Garden City, Inc. et al v. City of San Jose et al, No. 5:2013cv00577 - Document 33 (N.D. Cal. 2013)
Court Description: ORDER GRANTING-IN-PART DEFENDANTS' MOTION TO DISMISS OR STRIKE PORTIONS OF THE COMPLAINT AND TO ABSTAIN OR STAY THE PROCEEDINGS by Judge Paul S. Grewal granting-in-part and denying-in-part 17 Motion to Dismiss (psglc2, COURT STAFF) (Filed on 9/5/2013)
Download PDF
<![CDATA[
Garden City, Inc. et al v. City of San Jose et al Doc. 33 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 NORTHERN DISTRICT OF CALIFORNIA United States District Court For the Northern District of California 10 SAN JOSE DIVISION 11 12 GARDEN CITY, INC., et al., Plaintiffs, 13 14 15 16 v. SAN JOSE, et. al., Defendants. ) ) ) ) ) ) ) ) ) ) Case No.: CV 13-0577 PSG ORDER GRANTING-IN-PART DEFENDANTS’ MOTION TO DISMISS OR STRIKE PORTIONS OF THE COMPLAINT AND TO ABSTAIN OR STAY THE PROCEEDINGS. (Re: Docket No. 17, 22, 25) 17 18 Defendants City of San Jose, et al., (“Defendants”) move to dismiss or, in the alternative, 19 strike allegations from the complaint filed by Plaintiffs Garden City, Inc., et al., (“Plaintiffs”). 20 Defendants also move the court to abstain or, in the alternative, stay the proceedings. The parties 21 appeared for oral argument. Having considered the papers and the arguments, the court 22 23 GRANTS-IN-PART Defendants’ request for a motion to dismiss, DENIES Defendants’ motion to strike, and DENIES Defendants’ motion to abstain or stay the proceedings. 24 25 26 I. BACKGROUND The Gaming Control Ordinance (Title 16 of the San Jose Municipal Code), enacted by the 27 San Jose City Council on November 9, 1999, created the Division of Gaming Control (“the 28 Division”) within the San Jose Police Department. The Division of Gaming Control is charged 1 Case No.: CV 13-0577 PSG ORDER Dockets.Justia.com 1 with carrying out licensing, permitting, revenue and tax auditing, regulatory compliance testing, 2 regulation promulgation, and other administrative functions pursuant to the regulatory program 3 outlined in the Ordinance. Except where otherwise noted, the court draws the following facts 4 below, taken as true for the purposes of this motion to dismiss, from Plaintiffs’ complaint. 1 5 6 Casino M8trix is one of two cardrooms permitted for gambling in San Jose. It is the successor to Garden City, Inc., which originally owned the cardroom permit at issue here and 7 which was bought by Eric Swallow, Peter Lunardi, and Jeanine Lunardi (the “Owners”) in 2007. 8 9 Following their purchase, the Owners moved Garden City to a new high-rise building near Minetta United States District Court For the Northern District of California 10 San Jose Airport and rechristened the operation as Casino M8trix. Business has since flourished. 11 The claims now before the court arose from Casino M8trix’s move to its new home. The 12 13 14 move was not an easy one and was not made any easier by Defendants’ actions. According to Plaintiffs, despite their attempts to comply with the Division’s requirements regulating the cardroom, as well as the city’s general land use restrictions, the Administrator of the Division, 15 16 Richard Teng (“Teng”) and the remaining Defendants have treated them unfairly and unlawfully 17 by: (1) delaying the licensure of key employees, (2) delaying their permit amendment to their 18 cardroom permit, (3) conditioning the permit amendment on disclosure of its proprietary gaming 19 systems, (4) recommending denial of Casino M8trix’s plans for an eighth-floor gaming space, (5) 20 requiring a live video feed despite the Division’s lack of capability to receive the feed, and (6) 21 causing excessive enforcement of parking and vehicular code regulations at the facility in an effort 22 to inflate crime statistics. 23 Plaintiffs point to the ease with which Casino M8trix’s only competitor, Bay 101, was able 24 25 to obtain its gaming permits from the Division. Plaintiffs allege that Bay 101 obtained illegal and 26 improper benefits from several former Division officers who had previously worked for Teng. 27 28 1 See Docket No. 1. 2 Case No.: CV 13-0577 PSG ORDER On the basis of these allegations, Plaintiffs bring claims under 42 U.S.C. § 1983. First, 1 2 Plaintiffs allege violations of their right to procedural and substantive due process. Second, 3 Plaintiffs raise a so-called “class-of-one” equal protection claim. 4 5 6 In addition to their merits-based defenses, Defendants offer affirmative and procedural defenses that they believe mandate dismissal or at least a narrowing of this case. Defendants contend Plaintiffs’ claims fall short on (1) standing, (2) res judicata, (3) statute of limitations, and 7 (4) immunity grounds. Defendants also claim that Plaintiffs improperly seek punitive damages. 8 9 Based on all this, Defendants move the court to dismiss the case in full or in part. In the alternative, United States District Court For the Northern District of California 10 Defendants seek to stay the action under the abstention doctrine set forth in Younger. 2 Defendants 11 also move the court to strike allegations barred by the statute of limitations and res judicata. 12 13 II. LEGAL STANDARDS A. 14 Motion to Dismiss A complaint must contain “a short and plain statement of the claim showing that the pleader 15 16 is entitled to relief.” 