Cotton v. Geraci et al

Filing 7

ORDER Granting 2 Motion for Leave to Proceed in forma pauperis; Sua Sponte Staying the Case Pursuant to the Colorado River Doctrine; Denying 3 Motion for Temporary Restraining Order; and Denying 6 Motion to Appoint Counsel. Plaintiff shall notify the Court promptly upon final judgment in the state court action. Signed by Judge Gonzalo P. Curiel on 2/28/18. (All non-registered users served via U.S. Mail Service)(dlg)

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UNITED STATES DISTRICT COURT

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SOUTHERN DISTRICT OF CALIFORNIA

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DARRYL COTTON,

Case No.: 18cv325-GPC(MDD)
Plaintiff,

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v.

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ORDER:
1) GRANTING PLAINTIFF’S
MOTION TO PROCEED IN FORMA
PAUPERIS

LARRY GERACI, an individual;
REBECCA BERRY, an individual; GINA
AUSTIN, an individual AUSTIN LEGAL
GROUP, a professional corporation;
MICHAEL WEINSTEIN, an individual;
FERRIS & BRITTON, a professional
corporation; CITY OF SAN DIEGO, a
public entity; and DOES 1 through 10,
inclusive,,

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2) SUA SPONTE STAYING THE
CASE PURSUANT TO THE
COLORADO RIVER DOCTRINE
3) DENYING EX PARTE MOTION
FOR TEMPORARY RESTARINING
ORDER; AND

Defendant.
4) DENYING PLAINTIFF’S
MOTION FOR APPOINTMENT OF
COUNSEL

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On February 9, 2018, Plaintiff Darryl Cotton (“Plaintiff”), proceeding pro se, filed

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a complaint against Defendants Larry Geraci, Rebecca Berry, Gina Austin, Austin Legal

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Group, Michael Weinstein, Ferris & Britton, and the City of San Diego (“Defendants”)

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alleging eighteen causes of action under federal and state law as well as declaratory and

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injunctive relief. Plaintiff concurrently filed a motion for leave to proceed in forma
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pauperis (“IFP”) under 28 U.S.C. § 1915(a) (“§ 1915(a)”). (Dkt. No. 2.) Furthermore,

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Plaintiff filed an ex parte application for a temporary restraining order (“TRO”), as well

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as a motion for appointment of counsel. (Dkt. Nos. 3, 6.) Based on the reasoning below,

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the Court GRANTS Plaintiff’s motion to proceed IFP, sua sponte STAYS the case

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pursuant to the Colorado River doctrine, and DENIES Plaintiff’s ex parte motion for

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TRO and motion for appointment of counsel as MOOT.

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Discussion
A.

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Motion to Proceed In Forma Pauperis
All parties instituting any civil action, suit, or proceeding in a district court of the

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United States, except an application for writ of habeas corpus, must pay a filing fee of

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$400. See 28 U.S.C. § 1914(a).1 An action may proceed despite a plaintiff’s failure to

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prepay the entire fee only if he is granted leave to proceed IFP pursuant to § 1915(a). See

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Andrews v. Cervantes, 493 F.3d 1047, 1051 (9th Cir. 2007); Rodriguez v. Cook, 169

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F.3d 1176, 1177 (9th Cir. 1999). The plaintiff must submit an affidavit demonstrating his

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inability to pay the filing fee, and the affidavit must include a complete statement of the

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plaintiff’s assets. 28 U.S.C. § 1915(a)(1). When a plaintiff moves to proceed IFP, the

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court first “grants or denies IFP status based on the plaintiff’s financial resources alone

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and then independently determines whether to dismiss the complaint” pursuant to 28

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U.S.C. § 1915(e)(2) (“§ 1915(e)(2)”). Franklin v. Murphy, 745 F.2d 1221, 1226 n.5 (9th

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Cir. 1984).

