Rothschild v. The Pacific Companies

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4 UNITED STATES DISTRICT COURT

5 NORTHERN DISTRICT OF CALIFORNIA

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7 THOMAS E ROTHSCHILD, Case No. 23-cv-01721-LJC

8 Plaintiff,

ORDER SCREENING SECOND

9 v. AMENDED COMPLAINT PURSUANT

TO 28 U.S.C. § 1915(E)(2)(B);

10 THE PACIFIC COMPANIES, et al., CONTINUING CASE MANAGEMENT

CONFERENCE

Defendants.

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Re: ECF No. 22

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13 Plaintiff Thomas E. Rothschild is proceeding in this case in forma pauperis (IFP). ECF

14 No. 16. The Court previously screened his original Complaint pursuant to 28 U.S.C.

15 § 1915(e)(2)(B) (First Screening Order) and ordered Mr. Rothschild to file an amended complaint

16 that addressed certain deficiencies identified by the Court as to the basis for its subject matter

17 jurisdiction. Id. at 1.1 Mr. Rothschild has since filed two separate amended complaints. ECF

18 Nos. 18, 22. But the Court nevertheless remains under a continuing duty to dismiss a case filed

19 without the payment of the filing fee whenever it determines that “(A) the allegation of poverty is

20 untrue; or (B) the action or appeal (i) is frivolous or malicious; (ii) fails to state a claim on which

21 relief may be granted; or (iii) seeks monetary relief against a defendant who is immune from such

22 relief.” 28 U.S.C. § 1915(e)(2)(A)-(B).

23 Having considered Mr. Rothschild’s Second Amended Complaint (SAC), the Court finds

24 that it fails to state a claim on which relief may be granted pursuant to Section 1915(e)(2)(B)(ii).

25 The Court orders Mr. Rothschild to file a third amended complaint that addresses the deficiencies

26 identified in this screening order by September 22, 2023. In addition, the Court requires

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1 additional information to make a determination as to Mr. Rothschild’s allegations of poverty under

2 Section 1915(e)(2)(A). Therefore, he is also ordered to submit a new IFP application by

3 September 22, 2023 that includes the information requested by the Court below. To allow time

4 for Mr. Rothschild to amend, the Case Management Conference, currently scheduled for

5 September 14, 2023, shall be continued 90 days.

6 I. BACKGROUND

7 In its First Screening Order, the Court summarized the events giving rise to Mr.

8 Rothschild’s claims and so incorporates that background by reference here. See ECF No. 16 at 2.

9 After screening the Complaint, the Court found that it did not allege a basis for subject matter

10 jurisdiction. Id. at 3-5. Mr. Rothschild was given leave to amend his Complaint. Id. at 7.

11 On June 30, 2023, Mr. Rothschild filed his First Amended Complaint (FAC). ECF No.

12 18. The FAC dropped some claims, added new federal and state law claims, and added defendants

13 to the action.2 See id. On August 8, 2023, Mr. Rothschild filed his SAC.3 ECF No. 22. The SAC

14 is now the operative complaint in the case.4 The remaining claims are for fraud, civil conspiracy,

15 tortious interference with business expectancy, breach of contract, nuisance, and “personal injury.”

16 Id. at 1. These state law claims are being brought against The Pacific Companies, Caleb Roope,

17 Stephanie Ann Gildred, Lorton Management Corporation (Lorton), and Byldan Corporation

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2 The FAC dropped the claims for violations of the Clean Air Act, breach of warranty, and fraud,

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but added claims for violations of Title II of the Americans with Disabilities Act (ADA),

violations of the Fair Housing Act (FHA), civil conspiracy, unfair business practices, breach of

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contract, tortious interference with business expectancy, and “rat and vermin health violation[s].”

ECF No. 18 at 1. The additional defendants added were Stephanie Gildred, Caleb Roope, Lorton

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Management Corporation, and Byldan Corporation. Id.

3 The SAC dropped the ADA and FHA claims, as well as the claims for unfair business practices

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and “rat and vermin health violations[s].” ECF No. 22 at 1. The SAC also dropped the claims for

negligence, negligence per se, and breach of the covenant of quiet enjoyment, all of which were

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part of Mr. Rothschild’s original Complaint and renewed in the FAC. Id. Instead, the SAC

renewed the fraud claim from the original Complaint and added brand new claims for nuisance

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and “personal injury.” Id. The SAC did not add or remove any defendants.

