National Case Summaries
Missouri and Louisiana v Biden, Amici Brief
4:21-cv-01058-P
Jul. 04, 2023
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
FORT WORTH DIVISION
PUBLIC HEALTH AND MEDICAL
PROFESSIONALS FOR TRANSPARENCY,
Plaintiff,
v. No. 4:21-cv-1058-P
FOOD AND DRUG ADMINISTRATION,
Defendant.
ORDER
This case involves the Freedom of Information Act (“FOIA”). Specifically, at issue is Plaintiff’s FOIA request seeking “[a]ll data and information for the Pfizer Vaccine enumerated in 21 C.F.R. § 601.51(e) with the exception of publicly available reports on the Vaccine Adverse Events Reporting System” from the Food and Drug Administration (“FDA”). See ECF No. 1. As has become standard, the Parties failed to agree to a mutually acceptable production schedule; instead, they submitted dueling production schedules for this Court’s consideration. Accordingly, the Court held a conference with the Parties to determine an appropriate production schedule
Open government is fundamentally an American issue”—it is neither a Republican nor a Democrat issue.
Echoing these sentiments, “[t]he basic purpose of FOIA is to ensure an informed citizenry, [which is] vital to the functioning of a democratic society.” NLRB v. Robbins Tire & Rubber Co., 437 U.S. 214, 242 (1977). “FOIA was [therefore] enacted to ‘pierce the veil of administrative secrecy and to open agency action to the light of public scrutiny.’” Batton v. Evers, 598 F.3d 169, 175 (5th Cir. 2010) (quoting Dep’t of the Air Force v. Rose, 425 U.S. 352, 361 (1976)). And “Congress has long recognized that ‘information is often useful only if it is timely’ and that, therefore ‘excessive delay by the agency in its response is often tantamount to denial.’” Open Soc’y Just. Initiative v. CIA, 399 F. Supp. 3d 161, 165 (S.D.N.Y. 2019) (quoting H.R. REP. NO. 93-876, at 6271 (1974)). When needed, a court “may use its equitable powers to require an agency to process documents according to a court-imposed timeline.” Clemente v. FBI, 71 F. Supp. 3d 262, 269 (D.D.C. 2014).
Here, the Court recognizes the “unduly burdensome” challenges that this FOIA request may present to the FDA. See generally ECF Nos. 23, 30, 34. But, as expressed at the scheduling conference, there may not be a “more important issue at the Food and Drug Administration . . . than the pandemic, the Pfizer vaccine, getting every American vaccinated, [and] making sure that the American public is assured that this was not [] rush[ed] on behalf of the United States . . . .” ECF No. 34 at 46. Accordingly, the Court concludes that this FOIA request is of paramount public importance.
“[S]tale information is of little value.” Payne Enters., Inc. v. United States, 837 F.2d 486, 494 (D.C. Cir. 1988). The Court, agreeing with this truism, therefore concludes that the expeditious completion of Plaintiff’s request is not only practicable, but necessary. See Bloomberg, L.P. v. FDA, 500 F. Supp. 2d 371, 378 (S.D.N.Y. Aug. 15, 2007) (“[I]t is the compelling need for such public understanding that drives the urgency of the request.”). To that end, the Court further concludes that the production rate, as detailed below, appropriately balances the need for unprecedented urgency in processing this request with the FDA’s concerns regarding the burdens of production. See Halpern v. FBI, 181 F.3d 279, 284–85 (2nd Cir. 1991) (“[FOIA] emphasizes a preference for the fullest possible agency disclosure of such information consistent with a responsible balancing of competing concerns . . . .”).
Accordingly, having considered the Parties’ arguments, filings in support, and the applicable law, the Court ORDERS that:
1. The FDA shall produce the “more than 12,000 pages” articulated in its own proposal, see ECF No. 29 at 24, on or before January 31, 2022.
2. The FDA shall produce the remaining documents at a rate of 55,000 pages every 30 days, with the first production being due on or before March 1, 2022, until production is complete.
3. To the extent the FDA asserts any privilege, exemption, or exclusion as to any responsive record or portion thereof, FDA shall, concurrent with each production required by this Order, produce a redacted version of the record, redacting only those portions as to which privilege, exemption, or exclusion is asserted.
4. The Parties shall submit a Joint Status Report detailing the progress of the rolling production by April 1, 2022, and every 90 days thereafter.
SO ORDERED on this 6th day of January, 2022.
Mark T. Pittman
UNITED STATES DISTRICT JUDGE
Reply ISO Motion to Dismiss Counterclaims
CV2022-015525
Feb. 20, 2023
In the superior court of the state of Arizona in and for the county of MaricopaDr. Gold replies in support of her Motion to Dismiss the Counterclaims brought by Gilbert
- All claims purportedly brought by AFLDS should be dismissed.
A. Defendants misconstrue Gold’s declaratory judgment claim; she does not seek relief against AFLDS.
Principally, Defendants argue that AFLDS is an “adverse party” to Dr. Gold and thus able to bring counterclaims against her by misconstruing Dr. Gold’s declaratory claim. Defendants argue that Dr. Gold’s declaratory claim (Claim One): asserts a breach by AFLDS, “seeks relief from” AFLDS, and is a direct rather than a derivative claim. The first two points are false; the third point is irrelevant because whether the declaratory claim is direct or derivative cannot change AFLDS’s status as a nominal defendant.
1. Dr. Gold has not asserted any breach by AFLDS.
The Response contends that “[t]he centerpiece of Plaintiff’s claim is the assertion that AFLDS breached an alleged agreement to pay Plaintiff in exchange for her resignation.” [Resp. at 2:23-25]. But Dr. Gold has never claimed any such thing.
Dr. Gold’s Verified Complaint alleges that Dr. Gold reached an agreement, the “Resignation Agreement,” that was “between Gold and the other members of the Board of Directors.” [Verif. Compl. ¶¶ 34-36]. There is no allegation that AFLDS was a party to the Resignation Agreement. [See generally Verif. Compl.]. There is no allegation that AFLDS breached the Resignation Agreement. [See generally Verif. Compl.]. Indeed, Dr. Gold is not bringing a breach of contract claim at all. [See generally Verif. Compl.].
Rather, Dr. Gold has alleged that the Resignation Agreement never took effect or, in the alternative, was rescinded because Defendants Gilbert, Mack, and Matthesius did not cause the conditions precedent to occur, did not perform or provide consideration, and fraudulently induced Dr. Gold to enter the Resignation Agreement. [Verif. Compl. ¶¶ 39- 45]. The Verified Complaint is clear that “the seed payment and consulting agreement were the other Board members’ performance and consideration under the Resignation Agreement,” not an obligation of AFLDS’s. [Verif. Compl. ¶ 44 (emphasis added)].
The Verified Complaint does not allege any wrongdoing by AFLDS. This effort by Defendants to turn AFLDS into an “adverse party” entitled to bring counterclaims fails.
2. Dr. Gold does not seek any relief from AFLDS.
Defendants’ related argument that Dr. Gold “seeks relief from . . . AFLDS” [Resp. at 3:20-21] likewise fails. Their argument is that a declaration that Dr. Gold is on the Board would require “corporate action” by AFLDS. [Resp. at 4:7-9]. Not so — Dr. Gold seeks a declaration that she is on the Board, to resolve the justiciable controversy with Gilbert, Mack, and Matthesius. [Verif. Compl. ¶¶ 119-20]. The declaration Dr. Gold seeks would not require AFLDS to do anything.
Defendants’ assertion that “the declaratory judgment must bind AFLDS” [Resp. at 4:8-10] does not change this. A corporate nominal defendant can be bound by a judgment without being rendered an “adverse party.”
Indeed, Defendants’ own purported counterclaims confirm this. In Count I of the Counterclaims, Defendants purport to bring a counterclaim on behalf of AFLDS for a declaration that Defendants (Gilbert, Mack, and Matthesius) are on the Board and Dr. Gold is not. [Countercl. ¶¶ 35-36]. If the declaratory claim in Dr. Gold’s Verified Complaint, seeking a declaration of the makeup of the AFLDS Board of Directors, rendered AFLDS an “adverse party” to Dr. Gold (it does not), then the declaratory claim in the Counterclaims, also seeking a declaration of the makeup of the AFLDS Board of Directors, would likewise render AFLDS an adverse party to Defendants. Defendants plainly do not contend such a thing — to the contrary, they argue that it is not a conflict of interest for Defendants and AFLDS to be represented by the same counsel in this case — and that puts the lie to their contention that Dr. Gold’s declaratory claim is “against” or “seeks relief from” AFLDS. It does not.
The Verified Complaint does not seek relief from AFLDS. This argument also fails to turn AFLDS into an “adverse party” entitled to bring counterclaims.
3. Whether the declaratory claim is a direct claim is a red herring.
Defendants next engage in a lengthy discussion of direct versus derivative claims that has no relevancy to the issue before the Court. This is because, whether direct or derivative, Dr. Gold’s declaratory claim is not asserted against AFLDS.
Citing Albers v. Edelson Technology Partners L.P., 201 Ariz. 47 (App. 2001), Defendants argue that Dr. Gold’s declaratory claim is direct and not derivative because she “is seeking to restore her status as a director and officer of AFLDS” and because that is an injury felt by Dr. Gold individually and not by AFLDS. [Resp. at 3:7-19].
Under Albers, “an action is derivative rather than direct if the gravamen of the complaint is injury to the corporation, or to the whole body of its stock or property without any severance or distribution among individual holders, or if it seeks to recover assets for the corporation or to prevent the dissipation of its assets.” Albers, 201 Ariz. at 52, ¶ 17 (quotation marks omitted). Although the “injury” analysis does not entirely fit the situation of a declaratory claim, to the extent it applies, it shows that Dr. Gold may bring a derivative claim here: protecting AFLDS from Defendants’ causing injury, and resolving control of the entity — in which AFLDS plainly has an interest — are the goals of the action. And, because Dr. Gold also has an interest in the determination of her continuing position on the Board, she also can bring (and has brought) a direct claim. Dr. Gold’s derivative claim is properly brought both derivatively and directly.
Defendants’ argument here is a red herring because, even if the claim were only direct, that would not make AFLDS an adverse party to Dr. Gold. As discussed above, the claim does not allege wrongdoing by AFLDS and does not seek relief from AFLDS. Nor is AFLDS named as a defendant on the claim. Indeed, when a party asserts claims as derivative yet they are determined to be direct, the claims are not transformed into claims against the nominal defendant. See generally, e.g., Albers. Defendants’ derivative vs. direct discussion has no bearing on whether Dr. Gold has brought claims against AFLDS so as to render AFLDS an adverse party capable of bringing counterclaims.
It is clear from reading the Verified Complaint that AFLDS is only a nominal defendant. Dr. Gold has not asserted any claims against AFLDS. AFLDS is not an adverse party to Dr. Gold. Accordingly, Defendants’ arguments fail — AFLDS cannot bring “counterclaims” against Dr. Gold in this action. See Ariz. R. Civ. P. 13(a)(1), (b); see also, e.g., Am. Jur. 2d Counterclaim, Recoupment, Etc. § 53 (“[A] corporation which is a nominal defendant and against which no relief is asked is not an adverse party or a defendant entitled to plead a counterclaim against a plaintiff stockholder seeking relief on behalf of the corporation in a representative suit.”); Wesolowski v. Erickson, 5 Wis. 2d 335, 342 (1958); Higgins v. Shenango Pottery Co., 99 F. Supp. 522, 524 (W.D. Pa. 1951).
B. The rule of corporate neutrality should apply.
Defendants assert three arguments in their attempt to evade the rule of corporate neutrality, which provides that, in a derivative lawsuit, the corporation generally cannot participate in the merits of the defense. Here, the rule should bar AFLDS from “defending” the lawsuit (which asserts no claims against AFLDS), much less bringing counterclaims. Each of Defendants’ arguments against application of the rule of corporate neutrality fail.
1. Arizona law does not preclude application of the rule of corporate neutrality.
First, Defendants argue the rule of corporate neutrality “is not the law in Arizona.” [Resp. at 4:16-17]. That is overreaching. They cite no authority for this proposition — they do not point to any Arizona case rejecting the rule of corporate neutrality.
