TAMPA DIVISION MARIA DEL ROCIO BURGOS GARCIA and LUIS A. GARCIA SAZ, Plaintiffs, v. CHURCH OF SCIENTOLOGY RELIGIOUS TRUST, CHURCH OF SCIENTOLOGY FLAG SERVICE ORGANIZATION, INC., CHURCH OF SCIENTOLOGY FLAG SHIP SERVICE ORGANIZATION, INC., IAS ADMINISTRATIONS, INC. and U.S. IAS MEMBERS TRUST, Defendants. I ~ ~ ORDER Case No: 8:13-cv-220-T-27TBM BEFORE THE COURT is the Second Amended Plaintiffs' Renewed Motion to Amend Complaint and Memorandum of Law (Dkt. 108) attaching a proposed amended complaint (Dkt. 108- 1), and Defendants' Flag Church and Ship Church, M.emorandum in Opposition (Dkt. 110). Also before the Court is Defendants IAS Administrations, Inc.'s, U.S. IAS Members Trust's and Church of 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 jurisdictional discovery, 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. 1 Case 8:13-cv-00220-JDW-TBM Document 113 Filed 05/02/14 Page 1 of 12 PageID 2694 I. Background Plaintiffs 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 and deceptive trade practices in connection with monetary contributions and payments made to various Scientology entities. 1 According to the Complaint (Dkt. 1 ), Plaintiffs are former members of the Church of Scientology who contributed hundreds of thousands of dollars to these various entities as a result of false and misleading representations and/or omissions regarding the "Super Power Project" and various humanitarian initiatives. 2 In addition, the Complaint alleges that Plaintiffs paid deposits towards counseling services ("auditing"), training, and accommodations that were never provided. 3 Defendants moved to compel arbitration of all of Plaintiffs' claims in accordance with several purported agreements to arbitrate contained in the numerous Religious Services Enrollment Applications, Agreements and General Releases Plaintiffs completed as a prerequisite to participating in Scientology religious training and services (Dkts. 8, 15, 18). While these motions were pending, Defendants CSRT, USIMT, and IASA filed a motion to dismiss based on lack of diversity jurisdiction (Dkt. 90). Specifically, CSRT, USIMT, and IASA contend that they, like 1 The five Scientology entities currently named as defendants are: Church of Scientology Flag Service Organization, 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, which took over eighteen years to complete and open (Dkt. 1, 126). Plaintiffs allegedly contributed a total of$340,000 to this 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 Case 8:13-cv-00220-JDW-TBM Document 113 Filed 05/02/14 Page 2 of 12 PageID 2695 Plaintiffs, are citizens of California, and therefore diversity jurisdiction is lacking. The case was stayed pending resolution of the jurisdictional issue (Dkt. 100). Following the ninety-day period for discovery, the parties were given leave to file supplemental memoranda in connection with the motion to dismiss (Dkt. 102). Two days before Defendants' memorandum was due, Plaintiffs filed the a motion to amend their Complaint based on new information learned through discovery (Dkt. 103). The motion to amend was denied without prejudice to refiling it with a 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 activities relating 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 resolve the diversity jurisdictional issue. 4 The proposed amended complaint revises several paragraphs to conform 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, and IASA should be permitted as these entities are nominal and dispensable parties. Plaintiffs assert that none of the parties will be harmed by dismissal of CSRT, USIMT, and IASA as their presence provides no tactical advantage to Flag Church and Ship Church and the close inter-relationship among the Scientology entities permits those entities to resolve the sharing of damages amongst themselves (Dkt. 112 at 3). Alternatively, Plaintiffs suggest that CSRT, USIMT, and IASA could be dismissed with prejudice. (id.). 4 Plaintiffs do not dispute that the evidence Defendants submitted with their supplemental memorandum in support of the motion to dismiss reflects that CSRT, USIMT, and IASA are not diverse from Plaintiffs (Dkt. 112 at 2 n. I). 