Opinion
No. 2:16-cv-00309-JAM-CMK
03-22-2017
TIMOTHY A. KERSTEN, D.D.S., Plaintiff, v. STATE OF CALIFORNIA FRANCHISE TAX BOARD, et al, Defendants.
ORDER GRANTING INDIVIDUAL DEFENDANTS' AND LUIS R. DOMINICIS'S MOTIONS TO DISMISS
At first glance, this case involves a dentist's constitutional challenge to California's tax system. But a closer look reveals salient procedural issues about federalism, proper service, and Eleventh Amendment immunity. Plaintiff Timothy A. Kersten, D.D.S. challenges California's statutory tax scheme. First Am. Compl. ("FAC"), ECF No. 12. Now before the Court are two motions to dismiss. ECF No. 15 ("Individual Defendants' MTD"); ECF No. 17 ("Dominicis's MTD"). Kersten offers no opposition to the substantive legal arguments raised in these motions. ECF No. 20. For the reasons set forth below /// both motions are granted and the FAC is dismissed in its entirety.
This motion was determined to be suitable for decision without oral argument. E.D. Cal. L.R. 230(g). The hearing was scheduled for February 21, 2017. In deciding this motion, the Court takes as true all well-pleaded facts in the complaint.
I. FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND
California has a statutory scheme for handling delinquent taxpayers. Section 19195 requires the California Franchise Tax Board ("FTB") to biannually compile and publish a list of the 500 largest state income tax delinquencies. Cal. Rev. & Tax. Code § 19195 (West 2012). And Section 494.5 requires the FTB to create a "certified list" of those taxpayers and mandates the Board of Dentistry ("Board") (which is part of the Department of Consumer Affairs ("DCA")) and the Department of Motor Vehicles ("DMV") to revoke the licenses of taxpayers on the delinquency list unless they obtain a release. Cal. Bus. & Prof. Code § 494.5 (West 2013).
Defendants incorrectly cite section 10195. No such provision exists in California's Revenue and Taxation Code, and Kersten references Section 19195 in his FAC.
Plaintiff Timothy A. Kersten's name appeared on the FTB list in October 2013. FAC ¶ 118. The Board and DCA suspended Kersten's dental license, and he could not renew it. Id. ¶¶ 70-72. He also could not renew his revoked driver's license. Id. ¶¶ 80-83. So Kersten challenged California's tax scheme in a § 1983 suit. He alleged that several California agencies and officials violated his procedural due process, substantive due process, and equal protection rights. See generally FAC. He also claimed California's statutory scheme violated the supremacy clause. Id. Kersten seeks monetary, declarative, and injunctive relief. Id. at 47-50.
Kersten named all of the following defendants in the FAC: the FTB, the DCA, the Board, and the DMV ("State Agencies"); Betty T. Yee, Jerome Horton, Michael Cohen, Selvi Stanislaus, John Chiang, Awet Kidane, Alexis Podesta, Spencer L. Walker, Steven G. Morrow, Judith Forsythe, Steven Afriat, Fran Burton, Stephen Casagrande, Yvette Chappel-Ingram, Katie Dawson, Luis R. Dominicis, Kathleen King, Ross Lai, Huong Le, Meredith McKenzie, Thomas Stewart, Bruce L. Whitcher, Debra Woo, Karen Fischer, Dawn Dill, Jean Shiomoto, David P. Harris, and Fiona Ma ("Individual Defendants") (collectively "Defendants").
Soon after filing his FAC, Kersten moved to voluntarily dismiss the FTB, the Board, and the DMV, leaving the DCA as the only remaining state agency. ECF No. 19. The Court granted his motion without prejudice. ECF No. 21.
