Richard Doermer , both individually v. Kathryn Callen

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 15-3734
R ICHARD D OERMER , both individually and derivatively on be-
half of the Doermer Family Foundation, Inc.,
Plaintiff-Appellant,
v.
KATHRYN C ALLEN, et al.,
Defendants-Appellees.
____________________
Appeal from the United States District Court for the
Northern District of Indiana, Hammond Division.
No. 2:15-cv-00154-JVB-JEM — Joseph S. Van Bokkelen, Judge.
____________________
A RGUED D ECEMBER 9, 2016 — D ECIDED FEBRUARY 1, 2017
____________________
Before W ILLIAMS and HAMILTON, Circuit Judges, and
C HANG , District Judge.*
HAMILTON, Circuit Judge. This case poses several questions
under the Indiana Nonprofit Corporation Act of 1991 about
* The Honorable Edmond E. Chang, United States District Judge for the
Northern District of Illinois, sitting by designation.

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2 No. 15-3734
the governance of nonprofit corporations in Indiana. The case
pits brother against sister in a long-running dispute over con-
trol of a small family foundation established by their parents.
Plaintiff Richard Doermer is a member of the board of direc-
tors of the Doermer Family Foundation, Inc. (“the Corpora-
tion”). He asserts claims in his individual capacity and deriv-
atively on behalf of the Corporation. The defendants include
his fellow board members Kathryn Callen (his sister), John
Callen (his nephew), and Phyllis Alberts. Richard also named
as a defendant the University of Saint Francis of Fort Wayne,
Indiana, Inc. Richard seeks injunctive relief against all other
board members and a money judgment for the Corporation
against Kathryn and Saint Francis.
The district court granted defendants’ motions to dismiss,
and we affirm. Under Indiana law, only a shareholder or
member of a corporation may bring a derivative action on the
corporation’s behalf. Richard lacks standing to bring a deriv-
ative claim because he is neither a shareholder nor a member.
In fact, the Corporation’s articles of incorporation provide that
it “shall have no members.” Richard’s individual claims for
money judgment likewise fail. They are properly understood
as belonging to the Corporation (and so derivative in nature).
Finally, all of Richard’s individual claims fail as a matter of
law on their merits.
I. Factual and Procedural Background
We recount the key factual allegations in the complaint,
which we accept as true and construe in the light most favor-
able to plaintiff Richard Doermer. See Huon v. Denton, 841 F.3d
733, 738 (7th Cir. 2016). We have also considered the Corpora-
tion’s articles of incorporation and bylaws and the resolution
first appointing defendant Phyllis Alberts to the board. The

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No. 15-3734 3
Corporation appended these documents to its motion to dis-
miss: the documents are “central to the complaint and are re-
ferred to in it,” Williamson v. Curran, 714 F.3d 432, 436 (7th Cir.
2013), and Richard has not challenged their authenticity.
Richard’s father formed the Corporation in 1990 along
with Richard; Richard’s mother; and Richard’s sister, defend-
ant Kathryn Callen. Pursuant to the Corporation’s articles of
incorporation and bylaws, each family member served as a
lifetime director. Richard’s mother died in 2000. A decade
later, the remaining family members elected defendant Phyl-
lis Alberts to a three-year term on the board. Richard’s father
died in October 2010, leaving three directors: Richard,
Kathryn, and Phyllis. Phyllis’s term expired on January 28,
2013.
Under Indiana law, a nonprofit corporation must be gov-
erned at all times by at least three directors. See Ind. Code
§ 23-17-12-3. In Richard’s view, when Phyllis’s term expired,
the Corporation was no longer lawfully constituted and the
two remaining board members (he and his sister Kathryn)
could not act on the Corporation’s behalf or exercise its corpo-
rate powers. However, Indiana law provides a safety valve
when a nonprofit director’s term expires without further ac-
tion by the board. Despite the expiration, “the director contin-
ues to serve until … a successor is elected, designated, or ap-
pointed and qualifies.” § 23-17-12-5(d). That language is re-
flected in the Corporation’s bylaws and in the 2010 resolution
first appointing Phyllis to the board. The bylaws stipulate that
any director other than one of the surviving founders “shall
serve for three (3) years … and until her or his successor is
elected and qualified” (emphasis added). The resolution con-
firmed that Phyllis would serve “for a term of three (3) years,

