Free Motion to Dismiss - District Court of California - California

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1 EDMUND G. BROWN JR. Attorney General of the State of California 2 CHRISTOPHER E. KRUEGER Senior Assistant Attorney General 3 DOUGLAS 1. WOODS . Supervising Deputy Attorney General 4 JACK WOODSIDE, State Bar No. 189748 Deputy Attorney General 5 1300 I Street, Suite 125 P.O. Box 944255 6 Sacramento, CA 94244-2550 Telephone: (916) 324-5138 7 Fax: (916) 324-8835 Email: [email protected] 8 Attorneys for Defendants John Chiang, in his official 9 capacity; Rachel Carrola, in her official capacity; and, Penny Gilman, in her official capacity 10

11
12 13 14 15 16

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA

ESTATE OF CLARA SHIMAN, SCOTT A. FLAXMAN ADMINISTRATOR, SCOTT A. FLAXMAN, BENEFICIARY, ESTATE OF CLARA SHIMAN,
Plaintiffs,

Case No: CV 08 2365 SBA

DEFENDANTS' NOTICE OF MOTION AND MOTION TO DISMISS; POINTS AND AUTHORITIES IN SUPPORT
Hearing: Time: Courtroom: Judge: September 9, 2008 1:00 p.m. 3, Floor 3 The Honorable Saundra B. Armstrong

17

v.
18 19 20 21 22 23 24 25 26 27 28
DEFENDANTS' NOTICE OF MOTION AND MOTION TO DISMISS; POINTS AND AUTHORITIES IN SUPPORT
Estate of Clara Shiman et aI. v. John Chiang et aI. CV 08 2365 SBA

JOHN CHIANG, IN HIS OFFICIAL CAPACITY, RACHEL CARROLA, IN HER OFFICIAL CAPACITY AND PENNY GILMAN, IN HER OFFICIAL CAPACITY,
Defendants.

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1 2 3 I. 4 II. 5 III. 6 A. 7 B. 8 IV. 9 A. 10 B.
11

TABLE OF CONTENTS Page
DEFENDANTS' NOTICE OF MOTION AND MOTION TO DISMISS DEFENDANTS' POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS STATEMENT OF FACTS AND ISSUES TO BE DECIDED Facts Alleged in the Complaint Causes of Action and Prayer for Relief
1

1

2

2 3 3 4
4

LEGAL STANDARDS APPLICABLE TO RULE 12(B) MOTIONS Rule 12(b)(I) Rule 12(b)(6)

V. 12
13

LEGAL DISCUSSION A. The Lawsuit Against Defendants Chiang, Carrola and Gilman, in Their Official Capacities, is Barred by the Eleventh Amendment. The Causes of Action under 42 U.S.c. § 1983 Fails to State a Claim upon Which Relief Can Be Granted Because Such Claims Can Only Be Alleged Against a "Person" as Defined. Plaintiffs' Assertion of State Law Claims Does Not Avoid the Eleventh Amendment Bar.

5

5

14 15 16 17 VI. 18 19 20 21 22 23 24 25 26 27 28

B.

9

C.

10
11

CONCLUSION

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1

TABLE OF AUTHORITIES

2

Page

3 Cases
4 Alabama v. Pugh
438 U.S. 781 (1978) 5

5
7

Aminoil US.A., Inc., v. Cal. State Water Res. Control Bd.
6 674 F.2d 1227 (9th Cir. 1982) 7 Arizonans for Official English v. Arizona 520 U.S. 43 (1997) 8

9
10 4

Bairv. Krug
9 853 F.2d 672 (9th Cir. 1988) 127 S.Ct. 1955 (2007) 11

10 Bell Atlantic Corp. v. Twombly, --- U.S. ---College Savings Bank v. Florida Prepaid Postsecondary Education Expense Board
527 U.S. 666 (1999) 13

12

5

Doe v. Lawrence Livermore Nat 'I Lab
14 131 F.3d 836 (9th Cir. 1997) 415 U.S. 651 (1974) 16

