Kihagi v. City of San Francisco

Filing 121

ORDER by Judge Kandis A. Westmore Dismissing Case with Prejudice. (kawlc2S, COURT STAFF) (Filed on 11/22/2019)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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ANNA KIHAGI, et al.,
Plaintiffs,

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Case No. 15-cv-01168-KAW
ORDER DISMISSING CASE WITH
PREJUDICE

v.
CITY OF SAN FRANCISCO,
CALIFORNIA, et al.,

Re: Dkt. Nos. 106, 110

United States District Court
Northern District of California

Defendants.
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On March 12, 2015, Plaintiffs Anna Kihagi, Xelan Prop 1, LLC, Renka Prop, LLC, and

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Zoriall LLC (collectively, “Kihagi”) filed the instant suit, asserting that Defendants’ enforcement

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of building, property maintenance, construction, and other ordinances with respect to Kihagi’s

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properties violated their constitutional rights. (Compl. ¶1, Dkt. No. 1.) On June 4, 2015,

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Defendant City and County of San Francisco (“City”) filed a lawsuit against Kihagi in the

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Superior Court for the County of San Francisco, alleging that Kihagi had, “[i]n defiance of

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numerous state and local laws protecting these tenants and capping rents, [been waging] a war of

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harassment, intimidation, and retaliation using unlawful, unfair and fraudulent practices . . . .”

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(Defs.’ Req. for Judicial Not. (“RJN”), Exh. A (“State Compl.”) at 1, Dkt. No. 107.)

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Pending before the Court are: (1) Defendants’ motion to dismiss the complaint with

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prejudice, and (2) Kihagi’s motion to voluntarily dismiss the case without prejudice, pursuant to

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Federal Rule of Civil Procedure 41(a)(2). (Defs.’ Mot. to Dismiss, Dkt. No. 106; Pls.’ Mot. to

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Dismiss, Dkt. No. 110.) Having considered the parties’ filings, the relevant legal authority, and

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the arguments made at the November 21, 2019 hearing, the Court GRANTS Defendants’ motion

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to dismiss with prejudice and DENIES Kihagi’s motion to dismiss without prejudice.

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I.

BACKGROUND

Kihagi is the owner of residential rental units in San Francisco. (First Amended Compl.

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(“FAC”) ¶ 1, Dkt. No. 18.) Kihagi alleges that Defendants arbitrarily brought enforcement actions

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against Plaintiffs based on race discrimination and “bureaucratic hostility towards landlords’ right

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to evict tenants who are breaking their leasing contracts.” (FAC ¶ 4.)

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Kihagi alleges that in 2014, she noticed tenants were illegally subletting their rent

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controlled units at market rates. (FAC ¶¶ 35-37.) Kihagi sought to evict the tenants, who then

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complained to the City. (FAC ¶¶ 38-39.) Kihagi alleges that the City then “initiated a full-fledged

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attack on Kihagi vis-à-vis the City’s handling of applications for construction and remodeling
permits and virtually anything else that required City approval . . . .” (FAC ¶ 40.) This included

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United States District Court
Northern District of California

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an April 2014 permit to demolish an illegal unit, a September 2014 permit at 1135 Guerrero, and a

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January 2015 permit at 1137 Guerrero Street. (FAC ¶¶ 41-44, 72-73.)

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The City then allegedly began to perform illegal and improper inspections in retribution for

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Kihagi’s actions with respect to its tenants. (FAC ¶ 45.) This included a March 4, 2015

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inspection, which Kihagi alleges was illegal. (FAC ¶¶ 50-64.) Kihagi further alleges that “she is

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the only person with property i[n] good condition which has been raided by a Task Force,” and

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that none of the properties have the “uninhabitable conditions [that would] warrant attention by the

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Task Force.” (FAC ¶ 65.) Kihagi also alleges that the City issued a false Code Enforcement

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Violation in February 2015 with respect to the Filbert property, despite Kihagi having valid

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permits. (FAC ¶¶ 68-70.) Kihagi further asserts that the Code Enforcement Violation was the

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result of a discriminatory enforcement action. (FAC ¶ 68.)

