1 2 3 UNITED STATES DISTRICT COURT 4 NORTHERN DISTRICT OF CALIFORNIA 5 6

STANLEY MILLER,

Case No. 4:23-cv-02332-YGR Plaintiff, 7 ORDER TO SHOW CAUSE WHY PLEADINGS v. SHOULD NOT BE STRUCK 8 NOMOTA LLC, et al., Re: Dkt. No. 23 9 Defendants. 10

11 Pending before the Court are motions to dismiss filed by defendants Neal J. Schon and 12 Jonathan Cain (collectively, the “Individual Defendants”), as well as Mr. Schon’s motion to 13 strike certain allegations in plaintiff’s Amended Complaint (“AC”).1 14 In support of his motion, Mr. Schon argues the allegations to which he objects were 15 “impermissibly cherry-picked” from pleadings in a separate matter involving the Individual 16 Defendants, Schon v. Cain, No. C22-02337 (Cal. Super. Ct., filed Oct. 31, 2022). (Schon Mot. at 17 2:2-3.) He further asserts that plaintiff’s counsel undertook no efforts to corroborate the veracity of 18 such pleadings before copying and pasting them into the AC. On that basis, Mr. Schon contends 19 the inclusion of the challenged pleadings in the AC represents a dereliction of plaintiff’s counsel’s 20 obligations under Federal Rule of Civil Procedure 11.2 21 /// 22 1 See Dkt. No. 23, Schon’s Motion to Dismiss (“Schon Mot.”); Dkt. No. 28, Cain’s Motion 23 to Dismiss; Dkt. No. 9, Plaintiff’s Amended Complaint. Defendant Schon’s motion to strike is contained within his motion to dismiss. See Schon Mot. at 2:1-7; 3:3-11. He moves this Court to 24 strike allegations in paragraphs 13, 14, 15, 16, and 49 of the AC, as well as Exhibits 1 and 2 attached thereto. 25

2 In addition, Mr. Schon asserts that the challenged pleadings are “immaterial” within the 26 meaning of Federal Rule of Civil Procedure 12(f) and are therefore not proper pleadings. Plaintiff responds to this argument at length in his opposition brief. Mr. Schon also suggests, without 27 citation to authority, that the challenged pleadings violate Federal Rule of Civil Procedure 8. Such 1 To assist in assessing Mr. Schon’s Rule 11 arguments, given they impact the analysis of 2 the underlying motions to dismiss, the Court ORDERS plaintiff’s counsel to file a letter brief 3 describing any investigations made to corroborate the veracity of the at-issue pleadings in Schon v. 4 Cain. The letter brief shall be filed no later than December 28, 2023 and not exceed 3 single- 5 spaced pages. The Court sets a hearing for January 9, 2024 at 2:01 p.m. to address this matter. 6 Defendants will have the opportunity to respond to Mr. Schon’s letter brief at that time or may file 7 a letter brief subject to the same page limit by no later than January 4, 2024. 8 The Court notes that, if counsel’s investigation of the challenged pleadings was 9 insufficient, plaintiff’s attempt to hold the Individual Defendants liable under an alter ego theory 10 may be premature and/or inadequately pled, the motion to strike appropriate, and analysis of the 11 pending motions to dismiss settled. For context: 12 In California, two conditions must be met before the alter ego doctrine will be invoked. First, there must be such a unity of interest and ownership between the corporation and its 13 equitable owner that the separate personalities of the corporation and the shareholder do not in reality exist. Second, there must be an inequitable result if the acts in question are 14 treated as those of the corporation alone. Among the factors to be considered in applying 15 the doctrine are commingling of funds and other assets of the two entities, the holding out by one entity that it is liable for the debts of the other, identical equitable ownership in the 16 two entities, use of the same offices and employees, and use of one as a mere shell or conduit for the affairs of the other. Other factors which have been described in the case law 17 include inadequate capitalization, disregard of corporate formalities, lack of segregation of corporate records, and identical directors and officers. No one characteristic governs, but 18 the courts must look at all the circumstances to determine whether the doctrine should be 19 applied. 20 Sonora Diamond Corp. v. Superior Ct., 83 Cal. App. 4th 523, 538–39 (2000) (internal quotations 21 and citations omitted). 22 Without such allegations, properly made, a claim based on alter ego is not properly stated. 23 See also AngioScore, Inc. v. TriReme Medical, Inc., 87 F.Supp.3d 986, 1013 (N.D. Cal. 2015), 24 reversed and remanded on other grounds, 666 Fed.Appx. 884 (Fed. Cir. Nov. 8, 2016) (“Alter ego 25 liability is an extreme remedy, sparingly used.”) (quoting Sonora, 83 Cal.App.4th at 538). “Such 26 relief is appropriate where there has been an abuse of the corporate privilege so severe that it 27 justifies holding the equitable ownership of a corporation liable for the actions of the corporation.” ] corporate form is ‘used to perpetrate a fraud, circumvent a statute, or accomplish some other 2 || wrongful or inequitable purpose.’” /d. (quoting Sonora, 83 Cal.App.4th at 538). 3 IT Is SO ORDERED. 4 5 Dated: December 15, 2023 see Gonzéonz ee □ 7 NITED STATES DISTRICT COURT JUDGE 8 9 10 1] as 12

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