4 Mr. Rothschild filed the SAC without leave of court. However, he filed the FAC pursuant to the

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Court’s First Screening Order, and the Ninth Circuit allows a party to make its one amendment as

of right under Federal Rule of Civil Procedure 15 after it has previously amended with leave of

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court. See Fed. R. Civ. P. 15 advisory committee notes; see also Ramirez v. Cnty. of San

Bernardino, 806 F.3d 1002 (9th Cir. 2015) (“[Rule 15] does not mandate that the matter of course

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amendment under 15(a)(1) be exhausted before an amendment may be made under 15(a)(2), nor

1 (Byldan). Id.

2 II. LEGAL STANDARD

3 In screening an IFP complaint under Section 1915(e)(2)(B), courts assess whether the

4 complaint “lacks an arguable basis either in law or in fact.” Neitzke v. Williams, 490 U.S. 319,

5 325 (1989). Courts can dismiss complaints founded on “wholly fanciful” factual allegations for

6 lack of subject matter jurisdiction. Franklin v. Murphy, 745 F.2d 1221, 1228 (9th Cir. 1984). A

7 court can also dismiss a complaint where it is based solely on conclusory statements, naked

8 assertions without any factual basis, or allegations that are not plausible on their face. See

9 Ashcroft v. Iqbal, 556 U.S. 662, 677–78 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555–

10 57 (2007); see also Erickson v. Pardus, 551 U.S. 89 (2007) (per curiam). Ordinarily the Court

11 must give an IFP plaintiff leave to “amend their complaint unless it is absolutely clear that the

12 deficiencies of the complaint could not be cured by amendment.” Franklin, 745 F.2d at 1235, n.9.

13 III. DISCUSSION

14 A. Diversity Jurisdiction

15 Because there are no claims in the SAC that arise under federal law, the Court does not

16 have federal question jurisdiction pursuant to 28 U.S.C. § 1331. Accordingly, the Court only has

17 subject matter jurisdiction if diversity jurisdiction exists.

18 The First Screening Order explained what diversity jurisdiction entails and how Mr.

19 Rothschild could establish the state citizenship of both corporations and natural persons. ECF No.

20 16 at 4-5. In the SAC, Mr. Rothschild alleges that he is domiciled in Scottsdale, Arizona,

21 Defendant Stephanie Gildred is domiciled in Tacoma, Washington, and Defendant The Pacific

22 Companies is incorporated in the state of Idaho, with headquarters in Eagle, Idaho. ECF No. 22 at

23 1-2. These allegations are sufficient to establish the state citizenship as to himself and two of the

24 Defendants. However, Mr. Rothschild has failed to properly allege the state citizenship for

25 Defendants Caleb Roope, Byldan, and Lorton.

26 First, Mr. Rothshild makes no factual allegations of any kind as to the state of domicile for

27 Mr. Roope. He alleges only that Mr. Roope is the CEO of The Pacific Companies. Id. at 3. But

1 Roope resides “with the intention to remain or to which [he] intends to return.” Kanter v. Warner-

2 Lambert Co., 265 F.3d 853, 857 (9th Cir. 2001).

3 Mr. Rothschild further alleges that Byldan is “located in California” and that Lorton “has a

4 statutory address” in Del Mar, California. ECF No. 22 at 1-2. But these factual allegations do not

5 establish where each company’s place of incorporation and principal place of business are. For

6 diversity purposes, an entity that is founded and incorporated pursuant to a particular state’s laws

7 is a citizen of that state, regardless of whether it is a business or nonbusiness entity, and regardless

8 of its “individual structure, purpose, operations, or name.” Kuntz v. Lamar Corp., 385 F.3d 1177,

9 1183 (9th Cir. 2004). On the other hand, the phrase “principal place of business” means the place

10 where a company’s board and high-level officers direct, control, and coordinate its activities,

11 which is often referred to as the company’s “nerve center.” See Hertz Corp. v. Friend, 559 U.S.

12 77, 80-81 (2010). Typically, the “nerve center” is at the corporate headquarters, “provided that the

13 headquarters is the actual center of direction, control, and coordination…and not simply an office

14 where the corporation holds its board meetings.” Id. at 93. Importantly, a corporation is not a

15 “citizen” of every state in which it does business, or in which it has plants and offices; a

16 corporation’s “nerve center” is its only “principal place of business” for diversity jurisdiction

17 purposes. Id. at 96 (“For example, if the bulk of a company’s business activities visible to the

18 public take place in New Jersey, while its top officers direct those activities just across the river in

19 New York, the ‘principal place of business’ is New York.”) Importantly, all corporations are

20 considered citizens of both the place of incorporation and the principal place of business. 28

21 U.S.C. § 1332(c)(1). This means that a corporation incorporated in one state, and having its

22 principal place of business in another, is a citizen of both states. For there to be complete

23 diversity, the corporation cannot be sued by another citizen of either state.

