Garcia v. Scientology: Order denying Scientology motion to dismiss

8/12/2019 Garcia v. Scientology: Order denying Scientology motion to dismiss

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UNITED STATES DISTRICT COURTMIDDLE DISTRICT OF FLORIDATAMPA DIVISIONMARIA DEL ROCIO BURGOS GARCIAand LUIS A. GARCIA SAZ,

Plaintiffs,v

CHURCH OF SCIENTOLOGYRELIGIOUS TRUST, CHURCH OFSCIENTOLOGY FLAG SERVICEORGANIZATION, INC., CHURCH OFSCIENTOLOGY FLAG SHIP SERVICEORGANIZATION, INC., IASADMINISTRATIONS, INC. and U.S. IASMEMBERS TRUST,Defendants.

ORDER

Case No: 8:13-cv-220-T-27TBM

BEFORE THE COURT is the Second Amended Plaintiffs' Renewed Motion to AmendComplaint and Memorandum ofLaw (Dkt. 108) attaching a proposed amended complaint (Dkt. 108-1), and Defendants' Flag Church and Ship Church, M.emorandum in Opposition (Dkt. 110). Alsobefore the Court is Defendants IAS Administrations, Inc.'s, U.S. IAS Members Trust s and Churchof Scientology Religious Trust s Joint Motion to Dismiss for Lack of Subject Matter Jurisdiction(Dkt. 90) and Plaintiffs' response (Dkt. 93). The parties were permitted to conduct jurisdictionaldiscovery, following which they filed additional briefing regarding diversity jurisdiction (Dkts. 104

112). Upon consideration, Plaintiffs ' Motion to Amend (Dkt. 108) is GRANTED. Defendants'motions (Dkts. 93 96) are DENIED as moot.

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Case 8:13-cv-00220-JDW-TBM Document 113 Filed 05/02/14 Page 1 of 12 PageID 2694


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I. ackgroundPlaintiffs Maria Del Rocio Burgos Garcia and Luis Garcia Saz originally filed a complaint

against five Scientology entities, alleging claims of fraud, breach of contract, and unfair anddeceptive trade practices in connection with monetary contributions and payments made to variousScientology entities.1 According to the Complaint (Dkt. 1 , Plaintiffs are former members of theChurch ofScientology who contributed hundreds of housands ofdollars to these various entities asa result of false and misleading representations and/or omissions regarding the Super PowerProject and various humanitarian initiatives.2 In addition, the Complaint alleges that Plaintiffs paiddeposits towards counseling services ( auditing ), training, and accommodations that were neverprovided.3

Defendants moved to compel arbitration ofall ofPlaintiffs' claims in accordance with severalpurported agreements to arbitrate contained in the numerous Religious Services EnrollmentApplications, Agreements and General Releases Plaintiffs completed as a prerequisite toparticipating in Scientology religious training and services (Dkts. 8, 15, 18). While these motionswere pending, Defendants CSRT, USIMT, and IASA filed a motion to dismiss based on lack ofdiversity jurisdiction (Dkt. 90). Specifically, CSRT, USIMT, and IASA contend that they, like

The five Scientology entities currently named as defendants are: Church of Scientology Flag ServiceOrganization, Inc. ( Flag Church ), Church of Scientology Flag Ship Service Organization, Inc. ( Ship Church ),Church of Scientology Religious Trust ( CSRT''), IAS Administrations, Inc. ( IASA ), and U.S. IAS Members Trust( USIMT ).2 The Super Power Project involves the construction of a Scientology facility in Clearwater, Florida, whichtook over eighteen years to complete and open (Dkt. 1 126 . Plaintiffs allegedly contributed a total of$340,000 tothis project id, - i 32). The humanitarian initiatives involve funding for various church campaigns and relief efforts

id, 1153-68). Plaintiffs allegedly contributed a total of$40,4IO to these humanitarian initiatives id, 1118 .3 Plaintiffs deposited $3 7 413 .56 with Flag Church and $31,445 .45 with Ship Church for these services and