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On June 4, 2015, after Kihagi filed the instant federal action, the City brought an

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enforcement action against Kihagi. (See State Compl. at 1.) The City alleged that Kihagi had

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engaged in unlawful “business practices to systematically displace and recover possession of rent-

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controlled units in violation of state and federal law,” including harassing and intimidating tenants,

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reducing services, and refusing to timely and properly perform repairs. (State Compl. ¶ 8.)

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Further, once the tenants have left, Kihagi would “quickly renovate the units, in many cases

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without first obtaining the proper City permits and attendant inspections . . . .” (State Compl. ¶ 8.)
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On June 30, 2015, Defendants filed a motion to stay the federal action. (Dkt. No. 19.) The

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Court subsequently granted the motion, based on Younger abstention, to permit the state action to

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proceed. (Dkt. No. 43 at 6-7.)

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While the federal action was stayed, the state case proceeded. Due to Kihagi’s failure to

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comply with their discovery obligations, numerous evidentiary sanctions were issued, including

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prohibiting Kihagi from testifying at trial. (Defs.’ RJN, Exh. B (“Statement of Decision”) ¶¶ 62-

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69.) On May 23, 2017, following a trial, the state court issued a 151-page Statement of Decision,

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which found, amongst other things:

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(1) Kihagi illegally evicted tenants. (Statement of Decision ¶¶ 164, 220, 253, 268, 363.)

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(2) The City did not arbitrarily deny construction and building permits, and Kihagi failed
to obtain permits. (Statement of Decision ¶¶ 387-90, 394-95, 399-437.)

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Northern District of California

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(3) The City lawfully inspected or attempted to inspect Kihagi’s properties. (Statement of
Decision ¶¶ 454-62.)

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(4) The City lawfully issued citations for building code violations. (Statement of Decision
¶¶ 388, 452-53.)

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(5) Kihagi’s properties were not in good condition, and warranted inspection. (Statement
of Decision ¶¶ 219, 313, 430, 452, 472.)

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(6) The March 4, 2015 inspection was lawful, and Kihagi prevented the City from
performing these lawful inspections. (Statement of Decision ¶¶ 454-62.)

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(7) The Filbert Street Enforcement Violation was proper and Kihagi failed to obtain the
necessary permits. (Statement of Decision ¶¶ 399-409.)

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The state court imposed over $2.7 million in penalties against Kihagi. (Statement of

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Decision ¶ 515.) On December 3, 2018, the California Court of Appeal affirmed the state court

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decision, including the forfeiture of Kihagi’s testimony. (Defs.’ RJN, Exh. C (Appellate Decision)

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at 1, 14.)

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On January 8, 2019, Kihagi’s counsel moved to withdraw. (Dkt. Nos. 84-87.) On

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February 27, 2019, the Court granted the motions to withdraw. (Dkt. No. 97 at 1.) The Court also

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issued an order for Plaintiffs to show cause why the case should not be dismissed when the state
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action and its appeal had been resolved in favor of the City. (Id. at 4.) The Court specifically

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raised “res judicata and other principles of claim preclusion.” (Id.)
On April 29, 2019, Kihagi’s new counsel filed a response to the order to show cause,

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asserting that Kihagi intended “to amend the pleadings to capture facts that occurred since the

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City’s lawsuit was filed in 2015.” (Dkt. No. 100 at 2.) Kihagi also argued that res judicata did not

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apply because there were different claims, and that issue preclusion did not apply because “none

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of the issues or elements of Ms. Kihagi’s federal causes of actions was actually litigated or

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adjudicated in the state court action.” (Id. at 3-5.) The Court discharged the order to show cause

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and set a case management conference. (Dkt. No. 101.)
On July 2, 2019, the Court held a case management conference, setting a hearing date of

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United States District Court
Northern District of California

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October 3, 2019 for Defendants’ proposed motion to dismiss. (Dkt. No. 105.) On August 29,

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2019 – the last day Defendants could file a motion to dismiss in compliance with the Civil Local

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Rules – Defendants filed their motion to dismiss. Defendants also requested monetary sanctions

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for filing the motion. (Defs.’ Mot. to Dismiss at 12.)
Kihagi’s opposition was due on September 12, 2019. Instead of filing an opposition,

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Kihagi filed a “Notice of Voluntary Dismissal of Entire Action Without Prejudice,” requesting a

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court order for dismissal per Federal Rule of Civil Procedure 41(a)(2). (Pls.’ Mot. to Dismiss at

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2.)