9
5
4

15 Edelman v. Jordan Epstein v. Wash. Energy Co.
17 83 F.3d 1136 (9th Cir.1996) 18 Hal Roach Studios, Inc. v. Richard Feiner & Co., Inc. 896 F.2d 1542 (9th Cir. 1990) 19 Kentucky v. Graham 20 473 U.S. 159 (1985)

4

9
7 7
4

21 Larson v. Domestic & Foreign Commerce Corp.
337 U.S. 682 (1949}

22

Malone v. Bowdoin
23 369 U.S. 643 (1962) 844 F.2d 646 (9th Cir. 1988) 25

24 Mir v. Little Co. ofMary Hosp. N Star Int 'I v. Arizona Corp. Comm 'n
26 720 F.2d 578 (9th Cir. 1983)
v.

4 5,10
Estate of Clara Shiman et al. v. John Chiang et al. CV 08 2365 SBA

27 Pennhurst State Sch. & Hosp.
465 U.S. 89 (1984) 28

Halderman

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ii

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TABLE OF AUTHORITIES (continued) 1 Page
4

2 Savage v. Glendale Union High School 343 F.3d 1036 (9th Cir. 2003) 3 4 Seminole Tribe ofFlorida v. Florida 517 U.S. 44 (1996) Taylor v. Westley 402 F.3d 924 (9th Cir. 2005) 6
7 8 9 10
11

5, 10

5

United States v. Lee 106 U.S. 196 (1882) W Mining Council v. Watt 643 F.2d 618 (9th Cir. 1981) Warren v. Fox Family Worldwide, Inc. 328 F.3d 1136 (9th Cir. 2003) Washington v. Udall 417 F.2d 1310 (9th Cir. 1969) Will v. Michigan Dept. ofState Police 491 US 58 (1989)

5-8 6 4,8
4

12 13 14

7
9

Wolfe v. Strankman 392 F.3d 358 (9th Cir. 2004) 15
16 17 Statutes 18 Federal Rules of Civil Procedure § 12(b)(I) § 12(b)(6) 19

4

3,4 3,4

20 21 22 23 24 25 26 27 28
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DEFENDANTS' NOTICE OF MOTION AND MOTION TO DISMISS PLEASE TAKE NOTICE that on September 9,2008, at 1:00 p.m., in Courtroom 3 of

2

3 the above-entitled Court, located at 1301 Clay Street, Oakland, California, defendants will move, 4 and hereby do move, this Court for entry of dismissal of this action, with prejudice, pursuant to 5 Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6).
6

This motion is based on the following grounds: 1) the action is barred by the Eleventh

7 Amendment to the United States Constitution, which precludes state officials from being sued in 8 federal court; and 2) the complaint fails to state a claim upon which relief can be granted because 9 defendant state officials are not "persons" within the meaning of Section 1983, and therefore not 10 amenable to suit.
11

The parties met and conferred on May 29,2008 and no agreement or settlement was

12 reached.
13

This motion is based upon this notice of motion and motion, the memorandum of

14 points and authorities filed herewith, and the pleadings, orders, memoranda, exhibits and other 15 documents already on file in this action. 16 17 18 Plaintiffs Estate of Clara Shiman, Scott A. Flaxman, Administrator, Scott A. Flaxman, DEFENDANTS' POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS

19 beneficiary, Estate of Clara Shiman (collectively "plaintiffs") initiated this action pursuant to 42 20 U.S.c. § 1983 ("Section 1983") by filing the complaint on May 7, 2008. The named defendants 21 include John Chiang, in his official capacity, Rachel Corrola, in her official capacity and Penny 22 23 24 25 26
27

Gilman, in her official capacity." By their misconceived action, plaintiffs are attempting to turn an ordinary state law claim for recovery of unclaimed property into the proverbial "federal case." Plaintiffs' complaint generally contends that defendants violated the Fifth and Fourteenth Amendments to the United States Constitution and that defendants violated

