Hankinson v. King, Case No. 14–cv–5105 (SRN/BRT).
| Decision Date | 27 July 2015 |
| Docket Number | Case No. 14–cv–5105 (SRN/BRT). |
| Citation | 117 F.Supp.3d 1068 |
| Parties | Janet HANKINSON, Plaintiff, v. Douglas KING, an individual; Eagle Brook Church of White Bear Lake, Minnesota, a Minnesota nonprofit corporation; and Spring Lake Baptist Church, an inactive Minnesota nonprofit corporation, Defendant. |
| Court | U.S. District Court — District of Minnesota |
Stuart S. Mermelstein, Herman Law, Boca Raton, FL; Michael A. Bryant, Bradshaw & Bryant PLLC, Waite Park, MN, for Plaintiff.
Paul Engh, Paul Engh Law Office, Minneapolis, MN, for Defendant Douglas King.
Jason M. Stoffel and Timothy W. Waldeck, Waldeck Law Firm, P.A., Minneapolis, MN, for Defendant Eagle Brook Church of White Bear Lake, Minnesota.
This matter is before the Court on Defendant Eagle Brook Church of White Bear Lake's Motion to Dismiss [Doc. No. 5]. For the reasons set forth below, the Court denies this motion.
Plaintiff brings suit against Defendants for alleged sexual abuse she experienced as a minor. Plaintiff Janet Kay Hankinson ("Plaintiff" or "Hankinson") resides in the State of Maryland. (Compl. ¶ 1 [Doc. No. 1].) Defendant Douglas Wayne King ("King") resides in the Commonwealth of Virginia. (Id. ¶ 2.) Defendant Spring Lake Park Baptist Church ("Spring Lake Park Baptist Church") is an inactive Minnesota Nonprofit Corporation with its principal place of business in the State of Minnesota. (Id. ¶ 3.) Defendant Eagle Brook Church of White Bear Lake, Minnesota ("Eagle Brook Church" or "Defendant") is a Minnesota Nonprofit Corporation with its principal place of business also in the State of Minnesota. (Id. ¶ 5.) Plaintiff alleges that the Court has diversity jurisdiction, and also alleges that venue in this District is proper because the events giving rise to this claim allegedly occurred in Minnesota. (Id. ¶¶ 6–7.)
Hankinson claims that around the Spring of 1975, Spring Lake Park Baptist Church hired King as a Youth Pastor. (Id. ¶ 10.) From 1975 to 1977, King led a youth group at Spring Lake Park Baptist Church. (Id. ¶ 8.) Plaintiff claims that while she was a member of this youth group, King repeatedly sexually assaulted her. King allegedly admitted to Anoka County police that he had sexual intercourse with Hankinson on multiple occasions while she was a minor. (Id. ¶ 15.)
Hankinson alleges that during a youth group bicycle trip in 1975, a church volunteer witnessed Hankinson exiting King's tent at approximately 3:00 am. (Id. ¶ 20.) The volunteer allegedly informed Spring Lake Park Baptist Church administrative officials, Board of Directors, Deacons, and the church's Pastor about this incident. (Id. ¶¶ 21–22.) Despite the church leadership's knowledge about this incident, Plaintiff claims "nothing was done about the inappropriate relationship" between King and Hankinson. (Id. ¶ 23.)
Upon information and belief, Plaintiff alleges that Spring Lake Park Baptist Church was absorbed into Eagle Brook Church in a de facto merger in 2009. Eagle Brook Church allegedly "continued the missions and ministry of the Spring Lake Park Baptist Church with a continuity of management, personnel, physical location, assets, records and general business operations." (Id. ¶ 40.) As a result of this merger, Spring Lake Park Baptist Church ceased all independent operations and the State of Minnesota involuntarily dissolved the church on January 21, 2009. (Id. ¶ 42.)
Plaintiff alleges three claims in her Complaint. In Count I, she alleges sexual assault and battery against King. (See id. ¶¶ 24–27.) In Count II, Hankinson claims that Spring Lake Park Baptist Church was negligent by failing to "use reasonable care to insure [her] safety, care, well-being and health ... while she was under the care, custody or in the presence of the Church." (See id. ¶¶ 28–36.) Finally, in Count III, Plaintiff alleges that as a result of the de facto merger between Spring Lake Park Baptist Church and Eagle Brook Church, Eagle Brook Church assumed all of the liability and obligations of Spring Lake Park Baptist Church; and thus, Eagle Brook Church is liable for the negligence of its acquired entity, Spring Lake Park Baptist Church.
On February 2, 2015, Eagle Brook Church filed a Motion to Dismiss [Doc. No. 5] with a supporting memorandum [Doc. No. 7]. Eagle Brook Church argues that the Court should dismiss Plaintiff's Count III because the de facto merger doctrine does not apply to nonprofits in Minnesota; and therefore, Hankinson's claim against Eagle Brook Church fails as a matter of law. (See Def.'s Mem. at 2 [Doc. No. 7].) On March 9, 2015, Plaintiff filed a response brief [Doc. No. 20], and Defendant filed a reply on March 20, 2015 [Doc. No. 23]. The Court heard oral argument on Defendant's motion on May 29, 2015.