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4 No. 15-3734
or until such time as her successor shall be elected and quali-
fied” (emphasis added).
Acting pursuant to the resolution and bylaws, Kathryn
and Phyllis voted in September 2013 to elect Phyllis to a sec-
ond term. Richard opposed Phyllis’s reelection. The board
then took a series of actions over Richard’s objections, includ-
ing authorizing gifts to Saint Francis (on whose board
Kathryn also serves) and electing Kathryn’s son, defendant
John Callen, as a fourth board member.
Following John’s election, Richard brought this suit. He
seeks to assert claims on his own behalf and derivatively on
behalf of the Corporation. Richard requested a judgment
against Kathryn for the amount of charitable contributions
made by the Corporation following the expiration of Phyllis’s
original term (Count I); he sought to recover the gifts received
by Saint Francis (Count III); and he sought Kathryn’s removal
from the board (Count II), an injunction barring Phyllis and
John from acting as directors (Count IV), and appointment of
new directors (Count V). The Corporation and Saint Francis
each moved to dismiss, citing Federal Rules of Civil Proce-
dure 12(b)(6) and 23.1. The individual defendants answered
the complaint and then moved for judgment on the pleadings
and to join the Corporation’s motion.1
1 The Corporation also argued lack of subject matter jurisdiction, citing
Rule 12(b)(1). The district court also cited Rule 12(b)(1). As explained be-
low, we agree with the district court that Richard lacked standing to sue
derivatively. However, the problem is one of prudential rather than con-
stitutional standing, so it did not actually affect subject matter jurisdiction.
See Korte v. Sebelius, 735 F.3d 654, 668 (7th Cir. 2013) (“The [shareholder-
standing] rule is an aspect of third-party standing doctrine, which imple-
ments the general principle that litigants may not sue in federal court to

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No. 15-3734 5
The district court granted the defendants’ motions and
dismissed the action. Doermer v. Callen, No. 2:15-CV-154 JVB,
2015 WL 6870580 (N.D. Ind. Nov. 9, 2015). The court found
that Richard lacked standing to bring a derivative claim, id. at
*2, and that his individual claims failed because he lacked
standing to bring them and, even if he did have standing, be-
cause the claims were meritless, id. at *4–5. Richard has ap-
pealed.
II. Analysis
We review de novo the district court’s dismissal of Richard’s
claims for lack of standing to proceed in a derivative capacity,
see Westmoreland County Employee Retirement System v. Parkin-
son, 727 F.3d 719, 724 (7th Cir. 2013), and for failure to state a
claim, see Rocha v. Rudd, 826 F.3d 905, 909 (7th Cir. 2016). Our
duty in this diversity suit is to decide issues of Indiana state
law as we predict the Indiana Supreme Court would decide
them today. E.g., Frye v. Auto-Owners Ins. Co., No. 16-1677, —
enforce the rights of others. … Like other rules of third-party standing,
however, the shareholder-standing rule is a prudential limitation and
does not affect the court’s authority to hear the case.”); see also In re Face-
book, Inc., Initial Public Offering Derivative Litig., 797 F.3d 148, 156 (2d Cir.
2015) (“Failure to satisfy the contemporaneous ownership requirement of
Rule 23.1 does not, of course, raise a jurisdictional issue under Article III.
Rather, it means that the putative derivative plaintiff does not have stand-
ing to represent the interests of the nominal defendant in a derivative ca-
pacity.”); In re Digimarc Corp. Derivative Litig., 549 F.3d 1223, 1237 (9th Cir.
2008) (“Federal Rule of Civil Procedure 23.1’s pleading requirement does
not directly implicate subject matter jurisdiction[.]”). The district court’s
citation to Rule 12(b)(1) does not affect this appeal. The court properly
confined its review to Richard’s allegations and the legal documents that
were integral to his complaint. The court’s substantive analysis was cor-
rect, as was the scope of its review.

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6 No. 15-3734
F.3d —, —, 2017 WL 25481, at *3 (7th Cir. Jan. 3, 2017). The case
presents questions about the meaning of Indiana’s Nonprofit
Corporation Act, so we apply the “basic tools of statutory in-
terpretation” that the Indiana Supreme Court has long recog-
nized: statutes are “read as a whole, and words are given their
plain and ordinary meaning.” Id.; see also ESPN, Inc. v. Uni-
versity of Notre Dame Police Dep’t, 62 N.E.3d 1192, 1195 (Ind.
2016) (“Our first task when interpreting a statute is to give its
words their plain meaning and consider the structure of the
statute as a whole.”); Ind. Code § 1-1-4-1 (codifying the canon
that words “shall be taken in their plain, or ordinary and
usual, sense”). Conversely, “when a statute is susceptible to
more than one interpretation, it is deemed ambiguous and is
thus open to judicial construction.” In re Howell, 27 N.E.3d
723, 726 (Ind. 2015).
In construing a statute, “our primary goal is to effectuate
legislative intent.” Walczak v. Labor Works-Fort Wayne LLC, 983
N.E.2d 1146, 1154 (Ind. 2013). We aim for an interpretation
that harmonizes all provisions so as to give a consistent mean-
ing to the whole without treating any language as surplusage.
See Klotz v. Hoyt, 900 N.E.2d 1, 5 (Ind. 2009); Corr v. American
Family Ins., 767 N.E.2d 535, 540 (Ind. 2002). We avoid interpre-
tations that depend on selective readings of individual words,
and we “do not presume that the Legislature intended lan-
guage used in a statute to be applied illogically or to bring
about an unjust or absurd result.” ESPN, Inc., 62 N.E.3d at
1196, quoting Anderson v. Gaudin, 42 N.E.3d 82, 85 (Ind. 2015).
Before turning to the substantive issues on appeal, though,
we address a procedural point. In the final paragraph of his
brief in the district court, Richard asked for leave to amend
his complaint. He offered, however, no explanation as to any