That leaves Defendants' motions to dismiss. All individual defendants—except Luis R. Dominicis and Dawn Dill—bring the first motion. See generally Individual Defendants' MTD. Dominicis brings the second motion. See generally Dominicis's MTD. Neither Dawn Dill nor the DCA is a party to either motion to dismiss. Kersten opposes only the Individual Defendants' motion. See Opp'n at 1. The Individual Defendants and Dominicis filed a joint reply. See Reply at 2 n.1. /// /// ///
II. OPINION
A. Judicial Notice
The Individual Defendants and Dominicis separately request judicial notice for the same documents: (1) Kersten's Petition for Writ of Mandamus (attached to Request for Judicial Notice ["RJN"] as Exh. A); (2) Kersten's First Amended Petition for Writ of Mandamus (attached to RJN as Exh. B); and (3) the Shasta County Superior Court's Final Ruling on Motion for Judgment on the Pleadings (attached to RJN as Exh. C). See Individual Defendants' RJN, ECF No. 15-3, at 2. See also Dominicis's RJN, ECF No. 17-1, at 2. All documents arise from the state court case.
A court may take judicial notice of a fact that is not reasonably disputed if it "can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned." Fed. R. Evid. 201(b)(2). On a motion to dismiss, courts may consider "matters of public record." Northstar Fin. Advisors Inc. v. Schwab Inv., 779 F.3d 1036, 1042 (9th Cir. 2015) (internal citation omitted). "Matters of public record" include court filings. See Reyn's Pasta Bella, LLC v. Visa USA, Inc., 442 F.3d 741, 746 n.6 (9th Cir. 2006) (courts may take judicial notice of court filings and other matters of public record).
The Court takes judicial notice of Kersten's Petition, his First Amended Petition, and the Superior Court's Final Ruling because they constitute matters of public record not subject to reasonable dispute. ///
B. Discussion
1. Comity
The comity principle's teeth are sharpest in federal cases involving challenges to state taxation. For nearly a century, Congress has recognized that "the autonomy and fiscal stability of the States survive best when state tax systems are not subject to scrutiny in federal courts." Fair Assessment in Real Estate Ass'n, Inc. v. McNary, 454 U.S. 100, 102-03 (1981). Congress codified this recognition in its Tax Injunction Act, which provides that "district courts shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State." 28 U.S.C. § 1341. Rooted in federalism principles, § 1341 "was first and foremost a vehicle to limit drastically federal district court jurisdiction to interfere with so important a local concern as [tax collection]." Franchise Tax Bd. of California v. Alcan Aluminum Ltd., 493 U.S. 331, 338 (1990) (internal citation and quotation marks omitted).
In other words, the comity principle precludes taxpayers from bringing § 1983 actions challenging the validity of state tax systems in federal court. See McNary, 454 U.S. at 116 (emphasis added). Instead, these taxpayers must use state remedies to protect their federal rights, provided "those remedies are plain, adequate, and complete . . . ." Id. "A state remedy is adequate only where it is certain that the taxpayer can raise constitutional claims in the state court." Capitol Industries-EMI, Inc. v. Bennett, 681 F.2d 1107, 1116 (internal citation omitted).
Defendants argue that comity bars Kersten's suit, reasoning that his case attacks California's tax system and, so, implicates federalism. See Individual Defendants' MTD at 7-8; Dominicis's MTD at 7-8. Kersten offers no response. See Opp'n at 1(discussing only mootness). Instead, he argues that, properly construed, the Individual Defendants' motion is actually FTB's motion because defense counsel appeared solely on FTB's behalf, and so the Court should dismiss Individual Defendants' motion as moot because FTB lacks standing to sue on the Individual Defendants' behalf. Id. at 2. This makes no sense. As the Individual Defendants and Dominicis correctly state in reply, the notice of motion clearly shows the Individual Defendants brought the motion. See Reply at 2 (emphasis added). See also Notice of Mot., ECF No. 15-1, at 2. And defense counsel has been counsel of record since the case's inception. The docket reflects this. To argue that the Court made a clerical error, see Opp'n at 2, is wholly without merit. There is no error because the Individual Defendants properly noticed and filed their motion.
