Casa Nido Partnership v. Kwon

Background

Casa Nido Partnership sued Catherine O’Hanks, Jae Kwon, and Lynn Marie Garibotti. According to the first amended complaint, the defendants sequentially owned and operated a dry-cleaning facility from 1960 to 2007. Casa Nido alleged that the facility’s operations released tetrachloroethylene, or PCE, onto the floor, through drains, and into the groundwater. Casa Nido alleged that it spent hundreds of thousands of dollars investigating and remediating the contamination, with total costs potentially reaching $1 million or more.

Casa Nido alleged that Garibotti was the successor trustee of the Claudio Garibotti Trust, which owned the property from 1952 to 1976. It alleged that she held title to and managed the property while O’Hanks operated the dry-cleaning business there. Casa Nido sought indemnification and contribution under the federal Comprehensive Environmental Response, Compensation, and Liability Act, California’s Hazardous Substance Account Act, the California Water Code, and other California law.

Motion to Dismiss

Garibotti moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal for failure to state a legally sufficient claim. Her motion rested entirely on the argument that she was a trust beneficiary, not a trustee, and therefore could not be held liable. She sought to introduce a trust agreement and a letter from her bank under the incorporation-by-reference doctrine. That doctrine can allow a court deciding a dismissal motion to treat certain outside documents as part of the complaint when the complaint necessarily relies on them and their authenticity is not disputed.

The court found that neither proposed document was discussed in the first amended complaint. The complaint alleged that Garibotti was a trustee, but its claims did not depend on the contents of the proposed documents. Instead, the documents were being used by Garibotti to challenge the complaint’s factual premise. The court also found that Casa Nido disputed the documents’ authenticity and completeness. Because the dispute was facially plausible, the court could not resolve it or make credibility findings at the dismissal stage.

Ruling

The court declined to incorporate the trust agreement and bank letter into the complaint for two reasons: the complaint did not necessarily rely on them, and Casa Nido disputed their authenticity. Because Garibotti’s motion to dismiss depended entirely on those documents, the court denied the motion to dismiss. The court also granted Casa Nido leave to amend its complaint and required the amendment within 30 days. The order disposed of Docket No. 46. It did not resolve the ultimate question of Garibotti’s liability.