Pauma Band of Luiseno Mission Indians of the Pauma & Yuima Reservation v. California, State of et al

Filing 26

ORDER granting in part and denying in part Defendants' 19 Motion to Dismiss for Failure to State a Claim. Court grants Defendants' request to dismiss CGCC and the California Department of Justice from Pauma's twenty-first claim beca use Pauma fails to state a claim against these Defendant's. Court denies Defendants' request to dismiss Pauma's claim against the remaining Defendants' under the prudential standing requirements and on statute of limitations grounds. If Pauma chooses to file a Second Amended Complaint, it must be filed by 4/19/2017. Signed by Judge Cynthia Bashant on 3/29/2017. (jah)

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 12 13 PAUMA BAND OF LUISENO MISSION INDIANS OF THE PAUMA & YUIMA RESERVATION, a/k/a/ PAUMA BAND OF MISSION INDIANS, a federally recognized Indian Tribe, 14 15 16 17 Case No. 16-cv-01713-BAS-JMA ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS Plaintiff, [ECF No. 19] v. STATE OF CALIFORNIA, et al., Defendants. 18 19 20 21 On July 1, 2016, Plaintiff Pauma Band of Luiseno Mission Indians of the 22 Pauma & Yuima Reservation (“Pauma”) commenced this action against Defendants 23 the State of California; Governor Edmund G. Brown, Jr.; the California Gambling 24 Control Commission; and the State of California Department of Justice, Office of 25 the Attorney General. This action arises out of the Indian Gaming Regulatory Act 26 (“IGRA”) and an original form gaming compact executed between Pauma and the 27 State of California. Pauma brings claims against Defendants for violation of the 28 IGRA and for breach of the gaming compact. –1– 16cv1713 1 Pauma amended its complaint on August 4, 2016, and Defendants now move 2 to dismiss the twenty-first claim of the First Amended Complaint pursuant to Rule 3 12(b)(6) of the Federal Rules of Civil Procedure. (ECF No. 19.) Pauma opposes 4 Defendants’ motion. (ECF No. 22.) 5 The Court finds this motion suitable for determination on the papers submitted 6 and without oral argument. See Fed. R. Civ. P. 78(b); Civ. L.R. 7.1(d)(1). For the 7 reasons set forth below, the Court GRANTS IN PART and DENIES IN PART 8 Defendants’ motion to dismiss the twenty-first claim of the First Amended 9 Complaint. 10 11 I. BACKGROUND 12 A. The 1999 Gaming Compacts 13 The IGRA, “which was passed by Congress in 1988, provides a framework 14 for ‘the operation of gaming by Indian tribes as a means of promoting tribal 15 economic development, self-sufficiency, and strong tribal governments.’ ” Tulalip 16 Tribes of Washington v. Washington, 783 F.3d 1151, 1152 (9th Cir. 2015) (quoting 17 25 U.S.C. § 2702(1)). The act “provides that a state must negotiate in good faith 18 with its resident Native American tribes to reach compacts concerning casino-style 19 gaming on Native American lands.” Rincon Band of Luiseno Mission Indians of 20 Rincon Reservation v. Schwarzenegger, 602 F.3d 1019, 1022 (9th Cir. 2010). If the 21 state fails to do so, the IGRA allows a tribe to sue the state in federal court to compel 22 performance of the state’s duty to negotiate. 25 U.S.C. § 2710(d)(7).1 Despite the 23 IGRA’s gaming compact framework, “several unresolved conflicts . . . developed 24 25 26 27 28 1 California has waived its sovereign immunity in the compact it entered into with Pauma. (See 1999 Compact § 9.4, First. Am. Compl. Ex. 1, ECF No. 12-2.) See also Pauma Band of Luiseno Mission Indians of Pauma & Yuima Reservation v. California, 813 F.3d 1155, 1169 (9th Cir. 2015) (holding California “waived its Eleventh Amendment sovereign immunity through an explicit contractual waiver” in its compact with Pauma). –2– 16cv1713 1 between the State of California and Indian tribes surrounding . . . gaming and, 2 especially, gaming devices in casinos.” Hotel Emps. & Rest. Emps. Int’l Union v. 3 Davis, 21 Cal. 4th 585, 596 (1999). In response to these conflicts, California voters 4 passed Proposition 5, The Tribal Government Gaming and Economic Self- 5 Sufficiency Act of 1998, “to authorize various forms of gaming in tribal casinos.” 