3 Case 8:13-cv-00220-JDW-TBM Document 113 Filed 05/02/14 Page 3 of 12 PageID 2696 Flag Church and Ship Church respond that dismissal of CSRT, USIMT, and IASA does not cure 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 be considered for purposes of diversity jurisdiction. Second, they contend that because CSRT, USIMT, and IASA are indispensable parties, dropping them would be highly prejudicial to Flag Church and Ship 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 the case, that Plaintiffs tied in Flag Church and Ship Church by alleging a joint enterprise between the five 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. P. 15(a)(2). "In the absence of any apparent or declared reason-such as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment, etc.-the leave sought should, as the rules require, be 'freely given."' Foman v. 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 joint venture or partnership Flag 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 the identity or citizenship of the other members of the purported joint venture. "Leave to amend a 4 Case 8:13-cv-00220-JDW-TBM Document 113 Filed 05/02/14 Page 4 of 12 PageID 2697 complaint is futile when the complaint as amended would still be properly dismissed or be immediately 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 and fundraising activities and fraudulent representations with respect to the Super Power project were carried out by employees of Flag Church at Flag Church facilities, as opposed to CSRT, as originally alleged in the Complaint (see Dkt. 108-1, , 25). The proposed amended complaint alleges that "specially appointed fundraising representatives," are "contracted employees of FLAG (even though they may claim to be 'staff members' of other entities, an internal Scientology designation that has no legal significance but is designed to deceive Plaintiffs and others)" (id.,, 28). With respect to the claims regarding the humanitarian initiatives, the proposed amended complaint alleges that International Association ofScientologists ("IAS") representatives, as opposed to 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 by way of a "fraudulent enterprise" (see Dkt.108-1, ,, 56, 102, 108). It also alleges that "Defendants and their agents" made false statements in order to induce Plaintiffs to give money (id.,, 74). In addition, the proposed amended complaint alleges specific conduct by Flag Church and Ship Church representatives (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, concert of action, agents, and employees, the proposed amended complaint at the most suggests that the various Scientology entities may have acted in concert as joint or multiple tortfeasors in allegedly defrauding Plaintiffs and causing them to suffer monetary losses, rather than as a joint venture or 5 Case 8:13-cv-00220-JDW-TBM Document 113 Filed 05/02/14 Page 5 of 12 PageID 2698 partnership. 5 Although the proposed amended complaint includes the allegation that "the Church of Scientology ... is comprised of various corporations and related entities" that "make some efforts to appear distinct, [when] they are not in fact separate" (id, 4 ), this general allegation does not amount to an allegation of a joint venture or partnership. 6 The proposed amended complaint also alleges that Defendants "function as an interrelated and interdependent network of entities" (id., 20) and that "Defendants acted in concert either as agents or principals of one another, partners, joint venturers, or co-conspirators" (id, 21 ). Importantly, "Defendants," for purposes of the proposed amended complaint, are Flag Church and Ship Church, and not CSRT, IASA, or USIMT. These allegations will not be construed as a claim that Flag Church and Ship Church acted as part of a joint venture or partnership with unnamed entities such that the citizenship of these entities must be considered for purposes of diversity jurisdiction. And that is not what the amended complaint alleges. Moreover, whether Plaintiffs will be successful on their theory that the fundraising representatives are contracted employees of Flag Church and Ship Church is not an appropriate consideration 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 or through 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 Ins., 507 So. 2d 1080, 1090 (Fla.1987)). 6 "A joint venture is a 'legal relationship resulting from an agreement between two or more persons to engage 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 essential elements of a joint venture are: ( 1) a community of interest in the performance of a common purpose, (2) joint control 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 to exist if any element is missing." Id (quotations and citations omitted). These elements are not alleged in the proposed amended complaint. 