accommodations (Dkt. 1 11 41-42).2



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Plaintiffs, are citizens o California, and therefore diversity jurisdiction is lacking.The case was stayed pending resolution o he jurisdictional issue (Dkt. 100). Following the

ninety-day period for discovery, the parties were given leave to file supplemental memoranda inconnection with the motion to dismiss (Dkt. 102). Two days before Defendants' memorandum wasdue, Plaintiffs filed the a motion to amend their Complaint based on new information learnedthrough discovery (Dkt. 103). The motion to amend was denied without prejudice to refiling it witha proposed amended complaint (Dkt. 105). Plaintiffs filed a renewed motion to amend (Dkt. 108),attaching their proposed amended complaint (Dkt. 108-1 .

Plaintiffs claim to have discovered that Defendant Flag Church spearheaded all activitiesrelating to the other entities which have given rise to this suit (Dkt. 108 at 4). As such, Plaintiffs'proposed amended complaint drops CSRT, USIMT, and IASA as defendants, purporting to resolvethe diversity jurisdictional issue.4 The proposed amended complaint revises several paragraphs toconform the allegations to the contention that Flag Church and Ship Church were the real actors in

the events giving rise to Plaintiffs' claims. Plaintiffs contend that dropping CSRT, USIMT, andIASA should be permitted as these entities are nominal and dispensable parties. Plaintiffs assert thatnone o the parties will be harmed by dismissal o CSRT, USIMT, and IASA as their presenceprovides no tactical advantage to Flag Church and Ship Church and the close inter-relationshipamong the Scientology entities permits those entities to resolve the sharing o damages amongstthemselves (Dkt. 112 at 3). Alternatively, Plaintiffs suggest that CSRT, USIMT, and IASA couldbe dismissed with prejudice. id.).

4 Plaintiffs do not dispute that the evidence Defendants submitted with their supplemental memorandum insupport o he motion to dismiss reflects that CSRT, USIMT, and IASA are not diverse from Plaintiffs (Dkt. 112 at 2n. I .

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Flag Church and Ship Church respond that dismissal ofCSRT, USIMT, and IASA does notcure the jurisdictional defect because the amended complaint continues to allege a joint venture,partnership, or other similar relationship, such that the citizenship of these entities must beconsidered for purposes ofdiversity jurisdiction. Second, they contend that because CSRT, USIMT,and IASA are indispensable parties, dropping them would be highly prejudicial to Flag Church andShip Church. The crux of their argument is that Plaintiffs originally alleged conduct by CSRT,USIMT, and IASA and individuals associated with them which made them the main players in thecase, that Plaintiffs tied in Flag Church and Ship Church by alleging a joint enterprise between thefive defendants, and after the diversity jurisdictional issue was raised, changed their theory.II. Standard

The court should freely give leave [to amend] when justice so requires. Fed. R Civ. P15(a)(2). In the absence of any apparent or declared reason such as undue delay, bad faith ordilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments

previously allowed, undue prejudice to the opposing party by virtue ofallowance of he amendment,futility ofamendment, etc. the leave sought should, as the rules require, be 'freely given. ' Fomanv Davis 371 U.S. 178, 182, 83 S Ct. 227, 230, 9 L Ed. 2d 222 (1962).III. Discussion

A Plaintiffs proposed amendment is not futile because it does not allege a jointventure or partnershipFlag Church and Ship Church argue that Plaintiffs' proposed amendment is futile because

it continues to allege a joint venture, partnership, or other similar relationship, but fails to allege theidentity or citizenship of the other members of the purported joint venture. Leave to amend a

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complaint is futile when the complaint as amended would still be properly dismissed or beimmediately subject to summary judgment for the defendant. Cockrell v Sparks, 510 F.3d 1307,1310 (11th Cir. 2007).

In the proposed amended complaint, Plaintiffs contend that the high pressure solicitation andfundraising activities and fraudulent representations with respect to the Super Power project werecarried out by employees ofFlag Church at Flag Church facilities, as opposed to CSRT, as originallyalleged in the Complaint see Dkt. 108-1, , 25). The proposed amended complaint alleges thatspecially appointed fundraising representatives, are contracted employeesofFLAG (even though

they may claim to be staffmembers' ofother entities, an internal Scientology designation that hasno legal significance but is designed to deceive Plaintiffs and others) id.,, 28).