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Here, Plaintiff submitted a declaration reporting that he is currently unemployed,

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and he receives $192 a month from public assistance and $600 a month from “Recycled

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Material Processing.” (Dkt. No. 2 at 2.) Plaintiff declares that he has real estate valued

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In addition to the $350 statutory fee, civil litigants must pay an additional administrative fee of $50. See
28 U.S.C. § 1914(a) (Judicial Conference Schedule of Fees, District Court Misc. Fee Schedule, § 14 (eff.
Dec. 1, 2014)). The additional $50 administrative fee does not apply to persons granted leave to proceed
IFP. Id.
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at $400,000 and a car valued at $1,400. (Id. at 3.) Plaintiff reported no debts nor

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dependents. (Id. at 3.) He has living expenses totaling $2,935.00. (Id. at 4-5.)

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In consideration of Plaintiff’s application, the Court finds that Plaintiff has

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sufficiently demonstrated that he is unable to pay the required filing fee and meets the §

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1915(a) requirements to proceed IFP. Therefore, the Court GRANTS Plaintiff’s motion

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for leave to proceed IFP.

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B.

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Sua Sponte Dismissal Pursuant to 28 U.S.C. § 1915(e)(2)
A complaint filed by any person proceeding IFP pursuant to § 1915(a) is subject to

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mandatory sua sponte review and dismissal by the Court if it is “frivolous, or malicious;

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fails to state a claim upon which relief may be granted; or seeks monetary relief against a

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defendant immune from such relief.” 28 U.S.C. § 1915(e)(2)(B); Calhoun v. Stahl, 254

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F.3d 845, 845 (9th Cir. 2001) (“[T]he provisions of 28 U.S.C. § 1915(e)(2)(B) are not

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limited to prisoners.”); Lopez v. Smith, 203 F.3d 1122, 1126-27 (9th Cir. 2000).

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§ 1915(e)(2) mandates that a court reviewing a complaint filed pursuant to the IFP

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provisions of 28 U.S.C. § 1915 make and rule on its own motion to dismiss before

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directing that the complaint be served by the U.S. Marshal pursuant to Federal Rule of

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Civil Procedures 4(c)(2). Lopez, 203 F.3d at 1127.

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C.

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Factual Background
On March 21, 2017, Defendant Larry Geraci filed a complaint against Plaintiff

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Cotton in San Diego Superior Court alleging breach of contract, breach of the covenant

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of good faith and fair dealing, specific performance and declaratory relief. (Dkt. No. 3-

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11, P’s RJN, Ex. 2, State Court Compl.) According to the state court complaint, the

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parties entered into a written agreement for the purchase and sale of Cotton’s real

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property located 6176 Federal Boulevard, San Diego, CA on November 2, 2016. (Id.,

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Compl. ¶ 7.) A copy of the written agreement is attached as exhibit A to the state court

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complaint. (Id., Ex. A.) On that day, Geraci paid Cotton $10,000 good faith earnest

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money to be applied to the sales price of $800,000 and to remain in effect until a

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conditional use permit (“CUP”) is approved by the City of San Diego. (Id. ¶ 8.) Geraci
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made efforts and spent money to obtain a CUP which is a long and time-consuming

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process, including hiring a consultant to coordinate the CUP efforts, Defendant Rebecca

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Berry, as well as an architect. (Id. ¶ 9.) The state court complaint claims that Cotton has

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anticipatorily breached the contract stating he will not perform according to the terms of

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the written contract. (Id. ¶ 11.) Specifically, Geraci alleges that Cotton “has stated that,

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contrary to the written terms, the parties agreed to a down payment or earnest money in

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the amount of $50,000.00 and that he will not perform unless GERACI makes a further

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down payment. COTTON has also stated that, contrary to the written terms, he is entitled

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to a 10% ownership interest in the PROPERTY and that he will not perform unless

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GERACI transfers to him a 10% ownership interest. COTTON has also threatened to

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contact the City of San Diego to sabotage the CUP process by withdrawing his

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acknowledgment that GERACI has a right to possession or control of the PROPERTY if

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GERACI will not accede to his additional terms and conditions and, on March 21, 2017,

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COTTON made good on his threat when he contacted the City of San Diego and

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attempted to withdraw the CUP application.” (Id.)

