MEMORANDUM AND ORDER
JOHN A. ROSS, District Judge.
This matter is before the Court on Plaintiffs Phyllis Schlafly Revocable Trust and Eagle Trust Fund's Motion for Leave to Substitute Corrected Exhibit and Motion to Seal (Doc. 25), Motion for Leave to File Amended Complaint (Doc. 45), and Second Motion for Temporary Restraining Order and Preliminary Injunction (Doc. 46). Also before the Court are Defendants Anne Cori, Eunie Smith, Cathie Adams, Carolyn McLarty, Rosina Kovar, and Shirley Curry's (collectively, "Defendants") Motion to Dismiss or, in the Alternative, for Stay (Doc. 16). For the following reasons, the Court will grant Plaintiffs' Motion for Leave to File Amended Complaint (Doc. 45), deny their Second Motion for Temporary Restraining Order and Preliminary Injunction (Doc. 46), and grant in part and deny in part their Motion for Leave to Substitute Corrected Exhibit and Motion to Seal (Doc. 25). Moreover, the Court will deny as moot Defendants' Motion to Dismiss or, in the Alternative, for Stay (Doc. 16). Finally, the Court will direct the parties to show cause, in writing and within thirty (30) days, why this proceeding should not be stayed pending the resolution of two other lawsuits that could resolve potentially dispositive issues in this case.
I. Background and Facts
The People and Entities Involved
Phyllis Schlafly was a conservative political activist, and she founded several non-profit entities to further her causes. Her non-profit entities included the Phyllis Schlafly Revocable Trust ("the Trust"), the Eagle Trust Fund, the Eagle Forum, the Eagle Forum Education and Legal Defense Fund ("Education and Legal Defense Fund"), and Phyllis Schlafly's American Eagles ("PSAE"). John Schlafly, Bruce Schlafly, and Anne Cori are three of Phyllis Schlafly's adult children; they have held leadership positions with her non-profit entities and have been active in furthering her causes (Docs. 1 at ¶¶ 2-8, 33; 45.2 at ¶¶ 1-5).
The Eagle Forum is a non-profit corporation organized under the laws of Illinois, and it is tax-exempt under 26 U.S.C. § 501(c)(4) (Docs. 7.7 at 9; 45.2 at ¶ 12). Phyllis Schlafly formed the Eagle Forum to advance her conservative activism on a national level, and to further the notion that citizen-volunteers, through rigorous advocacy, can influence government policies on federal, state, and local levels (Doc. 7.7 at 9).
Phyllis Schlafly formed the Trust in 1997 (Docs. 1 at ¶¶ 2-3; 49.6 at 3). It is undisputed that, after Phyllis Schlafly's death, John Schlafly became the sole trustee of the Trust; and as such, he is authorized to bring this suit on its behalf (Docs. 1 at ¶ 2; 45.2 at ¶ 1; 49.6 at 5). According to Plaintiffs, Phyllis Schlafly transferred her personal intellectual property to the Trust during her lifetime; and any of her intellectual property rights that were not transferred to the Trust during her lifetime poured into the Trust according to the terms of her last will and testament (Doc. 45.2 at ¶ 1).
The Eagle Trust Fund publishes a newsletter titled The Phyllis Schlafly Report, conducts research relating to political science and national defense, distributes educational materials, and supports other goals in its trustees' discretion (Docs. 1 at ¶ 4; 45.2 at ¶ 2). John Schlafly and Bruce Schlafly are successor trustees of the Eagle Trust Fund, and its sole members (Doc. 45.2 at ¶ 6). According to Plaintiffs, the Eagle Trust Fund, as amended, is the "custodian" of much of Phyllis Schlafly's intangible personal property (Docs. 1 at ¶ 5; 45.2 at ¶ 2, 56, 154, 216). The Education and Legal Defense Fund is organized under Illinois law, and is tax-exempt under 26 U.S.C. § 501(c)(3) (Doc. 45.2 at ¶ 3).
Ed Martin was President of the Eagle Forum until April 11, 2016; he is currently President of the Education and Legal Defense Fund (Doc. 22.3 at 6). According to Plaintiffs, before her death, Phyllis Schlafly "personally endorsed" Ed Martin to serve as President of the Eagle Forum, the Education and Legal Defense Fund, and PSAE, a Virginia non-profit entity led by former Eagle Forum directors and officers who are loyal to John Schlafly and Ed Martin (Doc. 45.2 at 4).
In the months leading up to Phyllis Schlafly's death, John Schlafly and Anne Cori disagreed as to the positions they believed Phyllis Schlafly and the Eagle Forum should have taken on certain political issues, most notably the issue of which candidate to endorse in the 2016 U.S. Republican Presidential Primary (Docs. 7 at 5-6; 45.2 at ¶¶ 38-39, 117). John Schlafly is loyal to Ed Martin; and Anne Cori has aligned with her co-Defendants. Collectively, Defendants represent a majority of the members of the Eagle Forum Board of Directors ("the Eagle Forum Board").