3 If a plaintiff fails to proffer “enough facts to state a claim to relief that is 17 plausible on its face,” the complaint may be dismissed for failure to state a claim upon which relief 18 may be granted. 4 A claim is facially plausible “when the pleaded factual content allows the court 19 to draw the reasonable inference that the defendant is liable for the misconduct alleged.” 5 “The 20 plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than sheer 21 possibility that a defendant has acted unlawfully.” 6 Accordingly, under Fed. R. Civ. P. 12(b)(6), 22 which tests the legal sufficiency of the claims alleged in the complaint, dismissal “can be based on 23 2 Younger v. Harris, 401 U.S. 37 (1971). 3 Fed. R. Civ. P. 8(a)(2). 4 Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). 5 Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009). 6 Id. at 678. 24 25 26 27 28 3 Case No.: CV 13-0577 PSG ORDER 1 2 the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory.” 7 On a motion to dismiss, the court must accept all material allegations in the complaint as 3 4 true and construe them in the light most favorable to the non-moving party. 8 The court’s review is 5 limited to the face of the complaint, materials incorporated into the complaint by reference, and 6 7 matters of which the court may take judicial notice. 9 However, the court need not accept as true allegations that are conclusory, unwarranted deductions of fact, or unreasonable inferences. 10 8 “Dismissal with prejudice and without leave to amend is not appropriate unless it is 9 United States District Court For the Northern District of California 10 clear . . . that the complaint could not be saved by amendment.” 11 11 B. Motion to Strike 12 Upon motion or on its own, the court may strike from a pleading “any redundant, 13 immaterial, impertinent, or scandalous matter.” 12 “This includes striking any party of the prayer 14 for relief when the relief sought is not recoverable as a matter of law.” 13 Rule 12(f) motions are 15 16 designed “to avoid the expenditure of time and money that must arise from litigating spurious 17 issues by dispensing with those prior to trial.” 14 Motions to strike are disfavored and “generally 18 not granted unless it is clear that the matter sought to be stricken could have no possible bearing on 19 7 Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990). 8 See Metzler Inv. GMBH v. Corinthian Colls., Inc., 540 F.3d 1049, 1061 (9th Cir. 2008). 9 See id. 20 21 22 10 23 See Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001); see also Twombly, 550 U.S. at 561 (“a wholly conclusory statement” of a claim will not survive a motion to dismiss). 24 11 Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003). 25 12 Fed. R. Civ. P. 12(f). 26 13 Rosales v. Citibank, Fed. Sav. Bank, 133 F. Supp. 2d 1177, 1180 (N.D. Cal. 2001). 27 14 28 Fantasy, Inc. v. Fogerty, 984 F.2d 1524, 1527 (9th Cir.1993), rev’d on other grounds, 510 U.S. 517, 114 (1994). 4 Case No.: CV 13-0577 PSG ORDER 1 the subject matter of the litigation.” 15 “Courts must view the pleading under attack in the light 2 most favorable to the pleader, treating as admitted all material facts alleged and all reasonable 3 presumptions that can be drawn therefrom.” 16 4 5 III. DISCUSSION A. 6 Merits-Based Arguments 1. Procedural and Substantive Due Process 7 The court begins with the sufficiency of Plaintiffs’ procedural and substantive due process 8 9 claim. “A threshold requirement to a substantive or procedural due process claim is the plaintiff's United States District Court For the Northern District of California 10 showing of a liberty or property interest protected by the Constitution.” 17 A plaintiff may establish 11 a protected property interest “where an individual has a reasonable expectation of entitlement 12 deriving from existing rules or understandings that stem from an independent source such as state 13 law.” 18 A “reasonable expectation of entitlement is determined largely by the language of the 14 statute and the extent to which the entitlement is couched in mandatory terms.” 19 “Although 15 16 procedural requirements “ordinarily do not transform a unilateral expectation into a protected 17 property interest,” a property interest may be created if “the procedural requirements are intended 18 to be a significant substantive restriction on . . . decision making.” 20 19 20 21 22 15 Rosales, 133 F. Supp. 2d, at 1180. 23 16 Id. 24 17 25 Wedges/Ledges of Cal., Inc. v. City of Phoenix, 24 F.3d 56, 62 (9th Cir.1994) (internal quotations and citations omitted). 18 Id. 19 Id. 20 Id. 26 27 28 5 Case No.: CV 13-0577 PSG ORDER Plaintiffs claim their property interests arise from their: (1) cardroom permit amendment 1 2 applications, 21 (2) employee license applications and landowner license applications, 22 and (3) 3 business goodwill. 23 Plaintiffs point to the imperative “shall” in the Gaming Ordinance and their 4 right to a hearing to emphasize the limits upon Defendants’ discretion. 