2010-179 B.V. Brooks & a. v. Trustees of Dartmouth College

No. 2010-179

Grafton

McLane, Graf, Raulerson & Middleton, P.A.

Upton & Hatfield, LLP

(Harvey Silverglate Wadleigh, Starr & Peters, P.L.L.C. and Ruth O’Meara-Costello on the brief), and Bernstein,

the Association of Alumni of Dartmouth College, as amicus curiae.

Pepperman, II on the brief and orally), for the respondents. on the brief), and Sullivan & Cromwell LLP, of New York, New York (Richard C.

THE SUPREME COURT OF NEW HAMPSHIRE petitioners. III and Stephen J. Judge on the brief, and Mr. Van Loan orally), for the

page is: http://www.courts.state.nh.us/supreme. a.m. on the morning of their release. The direct address of the court's home reporter@courts.state.nh.us. Opinions are available on the Internet by 9:00 to press. Errors may be reported by E-mail at the following address: editorial errors in order that corrections may be made before the opinion goes Hampshire, One Charles Doe Drive, Concord, New Hampshire 03301, of any Readers are requested to notify the Reporter, Supreme Court of New well as formal revision before publication in the New Hampshire Reports. NOTICE: This opinion is subject to motions for rehearing under Rule 22 as p. 2 Trustees were barred by promissory estoppel from eliminating parity. promissory estoppel count alleged that, even in the absence of a contract, the fact contract to maintain parity between Alumni and Charter Trustees; the contract claims alleged that the Trustees breached an express or implied-inbreach of implied-in-fact contract and promissory estoppel. The breach of In response, the Association sued the Trustees for breach of contract,

one-half, of the non-ex unequal. As a result, Alumni Trustees comprised only one-third, and no longer 2 were not added, thus making the number of Alumni and Charter Trustees voted to expand its size by adding new Charter Trustees. New Alumni Trustees The parties refer to this as “parity.” In September 2007, however, the board number of Alumni Trustees remained equal to the number of Charter Trustees. Although the total number of trustees increased in 1961 and 2003, the

for five trusteeships (Alumni Trustees). See officio trustees on the board. The new method allowed the Association to nominate suitable persons I. Background

serving as ex officio trustees. and the President of the college occupied the remaining two trusteeships, Trustees) were to be nominated by the board. The Governor of New Hampshire created by charter in 1769. Brzica v. Trustees of Dartmouth College The relevant facts follow. The Dartmouth College Board of Trustees was id. Another five trustees (Charter

method. See id. signed a written agreement memorializing their approval of the new election Agreement,” although, in fact, the board and the Association never created or trustees. The petitioners refer to the new method of election as the “1891 board of trustees and the Association approved a new method of electing filled by a majority vote of trustees. Id. In 1891, in separate meetings, the appeal the order of the Superior Court (Vaughan 443, 452 (2002). At that time, there were twelve trustees and vacancies were members of the Association of Alumni of Dartmouth College (Association),, 147 N.H. DALIANIS, C.J. The petitioners, seven Dartmouth College alumni and

their remaining claims. We affirm. barred by the doctrine of res judicata and that they lacked standing to bring argue that the trial court erroneously ruled that some of their claims were the petitioners’ petition for declaratory and equitable relief. The petitioners judgment to the respondents, the Trustees of Dartmouth College (Trustees), on

for Professor Todd J. Zywicki, as amicus curiae. Shur, Sawyer & Nelson, P.A., of Manchester (Andru H. Volinsky on the brief), p. 3 II. Discussion

capacity. This appeal followed. that they could not prevail upon their breach of contract claims brought in that not, in fact, third-party beneficiaries of the “1891 Agreement,” the court ruled promissory estoppel claim. Because the court found that the petitioners were contract based upon their status as Association members and barred their court ruled that res judicata barred the petitioners’ claims for breach of alleged “1891 Agreement” between the trustees and the Association. The trial of res judicata; and (2) the petitioners lack standing to sue to enforce the the petitioners’ lawsuit was warranted because: (1) it is barred by the doctrine The Trustees moved for summary judgment, arguing that dismissal of

party. See the affidavits and other evidence in the light most favorable to the non-moving We review the trial court’s rulings on summary judgment by considering 3

to fact de novo. Id. a matter of law, we will affirm. Id. We review the trial court’s application of law the outcome of the litigation, and if the moving party is entitled to judgment as does not reveal any genuine issues of material fact, i.e., facts that would affect