24 Mr. Rothschild must allege sufficient facts about Mr. Roope’s domicile, and Byldan and

25 Lorton’s place of incorporation and principal place of business, to establish each party’s state

26 citizenship. Without this information, the Court cannot determine whether there is complete

27 diversity among the parties, and thus whether it has subject matter jurisdiction in this action. Mr.

1 SAC failed to remedy the issue. However, the Court is also under an obligation to give IFP

2 plaintiffs leave to “amend their complaint unless it is absolutely clear that the deficiencies of the

3 complaint could not be cured by amendment.” Franklin, 745 F.2d at 1235, n.9. Out of respect for

4 Mr. Rothschild’s pro se status, the Court gives him another opportunity to amend his allegations as

5 to subject matter jurisdiction.

6 B. Other Deficiencies

7 The claims in the SAC include for the most part “threadbare recitals of the elements” for

8 each cause of action, which by itself is not enough to state a claim on which relief may be granted.

9 Iqbal, 556 U.S. at 678. Some of the claims include additional factual allegations but others do not.

10 For each cause of action, Mr. Rothschild must plead enough “factual content that allows the

11 [C]ourt to draw the reasonable inference that the defendant is liable for the misconduct alleged.”

12 Id. Elsewhere in the SAC, Mr. Rothschild includes a “Nexus of Events” section which

13 summarizes the facts at issue in the case. ECF No. 22 at 2-3. Mr. Rothschild can incorporate

14 these facts by reference in his allegations with respect to his individual claims. See Fed. R. Civ. P.

15 10(c). But he must allege facts that are sufficient to support the elements of each of his claims.

16 See Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011) (“[A]llegations in a complaint…may not

17 simply recite the elements of a cause of action, but must contain sufficient allegations of

18 underlying facts to give fair notice and to enable the opposing party to defend itself effectively.”)

19 C. IFP Status

20 In an amended complaint filed in the related case before this Court, Rothschild v. Gildred

21 et al., Case No. 23-cv-01713-LJC, ECF No. 22 (July 27, 2023), Mr. Rothschild alleges that he

22 “lives intermittently” at a “sober house for alcohol treatment” in Florida, and “works in Real

23 Estate.”5 Id. at 5. However, in his IFP application for the present action, dated June 6, 2023, Mr.

24 Rothschild represented to the Court under penalty of perjury that he had received no income in the

25 preceding twelve months from “Business, profession, or other self-employment,” and his only

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5 See Norton v. LVNV Funding, LLC, 396 F. Supp. 3d 901, 909 (N.D. Cal. 2019) (noting that “a

1 source of income was from Social Security disability benefits he receives monthly. ECF No. 12 at

2 1. The Court granted the IFP application on June 21, 2023. ECF No. 16.

3 “Notwithstanding any filing fee, or any portion thereof, that may have been paid, the

4 [C]ourt shall dismiss the case at any time if the court determines that...the allegation of poverty is

5 untrue.” 28 U.S.C. § 1915(e)(2)(A). However, “[t]o dismiss [a] complaint pursuant to

6 || § 1915(e)(2), a showing of bad faith is required, not merely inaccuracy.” Escobedo v. Applebees,

7 || 787 F.3d 1226, 1235, n.8 (9th Cir. 2015). To address this inconsistency as to his employment, Mr.

8 Rothschild shall file a revised IFP application that indicates under penalty of perjury whether he

9 currently works in “Real Estate,” and whether he was doing this work at the time he filed his IFP

10 || application in June. If there is any source of income that was not disclosed in his original IFP

11 application, Mr. Rothschild shall explain why that information was omitted.

12 || Iv. CONCLUSION

13 For the reasons stated above, the Court finds that the SAC fails to state a claim pursuant to

14 28 U.S.C. § 1915(e). The Court orders Mr. Rothschild to file a third amended complaint and a

3 15 revised IFP application addressing the questions and deficiencies identified in this order by

a 16 September 22, 2023. If he does not file a timely third amended complaint or does not address all

3 17 the questions and deficiencies identified by the Court in this screening order, the Court will

18 |] recommend that this action be dismissed. To allow time for Mr. Rothschild to amend, the Case

19 Management Conference, currently scheduled for September 14, 2023, shall be continued 90 days.

20 IT IS SO ORDERED.

21 Dated: September 1, 2023

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23 7a

L . CIS OS

24 d States Magistrate Judge

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