Kersten v. State of California Franchise Tax Board, et al

Filing 24

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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1 2 3 4 5 6 7 8 9 UNITED STATES DISTRICT COURT 10 EASTERN DISTRICT OF CALIFORNIA 11 12 TIMOTHY A. KERSTEN, D.D.S., 13 2:16-cv-00309-JAM-CMK Plaintiff, 14 15 No. v. STATE OF CALIFORNIA FRANCHISE TAX BOARD, et al, ORDER GRANTING INDIVIDUAL DEFENDANTS’ AND LUIS R. DOMINICIS’S MOTIONS TO DISMISS 16 Defendants. 17 18 At first glance, this case involves a dentist’s 19 constitutional challenge to California’s tax system. 20 closer look reveals salient procedural issues about federalism, 21 proper service, and Eleventh Amendment immunity. 22 Timothy A. Kersten, D.D.S. challenges California’s statutory tax 23 scheme. 24 Court are two motions to dismiss. 25 Defendants’ MTD”); ECF No. 17 (“Dominicis’s MTD”). 26 offers no opposition to the substantive legal arguments raised in 27 these motions. 28 /// 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 1 1 both motions are granted and the FAC is dismissed in its 2 entirety. 1 3 4 I. 5 FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND California has a statutory scheme for handling delinquent 6 taxpayers. Section 19195 requires the California Franchise Tax 7 Board (“FTB”) to biannually compile and publish a list of the 500 8 largest state income tax delinquencies. 9 § 19195 (West 2012). 2 Cal. Rev. & Tax. Code And Section 494.5 requires the FTB to 10 create a “certified list” of those taxpayers and mandates the 11 Board of Dentistry (“Board”) (which is part of the Department of 12 Consumer Affairs (“DCA”)) and the Department of Motor Vehicles 13 (“DMV”) to revoke the licenses of taxpayers on the delinquency 14 list unless they obtain a release. 15 § 494.5 (West 2013). 16 Cal. Bus. & Prof. Code Plaintiff Timothy A. Kersten’s name appeared on the FTB list 17 in October 2013. FAC ¶ 118. The Board and DCA suspended 18 Kersten’s dental license, and he could not renew it. 19 72. 20 ¶¶ 80-83. 21 § 1983 suit. 22 officials violated his procedural due process, substantive due 23 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 24 1 25 26 27 28 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. 2 Defendants incorrectly cite section 10195. No such provision exists in California’s Revenue and Taxation Code, and Kersten references Section 19195 in his FAC. 2 1 also claimed California’s statutory scheme violated the supremacy 2 clause. Id. 3 relief. Id. at 47-50. 4 Kersten seeks monetary, declarative, and injunctive Kersten named all of the following defendants in the FAC: 5 the FTB, the DCA, the Board, and the DMV (“State Agencies”); 6 Betty T. Yee, Jerome Horton, Michael Cohen, Selvi Stanislaus, 7 John Chiang, Awet Kidane, Alexis Podesta, Spencer L. Walker, 8 Steven G. Morrow, Judith Forsythe, Steven Afriat, Fran Burton, 9 Stephen Casagrande, Yvette Chappel-Ingram, Katie Dawson, Luis R. 10 Dominicis, Kathleen King, Ross Lai, Huong Le, Meredith McKenzie, 11 Thomas Stewart, Bruce L. Whitcher, Debra Woo, Karen Fischer, Dawn 12 Dill, Jean Shiomoto, David P. Harris, and Fiona Ma (“Individual 13 Defendants”) (collectively “Defendants”). 14 Soon after filing his FAC, Kersten moved to voluntarily 15 dismiss the FTB, the Board, and the DMV, leaving the DCA as the 16 only remaining state agency. 17 motion without prejudice. 18 ECF No. 19. The Court granted his ECF No. 21. That leaves Defendants’ motions to dismiss. All individual 19 defendants—except Luis R. Dominicis and Dawn Dill—bring the first 20 motion. 21 brings the second motion. 22 Neither Dawn Dill nor the DCA is a party to either motion to 23 dismiss. 24 See Opp’n at 1. 25 joint reply. 26 /// 27 /// 28 /// 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. 