1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 CASA NIDO PARTNERSHIP, Case No. 20-cv-07923-EMC
8 Plaintiff, ORDER DENYING DEFENDANT’S 9 v. MOTION TO DISMISS FIRST AMENDED COMPLAINT 10 JAE KWON, et al., Docket No. 46 11 Defendants.
12 13 14 I. INTRODUCTION 15 Plaintiff Casa Nido Partnership (“Plaintiff”) filed suit against Defendants Catherine 16 O’Hanks, Jae Kwon, and Lynn Marie Garibotti (“Defendant Garibotti”), who sequentially owned 17 and operated a dry-cleaning facility over a 47-year period. Docket No. 38 (“FAC”) at 1. Plaintiff 18 alleges that the Defendants, while operating the facility, released Tetrachloroethylene (“PCE”) 19 onto the floor and into the groundwater below the facility, for which Plaintiff spent hundreds of 20 thousands of dollars remediating. Id. at 1. Plaintiff alleges that it is entitled to indemnification 21 and contribution from the Defendants under the federal Comprehensive Environmental Response, 22 Compensation, and Liability Act (“CERCLA”), California’s Hazardous Substance Account Act 23 (“HSAA”), the California Water Code, and on other California state law grounds. Id. Pending 24 before the Court is Defendant Garibotti’s motion to dismiss for failure to state a claim upon which 25 relief can be granted. Defendant Garibotti argues that she was not a trustee but a trust beneficiary, 26 and therefore cannot be held liable. Docket No. 63 (“Mot.”) at 1. As the basis for her argument, 27 she seeks to introduce documents showing that she was a trust beneficiary under the incorporation 1 II. BACKGROUND 2 According to Plaintiff’s FAC, Defendants Catherine O’Hanks, Jae Kwon, and Defendant 3 Garibotti sequentially owned and operated a dry-cleaning facility in California from 1960 to 2007. 4 FAC at 1. Plaintiff alleges that in the operation of the dry-cleaning facility, the Defendants 5 released or caused the release of PCE onto the floor, through the drains, and into the groundwater 6 below the facility. Id. PCE is a manufactured chemical and hazardous substance, as well as a 7 potential carcinogen. Id. 8 Plaintiff owned the Property from 1976 to 1992. Plaintiff alleges that Defendant Garibotti 9 was the successor trustee of the Claudio Garibotti Trust, which owned the Property between 1952 10 to 1976. Id. at 1, 3–4. Therefore, Plaintiff alleges that Defendant Garibotti held title to and 11 managed the Property, including the building, during the time Defendant O’Hanks operated the 12 dry-cleaning business on the Property and improperly disposed of fluids containing PCE. Id. 13 Plaintiff learned of the contamination when the facility closed in 2016, spent hundreds of 14 thousands of dollars remediating the site, and filed this lawsuit. Id. Plaintiff further states that the 15 total costs associated with the investigations and remediation of this contamination will likely be 16 as much as $1,000,000 or more. FAC at 6. 17 III. DISCUSSION 18 The premise of Defendant Garibotti’s motion to dismiss lies entirely on the assertion that 19 Defendant Garibotti was not a trustee but a trust beneficiary, and therefore cannot be held liable. 20 Mot. at 1. Therefore, Defendant Garibotti attempts to introduce a Trust Agreement and a letter 21 from a bank discussing the trust as evidence that she was not a trustee, under the incorporation by 22 reference doctrine. Id. at 2. 23 On a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), evidence beyond 24 the pleading should generally not be considered. Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 25 988, 998 (9th Cir. 2018). An exception to this rule is when the document is incorporated by 26 reference into the complaint. Id. The incorporation by reference doctrine “is a judicially created 27 doctrine that treats certain documents as though they are part of the complaint itself.” Id. at 1002. 