28

1. Defendant John Chiang is the Controller of the State of California, while defendants Rachel Corrola and Penny Gilman are employees of the Office of the State Controller.
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1 California's Unclaimed Property Law ("UPL") resulting in an alleged breach of fiduciary duties 2 and negligence. Specifically, plaintiffs charge that defendants held unclaimed property

3 belonging to the Estate of Clara Shiman, and that they have failed to return any money to that 4 Estate, for which plaintiff Flaxman is a beneficiary. As explained below, the Court should dismiss plaintiffs' complaint as to all defendants

5

6 based on Eleventh Amendment immunity. Where, as here, state officials are sued in their official 7 capacities for money damages, they are immune from suit in federal court. In addition, the 8 9 10 11 12 complaint fails to state a claim upon which relief can be granted because defendants are not "persons" within the meaning of Section 1983, and therefore not amenable to suit. Accordingly, defendants respectfully request that the Court dismiss this action without leave to amend. STATEMENT OF FACTS AND ISSUES TO BE DECIDED

13
14

A.

Facts Alleged in the Complaint

According to the complaint, plaintiff Scott A. Flaxman is a beneficiary of and the

15 administrator for the Estate of Clara Shiman ("Estate"). Compl. ~~ 12-13. Plaintiff Flaxman 16 apparently accessed the California Controller's website and determined that the State of 17 California held unclaimed property belonging to the Estate in the alleged amount of $29,881.59P.
~~

18 !d. 19 20 21 22 23 24 25 26 27 28

14-15; Exh. N. The complaint alleges that in May of2006, plaintiff Flaxman submitted claim forms to

the Controller's Office on behalf of the Estate. Compl, ~ 17. On October 15,2007, plaintiff Flaxman allegedly contacted defendant Corolla, who stated that the claim forms had been received and that the claim amounts would be paid to the Estate. !d.
~

18. The complaint further

alleges that defendant Corolla stated that because the claims were in the final processing stage, defendant Gilman would ensure payment was promptly made. !d. Plaintiff Flaxman allegedly ///

2. The unclaimed property appears to have allegedly escheated to the State in the form of stocks, dividends and insurance proceeds. Compl, ~ 15. The property was listed under various names, including Kay Shiman, Martin C. Shiman and Clara Shiman. See Cornpl. Exhs. A-M.
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1 left defendant Gilman several voice mail messages during the period from October 15, 2007, to 2 November 7,2007, which were not returned. Id. ~ 19-20.
3

On November 8, 2007, the complaint states that plaintiff Flaxman performed a search

4 on the Controller's website for the status of the claims. Compl. ~ 22. The search allegedly 5 revealed that the Estate had allegedly been paid for some of the unclaimed property claims. Id. 6 Plaintiffs contend that the Estate has never received any payment on the claims for the unclaimed 7 property. !d.
~

26. The complaint also alleges that defendants Corolla and Gilman have not

8 returned his telephone calls. Id.
9

B.

Causes of Action and Prayer for Relief

10

The complaint contains four causes of action. The first cause of action alleges a

11 violation of Section 1983, claiming that defendants violated plaintiffs' Fourteenth Amendment 12 right by depriving him of his property without due process oflaw in addition to an equal 13 protection violation. Compl,
~~

29-31. The second cause of action also asserts a violation of

14 Section 1983, claiming that defendants violated plaintiffs' Fifth Amendment right by taking his 15 property without just compensation. Compl. ~ 34-36. The third and fourth causes of action 16 assert that defendants' actions resulted in a breach of fiduciary duties and negligence, 17 respectively. 18 Finally, the complaint prays for actual, treble and punitive damages, as well as court

19 costs and attorney's fees in the amount of$750,000.00? 20 21 22 23
LEGAL STANDARDS APPLICABLE TO RULE 12(B) MOTIONS

This motion is brought pursuant to Federal Rules of Civil Procedure 12(b)(I) and 12(b)(6). Rule 12(b)(l) authorizes dismissal for lack of subject matter jurisdiction. Rule 12(b)(6) authorizes dismissal for the failure to state a claim upon which relief can be granted.