Although Arizona courts do not appear to have addressed the issue yet, that does not mean the rule should not apply here. It is a general rule applied throughout the country by most jurisdictions that have considered the issue. See, e.g., Krakow Bus. Park v. Locke Lord, LLP, 135 F. Supp. 3d 770, 791 (N.D. Ill. 2015; Swenson v. Thibaut, 39 N.C. App. 77, 99-100 (1978); Solimine v. Hollander, 19 A.2d 344, 346 (N.J. Ch. 1941) (collecting cases); Meyers v. Smith, 190 Minn. 157, 159 (1933); Chaplin v. Selznick, 186 Misc. 66, 68-69 (N.Y. Sup. Ct. 1945). It is applied with even more force where, as here, the individuals purporting to the control the corporation have been accused of wrongdoing in the lawsuit. See, e.g., Swenson, 39 N.C. App. at 99-100; Solimine, 19 A.2d at 346.
The Court should apply the rule of corporate neutrality. Indeed, this would be consistent with the Court’s prior statement on the issue. [M.E. filed Jan. 30, 2023 at 1 n.1 (“The Court considers AFLDS to be a neutral party.”)].
2. Again, Dr. Gold brought no claims against AFLDS.
Second, Defendants argue that the rule of corporate neutrality should not apply here because, they allege, AFLDS is “being directly sued for wrongdoing” by Dr. Gold. [Resp. at 4:17-20]. As discussed in Section I.A, supra, Dr. Gold has not asserted claims against AFLDS, Dr. Gold has not alleged wrongdoing by AFLDS, and Dr. Gold has not alleged that AFLDS breached any contract. This argument for avoiding the rule of corporate neutrality — again relying on a misconstruction of the Verified Complaint — also fails.
3. The exception to the rule of corporate neutrality does not apply.
Finally, Defendants rely on Blish v. Thompson Automatic Arms Corp., 30 Del. Ch. 538 (1948), and Ex parte Edman, 609 S.W.2d 532 (Tex. 1980), for the principle that a nominal corporate defendant may assert a defense in a derivative lawsuit where the corporation’s interests are threatened by the suit. But that exception does not apply here.
Blish is not on point, for three reasons. First, the litigation at issue there was a derivative suit seeking to cancel a shareholder’s shares in the corporation; there is no indication in the opinion that the lawsuit included claims of wrongdoing and fiduciary breaches by those in control of the corporation. Blish, 30 Del. Ch. at 590-91. That is critically different from here, where Defendants Gilbert, Mack, and Matthesius — the parties who purport to control AFLDS, purport to bring counterclaims on behalf of ALFDS, and purport to be represented by the same counsel as AFLDS — have been accused of financial abuse of the nonprofit and breaches of their fiduciary duties.
Second, the corporation in the Blish case was represented by separate counsel from the individual defendant. Id. That is not the case here.
Third, the Blish court concluded that the lawsuit threatened “the permanent welfare of the corporation,” permitting the exception to apply, but it offered little discussion of why. Id. at 591 (“The Chancellor in holding that the payment of these fees was proper necessarily determined that it was to the best interest of TAAC that it appear and defend the Kane litigation, and, further, that such action was taken by the Directors in the absence of fraud or duress. These findings by the Chancellor will not be disturbed since there is sufficient oral testimony in the record from which such a conclusion could be fairly drawn.”). Defendants cannot explain why they fit within this exception because there is no analysis to draw on — even if Blish were similar to the case at hand, which it is not.
Edman, also relied on by Defendants, is likewise distinguishable for two reasons: (1) it was a derivative suit to cancel a deed transfer, and there is no indication in the opinion that, as here, the lawsuit included claims of wrongdoing and fiduciary breaches by those in control of the entity; and (2) there is likewise no indication that the entity was represented by the same counsel as individual defendants accused of wrongdoing. See generally Edman, 609 S.W.2d 532.
Indeed, the exception to the rule of corporate neutrality is not so broad as Defendants suggest — directors accused of wrongdoing cannot merely invoke the corporation’s “interests” to get around the rule of neutrality. As explained in a case cited by Defendants, the exception has been applied “when the pleadings attack the corporation by a suit to enjoin performance of contracts; or pray for the appointment of a receiver; or seek to interfere with a corporate reorganization; or seek to interfere with corporate management when there is no allegation of fraud or bad faith.” Nat’l Bankers Life Ins. Co. v. Adler, 324 S.W.2d 35, 37 (Tex. Civ. App. 1959) (collecting cases) (citations omitted; emphasis added). This is not those cases. Defendants here are alleged to have engaged in fraud and breaches of fiduciary duties with respect to their control of AFLDS and, accordingly, they cannot rely on the latter example to invoke the exception.
Defendants’ only argument for why the exception should apply is that Dr. Gold has “put AFLDS in dire straits” through alleged personal spending and interference in AFLDS operations. [Resp. at 5:13-15]. This argument fails for three reasons. First, even if Defendants’ allegations about Dr. Gold were true (they are not), the issue is not whether prior, separate events allegedly threaten the corporation’s survival but whether Dr. Gold’s lawsuit does. Defendants have not raised any argument that it does. Second, this could not override the concern about AFLDS being represented by the same counsel as Defendants. Third, it would still not support allowing AFLDS to go beyond defending to actually bringing counterclaims. If AFLDS has valid claims against Dr. Gold, it can bring those in a separate lawsuit, after control of the corporation is decided.
Defendants have not identified any case with similar circumstances and allegations to those at issue here where a court declined to apply the rule of corporate neutrality — much less such a case where the corporation was permitted to be represented by the same counsel as the individuals alleged to have misused the corporation.
Defendants have not raised any legitimate argument why the rule of corporate neutrality should not be applied here. It should be.
C. A.R.S. § 10-3302 is irrelevant here.
Defendants’ last argument is that § 10-3302(1) gives AFLDS “the right to ‘[s]ue and be sued, complain and defend in its corporate name.’” [Resp. at 5:16-17]. Actually, that statute only recognizes the “power,” not the right. Anyway, this is another red herring.
AFLDS’s power to sue generally is not at issue. Rather, the question underlying the Motion is whether AFLDS can bring counterclaims against Dr. Gold in this derivative proceeding. A.R.S. § 10-3302 does not speak to that issue at all and is thus irrelevant here.
D. Defendants do not address the conflict of interest inherent in counsel purporting to represent both the individual Defendants and AFLDS.
Finally, it must be noted that Defendants do not respond at all to the argument in the Motion that, even if AFLDS were an adverse party that could assert counterclaims, and even if AFLDS were not bound by the rule of corporate neutrality, it would still be improper and a conflict of interest for AFLDS to be represented by the same counsel as the individual Defendants, who are accused here of seriously abusing the nonprofit. As the Motion pointed out, “[d]ual representation of the corporation and individual defendants in a derivative proceeding that asserts a claim of serious wrongdoing by those in control of the corporation is considered improper because a potential conflict of interest exists between counsel’s duty to the corporate entity and counsel’s relationship with the individual defendants.” 13 Fletcher Cyc. Corp. § 6025; see also, e.g., Yablonski v. United Mine Workers of Am., 448 F.2d 1175, 1181 (D.C. Cir. 1971).
Indeed, as the Northern District of Illinois explained in Krakow:
The true (vice nominal) alignment of the parties in a derivative suit also prevents attorneys from representing certain clients in the litigation. See, e.g., Ill. Rules of Prof’l Conduct R. 1.7 (2010) (prohibiting lawyers from representing in the same legal action clients whose interest are directly adverse). Because, as a practical matter, the corporation’s interests in a derivative action are adverse to those of the defendant officers or directors (though, as a technical matter, both appear as “defendants” in the complaint), a single attorney or group of attorneys typically cannot represent both. See id. R. 1.13 cmt. 14 (explaining that Rule 1.7 governs who should represent the corporation and the directors in a derivative suit). To the extent the Locke Lord attorneys formally appeared as counsel for the corporate defendants but secretly took actions on the individual defendants’ behalf, their conduct was improper. See May 29, 2012 order disqualifying Locke Lord LLP as counsel for the derivative defendants, [520]. The attorneys’ role, as plaintiffs correctly point out, was to remain neutral.
rakow, 135 F. Supp. 3d at 791-92.
Gold’s derivative claim for removal of Defendants as directors of AFLDS alleges serious wrongdoing by the Defendants that harmed AFLDS and breached Defendants’ duties to the company. It is improper and a conflict of interest for the same counsel to represent Defendants in defending against those claims and to also purport to represent AFLDS. The Response does not address this point at all.
This is another reason Defendants should not be permitted to assert counterclaims on behalf of AFLDS. For all of these reasons — the fact that AFLDS is not an adverse party, the fact that AFLDS should be bound by corporate neutrality, and the fact that AFLDS should not be represented by the same counsel as the individual Defendants — all counterclaims purportedly brought by AFLDS should be dismissed
II. The tortious interference claim also fails to state a claim
The Motion pointed out numerous pleading deficiencies in the three tortious interference claims purportedly brought by AFLDS. [Mot. at 6-9]. The Motion linked those deficiencies to: (1) specific claims and (2) specific portions of the claims. The only defense of those claims in the Response is that “the existence of a contract is not an element of a claim for tortious interference with business relations” and “AFLDS is not required to plead the existence of a contract.” [Resp. at 6:2-13]. These claims cannot stand.
First, Dr. Gold did not contend that the existence of a contract is required for tortious inference with business relations. Rather, she correctly noted that a claim for tortious interference “must allege the existence of a valid contractual relationship or business expectancy” and that “tortious inference with a business relationship requires a business relationship evidenced by an actual and identifiable understanding or agreement which in all probability would have been completed if the defendant had not interfered.” Dube, 216 Ariz. at 411, 414 (emphases added). Defendants ignore the latter requirement.
Second, Defendants do not respond at all to the seven categories of specific deficiencies identified by Dr. Gold in the Motion. For each of those seven reasons, the three tortious interference claims fail to state claims for relief and should be dismissed.
III. The fraud claim also fails to state a claim.
The Motion pointed out that several of the nine required elements of fraud were not pleaded in support of the fraud claim purportedly brought by AFLDS. The claim — governed by a heightened pleading standard — vaguely alleges that “Gold knowingly omitted to disclose to AFLDS and its Board of Directors material facts about her use of AFLDS charitable funds for her personal purposes and for those in her circle instead of to fulfill AFLDS’ charitable purposes and mission.” [Countercl. ¶ 38].
The Response does not overcome the deficiencies in the fraud claim. Defendants merely point to the allegations in Paragraphs 37-41 of the Counterclaims. [Resp. at 6:14- 7:1]. But there are absolutely no allegations in Counterclaim Paragraphs 37-41 about what facts were omitted, how they were false, why they were material, or that AFLDS actually relied on them. And, while there are conclusory allegations that Dr. Gold intended AFLDS to rely and that AFLDS was damaged, there are no facts alleged in support of those conclusory allegations.
These deficient, conclusory allegations do not meet the Rule 9(b) heightened pleading standard for fraud. This claim fails to state a claim and should be dismissed.
IV. Gilbert’s defamation claim fails to state a claim.
The Response clarifies the scope of Gilbert’s defamation claim: he is bringing claims only based on (1) alleged statements to donors that Gilbert engaged in financial improprieties, ethical violations, and corruption, and (2) Gold’s letter to AFLDS employees accusing Gilbert of improper financial dealings. [Resp. at 7:2-7]. But the Motion pointed out several reasons the Counterclaim cannot support a defamation claim as to those allegations, and the Response does not address those deficiencies.
First, although the Counterclaim alleges (without factual support) that the vaguely identified statements to donors were false, there is no allegation that the statements in the letter to AFLDS employees were false. [Countercl. ¶ 27(e)]. The Response now uses the word “falsely,” but it does not point to any allegation of falsity. That does not exist.
Second, there are no allegations that Gold acted with malice. The Motion pointed out that, as a public figure, Gilbert must plead that Dr. Gold acted with actual malice. See McCoy v. Johnson, 2022 WL 17491745, at *5 (App. Dec. 8, 2022).
Third, there are no allegations that Gilbert was damaged by the statements. The Counterclaim does not address damage at all, other than a conclusory, unsupported statement in Paragraph 91 that Gilbert “has suffered damages to his reputation.”
Each of these deficiencies — which are mostly ignored by the Response — independently mandates dismissal of the defamation claim for failure to state a claim.
V. Conclusion
For these reasons, the Court should: dismiss, without prejudice, all counterclaims purportedly brought by AFLDS, because it cannot bring counterclaims at all in this litigation, or, in the alternative, dismiss the three tortious interference claims and the fraud claim, with prejudice, for failure to state a claim; and dismiss Gilbert’s defamation claim with prejudice, for failure to state a claim.
