Flynt et al v. Harris et al

Filing 31

ORDER signed by District Judge John A. Mendez on 05/26/17 ORDERING that defendants' 19 Motion to Dismiss is GRANTED WITH LEAVE TO AMEND. Plaintiffs shall file a First Amended Complaint within 20 days or this action will be dismissed. Defendants' responsive pleadings are due 20 days thereafter. (Benson, A)

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 12 LARRY C. FLYNT; HAIG KELEGIAN SR.; and HAIG T. KELEGIAN JR., 13 Plaintiffs, 14 15 16 No. 2:16-cv-02831-JAM-EFB ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS v. XAVIER BECERRA, et al., Defendants. Three card club owners want more than a one-percent interest 17 18 in out-of-state casinos, which California’s gambling laws 19 prohibit. 20 Bureau of Gambling Control and California officials, alleging 21 these laws violate the U.S. Constitution’s dormant commerce and 22 substantive due process clauses. 23 move to dismiss this action. 24 oppose. 25 Court grants Defendants’ motion. 1 26 1 27 28 Because of this prohibition, Plaintiffs sue both the Opp’n, ECF No. 24. Compl., ECF No. 1. Mot., ECF No. 19. Defendants Plaintiffs For the reasons explained below, the This motion was determined to be suitable for decision without oral argument. E.D. Cal. L.R. 230(g). The hearing was scheduled for May 2, 2017. In deciding this motion, the Court takes as true all well-pleaded facts in the complaint. 1 1 2 I. BACKGROUND Card clubs pervade California. Patrons frequent these 3 establishments to play card games. 4 license, California residents may own card clubs. 5 Plaintiffs Larry C. Flynt, Haig Kelegian Sr., and Haig T. 6 Kelegian Jr. each own gaming licenses. 7 Compl. ¶ 17. With a gaming Id. Id. ¶¶ 8-10. But Plaintiffs want more than ownership: They also want to 8 substantially invest in out-of-state casinos. 9 California forbids this. Id. ¶ 4. California’s gambling laws empower the 10 state to revoke card club owners’ gaming licenses if they have 11 more than one-percent interest in an out-of-state, casino-style 12 gambling entity. 13 Flynt and Kelegian Sr. allege these laws made them forego 14 lucrative business opportunities; Kelegian Jr. owned more than 15 one-percent interest in an out-of-state casino, and the state 16 made him divest it. 17 Cal. Bus. & Prof. Code §§ 19858, 19858.5. See Compl. ¶¶ 47-57. Believing these laws to be unconstitutional, Plaintiffs sue 18 the Bureau of Gambling Control and state officials. 19 Automatic Substitution of Parties, ECF No. 18. 20 and as-applied challenges, Plaintiffs argue §§ 19858 and 19858.5 21 violate the U.S. Constitution’s dormant commerce and substantive 22 due process clauses. 23 this case as untimely. Compl. ¶¶ 1-7. Through facial Defendants move to dismiss Mem., ECF No. 19-1, at 4-5. II. 24 Notice of OPINION 25 A. Statute of Limitations 26 Section 1983 claims brought in California federal court 27 have a two-year statute of limitations. 28 Cmty. Renaissance of Cal., 766 F.3d 1191, 1198 (9th Cir. 2014) 2 See Butler v. Nat’l 1 (citing Cal. Civ. Proc. Code § 335.1). 2 defines the limitations period, federal law determines the claim 3 accrues “when a plaintiff knows or has reason to know of the 4 actual injury.” 5 Cir. 2016); Knox v. Davis, 260 F.3d 1009, 1013 (9th Cir. 2001). Although state law See Scheer v. Kelly, 817 F.3d 1183, 1188 (9th 6 B. Discussion 7 Plaintiffs filed their complaint on November 30, 2016. 8 generally Compl. 9 See The parties dispute whether this was timely. Defendants contend it is not because Plaintiffs’ injuries 10 occurred more than two years earlier. 11 Plaintiffs argue the case is timely because their injuries are 12 ongoing. 13 See Mem. at 5. But See Opp’n at 6-8. To bolster their statute-of-limitations defense, Defendants 14 cite two operative dates. 15 day California enacted its gambling law. 16 § 19858). The Ninth Circuit makes clear, however, that when a 17 plaintiff facially challenges a law, that law’s enactment date 18 does not commence the limitations period. 