1 support their claims, while omitting portions of those very documents that weaken—or doom— 2 their claims.” Id. at 1002. Such documents may be considered as “part of the complaint” without 3 converting the Rule 12(b)(6) motion into one for summary judgment. United States v. Ritchie, 4 342 F.3d 903, 908 (9th Cir. 2003). Therefore, “a court may assume [that an incorporated 5 document’s] contents are true for purposes of a motion to dismiss under Rule 12(b)(6).” Khoja, 6 899 F.3d at 1003. 7 The doctrine “permits a district court to consider documents whose contents are alleged in 8 a complaint and whose authenticity no party questions, but which are not physically attached to 9 the . . . pleadings.” Ritchie, 342 F.3d at 908 (internal quotation marks omitted). Such documents 10 may be incorporated “if the plaintiff refers extensively to the document or the document forms the 11 basis of the plaintiff’s claim.” Id. 12 Whether a document “forms the basis” of a complaint turns on whether the complaint 13 “necessarily relies” on that document. Ecological Rights Foundation v. Pacific Gas and Elec. Co., 14 713 F.3d 502 (9th Cir. 2013). “A court may consider evidence on which the complaint 15 “necessarily relies” if: (1) the complaint refers to the document; (2) the document is central to the 16 plaintiff’s claim; and (3) no party questions the authenticity of the copy attached to the 12(b)(6) 17 motion.” Marder v. Lopez, 450 F.3d 445, 448 (9th Cir. 2006). An example of necessary reliance 18 is when a document serves as the foundation for an element of the claim. See Khoja, 899 F.3d at 19 1005 (finding the district court did not abuse its discretion in incorporating by reference an article 20 that “revealed the materiality of [the defendant’s] alleged misrepresentations and omissions”); see 21 also Marder, 450 F.3d at 448–49 (a release of claims was incorporated by reference when the 22 interpretation of the release was necessary to the plaintiff’s claims). 23 The Ninth Circuit in Knievel extended this doctrine to allow the defendant to attach a 24 document in its motion to dismiss where the plaintiff does not explicitly allege the contents of the 25 document in the complaint, under some circumstances. In order for this extension to apply, the 26 plaintiff’s claim must depend on the contents of the document and the parties must not dispute the 27 authenticity of the document. Knievel v. ESPN, 393 F.3d 1068 (9th Cir. 2005) (allowing the 1 disputed for authenticity in a defamation lawsuit). 2 Defendant Garibotti argues that the proposed trust documents can be incorporated because 3 the FAC relies on them, allowing the Court to consider their contents. Reply at 3. Plaintiff 4 counters that Defendant Garibotti cannot introduce extrinsic documents in support of her motion. 5 Opp’n at 2. 6 Neither the trust agreement nor the letter is discussed in the FAC; therefore, they cannot be 7 introduced on the basis that Plaintiff refers extensively to the document. The only remaining 8 argument Defendant Garibotti can make is that the proposed documents “form the basis” of the 9 FAC because the FAC necessarily relies on those documents. However, while it may seem 10 firsthand that the issue of Defendant Garibotti’s role in the trust is “central” to the FAC, the 11 allegations in the FAC itself do not depend on the contents of the proposed documents. Rather, 12 the FAC depends on the factual premise that Defendant Garibotti is a trustee, which Defendant 13 Garibotti attempts to refute using the proposed documents.
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1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 CASA NIDO PARTNERSHIP, Case No. 20-cv-07923-EMC
8 Plaintiff, ORDER DENYING DEFENDANT’S 9 v. MOTION TO DISMISS FIRST AMENDED COMPLAINT 10 JAE KWON, et al., Docket No. 46 11 Defendants.
