Case 8:13-cv-00220-JDW-TBM Document 93 Filed 11/04/13 Page 1 of 11 PageID 1988

UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION

LUIS A. GARCIA SAZ, and wife, MARIA DEL ROCIO BURGOS GARCIA, Plaintiffs, vs. CHURCH OF SCIENTOLOGY RELIGIOUS TRUST; CHURCH OF SCIENTOLOGY FLAG SERVICE ORGANIZATION, INC.; CHURCH OF SCIENTOLOGY FLAG SHIP SERVICE ORGANIZATION, INC d/b/a MAJESTIC CRUISE LINES; U.S. IAS MEMBERS TRUST. Defendants. / CASE NO. 8:13-CV-220-T27 TBM

PLAINTIFFS’ MEMORANDUM OF LAW IN OPPOSITION TO DEFENDANTS IAS ADMINISTRATIONS, INC., U.S. IAS MEMBERS TRUST AND CHURCH OF SCIENTOLOGY RELIGIOUS TRUST’S JOINT MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JURISDICTION Plaintiffs Luis A. Garcia Saz and Maria Del Rocio Burgos Garcia respectfully submit their Memorandum of Law in Opposition to Defendants IAS Administrations, Inc. (“IASA”), U.S. IAS Members Trust (“USIMT”), and Church of Scientology Religious Trust’s (“CSRT”) Joint Motion to Dismiss for Lack of Subject Matter Jurisdiction (the “Joint Motion”). I. Summary of Argument

After ten months of protracted litigation addressing everything but the merits of this fraud suit, three Church-related Defendants now profess to have recently discovered the citizenship of their own entities. It is inconceivable that, with Defendants’ scorched earth approach to litigation and the layers of lawyers engaged to defend them, questions on the threshold issue of jurisdiction

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were not discussed at the outset of this case. It is also significant that Defendants have chosen to raise jurisdiction for the first time only after the Court has requested the existing, written arbitration procedures in support of the pending motion to compel arbitration. As Plaintiffs will demonstrate in their response to Defendants’ papers, no arbitration has ever taken place and no procedures written to govern the arbitration process exist. The strong belief is that the latest motion to dismiss based on the claimed citizenship of their entities is a ploy to change the forum and gain control over the outcome. The Court should deny Defendants’ motion for two equally compelling reasons. First, it is impossible to determine, based on the record before the Court, whether diversity jurisdiction is defeated. CSRT and USIMT claim that they are citizens of California because some or all of their trustees live there now. But they do not provide the Court with their Trust documents demonstrating that that they are established as Trusts and identifying their trustees. Nor do the declarations attached to the Joint Motion establish that the self-declared trustees lived in California at the time this action was filed. As to IASA, the bald and conclusory statement that its principal place of business is now Los Angeles does not satisfy the requisite “nerve center” test and is insufficient to defeat diversity jurisdiction. Defendants should be ordered to present the necessary facts and the support for those facts before asking the Court to dismiss this action outright. Until then, the Court has subject matter jurisdiction over this action and all the issues before it. Second, even if Defendants can establish their citizenship in California, the Court can and should permit Plaintiffs to amend the Complaint to cure the jurisdictional defect. CSRT and USIMT acted merely as the bank accounts into which some of Plaintiffs’ monies were deposited. The fraudulent procurement of Plaintiffs’ monies was committed by individuals associated with

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and at the physical premises of Defendant Church of Scientology Flag Service Organization, Inc. in Clearwater, Florida. As nominal parties to the litigation, citizenship of the trust defendants should not be employed to defeat diversity. An amendment can easily remedy the jurisdictional defect without delay or prejudice to Defendants. If it is determined that Defendants are not completely diverse and an amendment cannot cure the jurisdictional defect, Defendants should be required to pay the costs and attorneys’ fees that Plaintiffs have incurred in this litigation. Defendants’ motion-cum-litigation tactic should not go without accountability. II. A. Legal Standard Legal Argument

