Schultz v. Doe 1 ( 2023 )

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 SAN JOSE DIVISION 7 8 DAWN SCHULTZ, an individual; DAVID Case No. 23-cv-03290-BLF JENKS, an individual; and DANAI 9 MOONYHAM, an individual, ORDER GRANTING PLAINTIFFS’ 10 Plaintiffs, MOTION TO REMAND 11 v. [Re: ECF 14] 12 DOE 1, a Utah corporation sole; DOE 2, a Utah corporation sole; DOE 3, a California 13 corporation sole; and DOES 4-10, inclusive, 14 Defendants. 15 16 Plaintiffs Dawn Schultz, David Jenks, and Danai Moonyham filed this action in the Santa 17 Clara County Superior Court, alleging that they were sexually abused by a church leader when 18 they were children. See Not. of Removal Ex. A (“Compl.”), ECF 1. Plaintiffs sue the church and 19 related corporate entities for negligence and intentional infliction of emotional distress, asserting 20 that those entities failed to take reasonable steps to protect Plaintiffs. See id. The entities are 21 named as Doe defendants pursuant to California Code of Civil Procedure § 340.1, which extends 22 the statute of limitations for claims arising from childhood sexual abuse but requires that in some 23 circumstances the defendants be named as Does pending corroboration of the charging allegations. 24 Defendant Doe 1 removed the action to federal district court on the basis of diversity of 25 citizenship. See Not. of Removal ¶¶ 4-13. Plaintiffs seek to remand the action. The Court 26 previously determined that Plaintiffs’ motion to remand is suitable for decision without oral 27 argument and vacated the hearing. See Order Vacating Hearing, ECF 30. 1 I. BACKGROUND 2 The complaint alleges the following facts: Defendants Doe 1, Doe 2, and Doe 3 3 (collectively, “Defendants”) are religious corporations. See Compl. ¶¶ 8-10. Doe 1 and Doe 2 are 4 incorporated in the state of Utah and Doe 3 is incorporated in the state of California. See id. As 5 part of Defendants’ religious mission, they select leaders to educate and minister to large 6 geographic areas known as “Stakes,” and sub-units of Stakes known as “Wards.” Id. ¶ 13. 7 Defendants operated and controlled the Milpitas Ward. See id. ¶ 6. During all times relevant to 8 this action, non-party Kenneth Jenks was a teacher, executive secretary, librarian, and church 9 leader of the Milpitas Ward. See id. ¶ 7. 10 Plaintiffs were members and parishioners of the Milpitas Ward when they were minor 11 children. See Compl. at 1. Plaintiffs were placed under the supervision of Kenneth Jenks. See id. 12 ¶ 44. Defendants knew that Kenneth Jenks previously had been reprimanded for sexual abuse of 13 children, but Defendants allowed Kenneth Jenks to supervise and control minor children, 14 including Plaintiffs. See id. ¶ 45. Defendants knew that Kenneth Jenks and other sexual predators 15 within the church used their positions to groom and sexually abuse children. See id. ¶ 48. 16 Kenneth Jenks sexually abused Dawn Schultz from 1978 to 1990, beginning when Dawn 17 was five years old and continuing until she was eighteen. See Compl. ¶ 50. The abuse occurred 18 on property owned, operated, and/or controlled by Defendants, and during activities that were 19 sponsored by Defendants, including girls’ summer camp and youth travel conferences. See id. ¶¶ 20 51-54. Dawn Shultz is now an adult woman residing in Missouri. See id. ¶ 1. 21 Kenneth Jenks sexually abused David Jenks from 1979 to 1987, beginning when David 22 was nine years old and continuing until David was seventeen. See Compl. ¶ 56. The abuse 23 occurred on property owned, operated, and/or controlled by Defendants, and during activities that 24 were sponsored by Defendants, including when David helped set up chairs prior to religious 25 service. See id. ¶¶ 57-60. David Jenks is now an adult male residing in California. See id. ¶ 2. 