Pub. Media Lab, Inc. v. Dist. of Columbia

• Decision Date: 09 June 2022
• Docket Number: s. 21-CV-389 & 21-CV-475
• Parties: PUBLIC MEDIA LAB, INC. & Manifold Productions, Inc., Appellants, v. DISTRICT OF COLUMBIA, Appellee.
• Court: D.C. Court of Appeals

276 A.3d 1

PUBLIC MEDIA LAB, INC. & Manifold Productions, Inc., Appellants,

v.DISTRICT OF COLUMBIA, Appellee.

Nos. 21-CV-389 & 21-CV-475

District of Columbia Court of Appeals.

Argued January 18, 2022

Decided June 9, 2022

Jason B. Torchinsky, Washington, with whom Jonathan P. Lienhard, Edward Wenger, and Dennis W. Polio, were on the brief for appellant Public Media Lab, Inc.

Edward D. Greim, Kansas City, MO, with whom Matthew R. Mueller, and Christopher T. Craig, Fairfax, VA, were on the brief, for appellant Manifold Productions, Inc.

Thais-Lyn Trayer, Assistant Attorney General, with whom Karl A. Racine, Attorney General for the District of Columbia, and Loren L. AliKhan, Solicitor General at the time, Caroline S. Van Zile, Principal Deputy Solicitor General, and Carl J. Schifferle, Deputy Solicitor General, were on the brief, for appellee.

Before Easterly and Deahl, Associate Judges, and Thompson,^* Senior Judge.

Thompson, Senior Judge:

The District of Columbia (the "District"), through its Attorney General, brought suit against appellants Public Media Lab, Inc. ("PML") and Manifold Productions, Inc. ("Manifold"), alleging violations by PML of the District of Columbia Nonprofit Corporations Act ("NCA")¹ and PML's failure to comply with various corporate-governance requirements, and seeking judicial dissolution of PML and imposition of a constructive trust over non-profit funds awarded to Manifold by PML. Appellants, who partner together to produce documentary films about various historical and political figures, brought a special motion to dismiss pursuant to the District of Columbia Anti-Strategic Lawsuits Against Public Participation ("Anti-SLAPP") Act.² The trial court denied appellants’ motion, ruling that the District's suit could proceed, and appellants timely appealed that ruling. While this appeal was pending, the Council of the District of Columbia (the "Council") amended the Anti-SLAPP Act, initially through emergency legislation, exempting suits brought by the District of Columbia from its coverage and applying the new legislation to all pending cases. The District argues that this intervening legislation moots the appeal, while appellants contend that the amendment is invalid as applied to this case. We conclude that the new legislation is valid and deprives this court of the ability to grant the relief appellants seek. We therefore dismiss the appeal as moot (thereby leaving to stand the trial court's denial of appellants’ special motion to dismiss) and remand for further proceedings.

I. Factual & Procedural Background

PML is a nonprofit, 501(c)(3) corporation that was organized in 2007 under the laws of the District of Columbia to receive and award grant funding for the creation of educational documentary films and to engage in other charitable and educational activities. Manifold is a for-profit media production company that has received funding from PML to produce documentary films. The two entities have the same business address. At all relevant times, Michael Pack was the President, CEO, and a member of the Board of PML and the sole owner of Manifold.

On January 5, 2021, the Attorney General of the District of Columbia filed a lawsuit against PML and Manifold in the Superior Court, pursuant to its authority under common law and the NCA, alleging that PML had "fail[ed] to comply with District law, its corporate requirements, and its nonprofit purposes ...." The complaint alleges a series of transactions between PML and Manifold that violate the prohibition against private inurement. According to the complaint, all but one of the grants PML has awarded went to Manifold; more specifically, the complaint alleges that the grants to Manifold totaled more than $4 million and represent 99.3% of the total grant-funding PML has issued and 94.8% of its total revenues. The complaint asserts that the awards to Manifold violated D.C. Code § 29-404.40(a), which prohibits a nonprofit organization from distributing "any part of its assets, income, or profits to its ... directors ... or officers," and as well contravened PML's articles of incorporation, which prohibit private inurement. Additionally, the complaint alleges that in making grant awards to Manifold, PML failed to comply with D.C. Code § 29-406.70(a) and PML's own governing rules that establish disclosure and board-authorization requirements for conflicting-interest transactions. The complaint further alleges that from 2008 to 2016, PML did not disclose the awards as transactions with interested persons, as it was required to do on its annual IRS Form 990.