S. N.H. Med. Ctr. v. Hayes, 159 N.H. 711, 715 (2010). If this review

Association nor as Association members). (neither as third-party beneficiaries of a promise made by the Trustees to the Agreement.” They bring their promissory estoppel claim on their own behalf of implied-in-fact contract claim only as third-party beneficiaries of the “1891 of the “1891 Agreement,” or as Association members. They bring their breach bring their breach of express contract claims either as third-party beneficiaries Trustees are barred by that doctrine from eliminating parity. The petitioners Alumni and Charter Trustees. Their promissory estoppel claim alleges that the breached an express or implied-in-fact contract to maintain parity between estoppel. The petitioners’ breach of contract claims allege that the Trustees claims for breach of contract, breach of implied-in-fact contract and promissory In November 2008, the petitioners filed the instant lawsuit alleging

with prejudice. The court approved the stipulation in a June 30, 2008 order. and the Trustees entered into a stipulation to dismiss the Association’s lawsuit Association’s lawsuit against the Trustees. Shortly thereafter, the Association consistent with its campaign promises, adopted resolutions to dismiss the Unity Slate pledged to dismiss it. The Unity Slate won the election, and Slate of candidates pledged to continue the lawsuit against the Trustees; the ran against one another, the “Unity Slate” and the “Parity Slate.” The Parity Association. In the campaign preceding the election, two slates of candidates In June 2008, the alumni elected a new executive committee for the p. 4 Pursuant to Section 61 of the Restatement

of the Restatement, generally speaking, “a judgment in an action to which a corporation, as stated in § 59.” Restatement, supra § 61(2). Under Section 59 respect to the association and its members as a judgment for or against a members, a judgment for or against the association has the same effects with law an unincorporated association is treated as a jural entity distinct from its a party.” Restatement, supra § 41(1). If, on the other hand, “under applicable 1. Same Parties party is bound by and entitled to the benefits of a judgment as though he were rule, “[a] person who is not a party to an action but who is represented by a §§ 41 and 42.” Restatement, supra § 61(1)(a). Under the Restatement, as a association is binding on the members in accordance with the rules stated in members, . . . [a] judgment in an action by or on behalf of members of the unincorporated association is not treated as a jural entity distinct from its Sleeper v. Hoban Family P’ship, “[i]f under applicable law an to nonparties to the original judgment, this rule is subject to exceptions.” 1053 (9th Cir. 2005). lawsuit against the Trustees. “Although generally res judicata does not apply (Restatement It is undisputed that the petitioners were not parties to the Association’s); see also Headwaters, Inc. v. U.S. Forest Service, 399 F.3d 1047, their members. See Restatement (Second) of Judgments § 61 (1982) 894 n.8. Qualifying relationships include unincorporated associations and ‘privity.’” Sleeper, 157 N.H. at 534 (quotation omitted); Sturgell, 553 U.S. at relationships justifying preclusion are sometimes collectively referred to as 880, 894 (2008) (quotation and brackets omitted). “The substantive legal person to be bound and a party to the judgment.” Taylor v. Sturgell, 553 U.S. concerns “a variety of pre-existing substantive legal relationships between the

of res judicata is a question of law, which we review de contract claims, which they brought as Association members. The applicability judicata barred the petitioners’ promissory estoppel and breach of express have briefed on appeal. We first address whether the trial court erred when it ruled that res element in turn, limiting ourselves to the specific arguments the petitioners the merits must have been rendered in the first action. Id. We address each action must be before the court in both instances; and (3) a final judgment on parties must be the same or in privity with one another; (2) the same cause of action. Id. For the doctrine to apply, three elements must be met: (1) the litigated, in an earlier action between the same parties for the same cause of later case of matters actually decided, and matters that could have been Littleton, 154 N.H. 340, 342 (2006). Res judicata precludes the litigation in a

A. Res Judicata and 42 of the Restatement p. 5 bound by the judgment in the Association’s lawsuit is governed by Sections 41 be treated as a jural entity applies to this case, whether the petitioners are treated, and because no statute that requires an unincorporated association to association as a jural entity unless specific statutes provide that it be so

