Amer. Lung NH v . Amer. Lung Assoc CV-07-129-PB 12/04/07
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
American Lung Association of New Hampshire
v. Civil N o . 1:07-cv-129-PB Opinion N o . 2007 DNH 149 American Lung Association, and Director of Charitable Trusts of the New Hampshire Department of Justice
MEMORANDUM AND ORDER
The American Lung Association of New Hampshire (referred to
herein as “ALANH” and now known as “Breathe New Hampshire”)
disaffiliated from the American Lung Association (“ALA”) on June
3 0 , 2007. ALANH brought the present action to resolve several
issues surrounding the disaffiliation, and ALA responded with two
counterclaims.
ALANH now brings this motion to dismiss ALA’s first
counterclaim, which seeks declaratory relief with respect to a
unitized fund known as the Mary Fuller Russell Research Fund
(hereinafter “MFR Fund”). ALANH argues that the first
counterclaim should be dismissed because ALA released any and all claims to the MFR Fund in a 2003 settlement agreement between the
parties. Because I find that ALA did not clearly release ALANH
from this type of claim, ALANH’s motion to dismiss is denied.
I. BACKGROUND
In the 1980s, ALA and ALANH began an affiliation governed by
a series of constituent agreements, the last of which expired on
June 3 0 , 2007. 1 In 2002, a dispute arose between ALA and ALANH
regarding a charitable bequest of $13 million from the Margaret
L . Fuller Memorial Trust (hereinafter “MLF Trust”) made to ALANH
in 1994. The parties differed as to how the bequest should be
shared between the organizations based on the constituent
agreement and the language of the MLF Trust.
ALA argued that it was entitled to a portion of the bequest
based on language in the parties’ constituent agreement that, at
the time, required ALANH to share 10% of all income and receipts
with ALA. ALANH disagreed and sought a declaratory judgment in
1 Among other things, the constituent agreements required ALANH to submit annual financial reports to ALA, including proof of an annual independent audit. The constituent agreements also required ALANH to abide by policies in the ALA Polices Manual, which includes policies regarding approved investment practices and accounting methods.
-2- January 2002 in Hillsborough County Probate Court to establish
that ALANH was entitled to keep the full amount of the bequest.
ALA removed the case to this court and it was assigned to me on
March 5 , 2002. I denied ALANH’s motion to remand to state court
on July 2 5 , 2002.
The parties resolved their dispute over the bequest via
settlement in 2003 before any motions for dismissal or summary
judgment were filed. Based on the parties’ settlement agreement,
I approved a consent decree to govern the parties’ rights and
responsibilities with respect to the MFR Fund. The consent
decree was entered on July 9, 2003.
The consent decree ordered ALANH to divide the $13 million
bequest from the MLF Trust such that a separate unitized fund,
the MFR Fund, would be created containing $1,297,643.20 for the
benefit of both parties. The decree ordered that ALANH was to
have ownership and investment responsibility for the MFR Fund,
but that ALANH was to pay all income from the fund to ALA. In
the settlement agreement that served as the basis for the consent
decree, ALA agreed to the following release of claims:
In consideration of the agreement herein set forth and except for the Parties’ continuing obligations hereunder, ALA and ALANH hereby release and forever discharge each
-3- other, its successor and assigns, from any and all actions, causes of action, debts, claims, suits, and demands of every name and nature, both at law and in equity, which each party now has, or may have, from the beginning of the world to the date hereof, relating to the subject matter of this action, the Margaret L . Fuller Memorial Trust, or The Mary Fuller Russell Research Fund. More specifically, but without in any manner limiting the foregoing, ALA releases and forever discharges ALANH from any claim that ALA is entitled to a portion of the funds received by ALANH from the Margaret L . Fuller Memorial Trust (other than as described in the agreement herein).
Settlement Agreement at ¶ 8 .
The present case arose because, in early 2007, ALANH’s board
of directors voted to disaffiliate with ALA. In March 2007,
ALANH filed a Petition for Instructions and Preservation of
Charitable Assets in state court. The action was removed to this
court in April 2007 and the case was assigned to m e . Thereafter,
ALA filed an answer and two counterclaims.