6 See id. at 589.2 Shortly after Proposition 5 passed, the State of California entered 7 into negotiations with over sixty Indian tribes in the spring of 1999 to devise a 8 compact to establish Indian gaming under the IGRA. (First Am. Compl. (“FAC”) ¶¶ 9 39–40, ECF No. 12.) Pauma and the State fully executed a form version of the 1999 10 Compact on May 1, 2000. (Tribal-State Compact Between the State of California 11 and the Pauma Band of Mission Indians (“1999 Pauma Compact”), FAC Ex. 1, ECF 12 No. 12-1.) 13 The 1999 Compacts allowed signatory tribes to operate a baseline entitlement 14 of gaming devices, while allowing tribes to acquire licenses to operate additional 15 devices through a series of communal draws administered by a trustee. (FAC ¶¶ 46– 16 50.) The total number of licenses available to all tribes was capped based on a license 17 pool formula detailed in Section of the 1999 Compacts. (Id. ¶ 48.) On 18 March 13, 2001, then Governor of California Gray Davis empowered the California 19 Gambling Control Commission (“CGCC”) to assume control over the license pool 20 draws. (Id. ¶ 66.) The CGCC interpreted the license pool formula as providing for a 21 smaller number of total licenses than had the previous trustee. (Id. ¶¶ 68–71.) 22 // 23 // 24 25 26 27 28 2 In Hotel Employees, the California Supreme Court held that Proposition 5 violated article IV, section 19, subdivision (e) of the California Constitution, which prohibited the legislature from authorizing Nevada-style casinos. 21 Cal. 4th at 594, 615. The following year, California voters passed Proposition 1A, a constitutional amendment allowing the State’s governor to negotiate and conclude compacts with Indian tribes for the operation of casinos. Flynt v. Cal. Gambling Control Comm’n, 104 Cal. App. 4th 1125, 1128 (2002). Subsequent challenges to the constitutionality of Proposition 1A were unsuccessful. See id. at 1145–46. –3– 16cv1713 1 B. Renegotiation of the 1999 Pauma Compact 2 Following the reinterpretation of the license pool formula, Pauma entered into 3 negotiations with the State in an attempt to obtain a larger number of licenses than 4 was possible under the new interpretation of the 1999 Compacts. (FAC ¶ 77.) On 5 June 21, 2004, Pauma and the State executed an amendment to the 1999 Pauma 6 Compact (“2004 Amendment”) that included increased revenue sharing 7 requirements and operating costs. (Id.) However, subsequent litigation between the 8 State and the Cachil Dehe Band of Wintun Indians of the Colusa Indian Community 9 resulted in a finding that the State lacked the authority to interpret the license pool 10 formula. (Id. ¶¶ 79–83.) See also Cachil Dehe Band of Wintun Indians of Colusa 11 Indian Cmty. v. California, 629 F. Supp. 2d 1091, 1108 (E.D. Cal. 2009), aff’d in 12 part, rev’d in part, 618 F.3d 1066, 1084–85 (9th Cir. 2010). Following the decision, 13 Pauma brought suit to rescind the 2004 Amendment, and the U.S. District Court for 14 the Southern District of California granted that request in 2013. (FAC ¶¶ 84–90.) 15 See also Pauma Band of Luiseno Mission Indians of the Pauma & Yuima 16 Reservation v. California, No. 09-cv-1955-CAB-MDD, 2013 WL 12120442, at *17 17 (S.D. Cal. Mar. 18, 2013) (Bencivengo, J.). The Ninth Circuit affirmed. Pauma Band 18 of Luiseno Mission Indians of Pauma & Yuima Reservation v. California, 813 F.3d 19 1155, 1173 (9th Cir. 2015). 20 On November 14, 2014, Pauma made requests to commence renegotiations 21 with the State pursuant to Section 12.2 of the 1999 Pauma Compact following 22 rescission of the 2004 Amendment. (FAC ¶ 111, Ex. 2.) Between January 16, 2015, 23 and March 30, 2016, representatives for Pauma and the State held three in-person 24 meetings and exchanged seventeen letters. (Id. ¶¶ 106–52, Exs. 7–23.) As a result of 25 these exchanges, the State presented Pauma with a “complete draft [compact]” on 26 April 28, 2016. (Id. ¶ 152.) Pauma alleges that the complete draft compact contains 27 nearly identical gaming rights and a substantial increase in revenue sharing 28 requirements, but no new State concessions of meaningful value. (Id. ¶¶ 159–80.) –4– 16cv1713 1 C. Use of Special Distribution Fund Resources 2 Meanwhile, during a review of the 1999 Compacts in 2015, three signatory 