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On September 17, 2019, the Court issued an order, stating that it was “not inclined to grant

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Plaintiffs’ request for dismissal without prejudice. The claim and issue preclusion issues have

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been raised since at least February 2019, yet Plaintiffs waited until after Defendants expended the

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resources necessary to file the motion to dismiss to file for dismissal.” (Id.) The Court ordered

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Kihagi to file supplemental briefing explaining why the case should not be dismissed with

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prejudice, and why Kihagi should not be required to pay Defendants’ attorney’s fees for filing the

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motion to dismiss. (Id.)

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On September 26, 2019, Kihagi filed a supplemental brief. (Pls.’ Supp., Dkt. No. 113.)

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With respect to attorney’s fees, Kihagi argued that their counsel had “attempted to reach a

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resolution with [Defendants’ counsel] before Defendants filed their motion to dismiss,” including
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initiating discussions and attempts at follow up phone calls. (Id. at 6.) Thus, “[t]here was simply

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no need for Defendants’ [sic] to file this motion before counsel had a chance to have at least one

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conversation about possible alternatives to a motion.” (Id.) Kihagi attached an August 9, 2019 e-

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mail from their counsel to Defendants’ counsel, asking for a time to discuss the case and next

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steps. (Benjamin Decl., Exh. D, Dkt. No. 113-1.) Defendants’ counsel responded that same day,

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asking what Kihagi’s counsel wanted to discuss and giving a time to speak. Kihagi’s counsel

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replied at 10:47 a.m. that he had questions regarding Defendants’ compulsory counterclaims

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argument, and stated: “I’d like to reach agreement on how we proceed before a motion is filed.”

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(Id.)

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On October 3, 2019, Defendants filed their supplemental brief. (Defs.’ Supp., Dkt. No.

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Northern District of California

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114.) Defendants’ counsel provided a declaration, which stated that she had sent several e-mails

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and letters to Kihagi’s counsel in April through June 2019 regarding the preclusion issue.

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(Baumgartner Decl. ¶¶ 5-10.) With respect to the August 9, 2019 e-mails, Defendants’ counsel

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provided an additional e-mail showing her 11:36 a.m. response, stating: “When would you like to

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talk? The sooner the better if our discussion may not require I file a motion.” (Baumgartner Decl.,

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Exh. F.) On August 20, 2019, she e-mailed Plaintiff again, stating: “I left you a message; I’m off

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to court but will be back this afternoon. Is there a good time to call you?” (Id.) Defendants’

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counsel stated that she “did not hear back from [Kihagi’s counsel] before the Court’s deadline to

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file a motion.” (Baumgartner Decl. ¶ 12.) She received no communication until September 12,

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2019, the date Kihagi’s opposition was due, when Kihagi’s counsel asked for a stipulation of

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dismissal without prejudice. (Baumgartner Decl. ¶ 13, Exh. G.)

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II.

DISCUSSION

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A.

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A district court may take judicial notice of facts not subject to reasonable dispute that are

Request for Judicial Notice

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“capable of accurate and ready determination by resort to sources whose accuracy cannot

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reasonably be questioned.” Fed. R. Evid. 201(b); United States v. Bernal-Obeso, 989 F.2d 331,

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333 (9th Cir. 1993). A court may, therefore, take judicial notice of matters of public record.

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United States v. Wilson, 631 F.2d 118, 119 (9th Cir. 1980).
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Here, Defendants request judicial notice of court filings and rulings. The Court takes

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judicial notice of these documents because judicial notice may be taken of court records. See Fed.

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R. Evid. 201(b)(2); Wilson, 631 F.2d at 119.

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B.

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The parties do not dispute that dismissal of the case is proper, as Kihagi has filed a request

Dismissal

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for dismissal under Federal Rule of Civil Procedure 41(a)(2). Per Rule 41(a)(2), “an action may

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be dismissed at the plaintiff’s request only by court order, on terms that the court considers

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proper.” Thus, at issue is whether dismissal with or without prejudice is warranted.

