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1 THE FIERBERG NATIONAL LAW GROUP, PLLC
DOUGLAS E. FIERBERG (admitted pro hac vice)
2 dfierberg@tfnlgroup.com
JONATHON N. FAZZOLA (admitted pro hac vice)
3 jfazzola@tfnlgroup.com
161 East Front Street, Suite 200
4 Traverse City, MI 49684
Telephone: (231) 933-0180
5 Fax: (231) 252-8100
6 SAWYER & LABAR LLP
IVO LABAR, State Bar No. 203492
7 labar@sawyerlabar.com
1700 Montgomery Street, Suite 108
8 San Francisco, CA 94111
Telephone: (415) 262-3820
9
Attorneys for Plaintiffs
10 DAPHNE BELETSIS
YVONNE RAINEY
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12
SUPERIOR COURT OF CALIFORNIA
13
COUNTY OF SANTA CRUZ
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15
DAPHNE BELETSIS, individually, and as Case No. 19CV03287
16 Administrator of the ESTATE OF (Assigned to Hon. Paul Marigonda,
ALEXANDER BELETSIS, and Dept. 10)
17 YVONNE RAINEY, surviving parent of
PLAINTIFFS’ MEMORANDUM OF
18 ALEXANDER BELETSIS, deceased POINTS AND AUTHORITIES IN
OPPOSITION TO DEFENDANT
19 Plaintiffs, THETA CHI’S MOTION FOR
vs. SUMMARY JUDGMENT OR, IN THE
20 ALTERNATIVE, SUMMARY
THETA CHI FRATERNITY, INC., et al., ADJUDICATION
21
Hearing Date: December 9, 2022
22 Defendants. Time: 8:30 a.m.
Dept.: 10
23
Complaint Filed: October 31, 2019
24 FAC Filed: February 5, 2020
Trial Date: June 20, 2022
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PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO THETA CHI’S MOTION FOR SUMMARY JUDGMENT
1 TABLE OF CONTENTS
2
TABLE OF AUTHORITIES ........................................................................................................... iii
3
I. INTRODUCTION................................................................................................................. 1
4
5 II. RELEVANT MATERIAL FACTS ....................................................................................... 2
6 1. The Chapter Endangered the Health and Safety of UCSC Students ......................... 2
7 2. Theta Chi’s Promise of Reform for “the Health and Safety of the Students”
Was an Exercise – and Evidence – of its Absolute Authority Over the Chapter ...... 2
8
3. UCSC Relied on Theta Chi’s Promises of Reform to Make the Chapter Safe ......... 5
9
4. Theta Chi Never Reformed the Chapter or Warned UCSC about the Additional
10 Misconduct Disclosed During the Membership Review........................................... 5
11 5. The Unreformed Chapter’s Dangerous Activities Continued ................................... 6
12 6. The Unreformed Chapter Planned Two “Deadly” Rituals for June 2, 2018 ............. 8
13 7. Theta Chi Utilized the Chapter as an Instrumentality to Generate Revenue and
Protect Its Substantial Assets from the Claims of Creditors ..................................... 9
14
8. Theta Chi Has an Ownership Interest in the Insurance Company
15 that Underwrites the Policy Covering Theta Chi, the Chapter, and Members ........ 11
16
III. LEGAL ARGUMENT ........................................................................................................ 13
17
A. Standards for Summary Judgment .......................................................................... 13
18
B. Theta Chi and the Chapter are Alter Egos Rendering Theta Chi Directly
19 Liable for the Misconduct that Caused Alex’s Death ............................................. 13
20 C. Theta Chi Is Vicariously Liable for the Chapter’s and Members’ Negligence ....... 15
21 D. Theta Chi Voluntarily Undertook to Exercise Its Absolute Control
over the Chapter to Make It “Safe and Healthy for Students” ................................ 16
22
E. Theta Chi Had a Special Relationship with the Chapter and Alex ......................... 18
23
IV. CONCLUSION ................................................................................................................... 20
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ii
PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO THETA CHI’S MOTION FOR SUMMARY JUDGMENT
1 TABLE OF AUTHORITIES
2 CASES
3 Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.App.4th 826 ......................................................... 13
4 Alexander v. Kappa Alpha Psi Fraternity, Inc., 464 F. Supp. 2d 751
(M.D. Tenn. 2006)............................................................................................................... 20
5
6 Barenborg v. Sigma Alpha Epsilon Fraternity (2019) 33 Cal.App.5th 70 ......................... 15, 17, 19
7 Bloomberg v. Interinsurance Exchange (1984) 162 Cal.App.3d 571 ............................................. 16
8 C.R. v. Tenet Healthcare Corp. (2009) 169 Cal.App.4th 1094 ....................................................... 15
9 Colarossi v. Coty U.S. Inc. (2002) 97 Cal.App.4th 1142 ................................................................ 13
10 Communist Party v. 522 Valencia, Inc. (1995) 35 Cal.App.4th 980 .............................................. 13
11 Grenier v Commissioner of Transp., 51 A3d 367 (Conn. 2012) ..................................................... 20
12
Krueger v. Fraternity of Phi Gamma Delta, 2001 Mass. Super. LEXIS 430 (2001) ..................... 20
13
Lichtman v. Siemes Industry, Inc. (2017) 16 Cal.App.5th 914 ....................................................... 16
14
Michel vs. The Fraternity of Phi Gamma Delta Inc., No. RG20063042
15 (Alameda Superior Court) ............................................................................................. 18, 19
16 Morrison v. Kappa Alpha Psi Fraternity, 738 So.2d 1105 (La. Ct. App. 1999) ............................ 20
17 Paz v. State of California (2000) 22 Cal. 4th 550 ........................................................................... 16
18 Saelzler v. Advanced Group 400 (2001) 25 Cal.App.4th 763 ......................................................... 13
19
Scholastic Book Clubs, Inc. v. State Bd. of Equalization (1989) 207 Cal.App.3d 734 ................... 15
20
Sheffield v. Los Angeles County Dept. of Social Services (2003) 109 Cal.App.4th 153 ................. 13
21
Shultz Steel Co. v. Hartford Accident & Ind. Co. (1986) 187 Cal.App.3d 513 .............................. 15
22
Smith v. Delta Tau Delta, Inc. (Ind. 2014) 9 N.E.3d 154................................................................ 17
23
Toho-Towa Co., Ltd. v. Morgan Creek Productions, Inc. (2013) 217 Cal.App.4th 1096 .............. 14
24
University of Southern California v. Superior Court of County of Los Angeles (2018)
25 30 Cal.App.5th 429 ............................................................................................................. 17
26
Violette v. Shoup (1993) 16 Cal.App.4th 611 ................................................................................. 15
27
STATUTES
28
Cal. Corp. Code § 18630 ................................................................................................................. 13
iii
PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO THETA CHI’S MOTION FOR SUMMARY JUDGMENT
1 OTHER AUTHORITIES
2 Cal. Corp. Code § 18630, Law Revision Commission Comments (2004) ..................................... 14
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PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO THETA CHI’S MOTION FOR SUMMARY JUDGMENT
1 I. INTRODUCTION
2 In 2016, a University of California, Santa Cruz (“UCSC”) student was hospitalized for
3 alcohol poisoning after an event sponsored by the Theta Iota Chapter (the “Chapter”) of Theta Chi
4 Fraternity, Inc. (“Theta Chi”). After the incident, Theta Chi contacted UCSC officials on multiple
5 occasions and told UCSC it would be the “point person” to conduct a membership review and
6 reform the Chapter for the “health and safety of the students.” Theta Chi made that commitment to
7 dissuade UCSC from prohibiting the Chapter from recruiting new members, based upon that
8 incident and the Chapter’s record of other risky policy violations, which Theta Chi described as
9 the “life-blood” of any fraternity.
10 Multiple fraternity members interviewed during an ensuing half-day “membership review”
11 disclosed that they had endured hazing, recruiting activities involving the misuse of alcohol and
12 physical activities, and that the Chapter had “a drug problem (Reputation).” Despite its absolute
13 power over the Chapter, its promises of reform, and its direct knowledge of continuing dangers,
14 Theta Chi did nothing to make the Chapter safe.
15 As a result, the Chapter continued to engage in the same ultra-high-risk recruitment rituals,
16 practices, and illegal conduct. The very next semester those rituals, practices, and illegal conduct
17 forced one Theta Chi pledge to withdraw from UCSC and enter in-patient rehabilitation for poly-
18 substance abuse. Two semesters after that the Chapter’s misconduct resulted in the death of Alex
19 Beletsis, who on June 2, 2018, fell from a second-floor window of the Chapter’s satellite house,
20 sustaining critical, and ultimately fatal, injuries.