Because New Hampshire law does not treat an unincorporated

Pursuant to Restatement

who is “[i]nvested by the person with authority to represent him in an action.”

association is not The statutes to which Shortlidge New Hampshire adheres to the traditional common law view that an property in said corporate capacity.” organizations, societies and lodges “may sue and be sued in regard to such managing or using any gifts or grants made to them. Under RSA 292:12, these organizations shall be corporations” for the purpose of taking, holding, “societies or lodges of Elks, Knights of Columbus, . . . or other similar fraternal comment a at 118, RSA 292:12 specifically provides that unincorporated association had no ability to hold property, see Restatement, supra § 61 RSA 292:12-:14 (2010). For instance, while at common law, an unincorporated that it may sue and be sued just as a corporation may sue and be sued. See some purposes, an unincorporated association is a jural entity, which means

Shortlidge, 125 N.H. at 513 (emphasis added). donations), has no legal existence apart from the members who compose it.” (unincorporated associations deemed corporations for receiving and using association, except as provided for by statute, see RSA 292:12-14 entity apart from its individual members). In Shortlidge, we held: “A voluntary aggregate of individuals and modern view that unincorporated association is difference between common law view that unincorporated association is Thus, under the Restatement (1984); see also Restatement, supra § 61 comment a at 118-20 (explaining specifically provided by statute. See Shortlidge v. Gutoski, 125 N.H. 510, 513

a jural entity distinct from its members, except as may be

at 353-54. association will have preclusive effect. See Restatement, supra § 35 comment d association as a jural entity, then, in general, a judgment against the member. By contrast, if the applicable law does not treat an unincorporated against the association will not have preclusive effect on an association unincorporated association as a jural entity, then, as a rule, a judgment

supra § 59. director, stockholder, or member of a non-stock corporation.” Restatement, corporation is a party has no preclusive effects on a person who is an officer, argument is based upon a different p. 6 cannot be or should not be deemed to be in privity with the Association. This that the[y] . . . had no involvement whatsoever in the Prior Lawsuit,” they The petitioners also argue that because “the undisputed facts establish

Association’s members. Restatement and generally the exclusive authority, to participate as a party” on behalf of the managerial arm of the Association and, as such, had “the requisite authority, executive committee had the authority to act as it did because it is the its lawsuit against the Trustees, this is not required. The Association’s 6 personally gave the Association’s executive committee the authority to dismiss Association and its members. Although the petitioners contend that they never judicata does not apply to nonparties to the original judgment. Under this

support for the petitioners’ argument. action. Res judicata was not an issue in Kessler, and, thus, Kessler is no general partner directly, and did not have to proceed through a derivative limited partner could bring a declaratory judgment proceeding against a upon Kessler v. Gleich, 156 N.H. 488, 492-94 (2007), in which we ruled that a sue to enforce the association’s contracts.” To support this assertion, they rely lawsuit against the Trustees because of the relationship between the New Hampshire law, both Here, the petitioners are bound by the judgment in the Association’s an unincorporated association and its members may , “under

contracts.” Restatement, supra § 41 comment b at 395. of an unincorporated association with regard to association property and comment b at 395. “One such relationship . . . is that of the managing officers may repose in relationships other than a trust.” Restatement, supra § 41 The Restatement “[f]iduciary authority and responsibility for management of interests of others beneficiaries.” Restatement, supra § 41 comment b at 394. However, “authority to represent the estate, and the interests of those who are its trustee of a trust,” who, by “virtue of his nomination by the settlor,” has comment a at 394. Such “[p]rivately constituted representatives” include “[a] responsibility for the matter entrusted to him.” Restatement, supra § 41 a concomitant of the representative’s general managerial authority and authority and responsibility to represent the [represented party] in litigation is Restatement, supra § 41 comment a at 394. “In such circumstances, the representative is given authority to manage and safeguard” another’s interests. such through “some transaction antedating the litigation wherein the

process, or is not subject to service of process.” Restatement, supra § 41(2). though the person himself does not have notice of the action, is not served with “A person represented by a party to an action is bound by the judgment even amending the Association’s Constitution. The executive committee lacks the p. 7 lawsuit and thereby “cancel[ling]” the 1891 Agreement is tantamount to “presupposes [the] existence” of the 1891 Agreement, settling the Association’s The petitioners also argue that because the Association’s Constitution

executive committee authority over “the general interests of the Association.” did. In fact, the Association’s Constitution specifically confers upon the Constitution, however, that precludes the executive committee from acting as it The petitioners do not point to any provision in the Association’s

developed, and decline to address its merits. See graduating from Dartmouth College. We consider this argument insufficiently