Three rules of law govern consideration of Defendants’ motion to dismiss. First, in determining whether complete diversity exists, the Court must examine the citizenship of the real parties to the controversy. Frederick Bearse v. Main Street Investments, 220 F. Supp. 2d 1338 (M.D. Fla. 2002). Second, defective allegations of jurisdiction may be amended, upon terms, in the trial or appellate courts. 28 U.S.C. § 1653 (2006); see also Firemen's Ins. Co. of Newark, N.J. v. Robbins Coal Co., 288 F.2d 349, 350 (5th Cir. 1961). Third, when, as here, the existence of the Court’s subject matter jurisdiction is challenged based upon matters outside of the allegations in the Complaint, Plaintiffs must be afforded an opportunity to conduct discovery and present evidence supporting their allegations of jurisdiction. See Stonington Ins. Co. v. Motiva Enters., LLC, 2009 U.S. Dist. LEXIS 112357, 2-4 (S.D. Fla. 2009) (Corporate defendant’s conclusory affidavit offered in support of its motion to dismiss did not provide sufficient grounds for the Court to determine the defendant’s citizenship.); Colonial Pipeline Co. v. Collins, 921 F.2d 1237, 1243 (11th Cir. 1991) (“Although a district court has wide discretion

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to determine the scope of such discovery, a plaintiff must have ample opportunity to present evidence bearing on the existence of jurisdiction.”); In re CP Ships Ltd. Sec. Litig., 578 F.3d 1306, 1312 (11th Cir. 2009) (“In a factual challenge, the district court must give the plaintiff an opportunity for discovery and for a hearing that is appropriate to the nature of the motion to dismiss.”); Seguros Comercial Am. v. Hall, 115 F. Supp. 2d 1371, 1380-1381 (M.D. Fla. 2000) (defendant’s motion to dismiss for lack of subject matter jurisdiction was denied without prejudice to reassert a lack of diversity jurisdiction “should it appear after further discovery has been conducted.”). B. The Facts Are Insufficient to Defeat Diversity Jurisdiction

Defendants summarily disavow the existence of diversity jurisdiction by alleging that: (1) USIMT and CSRT are trusts, and as such, the current California residence and citizenship of three of the five trustees of CSRT (see Stilo Decl. at ¶ 4) and all four of the trustees of USIMT (see Warren Decl. at ¶ 3) destroy the Trust Defendants’ diversity with Plaintiffs, who are also citizens of California; and (2) IASA’s principal place of business is California and not Florida, as alleged by Plaintiff in the Complaint, (Raos Decl. at ¶ 3), and therefore IASA is not diverse from Plaintiffs. These facts, without more, do not defeat this Court’s subject matter jurisdiction. 1. The Citizenships of USIMT and CSRT Are Not Established

Beyond the bare allegations that USIMT and CSRT are “trusts,” the factual record does not establish that these entities are, in fact, trusts and does not establish the citizenship of each of these trust entities. The Trust Defendants have not submitted the trust instruments for the Court’s review and consideration, and the declarations of Warren and Stilo leave several critical questions unanswered.

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First, assuming the Trust Defendants are duly constituted trusts, under the authority of the United States Supreme Court decision, Carden v. Arkoma Associates, 494 U.S. 185 (1990) and its progeny, each trusts’ citizenship for the purposes of diversity jurisdiction “depends on the citizenship of ‘all the members (emphasis added).’” To determine the citizenship of each trust’s members, it logically follows that the identities of the trust’s members must be alleged. Warren states that she has been a trustee of USIMT since 2007, and it “has four trustees, all of whom are residents and citizens of California.” (Warren Decl. ¶¶2-3). Stilo states that CSRT has five trustees including himself, David Petit, and three other trustees who are unnamed. (Stilo Decl. ¶4). The identities of the unnamed members of the Trust Defendants remain exclusively within the knowledge of the Defendants, and must be disclosed to permit a proper inquiry into this Court’s jurisdiction. Second, the Trust Defendants have not established that each of the purported Californiabased trustees was a citizen and resident of California at the time the lawsuit was filed. Warren does not specifically confirm that she and the other unnamed trustees have resided in California since the commencement of this lawsuit. See Warren Decl. ¶3 (“USIMT has four trustees, all of whom are residents and citizens of California.”); See Stilo Decl. ¶4 (“David Petit…is a resident and citizen of Los Angeles, California. Two of the other trustees are also residents and citizens of California.”). Therefore, there is no evidence before the Court that each of the named trustees was, in fact, a citizen and resident of California at the time this case was filed. See, e.g., Holston Invs., Inc. v. Lanlogistics, Corp., 677 F.3d 1068 (11th Cir. 2012) (“Diversity jurisdiction is determined at the time the complaint was filed.”); Bey v. BankAtlantic, 2010 U.S. Dist. LEXIS 90188, 3-4 (M.D. Fla. Aug. 2, 2010) (noting that “diversity is determined when the suit is instituted…” (internal citations omitted)).