3 1 II. OPINION 2 A. Judicial Notice 3 The Individual Defendants and Dominicis separately request 4 judicial notice for the same documents: 5 for Writ of Mandamus (attached to Request for Judicial Notice 6 [“RJN”] as Exh. A); (2) Kersten’s First Amended Petition for 7 Writ of Mandamus (attached to RJN as Exh. B); and (3) the Shasta 8 County Superior Court’s Final Ruling on Motion for Judgment on 9 the Pleadings (attached to RJN as Exh. C). 10 Defendants’ RJN, ECF No. 15-3, at 2. 11 ECF No. 17-1, at 2. 12 (1) Kersten’s Petition See Individual case. 13 See also Dominicis’s RJN, All documents arise from the state court A court may take judicial notice of a fact that is not 14 reasonably disputed if it “can be accurately and readily 15 determined from sources whose accuracy cannot reasonably be 16 questioned.” 17 courts may consider “matters of public record.” 18 Advisors Inc. v. Schwab Inv., 779 F.3d 1036, 1042 (9th Cir. 19 2015) (internal citation omitted). 20 include court filings. 21 Inc., 442 F.3d 741, 746 n.6 (9th Cir. 2006) (courts may take 22 judicial notice of court filings and other matters of public 23 record). 24 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 25 First Amended Petition, and the Superior Court’s Final Ruling 26 because they constitute matters of public record not subject to 27 reasonable dispute. 28 /// 4 1 2 3 B. Discussion 1. Comity The comity principle’s teeth are sharpest in federal cases 4 involving challenges to state taxation. For nearly a century, 5 Congress has recognized that “the autonomy and fiscal stability 6 of the States survive best when state tax systems are not 7 subject to scrutiny in federal courts.” 8 Estate Ass’n, Inc. v. McNary, 454 U.S. 100, 102-03 (1981). 9 Congress codified this recognition in its Tax Injunction Act, Fair Assessment in Real 10 which provides that “district courts shall not enjoin, suspend 11 or restrain the assessment, levy or collection of any tax under 12 State law where a plain, speedy and efficient remedy may be had 13 in the courts of such State.” 14 federalism principles, § 1341 “was first and foremost a vehicle 15 to limit drastically federal district court jurisdiction to 16 interfere with so important a local concern as [tax 17 collection].” 18 Ltd., 493 U.S. 331, 338 (1990) (internal citation and quotation 19 marks omitted). 20 28 U.S.C. § 1341. Rooted in Franchise Tax Bd. of California v. Alcan Aluminum In other words, the comity principle precludes taxpayers 21 from bringing § 1983 actions challenging the validity of state 22 tax systems in federal court. 23 (emphasis added). 24 remedies to protect their federal rights, provided “those 25 remedies are plain, adequate, and complete . . . .” 26 state remedy is adequate only where it is certain that the 27 taxpayer can raise constitutional claims in the state court.” 28 Capitol Industries-EMI, Inc. v. Bennett, 681 F.2d 1107, 1116 See McNary, 454 U.S. at 116 Instead, these taxpayers must use state 5 Id. “A 1 2 (internal citation omitted). Defendants argue that comity bars Kersten’s suit, reasoning 3 that his case attacks California’s tax system and, so, 4 implicates federalism. 5 Dominicis’s MTD at 7-8. 6 at 1(discussing only mootness). 7 properly construed, the Individual Defendants’ motion is 8 actually FTB’s motion because defense counsel appeared solely on 9 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, 10 Defendants’ motion as moot because FTB lacks standing to sue on 11 the Individual Defendants’ behalf. 12 sense. 13 state in reply, the notice of motion clearly shows the 14 Individual Defendants brought the motion. 15 (emphasis added). 16 And defense counsel has been counsel of record since the case’s 17 inception. 18 made a clerical error, see Opp’n at 2, is wholly without merit. 19 There is no error because the Individual Defendants properly 20 noticed and filed their motion. 21 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 22 makes clear Kersten cannot bring his § 1983 suit in federal 23 court if California provides an adequate remedy. 