Events Leading up to this Case
On April 11, 2016, Defendants, as majority members of the Eagle Forum Board, voted to remove Ed Martin as President of the Eagle Forum; according to Plaintiffs, Defendants also voted to remove John Schlafly as Director and Treasurer of the Eagle Forum (Docs. 22.3 at 12-13; 45.2 at ¶ 6).
On April 22, 2016, Phyllis Schlafly executed an Amendment to and Restatement of the Trust ("April 22 Restatement") (Docs. 7.7 at 16-44; 49.6 at 82-110). As relevant, the April 22 Restatement removed Anne Cori as a co-trustee of the Trust, leaving only Phyllis Schlafly and John Schlafly as its co-trustees (Doc. 49.6 at 5, 104).
Also on April 22, 2016, Defendants herein, in their capacities as majority members of the Eagle Forum Board of Directors, filed an action against Ed Martin and John Schlafly in the Circuit Court for the Third Judicial Circuit in Madison County, Illinois,
On August 24, 2016, Defendants filed an action, on behalf of the Eagle Forum, against PSAE in the U.S. District Court for the Southern District of Illinois ("the SDIL case"),
On August 31, 2016, Phyllis Schlafly executed a Second Amendment to the April 22 Restatement ("August 31 Amendment") (Docs. 49.6 at 118-122). As relevant, the August 31 Amendment provides as follows:
On October 20, 2016, the Madison County court entered an amended TRO, suspending John Schlafly from the Eagle Forum Board, enjoining him from accessing Eagle Forum property, and granting Defendants temporary sole control of and possession over all Eagle Forum property ("Madison County TRO"). More specifically, the Madison County TRO provides as follows:
17. [T]his Order shall be binding upon the parties to this action, their officers, agents, employees, and attorneys, and upon those persons in active concert or participation with them who receive actual notice of this Order. The parties shall provide a copy of this Order to their officers, agents, employees and attorneys, as well as to any individual that has access to and/or control, possession or custody of Eagle Forum Property.
(Doc. 22.2 at 6-11) (emphasis added).
The Instant Action
On October 19, 2016, or the day before the Madison County court amended its TRO, John Schlafly and Ed Martin initiated this action on behalf of the Trust and the Eagle Trust Fund (Doc. 1). In their original complaint, Plaintiffs assert eight counts. Count I alleges a violation of the Defend Trade Secrets Act ("DTSA"), 18 U.S.C. § 1836 (
On November 3, 2016, Plaintiffs filed their first motion for a TRO and preliminary injunction (Doc. 7). In that motion, Plaintiffs asked the Court to enjoin Defendants from using Phyllis Schlafly's likeness or image; to enjoin them from distributing, using, or disseminating the database and any other confidential trade secrets belonging to Phyllis Schlafly; and to require them to list and return Phyllis Schlafly's confidential and proprietary trade secrets, including the database (
On November 9, 2016, after holding a hearing, the Court denied Plaintiffs' first motion for a TRO and preliminary injunction (Doc. 27). More specifically, the Court concluded that Plaintiffs had not shown a reasonable likelihood of success on the merits, as there remained significant factual disputes as to who owned the database and Phyllis Schlafly's name, image, and likeness (
Plaintiffs now move to substitute and to seal an exhibit they submitted in support of their first TRO motion (Doc. 25), and to amend their complaint (Doc. 45); they have also filed a second TRO motion (Doc. 46). Defendants oppose each of the motions (Docs. 28, 49-50, 54).
Other Events That Have Transpired During the Pendency of This Action
On March 20, 2017, Anne Cori filed a Petition in the Probate Division of the Circuit Court for the County of St. Louis, Missouri, seeking to set aside the May 26 and August 31 Amendments to the Trust ("St. Louis Probate Case") (Doc. 49.6). In the St. Louis Probate Case, Cori alleges that, when Phyllis Schlafly signed the May 26 and August 31 Amendments, she lacked testamentary capacity and was subject to undue influence by John Schlafly and others (Doc. 49.6 at 9-11). She also alleges that John Schlafly has breached his fiduciary duties as sole trustee of the Trust by using Trust assets to pay legal fees he has incurred in the Madison County case, the SDIL case, and/or this case (
A. Plaintiffs' Motion for Leave to File Amended Complaint
Plaintiffs' seek leave to amend their complaint to add the Education and Legal Defense Fund as a plaintiff; to name the Eagle Forum as a defendant; to allege additional facts, some of which have allegedly occurred since they filed their original complaint; and to add four new claims (Docs. 45.1, 45.2). In addition to the counts set forth in their original complaint, Plaintiffs' proposed first amended complaint would add the following substantive claims. In Count IX, the Trust Fund and the Education and Legal Defense Fund allege that Defendants have tortiously interfered with their business expectancies under Missouri law by altering eagleforum.org in a manner that has disrupted donations to the Eagle Trust Fund and the Education and Legal Defense Fund, in violation of the Madison County TRO; and by interfering with Plaintiffs' mail (
Defendants oppose the motion for leave to amend, arguing that Plaintiffs should not be allowed to amend their complaint in light of bad acts they have allegedly taken in the SDIL case and the Madison county case. Defendants also argue that Plaintiffs should not be permitted to amend their complaint, as PSAE has asserted counterclaims in the SDIL case which contradict the allegations in Plaintiffs' proposed amended complaint (Docs. 50, 54). In reply, Plaintiffs reiterate their arguments in favor of a grant of leave to amend (Doc. 55).