ALANH now moves to dismiss ALA’s first counterclaim, which
seeks either: (1) a declaratory judgment modifying the consent
decree to protect ALA’s interest in the MFR Fund post-
disaffiliation, or (2) a declaratory judgment that ALA has the
right to title and control of the MFR Fund. ALANH argues that
this claim must be dismissed because it is barred by the above-
-4- quoted release language in the 2003 settlement agreement. ALA
disagrees.
II. STANDARD OF REVIEW
On a Rule 12(b)(6) motion to dismiss a counterclaim, I must
accept a counterclaimant’s well-pleaded factual allegations as
true, and the counterclaimant is entitled to all reasonable
inferences from the facts alleged in the counterclaim. Fed. R.
Civ. P. 12(b)(6); Phoung Luc v . Wyndham Mgmt. Corp., 496 F.3d 8 5 ,
88 (1st Cir. 2007).
I may consider the counterclaim, documents annexed to the
counterclaim, and other materials fairly incorporated within it
when ruling on the motion. See Rodi v . S . New Eng. Sch. of Law,
389 F.3d 5 , 12 (1st Cir. 2004). I may also consider matters that
are susceptible to judicial notice, id., including matters of
public record such as records from prior court proceedings.
Boateng v . InterAmerican Univ., Inc., 210 F.3d 5 6 , 60 (1st Cir.
2000). I may consider “the relevant entirety of a document
integral to or explicitly relied upon in the complaint, even
though not attached to the complaint, without converting the
-5- motion into one for summary judgment.” Clorox C o . P.R. v .
Proctor & Gamble Commercial Co., 228 F.3d 2 4 , 32 (1st Cir. 2000).
In this case, therefore, I consider the counterclaim along
with the parties’ settlement agreement and consent decree from
2003; both documents are matters of public record and are
attached to ALA’s answer and counterclaim.
III. ANALYSIS
In essence, ALA’s counterclaim seeks to either modify or
vacate the 2003 consent decree.2 ALANH has moved for dismissal
of this claim, arguing that it is barred by release language in
the 2003 settlement agreement.
By making this argument, ALANH is actually raising an
affirmative defense as a ground for dismissal. This is
permissible provided that “(1) the facts establishing the defense
2 Ordinarily, a request to modify a consent decree is presented in a Rule 60(b) motion in the case where the consent decree was originally issued. However, it is possible to seek modification of a consent decree in a new, independent action. 12 James W . Moore, Moore’s Federal Practice § 60.80 (3d ed. 2007).
Free access — add to your briefcase to read the full text and ask questions with AI
Amer. Lung NH v . Amer. Lung Assoc CV-07-129-PB 12/04/07
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
American Lung Association of New Hampshire
v. Civil N o . 1:07-cv-129-PB Opinion N o . 2007 DNH 149 American Lung Association, and Director of Charitable Trusts of the New Hampshire Department of Justice
MEMORANDUM AND ORDER
The American Lung Association of New Hampshire (referred to
herein as “ALANH” and now known as “Breathe New Hampshire”)
disaffiliated from the American Lung Association (“ALA”) on June
3 0 , 2007. ALANH brought the present action to resolve several
issues surrounding the disaffiliation, and ALA responded with two
counterclaims.
ALANH now brings this motion to dismiss ALA’s first
counterclaim, which seeks declaratory relief with respect to a
unitized fund known as the Mary Fuller Russell Research Fund
(hereinafter “MFR Fund”). ALANH argues that the first
counterclaim should be dismissed because ALA released any and all claims to the MFR Fund in a 2003 settlement agreement between the
parties. Because I find that ALA did not clearly release ALANH
from this type of claim, ALANH’s motion to dismiss is denied.
