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Dallas Fallen Officer Foundation v. Frazier

United States District Court, E.D. Texas, Sherman Division

September 20, 2019

DALLAS FALLEN OFFICER FOUNDATION Plaintiff,
v.
FREDERICK FRAZIER, DPA’s ASSIST THE OFFICER FOUNDATION, INC. and DALLAS POLICE ASSOCIATION, Defendants.

          MEMORANDUM OPINION AND ORDER

          AMOS L. MAZZANT, UNITED STATES DISTRICT JUDGE

         Pending before the Court is Dallas Police Association (the “DPA”), Frederick Frazier (“Frazier”), and the DPA’s Assist the Officer Foundation’s (the “ATO”), herein after “Defendants, ” Motion to Dismiss Pursuant to Federal Rule of Civil Procedure 17(b)(2) and Brief in Support, or Alternatively, Motion to Show Authority (Dkt. #61). Having considered the motion and the relevant pleadings, the Court finds that Defendants’ Motion is DENIED.

         BACKGROUND

         Dallas Fallen Officer Foundation (the “FOF”) is a Texas nonprofit corporation that provides support and assistance to “the families of police officers killed or seriously injured in the line of duty” (Dkt. #1). While the FOF often responds to the tragic circumstances that surround a fallen officer, the FOF is not alone (Dkt. #1; Dkt. #25). For instance, after the July 7, 2016 sniper attack in downtown Dallas, Texas, the FOF was one of “three charitable organizations to whom the Dallas Police Department directed the public to donate” (Dkt. #1). One of the other charitable organizations designated to receive donations was the ATO (Dkt. #1; Dkt. #25). The ATO, unlike the FOF, serves as a separate entity of the DPA (Dkt. #1). Although both the FOF and ATO exist to provide charitable services, such charity clearly does not extend to one another.

         The FOF and ATO are entangled in what can be described as nothing short of a turf war. On July 6, 2018, that turf war reached its height when the FOF filed the present action against the ATO, DPA, and Frederick Frazier-the Chairman of the ATO and First Vice President of the DPA (Dkt. #1). The FOF claims that the ATO, DPA, and Frazier have “embarked on a scheme to expand their power within and outside Texas by affiliating the DPA and the ATO with an organization known as the Fraternal Order of Police (“FOP”) . . .” (Dkt. #1). Put simply, the FOF claims that it has become the ATO’s mission to “annihilate” the FOF and create a “monopoly over charitable fundraising for fallen officers” (Dkt. #1). To succeed in this purported scheme, the FOF maintains that Frazier, the ATO, and the DPA engaged in a number of illegal acts (Dkt. #1).

         The FOF points to four alleged incidents-or illegal acts-to substantiate its allegations. First, the FOF asserts that the City of Dallas and the ATO entered into an unlawful Donations Management Agreement (Dkt. #1). Under the alleged agreement, the City would intercept and deliver mail to the ATO so that the ATO could deposit the funds into its bank account, regardless of who the donations were for. The agreement occurred only after the DPA was unsuccessful in an attempted merger between the DPA and the FOP-another alleged attempt to “annihilate” the FOF according to the Complaint (Dkt. #1). Second, the FOF asserts that the ATO removed donations from the seized mail, some of which had originally been directed to the FOF, and then deposited those donations into the ATO’s account without the FOF’s consent (Dkt. #1). This resulted in the alleged misappropriation of over $5, 000 belonging to the FOF (Dkt. #1). Third, the FOF asserts that the ATO concealed its theft for over 18 months, despite knowing that each donation was made payable to a party other than the ATO (Dkt. #1). Finally, the FOF asserts that the ATO lied to “at least one third party using wires for the purpose of diverting donations to the ATO from the [FOF]” (Dkt. #1). The DPA, ATO, and Frazier deny all of the FOF’s assertions (Dkt. #25) and further maintain that the FOF simply has “no evidence of its claims” (Dkt. #47). As a result of the FOF’s assertions, the FOF brought six claims against the various defendants. Those claims include: (1) Civil RICO under 18 U.S.C. § 1962(c), (d);[1] (2) violations of the Texas Theft Liability Act;[2] (3) tortious interference; (4) money had and received; (5) unjust enrichment; and (6) civil conspiracy (Dkt. #1).

