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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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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LARRY C. FLYNT; HAIG KELEGIAN
SR.; and HAIG T. KELEGIAN
JR.,

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Plaintiffs,

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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

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in out-of-state casinos, which California’s gambling laws

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prohibit.

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Bureau of Gambling Control and California officials, alleging

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these laws violate the U.S. Constitution’s dormant commerce and

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substantive due process clauses.

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move to dismiss this action.

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oppose.

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Court grants Defendants’ motion. 1

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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.
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I.

BACKGROUND

Card clubs pervade California.

Patrons frequent these

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establishments to play card games.

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license, California residents may own card clubs.

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Plaintiffs Larry C. Flynt, Haig Kelegian Sr., and Haig T.

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Kelegian Jr. each own gaming licenses.

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Compl. ¶ 17.

With a gaming
Id.

Id. ¶¶ 8-10.

But Plaintiffs want more than ownership: They also want to

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substantially invest in out-of-state casinos.

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California forbids this.

Id. ¶ 4.

California’s gambling laws empower the

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state to revoke card club owners’ gaming licenses if they have

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more than one-percent interest in an out-of-state, casino-style

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gambling entity.

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Flynt and Kelegian Sr. allege these laws made them forego

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lucrative business opportunities; Kelegian Jr. owned more than

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one-percent interest in an out-of-state casino, and the state

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made him divest it.

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Cal. Bus. & Prof. Code §§ 19858, 19858.5.

See Compl. ¶¶ 47-57.

Believing these laws to be unconstitutional, Plaintiffs sue

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the Bureau of Gambling Control and state officials.

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Automatic Substitution of Parties, ECF No. 18.

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and as-applied challenges, Plaintiffs argue §§ 19858 and 19858.5

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violate the U.S. Constitution’s dormant commerce and substantive

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due process clauses.

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this case as untimely.

Compl. ¶¶ 1-7.

Through facial

Defendants move to dismiss

Mem., ECF No. 19-1, at 4-5.
II.

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Notice of

OPINION

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A.

Statute of Limitations

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Section 1983 claims brought in California federal court

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have a two-year statute of limitations.

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Cmty. Renaissance of Cal., 766 F.3d 1191, 1198 (9th Cir. 2014)
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See Butler v. Nat’l

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(citing Cal. Civ. Proc. Code § 335.1).

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defines the limitations period, federal law determines the claim

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accrues “when a plaintiff knows or has reason to know of the

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actual injury.”

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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

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B.

Discussion

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Plaintiffs filed their complaint on November 30, 2016.

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generally Compl.

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See

The parties dispute whether this was timely.

Defendants contend it is not because Plaintiffs’ injuries

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occurred more than two years earlier.

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Plaintiffs argue the case is timely because their injuries are

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ongoing.

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See Mem. at 5.

But

See Opp’n at 6-8.

To bolster their statute-of-limitations defense, Defendants

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cite two operative dates.

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day California enacted its gambling law.

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§ 19858). The Ninth Circuit makes clear, however, that when a

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plaintiff facially challenges a law, that law’s enactment date

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does not commence the limitations period.

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at 1188 (finding plaintiff’s claim timely because limitations

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period began when the California Supreme Court denied her review

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petition, not when the challenged rules were enacted).

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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

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Gambling Control Commission (“Commission”) ordered Kelegian Jr.

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to divest his illegal interest 2 and fined him $200,000 for

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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.
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violating §§ 19858 and 19858.5.

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Commission Decision (attached to Compl. as Ex. F).

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Commission’s decision applies only to Kelegian Jr., but it also

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admittedly put Flynt and Kelegian Sr. on notice about the injury

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underlying this suit (Compl. ¶¶ 47-57) and therefore is the

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operative date for all Plaintiffs’ alleged injuries.

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finds, therefore that all of the Plaintiffs’ claims accrued on

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June 12, 2014—more than two years before Plaintiffs filed suit

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and are time barred unless Plaintiffs pled a continuing harm.

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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

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beyond the statute of limitations but continues to occur within

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the statutory period.

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continuing harm may be timely even though they technically

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accrued outside the statute of limitations.

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continuing harm, the alleged wrongdoing and resultant injury must

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truly be ongoing or reoccurring; a “mere continuing impact from

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past violations” does not suffice.

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(internal citations and quotation marks omitted).

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See id.

Claims based on alleged

See id.

But to be a

See id. (original emphasis)

Plaintiffs argue they allege ongoing, continuous harm.

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Opp’n at 6-7.

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business opportunities: California’s gambling laws made Flynt and

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Kelegian Sr. forfeit lucrative opportunities to invest in out-of-

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state casinos.

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Kelegian Sr. identify a date these alleged injuries occurred.

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The Court lacks information critical to assess them and thus

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declines to consider them.

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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
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ongoing, continuous injury.

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Commission fined Kelegian Jr. for violating California’s gambling

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prohibition, see Ex. F at 5, which he paid, Compl. ¶ 57.

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a single harm.

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continuous harm theory by characterizing the Commission decision

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as a “pending enforcement action” whose impact remains in effect

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until June 13, 2019.

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Commission stayed (for five years) $125,000 of Kelegian Jr.’s

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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

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and 19858.5 compliance, see id. at 6.

In other words, the

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Commission made a one-time decision with a lasting impact.

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continuing impact (precluding Plaintiffs from substantially

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investing in out-of-state casinos) is not actionable.

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260 F.3d at 1013.

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so their complaint is time barred. The Court finds that

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Plaintiffs still might be able to plead sufficient facts to avoid

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dismissal on statute of limitations grounds and therefore grants

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the motion to dismiss without prejudice.

That

See Knox,

Plaintiffs have not alleged a continuous harm,

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III.

ORDER

The Court GRANTS Defendants’ motion to dismiss with leave

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to amend.

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twenty days of this Order or this action will be dismissed.

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Defendants’ responsive pleadings are due twenty days thereafter.

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Plaintiffs shall file a First Amended Complaint within

IT IS SO ORDERED.
Dated: May 26, 2017

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