I. BACKGROUND
In the 1980s, ALA and ALANH began an affiliation governed by
a series of constituent agreements, the last of which expired on
June 3 0 , 2007. 1 In 2002, a dispute arose between ALA and ALANH
regarding a charitable bequest of $13 million from the Margaret
L . Fuller Memorial Trust (hereinafter “MLF Trust”) made to ALANH
in 1994. The parties differed as to how the bequest should be
shared between the organizations based on the constituent
agreement and the language of the MLF Trust.
ALA argued that it was entitled to a portion of the bequest
based on language in the parties’ constituent agreement that, at
the time, required ALANH to share 10% of all income and receipts
with ALA. ALANH disagreed and sought a declaratory judgment in
1 Among other things, the constituent agreements required ALANH to submit annual financial reports to ALA, including proof of an annual independent audit. The constituent agreements also required ALANH to abide by policies in the ALA Polices Manual, which includes policies regarding approved investment practices and accounting methods.
-2- January 2002 in Hillsborough County Probate Court to establish
that ALANH was entitled to keep the full amount of the bequest.
ALA removed the case to this court and it was assigned to me on
March 5 , 2002. I denied ALANH’s motion to remand to state court
on July 2 5 , 2002.
The parties resolved their dispute over the bequest via
settlement in 2003 before any motions for dismissal or summary
judgment were filed. Based on the parties’ settlement agreement,
I approved a consent decree to govern the parties’ rights and
responsibilities with respect to the MFR Fund. The consent
decree was entered on July 9, 2003.
The consent decree ordered ALANH to divide the $13 million
bequest from the MLF Trust such that a separate unitized fund,
the MFR Fund, would be created containing $1,297,643.20 for the
benefit of both parties. The decree ordered that ALANH was to
have ownership and investment responsibility for the MFR Fund,
but that ALANH was to pay all income from the fund to ALA. In
the settlement agreement that served as the basis for the consent
decree, ALA agreed to the following release of claims:
In consideration of the agreement herein set forth and except for the Parties’ continuing obligations hereunder, ALA and ALANH hereby release and forever discharge each
-3- other, its successor and assigns, from any and all actions, causes of action, debts, claims, suits, and demands of every name and nature, both at law and in equity, which each party now has, or may have, from the beginning of the world to the date hereof, relating to the subject matter of this action, the Margaret L . Fuller Memorial Trust, or The Mary Fuller Russell Research Fund. More specifically, but without in any manner limiting the foregoing, ALA releases and forever discharges ALANH from any claim that ALA is entitled to a portion of the funds received by ALANH from the Margaret L . Fuller Memorial Trust (other than as described in the agreement herein).
Settlement Agreement at ¶ 8 .
The present case arose because, in early 2007, ALANH’s board
of directors voted to disaffiliate with ALA. In March 2007,
ALANH filed a Petition for Instructions and Preservation of
Charitable Assets in state court. The action was removed to this
court in April 2007 and the case was assigned to m e . Thereafter,
ALA filed an answer and two counterclaims.
ALANH now moves to dismiss ALA’s first counterclaim, which
seeks either: (1) a declaratory judgment modifying the consent
decree to protect ALA’s interest in the MFR Fund post-
disaffiliation, or (2) a declaratory judgment that ALA has the
right to title and control of the MFR Fund. ALANH argues that
this claim must be dismissed because it is barred by the above-
-4- quoted release language in the 2003 settlement agreement. ALA
disagrees.
II. STANDARD OF REVIEW
On a Rule 12(b)(6) motion to dismiss a counterclaim, I must
accept a counterclaimant’s well-pleaded factual allegations as
true, and the counterclaimant is entitled to all reasonable
inferences from the facts alleged in the counterclaim. Fed. R.
Civ. P. 12(b)(6); Phoung Luc v . Wyndham Mgmt. Corp., 496 F.3d 8 5 ,
88 (1st Cir. 2007).
I may consider the counterclaim, documents annexed to the
counterclaim, and other materials fairly incorporated within it
when ruling on the motion. See Rodi v . S . New Eng. Sch. of Law,
389 F.3d 5 , 12 (1st Cir. 2004). I may also consider matters that
are susceptible to judicial notice, id., including matters of
public record such as records from prior court proceedings.