24 / / / 25 / / / 26 / / / 27 28 3. See Demand posted on the Civil Docket sheet.
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1 2

A.

Rule 12(b)(1)

Where, as here, "defendants have made a facial rather than a factual attack on subject

3 matter jurisdiction," pursuant to Rule 12(b)(1), a court must "take the allegations in the plaintiffs 4 complaint as true" and "draw all reasonable inferences in [the plaintiffs'] favor." See Wolfe v.
5 Strankman, 392 F.3d 358,362 (9th Cir. 2004); see also Savage v. Glendale Union High School,

6 343 F.3d 1036, 1039 n.1 (9th Cir. 2003). Courts are not required to "assume the truth of legal 7 conclusions merely because they are cast in the form of factual allegations." See Warren v. Fox 8 Family Worldwide, Inc., 328 F.3d 1136, 1139 (9th Cir. 2003) (internal quotations and citations 9 omitted.) 10
11

B.

Rule 12(b)(6)

A motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure

12 tests the legal sufficiency of the complaint. N. Star Int 'I v. Arizona Corp. Comm 'n, 720 F.2d 13 578,581 (9th Cir. 1983). "While a complaint attacked by a Rule 12(b)(6) motion to dismiss does 14 not need detailed factual allegations, a plaintiffs obligation to provide the "grounds" of his 15 'entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the 16 elements of a cause of action will not do." Bell Atlantic Corp. v. Twombly, --- U.S. ----, 127 S.Ct. 17 1955, 1964-65 (2007). "All allegations of material fact are taken as true and construed in the 18 light most favorable to plaintiff. However, conclusory allegations of law and unwarranted 19 inferences are insufficient to defeat a motion to dismiss for failure to state a claim." Epstein v.
20 Wash. Energy Co., 83 F.3d 1136, 1140 (9th Cir.1996); see also W. Mining Council v. Watt, 643

21 F.2d 618,624 (9th Cir. 1981). A court generally cannot consider materials outside of the 22 complaint, except for materials submitted as part of the complaint or the contents of which are 23 alleged in the complaint. Hal Roach Studios, Inc. v. Richard Feiner & Co., Inc., 896 F.2d 1542, 24 1555 n.19 (9th Cir. 1990). A court may also consider matters subject to judicial notice. Mir v.
25 Little Co. ofMary Hosp., 844 F.2d 646, 649 (9th Cir. 1988).

26 / / / 27 / / / 28 / / /
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1

LEGAL DISCUSSION A. The Lawsuit Against Defendants Chiang, Carrola and Gilman, in Their Official Capacities, is Barred by the Eleventh Amendment. This official capacity action against defendants is barred under the Eleventh

2 3 4

5 Amendment to the United States Constitution, which provides as follows:
6

7 8

The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by citizens of another state or by citizens or subjects of any foreign state.

9 Although the text of the Eleventh Amendment only refers to citizens of another state or a foreign 10 state, the United States Supreme Court has interpreted the Eleventh Amendment also to bar suits 11 against a state brought by its own citizens in federal court, absent consent by the state. Seminole

12 Tribe ofFlorida v. Florida, 517 U.S. 44, 54 (1996); Pennhurst State Sch. & Hosp. v. Halderman,
13 465 U.S. 89,98:103 (1984); Edelman v. Jordan, 415 U.S. 651,662-663 (1974).

14

Unless a state has waived its Eleventh Amendment immunity, or Congress has

15 overridden it, a state itself cannot be sued in federal court regardless of the relief sought.