24 Those limits, Plaintiffs 5 argue, give rise to the property interests they claim. Defendants respond that a close read of the 6 complaint reveals that, whatever general allegations they raise, Plaintiffs’ due process claims arise 7 solely from Defendants’ failure to grant the cardroom permit amendment. Defendants therefore 8 9 urge the court to consider only that allegation. Defendants dispute that a cardroom permit constitutes a property interest to which Plaintiffs United States District Court For the Northern District of California 10 11 had a reasonable expectation of entitlement, highlighting the revocable nature of the cardroom 12 permit. Defendants also point out that although the statutes require the chief to make certain 13 14 21 15 22 16 17 18 19 20 21 22 23 24 25 26 27 28 See Docket No. 1 at ¶& 51, 88, and 95. Although the complaint references the Division’s “unreasonable delay” in licensing employees, the complaint does not claim that Plaintiffs possess a property interest in the timely licensure of its employees. 23 Docket No. 1 ¶ 91. Curiously, Plaintiffs’ complaint does not incorporate ¶ 91 into its procedural and substantive cause of action under Section 1983. Id. at ¶ 92 (“Plaintiffs incorporate paragraphs 1 through 88, inclusive, by reference as though set forth in full.”). 24 Section 16.30.230(B) of the Gaming Ordinance provides: The chief of police shall permit the amendment if the chief determines and finds that the proposed amendment will not: (1) Have an adverse effect on public health, safety, or welfare; or (2) Have an adverse effect on the ability of the administrator and the chief of police to effectively administer and enforce the requirements and policies of this title; or (3) Result in the violation of any city, state, or federal law; or (4) Be inconsistent with the policies, purposes, and provisions of this title or be contrary to the public interest. See also San Jose Municipal Code Title 16, Section 16.110(C) (to “the extent practicable, the administrator of [the Division] shall act on all [license] applications within one hundred and eighty calendar days of the date of receipt of a completed application”) (emphasis added). The court notes that the to “the extent practicable” language limits the persuasiveness of Plaintiffs’ argument that this portion of Title 16 is made compulsory upon the administrator of the Division. 6 Case No.: CV 13-0577 PSG ORDER 1 findings, they do not prescribe how the chief should arrive at his conclusions. Defendants 2 conclude that there is no “significant substantive restriction” on the chief’s discretion, and thus, no 3 protectable property right is created by the procedural hearing afforded to gaming permit 4 applicants. 25 5 6 As an initial matter, the court agrees that the complaint focuses Plaintiffs’ due process claim on the cardroom permit issue. And so there, too, will the court focus its analysis. The nub of 7 Plaintiffs’ due process claim centers on the degree to which the police chief and the division 8 9 administrator have any discretion to withhold the permit amendment. In analyzing this discretion United States District Court For the Northern District of California 10 the court must focus on the language of Title 16. That language requires the chief to permit 11 amendment of a gaming license unless the chief finds the proposed amendment will have one of 12 four detrimental effects. 26 If the chief does not make such a finding, then the chief “shall permit” 13 the requested amendment to the gaming license. 27 Because the chief is alleged to have never made 14 one of those four findings based on an established factual record, the chief was required to issue the 15 16 cardroom permit amendment. No discretion was permitted. 17 The same is true of the division administrator. 28 Casino M8trix submitted its permit 18 amendment application on March 30, 2011. Under Title 16 Section 16.30.200(E) the administrator 19 of the Division “shall file a public report” within a “reasonable time period” after receipt of the 20 completed application for permit amendment. 29 Plaintiffs claim Administrator Teng delayed 21 22 23 25 Parks v. Watson, 716 F.2d 646, 657 (9th Cir. 1983). 26 See supra note 24. 27 Id. 28 Docket No. 1, ¶ 40. 29 Id. 24 25 26 27 28 7 Case No.: CV 13-0577 PSG ORDER 1 2 completion of a Permit Amendment Report for 16 months until July 20, 2012. 30 No matter the objective motive, the division administrator does not enjoy any subjective discretion In sum, the court finds that Plaintiffs’ complaint successfully pleads a claim for violation of 3 4 their due process rights. Time will tell whether they can prevail but dismissal of Plaintiffs’ first 5 cause of action at the pleading stage is not warranted. 6 2. Class-of-One Equal Protection 7 An “equal protection claim can in some circumstances be sustained even if the plaintiff has 8 9 not alleged class-based discrimination, but instead claims that she has been irrationally singled out United States District Court For the Northern District of California 10 as a so-called class of one.” 31 A class-of-one equal protection claim under the Due Process Clause 11 of the Fourteenth Amendment lies where the plaintiff was (1) intentionally, (2) treated differently 12 than others similarly-situated, and (3) there is no rational basis for the difference in treatment. 