The complaint also alleges corporate-governance violations related to PML's managing structure. It asserts first that PML's board of directors has not held any official meetings or maintained records of actions taken by the board since 2008, in violation of D.C. Code § 29-406.01, which requires a nonprofit to have a board of directors to oversee its activities and affairs; D.C. Code § 29-413.01, which sets record-keeping requirements; and PML's by-laws, which provide for board management and annual board meetings. Second, the complaint alleges that for each year from 2008 through 2018, PML either listed only Mr. Pack as an officer in its tax reporting or did not list any officers, in violation of D.C. Code § 29-406.40(a), which requires nonprofit organizations to have at least two officers to divide responsibility for managing the corporation and its financial affairs. Similarly, PML's governing documents provide for six officer positions to be elected at each annual meeting.

Finally, the complaint alleges that PML has acted contrary to its nonprofit purpose, see D.C. Code § 29-403.01(a), by failing to conduct its grant-making program in the manner detailed in its application to the IRS seeking nonprofit status. Specifically, the complaint states that "PML projected it would issue grants, averaging between $100,000 and $200,000 per grant, with about ‘six or seven small grants’ its first year," and gradually increasing to twenty to twenty-five grants per year. PML also described a "comprehensive and competitive grant application and selection process, as well as disclosure and accounting requirements on grant recipients," which included, among other things, "an open solicitation basis and formal review process," issuing requests for proposals, and "[r]equiring recipients to provide PML with accountings for the uses of such grants ...." The complaint alleges that PML did not execute any of these activities. Instead, according to the complaint, PML's only disclosed expenses have been "grants to Manifold and infrequent nominal banking, legal, and accounting fees," and thus it has functioned "only as a funding mechanism for Manifold and Pack, not for a nonprofit purpose."

Citing all the foregoing acts and omissions, the complaint alleges that "PML acted as a conduit to raise tax-exempt funds for the sole and primary benefit of Manifold" and "serves no purpose other than to illegally pass along tax-exempt funds to Manifold, a for-profit entity." The complaint further asserts that PML's alleged failure "to safeguard [its] nonprofit assets" and "meet its fiduciary duties in ensuring that nonprofit funds are spent in ways that benefit the public, avoid waste[,] and are in accordance with PML's charitable purposes," in addition to entailing violations of the NCA and PML's own governance requirements, also "violated the responsibilities of a charitable corporation under common law." The Attorney General seeks judicial dissolution of PML and imposition of a constructive trust over funds Manifold received from PML on the grounds that, in awarding those funds, PML "exceeded or abused ... the authority conferred upon it by law" and "continued to act contrary to its nonprofit purposes ...." D.C. Code § 29-412.20(1)(1)(B)-(C).

In response to the complaint, PML and Manifold filed a Special Motion to Dismiss under the Anti-SLAPP Act. See D.C. Code § 16-5502(a). The trial court denied the motion in a written order dated June 7, 2021, finding that appellants had failed to make the required prima facie showing that the Anti-SLAPP Act applied. Id. § 16-5502(b). While appellants’ appeal of the trial court's denial of the special motion to dismiss was pending, the Council passed legislation — through a series of emergency and temporary amendments — that exempts actions brought by the District from the Anti-SLAPP Act.³ Appellants challenge the validity of this legislation on several grounds and maintain that the trial court erred in holding that the Anti-SLAPP Act does not apply.

II. The Anti-SLAPP Act and the Emergency and Temporary Amendments

The Anti-SLAPP Act, D.C. Code § 16-5501 et seq. (2021 Supp.) (the "Act"), protects the targets of meritless litigation that is "aimed to punish or prevent the expression of opposing points of view" by creating certain procedural tools, including a special motion to dismiss. Saudi Am. Pub. Rels. Affs. Comm. v. Inst. for Gulf Affs. , 242 A.3d 602, 605 (D.C. 2020) (quoting Competitive Enter. Inst. v. Mann , 150 A.3d 1213, 1226-27 (D.C. 2016) ). Under the Act, the party seeking dismissal (usually the defendant) must "make[ ] a prima facie showing that the claim at issue arises from an act in furtherance of the right of advocacy on issues of public interest ...." D.C. Code § 16-5502(b). If defendants succeed in making this showing, the burden then shifts to the plaintiff to "demonstrate[ ] that the claim is likely to succeed on the merits" in order to avoid dismissal. Id. The filing of a special motion to dismiss under the Anti-SLAPP act stays discovery (other than "targeted discovery" that "will enable the plaintiff to defeat the motion"), and the court must hold an expedited hearing on the motion. D.C. Code § 16-5502(c) - (d).

As noted above, while this appeal was pending — and after the trial court had ruled on appellants’ special motion to dismiss — the Council passed emergency and temporary ...