Kersten v. State of California Franchise Tax Board, et al
Filing
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ORDER signed by District Judge John A. Mendez on 3/22/2017 GRANTING #15 , #17 , Motions to Dismiss; DISMISSING the #12 First Amended Complaint, with prejudice, in its entirety. CASE CLOSED. (Michel, G.)
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UNITED STATES DISTRICT COURT
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EASTERN DISTRICT OF CALIFORNIA
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TIMOTHY A. KERSTEN, D.D.S.,
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2:16-cv-00309-JAM-CMK
Plaintiff,
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No.
v.
STATE OF CALIFORNIA FRANCHISE
TAX BOARD, et al,
ORDER GRANTING INDIVIDUAL
DEFENDANTS’ AND LUIS R.
DOMINICIS’S MOTIONS TO DISMISS
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Defendants.
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At first glance, this case involves a dentist’s
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constitutional challenge to California’s tax system.
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closer look reveals salient procedural issues about federalism,
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proper service, and Eleventh Amendment immunity.
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Timothy A. Kersten, D.D.S. challenges California’s statutory tax
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scheme.
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Court are two motions to dismiss.
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Defendants’ MTD”); ECF No. 17 (“Dominicis’s MTD”).
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offers no opposition to the substantive legal arguments raised in
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these motions.
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First Am. Compl. (“FAC”), ECF No. 12.
ECF No. 20.
But a
Plaintiff
Now before the
ECF No. 15 (“Individual
Kersten
For the reasons set forth below
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both motions are granted and the FAC is dismissed in its
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entirety. 1
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I.
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FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND
California has a statutory scheme for handling delinquent
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taxpayers.
Section 19195 requires the California Franchise Tax
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Board (“FTB”) to biannually compile and publish a list of the 500
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largest state income tax delinquencies.
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§ 19195 (West 2012). 2
Cal. Rev. & Tax. Code
And Section 494.5 requires the FTB to
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create a “certified list” of those taxpayers and mandates the
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Board of Dentistry (“Board”) (which is part of the Department of
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Consumer Affairs (“DCA”)) and the Department of Motor Vehicles
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(“DMV”) to revoke the licenses of taxpayers on the delinquency
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list unless they obtain a release.
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§ 494.5 (West 2013).
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Cal. Bus. & Prof. Code
Plaintiff Timothy A. Kersten’s name appeared on the FTB list
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in October 2013.
FAC ¶ 118.
The Board and DCA suspended
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Kersten’s dental license, and he could not renew it.
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72.
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¶¶ 80-83.
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§ 1983 suit.
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officials violated his procedural due process, substantive due
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process, and equal protection rights.
Id. ¶¶ 70-
He also could not renew his revoked driver’s license.
Id.
So Kersten challenged California’s tax scheme in a
He alleged that several California agencies and
See generally FAC.
He
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This motion was determined to be suitable for decision without
oral argument. E.D. Cal. L.R. 230(g). The hearing was
scheduled for February 21, 2017. In deciding this motion, the
Court takes as true all well-pleaded facts in the complaint.
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Defendants incorrectly cite section 10195. No such provision
exists in California’s Revenue and Taxation Code, and Kersten
references Section 19195 in his FAC.
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also claimed California’s statutory scheme violated the supremacy
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clause.
Id.
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relief.
Id. at 47-50.
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Kersten seeks monetary, declarative, and injunctive
Kersten named all of the following defendants in the FAC:
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the FTB, the DCA, the Board, and the DMV (“State Agencies”);
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Betty T. Yee, Jerome Horton, Michael Cohen, Selvi Stanislaus,
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John Chiang, Awet Kidane, Alexis Podesta, Spencer L. Walker,
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Steven G. Morrow, Judith Forsythe, Steven Afriat, Fran Burton,
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Stephen Casagrande, Yvette Chappel-Ingram, Katie Dawson, Luis R.
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Dominicis, Kathleen King, Ross Lai, Huong Le, Meredith McKenzie,
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Thomas Stewart, Bruce L. Whitcher, Debra Woo, Karen Fischer, Dawn
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Dill, Jean Shiomoto, David P. Harris, and Fiona Ma (“Individual
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Defendants”) (collectively “Defendants”).
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Soon after filing his FAC, Kersten moved to voluntarily
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dismiss the FTB, the Board, and the DMV, leaving the DCA as the
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only remaining state agency.
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motion without prejudice.
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ECF No. 19.
The Court granted his
ECF No. 21.
That leaves Defendants’ motions to dismiss.
All individual
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defendants—except Luis R. Dominicis and Dawn Dill—bring the first
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motion.
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brings the second motion.