16 Alabama v. Pugh, 438 U.S. 781 (1978) (per curiam); College Savings Bank v. Florida Prepaid 17 Postsecondary Education Expense Board, 527 U.S. 666,670 (1999). Eleventh Amendment
18 Immunity exists not only for the state, but also for its agencies and its officials sued in their 19 official capacities. See Edelman v. Jordan, 415 U.S. at 666-667. 20 Here, defendants Chiang, Carro1a and Gilman are all sued in their official capacity and,

21 thus, are entitled to Eleventh Amendment immunity. Defendants have not waived their 22 23 immunity, nor has it been abrogated by Congress. The complaint attempts to circumvent the Eleventh Amendment protection afforded

24 state officials by citing to Taylor v. Westley, 402 F.3d 924 (9th Cir. 2005), which involved a 25 narrow exception to the rule of sovereign immunity in lawsuits for the return of unclaimed 26 property. Compl.
~

7. Though both cases involve issues concerning unclaimed property, the

27 Taylor decision is distinguishable in several material respects. In Taylor, the California State
28 Controller obtained stock from the holders of the stock, thereafter selling the stock and
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1 depositing the money into the State's general fund. Id. at 926. The two individual owners ofthe 2 stock later filed a lawsuit in federal court seeking a declaratory judgment, disgorgement and 3 return of either their stock investment or the return of the reasonable value thereof, money 4 damages, and injunctive relief. !d. at 926.
5

For a suit such as the action in Taylor to be viable in federal court, it initially has to be

6 interpreted as a suit for the return of property. !d. at 933; see also United States v. Lee, 106 U.S. 7 196,208-209 (1882) [sovereign immunity did not bar claim where a descendant of General

8 Robert E. Lee merely sought possession of land taken by federal government as opposed to 9 seeking government property as a remedy]. Here, although the complaint alleges that defendants 10 are in possession of funds belonging to plaintiffs, the bulk of the lawsuit seeks a monetary award 11 in the form of treble damages and punitive damages. To be sure, plaintiffs allege that the State 12 possesses a total of $29,881.59 belonging to the Estate, but the lawsuit seeks a total of 13 $750,000.00. The award sought by plaintiffs would run counter to the well-known proposition 14 acknowledged by the Taylor decision itself that "[g]enerally, the Eleventh Amendment shields 15 state governments from money judgments in federal courts, and from declaratory judgments 16 against the state governments that would have the practical effect of requiring the state treasury 17 to pay money to claimants." Taylor at 929-930. Here, the vast majority of what the complaint 18 seeks to recover would be considered government property since punitive and treble damages 19 would be paid from the state treasury. Therefore, because this lawsuit for all intents and 20 purposes seeks government property, as opposed to the return of property allegedly belonging to 21 plaintiffs, the defendant state officials are entitled to sovereign immunity protection. 22 In addition to the threshold requirement above, the Taylor decision stated that in order

23 for a suit such as the present one to fall outside of the ordinary rule of sovereign immunity, one 24 of two conditions must be met: "(1) it must be based on the public official having acted beyond 25 his statutory authority (the 'ultra vires exception') or (2) the plaintiffs theory must be that the 26 action leading to the government's possession of the property was constitutionally infirm."
27 ///

28 / / /
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1 Taylor at 933.11 The complaint in the present matter fails to satisfy either of the two 2 requirements. 3 With regard to the first requirement, "allegations that an officer violated a 'plain legal

4 duty' can take the officer's actions outside the scope of her delegated responsibilities." Taylor at 5 933 (quoting Washington v. Udall, 417 F.2d 1310,1316 (9th Cir. 1969)). On the other hand,
6

7
8
9

,[a] simple mistake of fact or law does not necessarily mean that an officer of the government has exceeded the scope of his authority,' and '[o]fficial action is still action of the sovereign, even if it is wrong, if it "does not conflict with the terms of the officer's valid statutory authority.'"

10 Taylor at 934 (quoting Aminoil U.S.A., Inc., v. Cal. State Water Res. Control Bd., 674 F.2d 1227, 11 1234 (9th Cir. 1982) and Larson v. Domestic & Foreign Commerce Corp., 337 U.S. 682, 695 12 (1949). 13 Concluding there that the complaint's allegations satisfied this first requirement, the

14 Taylor decision noted that at least some of the allegations, if true, "would clearly put the
15 Controller's actions beyond her statutory authority." Taylor at 934. For instance, the complaint 16 alleged that plaintiffs' property should have never been subject to the escheat scheme because 17 they were never "lost" as required by statute? Also, there were allegations that the property of 18 plaintiff Taylor escheated to the State in violation of the escheat statute because he was not a 19 resident of California. Id. 20 Here, aside from a conclusory allegation (See Compl, 'il7), the complaint lacks