Leave to amend should be "freely given when justice so requires." Fed. R. Civ. P. 15(a). Under this liberal standard, denial of leave to amend a pleading is appropriate only if "there are compelling reasons such as undue delay, bad faith or dilatory motive, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the nonmoving party, or futility of the amendment."
B. Plaintiffs' Second Motion for Temporary Restraining Order
In their second TRO motion, Plaintiffs seek an order enjoining Defendants from using the Eagle Logo trademark and Phyllis Schlafly's name, image, and likeness (Doc. 46). In support of their motion, Plaintiffs claim that Defendants impermissibly used Phyllis Schlafly's name, image, and likeness to promote "Phyllis Schlafly's 37th Annual Luncheon," an "unsanctioned competing event" held in Naples, Florida on March 10, 2017 ("the Luncheon"); and that Defendants are claiming
As to the threat of irreparable harm, Plaintiffs argue that Defendants hosted the Luncheon in order to directly compete with Phyllis Schlafly's 37th annual luncheon, an event co-hosted by the Education and Legal Defense Fund and PSAE on February 23, 2017 (
In addition, as to the balancing of harms, Plaintiffs assert that Defendants' misconduct is causing them permanent and irreparable harm to their "goodwill and hard-fought reputation for grassroots conservatism." Plaintiffs contend that Defendants would suffer little harm if a TRO were granted, as it would be inexpensive to republish the two offending issues of
In response, Defendants first argue that Plaintiffs' cannot show a likelihood of success on the merits because Plaintiffs' claim to ownership of the intellectual property at issue depends on the validity of the August 31 Amendment, which Defendants describe as a "deathbed assignment," the validity of which the Eagle Forum disputes in its competing claim to ownership (Doc. 49 at 12-16). Defendants further argue that Plaintiffs are unlikely to prevail on their claim based on Phyllis Schlafly's post-mortem right to publicity, as such a claim has never been recognized under Missouri law; and that even to the extent Plaintiffs may have had trademark rights in the Eagle Logo at one time, they have since abandoned those rights (
In determining whether to issue a TRO, the Court must consider four factors: (1) the threat of irreparable harm to the movants; (2) the balance between the threatened harm to the movant's and the injury that granting the TRO will inflict on other parties to the litigation; (3) the probability that the movants will succeed on the merits of the underlying action; and (4) the public interest.
For the following reasons the Court will deny Plaintiffs' second TRO motion. First, the Court concludes that Plaintiffs have not established a reasonable likelihood that they will succeed on the merits, as each of Plaintiffs' claims will require either (1) a finding that Plaintiffs own the intellectual property at issue despite Defendants' competing claim to ownership or control, or (2) a finding that directly contradicts the Madison County TRO. Specifically, as was more fully discussed in the Court's November 9, 2016 Order, to prevail on Counts I through VI, Plaintiffs must establish that they own the database and Phyllis Schlafly's image and likeness (Doc. 27 at 3-7). Likewise, to prevail on Counts VII and VIII Plaintiffs must show that they own the database and eagleforum.org. In addition, Counts X, XI, and XII all arise out of Defendants' allegedly impermissible use of Plaintiffs' trademarks in their publication and distribution of
As to Count IX, Plaintiffs' allegation of tortious interference with business expectancies is premised entirely on an alleged violation of the Madison County TRO. More specifically, the claim is based on the Eagle Forum's alleged failure to maintain the status quo as to the parties' preexisting business relationships as they relate to solicitations of donations via eagleforum.org and the U.S. Postal Service. As such, the Court notes that judicial efficiency and comity weigh in favor of the Court declining what is essentially an invitation from Plaintiffs to enforce the Madison County TRO on the Madison County court's behalf.