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Neither Dawn Dill nor the DCA is a party to either motion to
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dismiss.
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See Opp’n at 1.
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joint reply.
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///
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///
See generally Individual Defendants’ MTD.
Dominicis
See generally Dominicis’s MTD.
Kersten opposes only the Individual Defendants’ motion.
The Individual Defendants and Dominicis filed a
See Reply at 2 n.1.
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II.
OPINION
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A.
Judicial Notice
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The Individual Defendants and Dominicis separately request
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judicial notice for the same documents:
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for Writ of Mandamus (attached to Request for Judicial Notice
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[“RJN”] as Exh. A); (2) Kersten’s First Amended Petition for
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Writ of Mandamus (attached to RJN as Exh. B); and (3) the Shasta
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County Superior Court’s Final Ruling on Motion for Judgment on
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the Pleadings (attached to RJN as Exh. C).
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Defendants’ RJN, ECF No. 15-3, at 2.
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ECF No. 17-1, at 2.
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(1) Kersten’s Petition
See Individual
case.
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See also Dominicis’s RJN,
All documents arise from the state court
A court may take judicial notice of a fact that is not
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reasonably disputed if it “can be accurately and readily
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determined from sources whose accuracy cannot reasonably be
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questioned.”
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courts may consider “matters of public record.”
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Advisors Inc. v. Schwab Inv., 779 F.3d 1036, 1042 (9th Cir.
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2015) (internal citation omitted).
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include court filings.
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Inc., 442 F.3d 741, 746 n.6 (9th Cir. 2006) (courts may take
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judicial notice of court filings and other matters of public
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record).
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Fed. R. Evid. 201(b)(2).
On a motion to dismiss,
Northstar Fin.
“Matters of public record”
See Reyn’s Pasta Bella, LLC v. Visa USA,
The Court takes judicial notice of Kersten’s Petition, his
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First Amended Petition, and the Superior Court’s Final Ruling
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because they constitute matters of public record not subject to
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reasonable dispute.
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///
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B.
Discussion
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Comity
The comity principle’s teeth are sharpest in federal cases
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involving challenges to state taxation.
For nearly a century,
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Congress has recognized that “the autonomy and fiscal stability
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of the States survive best when state tax systems are not
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subject to scrutiny in federal courts.”
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Estate Ass’n, Inc. v. McNary, 454 U.S. 100, 102-03 (1981).
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Congress codified this recognition in its Tax Injunction Act,
Fair Assessment in Real
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which provides that “district courts shall not enjoin, suspend
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or restrain the assessment, levy or collection of any tax under
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State law where a plain, speedy and efficient remedy may be had
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in the courts of such State.”
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federalism principles, § 1341 “was first and foremost a vehicle
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to limit drastically federal district court jurisdiction to
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interfere with so important a local concern as [tax
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collection].”
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Ltd., 493 U.S. 331, 338 (1990) (internal citation and quotation
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marks omitted).
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28 U.S.C. § 1341.
Rooted in
Franchise Tax Bd. of California v. Alcan Aluminum
In other words, the comity principle precludes taxpayers
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from bringing § 1983 actions challenging the validity of state
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tax systems in federal court.
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(emphasis added).
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remedies to protect their federal rights, provided “those
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remedies are plain, adequate, and complete . . . .”
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state remedy is adequate only where it is certain that the
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taxpayer can raise constitutional claims in the state court.”
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Capitol Industries-EMI, Inc. v. Bennett, 681 F.2d 1107, 1116
See McNary, 454 U.S. at 116
Instead, these taxpayers must use state
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Id.
“A
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(internal citation omitted).
Defendants argue that comity bars Kersten’s suit, reasoning
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that his case attacks California’s tax system and, so,
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implicates federalism.
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Dominicis’s MTD at 7-8.
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at 1(discussing only mootness).
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properly construed, the Individual Defendants’ motion is
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actually FTB’s motion because defense counsel appeared solely on
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FTB’s behalf, and so the Court should dismiss Individual
See Individual Defendants’ MTD at 7-8;
Kersten offers no response.
See Opp’n
Instead, he argues that,
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Defendants’ motion as moot because FTB lacks standing to sue on
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the Individual Defendants’ behalf.
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sense.
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state in reply, the notice of motion clearly shows the
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Individual Defendants brought the motion.
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(emphasis added).
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And defense counsel has been counsel of record since the case’s
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inception.
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made a clerical error, see Opp’n at 2, is wholly without merit.
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There is no error because the Individual Defendants properly
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noticed and filed their motion.
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Id. at 2.
This makes no
As the Individual Defendants and Dominicis correctly
See Reply at 2
See also Notice of Mot., ECF No. 15-1, at 2.