21 allegations suggesting that any of the defendants acted outside of their "valid statutory authority." 22 At most, the complaint reveals that plaintiffs never received the funds at issue. However, this 23 24 4. This exception to sovereign immunity is commonly referred to as the Lee-Malone exception, which allows a plaintiff to assert a claim for the return of property if the claim falls 25 into one of the two categories. See United States v. Lee, 106 U.S. 196 (1882); Malone v. 26 Bowdoin, 369 U.S. 643 (1962). 27 5. For example, the complaint in Taylor alleged that plaintiff Taylor's Intel stock escheated to the State even though Intel knew where he lived and had been sending him 28 correspondence about his stock and pension. Taylor at 934.
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1 type of allegation falls well short of suggesting that any of the named defendants acted beyond 2 their statutory authority. In the same vein, the allegation that one of the defendants represented 3 that the claims were in the final processing stage fails to show how that defendant acted outside 4 of their statutory authority." In fact, at most, plaintiffs have alleged that there may have been a 5 mistake of fact or law which "does not necessarily mean that an officer of the government has 6 exceeded the scope of his authority." See Taylor at 934. Put simply, the allegations in plaintiffs' 7 complaint fail to satisfy the first thread of the Lee-Malone exception.
8

As stated above, the second thread of the Lee-Malone exception requires allegations

9 that the "action leading to the government's possession was constitutionally infirm." Taylor at 10 933. According to the Ninth Circuit, the plaintiffs in Taylor met this requirement by asserting a 11 procedural due process claim, contending that the Controller failed to provide constitutionally 12 adequate notice to interested parties "that their property was being taken and sold." /d. at 935. 13 In the present situation, the complaint fails to set forth any allegations suggesting that defendants 14 acquired the subject property or allegedly failed to deliver it in an unconstitutional manner. 15 Unlike the Taylor case where plaintiffs argued that their property was "taken andsold" without 16 constitutionally adequate notice, the complaint in the current matter does not allege a 17 constitutional violation concerning the manner in which defendants gained possession of the 18 property at issue, or any facts as to why any alleged failure to deliver it was unconstitutional. As 19 a result, the complaint likewise fails to satisfy the second category of the Lee-Malone exception 20 to sovereign immunity. 21 Plaintiffs' allegations in Counts I and II that each of the defendants violated the

22 Fourteenth and Fifth Amendments are nothing more than conclusory allegations which the Court 23 should not accept as true. See W. Mining Council v. Watt, 643 F.2d at 624. For all of the 24 reasons described, plaintiffs' complaint should be dismissed with prejudice. 25 / / / 26 / / /
27

28

6. The same holds true for the alleged unreturned phone calls.
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1

B.

2

The Causes of Action under 42 U.S.C. § 1983 Fails to State a Claim upon Which Relief Can Be Granted Because Such Claims Can Only Be Alleged Against a "Person" as Defined.

3

Even aside from the Eleventh Amendment immunity, to the extent plaintiffs attempt to

4 bring a claim pursuant to Section 1983 against the named defendants in their official capacities, 5 they are not proper defendants for such a claim in any event. Section 1983 provides, in relevant 6 part: 7
8

9
10
11

Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory or the District of Columbia, subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress.

