Heslep v. Americans for African Adoption, Inc.

• Decision Date: 27 August 2012
• Docket Number: Civil Action No. 1:11CV56.
• Citation: 890 F.Supp.2d 671
• Court: U.S. District Court — Northern District of West Virginia
• Parties: James William HESLEP, and Carey Waters Heslep, Plaintiffs, v. AMERICANS FOR AFRICAN ADOPTION, INC.; Cheryl Carter–Shotts; and Board of Directors, Americans for African Adoption, Inc., Defendants.

890 F.Supp.2d 671

James William HESLEP, and Carey Waters Heslep, Plaintiffs,

v.AMERICANS FOR AFRICAN ADOPTION, INC.; Cheryl Carter–Shotts; and Board of Directors, Americans for African Adoption, Inc., Defendants.

Civil Action No. 1:11CV56.

United States District Court, N.D. West Virginia.

Aug. 27, 2012.

Richard W. Weston, Weston Law Office, Huntington, WV, for Plaintiff.

Marjorie Anne McDiarmid, WVU College of Law, Morgantown, WV, Scott A. Curnutte, Curnutte Law Office, Elkins, WV, for Defendant.

MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' FIRST MOTION TO DISMISS [DKT. NO. 42], DENYING DEFENDANTS' SECOND MOTION TO DISMISS [DKT. NO. 56], AND SCHEDULING A SCHEDULING CONFERENCE

IRENE M. KEELEY, District Judge.

On January 30, 2012, the defendants, Cheryl Carter–Shotts (“Carter–Shotts”), Americans for African Adoption, Inc. (“AFAA, Inc.”), and its Board of Directors (“the Board”) (collectively, “AFAA”), filed a Motion to Dismiss pursuant to Fed.R.Civ.P. 12(b)(2), (4), (5), and (6) and 4(m). On May 8, 2012, AFAA filed a second Motion to Dismiss pursuant to Rule 12(b)(7). For the reasons that follow, the Court GRANTS IN PART and

DENIES IN

PART

AFAA's first Motion to Dismiss (dkt. no. 42), and DENIES its second Motion to Dismiss (dkt. no. 56).

I.

A.

In the summer of 2007, the plaintiffs, James and Carey Heslep (“the Hesleps”), decided to adopt a child from the Republic of Uganda (“Uganda”). According to the Hesleps, after considering several agencies and speaking with AFAA Inc.'s President and Managing Director, Carter–Shotts, they entered into an “illusory contract” with AFAA on August 6, 2007 under which AFAA would provide adoption services to the Hesleps in both the United States and Uganda. (Dkt. No. 3 at ¶ 19). To facilitate the international adoption process, AFAA identified Joseph Kagimu (“Kagimu”), a Ugandan citizen, as an AFAA employee who would coordinate the adoption in Uganda.

Following several months of preparation by the Hesleps, including undergoing an adoptive home study and petitioning for advanced processing (“the petition”) through the United States Citizenship and Immigration Services (“USCIS”), Carter–Shotts informed them on May 10, 2008 that AFAA had identified an orphaned boy named “Sam” who met the approval criteria in their home study and was living in a Ugandan orphanage operated by AFAA. Carter–Shotts sent them information that indicated Sam's paternal grandmother had brought him to the AFAA orphanage after his father had died while serving in the military, and his mother had died in an accident.

The Hesleps agreed to proceed with the adoption and, on May 10, 2008, began supporting Sam through AFAA foster care, paying $200 per month to cover his housing, food, healthcare, and schooling. They also began to develop a personal relationship with Sam; over the next fifteen months, the Hesleps communicated with him through video and letters. Then, on September 4, 2009, Carter–Shotts informed the Hesleps that they needed to appear before the High Court of Uganda to be named Sam's legal guardians. Per Carter–Shotts's instructions, the Hesleps traveled to Uganda where Kagimu gave them physical custody of Sam on September 12, 2009. On September 17th, the High Court of Uganda named them Sam's legal guardians.

On September 29, 2009, when the Hesleps applied for an IR–4 visa for Sam from the United States Embassy in Uganda (“the Embassy”), the Embassy informed them that it was opening an investigation into irregularities in Sam's documents, specifically his parents' death certificates. While the investigation proceeded, James Heslep returned to the United States, and Carey Heslep remained in Uganda to care for Sam. Two weeks later, on October 15, 2009, the Embassy reported that Kagimu had forged the death certificates of Sam's parents. The Hesleps later learned that Sam's parents are actually alive and that Kagimu is now imprisoned in Uganda on charges of fraud, forgery and embezzlement.

Carey Heslep returned to the United States on October 20th, leaving Sam in Uganda. On February 9, 2010, USCIS notified the Hesleps that AFAA held no legal authority in Uganda to assist in the adoption; that AFAA had failed to obtain appropriate legal custody of Sam under Ugandan law; and that “AFAA, knowingly and admittedly, provided false death certificates for the birth parents of [Sam].” (Dkt. No. 45–2 at 2–3). On February 24, 2010, the Hesleps withdrew their USCIS petition and, on April 1, 2010, returned Sam to the care of his biological grandmother in Uganda.

B.