32 13 a. 14 Intent To make out a class-of-one claim, a plaintiff must first establish the defendant’s intentional 15 16 conduct. Here, Plaintiffs’ complaint alleges a handful of instances where Casino M8trix received 17 markedly worse treatment than Bay 101, including: (1) intentional delays in granting key 18 employees licenses, (2) intentional obstruction of landowner license applications, (3) delayed 19 eighth floor gaming, (4) burdensome security procedures, and (5) harassing policing. Plaintiffs’ 20 allegations of a larger pattern and practice of regulatory harassment is sufficient to plead the intent 21 element of a class-of-one equal protection claim. In light of Gerhart, which explained that “a 22 23 24 25 30 26 31 27 Engquist v. Or. Dep’t of Agric., 553 U.S. 591, 601 (2008) (internal quotations and citations omitted). 32 28 Id. See Vill. of Willowbrook v. Olech, 528 U.S. 562, 564 (2000). 8 Case No.: CV 13-0577 PSG ORDER 1 2 continuous history of harassment” by government employees may be enough to satisfy the intent prong, the court finds that the Plaintiffs’ complaint sufficiently pleads intent. 33 b. 3 Differential Treatment Toward a Similarly-Situated Party 4 The second element of the class-of-one analysis considers whether Plaintiffs are 5 similarly-situated to Bay 101. Courts “should enforce the similarly-situated requirement with 6 7 particular strictness when the plaintiff invokes the class-of-one theory rather than the more settled cognizable-group theory.” 34 Class-of-one plaintiffs “must show an extremely high degree of 8 9 similarity between themselves and the persons to whom they compare themselves.” 35 The Seventh United States District Court For the Northern District of California 10 Circuit has held that to “be considered similarly situated, the class of one challenger and his 11 comparators must be prima facie identical in all relevant respects or directly comparable in all 12 material respects.” 36 Strict “enforcement of the similarly-situated requirement is a vital way of 13 14 minimizing the risk that, unless carefully circumscribed, the concept of a class-of-one equal protection claim could effectively provide a federal cause of action for review of almost every 15 16 executive and administrative decision” made by state actors. 37 Defendants argue that Plaintiffs and Bay 101 are not similarly-situated and thus differential 17 18 treatment of the casinos cannot form the basis of a class-of-one claim. In particular, Defendants 19 point out that Plaintiffs, unlike Bay 101, sought to carry out eighth-floor gaming. Moreover, even 20 Plaintiffs concede that the two casinos did not seek all of the same permits and licenses. On 21 balance, even taking the factual pleadings in the complaint as true, the court agrees with 22 23 33 Id. at 1023. 34 JDC Mgmt., LLC v. Reich, 644 F. Supp. 2d 905, 926 (W.D. Mich. 2009). 35 Clubside, Inc. v. Valentin, 468 F.3d 144, 159 (2d Cir. 2006). 36 U.S. v. Moore, 543 F.3d 891, 896 (7th Cir. 2008). 37 Reich, 644 F. Supp. 2d at 927. 24 25 26 27 28 9 Case No.: CV 13-0577 PSG ORDER 1 2 Defendants that Plaintiffs’ complaint fails to adequately plead that Plaintiffs and Bay-101 were similarly-situated. This case is analogous to Scocca v. Smith, a recent case from this district. 38 Scocca 3 4 considered an equal protection claim arising from a sheriff’s denial of an individual’s permit 5 application to carry a permit to carry a concealed weapon. The court rejected the applicant, 6 7 Mr. Scocca’s, assertion that he was similarly-situated to favored third parties, because the criteria for granting the firearm permit “are subjective and qualitative” in nature. 39 The court noted that in 8 9 “a class-of-one equal protection case, cursory allegations” that the parties are “similarly situated United States District Court For the Northern District of California 10 are especially problematic” where “inherently subjective and individualized enforcement of health 11 and safety regulations” are at issue. 40 Because the permit amendment at issue in this case calls for 12 similar individualized decision making, Plaintiffs cannot rely on conclusory allegations to plead the 13 similarly situated element of a class-of-one cause of action. 14 c. Was There a Rational Basis for the Disparity in Treatment 15 Plaintiffs also must show that there was no rational basis for the detrimental treatment 16 17 Plaintiffs suffered. The “rational basis prong of a ‘class of one’ claim turns on whether there is a 18 rational basis for the distinction, rather than the underlying government action.” 41 The key question 19 is whether the state had a rational basis for Plaintiffs’ for differential treatment. Here, Plaintiffs 20 21 22 38 Scocca v. Smith, No. 3:11-cv-1318 EMC, 2012 WL 2375203, at *5 (N.D. Cal. June 22, 2012). 23 39 Id. 24 40 25 26 27 Id. (citing Kansas Penn Gaming, LLC v. Collins, No. 10-3002, 2011 WL 3849751 (10th Cir. Sept. 1, 2011); see also Perano v. Township of Tilden, 423 Fed. Appx. 234, 238–39 (3d Cir. 2011) (in class-of-one case, stating that allegation that plaintiff “was treated differently from ‘other similarly situated residential and commercial developers’” was not enough; without “more specific factual allegations as to the allegedly similarly situated parties, he has not made plausible the conclusion that those parties exist and that they are like him in all relevant aspects”). 41 28 Gerhart, 637 F. 3d at 1023 (emphasis in original). 10 Case No.: CV 13-0577 PSG ORDER 1 2 brief contains a bald allegation that “Defendants had no rational basis for their actions.” 42 Bald allegations, however, are not enough to satisfy the pleading standard in a Rule 12(b)(6) motion. 