3 tribes made a request for information regarding the State’s appropriation of moneys 4 paid by the tribes into a Special Distribution Fund (“SDF”). (FAC ¶ 186.) Under 5 Section 5.1(a) of the 1999 Compacts, tribes operating gaming devices as of 6 September 1, 1999, are required each quarter to pay into the SDF a percentage of 7 the average wins of those devices. (1999 Pauma Compact § 5.1(a).) The SDF funds 8 are then available for appropriation by the California legislature for a number of 9 purposes spelled out in Section 5.2—namely, to cover the regulatory and 10 administrative costs of implementing and administering the Compacts, as well as to 11 provide funding for programs designed to address gambling addiction. (Id.) In 12 response to the requests for information from the signatory tribes, the State, on 13 November 12, 2015, disclosed that SDF moneys were funding the California 14 Department of Justice’s litigation efforts with regards to the 1999 Compacts. (FAC 15 ¶¶ 186–87.) Shortly thereafter, counsel for Pauma submitted a California Public 16 Records Act request with the State of California, Office of the Attorney General, 17 asking for documents related to the appropriation and use of SDF funds by the State. 18 (Id. ¶ 190.) The Office of the Attorney General produced documents showing annual 19 expenditures for the SDF for fiscal years 2009–2010 to 2014–2015. (Id. ¶ 191.) 20 Pauma now alleges that, based on the records disclosed by California’s Office 21 of the Attorney General, the State has been misusing SDF funds in violation of 22 Section 5.2 of the 1999 Pauma Compact. (FAC ¶ 192.) Pauma contends that the 23 State’s use of SDF moneys has resulted in the prolonged and costly litigation of 24 compact suits and has discouraged the State from appropriately settling these 25 matters. (Id. ¶¶ 301–02.) Further, Pauma claims that the use of SDF funds for 26 litigation has resulted in a shortfall of SDF funds that would otherwise have gone to 27 local communities or be used for regulatory purposes. (Id. ¶ 302.) As a result, Pauma 28 alleges it was forced to execute a memorandum of understanding with the State –5– 16cv1713 1 under the now rescinded 2004 Amendment, which obligated Pauma to cover the 2 regulatory costs that the State had not been paying. (Id. ¶ 78.) Pauma claims it 3 anticipates having to do so again under any future compact with the State should 4 Pauma ever decide to expand its gaming operations. (Id. ¶ 302.) 5 Based on the foregoing, Pauma brings claims against (1) the State and 6 Governor Brown for negotiating in bad faith under the IGRA, and (2) the State, 7 Governor Brown, the CGCC, and the State of California Department of Justice, 8 Office of the Attorney General for breach of the 1999 Pauma Compact. (FAC ¶¶ 9 198–303.) 10 11 II. LEGAL STANDARD 12 A motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil 13 Procedure “tests the legal sufficiency” of the claims asserted in the complaint. 14 Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). The court must accept all 15 factual allegations pleaded in the complaint as true and must construe them and draw 16 all reasonable inferences from them in favor of the nonmoving party. Cahill v. 17 Liberty Mut. Ins. Co., 80 F.3d 336, 337–38 (9th Cir. 1996). To avoid a Rule 12(b)(6) 18 dismissal, a complaint need not contain detailed factual allegations; rather, it must 19 plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. 20 Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A claim has facial plausibility when 21 the plaintiff pleads factual content that allows the court to draw the reasonable 22 inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 23 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556). “Where a complaint 24 pleads facts that are ‘merely consistent with’ a defendant’s liability, it ‘stops short 25 of the line between possibility and plausibility of entitlement to relief.’ ” Id. (quoting 26 Twombly, 550 U.S. at 557). 