Girl Scouts of Manitou v. Girl Scouts, America, 08-2488.

Citation549 F.3d 1079
Decision Date11 September 2008
Docket NumberNo. 08-2488.,08-2488.
PartiesGIRL SCOUTS OF MANITOU COUNCIL, INC., Plaintiff-Appellant, v. GIRL SCOUTS OF The UNITED STATES OF AMERICA, INC., et al., Defendants-Appellees.
CourtUnited States Courts of Appeals. United States Court of Appeals (7th Circuit)

Gary W. Leydig, Attorney, Riordan, Fulkerson, Hupet & Coleman, Chicago, IL, for Plaintiff-Appellant.

Kenneth Kirschner, Attorney, Heller Ehrman, New York, NY, David E. Jones, Attorney, Heller Ehrman LLP, Madison, WI, for Defendants-Appellees.

Before POSNER, KANNE, and TINDER, Circuit Judges.

KANNE, Circuit Judge.

Girls Scouts of the United States of America (GSUSA) first chartered Girl Scouts of Manitou Council, Inc. as a local Girl Scout council in 1950. Now, almost sixty years later, GSUSA, acting pursuant to a new organizational strategy, is in the process of merging many of its local councils to form larger regional councils. Manitou has declined to participate in the proposed restructuring, which has prompted GSUSA to undertake proceedings to unilaterally reduce Manitou's chartered territory. Manitou filed suit against GSUSA and sought a preliminary injunction to prevent any changes to its jurisdiction pending final resolution of its claims. The district court denied Manitou's motion for a preliminary injunction, concluding that Manitou would not suffer the requisite irreparable harm, and Manitou appealed. We have found the district court's determination that Manitou would not suffer irreparable harm between now and resolution of its claims to be clearly erroneous. Because Manitou has also satisfied the other requirements for a preliminary injunction, on September 11, 2008, this court issued an order, with an opinion to follow, reversing the district court. The order enjoined GSUSA from making any changes to, or interfering with, Manitou's current jurisdiction. This opinion sets forth the rationale for our order of September 11.

I. BACKGROUND

In 1912, Juliette Gordon Low founded the Girl Scouts in Savannah, Georgia. Nearly four decades later, in 1950, Congress incorporated the organization as the Girl Scouts of the United States of America. See Pub.L. No. 460, 64 Stat. 22 (1950) (codified as amended at 36 U.S.C. § 80301 et seq.). Today, as GSUSA approaches its 100th birthday, its membership stands at approximately 3.7 million and includes satellite organizations in ninety countries.

The stated purposes of GSUSA are "to promote the qualities of truth, loyalty, helpfulness, friendliness, courtesy, purity, kindness, obedience, cheerfulness, thriftiness, and kindred virtues among girls," 36 U.S.C. § 80302(1), and to instill "the highest ideals of character, patriotism, conduct, and attainment," id. § 80302(3). Notwithstanding these virtuous aspirations, however, "Girl Scouting" is big business. In Fiscal Year 2006, GSUSA reported operating revenues of nearly $123 million. Of that number, $35 million derived from membership dues,2 while another $13.5 million came from the sales of Girl Scout merchandise.3 Notably, these figures do not include direct revenues from sales of the organization's famous cookies, which accrue entirely to the local councils that conduct the sales.4

GSUSA is led by the National Council of Girl Scouts, which consists of delegates from its various member organizations. The National Council meets every three years to elect its board of directors (the "National Board") and various corporate officers. The National Board appoints other corporate officers, including the chief executive officer. GSUSA is governed by the Blue Book of Basic Documents, a compilation of organizational documents that includes GSUSA's congressional charter, constitution, bylaws, policies, and so forth. GSUSA periodically updates the Blue Book; it issued the current version in 2006.

To provide Girl Scouting to the masses, GSUSA has developed an extensive network of local councils. In 2005, GSUSA's organizational structure featured approximately 315 of these councils. Each local council is governed by its own independent board of directors, employs its own officers and professional staff, and is responsible for its own financial health. A local council's primary revenue sources include private donations, sales of Girl Scout cookies, sales of other Girl Scout products and services,5 and fees and charges from the use of council-owned camps and facilities.