AZ Judge Supports AFLDS Founder Dr. Gold's Motion to Proceed with Lawsuit Against Captured Board
CV 2022-015525
Feb. 09, 2023
In the superior court of the state of Arizona in and for the county of MaricopaThe Court declines to enter the Order submitted by defendants on February 1, 2023
Defendants have moved to dismiss claim one, a derivate claim for a declaratory judgment, and claim two, a claim for judicial removal of directors. Defendants Richard Mack (“Mack”) and Jurgen Matthesius (“Matthesius”) have moved to dismiss all claims against them. The Court has considered the Motion, Response and Reply.
The Court has already made significant findings based on the evidentiary hearing on January 25, 2023. The Court, however, must rule on this Motion based on the allegations in the Complaint.
n deciding a Motion to Dismiss, the Court looks at the Complaint only and assumes the truth of the well-pled factual allegations. State ex rel. Brnovich v. Arizona Bd. of Regents, 250 Ariz. 127, 134 (2020). Defendants’ Motion and Reply often refer to facts outside the pleadings. The Court declines to turn the Motion into a Motion for Summary Judgment.
BRIEF FACTUAL BACKGROUND
Plaintiff Simone Gold (“Gold”) founded Free Speech Foundation, Inc. d/b/a/ America’s Frontline Doctors (“AFLDS”) in 2020. Gold served on the Board of Directors (“Board”). In the spring of 2022, AFLDS’s Board had some concerns that Gold was misusing corporate funds. An audit was commenced.
Gold resigned from the Board on February 2, 2022. Gold contends, however, that her resignation was conditioned on Gold receiving certain payments and a Consulting Agreement. The payments have not been made. No Consulting Agreement was ever completed and signed. As such, Gold contends that her resignation was not effective.
Gold later made allegations of financial improprieties against fellow Board member Joseph Gilbert (“Gilbert”). She has also made allegations of improper conduct against Mack and Matthesius.
Gold now contends that she is a Board member and that she has the authority to operate AFLDS. Defendants disagree, claiming that Gold has no standing to serve as a Director or Officer of AFLDS.
DERIVATIVE CLAIM
To bring a derivative claim, the Arizona Nonprofit Corporation Act requires that the plaintiff or plaintiffs be a current “director or twenty-five per cent of the directors, whichever is greater.” A.R.S. § 10-3631(A)(2). Gold claims to be a Director.
Gold asserts that her resignation was conditioned on AFLDS entering into a Consulting Agreement and on Gold receiving certain payments from AFLDS. Gold asserts that the conditions were not met and that she, therefore, is still a Director of AFLDS. Gold also asserts that she never really resigned at all, because her resignation was not in writing. Lastly, she claims that she rescinded her resignation.
Gold seeks, inter alia, declaratory relief, establishing that she is a Director of AFLDS. Defendants claim that Gold resigned from the Board and, therefore, has no standing to assert this claim.
The Court cannot weigh the evidence at this point and make a determination as to whether Gold is a Director. The sole question before the Court is whether Gold has adequately pled a claim that she is a Director. She has.
The Court does, however, reject Gold’s claim she never formally resigned. Gold contends that any resignation had to be in writing under AFLDS’s By-laws and A.R.S. § 10-3807(A). As the Court ruled on January 27, however, the By-laws and the statute do not require resignations to be in writing.
Gold clearly resigned. She told the Board that she was resigning, and her resignation was accepted.
The salient question is whether her resignation was conditional. Rule 9(c) provides that “when denying that a condition precedent has occurred or been performed, a party must do so with particularity.” Arizona courts do not favor conditions precedent and “will not construe stipulations to be such unless required to do so by the plaint, unambiguous language or by necessary implication.” Angle v. Marco Builders, Inc., 128 Ariz. 396, 399-400 (1981).
A.R.S. § 10-3807(B) provides that “(a) resignation is effective when the notice is delivered unless the notice specifies a later effective date or event.” As such, a resignation can be conditional. Bouchard v. Braidy Indus., Inc., 2020 WL 2036601, at *15 (Del. Ch. Apr. 28, 2020).
Gold has pled that her resignation was conditional. Paragraph 35 of the Complaint contains specific allegations of what the Board of Directors allegedly promised Gold. Paragraph 42 specifically states the promises were conditions to her resignation.
As such, Gold has asserted a viable cause of action. The Court cannot find that the Complaint fails to state a claim upon which relief may be granted. If the resignation was conditional, then Gold has a viable claim that she is still a Director.
Gold also contends that she rescinded her resignation. The Court rejects the proposition that a Director can resign and then, several months later, proclaim that the resignation is rescinded.
In any event, in order to rescind a contract, the proponent must provide prompt notice to the other party and a restoration of all benefits received as part of the transaction. Dewey v. Arnold, 159 Ariz. 65, 69 (App. 1988) quoting D. Dobbs, Law of Remedies, § 4.8 (1973). Gold’s pleading makes no showing that she provided prompt notice to the defendants of her rescission. In fact, it is not clear that Gold ever told the Board that she “rescinded” her resignation.
Gold also has not pled that she has returned benefits received, as part of the alleged deal. Indeed, she was paid $50,000 per month from AFLDS for several months after her resignation. Gold herself contends that these payments were part of what AFLDS agreed to provide her in exchange for her resignation. She has returned none of that money. As such, even if her resignation could be rescinded, she has not legally rescinded her resignation, as a matter of law.
The Court rejects the notion that Gold has pled a claim for rescission. As noted above, however, the derivative claim will not be dismissed, based on the claim that the resignation was conditional.
REMOVAL OF DIRECTORS
The claim for judicial removal of Directors requires proof that the “defendant director has engaged in fraudulent conduct or intentional criminal conduct with respect to the corporation.” A.R.S. § 10-3810. Mack and Matthesius argue that the Complaint contains no specific allegations that they engaged in such conduct. Rather, the claims are purportedly completely conclusory. As such, Mack and Matthesius request dismissal.
The Complaint alleges that “Mack and Matthesius have supported, facilitated, and/or permitted Gilbert’s wrongful acts and attempt to seize control” of the company. Gold contends that supporting and facilitating fraudulent conduct is itself fraudulent. The Complaint also alleges that Mack and Matthesius failed to act when notified of Gilbert’s alleged wrongdoing. The Complaint claims that Mack and Matthesius failed to investigate Gilbert and failed to act in the best interest of the company. The Complaint further alleges that Mack attempted to pressure Gold into causing AFLDS to donate $2.5M to an event he was organizing.
The claim against Mack and Matthesius is far from strong. The case, however, is at the pleading stage. There have been sufficient facts pled to state a viable cause of action for removal of directors against Mack and Matthesius.
Federal Judge Tosses Lawsuit Filed by Rogue Lawyer Against Dr. Simone Gold as President of AFLDS
Case No.: 2:22-cv-714-SPC-NPM
Dec. 05, 2022
UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF FLORIDA FORT MYERS DIVISIONFREE SPEECH FOUNDATION, INC.
and JOSEPH GILBERT, an
Arizona nonprofit corporation,
Plaintiffs,
v. Case No.: 2:22-cv-714-SPC-NPM
SIMONE GOLD,
Defendant.
OPINION AND ORDER
Before the Court is Defendant Simone Gold’s Motion to Dismiss Pursuant to Fed. R. Civ. P. 12(b)(1) (Doc. 24), and Plaintiffs’ Memorandum in Opposition (Doc. 29). For the reasons explained below, the Court grants the Motion.
BACKGROUND
A core dispute in this fraud and tort case is Gold’s place in Plaintiff organization Free Speech Foundation, Inc. d/b/a America’s Frontline Doctors, Inc. (“AFLDS”). Plaintiffs allege that Gold founded AFLDS in 2020 but held “no officer, director, or other official management role with AFLDS” after February 2022. (Doc. 1 at 3, Doc. 29 at 1). Plaintiffs allege that despite this, Gold continued to “represent herself as the founder and public voice of AFLDS” and has “interfere[ed] with AFLDS’ operations, funds, donor relationships, [and] employee relationships; convert[ed] and improperly assert[ed] control over AFLDS [information technology], bank accounts, money and resources; defam[ed] and disparage[ed] Mr. Gilbert and others associated with AFLDS, and fraudulently [held] herself out as representative, officer, and director of AFLDS.” (Doc. 29 at 1, Doc. 1 at 1-2). Gold alleges she is the Chairman of the AFLDS Board of Directors. (Doc. 24 at 11). Several counts in the Complaint rest on Gold being a “rogue founder” of AFLDS rather than Chairperson of AFLDS. (Doc. 1 at 2).
Plaintiffs’ Complaint alleges diversity jurisdiction and seeks injunctive relief. (Doc. 1). Gold moved to dismiss under Federal Rule of Civil Procedure 12(b)(1) challenging this Court’s subject-matter jurisdiction. (Doc. 24). Gold challenges both the diversity of the parties and the amount in controversy. (Doc. 24).
DISCUSSION
Federal courts are courts of limited jurisdiction that only possess the power to hear those cases which they are authorized to under statute and the Constitution. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). “[A] federal court is obligated to inquire into subject matter jurisdiction . . . whenever it may be lacking” and should do so “at the earliest possible stage in the proceedings.” Univ. of S. Ala. v. Am. Tobacco Co., 168 F.3d 405, 410 (11th Cir. 1999).
Plaintiffs assert diversity jurisdiction under 28 U.S.C. §1332. Diversity jurisdiction requires that the amount in controversy exceed $75,000, exclusive of interest and costs, and that the action be between citizens of different states. 28 U.S.C. §1332(a)(1). It requires the citizenship of every plaintiff to differ from the citizenship of every defendant. Lincoln Prop. Co. v. Roche, 546 U.S. 81, 89 (2005).
A corporation is a citizen of both its place(s) of incorporation and its principal place of business. 28 U.S.C. §1332(c). A corporation’s “principal place of business” is its “nerve center.” Hertz Corp. v. Friend, 559 U.S. 77, 92-93 (2010). This is the place “where a corporation’s officers direct, control, and coordinate the corporation’s activities.” Id. The nerve center is where highlevel corporate decisions are made, not the location of day-to-day operations. See Hoschar v. Appalachian Power Co., 739 F.3d 163, 172 (4th Cir. 2014) (noting that a corporation’s day-to-day operations are not relevant to the nerve center test and “[w]hen a corporation’s day-to-day operations are managed in one state and its officers make significant corporate policy in another, the corporation’s nerve center and principal place of business is the latter”); Cent. W. Va. Energy Co. v. Mt. State Carbon, LLC, 636 F.3d 101, 105-107 (4th Cir. 2011) (determining that where “day-to-day operations” occur is irrelevant to the nerve center test); WM Mobile Bay Env’t Ctr., Inc. v. City of Mobile, No. 1800429, 2022 WL 2070386 (S.D. Ala. Jun. 8, 2022) (discussing the irrelevance of “day-to-day activities or daily management” under the nerve center test).
It is the burden of the party asserting jurisdiction to establish “by a preponderance of the evidence, facts supporting the existence of federal jurisdiction.” Underwriters at Lloyd’s, London v. Osting-Schwinn, 613 F.3d 1079, 1085 (11th Cir. 2010). Challenges to subject-matter jurisdiction can be “facial” or “factual” attacks under Federal Rule of Civil Procedure 12(b)(1). Morrison v. Amway Corp., 323 F.3d 920, n.5 (11th Cir. 2003). Facial attacks challenge jurisdiction based entirely on the complaint, and the court must take the facts in the complaint as true when deciding the motion to dismiss. Id. Factual attacks challenge jurisdiction irrespective of the pleadings, and the court may consider extrinsic evidence when resolving a factual attack. Id. See also Sinaltrainal v. Coca-Cola Co., 256 F. Supp. 2d 1345, 1351 (S.D. Fla. 2003) (“[i]n a factual challenge, the defendant has the burden to produce evidence to contradict the plaintiff's allegations. If the burden is met, the allegations do not carry a presumption of truthfulness”). Defendant notes in her Motion that her attack on diversity of citizenship is factual and her attack on the amount in controversy is facial. The Court starts with the citizenship prong. Because the Court dismisses this case based on the citizenship prong, it need not address the amount in controversy.
The parties agree that Defendant Gold is a citizen of Florida. They also agree that AFLDS is a citizen of Arizona, its place of incorporation. But they dispute the “principal place of business” of AFLDS.
According to Plaintiffs, AFLDS “is an Arizona nonprofit organization with its principal place of business in Tucson, Arizona,” Plaintiff Gilbert is a citizen of Nevada, and Defendant is a citizen of Florida. (Doc. 1 at 3). Yet also according to Plaintiffs, “there is no physical principal place of business [for AFLDS] given that [AFLDS’] employees are all over the country and the world.” (Doc. 29 at 14).