With respect to the claims regarding the humanitarian initiatives, the proposed amendedcomplaint alleges that International Association ofScientologists ( IAS ) representatives, as opposedto IAS Administrations, Inc. ( IASA ) and/or U.S. IAS Members Trust ( USIMT ), solicited

contributions and made representations, for which Flag Church and Ship Church are responsible byway of a fraudulent enterprise see Dkt.108-1, 56, 102, 108). It also alleges that Defendantsand their agents made false statements in order to induce Plaintiffs to give money id.,, 74). Inaddition, the proposed amended complaint alleges specific conduct by Flag Church and Ship Churchrepresentatives see id.,,, 52-53, 57, 71, 73, 75, 76, 77, 78).

Despite Plaintiffs' use of various legal terms of art, such as joint venture, joint enterprise,concertofaction, agents, and employees, the proposed amended complaint at the most suggests thatthe various Scientology entities may have acted in concert as joint or multiple tortfeasors in allegedlydefrauding Plaintiffs and causing them to suffer monetary losses, rather than as a joint venture or



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partnership.5Although the proposed amended complaint includes the allegation that the Church of

Scientology is comprised ofvarious corporations and related entities that make some effortsto appear distinct, [when] they are not in fact separate id, 4 ), this general allegation does notamount to an allegation of a joint venture or partnership.

The proposed amended complaint also alleges that Defendants function as an interrelatedand interdependent network of entities id., 20) and that Defendants acted in concert either asagents or principals of one another, partners, joint venturers, or co-conspirators id, 21 .Importantly, Defendants, for purposes of he proposed amended complaint, are Flag Church andShip Church, and not CSRT, IASA, or USIMT. These allegations will not be construed as a claimthat Flag Church and Ship Church acted as part of a joint venture or partnership with unnamedentities such that the citizenship of these entities must be considered for purposes of diversityjurisdiction. And that is not what the amended complaint alleges.

Moreover, whether Plaintiffs will be successful on their theory that the fundraisingrepresentatives are contracted employees of Flag Church and Ship Church is not an appropriateconsideration in considering whether the proposed amendment is futile. See Jackam v Hosp Corp

5 Joint and several liability among multiple tortfeasors exists when the tortfeasors, acting in concert orthrough independent acts, produce a single injury. Acadia Partners L.P. v Tompkins 759 So. 2d 732, 736 (Fla.5th DCA 2000) (citing Smith v Department of ns. 507 So. 2d 1080, 1090 (Fla.1987)).

A joint venture is a 'l egal relationship resulting from an agreement between two or more persons toengage in an enterprise of limited scope and duration. ' Advanced Prot. Technologies Inc. v Square D Co. 390 F.Supp. 2d 1155, 1159 (M.D. Fla. 2005) (quoting Kislakv. Kreedian 95 So.2d 510, 514 (Fla.1957). The essentialelements of a joint venture are: ( 1) a community of interest in the performance of a common purpose, (2) jointcontrol or right of control, (3) a joint proprietary interest in the subject matter, (4) a right to share in the profits and(5) a duty to share in any losses which may be sustained. Id. (citations omitted). A joint venture will not be found toexist i any element is missing. d (quotations and citations omitted). These elements are not alleged in theproposed amended complaint.

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o Am. Mideast Ltd. 800 F.2d 1577, 1579-80 (11th Cir. 1986) ( The issue is not whether [theplaintiffs] may ultimately prevail on [their] theory, but whether the allegations are sufficient to allowthem to conduct discovery in an attempt to prove their allegations. ).

B Plaintiffs' proposed amendment is not futile because CSRT, USIMT, and IASAare neither required nor indispensable parties

Flag Church and Ship Church argue that Plaintiffs' proposed amendment is futile becauseit would not include indispensable parties (CSRT, IASA, or USIMT) and would thereby beprejudicial to Flag Church and Ship Church.