24 454 U.S. at 116. 25 provides an adequate remedy because taxpayers may bring § 1983 26 actions in state court. 27 Transit Dist., 136 Cal. App. 3d 116, 124 (1982) (finding state 28 courts have concurrent jurisdiction to adjudicate federally See also 28 U.S.C. § 1341. See McNary, California See Logan v. S. California Rapid 6 1 created causes of action like § 1983 claims). 2 not to and that is a mistake with serious consequences for him. 3 See First Am. Pet. at 1, attached to RJN as Exh. B (seeking only 4 writ of mandamus under CCP Section 1085). 5 and sensitive nature of state tax systems and the need for 6 federal-court restraint when deciding cases that affect [those] 7 systems,” and because Kersten has not shown his remedy in 8 California state court is inadequate, the Court dismisses with 9 prejudice Kersten’s FAC. Kersten elected Given “the important See McNary, 454 U.S. at 102, 105 10 (dismissing “a § 1983 challenge to the administration of state 11 tax laws” on comity grounds). See also Navarro v. Block, 250 12 F.3d 729, 732 (9th Cir. 2001) (explaining dismissal with 13 prejudice appropriate “only if it appears beyond doubt that the 14 plaintiff can prove no set of facts in support of his claim 15 which would entitle him to relief.”). 16 Kersten’s FAC, the Court need not address Defendants’ arguments 17 regarding res judicata and failure to state a claim. 18 19 2. Having dismissed Additional Jurisdictional Issues Notwithstanding this dismissal, the Court must still 20 resolve, sua sponte, two jurisdictional issues affecting two 21 defendants: 22 party to either motion to dismiss. 23 24 Dawn Dill and the DCA. a. Neither defendant was a Improper Service on Defendant Dawn Dill A federal court lacks personal jurisdiction over a 25 defendant if service of process is insufficient. 26 Capital Int’l v. Rudolf Wolff & Co., 484 U.S. 97, 104 (1987). 27 Rule 4 permits service of process by following state law in the 28 state where the district court is located. 7 See Omni See Fed. R. Civ. P. 1 4(e)(1). 2 delivering the summons and complaint to the defendant personally 3 or to an agent authorized to receive service of process. 4 Code Civ. Proc. Section 416.90 (West 2017). 5 improper, a court may dismiss the case under Rule 12(b)(5). 6 Bravo v. CDCR Director, No. C-12-06414 JSC, 2013 WL 3786630, at 7 *1 (N.D. Cal. July 17, 2013). 8 9 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 10 her when he served the DCA because, at the time, she no longer 11 worked there. 12 Dominicis’s MTD at 2 n.1. 13 See Opp’n at 1 (discussing only mootness). 14 not met his burden to establish valid service under Rule 4, the 15 Court finds it lacks personal jurisdiction over Defendant Dill. 16 See Omni Capital Int’l, 484 U.S. at 104. 17 federalism concerns underlying Kersten’s suit, see supra Part 18 B.1, the Court dismisses with prejudice Kersten’s FAC against 19 Dill. 20 21 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 22 Eleventh Amendment immunity. See Dittman v. California, 191 23 F.3d 1020, 1025-26 (9th Cir. 1999) (internal citations and 24 quotation marks omitted). 25 immunity with respect to § 1983 claims brought in federal court. 26 See id. 27 constitutes a suit against California, and because Kersten does 28 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 8 1 Amendment bars Kersten’s § 1983 suit against the DCA. 2 v. California Dep’t of Consumer Affairs, No. 2:09-cv-02905, 2010 3 WL 2838628, at *3 (E.D. Cal. June 11, 2010) (dismissing 4 plaintiff’s § 1983 claim against the DCA on Eleventh Amendment 5 immunity grounds). 6 FAC against the DCA. See Kent The Court dismisses with prejudice Kersten’s 7 8 9 10 11 12 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 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 9

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