12 13 14 I. INTRODUCTION 15 Plaintiff Casa Nido Partnership (“Plaintiff”) filed suit against Defendants Catherine 16 O’Hanks, Jae Kwon, and Lynn Marie Garibotti (“Defendant Garibotti”), who sequentially owned 17 and operated a dry-cleaning facility over a 47-year period. Docket No. 38 (“FAC”) at 1. Plaintiff 18 alleges that the Defendants, while operating the facility, released Tetrachloroethylene (“PCE”) 19 onto the floor and into the groundwater below the facility, for which Plaintiff spent hundreds of 20 thousands of dollars remediating. Id. at 1. Plaintiff alleges that it is entitled to indemnification 21 and contribution from the Defendants under the federal Comprehensive Environmental Response, 22 Compensation, and Liability Act (“CERCLA”), California’s Hazardous Substance Account Act 23 (“HSAA”), the California Water Code, and on other California state law grounds. Id. Pending 24 before the Court is Defendant Garibotti’s motion to dismiss for failure to state a claim upon which 25 relief can be granted. Defendant Garibotti argues that she was not a trustee but a trust beneficiary, 26 and therefore cannot be held liable. Docket No. 63 (“Mot.”) at 1. As the basis for her argument, 27 she seeks to introduce documents showing that she was a trust beneficiary under the incorporation 1 II. BACKGROUND 2 According to Plaintiff’s FAC, Defendants Catherine O’Hanks, Jae Kwon, and Defendant 3 Garibotti sequentially owned and operated a dry-cleaning facility in California from 1960 to 2007. 4 FAC at 1. Plaintiff alleges that in the operation of the dry-cleaning facility, the Defendants 5 released or caused the release of PCE onto the floor, through the drains, and into the groundwater 6 below the facility. Id. PCE is a manufactured chemical and hazardous substance, as well as a 7 potential carcinogen. Id. 8 Plaintiff owned the Property from 1976 to 1992. Plaintiff alleges that Defendant Garibotti 9 was the successor trustee of the Claudio Garibotti Trust, which owned the Property between 1952 10 to 1976. Id. at 1, 3–4. Therefore, Plaintiff alleges that Defendant Garibotti held title to and 11 managed the Property, including the building, during the time Defendant O’Hanks operated the 12 dry-cleaning business on the Property and improperly disposed of fluids containing PCE. Id. 13 Plaintiff learned of the contamination when the facility closed in 2016, spent hundreds of 14 thousands of dollars remediating the site, and filed this lawsuit. Id. Plaintiff further states that the 15 total costs associated with the investigations and remediation of this contamination will likely be 16 as much as $1,000,000 or more. FAC at 6. 17 III. DISCUSSION 18 The premise of Defendant Garibotti’s motion to dismiss lies entirely on the assertion that 19 Defendant Garibotti was not a trustee but a trust beneficiary, and therefore cannot be held liable. 20 Mot. at 1. Therefore, Defendant Garibotti attempts to introduce a Trust Agreement and a letter 21 from a bank discussing the trust as evidence that she was not a trustee, under the incorporation by 22 reference doctrine. Id. at 2. 23 On a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), evidence beyond 24 the pleading should generally not be considered. Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 25 988, 998 (9th Cir. 2018). An exception to this rule is when the document is incorporated by 26 reference into the complaint. Id. The incorporation by reference doctrine “is a judicially created 27 doctrine that treats certain documents as though they are part of the complaint itself.” Id. at 1002. 1 support their claims, while omitting portions of those very documents that weaken—or doom— 2 their claims.” Id. at 1002. Such documents may be considered as “part of the complaint” without 3 converting the Rule 12(b)(6) motion into one for summary judgment. United States v. Ritchie, 4 342 F.3d 903, 908 (9th Cir. 2003). Therefore, “a court may assume [that an incorporated 5 document’s] contents are true for purposes of a motion to dismiss under Rule 12(b)(6).” Khoja, 6 899 F.3d at 1003. 7 The doctrine “permits a district court to consider documents whose contents are alleged in 8 a complaint and whose authenticity no party questions, but which are not physically attached to 9 the . . . pleadings.” Ritchie, 342 F.3d at 908 (internal quotation marks omitted). Such documents 10 may be incorporated “if the plaintiff refers extensively to the document or the document forms the 11 basis of the plaintiff’s claim.” Id. 12 Whether a document “forms the basis” of a complaint turns on whether the complaint 13 “necessarily relies” on that document. Ecological Rights Foundation v. Pacific Gas and Elec. Co., 14 713 F.3d 502 (9th Cir. 2013). “A court may consider evidence on which the complaint 15 “necessarily relies” if: (1) the complaint refers to the document; (2) the document is central to the 16 plaintiff’s claim; and (3) no party questions the authenticity of the copy attached to the 12(b)(6) 17 motion.” Marder v. Lopez, 450 F.3d 445, 448 (9th Cir. 2006). An example of necessary reliance 18 is when a document serves as the foundation for an element of the claim. See Khoja, 899 F.3d at 19 1005 (finding the district court did not abuse its discretion in incorporating by reference an article 20 that “revealed the materiality of [the defendant’s] alleged misrepresentations and omissions”); see 21 also Marder, 450 F.3d at 448–49 (a release of claims was incorporated by reference when the 22 interpretation of the release was necessary to the plaintiff’s claims). 