According to Gold, AFLDS’ principal place of business is Naples, Florida. (Doc. 24 at 12-13). As support, Gold cites “three pieces of real property” in Naples in which “frequent meetings are held . . . for senior workers and directors” and in which “officers and directors frequently make decisions.” (Doc. 24 at 7-8). Gold alleges that AFLDS’ “most significant business operation is the creation of media content and videos” (produced in Naples), that AFLDS’ “headquarters” are in Naples, and that “a significant number of AFLDS senior workers live in or around Naples.” (Doc. 29 at 7-11). Gold also asserts that “[b]esides Naples, Florida, there is no other single place where AFLDS workers meet and congregate.” (Doc. 24 Ex. 1). Gold has submitted affidavits from two individuals discussing the “bulk” of AFLDS’ operations being in Florida. (Doc. 24 Ex. 2, 3).
Both parties appear to misunderstand the “nerve center” test the Supreme Court put forth in Hertz Corp. v. Friend — the controlling test to determine a corporation’s principal place of business. The test is singularly concerned with “where a corporation’s officers direct, control, and coordinate the corporation’s activities.” 559 U.S. at 92-93. The Supreme Court adopted the nerve center test to simplify judicial determinations of “principal place of business.” The simplification was needed because the appellate courts were using different standards. See Hertz, 559 U.S. at 91-92 (describing the different approaches of the First, Second, Third, Fourth, Fifth, Ninth, Tenth, and Eleventh Circuits in determining a corporation’s principal place of business); see also Vareka Invest. v. Am. Inv. Properties, 724 F.2d 907 (11th Cir. 1984) (applying a hybrid “place of activities” test and “nerve center” test).
In Hertz, the Court resolved the circuit split by holding that a corporation’s principal place of business was “where the corporation’s high level officers direct, control, and coordinate the corporation’s activities.” 559 U.S. at 92-93. The Court stated that “lower courts have often metaphorically called [this location] . . . the ‘nerve center.’” Hertz, 559 U.S. at 80-81. In adopting this “nerve center” test, however, the Court adopted no specific Circuit’s iteration of the “nerve center” test. Instead, the Court defined “nerve center” itself.[1]
While both parties agree that Hertz governs, they disagree on what the Court should consider in determining AFLDS’ “nerve center.” Plaintiffs invite the Court to consider the factors the Southern District of Florida considered in Chusid, which was decided a few months after Hertz and ignores the Hertz decision completely. Chusid v. Swire Pac. Holdings, Inc., No. 09-23368, 2010 WL 11505092 (S.D. Fla. Jul. 16, 2010). (Doc. 29 at 11). Gold likewise misreads Hertz. It invites the Court to consider “the total amount of business activities that the corporation conducts [in a State] and [to determine] whether they are ‘significantly larger’ than the next-ranking State.” (Doc. 24 at 6). Gold’s proposed analysis is the “general business activities” test the Supreme Court expressly rejected in Hertz. 559 U.S. at 93.
With both parties missing the mark on the nerve center test, the Court is left to resolve the issue on its own. This task isn’t too difficult, as the Court need consider only what the Supreme Court directed it to consider per Hertz—“where a corporation’s officers direct, control, and coordinate the corporation’s activities.” Hertz, 559 U.S. at 92-93. And under this test Plaintiffs have not met their burden to establish jurisdiction.
In an attempt to establish AFLDS’ principal place of business, Plaintiffs have provided the residency of three members of AFLDS’ Board of Directors and the locations of AFLDS’ bank accounts, accountant, and head of payroll, in-house counsel, information technology director, Director of Social Media, and news team. (Doc. 29 at 13). Plaintiffs also have stated that “decisions of the board are made virtually and in no particular state.” (Doc. 29 at 13). Gold, too, has listed AFLDS employees and their residency.[2] Gold has also alleged that she is Chairman of the Board of Directors and she resides in Florida, along with AFLDS’ “headquarters.”[3] (Doc. 24 at 7-8, 11).
But listing employees and their locations is not enough. The relevant inquiry is not how many people work in a particular location, but “where a corporation’s officers direct, control, and coordinate the corporation’s activities.” Hertz, 559 U.S. at 92-93 (emphasis added). To determine where AFLDS’ nerve center is, the Court must first know the primary purpose of the organization. See Johnson v. Smithkline Beecham Corp., 724 F.3d 337, n.21 (3d Cir. 2013) (noting that to identify the actual center of direction, control, and coordination, “we first have to acknowledge the nature of the corporation’s activities, as it is difficult to locate a corporation’s brain without first identifying its body. In this case, GSK Holdings’ sole function is to hold assets. Therefore, the question under Hertz is where that activity is controlled and directed”). The Court must also understand the corporate structure of the organization so the Court can determine who is making the big corporate decisions that direct, control, and coordinate the corporation’s activities and where those decisions are being made.
The Court’s only information about the primary function of AFLDS comes from the Complaint, which states that AFLDS was organized “exclusively for charitable purposes . . . to perform, every act or acts necessary, incidental to or connected with the furtherance of its charitable, scientific, literary, religious and educational purposes, with a focus on educating the public on the enduring importance of the Bill of Rights to America’s history and civic traditions.” (Doc. 1 at 3-4). Gold alleges that AFLDS’ “most significant business operation is the creation of social media content.” (Doc. 24 at 8). These vague descriptions of AFLDS’ purpose leaves the Court short of being able to define its “nerve center.”
Plaintiffs also fail to explain AFLDS’ corporate structure. All that is alleged is that “AFLDS is currently governed and has always been governed by a Board of Directors,” and “AFLDS was run by its Board of Directors and staff.” (Doc. 1 at 4, Doc. 29 Ex. B). These vague statements offer the Court no insight into how AFLDS operates.
And the bylaws offer no more help to the nerve center analysis. They state the Board of Directors “shall have general powers to manage and direct the activities of the Corporation.” (Doc. 29 Ex. A). The bylaws also set an indeterminate number of corporate officers with unspecified responsibilities. (Doc. 29 Ex. A).[4] The Court is not confident it knows about all the potential important corporate decisionmakers within AFLDS. See Lewis Mech. Sales v. Union Std. Ins. Grp., LLC, No. 2:16-CV-00496, 2017 WL 11246844 (S.D. Tex. Nov. 8, 2017) (discussing the need for the party asserting federal jurisdiction to “establish[] the identities of its most important decisionmakers”). For example, the Complaint represents Plaintiff Gilbert to be “AFLDS Chairman of the Board, Chief Operating Officer, and Director of Strategy.” (Doc. 1 at 4). If there is a Chief Operating Officer, is there a Chief Executive Officer? A Chief Information Officer? A complete c-suite?[5] All this ambiguity has left Plaintiffs short of their burden.
Even if the parties agreed on the composition of the Board of Directors, it is unclear whether the Board of Directors (or one or more of the possible corporate officers) truly “direct[s], control[s], and coordinate[s] the corporation’s activities” for purposes of the nerve center test. Hertz, 559 U.S. at 92-93; see also Pool v. F. Hoffman-La Roche, Ltd., 386 F. Supp. 3d 1202, 1220 (N.D. Cal. 2019) (“Without an understanding of what each director or officer actually does for HLR as a practical matter, where the nerve center of the company is cannot be determined”).
In short, Plaintiffs have not provided a clear picture of what decisions the Board makes (or what authority the Board may have delegated to others). Plaintiffs have not even provided a clear picture of who may be considered a corporate decisionmaker for purposes of the nerve center test. And though both Plaintiffs and Gold provided the Court with a list of individuals allegedly employed by AFLDS, the Court only knows their titles, not their true role within AFLDS. Titles are not dipositive of who is making big corporate decisions (or where those decisions are being made). See Lewis Mech. Sales v. Union Std. Ins. Grp., LLC, No. 2:16-CV-00496, 2017 WL 11246844 (S.D. Tex. No. 8, 2017) (noting that a corporation’s principal place of business might be where its President and Director work, but that the President and Director “are not, in all instances, decisionmakers by which a corporation’s principal place of business is defined”). [6] Plaintiffs failed to provide enough information to establish AFLDS’ principal place of business, and thus have not met their burden of showing the Court’s diversity jurisdiction.
Because Plaintiffs have not met their burden on the citizenship prong to establish this Court’s subject matter jurisdiction, the Court need not address the arguments on the amount in controversy.
Accordingly, it is now
ORDERED:
Defendant Simone Gold’s Motion to Dismiss Pursuant to Fed. R. Civ. P. 12(b)(1) (Doc. 24) is GRANTED.
- The Complaint (Doc. 1) is DISMISSED without prejudice for lack of subject matter jurisdiction.
- The Clerk is DIRECTED to terminate any pending deadlines and close the case.
DONE and ORDERED in Fort Myers, Florida on December 6, 2022.
Copies: All Parties of Record
[1]See CostCommand, LLC v. WH Administrators, Inc., 820 F.3d 19, 24 (D.C. Cir. 2016) (finding that the nerve center test factors used by courts pre-Hertz “retain relevance only to the degree they speak to” Hertz’s nerve center test).
[2] Whether everyone listed was still employed by AFLDS at the time of the commencement of this suit is in dispute. In any event, Defendant’s list of individuals allegedly employed by AFLDS and residing in Florida includes the Legal Director, the Assistant Legal Director, the Director of Security, the Assistant Director of Security, the Executive Director, the Creative Director, the Director of Photography, two photographers, the Production Assistant, the Nutrition Director, a “consulting doctor and media talent,” a “volunteer,” the Operations Director, and the Information Technology Director. (Doc. 24 at 11-12).
[3] Whether this “headquarters” truly was a headquarters (and its use for AFLDS purposes) is in dispute. But a “headquarters” location is not necessarily relevant under the nerve center test. See Hoschar v. Appalachian Power Co., 739 F.3d 163, 173 (4th Cir. 2014) (noting “there is nothing in Hertz to suggest that a company cannot refer to one office as its ‘headquarters’ while maintaining its ‘nerve center’ in another office”).
[4] The bylaws provide for an Executive Director who “shall be the principal executive officer of the Corporation and, subject to the control of the Board of Directors, shall in general supervise and control the day-to-day business and affairs of the Corporation,” a Secretary, a Treasurer, and an indeterminate number of “Assistant Officers” who may be elected by the Board of Directors or appointed by the Executive Director if the Board delegates such authority. (Doc. 29 Ex. A). In her Response in Opposition to Motion for Preliminary Injunction, Gold listed eleven “director-level positions,” but provided no insight into what these roles entail or the scope of each director’s authority. (Doc. 33 at 10).
[5] These questions are compounded by Gold’s representation in her Response in Opposition to Motion for Preliminary Injunction that Richard Mack may have also held a c-suite position. (Doc. 33 at 11).
[6]See also Johnson v. Smithkline Beecham Corp., 724 F.3d 337, n.21 (3d Cir. 2013) (discussing an instance in which “a holding company’s officers, not its directors, actually control the company’s core activities”); Turner v. Digital Broad. Corp., 894 F. Supp. 2d 748, 752 (W.D. Va. 2012) (discussing the distinction between “officers” and “directors”).
AFLDS Files Lawsuit Against Rogue Lawyer/Disgraced Board Member for Theft and Corruption in Ultra Vires Hostile Takeover
APPLICATION FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION
Dec. 05, 2022
In the superior court of the state of Arizona in and for the county of MaricopaSIMONE GOLD, M.D., both in her individual capacity and as a director on behalf of Free Speech Foundation d/b/a America’s Frontline Doctors, an Arizona nonprofit corporation,
Plaintiff,
v.
JOSEPH “JOEY” GILBERT, JURGEN MATTHESIUS, RICHARD MACK, and FREE SPEECH FOUNDATION d/b/a AMERICA’S FRONTLINE DOCTORS, an Arizona nonprofit corporation, in a derivative capacity,
Defendants.
Plaintiff Dr. Simone Gold (“Gold” or “Plaintiff”), pursuant to Arizona Rule of Civil Procedure 65, hereby applies and moves this Court for a temporary restraining order and preliminary injunction against Defendants Joseph “Joey” Gilbert (“Gilbert”), Jurgen Matthesius (“Matthesius”), and Richard Mack (“Mack”) (collectively, “Defendants”), preventing them, during this lawsuit, from altering the status quo in connection with the operation of Arizona nonprofit Free Speech Foundation d/b/a America’s Frontline Doctors (“AFLDS”), a nominal defendant here in a derivative capacity. Defendants are attempting to tear the operations of AFLDS apart — e.g., purportedly firing most operational staff, and causing AFLDS’s primary bank accounts to be frozen — as part of an improper takeover attempt. To maintain the AFLDS operational status quo while the leadership dispute is decided in an orderly fashion, Court intervention is needed — not ridiculous “self-help” and damaging threats made against frontline AFLDS workers.
