Garden City, Inc. et al v. City of San Jose et al

Filing 66

ORDER RE: DEFENDANTS' MOTION TO DISMISS AND MOTION FOR PARTIAL SUMMARY JUDGMENT by Judge Paul S. Grewal granting-in-part 39 and 42 (psglc2, COURT STAFF) (Filed on 1/9/2014)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

United States District Court
For the Northern District of California

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SAN JOSE DIVISION

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GARDEN CITY, INC.,
Plaintiff,

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v.

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CITY OF SAN JOSE, et. al.,
Defendants.

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Case No.: 5:13-cv-00577-PSG
ORDER RE: DEFENDANTS’
MOTION TO DISMISS AND MOTION
FOR PARTIAL SUMMARY
JUDGMENT
(Re: Docket Nos. 39 and 42)

Before the court are Defendants City of San Jose, San Jose Police Department, and
Richard Teng’s motion to dismiss and motion for partial summary judgment. Plaintiff Garden

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City, Inc. (dba Casino M8trix) opposes. The parties appeared for a hearing. After considering the
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arguments the court DENIES both motions, with one exception. 1

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See Docket Nos. 39 and 42. Defendants also seek an express ruling that Garden City’s punitive
damages claim against Teng fails because 42 U.S.C. § 1983 precludes an award of punitive
damages for persons sued in their official capacity. The court GRANTS this request but only
IN-PART. See Mosley v. Cnty. of Clark, 996 F.2d 1226 (9th Cir. 1993) (officer defendants “are
immune from suit for punitive damages under § 1983 for actions taken in their official capacity”)
(citing City of Newport v. Fact Concerts, Inc., 453 U.S. 247, 271 (1981)). Garden City may still
seek punitive damages from Teng in his personal capacity.
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Case No.: 5:13-cv-00577-PSG
ORDER RE: DEFENDANTS’ MOTION TO DISMISS AND MOTION FOR PARTIAL
SUMMARY JUDGMENT

I. BACKGROUND

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Readers unfamiliar with the background of the dispute are directed to court’s prior order

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granting-in-part Defendants’ first motion to dismiss or in the alternative abstain or stay the

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proceedings. 2

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II. LEGAL STANDARDS
A.

Motion to Dismiss

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A complaint must contain “a short and plain statement of the claim showing that the pleader

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is entitled to relief.” 3 When a plaintiff fails to proffer “enough facts to state a claim to relief that is

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For the Northern District of California

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plausible on its face,” the complaint may be dismissed for failure to state a claim upon which relief

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may be granted. 4 A claim is facially plausible “when the pleaded factual content allows the court

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to draw the reasonable inference that the defendant is liable for the misconduct alleged.” 5 Under

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Fed. R. Civ. P. 12(b)(6), “dismissal can be based on the lack of a cognizable legal theory or the
absence of sufficient facts alleged under a cognizable legal theory.” 6 Dismissal with prejudice and

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without leave to amend is appropriate if it is clear that the complaint could not be saved by

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amendment. 7

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B.

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Summary Judgment
Summary judgment is appropriate only if there is “no genuine dispute as to any material

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See Docket No. 33.

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Fed. R. Civ. P. 8(a)(2).

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Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007).

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Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009).

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Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990).

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See Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003).

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Case No.: 5:13-cv-00577-PSG
ORDER RE: DEFENDANTS’ MOTION TO DISMISS AND MOTION FOR PARTIAL
SUMMARY JUDGMENT

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fact and the movant is entitled to judgment as a matter of law.” 8 The moving party bears the initial

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burden of production by identifying those portions of the pleadings, discovery, and affidavits

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which demonstrate the absence of a triable issue of material fact. 9 If the moving party is the

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defendant, he may do so in two ways: by proffering “affirmative evidence that negates an essential

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element” of the nonmoving party’s claim, or by demonstrating “the nonmoving party’s evidence is
insufficient to establish an essential element of the nonmoving party’s claim.” 10 If met by the

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moving party, the burden of production then shifts to the non-moving party, who must then provide
specific facts showing a genuine issue of material fact for trial. 11 The ultimate burden of

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For the Northern District of California

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persuasion, however, remains on the moving party. 12 In reviewing the record, the court must

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construe the evidence and the inferences to be drawn from the underlying evidence in the light

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most favorable to the nonmoving party. 13

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Fed. R. Civ. P. 56(a).

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See Fed. R. Civ. P. 56(c)(1); Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).

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See id. at 330; T.W. Elec. Service, Inc. v. Pac. Elec. Contractors Ass’n, 809 F.2d 626, 630
(9th Cir. 1987) (“Rule 56 provides that summary judgment ‘shall be rendered forthwith if the
pleadings, depositions, answers to interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any material fact and that the moving
party is entitled to judgment as a matter of law.’” (quoting Fed. R. Civ. P. 56(c)).
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Celotex, 477 U.S. at 330 (the “ultimate burden of persuasion” always “remains on the moving
party”).
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Celotex, 477 U.S. at 331.