Rule 19 sets out a two-step approach for determining whether a party must be joined asindispensable. Winn-Dixie Stores Inc v Dolgencorp LLC _ F 3 d _ 2014 WL 842949, 24(11th Cir. Mar. 5, 2014). First, it must be determined whether the party is one who should be joinedif feasible. Id. Second, for all such necessary parties, a court determines whether the Rule 19(b)factors permit the litigation to continue if the party cannot be joined, or instead whether they areindispensable. Id f the party is a required party, but cannot be joined--i.e., because they arenon-diverse--Rule 19(b) provides a list of factors to determine whether, in equity and goodconscience, the action should proceed among the existing parties or should be dismissed. MolinasValle Del Cibao C por A v Lama 633 F.3d 1330, 1344 I th Cir. 2011)(citations and quotationsomitted); Focus on the Family v Pinellas Suncoast Transit Auth. 344 F.3d 1263, 1280 (11th Cir.2003) (quoting Challenge Homes Inc v Greater Naples Care Ctr. Inc. 669 F.2d 667, 669 (11thCir. 1982)). This analysis has a direct bearing on whether the proposed Amended Complaint wouldbe futile.

Flag Church and Ship Church contend that complete relief cannot be afforded because

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CSRT, USIMT, and IASA solicited, received, used, and possess the alleged contributions or theirequivalent (Dkt. 110 at 15). They also argue that CSRT, USIMT, and IASA cannot defend theirrights if hey are not before the Court. Finally, they contend that CSRT, USIMT, and IASA wouldbe subject to a substantial risk of inconsistent obligations because Plaintiffs' claims against CSRT,USIMT, and IASA, if any, would have to be brought in another forum.

The feasibility question turns on whether a person is subject to service of process andwhether their joinder will deprive the court of subject matter jurisdiction. See Fed. R Civ. P.19(a)(l). The parties acknowledge that CSRT, USIMT, and IASA are non-diverse and spoildiversity jurisdiction. (Dkt. 112 at 2 n. l ). It is, therefore, not feasible to join them as parties. In anyevent, they are not necessary parties under Rule 19(a).

i Rule 19(a)(l)(A): Complete relief can be accorded in CSRT's , USIMT's,nd IASA's absence

It has long been the rule that it is not necessary for all joint tortfeasors to be named asdefendants in a single lawsuit. Temple v Svnthes Corp. Ltd. 498 U.S. 5, 7, 111 S.Ct. 315, 112L.Ed.2d 263 ( 1990); see also Fed. R Civ. P. 19 advisory committee's note (1966) (noting that jointlyand severally liable defendants are permissive parties); Ingram v CSXTransp. Inc. 146 F.3d 858,861 n.2 (11th Cir. 1998) (the alleged joint tortfeasorwas a dispensable party); United States v Janke09-14044-CIV, 2009 WL 2525073, *2 (S.D. Fla. Aug. 17, 2009). As discussed, to the extentPlaintiffs ' proposed amended complaint implicates CSRT, USIMT, and IASA, they are implicatedas joint tortfeasors. As such, their joinder would be permissive. Moreover, Plaintiffs seekcompensatory and punitive damages in their fraud claims. There is no apparent reason completerelief on these claims could not be afforded from Flag Church and Ship Church. See United States

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v TownhomesofKingsLakeHOA Inc., 8:12-CV-2298-T-33TGW,2013 WL807152, *4(M.D.Fla.Mar. 5, 2013) (quoting Molinas Valle Del Cibao, C por A v Lama, 633 F.3d 1330, 1345 (11th Cir.2011) (' money is fungible; the recipient cares not from whence it came. ').

ii Rule 19(a)(l)(B): CSRT, USIMT, and IASA have not claimed a legallyprotected interestRule 19 requires a legally protected interest, and not merely a financial interest or interest

ofconvenience. ' Axiom Worldwide, Inc. v Becerra, 808-CV-1918-T-27TBM, 2009WL1347398,4 (M.D. Fla. May 13, 2009) (quoting Kenko Int / Inc. v Asolo S.r.l., 838 F.Supp. 503, 506