21 After Alex’s death, UCSC uncovered extensive misconduct by the Chapter and its
22 members on the evening leading to Alex’s death and banned Theta Chi from operating at UCSC,
23 on- or off-campus. Theta Chi waived its right to appeal and, after UCSC refused to negotiate a
24 recolonization agreement, removed the Chapter’s charter, admitting that the Chapter “had
25 repeatedly violated Theta Chi alcohol policies,” and that “hazing activities” had been “taking place
26 within the chapter.” But Theta Chi did not punish any Chapter members. Instead, Theta Chi
27 ratified their misconduct by making them alumni members and organizing a gala, attended by its
28 CEO, to celebrate the Chapter’s 30-year anniversary.
1
PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO THETA CHI’S MOTION FOR SUMMARY JUDGMENT
1 While Theta Chi would now like to pretend otherwise, the facts establish that Theta Chi
2 exercised complete control over every material aspect of the Chapter. The facts and the
3 uncontroverted, qualified expert opinion by Karl Schulz, CPA, CFE, CVA, CFF, also establish
4 that the Chapter was a mere alter ego of Theta Chi, which Theta Chi deliberately undercapitalized
5 and underinsured, deprived of local autonomy, and used as a façade to try to shield its
6 considerable assets from the reach of potential creditors, like Plaintiffs. As the alter ego of the
7 Chapter, Theta Chi owes the same legal duties as the Chapter and is liable for the Chapter’s
8 negligence and dangerous misconduct that caused the death of Alex.
9 In moving for summary judgment, Theta Chi essentially ignores these facts, fails to advise
10 the Court of an adverse summary judgment ruling in the Superior Court of Alameda County in a
11 directly analogous fraternity case handled by the same counsel that represents Theta Chi, and
12 makes arguments about a purported lack of a special relationship that were squarely rejected in
13 that case for reasons that apply with equal, if not greater, force here. Accordingly, and for the
14 reasons and authorities set forth below, Theta Chi’s motion should be denied.
15 II. RELEVANT MATERIAL FACTS
16 1. The Chapter Endangered the Health and Safety of UCSC Students
17 Approximately two years before Alex’s death, UCSC suspended the Chapter following
18 multiple dangerous infractions. 1 (PSMF at TT.) The last straw came when a student attending an
19 April 2, 2016 Chapter rush event was found unconscious and hospitalized with alcohol poisoning.
20 (PSMF at VV.) UCSC ultimately determined that there was a “preponderance of evidence” that
21 the Chapter’s “activity that day threatened the health and safety of those present by failing to
22 monitor and ensure the well-being of your guests.” (PSMF at WW.)
23 2. Theta Chi’s Promise of Reform for “the Health and Safety of the Students”
Was an Exercise – and Evidence – of its Absolute Authority Over the Chapter
24
On April 27, 2016, when the Chapter was facing sanctions by UCSC, Tara Dunn, Theta
25
Chi’s National Director of Collegiate Services, wrote to UCSC’s Assistant Dean for Conduct and
26
27
1
28 UCSC recounted allegations from two women who reported being rendered “incapacitated” after
their drinks were drugged at a Chapter party. (PSMF at UU.)
2
PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO THETA CHI’S MOTION FOR SUMMARY JUDGMENT
1 Community Standards Cliff Golz, admitting “that improvements are overdue,” and stating that
2 Theta Chi would work with UCSC “to maximize the outcome of the conduct process for the good
3 of the chapter and the safety of your students while at the same time minimizing the effect it has on
4 recruitment for our chapter.” (PSMF at XX.) Dunn “extend[ed] a hand” “in an effort to improve
5 the Chapter,” and offered to be the “point person,” to “put to work” the “time and resources” of
6 Theta Chi to take “whatever” reforms or actions over the Chapter, short of restricting recruitment,
7 that UCSC deemed “appropriate.” (PSMF at YY.)
8 After UCSC announced, following a hearing, that it was suspending the Chapter from
9 campus activities for 12 months, on May 12, 2016, Ray Vanlanot, Theta Chi’s Chief Operating
10 Officer, wrote to propose a “remediation plan” “as a gesture of cooperation with UCSC policies
11 and procedures.” (PSMF at ZZ.) Vanlanot represented that Theta Chi would, inter alia, appoint a
12 “trained” Alumni Probation Committee (APC) to conduct a “Membership Review” consisting of
13 “one-on-one interviews with each of the members of the Chapter to determine each member’s
14 ability to maintain active membership in Theta Chi,” and “promptly” provide the results of the
15 review to UCSC. (PSMF at AAA.) Vanlanot advised that he would personally, and “in person,”
16 coordinate and oversee “the on-site process.” (PSMF at BBB.) He also told UCSC that the APC
17 would have “the powers to modify Chapter membership statuses, remove/replace Chapter officers,
18 amend local by-laws, and regulate Chapter functionality.” (PSMF at CCC.) No Chapter members
19 or officers were copied on Vanlanot’s letter, underscoring the absolute control Theta Chi exercised
20 over the Chapter. (PSMF at EEE.) Theta Chi believed that its proposals “would be better” at
21 reforming the Chapter than UCSC’s proposed sanctions. (PSMF at FFF.)
22 Theta Chi established the APC and ordered the Chapter to follow its directions and
23 “complete any additional requirements as deemed necessary.” (PSMF at GGG.) Vanlanot
24 informed UCSC that the APC would “maintain control over Chapter functioning and maintain the
25 authority to intervene as necessary.” (PSMF at DDD.)
26 Theta Chi could imbue the APC with that authority because as Tyson Lai, an APC member
27 and Chapter alumni, affirmed, Theta Chi exercised complete control over the Chapter’s policies,
28 activities, and people, and had the power to: remove any officer or member; impose any changes
3
PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO THETA CHI’S MOTION FOR SUMMARY JUDGMENT
1 that it believed necessary; change the means by which the Chapter recruited and who the Chapter
2 recruited; change the way Chapter funds were raised, managed, and held; change the types of
3 activities the Chapter engaged in; and convey on him (Lai), as an APC member, authority to
4 recommend any change he believed necessary. (PSMF at III.) Christopher Guevara, the Chapter’s
5 former president, confirmed that Theta Chi controlled the Chapter’s activities. (PSMF at JJJ.)
6 Theta Chi’s control of and authority over the Chapter derived from the Theta Chi
7 Constitution, which describes Theta Chi as a “Corporation” empowered to “establish, maintain
8 and govern” the “Fraternity.” (PSMF at KKK.) The “Fraternity” enterprise consists “of the
9 Corporation, active chapters … Theta Chi Chapter, and the members and Pledges of the
10 Fraternity.” (PSMF at LLL.) The Constitution is the “supreme law” of the Fraternity; any chapter
11 “bylaw, regulation, legislation or resolution” in conflict with it is “null and void.” (Id.)
12 Per the Constitution, Theta Chi has the power to: determine how and whether to establish
13 chapters; name Chapters; vest its CEO with absolute power to place a chapter on probation and to
14 impose “any limitation on its activities, not inconsistent with these Bylaws” and/or “any
15 affirmative requirement for the chapter’s conduct, that it deems necessary or appropriate”; expel
16 chapter members and remove and replace chapter officers; impose “Annual Programming and
17 Benefits Fee” on its chapters; restrict a “chapter from undertaking, performing or participating in a
18 specific activity or event or from conducting specific chapter operations”; revoke the charter of a
19 chapter and order that “all records, Ritual Books, minutes and correspondence, and the charter, of
20 the chapter shall be immediately returned to the International Headquarters.” (PSMF at MMM.)
21 Theta Chi’s control and authority over the Chapter was so absolute that during their
22 depositions, former Chapter officers did not even pretend to know the basics of how their Chapter
23 was formed, its legal form or status, whether it had its own bylaws, how it managed its money,
24 who opened and controlled the account through which it and its members paid dues and fees to
25 Theta Chi, whether it had established financial policies or controls, whether it obtained or
26 maintained insurance, or how it otherwise operated beyond simply following “the Ritual” and
27 other membership recruitment materials paid for and provided by Theta Chi. (PSMF at NNN.)