26 Kenneth Jenks sexually abused Danai Moonyham from 1978 to 1990, beginning when she 27 was three years old and continuing until she was sixteen. See Compl. ¶ 62. The abuse occurred 1 were sponsored by Defendants, including girls’ summer camp. See id. ¶¶ 63-66. Danai 2 Mooneyham is now an adult female residing in Texas. See id. ¶ 3. 3 Plaintiffs filed this action in the Santa Clara County Superior Court on December 14, 2022. 4 Although Plaintiffs claim to have suffered sexual abuse several decades ago, between 1978 and 5 1990, Plaintiffs allege that the suit is timely under California Code of Civil Procedure § 340.1, 6 which substantially extends the statute of limitations for such claims. See Compl. ¶ 20. Where, as 7 here, the plaintiffs are forty years of age or older, § 340.1 requires that each defendant be named 8 by “Doe” designation in the complaint “until there has been a showing of corroborative fact as to 9 the charging allegations against that defendant.” Cal. Civ. P. Code § 340.1(l). In compliance with 10 this statutory requirement, the complaint identifies the church and affiliated entities as DOE 1, a 11 Utah corporation, DOE 2, a Utah corporation, and DOE 3, a California corporation. See Compl. 12 ¶¶ 8-10. The complaint also asserts claims against Does 4-10, whose identities are unknown. 13 On June 30, 2023, Doe 1 removed the action to federal court on the basis of diversity of 14 citizenship. See Not. of Removal ¶¶ 4-13. While acknowledging that it appears on the face of the 15 complaint that both Plaintiff David Jenks and Doe 3 are California citizens, the notice of removal 16 asserts that there is diversity of citizenship between Plaintiffs and Defendants because: (1) the 17 citizenship of Doe defendants is not considered when determining the existence of diversity 18 jurisdiction in federal court; and (2) Doe 3 is a nominal or sham party. See id. ¶¶ 12 & n.1. 19 Plaintiffs seek remand of the action to state court. 20 II. LEGAL STANDARD 21 “A defendant may remove an action to federal court based on federal question jurisdiction 22 or diversity jurisdiction.” Hunter v. Philip Morris USA, 582 F.3d 1039, 1042 (9th Cir. 2009) 23 (citing 28 U.S.C. § 1441). A plaintiff who contests the existence of jurisdiction may file a motion 24 to remand. See 28 U.S.C. § 1447(c). “The strong presumption against removal jurisdiction means 25 that the defendant always has the burden of establishing that removal is proper, and that the court 26 resolves all ambiguity in favor of remand to state court.” Hunter, 582 F.3d at 1042 (quotation 27 marks and citation omitted). “If at any time before final judgment it appears that the district court 1 III. DISCUSSION 2 Under this legal standard, Doe 1 has the burden of establishing that removal is proper. As 3 noted above, Doe 1 removed the action on the basis of diversity of citizenship. Diversity 4 jurisdiction “requires complete diversity of citizenship, meaning that the citizenship of each 5 plaintiff is diverse from the citizenship of each defendant.” Demarest v. HSBC Bank USA, N.A., 6 920 F.3d 1223, 1226 (9th Cir. 2019) (quotation marks and citation omitted). 7 The notice of removal alleges that “Plaintiff David Jenks is an individual domiciled in 8 California.” Not. of Removal ¶ 6. Based on that allegation, David Jenks is a citizen of California 9 for purposes of determining the existence of diversity jurisdiction. See Kanter v. Warner-Lambert 10 Co., 265 F.3d 853, 857 (9th Cir. 2001) (a natural person’s citizenship is determined by the 11 person’s state of domicile). The notice of removal acknowledges the complaint’s allegation that 12 Doe 3 is a religious corporation, incorporated in the state of California. See Not. of Removal ¶ 12. 13 A corporation is a citizen of both its state of incorporation and the state in which it has its principal 14 place of business. See 28 U.S.C. § 1332(c)(1). If both Plaintiff David Jenks and Defendant Doe 3 15 are citizens of California, there is not complete diversity of citizenship between Plaintiffs and 16 Defendants, so diversity jurisdiction does not lie under § 1332. 