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No. 15-3734 7
revisions that might correct the deficiencies the defendants
had identified, nor did he ever submit a proposed amended
complaint or file a motion for leave to amend. On appeal, he
has not identified any proposed amendments to his com-
plaint, choosing instead to defend the complaint as pled. We
ordinarily hesitate before affirming a final judgment of dis-
missal when the plaintiff seeks leave to amend, at least where
there has been no prior effort to amend. See, e.g., Runnion v.
Girl Scouts of Greater Chicago & Northwest Indiana, 786 F.3d 510,
519–20 (7th Cir. 2015) (reversing dismissal). In this case, how-
ever, it is clear that amendment would be futile. Richard has
identified no proposed amendments that might save his case,
and the law is clearly on the defendants’ side. See id. at 520
(where amendment would be futile, district court may deny
leave to amend and enter immediate final judgment); see also
Foman v. Davis, 371 U.S. 178, 182 (1962) (futility of amendment
is one reason to deny leave to amend). We turn now to Rich-
ard’s derivative claims and then his individual capacity
claims.
A. Derivative Claims
1. The Indiana Nonprofit Corporation Act
Richard seeks to bring claims derivatively on behalf of the
Corporation. The problem is that he is not a “member” of the
Corporation. In fact, the Corporation has no members, a fea-
ture expressly permitted by the Nonprofit Corporation Act.
See Ind. Code § 23-17-7-3. Neither that Act nor any other In-
diana statute or case authorizes a non-member director of a
nonprofit corporation to bring a derivative suit on the corpo-
ration’s behalf. For that matter, the Act includes no provision
authorizing any derivative proceedings at all. (In this respect,
the Act differs from the Indiana Business Corporation Law,

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8 No. 15-3734
which provides that a shareholder—but not a director with-
out an ownership interest—may bring a derivative action. See
§ 23-1-32-1.)
The treatment of derivative litigation in the Indiana Busi-
ness Corporation Law is consistent with the approach that
most other jurisdictions take: “With the exception of the rare
corporate statute that provides otherwise, directors and offic-
ers who cannot satisfy the share-ownership requirement do
not have standing to bring a derivative suit solely because of
their capacity as directors or officers.” 3 James D. Cox &
Thomas Lee Hazen, Treatise on the Law of Corporations § 15:9
(3d ed. 2010) (updated 2016); cf. Schoon v. Smith, 953 A.2d 196,
209–10 (Del. 2008) (discussing 1994 proposal by American
Law Institute to allow for narrow director derivative stand-
ing, but observing there is “little, if any, case law adopting, or
legal commentary approving, this particular … proposal,”
and declining to recognize such an action in Delaware).
Richard argues, however, that if the Indiana courts
squarely confronted the issue, which he agrees is one of first
impression, they would likely permit a non-member director
in his position to sue derivatively. In support, he cites Kirtley
v. McClelland, 562 N.E.2d 27 (Ind. App. 1990), a case that rec-
ognized an equitable derivative remedy where none was ex-
pressly provided under the predecessor to the Nonprofit Cor-
poration Act. The Kirtley court observed that the “absence of
a statutory procedure for initiating a derivative action by a
not-for-profit corporation when one has been affirmatively
provided for for-profit corporations does not require the con-
clusion that statutory authorization is a necessity.” Id. at 30. In
Kirtley, however, the plaintiffs were themselves members of
the organization (a condominium owners’ association). Id. at