         On September 6, 2018, the Court issued the Order Governing Proceedings (Dkt. #12). The Court then entered its Scheduling Order (Dkt. #18) on November 2, 2018. The Court’s Scheduling Order set the deadline for the parties to file motions to dismiss, motions for summary judgment, or other dispositive motions for February 1, 2019 (Dkt. #18). On August 13, 2019, however, Defendants filed a Motion to Dismiss Pursuant to Federal Rule of Civil Procedure 17(b)(2) and Brief in Support, or Alternatively, Motion to Show Authority (Dkt. #61). According to Defendants, Demetrick Pennie (“Pennie”)-the FOF’s President-is ineligible to be President as he has served more than three consecutive years (Dkt. #61).[3] Further, Pennie is not listed in the FOF’s Certificate of Formation as a Director; thus, he was not permitted to bring this lawsuit on behalf of the FOF (Dkt. #61). Finally, Defendants contend that there “is no evidence that the Board of Directors authorized the filing of this lawsuit” (Dkt. #61). Thus, Defendants allege that the FOF and its attorneys “cannot demonstrate the required legal authority to file [and prosecute] this lawsuit” (Dkt. #61). In response, the FOF claims that Defendants’ Motion is untimely because Defendants failed to comply with the Court’s Scheduling Order (Dkt. #66). Moreover, the FOF asserts that, because Defendants did not challenge capacity in their Answer, nor seek leave to amend their Answer, Defendants waived any capacity argument (Dkt. #66). Finally, the FOF provides a “Resolution to Ratify Filing and Prosecution of Lawsuit” (“Resolution”) to make clear that the FOF’s Board of Directors “unanimously ratified the filing and prosecution of this lawsuit as well as each and every action undertaken by Demetrick Pennie on behalf of the FOF . . . .” (Dkt. #66). Predictably, Defendants replied and argued that the Resolution “fails to meet the legal requirements for ratification” (Dkt. #84).

         Accordingly, on the eve of trial, Defendants seek dismissal of this lawsuit pursuant to Rule 17(b)(2) (Dkt. #61). Alternatively, Defendants seek “a determination of the authority” of the FOF’s counsel “to file and prosecute this lawsuit” (Dkt. #61). The Court addresses each request in turn.

         LEGAL STANDARD

         I. Motion to Dismiss Pursuant to Rule 17(b)(2)

         Federal Rule of Civil Procedure 17(b)(2) provides that the capacity to “sue or be sued” is determined, “for a corporation, by the law under which it was organized.” Fed. R. Civ. Pro. 17(b)(2). As the Fifth Circuit has stated, “capacity to sue is a defense, and the federal rules require not only that the defendant raise issues of capacity, but [that he] must do so by ‘specific negative averment.’” F.D.I.C. v. Calhoun, 34 F.3d 1291, 1299 (5th Cir. 1994) (quoting Fed. R. Civ. Pro. 9(a)); see also Young v. Pattridge, 40 F.R.D. 376, 378 (1966) (quoting Fed. R. Civ. Pro. 9(a)). “Defenses objecting to lack of capacity that are not raised are waived.” Id.; see also MTO Maritime Transp. Overseas, Inc. v. McLendon Forwarding, 837 F.2d 215, 218 (5th Cir.1988) (“It is settled law that failure specifically to plead capacity waives the right to object.”).

         II. Motion to Show Authority

         Unlike a Motion to Dismiss Pursuant to Rule 17(b)(2), a Motion to Show Authority is not waivable. See Pueblo of Santa Rosa v. Fall, 273 U.S. 315, 318–19 (1927) (citing The King of Spain v. Oliver, Fed. Cas. No. 7, 814, 2 Wash. C. C. 429, 430). Indeed, because a court necessarily retains the inherent authority to question those that are practicing before it “at ...


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