17 In the notice of removal, Doe 1 asserts that complete diversity of citizenship exists despite 18 the complaint’s allegations that Doe 3 is a California corporation, because the citizenship of Doe 19 defendants is not considered when determining the existence of diversity jurisdiction. See Not. of 20 Removal ¶ 12. In a footnote, Doe 1 also argues that the citizenship of Doe 3 should be 21 disregarded because Doe 3 is a nominal or sham party. See id. n.1. 22 Plaintiffs argue in their motion to remand that Doe 3 is not a fictitious defendant, because 23 Doe 3’s identity is known, and the “Doe” designation was used only because it was required by 24 California Code of Civil Procedure § 340.1. For that reason, Plaintiffs argue, Doe 3’s California 25 citizenship should be considered and should result in remand on the basis that there is not 26 complete diversity of citizenship as required under 28 U.S.C. § 1332. Plaintiffs also point out that 27 if Doe 3’s California citizenship is considered, removal was improper because Doe 3 is a forum 1 removable solely on the basis of diversity jurisdiction “may not be removed if any of the parties in 2 interest properly joined and served as defendants is a citizen of the State in which such action is 3 brought.” 28 U.S.C. § 1441(b)(2). Finally, Plaintiffs argue that Doe 3 is not a sham defendant. 4 In its opposition to the remand motion, Doe 1 flips the order of the arguments it presented 5 in its notice of removal, arguing first that the California citizenship of Doe 3 should be disregarded 6 because Doe 3 is a nominal or sham party, and second that the citizenship of Doe defendants must 7 be disregarded under the removal statute. 8 Neither of Doe 1’s arguments is well-taken. The Court addresses the arguments in the 9 order presented in Doe 1’s notice of removal and Plaintiff’s motion to remand, first taking up the 10 citizenship of Doe defendants and then the assertion that Doe 3 is a nominal or sham defendant. 11 A. Citizenship of Doe Defendants 12 Doe 1 argues that the California citizenship of Doe 3 should be disregarded, because the 13 federal removal statute expressly states that: “In determining whether a civil action is removable 14 on the basis of the jurisdiction under section 1332(a) of this title, the citizenship of defendants 15 sued under fictitious names shall be disregarded.” 28 U.S.C. § 1441(b)(1). Plaintiffs contend that 16 this rule should not apply here, where California Code of Civil Procedure § 340.1 required 17 Plaintiffs to name the defendants by “Doe” designation in the complaint pending a showing of 18 corroborative facts as to the charging allegations. See Cal. Civ. P. Code § 340.1(l). 19 Plaintiffs assert that they know the identities of Doe 1, Doe 2, and Doe 3 and have served 20 those defendants. The evidence submitted by the parties shows that Plaintiffs served The Church 21 of Jesus Christ of Latter-Day Saints, Inc., a Utah corporation, as Doe 1. See Swaminathan Decl. ¶ 22 8 & Ex. B, ECF 18-1. Plaintiffs served the Corporation of the Presiding Bishop of the Church of 23 Jesus Christ of Latter-Day Saints, Inc., n/k/a Church of Jesus Christ of Latter-Day Saints, Inc., a 24 Utah corporation, as Doe 2. See id. ¶ 9 & Ex. C. The record evidence indicate that those two 25 corporations have merged, leaving a single Utah corporation known as The Church of Jesus Christ 26 of Latter-Day Saints (“the Church”). See Wilson Decl. ¶¶ 10-13 & Exs. A-E, ECF 18-2. Finally, 27 and more to the point here, Plaintiffs served the Corporation of the President of the San Jose 1 Decl. ¶¶ 8-11 & Exs. 4-6. Under these circumstances, Plaintiffs argue that the citizenship of Doe 2 1, Doe 2, and Doe 3 should be considered for purposes of determining whether diversity 3 jurisdiction exists. 