28 Zachary Davis, a Spring 2017 pledge and the Chapter’s Health and Safety Officer in Winter
4
PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO THETA CHI’S MOTION FOR SUMMARY JUDGMENT
1 2017/2018, attested:
2 Even as a member of the Chapter’s executive board, I did not know how the Chapter
was organized, such as whether it was a corporation or other legal entity. I was not
3 aware of any of this or any other matters involving its finances, by-laws, insurance,
how its insurance and other bills were paid, its legal standing, and how its fees and
4
dues were set. At meetings of Chapter officers, I do not recall any discussions about
5 these matters.
6 (Davis Decl., ¶ 15, Ex. 5 to Plaintiffs’ Index of Evidence.) 2
7 3. UCSC Relied on Theta Chi’s Promises of Reform to Make the Chapter Safe
8 UCSC believed, based on Theta Chi’s representations, that Theta Chi would reform the
9 Chapter to make it safe. UCSC Assistant Dean Golz expected that Theta Chi was going to follow
10 through on its offers of help to get the Chapter turned around. (PSMF at RRR.) Golz testified that,
11 given the Chapter’s history, which included activities that threatened the health and safety of a
12 student, Theta Chi’s involvement was important to turning around the Chapter. (PSMF at SSS.)
13 He testified that Theta Chi was saying to UCSC what it was going to do on its own to help turn
14 around the Chapter, which had been a threat to the health and safety of the students. (PSMF at
15 SSS.) UCSC Associate Director Katherine Canales-Molina testified that because it was a matter of
16 safety, UCSC expected that Theta Chi would undertake such actions as reasonably necessary to
17 stop the type of behavior that led to the Chapter’s sanctions as a condition of the Chapter coming
18 back to UCSC as a registered organization. (PSMF at TTT.)
19 4. Theta Chi Never Reformed the Chapter or Warned UCSC about the
Additional Misconduct Disclosed During the Membership Review
20
Theta Chi never trained the APC on how to do its job or reform the Chapter. (PSMF at
21
UUU.) However, the untrained APC did interview Chapter members for “several hours” on June
22
3, 2016. (PSMF at VVV.) Witnesses disagree about whether Vanlanot attended the membership
23
review in-person. (PSMF at WWW.) Nevertheless, at least four Chapter members disclosed that
24
they had been hazed, including with alcohol, that the Chapter improperly supplied and used
25
alcohol at recruiting events, and that the Chapter had a “drug problem” reputation. (PSMF at
26
27 2
The Chapter has not filed any legal documents required under California Corporations Code
28 section 21300 or under section 501, 527, or 4947(a)(a) of the Internal Revenue Code. (Declaration
of Douglas Fierberg, ¶ 33.)
5
PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO THETA CHI’S MOTION FOR SUMMARY JUDGMENT
1 XXX.) Members also told the APC that the Chapter lacked strong, experienced leadership, lacked
2 responsibility or accountability, and needed guidance on how to run the Chapter. (PSMF at YYY.)
3 Theta Chi did nothing after the on-site interviews to reform the Chapter and make it or its
4 activities safe for current and future members and pledges. (PSMF at DDDD.) Nor did Theta Chi
5 advise or warn UCSC about the information or concerns the members disclosed to the APC.
6 (PSMF at EEEE.) One month later, on July 5, 2016, UCSC upheld the Chapter’s suspension
7 following an appeal. (PSMF at ZZZ.) UCSC found that “members of your chapter should have
8 been aware of their responsibility for protecting the safety of your guest at an event sponsored by
9 the chapter.” (PSMF at AAAA.) UCSC noted that it appreciated the steps the Chapter had taken
10 “in collaboration with [its] local alumni and executive officers from the Theta Chi National
11 Headquarters since [it] received the May 5, 2016, letter from the conduct office,” and encouraged
12 the Chapter’s leadership “in cooperation with your chapter alumni and national headquarters
13 staff[,] prepare to come back to campus fully prepared to become a part of the UC Santa Cruz
14 community again” in Spring 2017. (PSMF at BBBB.) UCSC ultimately prohibited the Chapter
15 from using any UCSC facilities or resources until Fall 2017. (PSMF at CCCC.)
16 5. The Unreformed Chapter’s Dangerous Activities Continued
17 Vanlanot contended in his deposition that the “university’s suspension prohibited” Theta
18 Chi from acting independently to reform the Chapter. (PSMF at FFFF.) However, during UCSC’s
19 suspension, the Chapter continued to recruit and pledge new members. (PSMF at GGGG.) As one
20 member explained:
21 [W]e weren’t kicked off. We weren’t rogue. We weren’t any of these words that
are buzzwords … We were stillvery much recognized, still very much paying
22 insurance, still very much giving national’s money, and still very much attending
things that were nationally sponsored such as Theta Chi University.
23
24 *****
25 While we were suspended as a university chapter, we were still recognized by Theta
Chi International as a national chapter; therefore, could still continue to do Theta
26 Chi things … which included recruiting.
27 (See Garcia Dep. 133:17-134:10, 185:6-18 (Ex. 31 to Plaintiffs’ Index of Evidence)).
28 Theta Chi collected $8,125.75 dues and fees from the Chapter between January 1, 2017
6
PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO THETA CHI’S MOTION FOR SUMMARY JUDGMENT
1 and August 22, 2017. (PSMF at JJJJ.) Still, Theta Chi took no actions to reform the Chapter, or
2 even provide basic training or education to its members, despite its promises to UCSC. Davis, a
3 Spring 2017 pledge, attested:
4 While pledging Theta Chi, I do not recall anyone from the National Fraternity
visiting the Chapter for any reason, including to train pledges and members on risk
5 management, hazing, or alcohol misuse. And, during my entire time with Theta Chi
as an undergraduate, I do not recall anyone associated with the National Fraternity
6
ever asking me or other members about the Chapter’s rituals and whether or not
7 Chapter events complied with university or fraternity regulations or risk management
policies involving hazing, alcohol and drugs.
8
(Davis Decl., ¶ 3 (Ex. 5 to Plaintiffs’ Index of Evidence).) Guevara testified that he did not see any
9
changes from the national level following the June 2016 membership review to address the hazing
10
or alcohol and drug misuse that members had disclosed during the review. (PSMF at LLLL.)
11
Instead, “it was all kept the same, just PowerPoints and presentations,” which had not been
12
effective. (PSMF at MMMM.) As a result, inter alia, “the chapter did have a drug problem and it
13
continued”; the drug problem identified in 2016 was still a problem with the Chapter in 2018 and
14
2019 (PSMF at NNNN.)
15
Numerous former Chapter members and officers confirmed in discovery what Theta Chi
16
and its APC knew but failed to reform or inform UCSC: the Chapter remained “unhealthy,”
17
dangerous, and in need of reform. (PSMF at OOOO.) Davis described recruitment rituals and
18
dangerous activities, with pledges and members passed out from alcohol intoxication, vomiting,
19
and rampant binge drinking and drug use. (PSMF at PPPP.)3 Davis completed two or three weeks
20
of pledging before dropping out and checking himself into a rehabilitation facility for poly-
21
substance abuse. 4 (PSMF at QQQQ.)
22
23
3
24 Theta Chi also knew from the experience, memorialized in publications by its former Executive
Director, David Westol, and the deaths of pledges and members in California and elsewhere, that
25 the Chapter’s rituals and activities involving alcohol were deadly. Westol penned an article in
2005 entitled “The Three Deadly Nights,” stating “we know one thing for certain. If a chapter
26 allows alcohol into a bid night event, big brother night, or pre-initiation, that chapter has set the
27 stage for a tragedy.” (PSMF at SSSS.) Westol testified that the presence of alcohol at any one of
these rituals rendered them “dangerous.” (PSMF at TTTT.)
4
28 Davis returned to campus and completed pledging in Fall 2017, with Alex, eventually becoming
the Chapter’s Health and Safety Officer. (PSMF at UUUU.)
7
PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO THETA CHI’S MOTION FOR SUMMARY JUDGMENT
1 Davis testified that the Chapter remained “unsafe” up until Alex’s death because neither he
2 nor the rest of the Chapter’s Executive Board had any power to control or reform the Chapter’s
3 deadly traditions and misconduct. (PSMF at RRRR.) 5 Prior to Alex’s death, Davis met on
4 “numerous” occasions with the Chapter’s Executive Board urging it to reduce the amount of
5 alcohol at Chapter events, but his efforts “didn’t alter what we are – previous behaviors, no.”