43 Because the complaint (1) does not sufficiently plead that Plaintiffs and Bay One are 3 4 similarly-situated and (2) does not contain sufficient non-conclusory allegations that there was not 5 a rational basis for Defendants’ actions, dismissal is warranted on Plaintiffs’ class-of-one equal 6 protection claim. 7 8 B. In addition to merits-based arguments, Defendants offer several affirmative defenses that 9 United States District Court For the Northern District of California 10 Affirmative Defenses they believe require dismissal. 11 1. 12 Standing is a threshold inquiry whose requirements are well-known. Standing requires an 13 14 Standing (1) injury in fact, (2) causally tied to defendants’ actions, and (3) redressable by a favorable court decision. 44 The injury must be “concrete and particularized” as well as “actual or imminent, not 15 16 conjectural or hypothetical.” 45 A “core component” of constitutional standing requires a “plaintiff 17 to allege personal injury fairly traceable to the defendant’s allegedly unlawful conduct and likely to 18 be redressed by the requested relief.” 46 Prudential standing doctrine requires that “the plaintiff 19 generally must assert his own legal rights and interests, and cannot rest his claim to relief on the 20 legal rights or interests of third parties.” 47 21 22 42 Docket No. 1, ¶ 107. 23 43 See Iqbal, 556 U.S. at 681. 24 44 See Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992). 25 45 Id. (internal quotations and citations omitted). 26 46 Allen v. Wright, 468 U.S. 737, 751 (1984) (emphasis added). 27 47 28 Valley Forge Christian College v. Americans United for Separation of Church and State, Inc., 454 U.S. 464, 474 (1982) (citing Warth v. Seldin, 422 U.S. 490, 499 (1975)). 11 Case No.: CV 13-0577 PSG ORDER Here, the parties dispute whether two of the three plaintiffs, Airport Opportunity Fund, LLC 1 2 (“Airport Fund”) and Airport Parkway Two, LLC (“Airport Parkway”), have proper standing 3 before the court. Garden City (dba Casino M8trix) is a California corporation controlled by the 4 Owners. The Owners also own and control the Airport Fund which is the sole owner of Airport 5 Parkway. Airport Parkway is the business entity used by the Owners to purchase the property 6 where Casino M8trix is situated. Plaintiffs’ complaint only explicitly and sufficiently pleads a 7 single, narrow cause of action: Defendants failure to issue Casino M8trix’s cardroom permit 8 9 amendment violated Plaintiffs’ right to due process. Defendants claim that because the landowner United States District Court For the Northern District of California 10 limited liability companies do not hold an interest in the cardroom permits, those companies do not 11 have a sufficient stake in the outcome of the litigation to satisfy standing requirements. 12 13 14 The court finds the harm stemming from the delayed cardroom permit amendments and delayed licensing was, at most, tangential to Airport Fund and Airport Parkway. Airport Fund and Airport Parkways’ interest in the cardroom permit amendment is not direct or personal. The 15 16 complaint does not trace how Defendants failure to issue the cardroom permit amendment caused 17 any injury to Airport Fund or Airport Parkway. Moreover, any financial remedy from this 18 litigation would flow directly to Casino M8trix, not Airport Fund or Airport Parkway. In sum, 19 Plaintiffs’ complaint does not adequately allege sufficient personal injury suffered by Airport Fund 20 or Airport Parkway to confer standing on those parties. 21 2. Res Judicata 22 Based on a 2012 state writ proceeding, Defendants argue that all of Plaintiffs’ claims 23 24 against Defendants are barred by res judicata. A federal court must give a state court judgment the 25 same preclusive effect as would be given the judgment under the laws of the state in which the 26 judgment was rendered. 48 Under California law, for res judicata to apply, three elements must be 27 48 28 See Migra v. Warren City Sch. Dist. Bd. of Educ., 465 U.S. 75, 80 (1984). 12 Case No.: CV 13-0577 PSG ORDER 1 present: (1) a “claim or issue raised in the present action” must be “identical to a claim or issue 2 litigated in a prior proceeding,” (2) the prior proceeding must have “resulted in a final judgment on 3 the merits,” and (3) “the party against whom the doctrine is being asserted” must have been “in 4 privity with a party to the prior proceeding.” 49 California law distinguishes two kinds of res 5 judicata: claim preclusion and issue preclusion. “Claim preclusion bars successive litigation of the 6 same claim after a final judgment, even if the same issues on the claim were not raised in the first 7 suit, while issue preclusion bars relitigation of an issue that actually was litigated, even if the claim 8 9 is different.” 50 Here, Defendants assert claim preclusion. According to Defendants, this action is the same United States District Court For the Northern District of California 10 11 as Plaintiffs’ 2012 state court action seeking a writ of mandamus to force the Division to provide 12 timely processing of their applications for landowner licensing and amendment to the gaming 13 14 permit. The state court denied the request. Defendants assert that the issues here arise from the same set of factual circumstances as that case and so Plaintiffs should have raised them earlier. 