6 Case 8:13-cv-00220-JDW-TBM Document 113 Filed 05/02/14 Page 6 of 12 PageID 2699 of Am. Mideast, Ltd., 800 F.2d 1577, 1579-80 (11th Cir. 1986) ("The issue is not whether [the plaintiffs] may ultimately prevail on [their] theory, but whether the allegations are sufficient to allow them to conduct discovery in an attempt to prove their allegations."). B. Plaintiffs' proposed amendment is not futile because CSRT, USIMT, and IASA are neither required nor indispensable parties Flag Church and Ship Church argue that Plaintiffs' proposed amendment is futile because it would not include indispensable parties (CSRT, IASA, or USIMT) and would thereby be prejudicial to Flag Church and Ship Church. Rule 19 sets out a two-step approach for determining whether a party must be joined as indispensable. Winn-Dixie Stores, Inc. v. Dolgencorp, LLC, _F.3d _, 2014 WL 842949, 24 (11th Cir. Mar. 5, 2014). First, it must be determined whether the party "is one who should be joined if 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 are indispensable." Id. If the party is a required party, "but cannot be joined--i.e., because they are non-diverse--Rule 19(b) provides a list of factors to determine whether, in equity and good conscience, the action should proceed among the existing parties or should be dismissed." Molinas Valle Del Cibao, C. por A. v. Lama, 633 F.3d 1330, 1344 (I Ith Cir. 2011)(citations and quotations omitted); 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 (11th Cir. 1982)). This analysis has a direct bearing on whether the proposed Amended Complaint would be futile. Flag Church and Ship Church contend that complete relief cannot be afforded because 7 Case 8:13-cv-00220-JDW-TBM Document 113 Filed 05/02/14 Page 7 of 12 PageID 2700 CSRT, USIMT, and IASA "solicited, received, used, and possess the alleged contributions or their equivalent" (Dkt. 110 at 15). They also argue that CSRT, USIMT, and IASA cannot defend their rights if they are not before the Court. Finally, they contend that CSRT, USIMT, and IASA would be 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 and whether 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 "spoil" diversity jurisdiction. (Dkt. 112 at 2 n. l ). It is, therefore, not feasible to join them as parties. In any event, 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, and IASA's absence "It has long been the rule that it is not necessary for all joint tortfeasors to be named as defendants in a single lawsuit." Temple v. Svnthes Corp., Ltd., 498 U.S. 5, 7, 111 S.Ct. 315, 112 L.Ed.2d 263 ( 1990); see also Fed. R. Civ. P. 19 advisory committee's note (1966) (noting that jointly and 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. Janke, 09-14044-CIV, 2009 WL 2525073, *2 (S.D. Fla. Aug. 17, 2009). As discussed, to the extent Plaintiffs' proposed amended complaint implicates CSRT, USIMT, and IASA, they are implicated as joint tortfeasors. As such, their joinder would be permissive. Moreover, Plaintiffs seek compensatory and punitive damages in their fraud claims. There is no apparent reason complete relief on these claims could not be afforded from Flag Church and Ship Church. See United States 8 Case 8:13-cv-00220-JDW-TBM Document 113 Filed 05/02/14 Page 8 of 12 PageID 2701 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 legally protected interest "Rule 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 this litigation. Flag Chuch and Ship Church assert that CSRT, USIMT, and IASA cannot defend their rights before this Court. However, that interest amounts to no more than a speculative financial interest. 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 the lawsuit (ie. possible future harm) is not the type of "interest" contemplated under Rule 19(a)(l)(B)). Because neither the requirement of Rule 19(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 parties There is authority that following the conclusion that CSRT, USIMT, and IASA are not 7 Even ifCSRT, USIMT, and IASA had a legally protected interest in this litigation, Flag Church and Ship Church misconstrue the meaning of Rule 19(a)(l)(B)(ii)'s "multiple liability" clause in arguing that they would be subject to inconsistent obligations if Plaintiffs were to bring claims against CSRT, USIMT, and IASA in another forum. "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's order without breaching another court's order concerning the same incident."' Winn-Dixie Stores, Inc. v. Dolgencorp, LLC, supra, (quoting Delgado v. Plaza Las Ams., Inc., 139 F.3d 1, 3 (1st Cir.1998)); Becerra, 2009 WL 1347398, at *4. That Flag Church and Ship Church may be found liable in this action, and CSRT, USIMT, and IASA not liable in another hypothetical action, or vice versa, "does not raise the specter of conflicting obligations that Rule 19 guards against." Janke, 2009 WL 2525073, *5. 