6 (PSMF at VVVV.) So wholly absent or ineffective was Theta Chi in fulfilling its undertaking to
7 make the Chapter “safe,” that Davis did not even “know how I would contact the National
8 fraternity.” (PSMF at WWWW.)
9 6. The Unreformed Chapter Planned Two “Deadly” Rituals for June 2, 2018
10 In the spring of 2018, after semesters of continued dangerous misconduct and Davis’
11 return to campus from in-patient rehab, the Chapter planned a Crossover Ceremony, Big Brother
12 Night, and afterparty for June 2, 2018 that would be fueled with alcohol and drugs. (PSMF at O-
13 Q.) The Crossover Ceremony was held at the fraternity’s “satellite house.” (PSMF at R.) Theta
14 Chi member Miguel Salvidar, Jr. testified that Alex was sober when he drove him to the Crossover
15 Ceremony. (PSMF at R.) Alex did not bring alcohol to the event. (PSMF at S and BB.) During the
16 Big Brother portion of events, per tradition, “family” alcoholic drinks were served in large
17 quantities, and new family members and members drank the alcohol per the Chapter’s rituals and
18 traditions. (PSMF at W.) Alex had been made a member of the Johnny Walker Black Family,
19 meaning that he was handed a bottle of this hard alcohol and, by tradition, “the bottle was to be
20 finished that night by the pledge and the fraternity family.” (PSMF at W.)
21 When Alex arrived at the Chapter-sponsored afterparty, alcoholic drinks were set up at an
22 open bar. (PSMF at CC.) Burns, an underage Theta Chi member, made at least two trips to the bar
23 and never saw anyone checking IDs. (Id.) Burns observed Alex drinking alcohol from a red solo
24 cup. (PSMF at DD.) It was common knowledge that some Chapter members used cocaine, and
25 that some might have cocaine at the afterparty. (PSMF at EE.) Derek King, Chapter President the
26 year before, was inside his bedroom preparing and distributing lines of cocaine. (Id.) Alex – who
27
5
28 In Spring 2018, Alex reached out to Davis and expressed concerns about developing substance-
abuse issues because of the level of alcohol and drug use in the Chapter. (PSMF at N.)
8
PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO THETA CHI’S MOTION FOR SUMMARY JUDGMENT
1 was so intoxicated from the Chapter rituals that he was “swaying side to side” – consumed cocaine
2 while in King’s room. (PSMF at FF-GG.) Immediately afterward, Alex appeared upset, and Burns
3 walked Alex to a second-floor bathroom. (PSMF at HH.) Shortly after entering the bathroom,
4 Alex fell out of the window and onto the street below, sustaining traumatic injuries which would
5 ultimately prove fatal. (PSMF at II.) Burns later told UCSC that Alex would have never gone out
6 of the window if he had not consumed cocaine at the event. (PSMF at JJ.) Alex’s blood alcohol
7 content was 0.318, almost four times the legal limit in California. (PSMF at LL-MM.) 6
8 UCSC investigated and revoked the Chapter’s recognition, concluding, inter alia, that
9 “cocaine was flowing throughout the party”; the Chapter and its members engaged in deeply
10 appalling behavior of hazing, drug use, and more; and the Chapter engaged in conduct that
11 constituted a threat to people’s health and safety. (Plaintiffs’ Response and Supporting Evidence
12 in Opp. to Theta Chi’s SMF at 15.) Theta Chi later admitted that the Chapter “had repeatedly
13 violated Theta Chi alcohol policies” and that “hazing activities were taking place within the
14 chapter.” (PSMF at XXXX.) This was a rampant continuation of the threat to “peoples’ health and
15 safety” that Theta Chi promised to reform yet never did.
16 Despite UCSC’s findings, its expulsion of the Chapter, and Alex’s death, Theta Chi sought
17 a “recolonization agreement” for the Chapter (which UCSC rejected), made all the Chapter
18 members “alumnus” members – identical to the status of any Theta Chi member who graduates
19 from college – and sponsored a gala in Santa Cruz to celebrate the Chapter’s 30-year anniversary,
20 which Theta Chi CEO Mayer and APC member Lai attended. (PSMF at YYYY-AAAAA.) This
21 constituted a direct ratification of the events causing Alex’s death.
22 7. Theta Chi Utilized the Chapter as an Instrumentality to Generate Revenue
and Protect Its Substantial Assets from the Claims of Creditors
23
Theta Chi formed itself as a tax-exempt corporation with a designated agent for service of
24
25 6
Theta Chi built its defense on irrelevant hearsay that Alex was a frequent drug user even though
he showed up to the Chapter’s events entirely sober. A toxicology screen performed on Alex’s
26 urine gathered at the hospital tested negative for amphetamines, barbiturates, benzodiazepines,
27 opiates, phencyclidine (PCP), and oxycodone. (PSMF at PP.) There were no traces of any
substances in Alex’s system, other than the alcohol and cocaine provided at the Chapter’s planned
28 rituals and events. And contrary to Theta Chi’s repeated assertion, there is no competent evidence
that Alex “had a cocaine dealer” or “purchased the cocaine” from that “dealer” on June 2, 2018.
9
PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO THETA CHI’S MOTION FOR SUMMARY JUDGMENT
1 process. (Theta Chi SMF at 16.) Conversely, the Chapter – formed and controlled by Theta Chi –
2 is an unincorporated association with no such agent. (PSMF at SS.) Theta Chi tried to leverage
3 that difference to keep the Chapter out of this case. On July 17, 2020, the Chapter, by and through
4 an attorney who now serves as counsel of record for Theta Chi – Elaine Kobylecki – filed a
5 Motion to Quash the Service of Summons on the Chapter. (PSMF at BBBBB.) Ms. Kobylecki
6 argued on behalf of the purportedly non-existent Chapter that “it had no legal existence and/or
7 plaintiffs have failed to comply with the requirement that service be made on an individual
8 authorized to accept such service per Code of Civil Procedure section 416.40(b).” (PSMF at
9 CCCCC.) In support of its motion, which the Court denied, the Chapter submitted declarations
10 from Mayer and Guevara, the latter of whom Plaintiffs had served on behalf of the Chapter.
11 (PSMF at DDDDD.) Mayer declared that once a chapter’s charter has been revoked, “the chapter
12 ceases to exist as a Theta Chi chapter.” (PSMF at EEEEE.) Guevara, in turn, declared that “[t]he
13 Chapter was an unincorporated association at the time of the subject incident.” (PSMF at FFFFF.)
14 When Guevara was later deposed, he admitted that he did not know if the Chapter was, in fact, an
15 unincorporated association and conceded that he had never heard the term “unincorporated
16 association” before. (PSMF at GGGGG.) 7
17 Theta Chi has amassed millions in earnings and retained assets while keeping its chapters,
18 including the Chapter, undercapitalized. In its 2018 IRS Form 990, Theta Chi, which is exempt
19 from taxes pursuant to IRS § 501(c)(4), reported that at least 75% of its annual revenue of
20 $5,698,571 came from dues paid by undergraduate and alumni members. (PSMF at IIIII.) Theta
21 Chi reported $2 million in cash, net assets of $5,512,177, and a reserve for future liability claims
22 of $304,841. (PSMF at JJJJJ.)
23 In contrast, the Chapter had no assets and owned no property. (PSMF at KKKKK.) On
24 April 2, 2019, Mayer wrote the Chapter members to inform them that the Chapter’s charter was
25 revoked, it “is now closed,” and that its members “are prohibited from undertaking any activity in
26
7
27 Ms. Kobylecki – despite previously representing the Chapter, and apparently procuring a
declaration from Guevara that contained attestations that were not based on his personal
28 knowledge or understanding – represented Theta Chi during Guevara’s deposition. (PSMF at
HHHHH.)
10
PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO THETA CHI’S MOTION FOR SUMMARY JUDGMENT
1 the name of Theta Chi Fraternity.” (PSMF at LLLLL.) Although on April 2, 2019, the Chapter’s
2 OmegaFi account – which Theta Chi established and controlled 8 – had a balance of $5,497.97,
3 records show a series of withdrawals by Theta Chi on April 4 and April 9, 2019, totaling
4 $5,497.97, exhausting the balance. (PSMF at MMMMM-NNNNN.)