23 The Ninth Circuit in Knievel extended this doctrine to allow the defendant to attach a 24 document in its motion to dismiss where the plaintiff does not explicitly allege the contents of the 25 document in the complaint, under some circumstances. In order for this extension to apply, the 26 plaintiff’s claim must depend on the contents of the document and the parties must not dispute the 27 authenticity of the document. Knievel v. ESPN, 393 F.3d 1068 (9th Cir. 2005) (allowing the 1 disputed for authenticity in a defamation lawsuit). 2 Defendant Garibotti argues that the proposed trust documents can be incorporated because 3 the FAC relies on them, allowing the Court to consider their contents. Reply at 3. Plaintiff 4 counters that Defendant Garibotti cannot introduce extrinsic documents in support of her motion. 5 Opp’n at 2. 6 Neither the trust agreement nor the letter is discussed in the FAC; therefore, they cannot be 7 introduced on the basis that Plaintiff refers extensively to the document. The only remaining 8 argument Defendant Garibotti can make is that the proposed documents “form the basis” of the 9 FAC because the FAC necessarily relies on those documents. However, while it may seem 10 firsthand that the issue of Defendant Garibotti’s role in the trust is “central” to the FAC, the 11 allegations in the FAC itself do not depend on the contents of the proposed documents. Rather, 12 the FAC depends on the factual premise that Defendant Garibotti is a trustee, which Defendant 13 Garibotti attempts to refute using the proposed documents. Therefore, it is not Plaintiff’s claims in 14 the FAC that depend on the document, but Defendant’s motion to dismiss that depends on the 15 proposed documents. 16 Furthermore, Plaintiff disputes the authenticity of the proposed documents. Opp’n at 4–5. 17 Plaintiff argues that Defendant Garibotti is not a signatory to the trust instrument and that 18 Defendant Garibotti was a minor at the time. Id. at 5. Plaintiff argues that there is no credible 19 evidence indicating that the documents submitted by Defendant Garibotti are the only Trust 20 documents detailing her role in the Trust over the many years it existed. Id. Plaintiff further 21 alleges that the documents Defendant Garibotti seeks to introduce were “cherry-picked documents 22 taken out of context from other relevant Trust documents, in violation of Rule 106 of the Federal 23 Rules of Evidence[,]” and that Plaintiff, as an adverse party, may require the introduction of any 24 other part. Id. If Plaintiff disputes the authenticity of the document, “the court must accept her 25 representation that there is a dispute for purposes of applying the incorporation by reference 26 doctrine.” Gerritsen v. Warner Bros. Ent. Inc., 112 F. Supp. 3d 1011, 1027 n.77 (C.D. Cal. 2015) 27 (declining to consider the defendant’s argument that the plaintiff’s dispute was not truly a dispute 1 810256, at *4 (D. Nev. Mar. 2, 2011) (declining to incorporate by reference “where, although the 2 letter might have constituted a document upon which the counterclaimant’s claims depended, the 3 counterclaimant disputed the authenticity and completeness of the letter attached to the motion to 4 dismiss.”). If the plaintiff’s dispute of authenticity has facial plausibility, the court cannot make a 5 credibility finding concerning the matter at this stage. Id. at 1027. 6 The Court declines to incorporate by reference the Trust Agreement and letter from 7 Defendant Garibotti ‘s bank because: (1) the FAC does not “necessarily rely” on the documents 8 proposed, and (2) Plaintiff disputes the authenticity of the documents in its opposition. 9 IV. CONCLUSION 10 As Defendant Garibotti’s motion to dismiss is premised entirely on the ground that she is 11 not a trustee based on the contents of the Trust Agreement and letter they sought to introduce, the 12 Court must also deny Defendant Garibotti’s motion to dismiss. Plaintiff also seeks leave to amend 13 its complaint in light of this new development. Opp’n at 10. The Court therefore DENIES 14 Defendant Garibotti ‘s motion to dismiss and GRANTS Plaintiff leave to amend. Plaintiff must 15 amend within thirty (30) days from the date of this order. 16 This order disposes of Docket No. 46. 17 18 IT IS SO ORDERED. 19 20 Dated: November 1, 2021 21 22 ______________________________________ EDWARD M. CHEN 23 United States District Judge 24 25 26 27