See Anderson v. Liberty Lobby, Inc.,, 477 U.S. 242, 248 (1986) (noting that “all evidence must
be construed in the light most favorable to the party opposing summary judgment”); Matsushita
Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (On “summary judgment the
inferences to be drawn from the underlying facts” must “be viewed in the light most favorable to
the party opposing the motion.” (citations and quotations omitted)).
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Case No.: 5:13-cv-00577-PSG
ORDER RE: DEFENDANTS’ MOTION TO DISMISS AND MOTION FOR PARTIAL
SUMMARY JUDGMENT

III. DISCUSSION

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A.

Motion to Dismiss

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Defendants seek dismissal of Garden City’s class-of-one equal protection claim 14 because

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“Plaintiff cannot get away from the fact that the alleged different treatment arose in the context of

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the permitting process to move Garden City’s business to the new high-rise location. Because
Bay 101 was not moving” to a new high-rise location with proposed gaming on the eighth floor,

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Garden City “does not and cannot allege sufficient facts to establish that it is similarly situated with
Bay 101.” 15 Defendants also urge the court to take note of another key distinction between

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For the Northern District of California

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Garden City and Bay 101: Garden City was purchased out of bankruptcy in 2007 and thus had new

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owners who did not have a long track record with the gaming division when they sought licenses

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related to their move. As persuasive authority Defendants cite Scocca v. Smith, a case involving

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the denial of a permit to carry a concealed gun. 16 In that case the court noted that thin allegations

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that two parties are similar situated “are especially problematic where, e.g., ‘inherently subjective
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and individualized enforcement of health and safety regulations’” are at issue. 17
Garden City responds that the amended complaint spells out the similarities running

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between the two casinos at length. Its opposition draws these out:
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Casino M8trix and Bay 101 “are the only permitted cardrooms in San Jose and exist under,
and are required by law to operate under, the unique provisions of California and San Jose
law regarding gaming.”

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An “equal protection claim can in some circumstances be sustained even if the plaintiff has not
alleged class-based discrimination, but instead claims that she has been irrationally singled out as a
so-called class of one.” Engquist v. Or. Dep’t of Agric., 553 U.S. 591, 601 (2008) (internal
quotations and citations omitted). A class-of-one equal protection claim under the Fourteenth
Amendment lies where the plaintiff was (1) intentionally, (2) treated differently than others
similarly-situated, and (3) there is no rational basis for the difference in treatment. See Vill. of
Willowbrook v. Olech, 528 U.S. 562, 564 (2000).
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Docket No. 39 at 2.

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Case No.: 3:11-cv-01318-EMC, 2012 WL 2375203 (N.D. Cal. June 22, 2012).

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Id. at *5 (quoting Kansas Penn Gaming, LLC v. Collins, 656 F.3d 1210, 1220 (10th Cir. 2011)).
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Case No.: 5:13-cv-00577-PSG
ORDER RE: DEFENDANTS’ MOTION TO DISMISS AND MOTION FOR PARTIAL
SUMMARY JUDGMENT

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Under “the California laws and regulations for cardrooms, the card games at both Casino
M8trix and Bay 101 involve only the players directly competing against each other, without
a ‘house.’”

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“Both cardrooms provide player-dealers that deal the cards, and the cardrooms charge a
fixed fee per hand to play at the tables, but the cardrooms have no interest in the outcome of
the games.”

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As “cardrooms, Casino M8trix and Bay 101 are both limited in the type of gaming
permitted: various types of poker, and California and Asian card games.”

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Both “Casino M8trix and Bay 101 operate 49 gaming tables, the maximum amount
permitted in San Jose.” 18

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Garden City’s opposition also details its key allegations of disparate treatment:

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Although Casino M8trix was required to share its proprietary software (and train the
gaming division on how to use it) that monitors employee scheduling, staffing, and
performance information in real-time, Bay 101 was not subject to a similar requirement
with respect to its proprietary software that tracks gaming data at its casino. 19

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Casino M8trix was required to disclose and offer to its competitor a patented new baccarat
game with Bay 101. Bay 101 faced no such requirement. 20

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Casino M8trix was subject to heightened security requirements from the division that were
not imposed on Bay 101. For example, Casino M8trix was required to submit dozens of
hours of video footage and provide the division with remote access to Casino M8trix’s
surveillance system even though the division’s remote surveillance facility was not
equipped to stream the feed. According to the complaint, no similar demands were levied
upon Bay 101 despite similar security requirements. 21

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Casino M8trix was targeted by the San Jose Police Department, perhaps, because of its
ongoing dispute with the gaming division. The complaint notes a spike in police “calls for
service” related to parking violations or expired registrations at Casino M8trix from zero to
eighty the following year. In contrast, the division reported only two such calls at Bay
101. 22

United States District Court
For the Northern District of California

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On balance, the court is satisfied that Garden City has proffered enough facts to state a
claim that Garden City and Bay 101 are similarly situated. This is hardly a situation like that in

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Docket No. 57 at 2-3 (citing Docket No. 38). The complaint also points out the two casinos are
geographically proximate, have bars, serve food, employ proprietary software systems related to
gaming operations, and face similar levels of crime. See Docket No. 38 at ¶¶ 53, 54, 55, 57, 65,
and 70.
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See id. at 3-4 (citing Docket No. 38 at ¶¶ 56-57).