5 8. Theta Chi Has an Ownership Interest in the Insurance Company that
Underwrites the Policy Covering Theta Chi, the Chapter, and Members
6
Plaintiffs’ expert, Karl J. Schulze, has reviewed the formative documents of Theta Chi and
7
related financial and insurance information, and opines that “virtually all activities, structural, and
Preview
1 THE FIERBERG NATIONAL LAW GROUP, PLLC DOUGLAS E. FIERBERG (admitted pro hac vice) 2 dfierberg@tfnlgroup.com JONATHON N. FAZZOLA (admitted pro hac vice) 3 jfazzola@tfnlgroup.com 161 East Front Street, Suite 200 4 Traverse City, MI 49684 Telephone: (231) 933-0180 5 Fax: (231) 252-8100 6 SAWYER & LABAR LLP IVO LABAR, State Bar No. 203492 7 labar@sawyerlabar.com 1700 Montgomery Street, Suite 108 8 San Francisco, CA 94111 Telephone: (415) 262-3820 9 Attorneys for Plaintiffs 10 DAPHNE BELETSIS YVONNE RAINEY 11 12 SUPERIOR COURT OF CALIFORNIA 13 COUNTY OF SANTA CRUZ 14 15 DAPHNE BELETSIS, individually, and as Case No. 19CV03287 16 Administrator of the ESTATE OF (Assigned to Hon. Paul Marigonda, ALEXANDER BELETSIS, and Dept. 10) 17 YVONNE RAINEY, surviving parent of PLAINTIFFS’ MEMORANDUM OF 18 ALEXANDER BELETSIS, deceased POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANT 19 Plaintiffs, THETA CHI’S MOTION FOR vs. SUMMARY JUDGMENT OR, IN THE 20 ALTERNATIVE, SUMMARY THETA CHI FRATERNITY, INC., et al., ADJUDICATION 21 Hearing Date: December 9, 2022 22 Defendants. Time: 8:30 a.m. Dept.: 10 23 Complaint Filed: October 31, 2019 24 FAC Filed: February 5, 2020 Trial Date: June 20, 2022 25 26 27 28 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO THETA CHI’S MOTION FOR SUMMARY JUDGMENT 1 TABLE OF CONTENTS 2 TABLE OF AUTHORITIES ........................................................................................................... iii 3 I. INTRODUCTION................................................................................................................. 1 4 5 II. RELEVANT MATERIAL FACTS ....................................................................................... 2 6 1. The Chapter Endangered the Health and Safety of UCSC Students ......................... 2 7 2. Theta Chi’s Promise of Reform for “the Health and Safety of the Students” Was an Exercise – and Evidence – of its Absolute Authority Over the Chapter ...... 2 8 3. UCSC Relied on Theta Chi’s Promises of Reform to Make the Chapter Safe ......... 5 9 4. Theta Chi Never Reformed the Chapter or Warned UCSC about the Additional 10 Misconduct Disclosed During the Membership Review........................................... 5 11 5. The Unreformed Chapter’s Dangerous Activities Continued ................................... 6 12 6. The Unreformed Chapter Planned Two “Deadly” Rituals for June 2, 2018 ............. 8 13 7. Theta Chi Utilized the Chapter as an Instrumentality to Generate Revenue and Protect Its Substantial Assets from the Claims of Creditors ..................................... 9 14 8. Theta Chi Has an Ownership Interest in the Insurance Company 15 that Underwrites the Policy Covering Theta Chi, the Chapter, and Members ........ 11 16 III. LEGAL ARGUMENT ........................................................................................................ 13 17 A. Standards for Summary Judgment .......................................................................... 13 18 B. Theta Chi and the Chapter are Alter Egos Rendering Theta Chi Directly 19 Liable for the Misconduct that Caused Alex’s Death ............................................. 13 20 C. Theta Chi Is Vicariously Liable for the Chapter’s and Members’ Negligence ....... 15 21 D. Theta Chi Voluntarily Undertook to Exercise Its Absolute Control over the Chapter to Make It “Safe and Healthy for Students” ................................ 16 22 E. Theta Chi Had a Special Relationship with the Chapter and Alex ......................... 18 23 IV. CONCLUSION ................................................................................................................... 20 24 25 26 27 28 ii PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO THETA CHI’S MOTION FOR SUMMARY JUDGMENT 1 TABLE OF AUTHORITIES 2 CASES 3 Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.App.4th 826 ......................................................... 13 4 Alexander v. Kappa Alpha Psi Fraternity, Inc., 464 F. Supp. 2d 751 (M.D. Tenn. 2006)............................................................................................................... 20 5 6 Barenborg v. Sigma Alpha Epsilon Fraternity (2019) 33 Cal.App.5th 70 ......................... 15, 17, 19 7 Bloomberg v. Interinsurance Exchange (1984) 162 Cal.App.3d 571 ............................................. 16 8 C.R. v. Tenet Healthcare Corp. (2009) 169 Cal.App.4th 1094 ....................................................... 15 9 Colarossi v. Coty U.S. Inc. (2002) 97 Cal.App.4th 1142 ................................................................ 13 10 Communist Party v. 522 Valencia, Inc. (1995) 35 Cal.App.4th 980 .............................................. 13 11 Grenier v Commissioner of Transp., 51 A3d 367 (Conn. 2012) ..................................................... 20 12 Krueger v. Fraternity of Phi Gamma Delta, 2001 Mass. Super. LEXIS 430 (2001) ..................... 20 13 Lichtman v. Siemes Industry, Inc. (2017) 16 Cal.App.5th 914 ....................................................... 16 14 Michel vs. The Fraternity of Phi Gamma Delta Inc., No. RG20063042 15 (Alameda Superior Court) ............................................................................................. 18, 19 16 Morrison v. Kappa Alpha Psi Fraternity, 738 So.2d 1105 (La. Ct. App. 1999) ............................ 20 17 Paz v. State of California (2000) 22 Cal. 4th 550 ........................................................................... 16 18 Saelzler v. Advanced Group 400 (2001) 25 Cal.App.4th 763 ......................................................... 13 19 Scholastic Book Clubs, Inc. v. State Bd. of Equalization (1989) 207 Cal.App.3d 734 ................... 15 20 Sheffield v. Los Angeles County Dept. of Social Services (2003) 109 Cal.App.4th 153 ................. 13 21 Shultz Steel Co. v. Hartford Accident & Ind. Co. (1986) 187 Cal.App.3d 513 .............................. 15 22 Smith v. Delta Tau Delta, Inc. (Ind. 2014) 9 N.E.3d 154................................................................ 17 23 Toho-Towa Co., Ltd. v. Morgan Creek Productions, Inc. (2013) 217 Cal.App.4th 1096 .............. 14 24 University of Southern California v. Superior Court of County of Los Angeles (2018) 25 30 Cal.App.5th 429 ............................................................................................................. 17 26 Violette v. Shoup (1993) 16 Cal.App.4th 611 ................................................................................. 15 27 STATUTES 28 Cal. Corp. Code § 18630 ................................................................................................................. 13 iii PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO THETA CHI’S MOTION FOR SUMMARY JUDGMENT 1 OTHER AUTHORITIES 2 Cal. Corp. Code § 18630, Law Revision Commission Comments (2004) ..................................... 14 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 iv PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO THETA CHI’S MOTION FOR SUMMARY JUDGMENT 1 I. INTRODUCTION 2 In 2016, a University of California, Santa Cruz (“UCSC”) student was hospitalized for 3 alcohol poisoning after an event sponsored by the Theta Iota Chapter (the “Chapter”) of Theta Chi 4 Fraternity, Inc. (“Theta Chi”). After the incident, Theta Chi contacted UCSC officials on multiple 5 occasions and told UCSC it would be the “point person” to conduct a membership review and 6 reform the Chapter for the “health and safety of the students.” Theta Chi made that commitment to 7 dissuade UCSC from prohibiting the Chapter from recruiting new members, based upon that 8 incident and the Chapter’s record of other risky policy violations, which Theta Chi described as 9 the “life-blood” of any fraternity. 10 Multiple fraternity members interviewed during an ensuing half-day “membership review” 11 disclosed that they had endured hazing, recruiting activities involving the misuse of alcohol and 12 physical activities, and that the Chapter had “a drug problem (Reputation).” Despite its absolute 13 power over the Chapter, its promises of reform, and its direct knowledge of continuing dangers, 14 Theta Chi did nothing to make the Chapter safe. 15 As a result, the Chapter continued to engage in the same ultra-high-risk recruitment rituals, 16 practices, and illegal conduct. The very next semester those rituals, practices, and illegal conduct 17 forced one Theta Chi pledge to withdraw from UCSC and enter in-patient rehabilitation for poly- 18 substance abuse. Two semesters after that the Chapter’s misconduct resulted in the death of Alex 19 Beletsis, who on June 2, 2018, fell from a second-floor window of the Chapter’s satellite house, 20 sustaining critical, and ultimately fatal, injuries. 