15 16 Plaintiffs respond that the issues actually litigated in the prior proceeding were different from the 17 federal civil rights claims here and so res judicata does not apply. Plaintiffs also argue that even if 18 certain factual allegations overlap, in this action, those allegations highlight a pattern and practice 19 of violations of their due process rights. 20 The court turns to whether each of the three factors identified above is present. 21 a. Identity of Claims 22 Under California law, claims are sufficiently identical if they deal with the same “primary 23 24 right.” 51 For “the purposes of applying the doctrine of res judicata, the phrase ‘cause of action’ has 25 49 26 Boeken v. Philip Morris USA, Inc., 48 Cal. 4th 788, 797 (2010). 50 27 Carollow v. Vericrest Financial Inc., Case No. 11-cv-4767 YGR, 2012 WL 4343816, at *4 (N.D. Cal. Sept. 21, 2012). 28 51 See Boeken, 48 Cal. 4th at 798. 13 Case No.: CV 13-0577 PSG ORDER 1 a more precise meaning: The cause of action is the right to obtain redress for a harm suffered, 2 regardless of the specific remedy sought or the legal theory (common law or statutory) 3 advanced.” 52 In other words, two causes of action under California law generally consist of the 4 same “primary right” when “the same parties seek compensation for the same harm.” 53 5 6 Defendants argue that in both lawsuits Plaintiffs have sought to have their applications for landowner licenses and cardroom permit amendments granted in a timely fashion. Defendants 7 claim Plaintiffs allege the same harm in both suits: an inability to provide gaming at the new 8 9 location. Defendants argue the alleged harm occurred at the same time, by the same acts, and by United States District Court For the Northern District of California 10 the same actors. Defendants claim that the constitutional violations could have been asserted in the 11 prior state court proceeding, but were not due to inartful drafting. Nonetheless, Defendants claim 12 that Plaintiffs “expressly alleged” the issues of due process and equal protection under the federal 13 14 constitution in the earlier lawsuit. Defendants cite Palomar Mobilehome Park Ass’n v. City of San Marcos for the proposition that litigants “cannot avoid the preclusive effect of res judicata by 15 16 failing explicitly to plead federal constitutional violations in a prior state action.” 54 Thus, 17 Defendants conclude that California law bars Plaintiffs’ constitutional claims that could have been 18 litigated in a prior California state proceeding. 19 20 21 Plaintiffs note that under California law, a final state court judgment, “precludes further proceedings if they are based on the same cause of action.” 55 Plaintiffs argue that different primary rights may be violated by the same wrongful conduct and therefore the focus should fall on the 22 harm suffered. Plaintiffs argue that even though their constitutional claims in this litigation arise 23 24 52 Id. 53 Id. 54 989 F.2d 362, 365 (9th Cir. 1993). 55 Brodheim v. Cry, 584 F.3d 1262, 1268 (9th Cir. 2009) (citations omitted). 25 26 27 28 14 Case No.: CV 13-0577 PSG ORDER 1 from some of the same transactions or occurrences, and thus some of the same facts underlying 2 both suits, that alone is not dispositive. Plaintiffs identify a series of events that occurred after June 3 25, 2012, (the date of the state petition decision) to support their argument that later events ripened 4 Plaintiffs’ claims. Therefore, Plaintiffs allege, they could not have raised those claims earlier. 5 The court finds that the primary rights at issue in the current proceedings are markedly 6 different from the primary right at issue in the California mandamus action. In the prior California 7 action Plaintiffs sought mandamus relief to obtain their cardroom permit amendment and 8 9 landowner license. Although the mandamus petition made passing reference to the parties’ United States District Court For the Northern District of California 10 constitutional rights, Plaintiffs never brought constitutional claims.56 The petition limited itself to 11 mandamus relief to pave the way for Plaintiffs to legally open their new gaming facility. Plaintiffs’ 12 complaint in the current litigation seeks compensation for Defendants’ ongoing violation of their 13 constitutional rights. Thus, different primary rights are implicated by the two claims. 14 b. Identity of Parties 15 Plaintiffs and Defendants agree that the parties were identical in both proceedings. Garden 16 17 City, Airport Parkway, and Airport Opportunity were plaintiffs in the prior proceeding and brought 18 the mandamus petition against the defendants in the current proceeding the City of San Jose, the 19 San Jose Police Department, and Richard Teng. 57 Thus, this element of res judicata is satisfied. 20 c. 21 Final Judgment on the Merits For res judicata to apply, the initial state court proceeding must have resulted in a final 22 judgment on the merits. Defendants argue that the June 25, 2012, denial of a state petition for a 23 24 writ of mandate constitutes a final judgment on the merits that precludes Plaintiffs’ federal claim. 