Gold further moves the Court for an order that Defendants show cause, if any exists, why a temporary restraining order and preliminary injunction should not be issued. Gold requests that the Court schedule a hearing on this Application for Temporary Restraining Order and Preliminary Injunction at the soonest practicable date and time.
This Application is supported by the Verified Complaint, the following Memorandum of Points and Authorities, and the accompanying declarations of Troy Brewer [Exhibit 1 hereto], Lisa Andrzejewski [Exhibit 2 hereto], Dr. Simone Gold [Exhibit 3 hereto], and George Wentz [Exhibit 4 hereto]. Pursuant to Arizona Rule of Civil Procedure 65(a)(1), Plaintiff is giving all defendants notice of this Application by mail and email on the date of filing.
Memorandum of Points and Authorities
I. Introduction
Gold and Defendants are the directors of AFLDS, an Arizona nonprofit corporation. Gold, an experienced emergency physician, founded the nonprofit, is the face of its operations, and generates millions of dollars in donations for it. This dispute arises from Gilbert’s malfeasance as a director, and his ultra vires attempt to seize control of the company — efforts Mack and Matthesius have participated in, supported, facilitated, and/or permitted to occur.
This litigation will determine who controls the company. Gold has asked this Court for a declaratory judgment that she is a member of the Board of Directors and President of AFLDS, and for A.R.S. § 10-3810 judicial removal of Defendants as Board members, based on their misdeeds. Gold is likely to prevail: she will demonstrate Defendants’ fraudulent actions justify their removal. But meanwhile, the balance of hardships tips strongly in favor of maintaining the status quo. Defendants are engaging in conduct designed to substantially and irreparably alter the status quo — actions that threaten the very existence of AFLDS. For example, in recent weeks, Gilbert, with the support of Mack and Matthesius, has purported to fire the majority of AFLDS’s management/director-level employees, including Gold. Not only is Gold the founder and face of AFLDS, she also is the cause for the vast majority of its donations and, as one of only two medical doctors at the management level of AFLDS, is the primary idea-generator and decision-maker for this medically-oriented nonprofit. Without Gold, and without the majority of the management/director-level employees who are charged with running the company, it is doubtful that the company can survive.
Defendants’ rapidly escalating misconduct reached new levels over the past week. On November 30, 2002, Mack, a former sheriff, threatened to have AFLDS’s CPA arrested if the CPA — who had asked Gilbert the prior week to return $1.1 million in AFLDS funds Gilbert misappropriated — did not follow Gilbert’s orders. Gilbert also made similar improper threats to the CPA the same day. Then, on December 2, 2022, Gilbert caused AFLDS’s primary banking institution to freeze the company’s accounts, so that AFLDS can no longer pay its expenses (including payroll). Without the ability to access its funds, AFLDS likely will not survive the month. Gilbert is turning the corporate control dispute into a business-ending event.
Gold is bringing this Application as soon as possible after learning of those events. Immediate injunctive relief is warranted. First, AFLDS cannot operate without the frozen bank accounts. Second, AFLDS risks losing its CPA firm, which controls its bank accounts and handles AFLDS financial matters, including payroll. But beyond that, Defendants’ actions over the past week demonstrate that they are growing increasingly brazen and extreme in their attempts to dismantle the nonprofit and appropriate its funds. To protect this Arizona nonprofit, the interests it serves, the people who work for it, and the judicial process of this lawsuit, the Court should enter a temporary restraining order and preliminary injunction, preventing Defendants from altering the status quo as to AFLDS operations during the pendency of the litigation.
II. Relevant Background
A. Formation and Purpose of AFLDS
Gold is both a medical doctor (an emergency physician) and a lawyer. She founded AFLDS as an Arizona nonprofit corporation in June 2020. [Verif. Compl. ¶ 15].
AFLDS’s mission and work includes advocating for medical and healthcare issues, combatting media censorship of medical-related information, and supporting medical freedom and civil liberties around healthcare issues. AFLDS offers an array of online content related to those issues. [Verif. Compl. ¶ 16].
Since its formation, AFLDS has been successful in raising funds for its mission and work. Gold, in particular, has assisted in raising more than $25 million in donations for the organization since its formation. [Verif. Compl. ¶ 17]. Gold has been responsible for approximately 95% of donations to AFLDS. [Gold Decl. ¶ 5].
Due to Gold’s efforts, the nonprofit has had measurable success and prominence since its formation. More than 2,000 medical professionals have associated with AFLDS, referring to themselves as “America’s Frontline Doctors.” AFLDS has amassed more than 1 million subscribers to its online content. [Verif. Compl. ¶¶ 18-19].
Gold has been instrumental in this success. AFLDS’s success is built on the personality of Gold, who rose to public prominence in 2020 as a critic of aspects of the response to the COVID-19 pandemic. Gold is the “face” of AFLDS. She frequently engages in public speaking on topics related to AFLDS’s mission and work. [Verif. Compl. ¶¶ 20-22].
Indeed, multiple substantial donors to AFLDS, including one who donated $5 million to AFLDS in August 2022 and one who has donated $500,000 since 2020, have expressed that they gave to AFLDS because Gold was at the helm of the organization. [Verif. Compl. ¶ 23].
Furthermore, most of the medical professionals associated with AFLDS, including AFLDS’s physician liaison and physician pilot liaison, have expressed that they associated with AFLDS, and remain associated with AFLDS, because of Gold’s connection to the organization. The vast majority of AFLDS’s workers, who see themselves as “freedom fighters,” have likewise indicated that they remain working for AFLDS because of Gold’s connection to the organization. [Verif. Compl. ¶¶ 24-25]
B. The Board of Directors of AFLD
In 2020, shortly after she founded AFLDS, Gold was appointed as a director, Chairman of the Board, and President of the organization. Gold remains in those roles to this day, though the issue is disputed in this litigation. [Verif. Compl. ¶¶ 26-27].
In addition to Gold, AFLDS has had other Board members over time. For example, third-party Amy Landau was appointed a director of AFLDS in or about September 2020. Gilbert was appointed a director of AFLDS in or about March 2021. Mack and Matthesius were added to the Board in or about December 2021. [Verif. Compl. ¶¶ 28-31].
C. The Failed Agreement for Gold to Resign from the Board
In early 2022, Gold considered the possibility of stepping down from her position on the Board of Directors, in the interest of protecting the functionality of AFLDS (including concerns that she had become a political target of third parties) and so that she could continue her extraordinary contributions to AFLDS of visionary leadership and increasing public support while simultaneously protecting other efforts, such as starting healthcare clinics. [Verif. Compl. ¶ 33].
Gold’s attorney, George Wentz, negotiated on her behalf with the other members of the Board of Directors to reach an agreement for Gold to leave the Board in exchange for a set of promises, including valuable consideration. In or around February 2022, Gold and the other members of the Board of Directors reached an agreement that Gold would resign from the Board of Directors in exchange for an agreement regarding an ongoing arrangement, which included the following major components: (i) Gold would have an ongoing consulting agreement with AFLDS for monthly compensation, and (ii) AFLDS would provide Gold with a payment for seed money to start certain healthcare clinics (collectively, the “Resignation Agreement”). [Verif. Compl. ¶¶ 34-35].
Under the Resignation Agreement, which was made between Gold and the other members of the Board of Directors, Gold’s resignation was conditioned on the occurrence of the seed payment and the consulting agreement (and payments thereunder). [Verif. Compl. ¶ 36].
At a meeting of the Board of Directors on or about February 2, 2022, Gold orally offered her resignation, performing her obligations under the Resignation Agreement. Gold (through counsel) and the other members of the Board of Directors negotiated and agreed that the seed money payment to start healthcare clinics would be $1.5 million and that Gold’s compensation for the consulting agreement would be $50,000 per month, plus an allowance for residence in AFLDS-owned property. [Verif. Compl. ¶¶ 37-38].
Despite these agreements, the other members of the Board of Directors (the Defendants here
The seed payment and the consulting agreement were material terms of the Resignation Agreement. The seed payment and the consulting agreement were both conditions precedent to Gold’s resignation taking effect. [Verif. Compl. ¶¶ 41-42].
Because the seed payment (a condition) and the consulting agreement (a condition) never occurred, the Resignation Agreement never took effect. Specifically, Gold’s offered resignation from the Board never took effect. [Verif. Compl. ¶ 43].
Additionally or in the alternative, the cash payment, consulting agreement, and consulting compensation were the other Board members’ performance under the Resignation Agreement. Because a substantial part of that performance (the seed payment) never occurred, Gold was entitled to, and did, rescind the Resignation Agreement, returning the parties to the status quo before the agreement was formed — in other words, with Gold on the Board and President. [Verif. Compl. ¶ 44].
As a result, Gold remained (and, as of the filing of this Application, remains) a member (and Chairman) of the Board of Directors of AFLDS. [Verif. Compl. ¶ 46]. This fact was confirmed by the subsequent conduct of the parties. For example, because the Resignation Agreement never took effect and/or was never fully performed, Gold never gave her resignation in writing, as required by Section 7.1 of AFLDS’s bylaws. [Verif. Compl. ¶ 47]. And indeed, other than a brief absence during the summer of 2022, Gold has continued to principally direct the operations of AFLDS, including since February 2022, with the knowing consent of Defendants. [Verif. Compl. ¶ 47].
D. Gilbert’s Malfeasance
In or around March 2021, Gilbert — an attorney practicing law in Nevada — convinced Gold to deposit $1.1 million in AFLDS funds into the trust account of his law firm. [Verif. Compl. ¶ 50]. In doing so, Gilbert failed to disclose the existence of an unwaivable conflict of interest arising from the fact that he was being added to the Board of Directors for AFLDS that same month. [Verif. Compl. ¶ 51]. Since at least January 2022, Gold has demanded that Gilbert return those funds to an AFLDS bank account. Gilbert verbally agreed multiple times to return the $1.1 million to an AFLDS bank account, but he never did so. [Verif. Compl. ¶¶ 52-53].
Instead, Gilbert saw an opportunity to remove Gold, and potentially keep the money, and hide other financial improprieties. In summer 2022, Gold spent 48 days incarcerated on a misdemeanor trespassing charge related to being at the U.S. Capitol on January 6, 2021. As Founder and President of AFLDS, Gold was an invited guest speaker that day, alongside newly elected members of Congress. [Verif. Compl. ¶ 56].
During Gold’s short absence from AFLDS, she left various AFLDS personnel with instructions about their roles and authority. The Executive Director, Lisa Andrzejewski, was in charge of the AFLDS organization. Gilbert’s only role during that period was to facilitate an internal financial auditor hired by Gold for AFLDS. [Verif. Compl. ¶ 57].
However, apparently seeking to hide his financial impropriety, Gilbert began to overstep his authority and to build a platform for a power grab during Gold’s absence. [Verif. Compl. ¶ 58; Andrzejewski Decl. ¶¶ 13-25].
For example, in July and August 2022, beginning within two days of Gold’s absence, Gilbert purported to fire two key AFLDS workers, National Director Alison Rockett and Creative Director John Strand, as well as a consultant AFLDS had already contracted with and prepaid for six months’ work. Gilbert had no authority to hire or fire any AFLDS workers, and, as such, had no authority to fire Alison Rockett, John Strand, or the consultant. [Verif. Compl. ¶¶ 62-64].
Additionally, following her release in September 2022, Gold discovered that Gilbert was engaging in malfeasance, including financial improprieties, related to AFLDS. [Andrzejewski Decl. ¶¶ 13-22; Gold Decl. ¶¶ 35-36]. For example, Troy Brewer, a certified public accountant whose firm has provided services to AFLDS for most of its existence, confirmed in October 2022 that Gilbert had, since May 2022, taken at least $5,000 per month (and up to $10,000 per month) in AFLDS funds and appropriated it for his personal use. [Verif. Compl. ¶ 66; Brewer Decl. ¶¶ 12-13]. Those withdrawals of company funds were not recorded on the company’s books and were not authorized by the Board of Directors or any individual with the authority to authorize them. These amounts were on top of a salary of $15,000 per month being paid to Gilbert. [Verif. Compl. ¶ 67; Brewer Decl. ¶15].
The full extent of Gilbert’s financial malfeasance, including the full extent of funds he improperly appropriated from AFLDS, is not yet known to Gold. [Verif. Compl. ¶ 68].