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No. 15-3734 9
28–29. Kirtley did not hold or even hint that a non-member
would have standing to bring such an equitable action.
Richard also relies on Dotlich v. Dotlich, 475 N.E.2d 331
(Ind. App. 1985), abrogated in part on other grounds by State
Board of Tax Comm’rs v. Town of St. John, 751 N.E.2d 657 (Ind.
2001). The plaintiff in Dotlich was both a shareholder and a
director of a for-profit corporation. Id. at 335. The court saw
no reason why the plaintiff should be “barred from suing on
behalf of the corporation just because he [was] a director.” Id.
at 340. Again, the court did not hold or hint that a director
who was not a shareholder could nevertheless sue to vindi-
cate the corporation’s rights. On the contrary, in the more re-
cent case of Brenner v. Powers, 584 N.E.2d 569, 576 (Ind. App.
1992), the Indiana Court of Appeals (again construing a pre-
decessor to the Nonprofit Corporation Act of 1991) held that
before plaintiffs’ standing to prosecute a derivative action
could be established, the trial court would first have to resolve
a dispute concerning plaintiffs’ corporate membership status.
In short, the Nonprofit Corporation Act does not author-
ize, nor have Indiana courts suggested they would approve, a
non-member director’s derivative action. The state court of
appeals has strongly implied that such an action would be
barred. See Kirtley, 562 N.E.2d at 30 (“In Indiana, standing is
achieved by showing a personal interest in the corporation.
‘Shareholders and stockholders in a corporation, or an inter-
ested member, may bring suit on behalf of the corporation to
protect the interest of the corporation … but, in doing so, their
interest must be shown … .’”) (citations omitted).
Even if Richard could find some support in substantive
state law for allowing him to bring derivative claims as a non-
member director, we doubt that he could bring a director’s

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10 No. 15-3734
derivative suit in federal court. Under Federal Rule of Civil
Procedure 23.1(b)(1), a derivative complaint must “allege that
the plaintiff was a shareholder or member at the time of the
transaction complained of, or that the plaintiff’s share or
membership later devolved on it by operation of law.” Federal
jurisdiction here is based on diversity of citizenship under 28
U.S.C. § 1332. State substantive law applies, but federal pro-
cedural rules govern. Goesel v. Boley Int’l (H.K.) Ltd., 806 F.3d
414, 419 (7th Cir. 2015), citing Erie Railroad Co. v. Tompkins, 304
U.S. 64 (1938); see also Parkinson, 727 F.3d at 721–22 (adequacy
of pleadings in derivative suit is “measured by federal law—
in particular, Rule 23.1”); Boland v. Engle, 113 F.3d 706, 710 (7th
Cir. 1997) (derivative suits in federal court are governed by
“federal procedural requirements and state substantive law”).
Nor would Indiana procedural rules offer Richard any ref-
uge even if they applied. Indiana Rule of Trial Procedure 23.1
echoes the requirements of the federal rule, providing that a
derivative complaint “shall allege that the plaintiff was a
shareholder or member or holder of an interest, legal or equi-
table, in such shares or membership at the time of the trans-
action … or that his share or membership thereafter devolved
on him by operation of law.” Neither the federal nor the state
rule contemplates an action by a non-member director with
no legal or beneficial interest in the corporation.
2. Policy Concerns
Lacking a legal basis for his theory of derivative standing,
Richard invokes public policy concerns. He argues that a rule
barring directors from pursuing derivative claims on behalf
of memberless nonprofit corporations would “allow for a
wrong without a remedy.” He adds that the “logical extension

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No. 15-3734 11
of defendants’ argument would leave the [Corporation] with
no recourse for a director’s fraud or even embezzlement.”
The argument overlooks a number of other remedies that
are less susceptible to private misuse. The Nonprofit Corpo-
ration Act authorizes a variety of mechanisms (including two
that Richard himself invokes in support of his individual
claims) to address such issues as deadlock or director miscon-
duct. For example, the Act authorizes suit by a director or by
the attorney general to enjoin corporate acts where third par-
ties have not acquired relevant rights. Ind. Code § 23-17-4-
4(b). The Act also authorizes suit by the corporation itself or
by ten percent of members of a voting class to remove a direc-
tor who engages in specified misconduct, such as fraud or
gross abuse of discretion. § 23-17-12-13. The Act provides for
administrative dissolution if the secretary of state receives
credible evidence that the corporation is engaging in illegal or
ultra vires acts. § 23-17-23-1(5). It also provides for judicial dis-
solution in an action brought by the attorney general if the
corporation abuses its authority, § 23-17-24-1(a)(1)(B), or in an
action brought by a director or a small consortium of mem-
bers if the directors are deadlocked or engaged in illegal, op-
pressive, or fraudulent conduct, § 23-17-24-1(a)(2)(A)–(B).
And the Act empowers the attorney general to request a vari-
ety of remedies in addition to dissolution, including injunc-
tive relief and the appointment or removal of trustees, offic-
ers, or directors. § 23-17-24-1.5(b). These provisions are only
illustrative; the Act authorizes additional remedies. The point
is simply that the absence of a non-member director’s deriva-
tive action would not leave memberless nonprofit corpora-
tions (like the Corporation here) without legal protection
from wrongdoing by directors or others.