21 After Alex’s death, UCSC uncovered extensive misconduct by the Chapter and its 22 members on the evening leading to Alex’s death and banned Theta Chi from operating at UCSC, 23 on- or off-campus. Theta Chi waived its right to appeal and, after UCSC refused to negotiate a 24 recolonization agreement, removed the Chapter’s charter, admitting that the Chapter “had 25 repeatedly violated Theta Chi alcohol policies,” and that “hazing activities” had been “taking place 26 within the chapter.” But Theta Chi did not punish any Chapter members. Instead, Theta Chi 27 ratified their misconduct by making them alumni members and organizing a gala, attended by its 28 CEO, to celebrate the Chapter’s 30-year anniversary. 1 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO THETA CHI’S MOTION FOR SUMMARY JUDGMENT 1 While Theta Chi would now like to pretend otherwise, the facts establish that Theta Chi 2 exercised complete control over every material aspect of the Chapter. The facts and the 3 uncontroverted, qualified expert opinion by Karl Schulz, CPA, CFE, CVA, CFF, also establish 4 that the Chapter was a mere alter ego of Theta Chi, which Theta Chi deliberately undercapitalized 5 and underinsured, deprived of local autonomy, and used as a façade to try to shield its 6 considerable assets from the reach of potential creditors, like Plaintiffs. As the alter ego of the 7 Chapter, Theta Chi owes the same legal duties as the Chapter and is liable for the Chapter’s 8 negligence and dangerous misconduct that caused the death of Alex. 9 In moving for summary judgment, Theta Chi essentially ignores these facts, fails to advise 10 the Court of an adverse summary judgment ruling in the Superior Court of Alameda County in a 11 directly analogous fraternity case handled by the same counsel that represents Theta Chi, and 12 makes arguments about a purported lack of a special relationship that were squarely rejected in 13 that case for reasons that apply with equal, if not greater, force here. Accordingly, and for the 14 reasons and authorities set forth below, Theta Chi’s motion should be denied. 15 II. RELEVANT MATERIAL FACTS 16 1. The Chapter Endangered the Health and Safety of UCSC Students 17 Approximately two years before Alex’s death, UCSC suspended the Chapter following 18 multiple dangerous infractions. 1 (PSMF at TT.) The last straw came when a student attending an 19 April 2, 2016 Chapter rush event was found unconscious and hospitalized with alcohol poisoning. 20 (PSMF at VV.) UCSC ultimately determined that there was a “preponderance of evidence” that 21 the Chapter’s “activity that day threatened the health and safety of those present by failing to 22 monitor and ensure the well-being of your guests.” (PSMF at WW.) 23 2. Theta Chi’s Promise of Reform for “the Health and Safety of the Students” Was an Exercise – and Evidence – of its Absolute Authority Over the Chapter 24 On April 27, 2016, when the Chapter was facing sanctions by UCSC, Tara Dunn, Theta 25 Chi’s National Director of Collegiate Services, wrote to UCSC’s Assistant Dean for Conduct and 26 27 1 28 UCSC recounted allegations from two women who reported being rendered “incapacitated” after their drinks were drugged at a Chapter party. (PSMF at UU.) 2 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO THETA CHI’S MOTION FOR SUMMARY JUDGMENT 1 Community Standards Cliff Golz, admitting “that improvements are overdue,” and stating that 2 Theta Chi would work with UCSC “to maximize the outcome of the conduct process for the good 3 of the chapter and the safety of your students while at the same time minimizing the effect it has on 4 recruitment for our chapter.” (PSMF at XX.) Dunn “extend[ed] a hand” “in an effort to improve 5 the Chapter,” and offered to be the “point person,” to “put to work” the “time and resources” of 6 Theta Chi to take “whatever” reforms or actions over the Chapter, short of restricting recruitment, 7 that UCSC deemed “appropriate.” (PSMF at YY.) 8 After UCSC announced, following a hearing, that it was suspending the Chapter from 9 campus activities for 12 months, on May 12, 2016, Ray Vanlanot, Theta Chi’s Chief Operating 10 Officer, wrote to propose a “remediation plan” “as a gesture of cooperation with UCSC policies 11 and procedures.” (PSMF at ZZ.) Vanlanot represented that Theta Chi would, inter alia, appoint a 12 “trained” Alumni Probation Committee (APC) to conduct a “Membership Review” consisting of 13 “one-on-one interviews with each of the members of the Chapter to determine each member’s 14 ability to maintain active membership in Theta Chi,” and “promptly” provide the results of the 15 review to UCSC. (PSMF at AAA.) Vanlanot advised that he would personally, and “in person,” 16 coordinate and oversee “the on-site process.” (PSMF at BBB.) He also told UCSC that the APC 17 would have “the powers to modify Chapter membership statuses, remove/replace Chapter officers, 18 amend local by-laws, and regulate Chapter functionality.” (PSMF at CCC.) No Chapter members 19 or officers were copied on Vanlanot’s letter, underscoring the absolute control Theta Chi exercised 20 over the Chapter. (PSMF at EEE.) Theta Chi believed that its proposals “would be better” at 21 reforming the Chapter than UCSC’s proposed sanctions. (PSMF at FFF.) 22 Theta Chi established the APC and ordered the Chapter to follow its directions and 23 “complete any additional requirements as deemed necessary.” (PSMF at GGG.) Vanlanot 24 informed UCSC that the APC would “maintain control over Chapter functioning and maintain the 25 authority to intervene as necessary.” (PSMF at DDD.) 26 Theta Chi could imbue the APC with that authority because as Tyson Lai, an APC member 27 and Chapter alumni, affirmed, Theta Chi exercised complete control over the Chapter’s policies, 28 activities, and people, and had the power to: remove any officer or member; impose any changes 3 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO THETA CHI’S MOTION FOR SUMMARY JUDGMENT 1 that it believed necessary; change the means by which the Chapter recruited and who the Chapter 2 recruited; change the way Chapter funds were raised, managed, and held; change the types of 3 activities the Chapter engaged in; and convey on him (Lai), as an APC member, authority to 4 recommend any change he believed necessary. (PSMF at III.) Christopher Guevara, the Chapter’s 5 former president, confirmed that Theta Chi controlled the Chapter’s activities. (PSMF at JJJ.) 6 Theta Chi’s control of and authority over the Chapter derived from the Theta Chi 7 Constitution, which describes Theta Chi as a “Corporation” empowered to “establish, maintain 8 and govern” the “Fraternity.” (PSMF at KKK.) The “Fraternity” enterprise consists “of the 9 Corporation, active chapters … Theta Chi Chapter, and the members and Pledges of the 10 Fraternity.” (PSMF at LLL.) The Constitution is the “supreme law” of the Fraternity; any chapter 11 “bylaw, regulation, legislation or resolution” in conflict with it is “null and void.” (Id.) 12 Per the Constitution, Theta Chi has the power to: determine how and whether to establish 13 chapters; name Chapters; vest its CEO with absolute power to place a chapter on probation and to 14 impose “any limitation on its activities, not inconsistent with these Bylaws” and/or “any 15 affirmative requirement for the chapter’s conduct, that it deems necessary or appropriate”; expel 16 chapter members and remove and replace chapter officers; impose “Annual Programming and 17 Benefits Fee” on its chapters; restrict a “chapter from undertaking, performing or participating in a 18 specific activity or event or from conducting specific chapter operations”; revoke the charter of a 19 chapter and order that “all records, Ritual Books, minutes and correspondence, and the charter, of 20 the chapter shall be immediately returned to the International Headquarters.” (PSMF at MMM.) 21 Theta Chi’s control and authority over the Chapter was so absolute that during their 22 depositions, former Chapter officers did not even pretend to know the basics of how their Chapter 23 was formed, its legal form or status, whether it had its own bylaws, how it managed its money, 24 who opened and controlled the account through which it and its members paid dues and fees to 25 Theta Chi, whether it had established financial policies or controls, whether it obtained or 26 maintained insurance, or how it otherwise operated beyond simply following “the Ritual” and 27 other membership recruitment materials paid for and provided by Theta Chi. (PSMF at NNN.) 28 Zachary Davis, a Spring 2017 pledge and the Chapter’s Health and Safety Officer in Winter 4 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO THETA CHI’S MOTION FOR SUMMARY JUDGMENT 1 2017/2018, attested: 2 Even as a member of the Chapter’s executive board, I did not know how the Chapter was organized, such as whether it was a corporation or other legal entity. I was not 3 aware of any of this or any other matters involving its finances, by-laws, insurance, how its insurance and other bills were paid, its legal standing, and how its fees and 4 dues were set. At meetings of Chapter officers, I do not recall any discussions about 5 these matters. 