4 Another court in this district addressed the identical issue on strikingly similar facts in 5 Geppert v. Doe 1, No. 23-CV-03257-SVK, 2023 WL 5804156 (N.D. Cal. Sept. 7, 2023), which 6 was not cited by either party. Geppert involved alleged sexual abuse of the plaintiff by non-party 7 Kenneth Jenks when the plaintiff was a minor child in the Milpitas Ward of the Church. See id. at 8 *1. The plaintiff filed suit in state court against the Church and related entities for negligence and 9 intentional infliction of emotional distress. See id. Pursuant to California Code of Civil Procedure 10 § 340.1, the plaintiff identified the entity defendants as Doe 1, Doe 2, and Doe 3 in the complaint. 11 See id. Doe 2 removed the suit to federal district court on the basis of diversity jurisdiction, and 12 the plaintiff moved to remand. See id. at *2. The plaintiff argued that there was no diversity 13 jurisdiction because both the plaintiff and Doe 3 were alleged to be California citizens. See id. 14 Doe 1 and Doe 2 opposed remand, arguing that the removal statute required the court to disregard 15 the California citizenship of Doe 3. See id. 16 The Geppert court agreed with the defendants that it was required to disregard the 17 citizenship of Doe 3 under the removal statute, 28 U.S.C. § 1441(b)(1). See Geppert, 2023 WL 18 5804156, at *3. The court concluded as follows: 19 [T]he removal statute obligates the Court to disregard Defendant Doe 3’s citizenship regardless of whether Doe 3 is actually fictitious or whether state law 20 mandates use of the Doe designation. Plaintiff cites no authority, and the Court is not aware of any, supporting the proposition that the California Code of Civil 21 Procedure overrides fundamental principles of diversity jurisdiction and removal as codified in the removal statute. 22 23 Id. However, the court determined that it was required to disregard the citizenship of all Doe 24 defendants, which presented the court with “the rare scenario in which a sole plaintiff is a citizen 25 of one state, and every single defendant (for purposes of assessing removal based on diversity 26 jurisdiction) is effectively a citizen of no state.” Id. Under those circumstances, the Geppert court 27 found that diversity jurisdiction did not exist, because the defendants had not established they 1 The Geppert court relied on Ninth Circuit decisions finding that where the defendant is not 2 a citizen of a state for diversity purposes, there is no diversity jurisdiction under § 1332. See 3 Louisiana Mun. Police Employees’ Ret. Sys. v. Wynn, 829 F.3d 1048, 1056 (9th Cir. 2016) 4 (holding that a defendant who was a United States citizen but was not domiciled in any state was 5 “stateless” for purposes of § 1332 and therefore destroyed complete diversity under § 1332); 6 Hancock Fin. Corp. v. Fed. Sav. & Loan Ins. Corp., 492 F.2d 1325, 1329 (9th Cir. 1974) (holding 7 that diversity jurisdiction did not exist where the defendant was “not a citizen of any particular 8 state for diversity purposes”). The Geppert court also relied on a decision of another district court 9 in this circuit, Batista v. Doe Driver I, No. 2:22-cv-01021-APG-VCF, 2022 WL 4329793 (D. Nev. 10 Sept. 19, 2022), which specifically addressed whether diversity jurisdiction exists when the 11 complaint names only Doe defendants. 12 In Batista, the plaintiff was rear-ended by an unknown driver who fled the scene, and the 13 plaintiff thereafter filed a suit in state court alleging negligence claims against Doe Drivers and 14 Doe Owners. See Batista, 2022 WL 4329793, at *1. The plaintiff’s insurer intervened in the state 15 court action, after which the plaintiff named the insurer as a defendant, and the insurer removed 16 the action to federal court. See id. On the plaintiff’s motion to remand, the district court noted 17 that if a suit is not initially removable, it may not later be removed based on diversity jurisdiction 18 more than one year after commencement of the suit. See id. at *2. The Batista court determined 19 that the suit was not removable when filed against only Doe defendants, reasoning that “[a]lthough 20 the citizenship of Doe defendants does not destroy diversity for removability, neither does it 21 presumptively create it.” Id. at *1. The court noted that the insurer had not pointed to “any 22 authority for the proposition that diversity exists where only fictitious defendants are named.” Id. 23 On that basis, the Batista court found the insurer’s removal of the suit more than one year after 24 commencement to be untimely, and remanded the action. See id. at *2. 