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As the citizenships of USIMT and CSRT have not been established, this Court should not dismiss the Complaint on the basis of lack of diversity jurisdiction.
 2.

The Citizenship of IASA Is Not Established

A corporation’s principal place of business is the “place where a corporation’s officers direct, control and coordinate the corporation’s activities.” The Hertz Corp. v. Friend, 130 S.Ct. 1181, 1192, 175 L. Ed. 2d 1029 (2010). This is known as the “nerve center” test. Ehrler v. Seashore Resorts, LLC, 2010 U.S. Dist. LEXIS 36778 at *2 (M.D. Fla. 2010); Meier v. Deutsche Bank Trust Co. Americas, 2010 U.S. Dist. LEXIS 40171 at *1 (M.D. Fla. 2010). IASA’s statements regarding its citizenship are deficient on their face. This Court’s jurisdiction depends on the facts in existence at the time this suit was filed. The fact that a majority of IASA’s “current staff” and officers and directors “are permanently posted” in Los Angeles does not demonstrate IASA’s citizenship. Second, IASA has failed to substantiate its statement that Los Angeles is the “nerve center” of its operations. Rather, contrary evidence available on public record suggests that its principal place of business is and has at all relevant times been in Clearwater, Florida. (See “Exhibit A,” IAS Administration, Inc.’s 2012 and 2013 Annual Reports). Therefore, this Court should not dismiss the Complaint on the basis of lack of diversity jurisdiction with IASA. In light of the disputed and unsubstantiated factual record before the Court, jurisdictional discovery is needed. Defendants should substantiate their assertions that USIMT and CSRT are established trusts and that at least one of their members was a citizen of California at the time the lawsuit was filed. IASA should be required to establish that its principal place of business under the “nerve center” test was California.

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C.

The Court Should Permit Amendment to the Complaint to Cure Any Jurisdictional Defect

Once a factual record is properly developed, Plaintiffs should then be granted leave to amend the Complaint, if justified, to cure any jurisdictional defect. Such amendments are freely permitted where necessary to avoid dismissal on purely technical grounds. See 28 U.S.C. § 1653 (providing “defective allegations of jurisdiction may be amended, upon terms, in the trial or appellate courts.”). Courts within the Eleventh Circuit have frequently afforded litigants the opportunity to conduct discovery and amend their pleadings to correct jurisdictional allegations. See, e.g., Stonington Ins. Co. v. Motiva  Enters., LLC, 2009 U.S. Dist. LEXIS 112357 (S.D. Fla. 2009) (granting the insurer’s request for an opportunity  to discover facts to support diversity jurisdiction); Majd-Pour v. Georgiana Community Hospital, Inc., 724 F.2d 901 (11th Cir. 1984) (Where the plaintiff alleged that further discovery could show that the two defendants were actually one entity operating out of the state of Indiana, the district court’s dismissal based on lack of subject matter jurisdiction without permitting discovery was an abuse of discretion.). Here, Plaintiffs were defrauded into making payments based on misrepresentations made to them by Defendant Church of Scientology Flag Service Organization, Inc. (“FSO”) at FSO’s premises in Clearwater, Florida. (See Exhibit B, Declaration of Luis Garcia, at ¶ 3.) CSRT and USIMT are merely the bank accounts that FSO used to receive Plaintiffs’ money. (See id. ¶ 5.) As nominal defendants, the Court should disregard CSRT and USIMT and rest jurisdiction on the citizenship of the real parties in interest. Navarro Savings Ass’n v. Lee, 446 U.S. 458, 462 n. 9 (1980). D. Defendants Should Be Sanctioned