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12 No. 15-3734
Even if the exclusion of a derivative remedy for member-
less nonprofit corporations could result in some unchecked
corporate mischief, it is no answer that the law guarantees a
remedy for every wrong. The law has many doctrines and ex-
ceptions that limit the power of courts to redress even sub-
stantial harms. For example, immunity doctrines shield cer-
tain classes of government defendants from liability for mis-
conduct. Judges, prosecutors, and officials who fill quasi-ju-
dicial and quasi-prosecutorial roles are entitled to absolute
immunity from damages stemming from many of their offi-
cial acts, no matter how erroneous or harmful. Brunson v. Mur-
ray, 843 F.3d 698, 710 (7th Cir. 2016). Other government offi-
cials who do not enjoy absolute immunity are nonetheless
shielded by qualified immunity, a robust doctrine that “pro-
tects government officials ‘from liability for civil damages in-
sofar as their conduct does not violate clearly established stat-
utory or constitutional rights of which a reasonable person
would have known.’” Pearson v. Callahan, 555 U.S. 223, 231
(2009), quoting Harlow v. Fitzgerald, 457 U.S. 800, 818 (1982).
More broadly, doctrines of sovereign immunity bar or limit
relief for many torts or breaches of contract by governments.
Compare, e.g., FDIC v. Meyer, 510 U.S. 471, 475 (1994) (“Absent
a waiver, sovereign immunity shields the Federal Govern-
ment and its agencies from suit.”), with Hess v. Port Authority
Trans-Hudson Corp., 513 U.S. 30, 39 (1994) (“The Eleventh
Amendment largely shields States from suit in federal court
without their consent … .”), and Alden v. Maine, 527 U.S. 706,
713 (1999) (“[T]he States’ immunity from suit is a fundamental
aspect of the sovereignty which the States enjoyed before the
ratification of the Constitution, and which they retain today
… .”). Some statutes provide heightened standards of liability

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No. 15-3734 13
for certain classes of defendants (such as Good Samaritan vol-
unteers) who act in ways that society values, even if harm re-
sults in a particular case. E.g., Ind. Code § 34-30-12-1 (person
who gratuitously renders emergency care at scene of accident
is generally immune from liability for injuries unless person’s
acts or omissions involved gross negligence or willful or wan-
ton misconduct); § 34-30-12-2 (same for person who has com-
pleted a CPR training course and who attempts to gratui-
tously administer CPR to a victim of a medical emergency).
Just as the law protects certain classes of defendants, it
limits the recovery that might otherwise inure to certain clas-
ses of plaintiffs. Prisoners, for instance, are barred under the
Prison Litigation Reform Act of 1995 from bringing a federal
civil action to recover for strictly mental or emotional injuries
suffered while in custody. 42 U.S.C. § 1997e(e). Tort plaintiffs
in jurisdictions that maintain traditional contributory negli-
gence rules often encounter insurmountable barriers to recov-
ery for tortious injuries. See, e.g., Coleman v. Soccer Ass’n of Co-
lumbia, 69 A.3d 1149, 1150, 1152 (Md. 2013). Federal taxpayers
who wish to bring a tax refund suit must typically first pay
their assessed liability in full, a heavy burden for those tax-
payers with limited means or large assessments. See Gessert v.
United States, 703 F.3d 1028, 1037 (7th Cir. 2013), citing Flora v.
United States, 357 U.S. 63 (1958). Litigants with otherwise via-
ble claims often run up against statutes of limitation or repose,
administrative exhaustion requirements, and other defenses.
Through these restrictions and limitations, legislatures and
courts attempt to balance the benefits of a robust private liti-
gation regime against the costs that such a regime can impose.
Derivative litigation, which is a “perennial target of the
commentators’ blandishments and ire,” 3 Cox & Hazen, supra,