6 (Davis Decl., ¶ 15, Ex. 5 to Plaintiffs’ Index of Evidence.) 2 7 3. UCSC Relied on Theta Chi’s Promises of Reform to Make the Chapter Safe 8 UCSC believed, based on Theta Chi’s representations, that Theta Chi would reform the 9 Chapter to make it safe. UCSC Assistant Dean Golz expected that Theta Chi was going to follow 10 through on its offers of help to get the Chapter turned around. (PSMF at RRR.) Golz testified that, 11 given the Chapter’s history, which included activities that threatened the health and safety of a 12 student, Theta Chi’s involvement was important to turning around the Chapter. (PSMF at SSS.) 13 He testified that Theta Chi was saying to UCSC what it was going to do on its own to help turn 14 around the Chapter, which had been a threat to the health and safety of the students. (PSMF at 15 SSS.) UCSC Associate Director Katherine Canales-Molina testified that because it was a matter of 16 safety, UCSC expected that Theta Chi would undertake such actions as reasonably necessary to 17 stop the type of behavior that led to the Chapter’s sanctions as a condition of the Chapter coming 18 back to UCSC as a registered organization. (PSMF at TTT.) 19 4. Theta Chi Never Reformed the Chapter or Warned UCSC about the Additional Misconduct Disclosed During the Membership Review 20 Theta Chi never trained the APC on how to do its job or reform the Chapter. (PSMF at 21 UUU.) However, the untrained APC did interview Chapter members for “several hours” on June 22 3, 2016. (PSMF at VVV.) Witnesses disagree about whether Vanlanot attended the membership 23 review in-person. (PSMF at WWW.) Nevertheless, at least four Chapter members disclosed that 24 they had been hazed, including with alcohol, that the Chapter improperly supplied and used 25 alcohol at recruiting events, and that the Chapter had a “drug problem” reputation. (PSMF at 26 27 2 The Chapter has not filed any legal documents required under California Corporations Code 28 section 21300 or under section 501, 527, or 4947(a)(a) of the Internal Revenue Code. (Declaration of Douglas Fierberg, ¶ 33.) 5 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO THETA CHI’S MOTION FOR SUMMARY JUDGMENT 1 XXX.) Members also told the APC that the Chapter lacked strong, experienced leadership, lacked 2 responsibility or accountability, and needed guidance on how to run the Chapter. (PSMF at YYY.) 3 Theta Chi did nothing after the on-site interviews to reform the Chapter and make it or its 4 activities safe for current and future members and pledges. (PSMF at DDDD.) Nor did Theta Chi 5 advise or warn UCSC about the information or concerns the members disclosed to the APC. 6 (PSMF at EEEE.) One month later, on July 5, 2016, UCSC upheld the Chapter’s suspension 7 following an appeal. (PSMF at ZZZ.) UCSC found that “members of your chapter should have 8 been aware of their responsibility for protecting the safety of your guest at an event sponsored by 9 the chapter.” (PSMF at AAAA.) UCSC noted that it appreciated the steps the Chapter had taken 10 “in collaboration with [its] local alumni and executive officers from the Theta Chi National 11 Headquarters since [it] received the May 5, 2016, letter from the conduct office,” and encouraged 12 the Chapter’s leadership “in cooperation with your chapter alumni and national headquarters 13 staff[,] prepare to come back to campus fully prepared to become a part of the UC Santa Cruz 14 community again” in Spring 2017. (PSMF at BBBB.) UCSC ultimately prohibited the Chapter 15 from using any UCSC facilities or resources until Fall 2017. (PSMF at CCCC.) 16 5. The Unreformed Chapter’s Dangerous Activities Continued 17 Vanlanot contended in his deposition that the “university’s suspension prohibited” Theta 18 Chi from acting independently to reform the Chapter. (PSMF at FFFF.) However, during UCSC’s 19 suspension, the Chapter continued to recruit and pledge new members. (PSMF at GGGG.) As one 20 member explained: 21 [W]e weren’t kicked off. We weren’t rogue. We weren’t any of these words that are buzzwords … We were stillvery much recognized, still very much paying 22 insurance, still very much giving national’s money, and still very much attending things that were nationally sponsored such as Theta Chi University. 23 24 ***** 25 While we were suspended as a university chapter, we were still recognized by Theta Chi International as a national chapter; therefore, could still continue to do Theta 26 Chi things … which included recruiting. 27 (See Garcia Dep. 133:17-134:10, 185:6-18 (Ex. 31 to Plaintiffs’ Index of Evidence)). 28 Theta Chi collected $8,125.75 dues and fees from the Chapter between January 1, 2017 6 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO THETA CHI’S MOTION FOR SUMMARY JUDGMENT 1 and August 22, 2017. (PSMF at JJJJ.) Still, Theta Chi took no actions to reform the Chapter, or 2 even provide basic training or education to its members, despite its promises to UCSC. Davis, a 3 Spring 2017 pledge, attested: 4 While pledging Theta Chi, I do not recall anyone from the National Fraternity visiting the Chapter for any reason, including to train pledges and members on risk 5 management, hazing, or alcohol misuse. And, during my entire time with Theta Chi as an undergraduate, I do not recall anyone associated with the National Fraternity 6 ever asking me or other members about the Chapter’s rituals and whether or not 7 Chapter events complied with university or fraternity regulations or risk management policies involving hazing, alcohol and drugs. 8 (Davis Decl., ¶ 3 (Ex. 5 to Plaintiffs’ Index of Evidence).) Guevara testified that he did not see any 9 changes from the national level following the June 2016 membership review to address the hazing 10 or alcohol and drug misuse that members had disclosed during the review. (PSMF at LLLL.) 11 Instead, “it was all kept the same, just PowerPoints and presentations,” which had not been 12 effective. (PSMF at MMMM.) As a result, inter alia, “the chapter did have a drug problem and it 13 continued”; the drug problem identified in 2016 was still a problem with the Chapter in 2018 and 14 2019 (PSMF at NNNN.) 15 Numerous former Chapter members and officers confirmed in discovery what Theta Chi 16 and its APC knew but failed to reform or inform UCSC: the Chapter remained “unhealthy,” 17 dangerous, and in need of reform. (PSMF at OOOO.) Davis described recruitment rituals and 18 dangerous activities, with pledges and members passed out from alcohol intoxication, vomiting, 19 and rampant binge drinking and drug use. (PSMF at PPPP.)3 Davis completed two or three weeks 20 of pledging before dropping out and checking himself into a rehabilitation facility for poly- 21 substance abuse. 