Tunio v. Daudi, 2:16-cv-00873

Background

Plaintiff Ishaq Tunio filed a derivative suit purportedly on behalf of the Sindhi Association of North America (SANA), a New York nonprofit with principal place of business in Maryland; Tunio is an Illinois domiciliary.
Defendants are seven former/current SANA managers with various domiciles (including one Canadian defendant); allegations include election manipulation and loss of §501(c)(3) status.
Court previously found original complaint deficient for federal jurisdiction; Tunio filed an amended complaint asserting diversity jurisdiction under 28 U.S.C. § 1332 and alleging the matter exceeds $75,000.
The amended complaint specifically alleges SANA has a >$75,000 claim against defendant Irshad Kazi and a $100,000 pledge owed by defendant Aijaz Turk; no individual claim by Tunio exceeds $75,000.
Defendants moved to dismiss; court revisited subject-matter jurisdiction and addressed procedural defects for derivative suits under New York Not-For-Profit Corporation Law § 623 and Rule 23.1.
Court dismissed SANA’s derivative claims without prejudice for failure to satisfy § 623(a)’s requirement that the suit be “brought by” at least 5% of a member class and for failure to plead with particularity efforts to obtain board action under § 623(c)/Fed. R. Civ. P. 23.1(b)(3); court relinquished supplemental jurisdiction over Tunio’s individual claims.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Amount-in-controversy / subject-matter jurisdiction under § 1332	Am. Compl. alleges matter exceeds $75,000 and diversity exists	Multiple plaintiffs/defendants prevents aggregation; must show at least one plaintiff’s claim v. a defendant exceeds $75,000	Court: jurisdiction adequately alleged because SANA’s claim v. Kazi (and SANA v. Turk pledge) satisfies amount requirement; other claims may rely on supplemental jurisdiction
§ 623(a) 5% membership requirement for derivative actions	Tunio alleges “over 5% of SANA members … support this lawsuit”	Statute requires the suit to be "brought by" ≥5% of a class (i.e., named plaintiffs); mere support is insufficient	Court: allegation of mere "support" is insufficient; derivative claims dismissed without prejudice for failure to allege ≥5% of a class as named plaintiffs
§ 623(c) / Fed. R. Civ. P. 23.1(b)(3) — particularity of efforts to secure board action	Tunio did not meaningfully plead efforts or reasons for not securing board action	Defendants argue complaint fails to state with particularity required efforts/reasons	Court: Tunio waived response and complaint fails to comply; this is an additional basis for dismissing derivative claims
Supplemental jurisdiction over Tunio’s individual claims after dismissal of original-jurisdiction claims	Tunio relied on supplemental jurisdiction for individual claims	Defendants sought dismissal of the suit; dismissal of SANA’s claims eliminates original-jurisdiction anchors	Court: Dismissed SANA’s claims and relinquished supplemental jurisdiction under 28 U.S.C. § 1367(c)(3), sending Tunio’s individual claims out of federal court

Key Cases Cited

Travelers Property Cas. v. Good, 689 F.3d 714 (7th Cir.) (claims by multiple parties cannot be aggregated; at least one plaintiff must meet amount-in-controversy)
Exxon Mobil Corp. v. Allapattah Services, Inc., 545 U.S. 546 (U.S.) (once one claim satisfies amount-in-controversy, court may exercise supplemental jurisdiction over related claims)
Segal v. Powers, 687 N.Y.S.2d 589 (N.Y. Sup. Ct.) (derivative complaint must identify by name member plaintiffs who constitute the required percentage; bald representation allegations insufficient)
Harper v. Vigilant Ins. Co., 433 F.3d 521 (7th Cir.) (arguments not raised in response to a motion are waived)