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14 No. 15-3734
§ 15:1, can impose significant costs.2 In enacting the Nonprofit
Corporation Act, the Indiana legislature could reasonably
have determined that the non-derivative remedies we cite
above are adequate to protect against nonprofit corporate
governance run amok. Indeed, the drafters likely included In-
diana Code § 23-17-7-3 (providing that nonprofits may organ-
ize without members) to allow incorporators to opt out of de-
rivative litigation. The Act was enacted barely six months af-
ter the Indiana Court of Appeals decided Kirtley, and early
commentators read the new law as providing an escape hatch
to avoid the consequences of Kirtley (or possibly even as su-
perseding it). See Kevin M. Boyle, Nonprofit Corporation Act of
1991: Introduction to Significant Changes, 35 Res Gestae 462, 463
(1992) (“If members or directors of a Nonprofit organized un-
der [a prior act] are concerned about potential derivative ac-
tions, the Nonprofit should opt into the 1991 Act. The elimi-
nation of members prevents the opportunity for member de-
2 See, e.g., Harry G. Hutchison, Presumptive Business Judgment, Substantive
Good Faith, Litigation Control: Vindicating the Socioeconomic Meaning of Har-
hen v. Brown, 26 J. Corp. L. 285, 290 (2001) (“[Derivative] suits raise the
possibility that even where the interests of management and shareholders
are already properly aligned, litigation that results in abusive settlements
may nonetheless occur. This may provide an incentive for future, im-
proper litigation or abusive settlements while also raising the possibility
of income redistribution from shareholders to attorneys.”); Carol B. Swan-
son, Juggling Shareholder Rights and Strike Suits in Derivative Litigation: The
ALI Drops the Ball, 77 Minn. L. Rev. 1339, 1348 (1993) (“In contrast to …
potentially substantial benefits, courts and commentators have … long
stigmatized derivative litigation as the ‘refuge of strike suit artists special-
izing in corporate extortion.’ … In addition to inviting strike suits, intra-
corporate litigation necessarily entails significant social costs.”) (footnote
omitted).

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No. 15-3734 15
rivative actions.”); Paul J. Galanti, Indiana Nonprofit Corpora-
tion Act, 25 Ind. L. Rev. 999, 1013 (1992) (“The court in Kirtley
… recognized the right of a member of an Indiana not-for-
profit corporation organized under the [predecessor statute]
to bring a derivative action to remedy the defendant’s breach
of duty. However, it is possible that the [Nonprofit Corpora-
tion Act’s] drafters intended to eliminate this right.”). It is gen-
erally prudent for courts to assume that legislatures intend
the obvious and natural consequences of the statutory lan-
guage they enact. The obvious and natural consequence of al-
lowing nonprofit corporations without members is that the
option forecloses derivative litigation.
As several commentators have noted, the drafters of the
Nonprofit Corporation Act used the American Bar Associa-
tion’s Revised Model Nonprofit Corporation Act of 1987 as a
template for the Indiana statute. See, e.g., 1 Marilyn E. Phelan,
Nonprofit Organizations: Law and Taxation § 1:27 (2010) (up-
dated 2016); Boyle, supra, at 462; Evelyn Brody, Institutional
Dissonance in the Nonprofit Sector, 41 Vill. L. Rev. 433, 477 n.223
(1996); Galanti, supra, at 999–1003. The Indiana drafters incor-
porated the vast majority of provisions from the model act,
often with only subtle changes in wording. But there is one
difference important for this case. The Indiana drafters did
not adopt section 6.30 of the model act, which authorizes de-
rivative suits (including those brought by a director). Given
the structure of the Nonprofit Corporation Act, the timing of
its enactment, and the relationship between the Act and the
ABA’s model act, the statutory option for incorporators to or-
ganize without members appears to be not a “bug” in the Act
but a deliberate feature.

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16 No. 15-3734
Richard has identified no authority for the proposition
that a non-member director’s derivative action is available un-
der Indiana law, and all signs point to the contrary. Moreover,
federal procedural rules unambiguously require a derivative
plaintiff to plead and prove that he is a member or share-
holder of the subject corporation, and Richard is neither. We
affirm the district court’s conclusion that Richard lacks stand-
ing to bring a derivative action. We need not reach the sepa-
rate question whether Richard was excused from making de-
mand on the board.
B. Individual Claims
Richard pled each of the five counts in his complaint both
as derivative and as personal to him. Our conclusion that he
may not bring a derivative action does not necessarily fore-
close all of his individual or “direct” claims. His claims for
money judgment nonetheless fail because he is the wrong
party to bring them. He might have had standing in theory to
pursue a narrow claim for injunctive relief, but he has neither
pled factual allegations nor identified a viable legal theory
that could support such relief here.
1. Money Judgment
We consider first Richard’s claims for a money judgment.
In Count I, he requests a judgment against his sister Kathryn
and in favor of the Corporation in the amount of at least
$220,000. In Count III, he seeks to recover gifts received by
Saint Francis and thus requests judgment in favor of the Cor-
poration in the amount of at least $115,000. There is no indi-
cation in the complaint that Richard has personally suffered
any economic damage.

