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1 United States District Court for the District Of Case 1:17-cv-00635-RDM Document 41 Filed 03/30/18 Page 1 of 17 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA HE DEPU, et al., Plaintiffs, v. Civil Action No. 17-635 (JDB) YAHOO! INC., et al. Defendants. MEMORANDUM OPINION China’s vast censorship of speech on the Internet has been widely reported, as has the Chinese government’s detention and imprisonment of many of its citizens for expressing political views online. Plaintiffs are seven Chinese citizens who allege that they were imprisoned in China for online speech, and the wife of another Chinese citizen who was also imprisoned. They allege that as part of a settlement of a 2007 lawsuit brought by imprisoned Chinese activists against Yahoo, the defendants established a charitable trust to provide humanitarian and legal assistance to imprisoned Chinese dissidents. But then defendants allegedly mismanaged and depleted the trust funds and terminated the trust’s humanitarian purpose, in violation of their duties under trust and contract law. As explained below, plaintiffs’ claims that sound in trust law will be dismiss e d because they have not plausibly alleged that Yahoo established a charitable trust in 2007 and, even if they had, they lack standing to bring these claims. Plaintiff Ling Yu’s contract claims are both insufficiently pled and were released by her when she settled an earlier lawsuit against these defendants. Hence, those claims also fail and the complaint in its entirety will be dismissed. BACKGROUND This case arises from another case filed by Chinese political activists against Yahoo more than ten years ago. See Am. Compl. [ECF No. 26] ¶ 29 [hereinafter “FAC”]; Wang v. Yahoo! Inc. 1 Case 1:17-cv-00635-RDM Document 41 Filed 03/30/18 Page 2 of 17 No. 07-cv-2151-CW (N.D. Cal. filed Apr. 18, 2007). The Wang lawsuit was brought by Wang Xiaoning and Shi Tao, two imprisoned Chinese political activists, and Wang’s wife, Ling Yu, who is also a plaintiff in this case. The plaintiffs in Wang alleged that Yahoo violated federal and state laws by turning over their Yahoo e-mails to Chinese authorities who used the information to prosecute Wang and Shi for political dissent. FAC ¶¶ 28–30. Yahoo moved to dismiss the Wang lawsuit in August 2007. In November 2007 (while the case remained pending), Yahoo’s CEO, Jerry Yang, testifie d before Congress concerning the company’s disclosure of information to Chinese authorities. Shortly after the hearing, and facing significant pressure from certain members of Congress, Yahoo agreed to settle the Wang lawsuit. In exchange for the Wang plaintiffs’ agreement to dismiss their lawsuit with prejudice, Yahoo agreed to pay $3.2 million to each plaintiff’s family, and an additional $17.3 million to the Laogai Research Foundation (“LRF”) to establish the Yahoo Human Rights Fund (“YHRF”). Id. ¶¶ 33, 36. Plaintiffs here allege that the YHRF is a charitable trust for which they are beneficiaries. See, e.g., id. ¶ 33. The LRF is a non-profit corporation founded by Harry Wu, a former Chinese political prisoner turned politica l activist. Id. ¶ 24. Under the terms of the settlement agreement (the “Wang Settlement”), the LRF was to use the $17.3 million for three purposes: (1) “to provide humanitarian and legal assistance primarily to persons in or from . China who have been imprisoned for expressing their views through Yahoo! or another medium”; (2) “to resolve claims primarily by such persons, or persons threatened with prosecution or imprisonment, against the Yahoo! Entities or any Yahoo! subsidiary or affiliate”; and (3) “for payment of [LRF] operating expenses and the [LRF’s] educational work conducted in the United States in support of human rights.” Wang Settlement (Ex. 2 to Yahoo’s Mot. to Dismiss) [ECF No. 29-5] at 113; FAC ¶ 40 n.4. The Wang Settlement further provided 2 Case 1:17-cv-00635-RDM Document 41 Filed 03/30/18 Page 3 of 17 that there were “no express or implied third party beneficiaries” to the agreement, and that individuals who received funds from the LRF to resolve claims against Yahoo were not third-party beneficiaries. Id. at 113, 119. In June 2009, the Wang Settlement was amended to create the Yahoo Irrevocable Human Rights Trust 2009 (“YIHRT”).1 FAC ¶ 6 & n.1. As part of the amendment, the LRF transferred $3.55 million to the YIHRT, while the remaining funds were transferred to the newly formed Laogai Human Rights Organization (“LHRO”). See id. ¶¶ 25, 52–54; see also June 12, 2009 Amendment (Ex. 3 to Yahoo’s Mot. to Dismiss) [ECF