19 at 1188 (finding plaintiff’s claim timely because limitations 20 period began when the California Supreme Court denied her review 21 petition, not when the challenged rules were enacted). 22 First, they cite January 1, 2008—the Mem. at 5 (referencing See Scheer, 817 F.3d Second, Defendants cite June 12, 2014—the day the California 23 Gambling Control Commission (“Commission”) ordered Kelegian Jr. 24 to divest his illegal interest 2 and fined him $200,000 for 25 2 26 27 28 Kelegian Jr. opened Kelco Gaming, LLC, a casino-style gambling entity in Seattle, Washington. Compl. ¶¶ 54-55. He owned 1% interest and his wife owned 99% interest. Id. ¶ 55. He reported his interest, but California’s marital property law deemed it “vastly in excess of one percent.” Id. ¶ 56. 3 1 violating §§ 19858 and 19858.5. 2 Commission Decision (attached to Compl. as Ex. F). 3 Commission’s decision applies only to Kelegian Jr., but it also 4 admittedly put Flynt and Kelegian Sr. on notice about the injury 5 underlying this suit (Compl. ¶¶ 47-57) and therefore is the 6 operative date for all Plaintiffs’ alleged injuries. 7 finds, therefore that all of the Plaintiffs’ claims accrued on 8 June 12, 2014—more than two years before Plaintiffs filed suit 9 and are time barred unless Plaintiffs pled a continuing harm. 10 11 See Mem. at 5. See also The The Court See Knox, 260 F.3d at 1013. They did not. A continuing harm is one that first occurs 12 beyond the statute of limitations but continues to occur within 13 the statutory period. 14 continuing harm may be timely even though they technically 15 accrued outside the statute of limitations. 16 continuing harm, the alleged wrongdoing and resultant injury must 17 truly be ongoing or reoccurring; a “mere continuing impact from 18 past violations” does not suffice. 19 (internal citations and quotation marks omitted). 20 See id. Claims based on alleged See id. But to be a See id. (original emphasis) Plaintiffs argue they allege ongoing, continuous harm. 21 Opp’n at 6-7. 22 business opportunities: California’s gambling laws made Flynt and 23 Kelegian Sr. forfeit lucrative opportunities to invest in out-of- 24 state casinos. 25 Kelegian Sr. identify a date these alleged injuries occurred. 26 The Court lacks information critical to assess them and thus 27 declines to consider them. 28 First they cite Flynt’s and Kelegian Sr.’s lost See Compl. ¶¶ 47-52. Yet neither Flynt nor Second, Plaintiffs cite the Commission’s decision as an 4 1 ongoing, continuous injury. 2 Commission fined Kelegian Jr. for violating California’s gambling 3 prohibition, see Ex. F at 5, which he paid, Compl. ¶ 57. 4 a single harm. 5 continuous harm theory by characterizing the Commission decision 6 as a “pending enforcement action” whose impact remains in effect 7 until June 13, 2019. 8 Commission stayed (for five years) $125,000 of Kelegian Jr.’s 9 fine, see Ex. F at 5, the stay was conditioned on his §§ 19858 See Opp’n at 8. It is not. The This is In opposition, Plaintiffs manufacture an ongoing, See Opp’n at 8. Not so. Although the 10 and 19858.5 compliance, see id. at 6. In other words, the 11 Commission made a one-time decision with a lasting impact. 12 continuing impact (precluding Plaintiffs from substantially 13 investing in out-of-state casinos) is not actionable. 14 260 F.3d at 1013. 15 so their complaint is time barred. The Court finds that 16 Plaintiffs still might be able to plead sufficient facts to avoid 17 dismissal on statute of limitations grounds and therefore grants 18 the motion to dismiss without prejudice. That See Knox, Plaintiffs have not alleged a continuous harm, 19 20 21 III. ORDER The Court GRANTS Defendants’ motion to dismiss with leave 22 to amend. 23 twenty days of this Order or this action will be dismissed. 24 Defendants’ responsive pleadings are due twenty days thereafter. 25 26 Plaintiffs shall file a First Amended Complaint within IT IS SO ORDERED. Dated: May 26, 2017 27 28 5

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