Gilbert also engaged in other unauthorized actions, to the detriment of AFLDS. For example, a few days prior to Gold’s incarceration, Gilbert recommended that Gold, on behalf of AFLDS, hire Andrea Wexelblatt, his personal campaign manager for his failed primary campaign for governor of Nevada, as a media manager. Gold approved the hire, and Wexelblatt was hired in a part-time role for $3,000 per month. [Verif. Compl. ¶ 59]. During Gold’s absence, however, Gilbert improperly, and without authority, caused AFLDS’s accountant to pay Wexelblatt $12,000 per month, even though she only worked part time. [Verif. Compl. ¶ 70; Brewer Decl. ¶ 18]; Andrzejewski Decl. ¶¶ 14-21].
Additionally, Gilbert has, for months, substantially failed to perform services for AFLDS, despite drawing a salary (and taking the additional unauthorized amounts on top of that). [Verif. Compl. ¶ 71].
During 2021 and 2022, Gilbert has been primarily focused on his outside activities, rather than AFLDS’s operations. Gilbert has a law practice in Reno, Nevada; he conducted an unsuccessful primary campaign for Nevada governor spanning 2021 and 2022; and he challenged the results of the June 2022 Nevada primary election in a lawsuit that was found to be frivolous and resulted in a sanctions ruling against Gilbert. See Order Granting Def. Joseph Lombardo’s Mot. for Sanctions, Gilbert v. Sisolak et al., Carson City, Nev. First Jud. Dist. Ct., Case No. 22 OC 000851B (Sept. 21, 2022), Exhibit 5 hereto.
While focused on those activities, Gilbert substantially failed to attend AFLDS meetings, perform research or writing for AFLDS, oversee the business of AFLDS, oversee the financial audit of AFLDS, or otherwise benefit AFLDS. [Verif. Compl. ¶¶ 72- 73].
In October 2022, Gold reported Gilbert’s malfeasance to the Board of Directors, AFLDS general counsel Adam Fulton, and AFLDS outside counsel Sally Wagenmaker. No actions were taken by those parties to address the situation. [Verif. Compl. ¶¶ 76-77].
E. Gilbert’s Attempted Seizure of Control of AFLDS
As retaliation for Gold’s inquiry into his malfeasance, and in an attempt to cover-up, obfuscate, and avoid responsibility for his wrongdoing, Gilbert attempted to seize control of AFLDS and launched a smear campaign against Gold. [Verif. Compl. ¶ 78].
Gilbert falsely announced to AFLDS employees that Gold purportedly was no longer in charge at the company. [Verif. Compl. ¶ 80]. Gilbert then attempted to dismantle the company. He did not have operational authority to fire anyone at AFLDS, either as a Board member or as “Strategy Director” — that authority is reserved to the Executive Director and President of AFLDS. [Verif. Compl. ¶ 64].
Notwithstanding his lack of authority, Gilbert purported to fire key AFLDS employees and personnel, without cause. In October 2022, Gilbert, without cause or authority, purported to fire Executive Director Lisa Andrzejewski, shortly after she confronted him about his financial improprieties. [Verif. Compl.¶ 82; Andrzejewski Decl. ¶¶ 13, 20, 25; Brewer Decl. ¶ 14]. In late October, Gilbert, without cause or authority, purported to fire Gold and turned off her access to AFLDS emails. [Verif. Compl. ¶ 85].
These purported firings were in addition to Gilbert’s unauthorized purported firings of National Director Alison Rockett and Creative Director John Strand in August 2022, during Gold’s absence (discussed above).
Also in October, Gilbert began threatening AFLDS employees that he would cut their pay or fire them — actions he was not authorized to take. [Verif. Compl. ¶ 87].
Gilbert also fabricated allegations that Gold had acted improperly, which he then spread to AFLDS employees, lawyers, and the community, including through social media. For example, Gilbert has alleged that Gold had improperly used company resources by purchasing a house in the company’s name. In reality, the house was properly purchased for company purposes — with Gilbert’s knowledge, participation, and approval — and the Board wanted Gold to live and conduct business meetings and increase publicity in the house because of the inseparable relationship between her public image and AFLDS’s success. [Verif. Compl. ¶¶ 88-89; Gold Decl. ¶¶ 49-56; Brewer Decl. ¶ 20; Wentz Decl. ¶¶ 7, 9]. Gilbert has defamed Gold, through his misrepresentations.
As a result of Gilbert’s unauthorized actions and attempt to seize control of AFLDS, Gold terminated Gilbert as an employee of AFLDS (“Strategy Director”) on or about October 31, 2022. Gilbert has not recognized that termination and purports to still hold both a position with and control of AFLDS. [Verif. Compl. ¶ 92].
Gilbert’s purported mass firings continued even after his employment was terminated. On or about November 7, 2022, Gilbert, with no authority or cause, purported to fire Operations Director Sarah Denis, Security-Logistics-Procurement Director AJ Andrzejewski, and Communications Director Lisa Alexander. [Verif. Compl. ¶ 93].
AFLDS has a total of 11 director-level positions, in addition to the President: Executive Director, National Director, Medical Director, Communications Director, Creative Director, Security-Logistics-Procurement Director, IT Director, Operations Director, Social Media Director, Legal Director, and News Director. Gilbert purports to have fired six of those 11 directors and has threatened to fire four others — in other words, almost all of the directors. [Verif. Compl. ¶ 94]
F. Threats and Intimidation of AFLDS’s CPA; Freezing of Bank Accounts
Again, Gilbert holds $1.1 million of AFLDS funds that were deposited by Gold in the trust account of his law firm, which he has refused to return to AFLDS. Gold recently learned that Gilbert may have inappropriately transferred some or all of those funds to another law firm, to fund separate litigation Gilbert has brought against Gold in Florida. [Verif. Compl. ¶ 95].
On November 21, 2022, AFLDS’s CPA, Troy Brewer, requested that Gilbert return that money. [Brewer Decl. ¶ 7]. Gilbert did not do so. Instead, Gilbert, Mack, and former AFLDS outside counsel Sally Wagenmaker began a campaign of threats against Mr. Brewer. [Id.]. On November 22, 2022, Wagenmaker threatened Mr. Brewer with criminal liability for any payments out of AFLDS accounts not authorized by Defendants. [Brewer Decl. ¶ 9].
On November 29, 2022, Wagenmaker demanded that Mr. Brewer not authorize payroll for five employees Gilbert had purported to fire — despite the fact that those individuals have continued to perform their duties for AFLDS. [Brewer Decl. ¶ 8].
On November 30, 2022, Mack, a former sheriff with continued connections in law enforcement, sent Mr. Brewer a text message in which he threatened to file a police report and potentially have Mr. Brewer arrested if Mr. Brewer did not follow Gilbert’s instructions. [Brewer Decl. ¶ 10]. Gilbert also sent Mr. Brewer a text message with similar threats. [Brewer Decl. ¶ 11].
Mr. Brewer, a 26-year CPA who specializes in nonprofit accounting, has had charge of all AFLDS financial matters (including payroll) since early 2021. [Brewer Decl. ¶¶ 2-4]. During the current dispute over control of the company, he continued to perform his duties to the organization as they had always been performed. [Brewer Decl. ¶ 6].
These actions by Gilbert, Mack, and the attorney they are directing to threaten and coerce Mr. Brewer for doing his job have paralyzed his ability to keep AFLDS’s finances operating. [Brewer Decl. ¶ 7].
Additionally, on December 2, 2022, Gold learned that Gilbert had caused Security Bank and Trust Company, the financial institution where AFLDS has its primary operational accounts, to freeze those accounts. The only signatories on the accounts are (and have always been) Gold and Mr. Brewer. Gilbert attempted to have Mr. Brewer removed as a signatory on December 2, 2022, causing the bank to freeze the accounts until the corporate control issue can be resolved. [Gold Decl. ¶ 70]. The bank subsequently notified Gold and Mr. Brewer of the freezing, on December 3, 2022, and advised them to not write checks on the accounts while they are frozen. [Gold Decl. ¶ 71].
AFLDS uses those bank accounts as its primary operational accounts — for payroll, media operations, and day-to-day business expenses. Without the ability to access those funds, AFLDS will likely will not be able to survive the month. [Gold Decl. ¶ 72].
G. Mack and Matthesius’s Other Acts and Omissions
Beyond the specific acts by Mack described above, Mack and Matthesius have otherwise supported, facilitated, and/or permitted Gilbert’s wrongful acts and attempt to seize control. For example, Mack and Matthesius failed to act when notified about Gilbert’s wrongdoing, or when Gilbert purported to fire the majority of AFLDS’s directors. [Verif. Compl. ¶¶ 98-99].
Additionally, Gilbert has publicly represented that many of his actions described above were the result of joint decisions by Gilbert, Mack, and Matthesius. [Gold Decl. ¶ 74].
Mack has also engaged or participated in financial improprieties and/or misused AFLDS. For example, in mid-2022, Mack asked Gold to cause AFLDS to donate $2.5 million to an event Mack was organizing. Gold understood, and conveyed to Mack, that this would be inappropriate, as AFLDS’s funds had been donated to AFLDS for use by AFLDS. Mack then asked Gilbert to pressure Gold to release $2 million to Mack. Gilbert raised this issue, as an ethical conflict for Mack, at a Board meeting in or around June 2022. [Verif. Compl. ¶¶ 102-03].
In or around October 2022, Gilbert purported to hire Mack as “CEO” of AFLDS for $20,000 per month. [Verif. Compl. ¶ 105; Brewer Decl. ¶ 19]. Again, Gilbert lacks hiring authority — his purported hiring of Mack lacks effect. [Verif. Compl. ¶ 106]. Furthermore, AFLDS does not have the position of “CEO.” The bylaws do not provide for such a position. With an Executive Director and a President, there is no need for this nonprofit to also have a CEO. [Verif. Compl. ¶ 107]. The purported hiring of Mack is another attempt by Gilbert and Mack to bilk AFLDS of large sums of money, with no benefit to the nonprofit.
III. Legal Analysis
A preliminary injunction is proper when (1) the party seeking the injunction has a strong likelihood of success on the merits at trial; (2) there is a possibility of irreparable injury not remediable by damages if the injunction is not issued; (3) the balance of hardships favors the party seeking the injunction; and (4) public policy favors the injunction. Shoen v. Shoen, 167 Ariz. 58, 63 (App. 1990). “To meet this burden, the moving party may establish either 1) probable success on the merits and the possibility of irreparable injury; or 2) the presence of serious questions and the balance of hardships tip sharply in [the party’s] favor.” Id. (internal quotation marks omitted). Here, either standard merits issuance of the requested injunction.
A. Gold is likely to succeed on the merits.
Gold has two primary claims in this action: (1) a declaratory claim, asking the Court to determine that Gold remains on the Board, and (2) a claim for A.R.S. § 10-3810 judicial removal of Defendants as directors of AFLDS.
1. Gold is likely to succeed on her declaratory claim.
Gold seeks a declaration that she remains on the Board of Directors. This claim depends on a determination that the Resignation Agreement (and, by extension, Gold’s offer of resignation) either never took effect or was rescinded. Under the circumstances, one of those outcomes is likely.
a. The Resignation Agreement never took effect.
The Resignation Agreement never took effect due to failure of a condition precedent. If a condition precedent to an agreement does not occur, the agreement — and anything flowing from it — is void ab initio and never took effect. See, e.g., Nicholas v. Fowler, 89 Ariz. 7, 10-11 (1960) (sale and resulting deed were both void for failure of condition precedent to agreement); Betancourt v. Logia Suprema De La Alianza HispanaAmericana, 53 Ariz. 151, 157-58, opinion modified on reh’g, 53 Ariz. 263 (1939). Here, the Resignation Agreement conditioned Gold’s resignation on the occurrence of the seed payment, the consulting agreement, and the consulting compensation. The occurrences of all three of those things were conditions precedent to Gold’s resignation.
Indeed, Gold never offered her resignation in writing, as required by Section 7.1 of AFLDS’s bylaws, because the Resignation Agreement never took effect.
Gold is likely to succeed in showing that the Resignation Agreement never took effect, and, thus, that she remains a Board member and President of AFLDS
b. In the alternative, Gold properly rescinded the Resignation Agreement.
Rescission is a remedy that “contemplates the ‘undoing of the transaction,’ whereby each party gives back to the other what it parted with in the original transaction.” Grand v. Nacchio, 214 Ariz. 9, 19, ¶ 27 (App. 2006) (quotation marks omitted). Gold had at least two grounds for rescission here.