The docket reflects this.
To argue that the Court
In short, the Court agrees with Defendants.
Federal law
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makes clear Kersten cannot bring his § 1983 suit in federal
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court if California provides an adequate remedy.
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454 U.S. at 116.
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provides an adequate remedy because taxpayers may bring § 1983
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actions in state court.
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Transit Dist., 136 Cal. App. 3d 116, 124 (1982) (finding state
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courts have concurrent jurisdiction to adjudicate federally
See also 28 U.S.C. § 1341.
See McNary,
California
See Logan v. S. California Rapid
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created causes of action like § 1983 claims).
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not to and that is a mistake with serious consequences for him.
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See First Am. Pet. at 1, attached to RJN as Exh. B (seeking only
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writ of mandamus under CCP Section 1085).
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and sensitive nature of state tax systems and the need for
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federal-court restraint when deciding cases that affect [those]
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systems,” and because Kersten has not shown his remedy in
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California state court is inadequate, the Court dismisses with
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prejudice Kersten’s FAC.
Kersten elected
Given “the important
See McNary, 454 U.S. at 102, 105
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(dismissing “a § 1983 challenge to the administration of state
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tax laws” on comity grounds). See also Navarro v. Block, 250
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F.3d 729, 732 (9th Cir. 2001) (explaining dismissal with
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prejudice appropriate “only if it appears beyond doubt that the
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plaintiff can prove no set of facts in support of his claim
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which would entitle him to relief.”).
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Kersten’s FAC, the Court need not address Defendants’ arguments
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regarding res judicata and failure to state a claim.
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2.
Having dismissed
Additional Jurisdictional Issues
Notwithstanding this dismissal, the Court must still
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resolve, sua sponte, two jurisdictional issues affecting two
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defendants:
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party to either motion to dismiss.
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Dawn Dill and the DCA.
a.
Neither defendant was a
Improper Service on Defendant Dawn Dill
A federal court lacks personal jurisdiction over a
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defendant if service of process is insufficient.
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Capital Int’l v. Rudolf Wolff & Co., 484 U.S. 97, 104 (1987).
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Rule 4 permits service of process by following state law in the
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state where the district court is located.
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See Omni
See Fed. R. Civ. P.
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4(e)(1).
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delivering the summons and complaint to the defendant personally
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or to an agent authorized to receive service of process.
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Code Civ. Proc. Section 416.90 (West 2017).
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improper, a court may dismiss the case under Rule 12(b)(5).
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Bravo v. CDCR Director, No. C-12-06414 JSC, 2013 WL 3786630, at
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*1 (N.D. Cal. July 17, 2013).
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Under California law, process can be served by
Cal.
Where service is
See
In their motions, Defendants note that Dawn Dill is not a
party to their briefs, reasoning that Kersten improperly served
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her when he served the DCA because, at the time, she no longer
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worked there.
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Dominicis’s MTD at 2 n.1.
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See Opp’n at 1 (discussing only mootness).
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not met his burden to establish valid service under Rule 4, the
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Court finds it lacks personal jurisdiction over Defendant Dill.
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See Omni Capital Int’l, 484 U.S. at 104.
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federalism concerns underlying Kersten’s suit, see supra Part
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B.1, the Court dismisses with prejudice Kersten’s FAC against
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Dill.
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See Individual Defendants’ MTD at 2 n.1;
b.
Kersten does not contest this issue.
Because Kersten has
And given the
Defendant DCA’s Eleventh Amendment Immunity
Congress did not intend for § 1983 to abrogate a state’s
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Eleventh Amendment immunity.
See Dittman v. California, 191
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F.3d 1020, 1025-26 (9th Cir. 1999) (internal citations and
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quotation marks omitted).
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immunity with respect to § 1983 claims brought in federal court.
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See id.
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constitutes a suit against California, and because Kersten does
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not contest that the DCA is a California agency, the Eleventh
And California has not waived its
Because a suit against a California agency effectively
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Amendment bars Kersten’s § 1983 suit against the DCA.
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v. California Dep’t of Consumer Affairs, No. 2:09-cv-02905, 2010
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WL 2838628, at *3 (E.D. Cal. June 11, 2010) (dismissing
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plaintiff’s § 1983 claim against the DCA on Eleventh Amendment
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immunity grounds).
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FAC against the DCA.
See Kent
The Court dismisses with prejudice Kersten’s
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III.
ORDER
For the reasons set forth above, Kersten’s FAC is DISMISSED
WITH PREJUDICE in its entirety.
IT IS SO ORDERED.
Dated: March 22, 2017
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