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No. 15-3734 17
But there’s the rub. Even if Richard’s claims had merit
(they do not, as discussed below), he could not step up as lit-
igation champion on behalf of the Corporation to vindicate its
interests. That is what derivative litigation is for—and Rich-
ard lacks standing to bring a derivative suit. He cannot avoid
that bar simply by re-characterizing the Corporation’s claims
as his own. See Knauf Fiber Glass, GmbH v. Stein, 622 N.E.2d
163, 165 (Ind. 1993) (“[T]he general rule of corporations [is]
that a shareholder may not maintain an action in his or her
own name to redress an injury to the corporation.”); cf. Mid-
State Fertilizer Co. v. Exchange Nat’l Bank of Chicago, 877 F.2d
1333, 1335 (7th Cir. 1989) (“Good reasons account for the en-
during distinction between direct and derivative injury. When
the injury is derivative, recovery by the indirectly-injured per-
son is a form of double counting.”).3
3 Richard’s attempt to recover the gifts to Saint Francis would fail as a mat-
ter of law even apart from his lack of standing. Richard relies on a theory
of unjust enrichment. That does not work. To show unjust enrichment, a
plaintiff must establish that he conferred a benefit on the defendant while
expecting remuneration and that it would be unjust for the defendant to
retain the benefit without making restitution. Woodruff v. Indiana Family &
Social Servs. Admin., 964 N.E.2d 784, 791 (Ind. 2012); see also Coleman v.
Coleman, 949 N.E.2d 860, 867 (Ind. App. 2011) (“We [have] noted that ‘re-
lief will be denied if the plaintiff did not contemplate a fee in consideration
of the benefit or if the defendant could not reasonably believe the plaintiff
expected a fee.’”) (citation omitted). Putting to one side the problem that
Richard personally conferred no benefit on Saint Francis, there is no indi-
cation that the Corporation expected some kind of remuneration in ex-
change for its gifts, nor certainly that Saint Francis believed it would owe
any remuneration. Richard’s reliance on Scholes v. Lehmann, 56 F.3d 750
(7th Cir. 1995), is not helpful. That case involved a different jurisdiction
(Illinois), a different type of claim (fraudulent conveyance as prohibited
by statute), and a different policy concern (protection of creditors).

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18 No. 15-3734
2. Injunctive Relief
Richard has identified two sections of the Nonprofit Cor-
poration Act that he reads as according him a right to sue for
injunctive relief in his capacity as director. We examine them
in turn.
First, Indiana Code § 23-17-12-13(a) provides that a court
may remove a director who commits specified misconduct in
a proceeding “commenced by the corporation or at least ten
percent (10%) of the members of a class entitled to vote for
directors.” This removal statute, if applicable, would pertain
only to Count II, which asks the court to remove Kathryn from
the board. The statute does not apply because Richard is not
a member of the Corporation.
As a director, Richard is entitled under Article IV of the
Corporation’s bylaws to vote for directors. But the Nonprofit
Corporation Act states that a person will not be deemed a
member based on “Any rights the person has as a director.”
§ 23-17-2-17(b)(3). The phrasing of the removal statute—“ten
percent (10%) of the members of a class entitled to vote for di-
rectors” (emphasis added)—connotes corporate membership
rather than inclusion in any group that happens to enjoy vot-
ing rights. That reading is bolstered by § 23-17-7-4, which al-
lows incorporators to “establish classes of membership with
different rights or obligations.” A nonprofit corporation could
be structured to have several classes of membership, only one
of which might be authorized to elect directors. The members
of that discrete voting class would then have standing to sue
under the removal statute, provided all other requirements
are satisfied. Since the Corporation has no members, the re-
moval statute is irrelevant here.