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The Court finds that dismissal with prejudice is warranted because Kihagi’s claims are
barred by res judicata. The concept of res judicata – that is, the preclusive effect of a judgment –

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Northern District of California

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encompasses both issue preclusion and claim preclusion. Taylor v. Sturgell, 553 U.S. 880, 892

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(2008). “Under the doctrine of claim preclusion, a final judgment forecloses successive litigation

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of the very same claim, whether or not relitigation of the claim raises the same issues as the earlier

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suit . . . . Issue preclusion, in contrast, bars successive litigation of an issue of fact or law actually

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litigated and resolved in a valid court determination essential to the prior judgment, even if the

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issue recurs in the context of a different claim.” Id. (internal citations omitted).

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Here, although the federal and state action raise different claims, they are incontrovertibly

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based on the same facts, namely the legality of Kihagi’s eviction of tenants, the City’s inspections

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and citations, and the City’s refusal to issue permits. Indeed, Kihagi’s complained of actions are

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directly addressed by the state court. For example, Kihagi alleges that a March 4, 2015 inspection

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was illegal, and that the City had no right to inspect any part of the property. (FAC ¶¶ 50-57.)

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The state court specifically found that these inspections were lawful, and that Kihagi had in fact

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attempted to impede the lawful inspections. (Statement of Decision ¶¶ 454-62.) Likewise, Kihagi

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alleges that she was targeted for discriminatory enforcement action based on a Code Enforcement

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Violation at the Filbert property in February 2015, when she in fact had proper permits. (FAC ¶¶

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68-71.) The state court, however, found that the notice of violation for work “without permit” was

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proper, and that Kihagi’s actions constituted a violation of the Unfair Competition Law.

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(Statement of Decision ¶¶ 405-406.) Further, to the extent Kihagi alleges she was arbitrarily
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inspected when “[a]ll of [Kihagi]’s properties are in extremely good condition,” the state court

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found that “several of [Kihagi]’s buildings were at various times between 2014 and the present, in

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a condition which substantially endangered the health and safety of residents . . . .” (Statement of

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Decision ¶ 452; see also id. ¶ 472 (“the Court finds that [Kihagi] allowed serious conditions to

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worsen and persist and then used those very conditions as an excuse to try to evict elderly or

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disabled, long term low rent tenants. Numerous violations consisted of unacceptable health and

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safety violations that jeopardized tenants’ well being.”) With respect to the legality of the

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evictions, the state court found that the City had proved Kihagi’s “repeated harassment and

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fraudulent evictions of multiple tenants in multiple buildings,” and noted that “the record is replete
with outrageous, unlawful and fraudulent violations that were specifically targeted against often

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Northern District of California

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long term tenants who were protected by San Francisco’s rent control laws.” (Statement of

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Decision ¶ 363.) In short, Kihagi’s constitutional claims are premised on facts and allegations that

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the state court has already decided against Plaintiffs. To permit Kihagi to bring the constitutional

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claims would thus require re-litigating (and potentially rejecting) these findings.

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In the supplemental brief, Kihagi does not specifically dispute these findings or identify

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any specific facts or claims that have not already been decided against them. Instead, Kihagi

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appears to argue that they were not given the opportunity to litigate the federal claims because

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Kihagi was not allowed to present any evidence relating to the federal claims. (Pls.’ Supp. at 4-5.)

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Kihagi, however, did in fact have the opportunity to litigate these facts before the state court;

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Kihagi forfeited that opportunity by refusing to participate in discovery, resulting in the imposition

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of numerous evidentiary sanctions. To find that Kihagi did not have the opportunity to litigate her

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federal claims now would be to reward her conduct before the state court. Additionally, even if

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Kihagi did make arguments related to the specific federal claims, including whether there was

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discrimination, this does not change the fact that the parties did litigate the factual underpinnings

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of the federal claims. Thus, Kihagi would still be bound by the state court’s findings on those

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facts. Kihagi does not explain how, for example, they could argue that Defendants arbitrarily

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investigated the properties that were all in “extremely good condition” when the state court has

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already found that the buildings were in fact not in good condition, but had health and safety
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violations that jeopardized tenant safety. (See FAC ¶ 65; Statement of Decision ¶¶ 452, 472.)