27 “[A] plaintiff’s obligation to provide the ‘grounds’ of his ‘entitle[ment] to 28 relief’ requires more than labels and conclusions, and a formulaic recitation of the –6– 16cv1713 1 elements of a cause of action will not do.” Twombly, 550 U.S. at 555 (alteration in 2 original) (quoting Papasan v. Allain, 478 U.S. 265, 286 (1986)). A court need not 3 accept “legal conclusions” as true. Iqbal, 556 U.S. at 678. Despite the deference the 4 court must pay to the plaintiff’s allegations, it is not proper for the court to assume 5 that “the [plaintiff] can prove facts that it has not alleged or that the defendants have 6 violated the . . . law[] in ways that have not been alleged.” Assoc. Gen. Contractors 7 of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 526 (1983). 8 9 III. DISCUSSION 10 Defendants move to dismiss the twenty-first claim of the First Amended 11 Complaint, which alleges a breach of the 1999 Pauma Compact through the misuse 12 of SDF funds. Defendants argue for dismissal of this claim on three bases. First, 13 Defendants argue that Pauma does not have standing to bring the claim because it 14 has failed to satisfy prudential standing requirements. (Mot. 4:14–5:2, ECF No. 19.) 15 Second, they argue Pauma’s twenty-first claim is time-barred by the applicable 16 statute of limitations. (Id. 7:7–8.) Third, Defendants argue Pauma has failed to state 17 a claim against the CGCC and the California Department of Justice because these 18 two Defendants are not parties to the 1999 Pauma Compact. (Id. 8:8–13.) The Court 19 addresses each of these three arguments in turn. 20 21 A. Standing 22 Article III, section 2 of the U.S. Constitution restricts the power of the federal 23 judiciary to the resolution of “Cases” and “Controversies.” Sprint Commc’ns Co., v. 24 APCC Servs., Inc., 554 U.S. 269, 273 (2008). The requirement of a case-or- 25 controversy is satisfied where the plaintiff has standing to bring suit. Id. For a 26 plaintiff to have standing, the plaintiff must meet the constitutional minimum of (1) 27 an injury in fact, (2) a causal connection between the injury and the challenged action 28 –7– 16cv1713 1 of the defendant, and (3) a likelihood that the injury will be redressed by a favorable 2 decision. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560–61 (1992). 3 Outside of Article III, courts have imposed a number of prudential standing 4 requirements that act as self-imposed limits on the exercise of their jurisdiction. See, 5 e.g., Warth v. Seldin, 422 U.S. 490, 499–500 (1975). First is the requirement that 6 plaintiffs assert and rely on their own rights and interests, rather than the legal rights 7 and interests of third parties. Valley Forge Christian Coll. v. Ams. United for 8 Separation of Church and State, 454 U.S. 464, 474 (1982). Second, plaintiffs must 9 assert more than a generalized grievance of wide public significance. Id. at 474–75. 10 11 1. Asserting a Party’s Own Legal Interest 12 Federal courts generally will not allow a plaintiff to assert the rights and 13 interests of absent third parties. Warth, 422 U.S. at 499. This limitation serves as a 14 restriction on the court’s authority, requiring that a litigant assert his or her own legal 15 rights and interests rather than rest a claim to relief on the legal rights or interests of 16 others. Mills v. United States, 742 F.3d 400, 406–07 (9th Cir. 2014). 17 Defendants contend that Pauma is relying on the contract rights of third 18 parties, as opposed to the tribe’s own rights, because the 1999 Pauma Compact does 19 not require that the tribe make—nor does Pauma allege that it has made—any 20 payments into the SDF. (Mot. 3:17–28.) Section 5.1(a) of the 1999 Pauma Compact 21 requires Pauma to make quarterly contributions to the SDF only with respect to the 22 number of gaming devices operated by Pauma as of September 1, 1999. (1999 23 Pauma Compact § 5.1(a).) Pauma did not put any gaming devices into operation 24 until May 2001; thus, it was not required to make any payments into the SDF. (FAC 25 ¶ 63.) Under Defendants’ theory, Pauma has no direct interest in the spending of 26 SDF monies because Pauma never paid into the SDF, and Pauma must therefore rely 27 on the interests of third party tribes that did pay into the SDF in order to pursue 28 relief. (Mot. 5:4–9.) –8– 16cv1713 1 The Court disagrees. Pauma asserts its own legal interest; namely, an interest 2 in