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At some point, Cotton filed a cross-complaint against Geraci and Rebecca Berry.

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(Dkt. No. 3-13, P’s RJN, Ex. 5.) On December 6, 2017, Cotton, with counsel, filed an ex

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parte application for temporary restraining order and order to show cause regarding

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preliminary injunction. (Dkt. No. 3-13, P’s RJN, Ex. 4.) It sought an injunction against

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Geraci and Berry to recognize Cotton as a co-applicant on the CUP. (Id. at 6.1) On

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December 7, 2017, the Superior Court denied the request for TRO and set a date for

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hearing on preliminary injunction for January 25, 2018. (Id., Ex. 6.) On December 12,

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2017, the state court denied Cotton’s, now proceeding pro se, ex parte application for

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reconsideration of the state court’s ruling on the TRO. (Id., Ex. 7.)

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Page numbers are based on the CM/ECF pagination.
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On January 25, 2018, the state court held a hearing on Cotton’s writ of mandate

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and motion for preliminary injunction, and Geraci and Berry’s motion to compel Cotton’s

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deposition. (Id., Ex. 8.) In its brief order, the state court noted no additional papers were

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filed, and denied Cotton’s writ of mandate and denied his motion for a preliminary

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injunction, and granted Geraci and Berry’s motion to compel Cotton’s deposition. (Id.)

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On February 9, 2018, Plaintiff Cotton filed the instant complaint alleging breach of

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contract of the agreement between him and Geraci on November 2, 2016 as well as

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seventeen causes of action. (Dkt. No. 1, Compl.) Cotton’s property at 6176 Federal

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Boulevard, San Diego, CA, qualifies for a Conditional Use Permit (“CUP”) for the

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establishment of a Medical Marijuana Consumer Collective (“MMCC”) (Id. ¶ 2.) If the

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CUP is approved, the value of the property will potentially be greater than $100 million.

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(Id. ¶¶ 2, 3.) On November 2, 2016, Cotton and Geraci orally agreed to terms for the sale

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of Cotton’s property. (Id. ¶ 44.) The oral agreement contained condition precedents

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prior to closing. (Id. ¶ 45.) The Agreement required that Geraci provide a $50,000 non-

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refundable deposit for Cotton to keep if the CUP was not issued; a total purchase price of

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$800,000 if the CUP was issued; and a 10% equity stake in the MMCC with a guaranteed

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monthly equity distribution of $10,000. (Id. ¶ 46.) According to Cotton, Geraci provided

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Cotton with $10,000 cash to be applied toward the non-refundable deposit of $50,000 and

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had Cotton execute a document to record his receipt of the money and promised to have

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his attorney, Gina Austin, speedily draft a final, written purchase agreement for the

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Property that would memorialize their oral terms. (Id. ¶ 47.) They agreed to two written

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agreements: the “purchase agreement” for the sale of the property and a “side agreement”

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concerning Cotton’s equity stake and other provisions. (Id. ¶ 48.)

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Plaintiff claims he has definitive proof of the terms of their agreement based on a

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confirmation email Geraci sent to Cotton stating, “No No problem at all” when Cotton

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emailed Geraci noting that the 10% equity interest in the dispensary was not added into

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their purchase agreement of November 2, 2016 and asked that Geraci simply

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acknowledge that interest in a reply email. (Id. ¶ 49.) According to Cotton, Geraci’s
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response to the email demonstrates that the November 2, 2016 agreement is not the final

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agreement. (Id. ¶ 50.) He also claims that Geraci emailed him a draft “side agreement”

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providing for the 10% interest. (Id. ¶¶ 52-54.) Cotton argues that Geraci breached the

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Agreement by filing the CUP application without first paying the balance of $40,000, and

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failing to provide the final agreement as promised. (Id. ¶ 56.) Geraci made it clear he

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would not honor the Agreement, and then Cotton responded informing Geraci that he no

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longer has any interest in his property. (Id. ¶ 59.) In desperate need of funds, Cotton

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entered into a written real estate purchase agreement with a third party. (Id.)

