Thorsen ex rel. Sons of Norway, Inc. v. Sons Norway

• Decision Date: 14 May 2014
• Docket Number: No. 13–CV–2572 (PKC).,13–CV–2572 (PKC).
• Citation: 996 F.Supp.2d 143
• Parties: Theodore THORSEN, Christine M. Thorsen, and David M. Thorsen, both Individually and Derivatively on Behalf of Sons of Norway, Inc., Plaintiffs, v. SONS OF NORWAY, Eivind Heiberg, Dan Rude, and David Ness, Defendants.
• Court: U.S. District Court — Eastern District of New York

996 F.Supp.2d 143

Theodore THORSEN, Christine M. Thorsen, and David M. Thorsen, both Individually and Derivatively on Behalf of Sons of Norway, Inc., Plaintiffs,

v.SONS OF NORWAY, Eivind Heiberg, Dan Rude, and David Ness, Defendants.

No. 13–CV–2572 (PKC).

United States District Court, E.D. New York.

Signed Feb. 6, 2014.

Order Denying Reconsideration May 14, 2014.

Frances Codd Slusarz, The Slusarz Law Firm LLC, Bethel, CT, for Plaintiffs.

William A. Ruskin, Aime Gessler Dempsey, Epstein Becker & Green, P.C., New York, NY, for Defendants.

MEMORANDUM & ORDER

PAMELA K. CHEN, District Judge:

Before the Court are the motions of Defendants Eivind Heiberg, Dan Rude, and David Ness ¹ (the “Individual Defendants”), and Nominal–Defendant Sons of Norway, (collectively, “Defendants”) to dismiss the complaint pursuant to Federal Rules of Civil Procedure 12(b)(2) for lack of personal jurisdiction and 12(b)(6) for failure to state a claim upon which relief can be granted. (Dkts. 43, 44.) Plaintiffs Theodore Thorsen, Christine M. Thorsen, and David Thorsen (collectively, the “Thorsens” or “Plaintiffs”) were members of Derivative–Plaintiff Sons of Norway (“SON”) at all times relevant to the complaint. With respect to the Individual Defendants, Eivind Heiberg is a current officer of SON, Dan Rude is a former officer of SON, and David Ness is SON's general counsel.

The complaint in this action asserts five claims:

1) Count One: Breach of fiduciary duty against Heiberg, Rude, and Ness brought derivatively on SON's behalf;

2) Count Two: Defamation per se against SON brought by the Thorsens;

3) Count Three: Defamation against SON by the Thorsens;

4) Count Four: Intentional Infliction of Emotional Distress against SON by the Thorsens; and

5) Count Five: Intentional Infliction of Emotional Distress against SON by David Thorsen.

(Dkt. 1 at 45–46.) Plaintiffs seek monetary damages and the appointment of a receiver over SON, among other relief. (Dkt. 1 at 45–46.)

For the reasons set forth below, Defendants' motion is granted, and Plaintiffs' complaint is dismissed in its entirety with prejudice.

BACKGROUND

The Thorsens are former members of the Nansen Lodge, located in Staten Island, New York, a local lodge of SON, an international fraternal organization. (Dkt. 1 ¶¶ 18–19.) ² SON is a charitable 501(c)(8) organization incorporated in Minnesota, with approximately 61,000 members in approximately 400 lodges across the United States, Canada, and Norway. (Dkt. 1 ¶¶ 12, 18.) SON was established in 1895 for the purpose of promoting the interests of the Norwegian diaspora in North America and to protect the livelihoods of Norwegian immigrants and natives in the United States, Canada, and Norway. (Dkt. 1 at ¶ 18.)

Defendants are David Ness, a resident of Minnesota and general counsel for SON, Eivind Heiberg, CEO of SON and a resident of Minnesota, and Dan Rude, a resident of Montana and the former International President of SON. (Dkt. 1 ¶¶ 12–15.)

I. The Complaint

In their complaint, Plaintiffs allege a litany of misdeeds by a so-called “cabal” of members at the Nansen Lodge, actions which allegedly have resulted in the degradation of the organization. But the heart of Plaintiffs' complaint is that the members of the “cabal” within the Nansen Lodge, through their alleged financial mismanagement and negligence, have damaged the Nansen Lodge and SON by jeopardizing, but not causing the loss of, its charitable 501(c)(8) status. ( See Dkt. 1 ¶ 7) (“defendants have put the tax-exempt status of [SON] at risk of revocation by the [IRS]”). The complaint alleges that SON has been turned into “little more than a tax shelter” for the $500–million insurance business that SON operates. (Dkt. 1 ¶¶ 1, 20.) Notably, the Individual Defendants are not alleged to be members of the “cabal” that committed the various misdeeds at the Nansen Lodge. Rather, the Individual Defendants are alleged to have breached their fiduciary duties to SON as members of SON's international leadership, through their purported failed oversight and lax supervision of the Nansen Lodge.

Plaintiffs allege that the leadership “cabal” at the Nansen Lodge stymied reform and stifled dissent by ignoring the complaints of Plaintiffs and other members of the Nansen Lodge. (Dkt. 1 ¶ 41–59.) Plaintiffs further allege that the Nansen Lodge leadership granted a for-profit caterer, A Taste of Honey, Inc., “a rather privileged position” “as the exclusive caterer and concessionaire” of the Nansen Lodge. (Dkt. 1 ¶ 33.) The complaint alleges that this decision, among others, placed the Nansen Lodge's financial status at risk by tying the financial viability of the Nansen Lodge to that of A Taste of Honey. (Dkt. 1 ¶ 66.)