4 (PSMF at QQQQ.) 22 23 3 24 Theta Chi also knew from the experience, memorialized in publications by its former Executive Director, David Westol, and the deaths of pledges and members in California and elsewhere, that 25 the Chapter’s rituals and activities involving alcohol were deadly. Westol penned an article in 2005 entitled “The Three Deadly Nights,” stating “we know one thing for certain. If a chapter 26 allows alcohol into a bid night event, big brother night, or pre-initiation, that chapter has set the 27 stage for a tragedy.” (PSMF at SSSS.) Westol testified that the presence of alcohol at any one of these rituals rendered them “dangerous.” (PSMF at TTTT.) 4 28 Davis returned to campus and completed pledging in Fall 2017, with Alex, eventually becoming the Chapter’s Health and Safety Officer. (PSMF at UUUU.) 7 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO THETA CHI’S MOTION FOR SUMMARY JUDGMENT 1 Davis testified that the Chapter remained “unsafe” up until Alex’s death because neither he 2 nor the rest of the Chapter’s Executive Board had any power to control or reform the Chapter’s 3 deadly traditions and misconduct. (PSMF at RRRR.) 5 Prior to Alex’s death, Davis met on 4 “numerous” occasions with the Chapter’s Executive Board urging it to reduce the amount of 5 alcohol at Chapter events, but his efforts “didn’t alter what we are – previous behaviors, no.” 6 (PSMF at VVVV.) So wholly absent or ineffective was Theta Chi in fulfilling its undertaking to 7 make the Chapter “safe,” that Davis did not even “know how I would contact the National 8 fraternity.” (PSMF at WWWW.) 9 6. The Unreformed Chapter Planned Two “Deadly” Rituals for June 2, 2018 10 In the spring of 2018, after semesters of continued dangerous misconduct and Davis’ 11 return to campus from in-patient rehab, the Chapter planned a Crossover Ceremony, Big Brother 12 Night, and afterparty for June 2, 2018 that would be fueled with alcohol and drugs. (PSMF at O- 13 Q.) The Crossover Ceremony was held at the fraternity’s “satellite house.” (PSMF at R.) Theta 14 Chi member Miguel Salvidar, Jr. testified that Alex was sober when he drove him to the Crossover 15 Ceremony. (PSMF at R.) Alex did not bring alcohol to the event. (PSMF at S and BB.) During the 16 Big Brother portion of events, per tradition, “family” alcoholic drinks were served in large 17 quantities, and new family members and members drank the alcohol per the Chapter’s rituals and 18 traditions. (PSMF at W.) Alex had been made a member of the Johnny Walker Black Family, 19 meaning that he was handed a bottle of this hard alcohol and, by tradition, “the bottle was to be 20 finished that night by the pledge and the fraternity family.” (PSMF at W.) 21 When Alex arrived at the Chapter-sponsored afterparty, alcoholic drinks were set up at an 22 open bar. (PSMF at CC.) Burns, an underage Theta Chi member, made at least two trips to the bar 23 and never saw anyone checking IDs. (Id.) Burns observed Alex drinking alcohol from a red solo 24 cup. (PSMF at DD.) It was common knowledge that some Chapter members used cocaine, and 25 that some might have cocaine at the afterparty. (PSMF at EE.) Derek King, Chapter President the 26 year before, was inside his bedroom preparing and distributing lines of cocaine. (Id.) Alex – who 27 5 28 In Spring 2018, Alex reached out to Davis and expressed concerns about developing substance- abuse issues because of the level of alcohol and drug use in the Chapter. (PSMF at N.) 8 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO THETA CHI’S MOTION FOR SUMMARY JUDGMENT 1 was so intoxicated from the Chapter rituals that he was “swaying side to side” – consumed cocaine 2 while in King’s room. (PSMF at FF-GG.) Immediately afterward, Alex appeared upset, and Burns 3 walked Alex to a second-floor bathroom. (PSMF at HH.) Shortly after entering the bathroom, 4 Alex fell out of the window and onto the street below, sustaining traumatic injuries which would 5 ultimately prove fatal. (PSMF at II.) Burns later told UCSC that Alex would have never gone out 6 of the window if he had not consumed cocaine at the event. (PSMF at JJ.) Alex’s blood alcohol 7 content was 0.318, almost four times the legal limit in California. (PSMF at LL-MM.) 6 8 UCSC investigated and revoked the Chapter’s recognition, concluding, inter alia, that 9 “cocaine was flowing throughout the party”; the Chapter and its members engaged in deeply 10 appalling behavior of hazing, drug use, and more; and the Chapter engaged in conduct that 11 constituted a threat to people’s health and safety. (Plaintiffs’ Response and Supporting Evidence 12 in Opp. to Theta Chi’s SMF at 15.) Theta Chi later admitted that the Chapter “had repeatedly 13 violated Theta Chi alcohol policies” and that “hazing activities were taking place within the 14 chapter.” (PSMF at XXXX.) This was a rampant continuation of the threat to “peoples’ health and 15 safety” that Theta Chi promised to reform yet never did. 16 Despite UCSC’s findings, its expulsion of the Chapter, and Alex’s death, Theta Chi sought 17 a “recolonization agreement” for the Chapter (which UCSC rejected), made all the Chapter 18 members “alumnus” members – identical to the status of any Theta Chi member who graduates 19 from college – and sponsored a gala in Santa Cruz to celebrate the Chapter’s 30-year anniversary, 20 which Theta Chi CEO Mayer and APC member Lai attended. (PSMF at YYYY-AAAAA.) This 21 constituted a direct ratification of the events causing Alex’s death. 22 7. Theta Chi Utilized the Chapter as an Instrumentality to Generate Revenue and Protect Its Substantial Assets from the Claims of Creditors 23 Theta Chi formed itself as a tax-exempt corporation with a designated agent for service of 24 25 6 Theta Chi built its defense on irrelevant hearsay that Alex was a frequent drug user even though he showed up to the Chapter’s events entirely sober. A toxicology screen performed on Alex’s 26 urine gathered at the hospital tested negative for amphetamines, barbiturates, benzodiazepines, 27 opiates, phencyclidine (PCP), and oxycodone. (PSMF at PP.) There were no traces of any substances in Alex’s system, other than the alcohol and cocaine provided at the Chapter’s planned 28 rituals and events. And contrary to Theta Chi’s repeated assertion, there is no competent evidence that Alex “had a cocaine dealer” or “purchased the cocaine” from that “dealer” on June 2, 2018. 9 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO THETA CHI’S MOTION FOR SUMMARY JUDGMENT 1 process. (Theta Chi SMF at 16.) Conversely, the Chapter – formed and controlled by Theta Chi – 2 is an unincorporated association with no such agent. (PSMF at SS.) Theta Chi tried to leverage 3 that difference to keep the Chapter out of this case. On July 17, 2020, the Chapter, by and through 4 an attorney who now serves as counsel of record for Theta Chi – Elaine Kobylecki – filed a 5 Motion to Quash the Service of Summons on the Chapter. (PSMF at BBBBB.) Ms. Kobylecki 6 argued on behalf of the purportedly non-existent Chapter that “it had no legal existence and/or 7 plaintiffs have failed to comply with the requirement that service be made on an individual 8 authorized to accept such service per Code of Civil Procedure section 416.40(b).” (PSMF at 9 CCCCC.) In support of its motion, which the Court denied, the Chapter submitted declarations 10 from Mayer and Guevara, the latter of whom Plaintiffs had served on behalf of the Chapter. 11 (PSMF at DDDDD.) Mayer declared that once a chapter’s charter has been revoked, “the chapter 12 ceases to exist as a Theta Chi chapter.” (PSMF at EEEEE.) Guevara, in turn, declared that “[t]he 13 Chapter was an unincorporated association at the time of the subject incident.” (PSMF at FFFFF.) 14 When Guevara was later deposed, he admitted that he did not know if the Chapter was, in fact, an 15 unincorporated association and conceded that he had never heard the term “unincorporated 16 association” before. (PSMF at GGGGG.) 7 17 Theta Chi has amassed millions in earnings and retained assets while keeping its chapters, 18 including the Chapter, undercapitalized. In its 2018 IRS Form 990, Theta Chi, which is exempt 19 from taxes pursuant to IRS § 501(c)(4), reported that at least 75% of its annual revenue of 20 $5,698,571 came from dues paid by undergraduate and alumni members. (PSMF at IIIII.) Theta 21 Chi reported $2 million in cash, net assets of $5,512,177, and a reserve for future liability claims 22 of $304,841. (PSMF at JJJJJ.) 23 In contrast, the Chapter had no assets and owned no property. (PSMF at KKKKK.) On 24 April 2, 2019, Mayer wrote the Chapter members to inform them that the Chapter’s charter was 25 revoked, it “is now closed,” and that its members “are prohibited from undertaking any activity in 26 7 27 Ms. Kobylecki – despite previously representing the Chapter, and apparently procuring a declaration from Guevara that contained attestations that were not based on his personal 28 knowledge or understanding – represented Theta Chi during Guevara’s deposition. (PSMF at HHHHH.) 10 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO THETA CHI’S MOTION FOR SUMMARY JUDGMENT 1 the name of Theta Chi Fraternity.” (PSMF at LLLLL.) Although on April 2, 2019, the Chapter’s 2 OmegaFi account – which Theta Chi established and controlled 8 – had a balance of $5,497.97, 3 records show a series of withdrawals by Theta Chi on April 4 and April 9, 2019, totaling 4 $5,497.97, exhausting the balance. (PSMF at MMMMM-NNNNN.) 5 8. Theta Chi Has an Ownership Interest in the Insurance Company that Underwrites the Policy Covering Theta Chi, the Chapter, and Members 6 Plaintiffs’ expert, Karl J. Schulze, has reviewed the formative documents of Theta Chi and 7 related financial and insurance information, and opines that “virtually all activities, structural, and