whether the moneys of the SDF are spent in accordance with the terms of the 1999 3 Pauma Compact. As a party to the 1999 Pauma Compact with the State, the tribe has 4 a right to enforce its terms. Under Section 5.2 of the 1999 Pauma Compact, the SDF 5 monies are available for: (a) grants, including any administrative costs, for programs designed to address gambling addiction; (b) grants, including any administrative costs, for the support of state and local government agencies impacted by tribal government gaming; (c) compensation for regulatory costs incurred by the State Gaming Agency and the Department of Justice in connection with the implementation and administration of the Compact; (d) payment of shortfalls that may occur in the Revenue Sharing Trust Fund; and (e) any other purposes specified by the Legislature. 6 7 8 9 10 11 12 (1999 Pauma Compact § 5.2.) Pauma alleges that it has suffered, and will continue 13 to suffer, harms directly related to a breach of Section 5.2; that is, the use of SDF 14 funds for the negotiation of tribal compacts as well as the litigation of bad faith 15 claims against the State. (FAC ¶ 302.) That Pauma made no payments into the SDF 16 is of no consequence to whether Pauma has a legal interest in ensuring the State 17 abides by the terms of the 1999 Pauma Compact that the tribe is a party to. If the 18 State was interested in limiting the number of tribes that could bring suit against it 19 for potential misappropriation of SDF funds, it could have negotiated to remove 20 Section 5.2 from the compacts with tribes like Pauma who were not required to pay 21 into the SDF. Because the State did not do so, it is bound by the terms of the 1999 22 Pauma Compact that it voluntarily chose to enter into. 23 Accordingly, because Pauma is seeking to enforce a provision in a contract 24 that the tribe is a party to, the Court concludes Pauma is asserting its own legal 25 interest, as opposed to resting its claim on the legal rights of third parties. See Mills, 26 742 F.3d at 406. 27 // 28 // –9– 16cv1713 1 2. Asserting More than a Generalized Grievance 2 Asserted harms that amount to no more than generalized grievances shared 3 by a large class of citizens do not warrant the exercise of jurisdiction. Warth, 422 4 U.S. at 499. Generalized grievances present injuries that are not particularized or 5 actual, and suits alleging them fail for lack of standing. Novak v. United States, 795 6 F.3d 1012, 1018 (9th Cir. 2015). For a harm to amount to a generalized grievance it 7 must not only be widely shared, but also be of an abstract and indefinite nature. Id. 8 Here, Defendants assert that the only harm Pauma has suffered is a 9 generalized grievance over how the California legislature appropriates SDF monies. 10 (Mot. 6:15–20.) The Court is not persuaded. Pauma’s claim is grounded in harms 11 resulting from an alleged breach of Section 5.2 of the 1999 Pauma Compact. 12 Specifically, because the State was allegedly able to fund its litigation of compact 13 suits with SDF moneys, litigation between the State and Pauma was prolonged at 14 Pauma’s expense. Further, because of the misappropriation of SDF funds, Pauma 15 alleges it was previously forced, and may be forced again in the future, to execute a 16 memorandum of understanding with the State in order to make up the difference in 17 missing SDF moneys. The harm here is a particularized injury because it relates 18 directly to Pauma, a party to the compact that Defendants allegedly breached. The 19 harm itself is also actual; Pauma asserts it has been harmed, and that it will continue 20 to be harmed, as a result of the breach. It may be the case that certain classes of 21 citizens beyond Pauma also share this harm, such as other signatory tribes or even 22 individual members of the tribes. However, simply because a class of citizens apart 23 from Pauma may have also suffered as the result of a misappropriation of SDF funds 24 does not mean that a breach of the 1999 Pauma Compact amounts to no more than 25 a generalized grievance that is insufficient to confer standing to Pauma. 