Flynt et al v. Harris et al

Filing 40

ORDER signed by District Judge John A. Mendez on 10/26/17 GRANTING defendants' 33 Motion to Dismiss with prejudice. CASE CLOSED (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 14 15 16 17 No. Plaintiffs, 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 18 in out-of-state casinos, which California’s gambling laws 19 prohibit. Larry C. Flynt, Haig Kelegian, Sr., and Haig T. 20 Kelegian, Jr. (collectively “Plaintiffs”) sue both the Bureau of 21 Gambling Control and California officials (collectively 22 “Defendants”), alleging these laws violate the U.S. 23 Constitution’s dormant commerce and substantive due process 24 clauses. 25 granted the Defendants’ motion to dismiss, without prejudice, 26 based on Plaintiffs’ failure to bring suit within the statute of 27 limitations. 28 dismiss Plaintiffs’ First Amended Complaint, ECF No. 32 (the Compl., ECF No. 1. Earlier this year, this Court Order, ECF No. 31. Defendants again move to 1 1 “FAC”). 2 35. 3 motion—this time with prejudice. 1 Mot., ECF No. 33. Plaintiffs oppose. Opp’n, ECF No. For reasons explained below, the Court grants Defendants’ 4 5 I. 6 BACKGROUND Card clubs pervade California. Patrons frequent these 7 establishments to play card games. 8 license, California residents may own card clubs. 9 Plaintiffs Larry C. Flynt, Haig Kelegian, Sr., and Haig T. 10 FAC ¶ 17. Kelegian, Jr. each own gaming licenses. 11 With a gaming Id. Id. ¶¶ 8-10. But Plaintiffs want more than ownership: they also want to 12 substantially invest in out-of-state casinos. 13 California forbids this. 14 state to revoke card club owners’ gaming licenses if they have 15 more than a one-percent interest in an out-of-state, casino-style 16 gambling entity. 17 Flynt and Kelegian, Sr. allege these laws made them forego 18 lucrative business opportunities, including opportunities to 19 purchase out-of-state casinos in 2014 and 2015. 20 Kelegian, Jr. owned more than a one-percent interest in an out- 21 of-state casino and the state made him divest it and fined him. 22 See FAC ¶¶ 67-71. 23 Id. ¶ 4. California’s gambling laws empower the Cal. Bus. & Prof. Code §§ 19858, 19858.5. FAC ¶¶ 49-77. As a result of the State’s decision and enforcement of 24 §§ 19858 and 19858.5, Plaintiffs filed this action against the 25 Bureau of Gambling Control and state officials. 26 1 27 28 Through facial This motion was determined to be suitable for decision without oral argument. E.D. Cal. L.R. 230(g). The hearing was scheduled for Oct. 3, 2017. In deciding this motion, the Court takes as true all well-pleaded facts in the FAC. 2 1 and as-applied challenges, Plaintiffs argue these statutes 2 violate the U.S. Constitution’s dormant commerce and substantive 3 due process clauses. 4 Defendants’ motion to dismiss the initial complaint without 5 prejudice, Plaintiffs filed the FAC. 6 dismiss this case as untimely. FAC ¶¶ 1-7. After the Court granted Defendants again move to Mem., ECF No. 33-1, at 5-6. 7 8 II. 9 A. 10 OPINION Statute of Limitations Section 1983 claims brought in California’s federal courts 11 have a two-year statute of limitations. 12 Cmty. Renaissance of Cal., 766 F.3d 1191, 1198 (9th Cir. 2014) 13 (citing Cal. Civ. Proc. Code § 335.1). 14 defines the limitations period, federal law determines the claim 15 accrues “when a plaintiff knows or has reason to know of the 16 actual injury.” 17 Cir. 2016); Knox v. Davis, 260 F.3d 1009, 1013 (9th Cir. 2001). 18 Statutes of limitations may bar facial challenges against laws 19 deemed to violate constitutional provisions. 20 Kelly, 817 F.3d 1183, 1188 (9th Cir. 2016) (Section 1983’s two- 21 year statute of limitations applied to plaintiff’s facial First 22 Amendment and Fourteenth Amendment challenges to California’s 23 attorney discipline system); Levald, Inc. v. City of Palm 24 Desert, 998 F.2d 680, 688-89 (9th Cir. 1993) (facial Fifth 25 Amendment Takings challenge for declaratory relief was time 26 barred). 27 28 See Butler v. Nat’l Although state law See Scheer v. Kelly, 817 F.3d 1183, 1188 (9th See Scheer v. Plaintiffs filed their original complaint on November 30, 2016. See generally Compl. The parties dispute whether this 3 1 was timely. 2 injuries occurred more than two years earlier. 3 But Plaintiffs argue their filing was timely because the statute 4 of limitations does not apply to their claims and, even if it 5 does, their injuries are ongoing. Defendants contend it was not because Plaintiffs’ See Mem. at 5. See Opp’n at 2-3. 6 Plaintiffs cite Maldonado v. Harris in support of their 7 argument that the statute of limitations does not apply to their 8 facial constitutional challenges. 9 v. Harris, 370 F.3d 945 (9th Cir. 2004)). Opp’n at 2-3 (citing Maldonado But Plaintiffs’ 10 argument misrepresents the holding in Maldonado and ignores the 11 rule enunciated in Scheer v. Kelly, supra at 1188. The Maldonado 12 Court questioned—in dicta—the application of a limitations period 13 to a First Amendment facial challenge. 14 955. 15 ruled that the limitations period to bring a facial challenge 16 under § 1983, even based on the First Amendment, begins to run 17 when a plaintiff “knows or has reason to know of the actual 18 injury.” 19 § 1983 statute of limitations by asserting facial challenges. 20 Maldonado, 370 F.3d at Almost twelve years later, in Scheer, the Ninth Circuit 817 F.3d at 1186, 1188. Plaintiffs cannot avoid the To bolster their statute-of-limitations defense, Defendants 21 cite June 12, 2014—the day the California Gambling Control 22 Commission (“Commission”) ordered Kelegian, Jr. to divest his 23 illegal interest 2 and fined him $200,000 for violating §§ 19858 24 and 19858.5. See Mem. at 5. See also Commission Decision 25 2 26 27 28 Kelegian, Jr. opened Kelco Gaming, LLC, a casino-style gambling entity in Seattle, Washington. FAC ¶¶ 68-69. He owned a 1% interest and his wife owned a 99% interest. Id. ¶ 69. He reported his interest, but California’s marital property law deemed it “vastly in excess of one percent.” Id. ¶ 70. 4 1 (attached to FAC as Ex. F). 2 only to Kelegian, Jr. 3 not contest, that it also put Flynt and Kelegian, Sr. on notice 4 about the injury underlying this suit. 5 generally FAC and Opp’n. 6 decision is the operative date for all Plaintiffs’ alleged 7 injuries. 8 than two years before Plaintiffs filed suit. 9 Compl. 10 But Defendants argue, and Plaintiffs do See Mem. at 1; see So the date of the Commission’s All claims accrued on that date—June 12, 2014—more See generally Their complaint is time barred unless they pled a continuing harm. 11 The Commission’s decision applies See Knox, 260 F.3d at 1013. Plaintiffs have not pled a continuing harm. A continuing 12 harm is one that first occurs beyond the statute of limitations 13 but continues to occur within the statutory period. 14 Claims based on alleged continuing harm may be timely even though 15 they technically accrued outside the statute of limitations. 16 id. 17 resultant injury must truly be ongoing or reoccurring; a “mere 18 continuing impact from past violations” does not suffice. 19 id. (original emphasis) (internal citations and quotation marks 20 omitted). 21 See id. See But to be a continuing harm, the alleged wrongdoing and Plaintiffs argue they allege ongoing, continuous harm. See See 22 Opp’n at 3-4. First, they cite Flynt’s and Kelegian, Sr.’s lost 23 business opportunities: California’s gambling laws made Flynt and 24 Kelegian, Sr. forfeit lucrative opportunities to invest in out- 25 of-state casinos. 26 specific information about these foregone opportunities in its 27 prior order. 28 casinos that Mr. Flynn passed on the chance to buy and explained See FAC ¶¶ 49-63. Order at 4. The Court requested more In response, Plaintiffs detailed the 5 1 that Mr. Flynn may lose his minority interest in an adult 2 establishment if the majority owner adds gambling there. 3 ¶¶ 49-66. 4 impact from” the June 12, 2014 decision and are not enough to 5 plead a continuing harm. See FAC But these specifics only constitute “a mere continuing See Knox, 260 F.3d at 1013. 6 Second, Plaintiffs cite the Commission’s decision as an 7 ongoing, continuous injury because of a “continuing enforcement” 8 of the statutes. 9 fined Kelegian, Jr. for violating California’s gambling See Opp’n at 3. It is not. The Commission 10 prohibition, see Ex. F at 5, which he paid, FAC ¶ 71. 11 single harm. 12 continuous harm theory by characterizing the Commission decision 13 as a “continuing enforcement” akin to the permanent injunction in 14 Maldonado. 15 56). 16 Kelegian, Jr.’s fine, see Ex. F at 5, conditioned on his §§ 19858 17 and 19858.5 compliance. 18 Commission made a one-time decision with a lasting impact. 19 continuing impact (precluding Plaintiffs from substantially 20 investing in out-of-state casinos) is not actionable. 21 260 F.3d at 1013. 22 This is a In opposition, Plaintiffs manufacture an ongoing, See Opp’n at 2-3 (citing Maldonado, 370 F.3d at 955- Not so. The Commission stayed (for five years) $125,000 of See id. at 6. In other words, the That See Knox, Plaintiffs also argue that they are subject to a continuing 23 violation by the state due to: (1) the requirement that they 24 file declarations of compliance with §§ 19858 and 19858.5 when 25 applying to renew their licenses and (2) the state’s 26 investigation of those declarations. 27 facts are not in the FAC. 28 Plaintiffs’ obligation to comply with the June 12, 2014 decision See Opp’n at 4-5. See generally FAC. 6 These Still, the 1 and the state’s related investigations are a continuing impact 2 of that June 2014 decision. 3 state. 4 claims are time barred. 5 amendment would be futile and, therefore, grants Defendants’ 6 motion to dismiss with prejudice. Finally, the Court need not, 7 and does not, reach the parties’ arguments regarding the dormant 8 commerce clause and substantive due process claims brought by 9 Plaintiffs given the Court’s finding regarding the statute of 10 They are not a new action by the Plaintiffs have not alleged a continuous harm, so their The Court also finds that any further limitations. 11 12 13 14 15 16 III. ORDER For the reasons above, the Court GRANTS Defendants’ motion to dismiss with prejudice. IT IS SO ORDERED. Dated: October 26, 2017 17 18 19 20 21 22 23 24 25 26 27 28 7

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