9 Case 8:13-cv-00220-JDW-TBM Document 113 Filed 05/02/14 Page 9 of 12 PageID 2702 required parties under Rule 19(a), an inquiry under Rule 19(b) is unnecessary. See Winn-Dixie Stores, Inc. v. Dolgencorp, LLC, supra, ("Big Lots does not face section (B)(ii) 'inconsistent obligations,' and has no other Rule 19( a) hook on which to hang its mandatory joiner hat. As a result, we need not reach the second step to consider, under Rule 19(b), whether, in equity and good conscience, the action should proceed among the existing parties or should be dismissed."). Assuming, however, that CSRT, USIMT, and IASA are required parties, they are not indispensable under Rule 19(b ). To begin with, no compelling argument has been presented to show that any of the Scientology entities would suffer meaningful prejudice were this action to proceed in the absence of CSRT, USIMT, and IASA, the first factor in a Rule 19(b) analysis. And, none can be discerned. 8 "The second factor calls attention to the measures by which prejudice may be averted or lessened." Fed. R. Civ. P. 19 advisory committee's notes (1966). The third factor "calls attention to the extent of the relief that can be accorded among the parties joined." Fed. R. Civ. P. 19 advisory committee's notes (1966). This factor meshes with other factors, especially the second. Id. However, factors two and three only "come into play when ... litigants seek specific relief such as an injunction. In that context, if a party ultimately responsible for the plaintiffs woes is not present, the court cannot direct that party to change its behavior. Money damages lack these concerns. Money is fungible; the recipient cares not from whence it came." Molinas, 633 F.3d at 1344 (quotation and citation omitted). Plaintiffs seek money damages for all of their claims, with the exception of the unfair and deceptive trade practices claim (Count VI). If, however, Flag Church 8 Although Flag Church and Ship Church state they will be "highly prejudiced" if the other defendants are dismissed as parties, (Dkt. 110 at 14), they do not elaborate as to what prejudice they will suffer. 10 Case 8:13-cv-00220-JDW-TBM Document 113 Filed 05/02/14 Page 10 of 12 PageID 2703 ' is the entity that "spearheaded" the alleged improper practices, enjoining it from engaging in further improper conduct will accord Plaintiffs the relief they seek. Moreover, having found no prejudice to either Plaintiffs or any of the Scientology entities, the relevance of the second factor is severely diminished, if not completely eliminated. The fourth factor "indicates that the court should consider whether there is any assurance that the plaintiff, if dismissed, could sue effectively in another forum where better joinder would be possible." Fed. R. Civ. P. 19 advisory committee's notes (1966). Presumably, Plaintiffs could sue all five entities in state court, although neither party has addressed this issue. However, as in Molinos, 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 weighs against a finding that CSRT, USIMT, and IASA are indispensable parties. See id In sum, joinder of CSRT, USIMT, and IASA is not feasible because their joinder would deprive the court of diversity jurisdiction. None of the factors weigh in favor of 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 of this Order. 2. Defendants IAS Administrations, Inc. 's, U.S. IAS Members Trust's and Church of 9 The action has been proceeding for almost sixteen months and has required extensive motion practice and court resources on issues such as attorney disqualification, arbitration, and jurisdiction. 11 Case 8:13-cv-00220-JDW-TBM Document 113 Filed 05/02/14 Page 11 of 12 PageID 2704 Scientology Religious Trust's Joint Motion to Dismiss for Lack of Subject Matter Jurisdiction(Dkt. 90) is DENIED as moot. 3. Defendants' Objection and Motion to Strike Affidavit of Luis A Garcia (Dkt. 96) is DENIED as moot. 4. The stay is lifted. ,.,/_. DONE AND ORDERED this L day of May, 2014. Copies to: Counsel of Record 12 Case 8:13-cv-00220-JDW-TBM Document 113 Filed 05/02/14 Page 12 of 12 PageID 2705
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