No. 29-6] at 128. The LHRO was to provide up to $1 million annually to the LRF for its operational expenses, and additional support for LRF’s “humanitarian and legal assistance” to Chinese activists. See LHRO and YIHRT 2009 Documents (Ex. 1 to Yahoo’s Mot. to Dismiss) [ECF No. 29-4] at 8. Meanwhile, Harry Wu—once a celebrated human rights activist with close ties to members of Congress—came under increased scrutiny for his alleged mismanagement of the LRF and the YHRF, and he was involved in several lawsuits. See FAC ¶¶ 37–39; see generally Andrew Jacobs, Champion of Human Rights in China Leaves a Tarnished Legacy, N.Y. Times, Aug. 13, 2016 (Ex. 13 to Yahoo’s Mot. to Dismiss) [ECF No. 29-16]. One of those lawsuits was filed in 2011 by Ling Yu, who is also a plaintiff in this case. See Yu v. Wu, No. 11-cv-92 (E.D. Va. filed Jan. 28, 2011) [hereinafter “the 2011 Lawsuit”]. 2 Yu sued Harry Wu, the LRF, the LHRO, and the YHRF for the alleged mismanagement, misuse, and conversion of settlement funds, including the LRF’s purchase of real estate in Washington, and defendants’ other alleged breaches of their fiduciary 1 Plaintiffs here do not allege any violation of this 2009 trust and expressly disclaim that their lawsuit is based on this trust. See Pls.’ Opp’n [ECF No. 32] at 18–19 n.22. Rather, their lawsuit is based on the alleged trust created in 2007 by the Wang Settlement. FAC ¶¶ 26, 36. 2 The LRF attached a copy of the complaint from the 2011 Lawsuit as an exhibit to its motion to dismiss. See Ex. A to LRF’s Mot. to Dismiss [ECF No. 27-2] [hereinafter “DAC”]. 3 Case 1:17-cv-00635-RDM Document 41 Filed 03/30/18 Page 4 of 17 duties owed to the plaintiffs. See DAC ¶¶ 5–7, 48. Yu settled her lawsuit later in 2011. She agreed to dismiss all of her claims with prejudice, see Notice of Dismissal with Prejudice (Ex. B to LRF’s Mot. to Dismiss) [ECF No. 27-3] at 1, and granted Wu, the LRF, the LHRO, and the YHRF, and their affiliates, comprehensive releases, see 2011 Lawsuit Release (Ex. 5 to Yahoo’s Mot. to Dismiss) [ECF No. 29-8] at 138. Six years later, Yu filed this lawsuit against Yahoo and two of its executives, the Estate of Harry Wu,3 the LRF, the LHRO, the “Yahoo Human Rights Fund Trust,” and unknown Doe defendants who are allegedly current and former employees, officers, and directors of the defendants. FAC ¶¶ 19–27. Yu is joined by seven other plaintiffs—He Depu, Yang Zili, Li Dawei, Wang Jinbo, Ouyang Yi, Xu Yonghai, and Xu Wangping (collectively the “Beneficiary Plaintiffs”)—who allegedly are all political activists who were imprisoned in China for online dissent. Id. ¶¶ 10–16. Plaintiffs contend that through the 2007 Wang Settlement Yahoo established a charitable trust with the “primary” purpose of providing humanitarian and legal assistance to Chinese dissidents imprisoned for exercising their freedom of expression online. Id. ¶¶ 1, 19, 26, 33, 36. The Beneficiary Plaintiffs allege that they are “beneficiar[ies] of the Trust’s humanitarian purpose.” Id. ¶¶ 10–16. They contend that defendants—all of whom are allegedly trustees—improperly depleted the trust’s assets and unlawfully terminated the trust’s humanitarian purpose. They bring claims for breach and modification of trust, id. ¶¶ 125–131, 135–36, as well as third party and principal-agent liability claims for breach of trust, id. ¶¶ 137–141. Plaintiff Yu brings claims for unjust enrichment, id. ¶¶ 132–34, and for breach of the Wang Settlement, id. ¶¶ 142–45. All of the plaintiffs bring a claim for civil conspiracy. Id. ¶¶ 146–49. Defendants have all filed motions to dismiss the FAC. See Mot. in Supp. of Defs. LRF Cal. and LRF Va.’s Mot. to 3 Wu died on April 26, 2016. FAC ¶ 23. 4 Case 1:17-cv-00635-RDM Document 41 Filed 03/30/18 Page 5 of 17 Dismiss (“LRF’s Mot. to Dismiss”) [ECF No. 27-1]; Mem. of Law in Supp. of Def. LHRO’s Mot. to Dismiss [ECF No. 28-1]; Mem. of Law in Supp. of Defs. Yahoo! Inc., Ronald Bell, & Michae l Callahan’s Mot. to Dismiss (“Yahoo’s Mot. to Dismiss”) [ECF No. 30-1]. LEGAL STANDARD Federal Rule of Civil Procedure 12(b)(6) requires dismissal of a complaint that “fail[s] to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). At the motion to dismiss stage, all of a plaintiff’s factual allegations are taken as true. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). To survive a Rule 12(b)(6) motion to dismiss, a complaint’s “[f]actual allegations must be enough to raise a right to relief above the speculative level.” Id. The complaint “must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v.
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