25 56 26 57 27 28 See Docket 18, Ex. B-1. The court notes that Eric Swallow, Peter Lunardi III, and Jeanine Lunardi, the owners of Casino M8trix, were individually-named plaintiffs in the prior proceeding. The San Jose Police Department’s Division of Gaming Control and San Jose Police Chief Christopher M. Moore also were named defendants in the prior proceeding. 15 Case No.: CV 13-0577 PSG ORDER 1 Plaintiffs counter that recent Ninth Circuit precedent, Honey v. Distelrath, is controlling and 2 excepts mandamus actions from precluding subsequent civil rights claims under Section 1983. The 3 Ninth Circuit in Honey held that California mandamus actions do not result in res judicata and do 4 not preclude federal civil rights claims under Section 1983. 58 Therefore, Plaintiffs argue, res 5 judicata does not preclude Plaintiffs’ subsequent Section 1983 claims in this case. In the 6 alternative, Plaintiffs argue that if Honey is not dispositive, the preclusive effect of the prior 7 proceeding should be limited in scope because the court relied on a limited evidentiary record and 8 9 United States District Court For the Northern District of California 10 the court admitted that it “did not have the resources or experience to exercise its discretion to evaluate the approval process for licenses and gaming operations.” 59 In Yaqub v. Salinas Valley Memorial Hospital Judge Fogel squarely addressed the issue that 11 12 faces the court today: whether Honey permits a Plaintiff to raise a civil rights claim following a 13 mandamus state court action. 60 The court held that while Honey represented “a complete departure 14 from prior Ninth Circuit and California precedent,” it was still bound to “follow Honey as the 15 16 Ninth Circuit’s most recent decision on the issue at hand.” 61 The court agrees with Judge Fogel’s 17 prior holding and finds the Ninth Circuit’s case law dispositive on the point: even if the prior 18 claims were the same, in light of Yaqub, the prior California mandamus action does not result in res 19 judicata in this case. 20 3. 21 Statute of Limitations The statute of limitations for Section 1983 claims is the forum state’s statute of limitations 22 23 24 58 Honey v. Distelrath, 195 F.3d 531, 533 (9th Cir. 1999). 25 59 Docket No. 18, Ex. B-1, 8. 26 60 27 Yaqub v. Salinas Valley Mem’l Healthcare Sys., C-02-02703-JF, 2005 WL 588555, at *5 (N.D. Cal. Mar 14, 2005). 61 28 Id. 16 Case No.: CV 13-0577 PSG ORDER 1 for personal injury actions. 62 California’s two-year statute of limitations period for personal injury 2 actions arising on or after January 1, 2003, is applicable in this case. 63 Federal law “determines 3 when the state limitations period begins for a claim under 42 U.S.C. § 1983.” 64 “A federal claim is 4 generally considered to accrue when the plaintiff knows or has reason to know of the injury which 5 is the basis of the action.” 65 Plaintiffs may invoke the continuing violations doctrine to circumvent 6 7 the two-year statute of limitations period by tying defendants’ conduct beyond the two-year statute of limitations window to “a systematic policy or practice” of wrongdoing. 66 8 Here, Defendants argue that factual allegations predating February 2011 are barred by the 9 United States District Court For the Northern District of California 10 statute of limitations. Plaintiffs respond that Defendants have not shown that they knew or should 11 have known that those actions were part of Defendants’ violations through a pattern or practice of 12 Plaintiffs’ constitutional rights. Four of the events Defendants claim predate February 2011 have 13 14 no dates in the complaint and so Defendants have not shown they are untimely. And as to allegations regarding events predating 2011 alluding to Teng’s potential conflict of interest, 15 16 Plaintiffs argue that those citations show that Teng had the conflict, not that Plaintiffs knew about 17 the conflict or had notice of it. Plaintiffs also assert that, as a matter of law, they may rely on 18 actions before the statute of limitations to allege a “systematic pattern or practice” amounting to a 19 constitutional violation. 20 21 The parties’ dispute centers around what exactly Plaintiffs are alleging – if Plaintiffs seek liability for discrete acts predating February 2011, they are out of luck. However, Plaintiffs’ 22 allegations claim an overall systemic problem. Thus, Plaintiffs may rely on allegations of conduct 23 62 McDougal v. Cnty. of Imperial, 942 F.2d 668, 673 (9th Cir. 1991). 63 Cal. Civ. Proc. Code § 335.1 (West 2003). 64 Norco Const., Inc. v. King Cnty., 801 F.2d 1143, 1145 (9th Cir. 1986). 65 Id. 66 Gutowsky v. Cnty. of Placer, 108 F.3d 256, 259 (9th Cir. 1997). 24 25 26 27 28 17 Case No.: CV 13-0577 PSG ORDER 1 2 predating February 2011 to establish a pattern of misbehavior. The statute of limitations therefore does not apply. 3 4. 4 Defendants suggest Plaintiffs attempted “to sue Teng under state and local law for alleged 5 6 Conflict of Interest Claims conflict of interest.” 67 Defendants argue that Plaintiffs cannot bring such conflicts of interest claims against Teng under state law. Plaintiffs respond that they are not making such conflict of 7 interest claims, but rather relying on the conflict of interest factual allegations to buttress their 8 9 Section 1983 claims. Based on Plaintiffs’ representations that they are merely supporting their due United States District Court For the Northern District of California 10 process and equal protection claims and are not independently pursuing state law causes of action 11 in this litigation, the court holds dismissal is not warranted. 