12 (Emphasis added.) 13 The United States Supreme Court has ruled that a sovereign state cannot be sued under

14 Section 1983. Will v. Michigan Dept. ofState Police, 491 US 58,66 (1989). Moreover, "[s]tate 15 officers in their official capacities, like states themselves, are not amenable to suit for damages 16 under Section 1983." Arizonansfor Official English v. Arizona, 520 U.S. 43, 69, fn. 24 (1997);

17 Doe v. Lawrence Livermore Nat'l Lab, 131 F .3d 836, 839 (9th Cir. 1997) ["[S]tate officials sued
18 in their official capacities are not a 'person' within the meaning of section 1983."] Official 19 capacity suits filed against state officials are merely an alternative way of pleading an action 20 against the state. Kentucky v. Graham, 473 U.S. 159, 167 fn.14 (1985). 21 Here, defendants Chiang, Carrola and Gilman are all sued in their official capacities

22 and, thus, are not considered "person[s]" amenable to suit under Section 1983. The instant case 23 is properly considered a lawsuit against the State of California. As such, the complaint fails to

24 state a claim upon which relief can be granted and must be dismissed? 25 7. As described above, there are no facts alleged, and presumably none will be offered, to 27 suggest any actions taken by defendants outside their official capacities. There is thus no basis for allowing plaintiffs leave to amend to assert their claims against defendants in their individual 28 capacities.
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1 2
3

C.

Plaintiffs' Assertion of State Law Claims Does Not Avoid the Eleventh Amendment Bar.

As indicated, the Eleventh Amendment bar is only avoided when a state has expressly

4 waived its immunity or when Congress has overridden it. Seminole Tribe ofFlorida v. Florida, 5 517 U.S. 44, 54 (1996); Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89,98-103

6 (1984); Edelman v. Jordan, 415 U.S. 651, 662-663 (1974). Furthermore, a lawsuit can not be 7 maintained in federal court against state officials in their official capacity for alleged violations
8 9

of state law: [I]t is difficult to think of a greater intrusion on state sovereignty than when a federal court instructs state officials on how to conform their conduct to state law. Such a result conflicts directly with the principles of federalism that underlie the Eleventh Amendment.

10
11

12 Pennhurst, 465 U.S. at 106.
13 The concept of pendent jurisdiction does not vitiate an otherwise valid defense of

14 Eleventh Amendment immunity: "[W]ith respect to [plaintiffs'] pendent state law damages claim 15 asserted against [defendants], the Eleventh Amendment absolutely precludes such claims from 16 being brought in federal district court." Bair v. Krug, 853 F.2d 672, 675-76 (9th Cir. 1988). 17 In the present case, plaintiffs are suing various state officials for alleged violations of

18 California's Unclaimed Property Law ("UPL").]/ Because plaintiffs' UPL claims are against the 19 individual defendants in their official capacities, they are barred by the immunities afforded by 20 the Eleventh Amendment. Plaintiffs are free to pursue any claim for recovery of unclaimed

21 property in an ordinary state court proceeding under California Code of Civil Procedure section 22 23 24 25 26 27 28 8. The third cause of action alleges a breach of fiduciary duty, while the fourth cause of action alleges negligence.
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1541, but they cannot artificially expand such a claim to become a federal constitutional case. /// /// ///

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1

CONCLUSION For all of these reasons, defendants respectfully request that this Court grant its Motion

2

3 to Dismiss without leave to amend. 4 Dated: June 2, 2008 5 6 7 8 9 10
11

Respectfully submitted, EDMUND G. BROWN JR. Attorney General of the State of California CHRISTOPHER E. KRUEGER Senior Assistant Attorney General DOUGLAS J. WOODS Supervising Deputy Attorney General /s/ Jack Woodside JACK WOODSIDE Deputy Attorney General Attorneys for Defendants John Chiang, in' his official capacity; Rachel Carrola, in her official capacity; and, Penny Gilman, in her official capacity

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104421 62.wpd SA2008302695

DEFENDANTS' NOTICE OF MOTION AND MOTION TO DISMISS; POINTS AND AUTHORITIES IN SUPPORT

Estate of Clara Shiman et al. v. John Chiang et al. CV 08 2365 SBA

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IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA OAKLAND DIVISION ESTATE OF CLARA SHIMAN, SCOTT A. FLAXMAN ADMINISTRATOR, SCOTT A. FLAXMAN, BENEFICIARY, ESTATE OF CLARA SHIMAN, Plaintiffs, Case No: CV 08 2365 SBA [PROPOSED] ORDER ON DEFENDANTS' MOTION TO DISMISS

v.
JOHN CHIANG, IN HIS OFFICIAL CAPACITY, RACHEL CARROLA, IN HER OFFICIAL CAPACITY AND PENNY GILMAN, IN HER OFFICIAL CAPACITY, Defendants. Hearing: Time: Courtroom: Judge: September 9, 2008 1:00 p.m. 3, Floor 3 The Honorable Saundra B. Armstrong