26 Accordingly, because Pauma is asserting a particularized harm specific to the 27 tribe, the Court concludes that Pauma is not asserting a generalized grievance. See 28 Novak, 795 F.3d at 1018. The Court therefore rejects Defendants’ first ground for – 10 – 16cv1713 1 dismissal and finds that Pauma has satisfied the prudential requirements such that it 2 has standing to bring the twenty-first claim of the First Amended Complaint. 3 4 B. Statute of Limitations 5 A cause of action created by a federal statute will be governed by the statute 6 of limitations expressly supplied by the federal statute. Graham Cty. Soil & Water 7 Conservation Dist. v. U.S. ex rel. Wilson, 545 U.S. 409, 414 (2005). The IGRA, 8 however, does not expressly provide a statute of limitations period. See 25 U.S.C. § 9 2710(d)(7). When a federal statute does not expressly supply a statute of limitations 10 period, state statutes of limitations generally govern actions in federal courts. See 11 Papa v. United States, 281 F.3d 1004, 1011–12 (9th Cir. 2002). Here, California 12 provides a four-year statute of limitations period for breach of contract claims under 13 section 337 of the California Code of Civil Procedure. Thus, a four-year limitations 14 period applies to Pauma’s breach of compact claim. See id. at 1011–12. 15 Although state law provides the limitations period here, the law of the 16 jurisdiction creating the cause of action determines when the action accrues. Archer 17 v. Airline Pilots Ass’n Intern., 609 F.2d 934, 937 (9th Cir. 1979). Therefore, federal 18 law determines when the statute of limitations began to run on Pauma’s claim. See 19 id. Further, general principles of federal contract law govern the gaming compacts, 20 and the Ninth Circuit often looks to the Restatement when deciding questions of 21 federal common law. Pauma, 813 F.3d at 1163. The court “may also rely on 22 California contract law [when] there is no practical difference between state and 23 federal law in [the] area.” Id. 24 Defendants argue that the twenty-first claim of the First Amended Complaint 25 is, on its face, time barred by the four-year statute of limitations because Pauma 26 alleges the breach first occurred over a decade ago. (FAC ¶¶ 188–89.) In response, 27 Pauma advances two arguments. First, Pauma argues that accrual of its claim was 28 delayed under the discovery rule. (Opp’n 18:11–14, ECF No. 22.) Second, Pauma – 11 – 16cv1713 1 argues that Defendants’ actions constitute multiple breaches of the 1999 Pauma 2 Compact, and that these breaches have continuously accrued, which allows Pauma 3 to recover for those breaches falling within the limitations period. (Id. 18:15–17.) 4 The Court addresses each argument in turn. 5 6 1. Discovery Rule 7 The underlying purpose of statutes of limitations is fairness, and fairness may 8 require that the statutory bar not be strictly applied under certain circumstances. 9 Mont. Pole & Treating Plant v. I.F. Laucks and Co., 993 F.2d 676, 678 (9th Cir. 10 1993). These circumstances include instances when the plaintiff has no knowledge 11 of the facts essential to the cause of action. Id. at 678. “Under federal law [accrual 12 begins] when the plaintiff knows or has reason to know of the injury that is the basis 13 of the action.” N. Cal. Retail Clerks Unions & Food Emp’rs Joint Pension Tr. Fund 14 v. Jumbo Markets, Inc., 906 F.2d 1371, 1372 (9th Cir. 1990); see also Norman- 15 Bloodsaw v. Lawrence Berkeley Lab., 135 F.3d 1260, 1266 (9th Cir. 1998) (holding 16 that under the general federal rule, the limitations period begins to run when the 17 plaintiff knows or has reason to know of the injury which is the basis of the action). 18 However, “a plaintiff who did not actually know of his claim will be barred ‘if he 19 should have known [of it] in the exercise of due diligence.’ ” O’Connor v. Boeing 20 N. Am., Inc., 311 F.3d 1139, 1147 (9th Cir. 2002) (alteration in original) (quoting 21 Bibeau v. Pac. Nw. Research Found. Inc., 188 F.3d 1105, 1108 (9th Cir. 1999)). 