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Cotton alleges causes of action against Geraci and his agent Rebecca Berry, their

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attorneys for their actions during the underlying state court complaint, and the City of

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San Diego for its handling of the CUP. (Dkt. No. 1.)

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D.

Colorado River Abstention Doctrine

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In general, federal courts have a “virtually unflagging obligation . . . to exercise the

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jurisdiction given them.” Colorado River Water Conservation Dist. v. United States, 424

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U.S. 800, 817 (1976). However, the Court recognized that considerations of “'[w]ise

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judicial administration, giving regard to the conservation of judicial resources and

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comprehensive disposition of litigation’” allows a district court from either staying or

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dismissing a case pending resolution of concurrent state court litigation. Id. (quoting

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Kerotest Mfg. Co. v. C–O–Two Fire Equip. Co., 342 U.S. 180, 183 (1952)).

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The Court was concerned about the “problem posed by the contemporaneous

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exercise of concurrent jurisdiction by state and federal courts.” Smith v. Central Arizona

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Water Conserv. Dist., 418 F.3d 1028, 1032 (9th Cir. 2005); Kirkbride v. Cont'l Cas. Co.,

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933 F.2d 729, 734 (9th Cir. 1991) (The Colorado River abstention may be exercised only

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“in situations involving the contemporaneous exercise of concurrent jurisdictions, either

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by the federal courts or by state and federal courts.”). Nonetheless, the Court has noted

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that the Colorado River abstention should be invoked only in “exceptional

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circumstances.” Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 19

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(1983).
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The Colorado River doctrine may be raised by the Court sua sponte. See Jimenez

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v. Rodriguez-Pagan, 597 F.3d 18, 27 n. 4 (1st Cir. 2010) (even though issue was not

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raised below, decision to decline jurisdiction under Colorado River may be raised sua

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sponte); Heiner v. Fed. Nat’l Mort. Ass’n, No. 13cv364-DN, 2014 WL 4851888, at *5, 8

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(D. Utah Sept. 29, 2014) (proposed amended complaint would be futile as it would be

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subject to dismissal under the Colorado River doctrine under sua sponte analysis of 28

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U.S.C. § 1915(e)(2)(B)(ii).)

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The Ninth Circuit has identified “eight factors for assessing the appropriateness of
a Colorado River stay or dismissal: (1) which court first assumed jurisdiction over any

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property at stake; (2) the inconvenience of the federal forum; (3) the desire to avoid

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piecemeal litigation; (4) the order in which the forums obtained jurisdiction; (5) whether

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federal law or state law provides the rule of decision on the merits; (6) whether the state

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court proceedings can adequately protect the rights of the federal litigants; (7) the desire

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to avoid forum shopping; and (8) whether the state court proceedings will resolve all

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issues before the federal court.” R.R. St. & Co. v. Transp. Ins. Co., 656 F.3d 966, 978-79

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(9th Cir. 2011) (citing Holder v. Holder, 305 F.3d 854, 870 (9th Cir. 2002)). “These

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factors are to be applied in a pragmatic and flexible way, as part of a balancing process

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rather than as a ‘mechanical checklist.’” American Int'l Underwriters, (Phillipines), Inc.

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v. Continental Ins. Co., 843 F.2d 1253, 1257 (9th Cir. 1988) (quoting Moses Cone, 460

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U.S. at 16).