Defendant moves to dismiss Plaintiff's Count III, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, for failure to state a claim upon which relief can be granted. When evaluating a motion to dismiss, the Court assumes the facts in the Complaint to be true and construes all reasonable inferences from those facts in the light most favorable to Plaintiff. Morton v. Becker, 793 F.2d 185, 187 (8th Cir.1986). However, the Court need not accept as true wholly conclusory allegations, Hanten v. School District of Riverview Gardens, 183 F.3d 799, 805 (8th Cir.1999), or legal conclusions Plaintiff draws from the facts pled, Westcott v. City of Omaha, 901 F.2d 1486, 1488 (8th Cir.1990). In addition, the Court ordinarily does not consider matters outside the pleadings on a motion to dismiss. See Fed.R.Civ.P. 12(d) ; Gorog v. Best Buy Co., 760 F.3d 787, 791 (8th Cir.2014) ; Ashanti v. City of Golden Valley, 666 F.3d 1148, 1151 (8th Cir.2012). The Court may, however, consider exhibits attached to the complaint and documents that are necessarily embraced by the pleadings, Mattes v. ABC Plastics, Inc., 323 F.3d 695, 697 n. 4 (8th Cir.2003), and may also consider public records, Levy v. Ohl, 477 F.3d 988, 991 (8th Cir.2007).
To survive a motion to dismiss, a complaint must contain "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Although a complaint need not contain "detailed factual allegations," it must contain facts with enough specificity "to raise a right to relief above the speculative level." Id. at 555, 127 S.Ct. 1955. "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements," will not pass muster. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citing Twombly, 550 U.S. at 555, 127 S.Ct. 1955 ). In sum, this standard "calls for enough fact[s] to raise a reasonable expectation that discovery will reveal evidence of [the claim]." Twombly, 550 U.S. at 556, 127 S.Ct. 1955.
Defendant's argument about the inapplicability of the de facto merger doctrine to nonprofits is two-fold. First, Eagle Brook Church contends that the Minnesota de facto merger doctrine never applied to nonprofit corporations. (See Def.'s Mem. at 4 [Doc. No. 7].) Second, Defendant argues that, even if the doctrine once applied to nonprofits in the past, in 2006, the Minnesota Legislature abolished the de facto merger doctrine in all contexts that it once existed. (See id. at 8.) The Court addresses both of these arguments below.
Minnesota's de facto merger doctrine has evolved significantly over the past forty years. In J.F. Anderson Lumber Co. v. Myers, the Minnesota Supreme Court explained that traditional successor law provides that:
where one corporation sells or otherwise transfers all of its assets to another corporation, the latter is not liable for the debts and liabilities of the transferor, except: (1) where the purchaser expressly or impliedly agrees to assume such debts; (2) where the transaction amounts to a consolidation or merger of the corporation; (3) where the purchasing corporation is merely a continuation of the selling corporation; and (4) where the transaction is entered into fraudulently in order to escape liability for such debts.
See 296 Minn. 33, 206 N.W.2d 365, 368–69 (1973) (citing Forest Labs., Inc. v. Pillsbury Co., 452 F.2d 621 (7th Cir.1971) ). Although the Minnesota Legislature did not expressly adopt the de facto merger exception to successor liability, the doctrine developed through the common law. See, e.g., Niccum v. Hydra Tool, 438 N.W.2d 96, 98 (Minn.1989) ; T.H.S. Northstar Assocs. v. W.R. Grace & Co.-Conn., 840 F.Supp. 676, 678 (D.Minn.1993).
In order to determine whether a de facto merger had occurred, Minnesota courts would consider whether the following four factors existed:
(1) continuity of management, personnel, assets and operations; (2) continuity of shareholders which result[ed] from the purchasing corporation paying for the acquired assets with shares of its own stock; (3) ... the seller cease[d] operations, liquidate[d], and dissolve[d] as soon as legally and practically possible; and (4) ... the purchasing entity assume[d] the obligations of the seller necessary for uninterrupted continuation of business operations.
T.H.S. Northstar Assocs., 840 F.Supp. at 678 (citing Keller v. Clark Equip. Co., 715 F.2d 1280, 1291 (8th Cir.1983) ; Soo Line R. Co. v. B.J. Carney & Co., 797 F.Supp. 1472, 1483 (D.Minn.1992) ); Sylvester Bros. Dev. Co. v. Burlington N. R.R., 772 F.Supp. 443, 447–48 (D.Minn.1990) ; see Source One Enterprises, L.L.C. v. CDC Acquisition Corp., No. 02–cv–4925 (PAM/RLE), 2004 WL 1453529, at *4 (D.Minn. June 24, 2004). As evidenced by the "continuity of shareholders" requirement, these four...
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