12 5. 13 Defendants argue Teng cannot be liable for punitive damages in his official capacity. 68 14 Teng’s Liability for Punitive Damages Plaintiffs respond that they have sued him in both his official and personal capacity and therefore 15 16 he can be liable for punitive damages as a private individual. 69 Defendants did not address the 17 issue of Teng’s liability for punitive damages in his personal capacity and thus have conceded the 18 point. 19 6. 20 Defendants assert state immunity, which Plaintiffs respond is inapplicable to Section 1983 21 Immunity claims. Here, Plaintiffs have the high ground. In Guillory v. Orange Cnty., the Ninth Circuit held 22 23 24 67 Docket No. 17, 28. 68 Id. at 30. 25 26 69 27 28 Docket No. 22, 36. Although Plaintiffs’ opposition does not cite case law to support its position, the case law does provide some support. See Smith v. Wade, 461 U.S. 30 (1983) (finding that individual public officers may be liable for punitive damages in a Section 1983 action). 18 Case No.: CV 13-0577 PSG ORDER 1 2 that state statutory immunities do not apply to federal civil rights actions. 70 Thus, Defendants’ assertion of state immunity must be rejected. 3 7. 4 In the Ninth Circuit, “abstention is required” if four requirements are met: state court 5 proceedings must be (1) “ongoing,” (2) “implicate important state interests,” (3) “provide an 6 7 Abstention adequate opportunity to raise federal questions,” and (4) the federal court action must “enjoin the proceeding or have the practical effect of doing so.” 71 8 Plaintiffs assert that the parallel state court action does not meet the second or fourth 9 United States District Court For the Northern District of California 10 elements. They assert that the constitutional violations do not implicate important state interests 11 because they are not challenging the regulations, merely the enforcement of the regulations. 12 Plaintiffs also assert that this court’s judgment will not enjoin or threaten to enjoin the state court 13 14 action. Because the state court proceeding was only directed towards the issuance of the cardroom permit amendment and landowner license and not relief for due process violations, the court agrees 15 16 that abstention is not required in this case. 17 8. Motion to Strike 18 Defendants move the court to strike eleven portions of the complaint which they claim 19 constitute allegations barred by the statute of limitations or res judicata. Plaintiffs respond that 20 Rule 12(f) does not permit striking on the grounds that allegations are precluded as a matter of 21 law. 72 In light of Whittlestone the court agrees with Plaintiffs and finds Defendants must rely on 22 23 24 70 25 71 26 731, F.2d 1379, 1382 (9th Cir. 1984). Portrero Hills Landfill, Inc. v. Cnty. of Solano, 657 F.3d 876, 882 (9th Cir. 2011) (internal quotations omitted). 72 27 28 See Whittlestone, Inc. v. Handi-Craft, Co., 618 F.3d 970, 971 (9th Cir. 2010) (holding that “Rule 12(f) of the Federal Rules of Civil Procedure does not authorize a district court to dismiss a claim . . . on the basis it is precluded as a matter of law”). 19 Case No.: CV 13-0577 PSG ORDER 1 their Rule 12(b)(6) motion to test the legal sufficiency of the complaint. 73 IV. CONCLUSION 2 The court GRANTS Defendants’ motion to dismiss Plaintiffs’ equal protection claim. The 3 4 court GRANTS Defendants’ motion to dismiss Plaintiffs Airport Fund and Airport Parkway from 5 this litigation for lack of standing. 6 The court DENIES Defendants’ motion to dismiss Plaintiffs’ due process claim and 7 DENIES Defendants’ motion to dismiss Plaintiffs’ evidence of Defendants’ conflict of interest. 8 9 The court DENIES Defendants’ motion to dismiss Plaintiffs’ claim for punitive damages. The United States District Court For the Northern District of California 10 court DENIES Defendants’ motion to dismiss Plaintiffs’ complaint on res judicata grounds, statute 11 of limitations, and immunity grounds. The court DENIES Plaintiffs’ abstention motion and related 12 motion to stay the proceedings. The court DENIES Plaintiffs’ motion to strike. 13 14 Because the court is not persuaded that amendment would be futile, the court further GRANTS Plaintiffs leave to amend their complaint in a manner consistent with this order. Any 15 16 amended complaint shall be filed no later than September 30, 2013. 17 18 IT IS SO ORDERED. 19 Dated: September 5, 2013 20 _________________________________ PAUL S. GREWAL United States Magistrate Judge 21 22 23 24 25 26 27 28 73 Id. at 974 (identifying the defendant’s Rule 12(f) motion as an attempt to have certain portions of the complaint dismissed and noting that such an argument was better suited for a Rule 12(b)(6) motion or a Rule 56 motion); see also Yamamoto v. Omiya, 564 F.2d 1319, 1327 (9th Cir.1977) (“Rule 12(f) is neither an authorized nor a proper way to procure the dismissal of all or a part of a complaint.”) (internal citations and quotations omitted). 20 Case No.: CV 13-0577 PSG ORDER
]]>
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You
should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google
Privacy Policy and
Terms of Service apply.