Agreement absent a vote by the membership. members,” the executive committee could not take action to “cancel” the 1891

because they became members of the Association automatically upon 7 association.” They argue that the “normal rule” does not apply to them voluntary action upon the part of association members in joining the

the election of Alumni Trustees, these changes have been adopted by its changes have been made to the procedures to be used by the Association for Association by a vote of its members, and because “over the years, when They reason that because the 1891 Agreement was originally adopted by the such a cancellation can be effected only by a vote of the Association’s members. because, by so doing, the committee “cancell[ed]” the 1891 Agreement, and to settle the Association’s lawsuit by agreeing to dismiss it with prejudice, The petitioners argue that the executive committee lacked the authority

well. See members] with respect to association business presumes some type of consider this argument to be insufficiently developed for appellate review as grant of authority to the managing officers thereof to represent [association be divested by the stipulation between the Trustees and the Association. We that mere membership in an unincorporated association constitutes an implied petitioners contend that their right to bring such a claim “vested” and cannot With respect to their promissory estoppel claim, in particular, the Without citing any authority, the petitioners assert that “the normal rule

id.

Dartmouth College, 160 N.H. 452, 459 (2010).

lawsuit. the Association, not because they assumed control over the Association’s deemed to be in privity with the Association because of their relationship with v. City of Portsmouth, 129 N.H. 561, 571 (1987). Here, the petitioners are (quotation and brackets omitted); see Restatement, supra § 39; see also Daigle litigation in which that judgment was rendered.” Sturgell, 553 U.S. at 895 exception, “a nonparty is bound by a judgment if she assumed control over the we have already addressed. We decline to address the merits of the petitioners’ p. 8 executive committee lacked authority to settle the Association’s lawsuit, which without proper authority, is a reiteration of their prior argument that the petitioners’ second contention, that the stipulation for dismissal was executed Of these arguments, we address only the first on its merits. The

3. Final Judgment on the Merits terminate its lawsuit.

generally constitutes a final judgment on the merits. See The petitioners concede that a voluntary dismissal with prejudice

2. Same Cause of Action because the Association received no consideration for its agreement to executed without proper authority, and, as a contract, the stipulation fails judicata purposes because it was a product of collusion, the stipulation was that the dismissal at issue should not be considered a final judgment for res of the factual transaction in question.” Eastern Marine Const. Corp. v. First prejudice is “on the merits” for res judicata purposes). They argue, however, “cause of action” as “all theories on which relief could be claimed on the basis Beechwoods v. Pare, 138 N.H. 389, 391 (1994) (stipulated dismissal with contract and promissory estoppel, their challenge fails. We have defined a Cathedral of the promissory estoppel are the “same” as the Association’s claims for breach of judicata, whether their causes of action for breach of express contract and To the extent that the petitioners contest the second element of res

element is met. the basis of the Association’s and the petitioners’ claims. Thus, the second transaction -- the change in the composition of the board of trustees -- forms Southern Leasing, 129 N.H. 270, 275 (1987). Here, the same factual

We need not decide whether the Bricker

claims against the Trustees based upon the 1891 Agreement. not construe it to preclude the executive committee from agreeing to release its petitioners that it “presupposes” the Agreement’s existence. Accordingly, we do Constitution is silent as to the 1891 Agreement, and we disagree with the petitioners’ argument is based upon a faulty premise. The Association’s

the complaining member.” Id. the absence of a showing of injustice or illegal action and resulting damage to internal affairs of associations is strictly limited and will not be undertaken in N.H. 469, 470 (1970). Under the Bricker doctrine, “[j]udicial interference in the merits of the petitioners’ argument. See Bricker v. N.H. Medical Society, 110 Trustees contend that the Bricker doctrine precludes us from considering the authority, the petitioners assert, to amend the Association’s Constitution. The is to have the remedy of setting aside the judgment. . . . p. 9 for a judgment adversely determining his interests; it is whether he

simply whether the represented person is to have any remedy at all

The question concerning relief from the judgment is not

would be ineffectual.