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Accordingly, the Court finds that Kihagi’s claims are issue precluded, and thus dismissal

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with prejudice is warranted. To the extent, however, that Kihagi desires to bring a claim that she

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was the subject of discriminatory enforcement vis-à-vis other landlords who committed similar

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extensive violations, such claims may not be precluded. In contrast, here, Kihagi brings

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constitutional claims premised on the allegation that Defendants investigated their properties or

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issued notices of violation despite Kihagi’s properties being in good condition, and/or as

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punishment for Kihagi lawfully responding to tenant disputes. (E.g., FAC ¶ 3, 4, 65.) Again,

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because such claims are based on facts already decided against her, the instant suit must be

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dismissed with prejudice.
Attorney’s Fees

United States District Court
Northern District of California

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C.

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Defendants request the award of attorney’s fees under Federal Rule of Civil Procedure

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Rule 11 and 28 U.S.C. § 1927. (Defs.’ Mot. to Dismiss at 12.) Rule 11(b) states that “[b]y

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presenting to the court a pleading, written motion, or other finding . . . an attorney or

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unrepresented party certifies that to the best of the person’s knowledge, information, and belief,

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formed under an inquiry reasonable under the circumstances: (1) it is not being presented for any

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improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of

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litigation . . . .” Section 1927 states: “Any attorney . . . who so multiplies the proceedings in any

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case unreasonably and vexatiously may be required by the court to satisfy personally the excess

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costs, expenses, and attorneys’ fees reasonably incurred because of such conduct.” A finding of

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bad faith is not required; “recklessness suffices for § 1927.” Fink v. Gomez, 239 F.3d 989, 993

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(9th Cir. 2001).

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The Court declines to award sanctions. In so ruling, the Court finds that this was an

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especially close call. There is evidence that Kihagi’s actions have been taken in bad faith, with the

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effect of needlessly increasing the cost of litigation. For example, the res judicata issue has been

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raised since at least February 2019 by both Defendants and the Court. (See Dkt. No. 97.) After

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Kihagi’s counsel appeared, Defendants repeatedly raised the res judicata issue in an attempt to

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resolve the case without having to file the motion to dismiss. Kihagi’s counsel, however, refused
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to dismiss the case, before abruptly filing a motion for voluntary dismissal the day the opposition

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to Defendants’ motion to dismiss was due.

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Additionally, Kihagi’s counsel represented to the Court that he “attempted to reach a

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resolution with [Defendants’ counsel] before Defendants filed their motion to dismiss.” From the

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record before the court, it appears Kihagi’s counsel initiated a conversation with Defendants’

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counsel on August 9, 2019, but that when Defendants’ counsel responded with times to talk,

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Kihagi’s counsel failed to respond. Defendants’ counsel sent a follow-up e-mail on August 20,

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2019, requesting to talk, but received no response until September 12, 2019, the day Defendants’

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opposition to the motion to dismiss was due. It was only then – after Defendants had filed their

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United States District Court
Northern District of California

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motion to dismiss – that Kihagi sought to dismiss the case without prejudice.
At the hearing, Kihagi’s only explanation for waiting until after the motion to dismiss was

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filed was because counsel were not able to speak before then, and counsel had been waiting for

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client approval. Kihagi could not explain why their counsel did not respond to Defendants’

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counsel between August 9, 2019 and September 12, 2019. The failure to act sooner, when Kihagi

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had long been on notice of the res judicata issues, further evidences bad faith and an attempt to

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increase Defendants’ costs of litigation. As the Court is dismissing the case with prejudice,

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however, the Court declines to award sanctions.

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III.

CONCLUSION

For the reasons stated above, the Court GRANTS Defendants’ motion and DISMISSES the
case with prejudice. The Court DENIES Defendants’ request for monetary sanctions.
IT IS SO ORDERED.
Dated: November 22, 2019
__________________________________
KANDIS A. WESTMORE
United States Magistrate Judge

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