Defendants should know their citizenship. CSRT and USIMT profess to have less than ten trustees between the two of them. Under the circumstances, Defendants’ claim of mistake is

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specious. Their mistake, moreover, does not excuse the fault. Plaintiffs have been dragged through non-merits litigation tactics and, only when those tactics have failed to render the desired result (disqualification of three law firms) or remain uncertain (pending motion to compel arbitration), Defendants raise for the first time an issue that was apparent to them at the outset. This conduct should be sanctioned. The Court can award sanctions even if it lacks subject matter jurisdiction Prime Ins. Syndicate, 270 Fed. Appx. 962 (11th Cir. 2008) (awarding attorneys’ fees even though the declaratory action was dismissed for lack of subject matter jurisdiction and no ruling on the merits had been reached) (citing Will v. Coastal Corp., 503 U.S. 131 (1992) (district court could impose Rule 11 sanctions even where it was later determined that the court lacked subject matter jurisdiction over the underlying case because "an imposition of a Rule 11 sanction is not a judgment on the merits of an action.”). The issue is whether the party has abused the judicial process and, if so, what sanction would be appropriate. Such an order implicates no constitutional concern because it does not signify a district court's assessment of the legal merits of the complaint. III. CONCLUSION

For all of the foregoing reasons, this Court should deny Defendants’ Joint Motion to Dismiss for Lack of Subject Matter Jurisdiction.

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Dated: November 4, 2013 Respectfully submitted, s/ Amanda M. McGovern Ronald P. Weil (FBN 169966) Amanda M. McGovern (FBN 964263) WEIL QUARANTA MCGOVERN, P.A. Southeast Financial Center, Suite 900 200 South Biscayne Boulevard Miami, FL 33131 T: 305.372.5352 F: 305.372.5355 RPW@weillaw.net  amcgovern@weillaw.net - and -

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Theodore Babbitt, Esq. Florida Bar No: 091146 BABBITT JOHNSON OSBORNE & LECLAINCHE, P.A. 1641 Worthington Road, Suite 100 West Palm Beach, FL 33409 T: 561.684.2500 F: 561.684.6308 tedbabbitt@babbitt-johnson.com Counsel for Plaintiffs Luis A. Garcia Saz and Maria Del Rocio Burgos Garcia

CERTIFICATE OF SERVICE We hereby certify that, on November 4, 2013, we electronically filed the foregoing document with the Clerk of the Court using CM/ECF. We also certify that the foregoing document is being served this day on all counsel of record or pro se parties identified below in the manner specified, either via transmission of Notices of Electronic Filing generated by CM/ECF or in some other authorized manner for those counsel or parties who are not authorized to receive electronically Notices of Electronic Filings. F. Wallace Pope, Jr., Esq. FBN 124449 Johnson, Pope, Bokor, Ruppel & Burns, LLP P.O. Box 1368 Clearwater, FL 33757 Phone: (727) 461-1818 Fax: (727) 462-0365 E-mail: wallyp@ipfirm.com Counsel for Defendants Nathan M. Berman, Esq. FBN 329230 E-mail: nberman@zuckerman.com Lee Fugate, Esq. FBN 170928 E-mail: lfugate@zuckerman.com Jack E. Fernandez, Esq. FBN 843751 E-mail: jfernandez@zuckerman.com Mamie V. Wise, Esq. FBN 65570 E-mail: mwise@zuckerman.com Zuckerman Spaeder LLP 101 E. Kennedy Blvd., Suite 1200 Tampa, FL 33602 Phone: (813) 221-1010 Fax: (813) 223-7961 Counsel for Church of Scientology Religious Trust

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Marie Tomassi, Esq. FBN 772062 Trenam Kember Scharf Barkin Frye, O’Neill & Mullis, P.A. Bank of America Building 200 Central Avenue, Suite 1600 St. Petersburg, FL 33701 Phone: (727) 820-3952 Fax: (727) 820-3972 E-mail: mtomassi@trenam.com Counsel for IAS Administrations, Inc. and U.S. IAS Members Trust

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