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No. 15-3734 19
Second, Indiana Code § 23-17-4-4(b) provides that a “cor-
poration’s power to act may be challenged in a proceeding
against the corporation for a declaratory judgment or to en-
join an act where a third party has not acquired rights.” The
statute adds that proceedings “may be brought by the attor-
ney general or a director” (emphasis added). The remedy un-
der this section is narrow: it would not support the money
judgment Richard demands in Counts I and III, nor would it
provide a vehicle for the removal and appointment actions he
requests in Counts II and V. In theory it might support pro-
spective injunctive relief along the lines Richard describes in
Count IV, but the question remains whether Richard has pled
a plausible basis to justify such relief.
He has not. His complaint turns on two faulty theories of
corporate wrongdoing. Principally, he argues that Phyllis Al-
berts was no longer empowered to act as a director after her
original term expired on January 28, 2013, so that her Septem-
ber 2013 reelection was invalid. (Recall that she and Kathryn
voted in favor of her re-election, while Richard opposed.)
Building on that premise, Richard argues that all later corpo-
rate acts—including the gifts to Saint Francis and other chari-
ties and the election of Kathryn’s son John—were invalid be-
cause (1) he and Kathryn were the only authorized board
members, (2) he opposed each of these acts, and (3) regard-
less, Indiana law requires that nonprofits be governed at all
times by at least three directors. As Richard would have it, if
a family foundation with three directors inadvertently misses
a reelection deadline, the foundation is incapacitated as a mat-
ter of law.
Richard misreads a critical provision of the Corporation’s
bylaws. Under Article IV, any director other than one of the

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20 No. 15-3734
Doermer family founders “shall serve for three (3) years …
and until her or his successor is elected and qualified” (em-
phasis added). Article IV continues: “At the regular meeting
of the Board of Directors immediately preceding the expira-
tion of the term of any director, or at a special meeting, the
Board shall elect a successor director to replace the director
whose term will expire, or has expired … .” (Emphasis added.)
The bylaws contemplate the scenario that played out here—a
director’s term expired before the board convened to hold an-
other election.
The resolution originally appointing Phyllis to the board
is clearer still: it states that Phyllis would “serve … for a term
of three (3) years, or until such time as her successor shall be
elected and qualified.” (Emphasis added.) This unambiguous
language mirrors Indiana Code § 23-17-12-5(d): “Despite the
expiration of a director’s term, the director continues to serve
until … a successor is elected, designated, or appointed and
qualifies.”
To arrive at Richard’s preferred construction of the gov-
erning instruments, we would have to ignore a statute that is
directly on point, treat portions of Article IV of the bylaws as
surplusage, and interpret the resolution appointing Phyllis to
the board as if it read “serve … for a term of three (3) years, or
until such time as her successor shall be elected and qualified,
whichever comes first,” which it does not. Instead, we adopt an
interpretation that harmonizes the language of the bylaws
and the resolution in a practical manner wholly consistent
with the statute. Cf. Ryan v. Lawyers Title Ins. Corp., 959 N.E.2d
870, 875 (Ind. App. 2011) (courts will read a contract as a
whole, attempting to harmonize its provisions without ren-

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No. 15-3734 21
dering any meaningless). Phyllis retained her powers as a di-
rector even after her term formally expired. Her reelection by
a vote of 2–1 was lawful. The later corporate transactions and
activities approved by that same 2–1 vote were likewise law-
ful. All other issues in this case aside, the fact that Phyllis’s
power as a director did not expire as a matter of law on Janu-
ary 28, 2013 takes most of the remaining air out of Richard’s
complaint.
But not quite all of it. Richard offers a final theory of cor-
porate wrongdoing. He alleges that Kathryn’s vote in favor of
gifts to Saint Francis was “conflicted” because she also serves
as a member of that organization’s board of trustees. In this
court he characterizes this supposedly “conflicted” vote as a
kind of “self-dealing.”
Richard has not identified any authority for the proposi-
tion that, merely by voting in favor of a charitable contribu-
tion from one nonprofit organization to another, Kathryn
somehow breached a fiduciary duty or committed some other
wrong. Richard cannot cite a case, a statute, a regulation, or
even a provision of the corporate instruments that would ren-
der Kathryn’s vote unlawful. Indiana Code § 23-17-13-2.5(b)
does not expressly immunize a “conflicted” director, but it
provides that a transaction between two nonprofit corpora-
tions is not void or voidable solely because a director who
votes to authorize the transaction serves on the boards of both
corporations.4 With no explanation from Richard as to why
4 To qualify for protection under the statute, a transaction must be (1) au-
thorized by a majority of disinterested directors, (2) approved by those
members who are entitled to vote on the transaction, or (3) “fair as to the
corporation at the time the … transaction is authorized.” Ind. Code § 23-

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22 No. 15-3734
Kathryn’s approval of the gifts to Saint Francis was impermis-
sible, and with clear statutory guidance showing that the
transaction itself could survive irrespective of any “conflict,”
Richard’s final theory of corporate wrongdoing is without
merit.
Richard failed to allege a plausible claim for relief, and he
has proposed no amendment that could possibly save his
complaint. The district court’s dismissal of Richard’s case was
appropriate. The judgment of the district court is
AFFIRMED.
17-13-2.5(c). Richard has alleged no facts showing that the gifts to Saint
Francis were somehow unfair to the Corporation.

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