22 Pauma’s twenty-first claim contends that the State has been misusing SDF 23 moneys to fund the defense of bad-faith-negotiation and breach-of-compact suits for 24 over a decade. (FAC ¶¶ 188–89.) On its face, this claim is time-barred by the four- 25 year statute of limitations. Pauma asserts, however, that under the discovery rule the 26 earliest accrual date is on or about November 12, 2015, when the State first disclosed 27 how it was using SDF funds and when Pauma first became aware of the potential 28 breach. (Opp’n 18:11–14.) – 12 – 16cv1713 1 The Court is not convinced. Under the discovery rule, parties to a contract are 2 required to exercise reasonable due diligence in investigating potential breaches. See 3 O’Connor, 311 F.3d at 1147; see also Gryczman v. 4550 Pico Partners, Ltd., 107 4 Cal. App. 4th 1, 7 (2003) (noting where the plaintiff relied on the delayed discovery 5 rule, the plaintiff had the burden to demonstrate he exercised “due diligence in 6 discovering the breach of” the contractual obligation at issue). Pauma has failed to 7 show that it engaged in the kind of due diligence necessary to assert delayed 8 discovery. First, Pauma appears from its complaint to have failed to engage in any 9 reasonable due diligence after it was required to enter into a memorandum of 10 understanding with the State under the 2004 Amendment to cover funding 11 shortfalls—a harm that Pauma claims was the direct result of a misuse of SDF funds. 12 Second, when Pauma did take action to ascertain whether the State was abiding by 13 the terms of Section 5.2 of the 1999 Pauma Compact, it did so over ten years after it 14 concluded the 2004 Amendment. Further, Pauma only took action after other 15 signatory tribes had inquired about the use of SDF funds, which prompted a 16 disclosure by the State. Pauma’s California Public Records Act request, by itself, 17 does not satisfy Pauma’s reasonable due diligence obligations reaching back to the 18 time when the breach first allegedly occurred. Moreover, the First Amended 19 Complaint describes no other acts of due diligence on the part of Pauma despite the 20 tribe alleging that the misuse of SDF funds has been occurring since at least 2004. 21 Accordingly, because Pauma fails to plausibly plead that it has exercised 22 reasonable due diligence in discovering Defendants’ breach, Pauma cannot invoke 23 the discovery rule to delay the accrual of its claim. Therefore, Pauma’s twenty-first 24 claim is time-barred unless the tribe can proceed under a different theory, such as 25 continuous accrual. 26 // 27 // 28 // – 13 – 16cv1713 2. 1 Continuous Accrual 2 “A contract that creates continuing obligations ‘is capable of a series of partial 3 breaches or a single total breach by repudiation.’ ” Minidoka Irrigation Dist. v. Dep’t 4 of Interior of U.S., 406 F.3d 567, 572–73 (9th Cir. 2005) (alteration omitted) (quoting 5 Trs. for Alaska Laborers–Constr. Ind. Health & Sec. Fund v. Ferrell, 812 F.2d 512, 6 517 (9th Cir. 1987)). “Absent a repudiation of a contract that requires continuing 7 performance, the plaintiff may only sue for partial breaches as they occur, and the 8 statute of limitations does not begin to run against a subsequent failure to perform 9 until it occurs.” Trs. for Alaska Laborers–Constr., 812 F.2d at 517. California 10 similarly applies the rule of continuous accrual as an application of the doctrine of 11 contractual severability, where breaches of a contract’s severable parts give rise to 12 separate causes of action. Armstrong Petroleum Corp. v. Tri-Valley & Gas Co., 116 13 Cal. App. 4th 1375, 1388–89 (2004). When the doctrine applies, continuous accrual 14 only supports recovery for damages arising from breaches that fall within the most 15 recent statutory period. Aryeh v. Canon Bus. Sols., Inc., 55 Cal. 4th 1185, 1199 16 (2013). 17 Here, Section 5.1 of the 1999 Compacts requires signatory tribes to pay into 18 the SDF each quarter following the second anniversary date of the effective date of 19 the agreement. (1999 Compact § 5.1(a).) Section 5.2 allows the SDF funds, which 20 are deposited on a continuing basis, to be appropriated by the legislature and spent 21 in accordance with those purposes spelled out in Section 5.2. (Id.) The Compact thus 22 creates a recurring or continuing obligation both on the part of the signatory tribes 23 paying into the SDF, and on the part of the State in its use of those funds. Each 24 quarterly appropriation of SDF funds by the State, were they to constitute a breach 25 of Section 5.2, would constitute a new breach giving rise to a separate cause of action. 