🚀 go-pugleaf

Greetings,

I recently filed a Rule 12(b)(1) motion in federal court (E.D. La.,
New Orleans Div.) that I thought might be of interest to others on
this list.  I was hoping to have better pointers to the press release,
motion and brief by today, but the holiday weekend has apparently
slowed down getting the relevant files uploaded to the Internet.
Plus, I am flying out tonight for a week of depositions.  So, I
thought it best to post this before leaving, and then to update it
when I get back to Dallas next weekend.

Basically, we moved to have the United States Public Interest Research
Group ("USPIRG") dismissed from a citizen suit because, as a matter of
law, it has no members and, therefore, can not have constitutional
standing to sue as a representational organization on behalf of its
members.  The point by point analysis (summarized) is as follows:

1.  USPIRG brought a citizen suit against Bayou Steel in federal court
under the Clean Air Act, asserting standing based on actual harm to
three individuals who are allegedly members of USPIRG;

2.  Because USPIRG has no Article III harm of its own (that is, it can
not, as a matter of fact, state a case or controversy in its own
name), for USPIRG to have standing to bring a citizen suit it must sue
as a representational organization on behalf of its members.  Absent
members with actual harm, USPIRG is a constitutional stranger to the
dispute;

3.  USPIRG is a non-profit corporation organized and existing under
the laws of the District of Columbia.  By choosing this form of
organization, USPIRG received a number of benefits, including, inter
alia, statutory limitations on the potential liability of its
employees and volunteers when acting on behalf of USPIRG;

4.  USPIRG's Articles of Incorporation are its corporate birth
certificate, issued by its sovereign, the District of Columbia, to
whom it owes its very existence as a legal entity.

5.  Under Washington, D.C. law, a non-profit corporation may have
"members", which is a defined term, who are the functional equivalent
of shareholders.  That is, they are the residual claimants for whom
the corporation exists and carries on its business.  They have rights.
A non-profit corporation also may be chartered with no members, thus
making it a pure legal entity, a shell if you will, having the rights
of a legal person;

6.  The rights of members, if any, must be stated in the corporation's
Articles or its By Laws.  This is functionally equivalent to
designating various classes of shares (Class A common, Class B common,
Preferred, etc.), a matter which is not trivial because, among other
things, such provisions set out the legal obligations of the
corporation to its members, and fix the various rights and priorities
among the classes of members;

7.  For years USPIRG has been selling "memberships" to people, and
then bringing citizen suits in federal courts asserting that it has
members throughout the nation, including individuals with actual
(Article III) harm sufficient for subject matter jurisdiction, as they
did in the case against Bayou Steel;

8.  However, USPIRG's Articles of Incorporation state expressly, at
Article Ninth, "The Corporation shall have no members of any class."

9.  Both conditions can not be true at the same time - USPIRG can not
have "no members of any class", as stated in its corporate birth
certificate, and simultaneously have members throughout the nation, as
it has asserted in federal court.  Obviously, USPIRG's Articles, which
it selected, and which were granted by its sovereign, must prevail
over inconsistent allegations it makes in pleadings because otherwise
such a corporation is, in effect, denying its charter and amending it
at will, something which only its sovereign may do.  Only USPIRG's
sovereign, Washington, D.C., has power to change the conditions of
USPIRG's legal existence - USPIRG can not amend its charter
willy-nilly by pleading other than the truth to the federal courts.

10.  Because USPIRG has "no members of any class", it has no members
in Louisiana through whom it may assert representational standing in a
citizen suit against Bayou Steel and, therefore, lacks standing and
must be dismissed for lack of subject matter jurisdiction.

I believe it is clear that USPIRG must be dismissed from its suit
against Bayou Steel until such time as it: (1) straightens out its
charter, (2) designates the rights of any classes of members its
directors decide to establish, (3) builds a membership by issuing
lawful memberships, including disclosures consistent with Washington,
D.C.'s Blue Sky laws, and (4) starts a new action against Bayou Steel
based on valid statements about its own legal existence and rights.
(Federal jurisdiction exists or not at the time of filing, based on
facts as they exist at that time.)  In the meantime, USPIRG's citizen
suit against Bayou Steel, as well as any other such actions it has
filed, lack subject matter jurisdiction and, therefore, must be
dismissed, at least as regards USPIRG being a party.

The more interesting questions, it seems, involve the rights of those
people who have given money to USPIRG thinking they were buying
memberships when, as a matter of law, USPIRG had no legal authority to
sell any memberships (stock).  It might be that USPIRG has been
selling equity interests that do not even legally exist - raising a
number of Blue Sky issues.  Moreover, it might also be that USPIRG has
been wasting (and continues to waste) corporate assets by traveling
around the country misrepresenting itself in federal courts, incurring
significant legal bills, and exposing the corporation's assets to
adverse judgments (as provided, for example, in the citizen suit
provisions of the Clean Air Act).  These issues would, of course, be
the proper subject of litigation brought by a USPIRG "member" in the
District of Columbia.  They are not Bayou Steel's issues because Bayou
Steel is not a "member" of USPIRG.  However, if the analogous facts
were operating in a for-profit corporate setting, an action in equity
would lie for a District of Columbia court to impose a trust on
USPIRG's assets, and then to act as a receiver of USPIRG to supervise
the lawful adoption of new Articles, By Laws, and the issuance of
memberships, including such acts of USPIRG's directors as are
necessary to satisfy the many fiduciary duties of the corporation and
its directors.  Whether such an action is on the horizon will depend
on whether any "member" of USPIRG is sufficiently incensed by USPIRG's
practices (selling the Blue Sky equivalent of snake oil,
misrepresenting itself in numerous courts, incurring unjustified legal
bills and travel expenses, and recklessly exposing the corporation's
assets to adverse judgments) to file a class action suit.  Because of
the very interesting issues raised by all this I would love to act as
counsel in such a suit.  It's sort of a corporate governance meets the
Constitution dispute and, therefore, has real appeal to me.  (In fact,
I wrote my economics dissertation at UVA on corporate
governance/securities fraud.  The environmental statutes are,
for me anyway, infinitely boring by comparison.)

Bayou Steel's press release, motion and brief will eventually be made
available on the Internet through http://www.prprnet.com/bayou-steel/.
In the meantime, if you would like copies of any of these, please
contact my secretary, Suzanne Skidgel, at (214) 653-4871.  Feel free
as well to contact Bayou Steel's public relations firm, PR/PR Inc., in
New Orleans:

Charles Pizzo, Jr., P.R. PR, Inc., 504-525-7777; Pager, 800-617-5707;
or email to cpizzo@prprnet.com.

As I noted above, I will be on the deposition road at least until
Friday, and probably during the week after that as well.  However,
please feel free to email me at steen@netcom.com with any related
questions or discussions.  I will respond as soon as I get a chance.

Doc Steen

:----------------------------------------------------------------------:
: Charles H. Steen, J.D., Ph.D.  :  B&B Main:     (214) 653-4000       :
: "The Rock n' Roll Doctor"      :  B&B Direct:   (214) 653-4883       :
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:    "I often wonder whether we do not rest our hopes too much upon    :
:   constitutions, upon laws and upon courts.  These are false hopes;  :
:   believe me, these are false hopes.  Liberty lies in the hearts of  :
:    men and women; when it dies there, no constitution, no law, no    :
:               court can save it . . ."  - Learned Hand               :
:----------------------------------------------------------------------: