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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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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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

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

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

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Kelegian, Jr. (collectively “Plaintiffs”) sue both the Bureau of

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Gambling Control and California officials (collectively

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“Defendants”), alleging these laws violate the U.S.

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Constitution’s dormant commerce and substantive due process

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clauses.

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granted the Defendants’ motion to dismiss, without prejudice,

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based on Plaintiffs’ failure to bring suit within the statute of

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limitations.

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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

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“FAC”).

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35.

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motion—this time with prejudice. 1

Mot., ECF No. 33.

Plaintiffs oppose.

Opp’n, ECF No.

For reasons explained below, the Court grants Defendants’

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I.

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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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FAC ¶ 17.

Kelegian, Jr. each own gaming licenses.

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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.

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

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more than a 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, including opportunities to

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purchase out-of-state casinos in 2014 and 2015.

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Kelegian, Jr. owned more than a one-percent interest in an out-

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of-state casino and the state made him divest it and fined him.

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See FAC ¶¶ 67-71.

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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

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§§ 19858 and 19858.5, Plaintiffs filed this action against the

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Bureau of Gambling Control and state officials.

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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.
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and as-applied challenges, Plaintiffs argue these statutes

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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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Defendants’ motion to dismiss the initial complaint without

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prejudice, Plaintiffs filed the FAC.

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dismiss this case as untimely.

FAC ¶¶ 1-7.

After the Court granted

Defendants again move to

Mem., ECF No. 33-1, at 5-6.

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II.

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A.

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OPINION

Statute of Limitations

Section 1983 claims brought in California’s federal courts

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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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(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).

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Statutes of limitations may bar facial challenges against laws

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deemed to violate constitutional provisions.

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Kelly, 817 F.3d 1183, 1188 (9th Cir. 2016) (Section 1983’s two-

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year statute of limitations applied to plaintiff’s facial First

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Amendment and Fourteenth Amendment challenges to California’s

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attorney discipline system); Levald, Inc. v. City of Palm

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Desert, 998 F.2d 680, 688-89 (9th Cir. 1993) (facial Fifth

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Amendment Takings challenge for declaratory relief was time

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barred).

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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
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was timely.

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injuries occurred more than two years earlier.

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But Plaintiffs argue their filing was timely because the statute

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of limitations does not apply to their claims and, even if it

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does, their injuries are ongoing.

Defendants contend it was not because Plaintiffs’
See Mem. at 5.

See Opp’n at 2-3.

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Plaintiffs cite Maldonado v. Harris in support of their

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argument that the statute of limitations does not apply to their

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facial constitutional challenges.

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v. Harris, 370 F.3d 945 (9th Cir. 2004)).

Opp’n at 2-3 (citing Maldonado
But Plaintiffs’

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argument misrepresents the holding in Maldonado and ignores the

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rule enunciated in Scheer v. Kelly, supra at 1188. The Maldonado

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Court questioned—in dicta—the application of a limitations period

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to a First Amendment facial challenge.

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955.

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ruled that the limitations period to bring a facial challenge

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under § 1983, even based on the First Amendment, begins to run

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

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injury.”

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§ 1983 statute of limitations by asserting facial challenges.

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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

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cite June 12, 2014—the day the California Gambling Control

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Commission (“Commission”) ordered Kelegian, Jr. to divest his

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illegal interest 2 and fined him $200,000 for violating §§ 19858

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and 19858.5.

See Mem. at 5.

See also Commission Decision

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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.
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(attached to FAC as Ex. F).

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only to Kelegian, Jr.

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not contest, that it also put Flynt and Kelegian, Sr. on notice

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about the injury underlying this suit.

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generally FAC and Opp’n.

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decision is the operative date for all Plaintiffs’ alleged

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injuries.

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than two years before Plaintiffs filed suit.

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Compl.

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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.

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The Commission’s decision applies

See Knox, 260 F.3d at 1013.

Plaintiffs have not pled a continuing harm.

A continuing

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harm is one that first occurs beyond the statute of limitations

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but continues to occur within the statutory period.

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Claims based on alleged continuing harm may be timely even though

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they technically accrued outside the statute of limitations.

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id.

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resultant injury must truly be ongoing or reoccurring; a “mere

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continuing impact from past violations” does not suffice.

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id. (original emphasis) (internal citations and quotation marks

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omitted).

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See id.

See

But to be a continuing harm, the alleged wrongdoing and

Plaintiffs argue they allege ongoing, continuous harm.

See

See

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Opp’n at 3-4.

First, they cite Flynt’s and Kelegian, Sr.’s lost

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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-

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of-state casinos.

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specific information about these foregone opportunities in its

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prior order.

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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

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that Mr. Flynn may lose his minority interest in an adult

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establishment if the majority owner adds gambling there.

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¶¶ 49-66.

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impact from” the June 12, 2014 decision and are not enough to

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plead a continuing harm.

See FAC

But these specifics only constitute “a mere continuing

See Knox, 260 F.3d at 1013.

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Second, Plaintiffs cite the Commission’s decision as an

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ongoing, continuous injury because of a “continuing enforcement”

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of the statutes.

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fined Kelegian, Jr. for violating California’s gambling

See Opp’n at 3.

It is not.

The Commission

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prohibition, see Ex. F at 5, which he paid, FAC ¶ 71.

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single harm.

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continuous harm theory by characterizing the Commission decision

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as a “continuing enforcement” akin to the permanent injunction in

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Maldonado.

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56).

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Kelegian, Jr.’s fine, see Ex. F at 5, conditioned on his §§ 19858

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and 19858.5 compliance.

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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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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

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violation by the state due to: (1) the requirement that they

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file declarations of compliance with §§ 19858 and 19858.5 when

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applying to renew their licenses and (2) the state’s

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investigation of those declarations.

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facts are not in the FAC.

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Plaintiffs’ obligation to comply with the June 12, 2014 decision

See Opp’n at 4-5.

See generally FAC.

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These

Still, the

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and the state’s related investigations are a continuing impact

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of that June 2014 decision.

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state.

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claims are time barred.

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amendment would be futile and, therefore, grants Defendants’

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motion to dismiss with prejudice. Finally, the Court need not,

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and does not, reach the parties’ arguments regarding the dormant

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commerce clause and substantive due process claims brought by

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Plaintiffs given the Court’s finding regarding the statute of

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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.

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III.

ORDER

For the reasons above, the Court GRANTS Defendants’ motion
to dismiss with prejudice.
IT IS SO ORDERED.
Dated:

October 26, 2017

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