would become practically necessary and the representative device freely able to attack the judgment, his joinder in the first instance ordinarily attack the judgment by which he is bound. If he were representation, it also follows that the represented person cannot

protection of the represented person. . . . Under the concept of

those of the represented person, or both, sufficiently assure the

representative or the correspondence between his interests and

thought that the fiduciary responsibilities imposed on the the relationships referred to in §§ 29, 41-61, but not in others, it is representative will adequately protect the non-party’s interests. In purposes because it was the product of collusion. Restatement judgment through representation rests on the premise that the stipulated dismissal with prejudice is not a final judgment for res judicata The proposition that a non-party may be bound by a 9 We focus, therefore, upon the petitioners’ first contention, that the

The rationale for this rule is as follows:

by consideration. ascertain whether, as they contend, the stipulated dismissal was unsupported the opposing party was on notice of facts making that failure apparent.” complete record, which it was the petitioners’ obligation to produce, we cannot prosecute or defend the action with due diligence and reasonable prudence and Association’s legal fees was part of a negotiated settlement. Absent a more may obtain relief from the judgment if the party representing him failed to cannot tell, for instance, whether Dartmouth College’s payment of some of the person bound by a judgment by virtue of having a relationship with a party . . . whom the nonparty is bound through relationship. Section 75(2) provides: “A when a nonparty may be able to set aside a judgment rendered to a party to

and Trustees, such as a copy of a settlement agreement between them. We establish that there was no consideration exchanged between the Association Mgmt., 151 N.H. 248, 250 (2004). The record does not contain evidence to record sufficient for us to review this argument. See Bean v. Red Oak Prop. because, although they are the appealing parties, they have failed to provide a a final judgment for res judicata purposes because it lacks consideration, third contention, that the stipulated dismissal with prejudice cannot constitute p. 10 Restatement

is more complicated. . . . cannot be said to amount to collusion, the question of giving relief

See conduct that justifies barring enforcement of a judgment against a nonparty. filing it with the court, do not demonstrate the type of fraudulent or collusive Trustees jointly drafted the stipulation and cooperated with one another in petitioners rely, such as that counsel for the Association and counsel for the set aside the judgment. However, the undisputed facts upon which the When the representative’s mismanagement of the action lawsuit against the Trustees amounted to collusion, and, thus, enables them to

judicata purposes and that the petitioners are bound by that judgment. lawsuit with prejudice constitutes a final judgment on the merits for res product of collusion. We hold that the Association’s voluntary dismissal of its The petitioners argue that the Association’s mismanagement of its stipulated dismissal with prejudice is not a final judgment because it was the defendants). Accordingly, we reject the petitioners’ assertion that the will be diminished proportionately by increasing the liability of the other codefendant will proceed to defend himself in court, his own maximum liability which one co-defendant secretly agrees with the plaintiff that, if such “collusive characteristics,” “Mary Carter” agreements, which are “contract[s] by Caron Constr. Co., 116 N.H. 800, 802-03 (1976) (describing as having untrue” and plaintiff is a party to this agreement); cf. Bedford School Dist. v. defendant “agrees to perjure himself and testify falsely to statements that are Damron v. Sledge, 460 P.2d 997, 1001 (Ariz. 1969) (settlement collusive when institution of the lawsuit in an effort to defraud the insurance company.”); face of such an attack. . . . “involve[s] collusion by the plaintiff and the insured with respect to the enforcement of a judgment against the defendant’s insurer” ordinarily 1979) (“[T]he type of fraudulent and collusive conduct which might bar State Farm Mut. Auto. Ins. v. Paynter, 593 P.2d 948, 951 (Ariz. Ct. App.

interests would be violated if the judgment were given effect in the opposing party.”). served by sustaining such a judgment, and both private and public where it is the product of collusion between the representative and the representing him and the opposing party. No worthy interest is § 42 comment f aside a judgment that was procured by collusion between the party at 411 (“[A] judgment is not binding on the represented person , supra § 75 comments b -d, at 210-11; see p. 10 Restatement, supra