The relationship between GSUSA and a local council is defined by that council's Girl Scout charter. For a nominal fee, GSUSA issues a charter to the local council, which grants to that council "the right to develop, manage, and maintain Girl Scouting throughout the areas of its jurisdiction," including the right to use GSUSA's names and protected marks. In the charter application, which the charter incorporates by its terms, the local council agrees "to operate as a council in accordance with and to be limited by policies so identified, published, and distributed to councils by Girl Scouts of the United States of America, accepting them as binding on the Council, on all its members, officers, employees, and those affiliating with it." Each charter designates the council's jurisdiction and remains valid for a stated length of time.

A. Girl Scouts of Manitou Council, Inc.

The plaintiff in this case, Girl Scouts of Manitou Council, Inc., a Wisconsin nonprofit corporation, is one of GSUSA's local councils. Manitou's headquarters are in Sheboygan, Wisconsin. Its current jurisdiction consists of all or part of seven counties located in eastern Wisconsin,6 and its membership exceeds 7,000 individuals. GSUSA originally chartered Manitou in 1950 and has routinely renewed its charter, with the most recent renewal taking effect on January 1, 2006. The present charter is to run for "up to four years."

Manitou, like GSUSA, is no small organization. It is managed by an independent board of directors and employs a full-time staff of seventeen people. It owns significant real property, including two large Girl Scout camps and a corporate office building. The first camp, Camp Evelyn, is a 240-acre development in Plymouth, Wisconsin, that includes more than forty buildings and features an Olympic-sized swimming pool. The second camp, Camp Manitou, covers 140 acres near Two Rivers, Wisconsin. Manitou states that the two properties have a combined fair market value of more than $12 million. The corporate headquarters, which include administrative offices and meeting and activity rooms, are located in Sheboygan and have a fair market value in excess of $3 million.

Manitou asserts that nearly 100% of its annual revenues derive from the sale of Girl Scout merchandise and services, private donations, and investment income from Manitou's reserve funds. Girl Scout cookie sales alone generate more than $1 million in revenue each year. Manitou states that less than 0.2% of its revenues come from renting its facilities to third parties unaffiliated with the Girl Scouts.

B. GSUSA's National Realignment Strategy

In 2004, in response to what it cites as declining membership, fading brand image, and "waning program effectiveness," GSUSA commenced a thorough evaluation of its organization to determine how, moving forward, it could remain both viable and relevant. GSUSA, aided by a consultant from Columbia University, concluded that a "fundamental transformation" was necessary. In a strategy introduced in the summer of 2005, GSUSA announced a plan to reduce, by the end of 2009, the number of local councils from approximately 315 to 109, merging the local organizations to form larger, "high capacity" councils. These larger councils, according to GSUSA, would no longer compete for top local sponsors and media attention, would have the resources to hire professionally trained staff members, and would be positioned to take advantage of economies of scale in programming, training, fund-raising, and branding. GSUSA's realignment plan was nationwide in scope and involved virtually every council, regardless of size or past performance.

The National Board approved the realignment plan in September 2005. That winter, CEOs and chairs of the boards from the various local councils met in Orlando to discuss the realignment process. From that meeting, in which Manitou's representatives actively participated, came the initial realignment strategy for Wisconsin. The final proposal (the "Wisconsin Realignment Plan"), formally submitted by Denise Schemenauer, Manitou's CEO, on behalf of the affected councils in May 2006, would have reduced the fifteen local councils located in Wisconsin and the Upper Peninsula of Michigan to three. Manitou would have merged 60% of its territory with the territories of six other councils in northern Wisconsin and the Upper Peninsula7 to form a new council, the Girl Scouts of Northwestern Great Lakes. The remainder of Manitou's territory would have been divided between the other two new Wisconsin councils, which were to be situated to Manitou's south and southwest. The National Board approved the Wisconsin Realignment Plan in August 2006.

Not long thereafter, Manitou's leadership began having second thoughts about the proposed realignment. Between May and October 2007, while continuing to avow its intentions to follow through with the merger, Manitou proposed three separate amendments to the Wisconsin Realignment Plan. GSUSA's leadership rejected each in turn, choosing instead to reaffirm its support for the Wisconsin Realignment Plan. In a letter to the chair of Manitou's Board, Liesl Rice, dated October 3, 2007, GSUSA denied Manitou's third such proposal and stated that "[w]e will not again reconsider the jurisdictional boundaries, as approved by the National Board on August 24, 2006." The letter concluded by directing Manitou's leadership to sign the written agreements necessary for the merger to proceed. If Manitou failed to do so, warned GSUSA, "the National Board...

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