(D.Colo.1993)). CSRT, USIMT, and IASA have not claimed a legally protected interest in thislitigation. Flag Chuch and Ship Church assert that CSRT, USIMT, and IASA cannot defend theirrights before this Court. However, that interest amounts to no more than a speculative financialinterest.7 See id; Conceal City, L.L.C. v Looper Law Enforcement, LLC, 917 F. Supp. 2d 611, 622(N.D. Tex. 2013) (an interest in the outcome of he lawsuit (ie. possible future harm) is not the typeof interest contemplated under Rule 19(a)(l)(B)). Because neither the requirement of Rule19(a)(l)(A) nor 19(a)(l)(B) are met, CSRT, USIMT, and IASA are not required parties.

iii Rule 19(b): CSRT, USIMT, and IASA are not indispensable partiesThere is authority that following the conclusion that CSRT, USIMT, and IASA are not7 Even ifCSRT, USIMT, and IASA had a legally protected interest in this litigation, Flag Church and ShipChurch misconstrue the meaning ofRule 19(a)( l)(B)(ii) 's multiple liability clause in arguing that they would besubject to inconsistent obligations if Plaintiffs were to bring claims against CSRT, USIMT, and IASA in anotherforum. The clause was designed to compel joinder in order to 'avoid inconsistent obligations,' not 'inconsistent

adjudications. ' Janke, 2009 WL 2525073, 5 (citing 4 James Wm. Moore et al., Moore's Federal Practice,19.03[4][d]-[e] (3d ed.1997)). ' Inconsistent obligations occur when a party is unable to comply with one court'sorder without breaching another court's order concerning the same incident. ' Winn-Dixie Stores, Inc vDolgencorp, LLC, supra, (quoting Delgado v Plaza Las Ams., Inc., 139 F.3d 1, 3 (1st Cir.1998)); Becerra, 2009WL 1347398, at *4. That Flag Church and Ship Church may be found liable in this action, and CSRT, USIMT, andIASA not liable in another hypothetical action, or vice versa, does not raise the specter of conflicting obligationsthat Rule 19 guards against. Janke, 2009 WL 2525073, *5.

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is the entity that spearheaded the alleged improper practices, enjoining it from engaging in furtherimproper conduct will accord Plaintiffs the relief they seek. Moreover, having found no prejudiceto either Plaintiffs or any o the Scientology entities, the relevance o the second factor is severelydiminished, i not completely eliminated.

The fourth factor indicates that the court should consider whether there is any assurance thatthe plaintiff, i dismissed, could sue effectively in another forum where better joinder would bepossible. Fed. R Civ. P. 19 advisory committee's notes (1966). Presumably, Plaintiffs could sueall five entities in state court, although neither party has addressed this issue. However, as inMolinos this Court has invested significant resources in this matter.9 Molinos 633 F.3d at 1345.The concern expressed in Molinos for conserving judicial resources is present here and weighsagainst a finding that CSRT, USIMT, and IASA are indispensable parties. See i

In sum, joinder o CSRT, USIMT, and IASA is not feasible because their joinder woulddeprive the court o diversity jurisdiction. None o he factors weigh in favor o finding that CSRT,USIMT, and IASA are indispensable parties. The proposed amendment dropping CSRT, USIMT,and IASA is not futile.

Accordingly,1 The Second Amended Plaintiffs' Renewed Motion to Amend Complaint (Dkt. 108)

is GRANTED. Plaintiffs may file an amended complaint, as proposed, within ten 10) days o hisOrder.

2. Defendants IAS Administrations, Inc. 's, U.S. IAS Members Trust's and Church o

9 The action has been proceeding for almost sixteen months and has required extensive motion practice andcourt resources on issues such as attorney disqualification, arbitration, and jurisdiction.



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Scientology Religious Trust s Joint Motion to Dismiss for Lack o Subject Matter Jurisdiction(Dkt.90) is DENIED as moot

3. Defendants Objection and Motion to Strike Affidavit o Luis A Garcia (Dkt. 96) isDENIED as moot

4. The stay is lifted. . /_.DONE ND ORDERED this day o May, 2014.

Copies to: Counsel o Record

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Garcia v. Scientology: Order denying Scientology motion to dismiss