334 F. Supp. 3d 315
D.C. Cir.2018Background
- In 2007 plaintiffs (Chinese activists) sued Yahoo; the Wang Settlement paid $17.3 million to the Laogai Research Foundation (LRF) to create the Yahoo Human Rights Fund (YHRF).
- Plaintiffs later sued alleging the Wang Settlement created a charitable trust (the YHRF), that defendants were trustees, and that trustees misused or terminated the trust for plaintiffs' benefit.
- The district court dismissed the First Amended Complaint (FAC) under Fed. R. Civ. P. 12(b)(6) and 12(b)(1), finding the settlement did not manifest intent to create a trust and that plaintiffs lacked standing to enforce any charitable trust. The dismissal was entered with prejudice.
- Plaintiffs moved under Rule 59(e) to alter the judgment and under Rule 15(a) for leave to file a Second Amended Complaint (SAC) asserting additional facts and alternative theories (including reliance on conduct and a claimed small beneficiary class).
- The court evaluated (1) whether dismissal with prejudice was clear error and (2) whether the proposed SAC would be futile because it failed to allege trust-creating intent or enforceable standing.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the court committed "clear error" by dismissing the FAC with prejudice | Depu: dismissal with prejudice was improper because additional facts/pleading could cure defects | Yahoo: the settlement's plain language disclaims a trust; additional allegations cannot change that | Court: No clear error; dismissal with prejudice stands because no consistent additional facts could cure the core defect |
| Whether the Wang Settlement (or related conduct) created a charitable trust | Depu: payments to LRF, segregated funds, and parties' conduct show intent to create a charitable trust (or conduct-based trust) | Yahoo: the settlement was a contractual settlement, not a trust; language disclaims third-party beneficiaries and resolves claims finally | Court: Settlement language and context show no intent to create a trust; conduct allegations do not supply the missing intent |
| Whether plaintiffs have standing to enforce a charitable trust | Depu: SAC narrows beneficiaries to ~800–1,200 imprisoned Chinese online dissidents, claiming this creates a small, discrete class or special interest | Defs: Settlement language indicates a broader, primarily (but not exclusively) targeted class; plaintiffs remain an indefinite, shifting beneficiary class and lack special interest | Court: Plaintiffs lack charitable-beneficiary standing; proposed narrowing relies on assertions unsupported by the settlement and is still temporally and factually uncertain |
| Whether the proposed SAC is futile (including a constructive-trust claim) | Depu: asserts a standalone claim for imposition of a constructive charitable trust and alternative theories to survive Rule 12(b)(6) | Defs: Proposed amendments repurpose the same facts and legal theories already rejected; constructive trust is an equitable remedy, not an independent cause of action | Court: Proposed SAC is futile; constructive trust is not a separate cause of action; leave to amend denied |
Key Cases Cited
- Depu v. Yahoo! Inc., 306 F. Supp. 3d 181 (D.D.C. 2018) (district court opinion dismissing trust claims and resolving motions to amend)
- Brink v. Cont'l Ins. Co., 787 F.3d 1120 (D.C. Cir. 2015) (procedure for amending after dismissal with prejudice via Rule 59(e) and Rule 15)
- Firestone v. Firestone, 76 F.3d 1205 (D.C. Cir. 1996) (dismissal with prejudice only when no conceivable amendment could cure defect)
- Leidos, Inc. v. Hellenic Republic, 881 F.3d 213 (D.C. Cir. 2018) (standards limiting Rule 59(e) relief)
- Rollins v. Wackenhut Servs., Inc., 703 F.3d 122 (D.C. Cir. 2012) (involuntary dismissal presumptively adjudication on the merits unless order states otherwise)
- Rudder v. Williams, 666 F.3d 790 (D.C. Cir. 2012) (effect of dismissal with prejudice)
- Belizan v. Hershon, 434 F.3d 579 (D.C. Cir. 2006) (distinguishing pleading defects that might be cured by amendment)
- Family Fed'n for World Peace v. Hyun Jin Moon, 129 A.3d 234 (D.C. 2015) (discusses enforcement rights for donors of restricted gifts; not controlling here)