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The first factor is neutral as this case does not involve an in rem or quasi in rem

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proceeding. “Where concurrent proceedings in state and federal court are both suits in

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rem or quasi in rem, the court first assuming jurisdiction over the property may maintain

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and exercise that jurisdiction to the exclusion of the other.” Knaefler v. Mack, 680 F.2d

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671, 675 (9th Cir. 1982). The Supreme Court has held “that the court first assuming

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jurisdiction over property may exercise that jurisdiction to the exclusion of other courts.”

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Colorado River, 424 U.S. at 818. “Actions relating to land, such as suits to quiet title, are

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denominated quasi-in-rem.” Park v. Powers, 2 Cal. 2d 590, 598-99 (1935). Here, there is
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no dispute as to the ownership of the property but a breach of contract claim concerning

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the sale of property.

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Next, the second factor concerning the inconvenience of the federal forum is

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neutral since the location of the state and federal courts are both located in San Diego and

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the parties reside in San Diego. (Dkt. No. 1, Compl. ¶¶ 26-37.)

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The third factor concerning the desire to avoid piecemeal litigation strongly weighs

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in favor of a stay or dismissal. “Piecemeal litigation occurs when different tribunals

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consider the same issue, thereby duplicating efforts and possibly reaching different

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results.” Seneca Ins. Co., Inc. v. Strange Land, Inc., 862 F.3d 835, 842 (9th Cir. 2017)

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(quoting Am. Int'l Underwriters (Philippines), Inc. v. Cont'l Ins. Co., 843 F.2d 1253,

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1258 (9th Cir. 1988)). Here, Plaintiff seeks to litigate the exact same issues that are

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currently pending in state court in this Court. Not only will both courts consider the same

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issues but could possibly reach different results.

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Fourth, the state court action was filed first in March 2017 and appears to be in the

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middle of discovery2 while this case was recently filed on February 9, 2018. Therefore,

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this factor favors application of the Colorado River doctrine.

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The fifth factor looks at whether federal or state law provides the rule of decision

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on the merits and the sixth factor considers whether the state court proceedings can

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adequately protect the rights of the federal litigant. In this case, there are two federal

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causes of action for an unlawful seizure and violation of due process under 28 U.S.C. §

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1983 and sixteen state law causes of action. Therefore, state and federal law will apply in

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this case. While federal law will apply to the § 1983 causes of action, state courts have

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concurrent jurisdiction over these claims. See Maine v. Thiboutot, 448 U.S. 1, 3 n. 1

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(1980) (finding concurrent jurisdiction over 42 U.S.C. § 1983 suits, despite federal

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procedural provisions in § 1988); Patsy v. Bd. of Regents of Fla., 457 U.S. 496, 506-07

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On January 25, 2018, the state court granted Plaintiff’s motion to compel the deposition of Defendant
Cotton. (Dkt. No. 3-13, P’s RJN, Ex. 8.)
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(1982) (canvassing the legislative debates of the 1871 Congress and noting that “many

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legislators interpreted [§ 1983] to provide dual or concurrent forums in the state and

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federal system, enabling the plaintiff to choose the forum in which to seek relief”); but

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see Krieger v. Atheros Comm’ns, Inc., 776 F. Supp. 2d 1053, 1059-60 (N.D. Cal. 2011)

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(claims under the Securities Exchange Act are within the exclusive jurisdiction of the

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federal courts and therefore does not provide reason to stay under the Colorado River

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doctrine). “[I]f there is a possibility that the parties will not be able to raise their claims

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in the state proceeding, a stay or dismissal is inappropriate.” R.R. Street & Co., Inc., 656

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F.3d at 981; but see Holder, 305 F.3d at 869 n. 5 (state court probably lacked jurisdiction

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to hear the plaintiff's federal International Child Abduction Remedies Act (“ICARA”)

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claim). Here, the state court is able to address the state law causes of action as well as the

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1983 causes of action. These two factors weigh in favor of a stay or dismissal.