25 Based on Geppert and the cases cited therein, this Court concludes that if it accepts Doe 26 1’s argument that the citizenship of Doe defendants must be disregarded under the removal statute, 27 there is no diversity jurisdiction. However, given the lack of guidance from the Ninth Circuit on 1 defendants and the applicable state statute’s requirement that defendants be named as Does, this 2 Court is reluctant to make a final determination on the issue at this time. The Court need not do so 3 here, because the outcome of Plaintiffs’ motion is the same however the issue is decided. As 4 discussed above, there is no diversity jurisdiction if the citizenship of the Doe defendants is 5 disregarded. And as discussed below, there is no diversity jurisdiction if the citizenship of the 6 Doe defendants is considered, because Doe 1 has not established that Doe 3 is a nominal or sham 7 defendant whose California citizenship should be disregarded. 8 B. Nominal or Sham Defendant 9 Doe 1 argues that Doe 3’s California citizenship should be disregarded because Doe 3 is a 10 nominal or sham party that has been fraudulently joined. “[O]ne exception to the requirement for 11 complete diversity is where a non-diverse defendant has been fraudulently joined.” Hunter, 582 12 F.3d at 1043 (quotation marks and citation omitted). “Joinder is fraudulent [i]f the plaintiff fails to 13 state a cause of action against a resident defendant, and the failure is obvious according to the 14 settled rules of the state.” Id. (quotation marks and citation omitted, alteration in original). “In 15 such a case, the district court may ignore the presence of that defendant for the purpose of 16 establishing diversity.” Id. 17 The Ninth Circuit has recognized a “general presumption against fraudulent joinder,” and 18 emphasized that a defendant who asserts that a party is fraudulently joined carries a “heavy 19 burden.” Hunter, 582 F.3d at 1046. “The defendant seeking removal to the federal court is 20 entitled to present the facts showing the joinder to be fraudulent.” Ritchey v. Upjohn Drug Co., 21 139 F.3d 1313, 1318 (9th Cir. 1998). The defendant must “show that the individuals joined in the 22 action cannot be liable on any theory.” Id. “If factual issues are in dispute, the Court must resolve 23 all disputed questions of fact . . . in the plaintiff’s favor.” De Laveaga Serv. Ctr., Inc. v. 24 Nationwide Ins. Co., No. 21-CV-03389-BLF, 2021 WL 4400215, at *3 (N.D. Cal. Sept. 27, 2021) 25 (quotation marks and citation omitted, alteration in original). “[R]emand must be granted unless 26 the defendant shows that the plaintiff would not be afforded leave to amend his complaint to cure 27 [the] purported deficiency.” Id. at *2 (quotation marks and citation omitted). 1 Jesus Christ of Latter-Day Saints, a California corporation, is a nominal or sham defendant that 2 has no connection with the allegations of the complaint. Doe 1 submits a declaration from 3 Branden Wilson, the Director of Risk Management for the Church, who states that the California 4 corporation was formed in 1973 and currently exists to hold property. See Wilson Decl. ¶¶ 17-18, 5 ECF 18-2. Mr. Wilson does not address the scope of corporation’s purpose or activities at the 6 time of its formation in 1973, focusing only on its present role within the Church when stating that 7 “[c]urrently, it holds personal property such as kitchen equipment at a youth camp located in 8 Lower Bear Reservoir, Amador County, California, leased by the Church Corporation.” Id. ¶ 18. 