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See id. at 4-5(citing Docket No. 38 at ¶ 58).

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See id. at 5-6 (citing Docket No. 38 ¶¶ 59-63).

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See id. at 6 (citing Docket No. 38 ¶¶ 67-68).

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Case No.: 5:13-cv-00577-PSG
ORDER RE: DEFENDANTS’ MOTION TO DISMISS AND MOTION FOR PARTIAL
SUMMARY JUDGMENT

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Scocca, where the plaintiff offered nothing more than a conclusory statement that he was similarly

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situated with his comparators. 23 Garden City has alleged a dozen or more characteristics that it and

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Bay 101 share. While Defendants are quite right that the two entities are different in a number of

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other ways (e.g., only Garden City sought an amendment to add eighth-floor gaming at a new

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location and only Garden City had new owners without experience in cardroom gaming in

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San Jose), it is plausible, as the Supreme Court put it in Iqbal, that these differences are
immaterial. 24 In sum, whatever doubts the court may presently have about Garden City’s claim,
those doubts cannot substitute for a proper weighing of the claim after appropriate discovery has

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For the Northern District of California

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been completed.

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B.

Summary Judgment

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In considering Defendants’ initial objections to Garden City’s due process claim lodged in

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its first motion to dismiss, 25 the court identified the nub of the claim as centering “on the degree to

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which the police chief and the division administrator have any discretion to withhold the permit
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amendment.” 26 The court noted that pursuant to Title 16 of the San Jose Municipal Code the
police chief “shall permit” permit amendment to Garden City’s gaming license unless the chief

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2012 WL 2375203, at *2 (describing plaintiff’s bare allegations that his good moral character
and good cause as “functionally equivalent” to that of seventy others).
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Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570) (“To survive a motion to dismiss, a
complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is
plausible on its face.’”); see also Cypher v. California Univ. of Pennsylvania, 914 F. Supp. 2d 666,
667 (W.D. Pa. 2012) (quoting Sims v. Court of Common Pleas of Allegheny County,
Case No.: 10-cv-151, 2010 WL 3896428, at *4 (W.D. Pa. Sept. 30, 2010)) (The “‘question of
whether other employees are similarly situated is fact-intensive’ and a plaintiff who has stated a
plausible claim for relief should be ‘entitled to engage in discovery as to whether the alleged
comparators are, in fact, similarly situated.’”)).

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See Docket No. 33 at 7.

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Id.

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Case No.: 5:13-cv-00577-PSG
ORDER RE: DEFENDANTS’ MOTION TO DISMISS AND MOTION FOR PARTIAL
SUMMARY JUDGMENT

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finds the proposed amendment will have one of four detrimental effects. 27 The court concluded

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that because the chief was alleged to “have never made one of those four findings based on an

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established factual record, the chief was required to issue the cardroom permit amendment. No

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discretion was permitted.” 28

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Defendants now move for summary judgment on Garden City’s due process claim because
Garden City has not submitted evidence sufficient to establish a constitutionally protected right.

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First, the claim “is based only on the application to amend Casino M8trix’s cardroom permit to
allow gaming on the 8th floor and Plaintiffs allege no facts to establish a reasonable expectation

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For the Northern District of California

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that the application” would be granted. 29 Second, “the decision to issue a cardroom permit, or to

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amend one, is a discretionary act that, ultimately depends on determinations based on the judgment

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of the City’s Police Chief.” 30 Because Garden City’s first claim is based exclusively on its

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allegedly vested property interest in a cardroom amendment permit and the uncontroverted,
detailed decision by Chief Moore establishes that it did not have a right to that amendment, 31

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Defendants urge, summary judgment is warranted.
Garden City disputes that its entire due process claim solely alleges that it was entitled to an

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amendment to its cardroom permit to allow eighth-floor gaming. Garden City notes that its due

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Id. (citing Section 16.30.230(b) of the Gaming Ordinance (“The chief of police shall permit the
amendment if the chief determines and finds that the proposed amendment will not:
(1) Have an adverse effect on public health, safety, or welfare; or
(2) Have an adverse effect on the ability of the administrator and the chief of police
to effectively administer and enforce the requirements and policies of this title;
or
(3) Result in the violation of any city, state, or federal law; or
(4) Be inconsistent with the policies, purposes, and provisions of this title or be
contrary to the public interest.”).

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Id.

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Docket No. 42 at 9.

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Id.

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See Docket No. 48.

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Case No.: 5:13-cv-00577-PSG
ORDER RE: DEFENDANTS’ MOTION TO DISMISS AND MOTION FOR PARTIAL
SUMMARY JUDGMENT