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The seventh factor on whether the complaint filed in this case is an attempt by

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Plaintiff to forum shop strongly weighs in favor of a stay or dismissal. See Nakash v.

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Marciano, 882 F.2d 1411, 1417 (9th Cir. 1989) (after three and a half years, Nakash was

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dissatisfied with the state court and sought a new forum and the court has “no interest in

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encouraging this practice.”); Conte v. Aargon Agency, Inc., No. 12cv2811-MCE-DAD,

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2013 WL 1907722, at *5 (E.D. Cal. May 7, 2013) (filing of federal action shortly after

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adverse state court ruling demonstrated “reactive nature” of the federal lawsuit). In this

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case, Plaintiff is frustrated and dissatisfied with the acts taken by the defendants in the

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underlying state court case, and dissatisfied with the rulings of the state court. (See Dkt.

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No. 1, Compl. ¶¶ 79, 81-83, 97, 130, 131 134.) As a result, Cotton filed the instant

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complaint alleging the same breach of contract of the Agreement made on November 2,

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2016 between Cotton and Geraci. Cotton also filed a cross-complaint against Geraci and

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Berry in the state court complaint but it is not provided to the Court. In this case, Cotton

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also added additional defendants based on his dissatisfaction with their role during the

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state court litigation which include claims against Geraci’s agent, Berry, Geraci’s

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attorneys, and the City of San Diego for its handling of the CUP. (Dkt. No. 1.)
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In fact, Plaintiff Cotton expressly asks this Court to review the evidence currently

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pending in state court. (Dkt. No. 1, Compl. ¶ 150.) As stated in the TRO application,

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Cotton is “seeking the same injunctive relief requested . . . .” (Dkt. No. 3-1, at 7.) He

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provides the state court pleadings so that this Court can “make its own evaluation of

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whether the state court judge’s orders can be supported by the evidence and arguments

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they were presented with.” (Id. at 8.) Cotton is clearly forum shopping by asking this

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Court to review the evidence and rulings of the state court, a factor that strongly supports

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a stay or dismissal.

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The final factor, whether the state court proceedings will resolve all issues before

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the federal court weighs in favor of a stay or dismissal. “[E]xact parallelism” is not

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required; “[i]t is enough if the two proceedings are ‘substantially similar.’” Nakash, 882

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F.2d at 1416 (citations omitted). Proceedings are “substantially similar” when they arise

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out of the same conduct or interactions between the parties. Silvaco Data Sys. v.

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Technology Modeling Assocs., 896 F. Supp. 973, 976 (N.D. Cal. 1995) (state and federal

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actions substantially similar for purposes of Colorado River even though they did not

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address identical factual or legal issues). “[T]he existence of a substantial doubt as to

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whether the state proceedings will resolve the federal action precludes the granting of a

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stay.” Intel Corp. v. Adv. Micro Devices, Inc., 12 F.3d 908, 913 (9th Cir. 1993). Here,

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the state court complaint and this federal complaint are substantially similar as they both

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concern the same November 2, 2016 agreement between Cotton and Geraci and

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subsequent disputed actions. While there are additional defendants and causes of action

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in this case, these claims arise out the same November 2 Agreement. This factor weighs

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in favor of the application of the Colorado River doctrine.

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Accordingly, given the pendency of the parallel state proceeding and evaluating

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the factors in this case, the Court STAYS the case pending resolution of the state court

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action pursuant to the Colorado River doctrine. See R.R. St. & Co., 656 F.3d at 978 n. 8

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(“We generally require a stay rather than a dismissal.”)

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Conclusion

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Based on the above, the Court GRANTS Plaintiff’s motion for IFP status, STAYS

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the case until resolution of the parallel state court action and DENIES Plaintiff’s ex parte

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motion for temporary restraining order and motion for appointment of counsel as MOOT.

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Plaintiff shall notify the Court promptly upon final judgment in the state court action.

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IT IS SO ORDERED.
Dated: February 28, 2018

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