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Phyllis Schlafly Revocable Trust v. Cori

United States District Court, E.D. Missouri, Eastern Division

April 17, 2017

PHYLLIS SCHLAFLY REVOCABLE TRUST, et al., Plaintiffs,
v.
ANNE CORI, et al., Defendants.

          MEMORANDUM AND ORDER

          JOHN A ROSS UNITED STATES 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. 1at ¶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, see Cori v. Martin, No. 2016MR000111 (Ill. Cir. Ct. Oct. 20, 2016) (“the Madison County case”) (Doc. 22.3). In the Madison County case, Defendants herein seek, among other things, a declaration that their April 11, 2016 vote was effective to oust Ed Martin from the Eagle Forum Board. On April 29, 2016, the Madison County Court entered a TRO that, inter alia, required John Schlafly and Ed Martin to give Defendants access to the Eagle Forum headquarters and all Eagle Forum property (Doc. 7.10 at 40-42). On May 26, 2016, Phyllis Schlafly executed a First Amendment to the April 22 Restatement (“May 26 Amendment”) (Doc. 49.6 at 111-117).

         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”), see Cori v. Phyllis Schlafly's American Eagles, 3:16CV946-DRH-RJD (S.D. Ill.). In the SDIL case, Defendants herein, in their capacities as the majority members of the Eagle Forum Board, allege that PSAE has converted its assets; infringed upon its service marks, tradenames, and trademarks; engaged in unfair competition; diluted its brands, names, and marks; and committed cyberpiracy (Amended Complaint (Doc. 40) in 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:

All of [Phyllis Schlafly's] copyrights, moral rights, intellectual property rights, and trademark rights, whether statutory or common law, including the use of eagle emblems in connection with her work, [her] post mortem right of publicity, including [her] interest in her name, persona, and likeness, the right to license such rights in all media now known and hereafter invented, and right to take any and all actions necessary or desirable to protect and enforce such interests, shall be given to the Trustees of the PHYLLIS SCHLAFLY ROYALTY TRUST II, created by a Trust Agreement dated August 31, 2016, to be held and administered as a part of such trust estate.

(Id. at 118-119).

         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 ...


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