On April 25, 2011, the Hesleps filed this suit pursuant to 28 U.S.C. §§ 1331 and 1332 against the defendants, AFAA, Inc., Carter–Shotts, and AFAA's Board of Directors, which includes Carter–Shotts and individual members named Anne Duffus (“Duffus”), Anne Marie Merril (“Merril”), Temple Moorehead (“Moorehead”), and Suzanne Terrant (“Terrant”). In their complaint, the Hesleps allege that the defendants' fraudulent actions and misrepresentations caused them to suffer emotional distress and financial losses, including more than $10,000 they paid to AFAA directly, and several thousand dollars more in foster care expenses, adoption fees, and travel costs. They further claim that AFAA has defrauded at least five other couples in a similar manner and is part of an illicit enterprise that targets prospective adoptive parents. The Hesleps also allege that, to perpetrate its scheme, AFAA violated federal mail and wire fraud statutes, including 18 U.S.C. §§ 1341 and 1343.

Their complaint asserts nine causes of action: (1) violations of the Racketeer Influenced and Corrupt Organizations (“RICO”) Act, 18 U.S.C. §§ 1961 and 1962, (2) fraudulent misrepresentation and inducement, (3) intentional infliction of emotional distress (“IIED”), (4) negligent hiring, (5) negligent supervision, (6) negligent retention, (7) negligent administration of a program, (8) negligent infliction of emotional distress (“NIED”), and (9) punitive damages.

On January 30, 2012,¹ the defendants filed a motion to dismiss the Hesleps' claims, arguing that (1) the Board should be dismissed because it lacks capacity to be sued, (2) the individual directors should be dismissed for lack of personal jurisdiction, immunity from negligence liability under W. Va.Code § 55–7C–3 and Indiana Code § 23–17–13–1,² and improper service; (3) the fraud claim should be dismissed for failure to satisfy the heightened pleading standard of Fed.R.Civ.P. 9(b); and (4) the remaining claims should be dismissed for failure to state a cause of action. (Dkt. No. 42). The parties later agreed to attempt to resolve their dispute through mediation on April 23, 2012, but were unsuccessful. Then, on May 8, 2012, the defendants filed a second motion to dismiss, arguing that the plaintiffs had failed to join AFAA–Uganda, which they contend is a separate and distinct entity from AFAA and, thus, a necessary and indispensable party to this case. (Dkt. No. 56).

II.

The Court considers first whether the Board of Directors has the capacity to be sued. AFAA argues that the Board must be dismissed because it is not a distinct legal entity subject to suit; the plaintiffs, however, maintain that the Board is a proper party to this case.

It is important to note that the plaintiffs have sued only the Board, and not its members in their individual capacities.³ Although their complaint, under the heading “Parties,” identifies Duffus, Merrill, Moorehead, and Terrant as individual directors (dkt. Do. 3 at ¶¶ 8, 9, 10, 11), the style of the case names only Carter–Shotts, AFAA, Inc., and its “Board of Directors” as defendants ( id. at 1). Additionally, the plaintiffs concede that they served the “Board of Directors” at AFAA's headquarters in Indianapolis, but have made no attempt to serve the individual directors due to difficulties in ascertaining their identities. (Dkt. No. 45 at 18). Moreover, the complaint asserts no factual allegations against the individual directors and mentions them only twice: First, in Count One, as individuals comprising the alleged RICO enterprise ( id. at ¶ 77); and second, in Count Seven, as members of the Board, which allegedly breached its duty to administer an international adoption program ( id. at ¶ 129).

Pursuant to Fed.R.Civ.P. 17(b), a non-corporate entity's capacity to sue and be sued is governed “by the law of the state where the court is located.” In West Virginia, a corporate “board of directors is not a legal entity separate and apart” from the corporation itself and, thus, should not be named as a separate party. Mainella v. Bd. of Trs., 126 W.Va. 183, 27 S.E.2d 486, 488 (1943). This rule reflects the well-settled principle that “[t]he corporate entity does not exist separate from its board of directors.” Jules Inc. v. Boggs, 165 W.Va. 510, 270 S.E.2d 679, 683 (1980). “[D]ue to the nature of the body that is a board of directors, any action of the board of directors is an action of the corporation.” Flarey v. Youngstown Osteopathic Hosp., 151 Ohio App.3d 92, 783 N.E.2d 582, 585 (2002); see also Willmschen v. Trinity Lakes Improvement Ass'n, 362 Ill.App.3d 546, 298 Ill.Dec. 840, 840 N.E.2d 1275, 1280–81 (2005) (“[The] belief that [a] board [of directors] is a separate entity capable of being sued is a misconception of what a board of directors is and how it functions within the corporate structure.”).

Here, although AFAA, Inc. is a legal person incorporated under Indiana law, AFAA's Board of Directors is not a legal entity separate and apart from the corporation it directs. See Mainella, 27 S.E.2d at 488. As alleged in the complaint, AFAA, Inc. holds itself out as being controlled by the Board, so that its actions and those of the Board are one in the same. See Flarey, 783 N.E.2d at 585. As such, the Board does not exist separate from AFAA, Inc., see Boggs, 270 S.E.2d at 683, and, thus, lacks capacity to be sued under Fed.R.Civ.P. 17(b) and is dismissed.⁴

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