9 Mr. Wilson states that the Corporation of the President of the San Jose Stake, Church of Jesus 10 Christ of Latter-Day Saints, a California corporation, is not an not an ecclesiastical unit, and that it 11 does not have a clergy, teachers, librarians, executive secretaries, or parishioners. See id. Mr. 12 Wilson asserts that the corporation “does not have any connection to the Milpitas Ward referred to 13 in the Complaint,” emphasizing that “[i]t is a separate corporation that exists solely for the 14 purpose of holding property.” Id. Based on this evidence, Doe 1 asks the Court to consider Doe 3 15 to be a nominal or sham defendant and to disregard its California citizenship. 16 Doe 1 speculates that Plaintiffs may have intended to sue the “San Jose Stake,” an 17 unincorporated ecclesiastical subunit of the Church, as Doe 3. Doe 1 points to attorney 18 correspondence about the identify of Doe 3, in which Plaintiffs’ counsel stated that Doe 3 was the 19 “San Jose Stake of the Church of Jesus-Christ of Latter-Day Saints, Inc.” Swaminathan Decl. ¶ 20 11. If Doe 3 is the “San Jose Stake,” it is not a separate entity capable of defeating diversity. 21 In their reply, Plaintiffs state unequivocally that they intended to sue, and did sue, the 22 Corporation of the President of the San Jose Stake, Church of Jesus Christ of Latter-Day Saints, a 23 California corporation, as Doe 3. Plaintiffs deny that they ever sought to sue an ecclesiastical 24 subunit of the Church (which would not be a separate entity) as Doe 3. Plaintiffs submit a 25 declaration of counsel explaining that they sued the Corporation of the President of the San Jose 26 Stake, Church of Jesus Christ of Latter-Day Saints, based on public documents disclosing its 27 California incorporation and apparent link with the San Jose Stake, which encompasses the 1 had an opportunity to take discovery to determine the scope of the corporation’s involvement with 2 || the San Jose Stake and Milpitas Ward. Plaintiffs argue that the declaration submitted by Doe 1 3 does not establish that the Corporation of the President of the San Jose Stake, Church of Jesus 4 Christ of Latter-Day Saints, a California corporation, had no ownership, operation, or control over 5 the Milpitas Ward, Kenneth Jenks, or Church properties when the sexual abuse occurred. 6 The Court agrees with Plaintiffs that Doe 1 has not carried its heavy burden of establishing 7 that Doe 3 is a fraudulently joined defendant. Mr. Wilson’s declaration statements describing the 8 role of the Corporation of the President of the San Jose Stake, Church of Jesus Christ of Latter- 9 Day Saints, a California corporation, is couched entirely in the present tense. He does not speak to 10 || the role of the corporation when it was established in 1973 or in the decades thereafter, when the 11 sexual abuse is alleged to have occurred. Moreover, Mr. Wilson states that the California 12 || corporation “holds property,” including property related to a youth camp leased by the Church. 5 13 || See Wilson Decl. § 18. Two of the three plaintiffs allege that they were sexually molested at girls’ 14 summer camp. Based on this record, the Court cannot conclude that it would be impossible for 3 15 Plaintiffs to establish liability against the Corporation of the President of the San Jose Stake, 16 Church of Jesus Christ of Latter-Day Saints, a California corporation, which is sued as Doe 3. 3 17 C. Conclusion 18 For the reasons discussed above, the Court finds that the removing defendant, Doe 1, has 19 || failed to meet its burden to establish the existence of diversity jurisdiction. Accordingly, the 20 motion to remand is GRANTED. 21 IV. ORDER 22 (1) Plaintiff's motion to remand is GRANTED. 23 (2) The Clerk shall remand the case to the Santa Clara County Superior Court and 24 close the file in this Court. 25 (3) This order terminates ECF 14. 26 27 Dated: November 16, 2023 bi j BETH LABSON FREEMAN 28 United States District Judge