Plaintiffs' factual allegations as to the Individual Defendants relate almost exclusively to their roles as members of a special SON “Dispute Resolution Committee” (the “Committee”) empaneled to investigate and adjudicate the Thorsens' complaints regarding the Nansen Lodge's leadership and members of the “cabal.” (Dkt. 1 ¶ 115.) Plaintiffs also allege that the Individual Defendants were aware of the Nansen Lodge leadership's misdeeds but failed to intervene or provide proper oversight of the leadership group. (Dkt. 1 ¶¶ 41, 135.) According to the complaint, the Individual Defendants shirked their duties as members of the Committee by failing to adequately investigate and respond to the Thorsens' complaints. (Dkt. 1 ¶ 115–22.) Specifically, Plaintiffs complain that the Committee conducted its own investigation and ultimately hired an outside auditor that “did not perform the depth of review necessary to ensure that Nansen Lodge complied with all applicable laws and regulations” (Dkt. 1 ¶ 121) and did not adjudicate the Thorsens' claims of libel and slander. (Dkt. 1 at ¶ 118.)

As for Plaintiffs' defamation claims against SON, Plaintiffs allege that SON defamed them by “adopt[ing] as fact the defamatory statements made by Nansen Lodge members” by way of “paying or causing a third-party to pay the bond claim filed by Nansen[.]” (Dkt. 1 ¶ 146.) The “bond claim” refers to a “reimbursement of legal fees that Nansen Lodge incurred during Brian Olsen and David Thorsen's leadership.” (Dkt. 1 ¶ 104.) The complaint is unclear as to the precise circumstances of the bond claim, which apparently was made against the Nansen Lodge's directors' and officers' liability insurance program. (Dkt. 1 ¶ 104.) Nevertheless, Plaintiffs allege that by “paying the bond claim, [SON] adopted and ratified the statements and representations of the cabal that Brian Olsen and David Thorsen stole from Nansen Lodge when, in fact, they merely paid legal fees incurred by a firm hired by the Executive Board” and that “[s]imply, by paying the claim, [SON] added its imprimatur to the slanderous statements; legitimatizing them despite their untruth.” (Dkt. 1 ¶ 106.)

Lastly, Plaintiffs allege that SON committed intentional infliction of emotional distress as to the Thorsens through its overall course of conduct. (Dkt. 1 at ¶¶ 150–60.)

II. Proposed Additional Facts

Along with their opposition to the motion and in accordance with the Court's order of August 26, 2013, Plaintiffs include several additional factual allegations that would have been included in an amended complaint. (Dkt. 48 at 4–7.) The relevant proposed additional facts consist of the following:

1) Heiberg and Ness arranged via email two teleconferences with David and Christine Thorsen regarding their complaints and the formation of the Committee.

2) Heiberg, Ness, and Rude contacted non-party New Yorkers to investigate the Thorsens' complaints.

3) Heiberg and Rude, outside of their roles as members of the Committee, corresponded with officers of the Nansen Lodge regarding the submission of insurance claims related to Thorsen's service as a leader of the Nansen Lodge.

(Dkt. 48 at 5.) For purposes of this motion, the Court considers these additional allegations as if set forth in the complaint.

DISCUSSION

I. Personal Jurisdiction

The bulk of the parties' briefing concerns whether the Court has personal jurisdiction over the Individual Defendants. The parties do not appear to dispute that the Court has personal jurisdiction over SON, which is a national fraternal organization with affiliates in New York. (Dkt. 1 ¶¶ 12, 18.) Accordingly, the Court assumes it has jurisdiction over Derivative–Defendant SON.³ The Individual Defendants, however, argue that this Court lacks both general and specific personal jurisdiction over them. (Dkt. 44–1 at 6–13; Dkt. 43 at 6–12.) The only claim against the Individual Defendants is Count One of the complaint, for breach of fiduciary duty, brought derivatively by Plaintiffs on behalf of SON. (Dkt. 1 at 38–40.)

“On a Rule 12(b)(2) motion to dismiss for lack of personal jurisdiction, the plaintiff bears the burden of showing that the court has jurisdiction over the defendant.” Metro. Life Ins. Co. v. Robertson–Ceco Corp., 84 F.3d 560, 567 (2d Cir.1996) (citing Robinson v. Overseas Military Sales Corp., 21 F.3d 502, 507 (2d Cir.1994)). Where, as here, no discovery has occurred, a plaintiff can withstand a motion to dismiss on the basis of legally sufficient factual allegations of jurisdiction in the complaint. Ball v. Metallurgie Hoboken–Overpelt, S.A., 902 F.2d 194, 197 (2d Cir.1990).

Personal jurisdiction of a non-domiciliary in a federal diversity case is determined by the law of the forum state in which the federal court is sitting. See Whitaker v. Am. Tel., Inc., 261 F.3d 196, 208 (2d Cir.2001); see also Robertson–Ceco Corp., 84 F.3d at 567 (citing Arrowsmith v. United Press Int'l, 320 F.2d 219, 223 (2d Cir.1963) (“[T]he amenability of a foreign corporation to suit in a federal court in a diversity action is determined in accordance with the law of the state where the court sits, with ‘federal law’ entering the picture only for the purpose of deciding whether a state's assertion of jurisdiction contravenes a constitutional...