satisfied, the complaint
must allege that a single plaintiff has a claim against a
defendant that exceeds $75, 000.
the “jurisdiction and venue” section of the
amended complaint does not allege that any single plaintiff
has a claim for more than $75, 000 against any defendant, the
amended complaint later alleges that one of the defendants,
Irshad Kazi, “is liable to SANA for an amount in excess
of $75, 000.” Am. Compl. ¶ 128. This allegation
satisfies the amount-in-controversy requirement as to
SANA's claim against Kazi. The amended complaint also
alleges that defendant Aijaz Turk “owes SANA the $100,
000 he pledged to SANA.” Am. Compl. 118. Assuming that
Tunio intends to bring a claim on behalf of SANA against Turk
for payment of this $100, 000, then the amount-in-controversy
requirement would be satisfied as to that claim. However, the
complaint does not allege that Tunio himself has a claim
against any defendant for more than $75, 000, nor does it
allege that SANA has a claim for more than $75, 000 against
the other five defendants. It thus appears that, for these
additional claims, Tunio intends to rely on the supplemental
jurisdiction, 28 U.S.C. § 1367. This is allowed. See
Exxon Mobil Corp. v. Allapattah Services, Inc., 545 U.S.
546, 559 (2005) (“When the well-pleaded complaint
contains at least one claim that satisfies the
amount-in-controversy requirement, and there are no other
relevant jurisdictional defects, the district court, beyond
all question, has original jurisdiction over that claim. The
presence of other claims in the complaint, over which the
district court may lack original jurisdiction, is of no
moment.”). Accordingly, I conclude that the amended
complaint adequately alleges a basis for federal
turn to the motion to dismiss filed by defendants Irshad
Kazi, Aijazul Haque,  Dr. Aijaz Turk, Dr. Valeed Shaikh, and
Munir Soomro. Four of these defendants-Kazi, Haque, Turk, and
Shaikh-argue that they are not subject to personal
jurisdiction in Wisconsin. All five plaintiffs point to
various other problems with the plaintiffs' claims that
require dismissal. One such problem is that Tunio has not
complied with certain procedural requirements necessary to
bring a derivative action in SANA's name. As I explain
below, this problem requires the dismissal of SANA's
claims, which are the only claims that satisfy the
amount-in-controversy requirement of § 1332. Because I
am dismissing SANA's claims, I will relinquish
supplemental jurisdiction over Tunio's individual claims.
See 28 U.S.C. § 1367(c)(3) (district court may
decline to exercise supplemental jurisdiction over a claim if
it has dismissed all claims over which it has original
jurisdiction). Because these decisions will dispose of the
entire suit in this court, I will not separately address
personal jurisdiction or the other grounds raised by the
defendants for dismissing this suit.
noted above, SANA is organized under New York law. That state
has a statute allowing members of a not-for-profit
corporation to bring a derivative action in the name of the
corporation. See N.Y. Not-For-Profit Corporation Law
§ 623 (West 2017). Tunio purports to bring his suit on
behalf of SANA under this law, and he does not dispute that
before he may do so he must comply with that law's
procedural requirements. See Br. in Opp. at 10, ECF
No. 25. One such requirement is that the suit be
“brought . . . by five percent or more of any class of
members.” § 623(a). The defendants contend that
this requirement has not been satisfied.
response to the defendants' argument, Tunio argues that
he has satisfied the 5% requirement by alleging in the
complaint that “[o]ver five (5%) percent of the SANA
Members as of August 14, 2014 support this law
suit.” See Br. in Opp. at 10 (citing Am.
Compl. ¶ 96). However, the statute does not require that
at least 5% of the membership merely “support”
the lawsuit. Instead, the statute requires that the suit be
brought by 5% of the membership. In ordinary legal
usage, a suit is “brought by” a person when that
person is a named party, such as a plaintiff. So the text of
the statute seems to require that persons constituting at
least 5% of the membership actually appear in the suit as
parties or as named representatives of the corporation.
Likewise, the legislative commentary to the statute states
that “[n]o derivative action can be brought under this
section unless the plaintiffs in such action consist
of at least 5% of any class of members.”
See § 623, cmt. (a) (emphasis added). The text
that I have emphasized appears to require that at least 5% of
the class of members actually join the suit as plaintiffs.
Moreover, the only New York case to have expressly considered
this issue concludes that a derivative suit can be maintained
only if the complaint identifies by name the members of the
corporation who join the suit and constitute at least 5% of
the membership; under that case, a “bald allegation of
representation is insufficient.” Segal v.
Powers, 687 N.Y.S.2d 589, 591 (N.Y. Sup. Ct. 1999). In
light of the text of the statute, the legislative commentary,
and the only judicial opinion on this subject, I conclude
that Tunio's bald allegation that his suit is
“supported” by 5% of a class of members is
insufficient. For this reason alone, the derivative claims
must be dismissed.
defendants next contend that Tunio has not complied with
§ 623(c) of the Not-For-Profit Law, which requires that,
in any derivative action, “the complaint shall set
forth with particularity the efforts of the plaintiff or
plaintiffs to secure the initiation of [the] action by the
board o[r] the reason for not making such effort.” This
requirement parallels Federal Rule of Civil Procedure
23.1(b)(3), which requires that the complaint in any
derivative action “state with particularity any effort
by the plaintiff to obtain the desired action from the
directors or comparable authority . . . and the reasons for
not obtaining the action or not making the effort.” In
their brief in support of their motion to dismiss, the
defendants argue that the amended complaint does not comply
with these requirements. See Br. in Supp. at 25-26,
ECF No. 24. Tunio does not respond to this argument in his
brief in opposition to the motion, see Br. in Opp.
at 10, and therefore I consider him to have waived any
argument that the amended complaint complies with either
§ 623(c) or Rule 23.1(b)(3). See, e.g., Harper v.
Vigilant Ins. Co., 433 F.3d 521, 528 (7th Cir. 2005)
(argument not raised in response to motion in the district
court is waived).
above reasons, I will dismiss the claims of SANA and
relinquish supplemental jurisdiction over Tunio's
personal claims. Because, at least in theory, the defects in
the derivative claims can be cured by convincing 5% of a
class of SANA's members to join the suit as named parties
and by alleging that the requirements of § 623(c) and
Rule 23.1(b)(3) have been satisfied, the dismissal of the
derivative claims will be without prejudice. However, I
advise the plaintiff to bring any future derivative action in
New York, where all of the defendants are more likely to be
subject to personal jurisdiction. See N.Y.
Not-For-Profit Corporation Law § 309 (West 2017)
(providing that any director, officer, key person, or agent
of a not-for-profit corporation is subject to personal
jurisdiction in New York). The four defendants who have
objected to personal jurisdiction appear to have insufficient
contacts with Wisconsin to enable a Wisconsin court to
exercise jurisdiction over them consistently with the
IT IS ORDERED that the defendants'
motion to dismiss (ECF No. 23) is GRANTED.
The claims of SANA are dismissed without prejudice for
failure to comply with the procedural requirements for
bringing a derivative action. I relinquish supplemental
jurisdiction over Tunio's personal claim.
 The remaining two defendants, Jamil
Daudi and Zulfiqar Ali Shaikh, have not appeared in ...