Boateng v . InterAmerican Univ., Inc., 210 F.3d 5 6 , 60 (1st Cir.
2000). I may consider “the relevant entirety of a document
integral to or explicitly relied upon in the complaint, even
though not attached to the complaint, without converting the
-5- motion into one for summary judgment.” Clorox C o . P.R. v .
Proctor & Gamble Commercial Co., 228 F.3d 2 4 , 32 (1st Cir. 2000).
In this case, therefore, I consider the counterclaim along
with the parties’ settlement agreement and consent decree from
2003; both documents are matters of public record and are
attached to ALA’s answer and counterclaim.
III. ANALYSIS
In essence, ALA’s counterclaim seeks to either modify or
vacate the 2003 consent decree.2 ALANH has moved for dismissal
of this claim, arguing that it is barred by release language in
the 2003 settlement agreement.
By making this argument, ALANH is actually raising an
affirmative defense as a ground for dismissal. This is
permissible provided that “(1) the facts establishing the defense
2 Ordinarily, a request to modify a consent decree is presented in a Rule 60(b) motion in the case where the consent decree was originally issued. However, it is possible to seek modification of a consent decree in a new, independent action. 12 James W . Moore, Moore’s Federal Practice § 60.80 (3d ed. 2007). Although this could prove problematic in many cases, it is not a problem in this case because I approved the original consent decree and I am now assigned to the present case.
-6- are definitively ascertainable from the complaint and the other
allowable sources of information, and (2) those facts suffice to
establish the affirmative defense with certitude.” Rodi, 389
F.3d at 1 2 . In this case, the facts establishing the defense are
ascertainable from the settlement agreement, which is properly
before me as a public record and is also incorporated into the
pleadings.
The settlement agreement establishes that New Hampshire law
governs enforcement of the agreement. Settlement Agreement at ¶
11. In New Hampshire, settlement agreements are contractual in
nature and are generally governed by contract law principles.
Poland v . Twomey, --- N.H. ---, 2007 WL 3306905 (N.H. 2007);
Czumak v . N.H. Div. of Developmental Servs., 155 N.H. 3 6 8 , 373
(2007). When interpreting a settlement agreement, “we give the
language used by the parties its reasonable meaning, considering
the circumstances and the context in which the agreement was
negotiated, and reading the document as a whole.” Czumak, 155
N.H. at 373.
In this case, the settlement agreement’s plain language does
not clearly foreclose ALA’s right to seek modification of the
consent decree based on a change in circumstance. The first part
-7- of the release states that ALA and ALANH release and forever
discharge each other from claims to the MLF Trust or the MFR Fund
“from the beginning of the world to the date hereof.” Settlement
Agreement at ¶ 8 . The date of the agreement was in early 2003;
therefore, this release does not encompass ALA’s counterclaim,
which is based on changes in the relationship between the parties
that occurred only recently.
In the second part of the release, ALA releases and forever
discharges ALANH from any claim that ALA is entitled to a portion
of the MLF Trust. ALANH argues that this release precludes ALA’s
counterclaim because the MFR Fund is a portion of the funds
received from the MLF Trust. The language is ambiguous, however,
because it states that ALA releases claims to the trust “other
than as described in the agreement herein.” Because the MFR Fund
was created by the settlement agreement, the release can be read
to mean that ALA releases all claims to funds received from the
MLF Trust except those that involve the MFR Fund. Accepting
ALA’s well-pleaded factual allegations as true and granting ALA
all reasonable inferences from the facts, I cannot say that ALANH
has established its affirmative defense with the certitude
required to effect dismissal of ALA’s counterclaim.
-8- IV. CONCLUSION
For the reasons stated above, plaintiff’s partial motion to
dismiss defendant’s first counterclaim (Doc. N o . 11) is denied.
SO ORDERED.
/s/Paul Barbadoro Paul Barbadoro United States District Judge
December 4 , 2007
cc: Daniel E . Will, Esq. James Q . Shirley, Esq. Michael S . DeLucia, Esq. Richard W . Head, Esq.
-9-