First, failure of consideration of an essential part of a contract justifies rescission. Mortensen v. Berzell Inv. Co., 102 Ariz. 348, 350 (1967). Here, Defendants failed to provide to Gold the seed payment — an essential part of the consideration for the Resignation Agreement. As a result, Gold was entitled to rescind the Resignation Agreement and return to the pre-agreement status quo, including her position as a Board member and President.
Second, rescission is a remedy available for fraudulent misrepresentation. Lehnhardt v. City of Phoenix, 105 Ariz. 142, 144 (1969). Defendants induced Gold to enter the Resignation Agreement by falsely representing that AFLDS would pay the seed money — which, apparently, they did not intend to perform. That was a material representation, it was false, Gold reasonably relied on that representation in choosing to enter the Resignation Agreement, Defendants intended that she would so rely, and she was injured as a result. This constitutes fraud. See, e.g., Peery v. Hansen, 120 Ariz. 266, 269 (App. 1978). This is an independent reason Gold was entitled to rescind.
Having the right to rescind (for either of those reasons), Gold caused rescission to occur. “A rescission may be effected by applying to the courts for a decree of rescission, by one party declaring a rescission based upon a legally sufficient ground without the consent of the other party, or . . . by mutual agreement of the parties.” Bazurto v. Burgess, 136 Ariz. 397, 399 (App. 1983). Gold used the second method here.
“A notice of rescission must be clear and unambiguous, conveying the unquestionable purpose to terminate the contract . . . .” Mahurin v. Schmeck, 95 Ariz. 333, 340 (1964). “[S]uch notice is not required to be formal and may be evidenced by conduct . . . .” Miller v. Crouse, 19 Ariz. App. 268, 273 (1973).
Gold, both through formal notice and through conduct, clearly and unambiguously communicated her intent to rescind the Resignation Agreement. On October 31, 2022, she sent a rescission notice to Defendants, entitled “Nullification of Failed and Forfeited Consultant Contract, Clarification of Proper BOD.” [Gold Decl. Exh. A]. That notice stated “I am, and continue to be, the President and Chairman of the Board” of AFLDS because the consulting agreement required by the Resignation Agreement “was never fully executed nor fully performed,” “the signing bonus [seed money] agreed upon has never been paid,” and “the consideration I was promised, and I detrimentally relied on, in exchange for my departing from the Board, was not performed.” [Id. at 1]. On November 1, 2022, Gold sent a letter to AFLDS workersthat confirmed her ongoing status as Board member and President because “the proposed contract [for her resignation] was never fulfilled.” [Gold Decl. Exh. B]. Also on November 1, 2022, Gold sent a letter to former AFLDS attorney Sally Wagenmaker that notified Ms. Wagenmaker of the rescission notice sent to Defendants and confirmed that Gold remained a Board member and President because the consulting agreement was never executed and the seed money was never paid. [Gold Decl. Exh. C].
Gold is thus likely to succeed in showing that she rescinded the Resignation Agreement. This returned the parties to the pre-contracting status quo — in other words, with Gold in the Board and in the role of President.
2. Gold is likely to succeed on her A.R.S. § 10-3810 claim.
Under A.R.S. § 10-3810, a court may judicially remove the director of a nonprofit if it finds that: (1) the director engaged in fraudulent or criminal conduct with respect to the corporation and (2) removal is in the best interests of the corporation. Gold is likely to succeed on her derivative claim here.
The full extent of Defendants’ frauds and bad acts are not yet known to Gold. Yet, the facts already known are sufficient to show a likelihood of success on this claim.
Gilbert engaged in fraudulent and/or criminal conduct with respect to AFLDS by, inter alia: misappropriating AFLDS funds for his personal use, misappropriating AFLDS funds for the use of Wexelblett (his personal assistant), misappropriating AFLDS funds for the use of Mack (through the purported “CEO” hiring and resulting payments), purporting to fire AFLDS workers without authority, fraudulently misrepresenting facts about Gold to AFLDS workers, attempting a coup of the company, and misappropriating the $1.1 million in AFLDS funds that were deposited in his trust account.
Mack engaged in fraudulent and/or criminal conduct with respect to AFLDS by, inter alia: threatening AFLDS’s CPA with arrest, improperly seeking AFLDS funds for his separate organization, asking Gilbert to pressure Gold to approve that improper funding, attempting to misappropriate AFLDS funds (through the purported “CEO” position), and participating in, supporting, facilitating, and/or permitting Gilbert’s actions and frauds — including by not taking action as a Board member when they were disclosed.
Matthesius engaged in fraudulent and/or criminal conduct with respect to AFLDS by, inter alia, participating in, supporting, facilitating, and/or permitting Gilbert’s actions and frauds — including by not taking action as a Board member when they were disclosed.
Removal of these Defendants as directors is in the best interests of AFLDS because, inter alia, their misuse of AFLDS’s funds is harming AFLDS, the attempted seizure of AFLDS is harming and will continue to harm the company, the mass purported firings are leaving AFLDS with insufficient workers to accomplish its mission and to function, the purported firing of Gold (in particular) would (if effective) cause AFLDS to be unable to function, and Defendants have breached their fiduciary duties to AFLDS by causing and permitting all of the foregoing to occur.
For these reasons, Gold is likely to succeed on the merits of her claims. Or, at the very least, she has raised serious questions that, coupled with the fact that the balance of hardships tips sharply in her favor (discussed below), support granting injunctive relief.
B. Irreparable injury will occur if an injunction is not issued.
The future of AFLDS hangs in the balance. If Defendants are permitted to alter the status quo (as they have been attempting to do), it is highly likely that AFLDS will not survive as an organization, for multiple reasons.
First, Gilbert (supported by Mack and Matthesius) has been rapidly attempting to dismantle AFLDS. The events over the past week will, without Court intervention, cause AFLDS to fail. Again, the AFLDS bank accounts that Gilbert caused to be frozen are vital for AFLDS’s operations. Without the ability to access its funds, AFLDS is not likely to survive the month. This is the epitome of irreparable harm.
Likewise, Gilbert’s and Mack’s improper threats last week to AFLDS’s CPA — who completely manages the organization’s finances, and has continued to perform his tasks consistent with past organizational practice, but dared to ask Gilbert to return AFLDS’s $1.1 million to AFLDS — threaten AFLDS’s ability to operate. Furthermore, these actions show that Defendants will stop at nothing in their goal of keeping that misappropriated money and squashing the nonprofit.
Gilbert’ purported firing in recent weeks of Gold and six of the 11 director-level employees of AFLDS, and his threats to fire four of the five others, will also cause irreparable harm. While it is Gold’s position that the purported terminations are without effect (due to Gilbert’s lack of authority), it is evident that Gilbert, supported by Mack and Matthesius, will continue to try to dismantle AFLDS, if they remain unchecked and free to alter the status quo. By the time the Court determines that the purported firings are without effect, AFLDS would have been without the majority of its key personnel for an extended period of time — which would also likely cause the nonprofit to go under.
Second, if Defendants are permitted to continue to alter the status quo, AFLDS will not be able to function in the meantime. Again, Gilbert has caused AFLDS to lose the ability to use its primary bank accounts, Defendants have intimidated AFLDS’s CPA (who runs all of its finances) from doing his job, and Gilbert purports to have fired Gold (the face of and key person behind AFLDS) and the majority of the other people running AFLDS. AFLDS cannot function for any period of significance without its bank accounts. AFLDS cannot fully function without Gold — Gilbert, who is not a medical doctor, has not been involved in running AFLDS, does not have a track record of developing ideas for AFLDS, and lacks the qualifications, experience, and know-how to replace Gold. AFLDS also cannot function without six of its 11 director-level employees — and, if Gilbert follows through on his threats to purportedly fire four of others, the situation would be even more dire, with 10 out of 11 director-level workers gone.
Third, if Defendants are permitted to continue to alter the status quo, it is doubtful whether AFLDS will continue to raise the funds necessary to support its operations. Historically, Gold has personally generated approximately 95% of donations to AFLDS (which is completely funded by donations). Indeed, AFLDS’s most substantial donors have indicated that they gave to the organization because Gold was at its helm. If Gilbert’s purported termination of Gold is allowed to stand during the pendency of this litigation, AFLDS will not continue to raise enough funds to meet its expenses.
Fourth, Defendants may cause further financial harm to AFLDS if not enjoined from altering the status quo. The recent purported addition of Mack to the payroll, at a cost of $20,000 per month for no benefit to AFLDS, is just one example; the threats and intimidation of the nonprofit’s CPA is another. These acts are indicative of Defendants’ lack of concern for responsible financial stewardship of AFLDS. If Defendants are permitted to continue to alter the status quo, that financial irresponsibility will significantly harm AFLDS and its reputation.
Fifth, the $1.1 million in AFLDS funds that Gilbert has refused to return to the company should be protected. While the loss of money can, in a legal sense, be remediated with an award of monetary damages, the substantial amount and charitable nature of those funds (and, accordingly, their value to AFLDS) merits injunctive relief here as part of maintaining the status quo and protecting AFLDS’s reputation, particularly when viewed in conjunction with the threats of irreparable harm set forth above.
These circumstances weigh strongly in favor of entering an injunction to maintain the status quo. In contrast, Defendants will suffer no meaningful harm if they are temporarily enjoined from altering the status quo. They have no legitimate interest in immediately dismantling AFLDS (or, indeed, in dismantling AFLDS at all).
This Court is familiar with Shoen, but the facts are rather illustrative. That case also involved a dispute over corporate control — but, as to the application for injunctive relief, the roles were reversed from what they are here. The defendants were the directors of a company (the owner of U-Haul); the plaintiffs were a group of dissident shareholders who wanted to sell that company. After the directors issued stock to prevent the dissident shareholders from launching a hostile takeover, the dissident shareholders sought a preliminary injunction to cancel the stock issuance and prevent that stock from voting. Shoen, 167 Ariz. at 60-61.
In a decision that was upheld by the Court of Appeals, the superior court denied the injunction — based, among other findings, on the fact that the company could suffer “serious, irreparable harm” if an injunction were issued and the dissident stockholders were thus allowed to take over and sell the company. Id. at 63. The judge also found “that an abrupt shift in management could result in financial detriment to the corporation, its employees, and stockholders.” Id.
Here, Defendants are attempting that abrupt shift in management and an injunction is needed to stop it. The threat of similar harms if an injunction is not issued favors granting the injunction sought by Gold. If the Court does not issue an injunction maintaining the status quo, Defendants will continue their takeover and demolition of AFLDS, and the organization will collapse. If the Court does not issue an injunction maintaining the status quo, Defendants will continue their attempt to abruptly shift management, to the financial detriment of AFLDS and its employees. Just as these factors constituted irreparable harm that weighed in favor of the directors’ position in Shoen, so too do they weigh in favor of Gold on this factor.
C. The balance of hardships favors an injunction.
This factor tips sharply in favor of granting injunctive relief. As discussed above, if an injunction is not issued, AFLDS — the company created by Gold — will be unable to function and, ultimately, will likely be destroyed. Gold will be unable to work for the benefit of her company (if her purported termination stands), and Gold will suffer the destruction of the company she built. The six purportedly terminated director-level employees, and potentially others if the purported firings continue, will suffer the loss of their jobs, inappropriately and without cause or authority.
In contrast, Defendants will not suffer any hardships if an injunction is entered. They have no legitimate need to dismantle the company, and certainly no need to dismantle it now. This factor strongly favors entry of an injunction.
D. Public policy favors an injunction.
Again, the continued viability of AFLDS, an Arizona nonprofit, is at stake. Public policy favors an injunction that would allow the nonprofit to continue to survive. This factor, too, favors entry of an injunction.
IV. Conclusion
The relevant factors all weigh in favor of issuing an injunction. For these reasons, Gold respectfully requests that the Court enter a temporary restraining order and preliminary injunction against Defendants, enjoining them, during the pendency of this lawsuit, from altering the status quo (including spending the $1.1 million). Because any hardship suffered by Defendants from the injunction would be insignificant, and because Gold merely seeks injunctive relief to preserve the status quo during the litigation, any bond required pursuant to Arizona Rule of Civil Procedure 65(c) should be nominal.
A proposed form of Order to Show Cause, as well as a proposed form of Temporary Restraining Order, are submitted herewith. The proposed form of Temporary Restraining Order is also attached as Exhibit 6 hereto.
DATED this 6 th day of December, 2022.