In short, the Court agrees with Defendants. Federal law makes clear Kersten cannot bring his § 1983 suit in federal court if California provides an adequate remedy. See McNary, 454 U.S. at 116. See also 28 U.S.C. § 1341. California provides an adequate remedy because taxpayers may bring § 1983 actions in state court. See Logan v. S. California Rapid Transit Dist., 136 Cal. App. 3d 116, 124 (1982) (finding state courts have concurrent jurisdiction to adjudicate federally created causes of action like § 1983 claims). Kersten elected not to and that is a mistake with serious consequences for him. See First Am. Pet. at 1, attached to RJN as Exh. B (seeking only writ of mandamus under CCP Section 1085). Given "the important and sensitive nature of state tax systems and the need for federal-court restraint when deciding cases that affect [those] systems," and because Kersten has not shown his remedy in California state court is inadequate, the Court dismisses with prejudice Kersten's FAC. See McNary, 454 U.S. at 102, 105 (dismissing "a § 1983 challenge to the administration of state tax laws" on comity grounds). See also Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001) (explaining dismissal with prejudice appropriate "only if it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief."). Having dismissed Kersten's FAC, the Court need not address Defendants' arguments regarding res judicata and failure to state a claim.
2. Additional Jurisdictional Issues
Notwithstanding this dismissal, the Court must still resolve, sua sponte, two jurisdictional issues affecting two defendants: Dawn Dill and the DCA. Neither defendant was a party to either motion to dismiss.
a. Improper Service on Defendant Dawn Dill
A federal court lacks personal jurisdiction over a defendant if service of process is insufficient. See Omni Capital Int'l v. Rudolf Wolff & Co., 484 U.S. 97, 104 (1987). Rule 4 permits service of process by following state law in the state where the district court is located. See Fed. R. Civ. P. 4(e)(1). Under California law, process can be served by delivering the summons and complaint to the defendant personally or to an agent authorized to receive service of process. Cal. Code Civ. Proc. Section 416.90 (West 2017). Where service is improper, a court may dismiss the case under Rule 12(b)(5). See Bravo v. CDCR Director, No. C-12-06414 JSC, 2013 WL 3786630, at *1 (N.D. Cal. July 17, 2013).
In their motions, Defendants note that Dawn Dill is not a party to their briefs, reasoning that Kersten improperly served her when he served the DCA because, at the time, she no longer worked there. See Individual Defendants' MTD at 2 n.1; Dominicis's MTD at 2 n.1. Kersten does not contest this issue. See Opp'n at 1 (discussing only mootness). Because Kersten has not met his burden to establish valid service under Rule 4, the Court finds it lacks personal jurisdiction over Defendant Dill. See Omni Capital Int'l, 484 U.S. at 104. And given the federalism concerns underlying Kersten's suit, see supra Part B.1, the Court dismisses with prejudice Kersten's FAC against Dill.
b. Defendant DCA's Eleventh Amendment Immunity
Congress did not intend for § 1983 to abrogate a state's Eleventh Amendment immunity. See Dittman v. California, 191 F.3d 1020, 1025-26 (9th Cir. 1999) (internal citations and quotation marks omitted). And California has not waived its immunity with respect to § 1983 claims brought in federal court. See id. Because a suit against a California agency effectively constitutes a suit against California, and because Kersten does not contest that the DCA is a California agency, the Eleventh Amendment bars Kersten's § 1983 suit against the DCA. See Kent v. California Dep't of Consumer Affairs, No. 2:09-cv-02905, 2010 WL 2838628, at *3 (E.D. Cal. June 11, 2010) (dismissing plaintiff's § 1983 claim against the DCA on Eleventh Amendment immunity grounds). The Court dismisses with prejudice Kersten's FAC against the DCA.
III. ORDER
For the reasons set forth above, Kersten's FAC is DISMISSED WITH PREJUDICE in its entirety.
IT IS SO ORDERED. Dated: March 22, 2017
/s/_________
JOHN A. MENDEZ,
UNITED STATES DISTRICT JUDGE