Moreover, the Court emphasizes that there continue to be significant factual disputes as to which entity owns the intellectual property at issue in this case, i.e., the database, the trademarks, and Phyllis Schlafly's name, image, and likeness; and there are also significant disputes as to who will ultimately be entitled to control the Eagle Forum. As the Court noted in its November 9, 2016 Order, John Schlafly and Defendants are actively litigating—in the Madison County case—the issue of who is entitled to control the Eagle Forum and its assets. Moreover, as was also specifically noted in the Court's November 9, 2016 Order, Defendants dispute the enforceability of the May 26 and August 31 Amendments to the Trust and the purported transfer of ownership of Phyllis Schlafly's intangible property therein; and the ongoing nature of that dispute is now further evidenced by Anne Cori's recent filing of the St. Louis County Probate case. Given the significant factual disputes regarding the ownership of Phyllis Schlafly's intellectual property, the Court concludes that Plaintiffs have not established a likelihood of success on their claims.
The Court further notes that, much like the first TRO motion, Plaintiffs' second TRO motion seeks an order from this Court that would, in many respects, directly contradict the Madison County TRO. Notably, Plaintiffs admit that Defendants were granted licenses to use Plaintiffs' trademarks; but they nevertheless argue that they are likely to succeed on the merits because Phyllis Schlafly revoked those licenses on August 16, 2016. The Court notes, however, that the Madison County TRO specifically orders the Eagle Forum to continue to transact business with the Eagle Trust Fund and the Education and Legal Defense Fund consistently with the entities' established pattern of business dealings as it existed prior to April 11, 2016. As such, to the extent Plaintiffs rely on an alleged August 16, 2016 revocation of the Eagle Forum's licenses, their argument is contrary to the plain language of the Madison County TRO.
The Court further concludes that Plaintiffs have not established a threat of immediate and irreparable harm should a TRO not issue.
Finally, the Court notes that, while it is in the public interest to ensure that confidential and proprietary property is protected, the public interest would not be served by entry of a TRO in the instant case, given the significant disputes over the ownership of the intangible property at issue.
C. Motion for Leave to Substitute Corrected Exhibit and Motion to Seal
Plaintiffs also move for leave to substitute an exhibit for Exhibit 7 to their first TRO motion, and to seal Exhibits 2 and 7 to that motion (Docs. 25). Specifically, Plaintiffs' proposed substitute for Exhibit 7 consists of an affidavit by Ann Bensman and two affidavits by Elizabeth Miller, and totals 15 pages (Docs. 7.7-7.13). In contrast, Exhibit 7 contains 259 pages of filings from the Madison County case. Notably, Exhibit 7 includes Ann Bensman's affidavit, but includes only one of Elizabeth Miller's affidavits as proposed by Plaintiffs' substitute exhibit (Docs. 7.11 at 27-30; 7.13 at 7-12). Plaintiffs seek to seal Exhibits 2 and 7, as they contain confidential information, including trust documents, board meeting minutes, correspondence regarding bank accounts, and internal email communications. According to Plaintiffs, their proposed substitute Exhibit 7 excludes the confidential information and contains only the affidavits on which they relied in their first TRO motion (Docs. 25, 32). Defendants oppose the motion, arguing that Plaintiffs did not seek to substitute Exhibit 7 until after the Court had ruled on their first TRO motion, that only one of Elizabeth Miller's affidavits was before the Court when it ruled on that motion, and that substitution of the exhibits at this stage of the proceeding would unnecessarily muddle the record (Doc. 28).
The Court will grant the motion in part and deny the motion in part. The Court will grant the motion to the extent it seeks to seal Exhibits 2 and 7 to Plaintiffs' first TRO motion (Docs. 7.2, 7.7-7.13), as those exhibits contain confidential information. The Court will deny the motion to the extent it seeks to substitute the three affidavits for the Madison County case records, as one of the affidavits was not before the Court when it ruled on the motion to which the exhibit Plaintiffs seek to substitute was attached, and because any need to substitute a more concise version of Exhibit 7 will be remedied by the sealing of Exhibit 7.
D. Order to Show Cause Why this Proceeding Should Not be Stayed
As discussed more fully above, the parties are actively litigating in other judicial forums several issues that could be dispositive in this case. Notably, the St. Louis Probate case and the Madison County case directly implicate the extent to which this Court should intervene, at this time, in the parties' existing disputes regarding their relative ownership interests in, and ability to exercise control over, Phyllis Schlafly's or any of the aforementioned entities' intangible property. Specifically, the issue of who is entitled to control of the Eagle Forum is at the core of the Madison County case, and is directly addressed in the Madison County TRO. Moreover, it appears to the Court that the St. Louis Probate case squarely presents—in an arguably more appropriate judicial forum—the issue of whether the May 26 and August 31 Amendments were effective to transfer to the Trust ownership of Phyllis Schlafly's personal intellectual property or to otherwise alter the terms of the Trust. As such, the Court will direct the parties to show cause, in writing and within thirty (30) days of the date of the Order, why this proceeding should not be stayed pending the resolution of the Madison County case and the St. Louis County Probate case.