DICKINSON WRIGHT PLLC
By: s/ Bradley A. Burns Bradley
A. Burns Amanda E. Newman
Adin J. Tarr
1850 North Central Avenue, Suite 1400
Phoenix, Arizona 85004
Attorneys for Plaintiff
THIS DOCUMENT was electronically filed this 6 th day of December, 2022, with the Clerk of the Court and a copy electronically transmitted to:
Honorable Timothy J. Thomason
Superior Court of Maricopa County
COPY of the foregoing to be personally served on:
Joseph Gilbert
Defendant
Jurgen Matthesius
Defendant
Richard Mack
Defendant
By: s/ Veronica Newbank
Fearless Group of Nurses and Medical Workers File Lawsuit Against Texas Hospital Over Mandatory Covid-19 Injection Policy
Jennifer Bridges, et al. v. Houston Methodist Hospital, et al., 4:21-cv-01774
Feb. 24, 2022
U.S. District Court, Southern District of TexasUpdate: As of February 25, 2022, this case has been appealed to the Fifth Circuit and is still being briefed.
Summary:
On June 1, 2021, the Complaint for this case was filed. The plaintiffs, Jennifer Bridges and 116 other coworkers, allege the mandatory policy of the defendant, Houston Methodist Hospital (“Methodist”) is unlawful. The policy requires all employees to receive non-FDA approved, experimental mRNA COVID19 injections as a condition of employment.
The Complaint states Methodist’s policy violates the federal statute governing emergency use of medical products, the federal regulation governing informed consent by participants in medical research studies, and the Nuremberg Code.
On June 12, 2021, Judge Lynn N. Hughes (the “Judge”) abruptly ruled against the Complaint. In a terse six-page Dismissal Order, the Judge recognized the injections are “experimental and dangerous,” yet regarded the plaintiffs’ claims as “false and irrelevant.”
The Judge then declared “inapplicable,” the plaintiffs’ claim that Methodist’s policy violates the federal stature governing emergency use of medical products, but he does not say why that statute is inapplicable.
The Judge also appeared to rely heavily on the now-discredited “protection of the public” rationale, despite the fact that, as we now know, the injections neither prevent transmission to others nor confer immunity.
In his conclusion, the Judge minimizes Nurse Bridge’s claims, stating there was “no coercion,” but cites no source for his conclusion. He condescendingly states Nurse Bridges “can freely choose to accept or refuse a Covid-19 vaccine; however, if she refuses, she will simply need to work somewhere else.” The Judge concludes, “…every employment includes limits on the workers’ behavior in exchange for his remuneration. That is all part of the bargain.”
In other words, Nurse Bridges is faced with a classic Faustian bargain. Despite her previous willingness to treat seriously ill and dying patients before the policy, her job now hinges solely on her willingness to take a permanent, irreversible -- perhaps injurious and deadly -- injection.
Methodist proudly boasted its trailblazing effort to become the first major healthcare system in the nation to require injections for all its employees. In a three-page April 2021 “President’s Letter,” Methodist pressures employees to take the injections for the “safety of the patients,” to be “examples for those who are hesitant to get vaccinated” and to “show the world that we trust the safety and efficacy of the vaccine.” The plaintiffs obviously disagree, and present strong arguments to the contrary that the injections are indeed not safe.
Although the Judge indicated the plaintiffs could request a medical or religious exemption, the hospital was also the first in the nation to mandate the flu vaccine in 2009 for all employees. It’s unknown if any of the plaintiffs previously took the flu vaccines or received an exemption.
No evidentiary hearing was ever held
The plaintiffs' Appellant's Reply Brief deadline is now set for March 4, 2022
Stay Dissolved in Case Against the Biden Administration and OSHA Rule Implementing a Vaccine or Testing Mandate for Businesses with Over 100 Employees
In re: MCP No. 165, Occupational Safety & Health Admin. Rule on COVID-19 Vaccination and Testing, 86 Fed. Reg. 61402
Dec. 16, 2021
Sixth Circuit Court of AppealsOn December 17, 2021, a three-judge panel of the Sixth Circuit Court of Appeals, in a split 2-1 decision, dissolved the nationwide stay on the OSHA rule which had been in place since November 2021. OSHA had published its Emergency Temporary Standard (ETS) on November 5, 2021, requiring businesses with greater than 100 employees to require their employees to be vaccinated or regularly tested.
This is a loss for those employees opposing vaccination mandates, yet it is likely that this is headed to the Supreme Court for a final decision.
After the November 5, 2021, OSHA ETS, the stay, on November 6, 2021, had been issued by a 3-0 vote of the Fifth Circuit Court of Appeals. That was followed by petitions in several circuits, leading to a lottery to select a circuit to decide the multidistrict litigation. The Sixth Circuit was chosen by that lottery to decide whether the OSHA ETS is a lawful exercise of the administrative agency’s power.
The December 17th ruling by the Court panel ruled it is, though the panel did not address the ETS’s vaccination deadlines of December 6, 2021 and January 4, 2022. As it stands now, OSHA will not enforce compliance with the vaccination requirement until January 10, 2022 and with the testing requirement until February 9, 2022.
The Sixth Circuit panel noted that OSHA has wide discretion in how it ensures worker safety in workplaces and referred to the danger of unvaccinated workers in the workplace, and noted that a virus that causes bodily harm is within the ambit of OSHA’s role.
The panel was not persuaded by the Fifth Circuit’s argument that the OSHA ETS was an impermissibly large expansion of OSHA’s power. Nor was it persuaded by the Fifth Circuit’s argument that the timing of the ETS, long after the beginning of the pandemic, meant that OSHA was not responding to an emergency. OSHA countered that argument with an assertion that it was the rise in Delta and the approval of vaccines that played into its issuance of the ETS. Further, the Court was not persuaded by the argument that potential exposure to COVID-19 must be shown, in order to qualify for the “grave danger” requirement of the Occupational Safety and Health Act of 1970 (OSH Act), finding that COVID-19 was a grave danger, generally to workplaces.
The panel also found that there was no irreparable harm to the employees because of the masking and testing alternative available to them, considering the harms to be “entirely speculative.” It is the danger to the public of the virus that empowers OSHA, according to the Sixth Circuit panel.
The findings of the Sixth Circuit panel run in stark opposition to the Fifth Circuit’s findings in BST Holdings, L.L.C., et al. v Occupational Safety and Health Admin, Department of Labor, et al.
These majority and dissenting opinions will undoubtedly be compared and thoroughly analyzed in detail over the next coming weeks. The Attorney General of Texas has already announced that he will be taking the case to the Supreme Court.
It seems highly likely that this case may be one of the very first to be accepted and heard by SCOTUS on the non-emergency docket, especially if the Sixth Circuit en banc hearing is denied, as it's a case of great national importance and there is a split in the Circuits.
Case Filed on Behalf of Federal Employees Against the Biden Administration and the Safer Federal Workforce Task Force Alleging Violations of the Federal Code of Regulations and Unconstitutionality of the Executive Order No. 14043
Health Freedom Defense Fund, et al. v. Joseph R. Biden, Jr., et al., 21-cv-02679
Nov. 11, 2021
Middle District of FloridaOn November 12, 2021, several Department of Defense employees filed suit against Biden’s September 9, 2021 Executive Order No. 14043. The Plaintiffs include distinguished employees, such as a purple-heart service member and a Department of Justice Intelligence Research Specialist, along with Air Force personnel and an Air Traffic employee.
The Plaintiffs assert that they have a right to personal bodily integrity, a right which the government cannot intrude upon by mandate. The Complaint alleges, “At issue is American virtue. It comes to the court through the lens of the right to self-determination and bodily autonomy encompassed within the right to privacy.”
The suit was filed asserting violations of the U.S. Constitution’s 14th Amendment Substantive Due Process Clause and the Equal Protection Clause. The suit argues that the case should be evaluated in terms of strict scrutiny: that the “medical treatments are a substantial burden” and that the Defendants cannot meet their burden to show that “the Mandate is narrowly tailored to meet a compelling interest.” Plaintiffs additionally raise claims that their rights are being violated under parts 293.105 and 293.504 of Title 5 of the Code of Federal Regulations.
The case was brought by Health Freedom Defense Fund, along with Federal Employees for Freedom, on behalf of over 6000 federal employees. Plaintiffs seek declaratory and injunctive relief. Click here to access the Complaint
Case Against the Biden Administration, DOD, and Department of the Navy Alleging Discriminatory Treatment and Retaliation for Legally Exercising Rights Under Free Exercise Clause
U.S. Navy Seals 1-26, et al. v. Joseph R. Biden, Jr., et al., 21-cv-01236-P
Nov. 08, 2021
U.S. District Court, Northern District of Texas
On November 9, 2021, Navy Seals and other Navy personnel filed a federal suit against the Biden Administration, the DOD, and the Secretary of Navy (the ”Defendants“) asserting the Defendants refused to grant religious exemptions to the COVID-19 vaccine mandate in violation of federal law and statues.
The suit was filed under the U.S. Constitution, the Religious Freedom Restoration Act (RFRA), the Administrative Procedure Act (APA), the Department of Defense regulations, and the Department of Navy regulations. The suit asserts the denial of Plaintiffs' fundamental right to their free exercise of religion, and it also seeks protection from improper agency action.
Plaintiffs attack the Defendants’ administration of the Navy Vaccine Mandate for refusal to grant religious and medical exemptions, and for retaliatory actions because of exemption requests. The DOD and Navy regulations recognize religious and medical accommodations for immunizations under RFRA and the Free Exercise Clause of the First Amendment, however, Defendants’ actions are not recognizing this, the suit asserts. Plaintiffs additionally raise claims that their rights are being violated under the APA, and that the actions of the military agencies are not the least restrictive means of accomplishing their purported interests.
Plaintiffs seek declaratory and injunctive relief, as well as actual and nominal damages.
Case Against the Administration and OSHA Rule Implementing Biden’s Vaccine Mandate for Businesses With Over 100 Employees
BST Holdings, L.L.C., et al. v. Occupational Safety and Health Admin., Department of Labor, et al., Case: 21-60845
Nov. 05, 2021
Fifth Circuit Court of AppealsOn November 5, 2021, Petitioners, including numerous corporations and the states of Texas, Louisiana, Mississippi, South Carolina, and Utah filed an Emergency Motion to Stay Enforcement of the OSHA vaccine mandate Pending Review & to Expedite Review, pursuant to FRAP 18(a)(2)(A)(i).
FRAP 18(a)(2)(A)(i) allows for the filing of emergency motions to stay agency actions directly in the federal courts of appeal, instead of first filing with the agency, if it can be shown that "moving first before the agency would be impracticable." Petitioners asserted that first moving before OSHA would be “futile." The Petitioners alleged 10 violations in the suit. They are violations of the:
- Federal Procurement Act (FPA);
- Federal Procurement Policy Act (FPPA);
- Administrative Procedures Act (APA);
- Tenth Amendment (States have the police powers, not the federal government);
- Non-Delegation Principle (asserted under the Separation of Powers and the Legislative and Executive Vesting Clauses of the U.S. Constitution);
- Fifth Amendment Due Process rights to bodily integrity and to refuse medical treatment;
- Fourth Amendment right to privacy and asserts the mandate is an unconstitutional seizure of the person;
- First Amendment violation of free exercise of religion;
- Religious Freedom Restoration Act (RFRA), (imposes a substantial burden on the exercise of religion) and;
- Separation of Powers and Take Care clauses of the Constitution (the President has an obligation to faithfully enforce the laws that Congress has enacted).
In support of the alleged claims, the Plaintiffs argued that the mandate Emergency Temporary Standard (ETS) put forth is neither a “workplace rule” nor “responsive to an emergency,” and that vaccination status is not a workplace issue but a public health issue; that there is no need for an “emergency rule” for a pandemic that has been ongoing for two years; that the Petitioners are likely to succeed on the merits that the ETS exceeds OSHA's statutory authority; that OSHA only has authority over workplace-related hazards, not hazards which can be found worldwide; that the ETS does not address a “grave danger”; that OSHA previously came to an opposite conclusion than they have now; that the 100+ worker requirement makes no sense; that vaccinated people can still spread the disease; that Covid-19 is not a toxic substance or agent; that OSHA’s vaccination requirement, or alternative (to have a weekly test & wear a mask), is both overinclusive and underinclusive; that Petitioners meet the three criteria for a stay, and will suffer irreparable harm without a stay and; a stay won't harm OSHA, it is in the public interest, and expedited review is warranted.
The next day, on Saturday November 6, 2021, the Fifth Circuit Court of Appeal granted the Petitioners’ motion and stayed the ETS mandate, finding that there were "grave statutory and constitutional issues" with the mandate.
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