26 Accordingly, the doctrine of continuous accrual applies to the twenty-first 27 claim of the First Amended Complaint, and Pauma is entitled to pursue recovery for 28 those alleged breaches of Section 5.2 that occurred within the four-year statutory – 14 – 16cv1713 1 period. The Court therefore rejects Defendants’ second argument for dismissal of 2 Pauma’s breach of compact claim. 3 4 C. Parties to the Compact 5 The elements of a breach of contract claim under federal common law are: 6 “(1) a valid contract between the parties, (2) an obligation or duty arising out of the 7 contract, (3) a breach of that duty, and (4) damages caused by the breach.” San 8 Carlos Irr. & Drainage Dist. v. United States, 877 F.2d 957, 959 (Fed. Cir. 1989). 9 Pauma names the CGCC and the California Department of Justice as parties 10 to the twenty-first claim under a theory that both are parties to the 1999 Pauma 11 Compact as authorized officials or agents of the State. (Opp’n 20:11–21.) The 12 opening paragraph to the 1999 Pauma Compact states that the Compact is an 13 agreement between Pauma and the State of California, while Section 2.17 defines 14 “State” as the “State of California or an authorized official or agency thereof.” (1999 15 Pauma Compact pmbl., § 2.17.) Pauma asserts that the CGCC, in its responsibility 16 for administering the SDF, and the California Department of Justice, in its receipt of 17 SDF funds to represent the State in litigation, are properly named defendants as 18 agents of the State. (Opp’n 20:22–26.) 19 Accepting arguendo that the CGCC and the California Department of Justice 20 are themselves agents of the State for the purposes of the 1999 Pauma Compact, 21 Pauma must still assert that they breached the terms of the agreement. In other 22 words, there must be a separate and complete cause of action against each of these 23 Defendants. Section 5.2 of the Compact states that the SDF funds are available for 24 appropriation by the legislature for particular uses. Although the CGCC and the 25 California Department of Justice may have benefitted from the appropriation of SDF 26 moneys, Pauma does not plausibly allege that they themselves breached the terms 27 of the 1999 Pauma Compact. The complaint makes no allegation that the CGCC or 28 the California Department of Justice had any control over the appropriation of SDF – 15 – 16cv1713 1 funds. Pauma has therefore failed to show in the First Amended Complaint how the 2 CGCC or the California Department of Justice’s actions breached an obligation 3 under the 1999 Pauma Compact. 4 Accordingly, Pauma has failed to state a claim for relief against the CGCC 5 and the California Department of Justice, and the Court will dismiss Pauma’s 6 twenty-first claim against them. The Court grants Pauma leave to amend its pleading 7 because Pauma may be able to add allegations demonstrating that the actions of the 8 CGCC and the California Department of Justice have in some way breached an 9 obligation under the 1999 Pauma Compact. See Fed. R. Civ. P. 15(a); see also, e.g., 10 In re Anthem, Inc. Data Breach Litig., 162 F. Supp. 3d 953, 969 (N.D. Cal. 2016) 11 (“Generally, leave to amend shall be denied only if allowing amendment would . . . 12 be futile[.]”). 13 14 IV. CONCLUSION 15 For the foregoing reasons, the Court GRANTS IN PART and DENIES IN 16 PART Defendants’ motion to dismiss Pauma’s twenty-first claim. Specifically, the 17 Court grants Defendants’ request to dismiss the CGCC and the California 18 Department of Justice from Pauma’s twenty-first claim because Pauma fails to state 19 a claim against these Defendants. In addition, the Court denies Defendants’ request 20 to dismiss Pauma’s claim against the remaining Defendants under the prudential 21 standing requirements and on statute of limitations grounds. If Pauma chooses to file 22 a Second Amended Complaint, it must be filed no later than April 19, 2017. 23 IT IS SO ORDERED. 24 25 DATED: March 29, 2017 26 27 28 – 16 – 16cv1713

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