It is clear that the represented party should be able to set p. 11 11

an intention to confer a right on him to enforce the promise, he is an intended the beneficiary would be reasonable in relying on the promise as manifesting Hudson Light & Power, 938 F.2d 338, 342 (1st Cir. 1991). “In such cases, if performance on the would-be beneficiary.” Public Service Co. of N.H. v. “Unless the performance required by the contract will directly intent on the part of the promisee to confer the benefit of promised 144 N.H. at 458, “the promise and its circumstantial setting must evince an Restatement (Second) of Contracts § 302(1)(b), which we adopted in Grossman, benefits a corporation will benefit, indirectly, its shareholders.” Rather, under between their corporations and other parties merely because “[e]very act which 505, 512 (1991), all shareholders are not third-party beneficiaries of contracts that a non-party to a contract has no remedy for breach of contract. Arlington as we explained in Numerica Savings Bank v. Mountain Lodge Inn, 134 N.H. The third-party beneficiary doctrine is an exception to the general rule that party a third-party beneficiary of the contract. See promisee as one of the motivating causes of his making the contract. Tamposi id. Thus, for instance, to receive some benefit through the performance of the contract does not make promisor reason to know that a benefit to a third party is contemplated by the Grossman promisee to the third party; or (2) the contract is so expressed as to give the, 144 N.H. at 348 (quotation omitted). The fact that a third party is would-be intended beneficiary, he is at best an incidental beneficiary.” performance by the promisor, which will satisfy some obligation owed by the A third-party beneficiary relationship exists if: (1) the contract calls for a benefit the

Restatement (Second) of Contracts § 302(1)(b) (1981). Grossman v. Murray, 144 N.H. 345, 348 (1999) (quotation omitted); see intends to give the beneficiary the benefit of the promised performance.” party is a ‘motivating cause’ of entering into a contract only where the promisee Associates v. Star Mkt. Co., p. 11 119 N.H. 630, 633 (1979). “A benefit to a third

in fact, an enforceable contract between the Association and the Trustees. of this discussion, we assume, without deciding, that the 1891 Agreement was, implied-in-fact contract claims as third-party beneficiaries. For the purposes when it ruled that they lacked standing to bring their breach of express or brought as Association members, we turn next to whether the trial court erred v. Rutberg, 478 F.3d 790, 794 (7th Cir. 2007) (applying Illinois law). estoppel claim and their claim for breach of express contract, which they to enforce it because the parties intended them to have that right.” MacGregor beneficiaries are nonparties to a contract who are nevertheless allowed to sue Having concluded that res judicata bars the petitioners’ promissory Trust Co. v. Estate of Wood, 123 N.H. 765, 767 (1983). “Third-party

B. Third-Party Beneficiary Claims p. 12 Affirmed

DUGGAN and HICKS, JJ., concurred.

enforce the 1891 Agreement. court that the petitioners lack standing as third-party beneficiaries to sue to alumnus the right to enforce it. Absent such evidence, we agree with the trial the parties to the 1891 Agreement intended to confer upon each individual The petitioners do not point to anything in the record demonstrating that

power.” MacGregor performance.” Paglin, Criteria for Recognition of Third Party Beneficiaries’, 478 F.3d at 794 (quotation and citations omitted). third party to enforce their contract, and so courts hesitate to infer such a intention to confer upon [a third party] the benefit of the promised rather than implied. Parties to a contract are naturally reluctant to empower a In other words, it is not enough that the “contract manifests the parties’ enforce a contract to which she’s not a party must be expressed in the contract contractual standing.” Id. “[O]rdinarily a person’s entitlement to sue to does not exist, then the third party is only an incidental beneficiary, having no Maintenance Corp. v. Rutgers, 447 A.2d 906, 909 (N.J. 1982). “If that intent recognize a right to performance in the third person is the key.” Broadway confer upon him a right to sue the promisor.” Id. “The contractual intent to “that the parties considered the third party’s legal status and intended to Rights, 24 New Eng. L. Rev. 63, 69 (1989). Rather, the contract must show

(Second) of Contracts, supra § 302 comment d at 442. beneficiary.” Id. (quotation, brackets and emphasis omitted); see Restatement