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Defendants John Chiang, in his official capacity, Rachel Corrola, in her official capacity and Penny Gilman, in her official capacity (collectively "defendants") filed a motion to dismiss the claims of plaintiffs Estate of Clara Shiman, Scott A. Flaxman Administrator, Scott A. Flaxman, beneficiary, Estate of Clara Shiman (collectively "plaintiffs") pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). For the reasons set forth below, this Court GRANTS the motion without leave to amend.

Backeround
Plaintiffs initiated this action pursuant to 42 U.S.C. § 1983 ("Section 1983") generally

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alleging federal constitutional as well as state law violations against defendants. Specifically,
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1 plaintiffs complain that defendants held unclaimed property in the alleged amount of$29,881.59 2 belonging to plaintiff Estate of Clara Shiman, and that they have failed to return any of the 3 property to plaintiffs. The complaint prays for actual, treble and punitive damages as well as 4 court costs and attorney's fees in the amount of$750,000.00.
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Defendants filed a motion to dismiss claiming that the Eleventh Amendment bars this

6 action as to all defendants. The motion also argued that the complaint fails to state a claim upon 7 which relief can be granted because defendants are not "persons" within the meaning of Section 8 9 10 1983, and therefore not amenable to suit.

Leeal Standard
Where, as here, "defendants have made a facial rather than a factual attack on subject

11 matter jurisdiction," pursuant to Rule 12(b)(1), the Court must "take the allegations in the 12 plaintiffs complaint as true" and "draw all reasonable inferences in [the plaintiffs'] favor." See 13

Wolfe v. Strankman, 392 F.3d 358,362 (9th Cir. 2004); see also Savage v. Glendale Union High

14 School, 343 F.3d 1036, 1039 n.l (9th Cir. 2003). Courts are not required to "assume the truth of
15 legal conclusions merely because they are cast in the form of factual allegations." See Warren v.

16 Fox Family Worldwide, Inc., 328 F.3d 1136, 1139 (9th Cir. 2003) (internal quotations and
17 citations omitted.) 18 A motion to dismiss under Rule 12(b)(6) tests for legal sufficiency of the claims

19 alleged in the complaint. "While a complaint attacked by a Rule 12(b)(6) motion to dismiss does 20 not need detailed factual allegations, a plaintiffs obligation to provide the "grounds" of his 21 'entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the

22 elements of a cause of action will not do." Bell Atlantic Corp. v. Twombly, --- U.S. ----, 127 S.Ct. 23 24 1955, 1964-65, (2007). "All allegations of material fact are taken as true and construed in the light most favorable to plaintiff. However, conclusory allegations of law and unwarranted

25 inferences are insufficient to defeat a motion to dismiss for failure to state a claim." Epstein v.

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Wash. Energy Co., 83 F.3d 1136, 1140 (9th Cir.1996).

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Analysis A. The Eleventh Amendment Bars the Present Action
The Eleventh Amendment to the United States Constitution bars suits against a state

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4 brought by its own citizens in federal court, absent consent by the state. Seminole Tribe of
5 Florida v. Florida, 517 U.S. 44, 54 (1996); Pennhurst State Sch. & Hosp. v. Halderman, 465

6 U.S. 89, 98-103 (1984); Edelman v. Jordan, 415 U.S. 651, 662-663 (1974). Unless a state has 7 waived its Eleventh Amendment immunity, or Congress has overridden it, a state itself cannot be 8
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sued regardless of the relief sought. Alabama v. Pugh, 438 U.S. 781 (1978) (per curiam);
College Savings Bank v. Florida Prepaid Postsecondary Education Expense Board, 527 U.S.

10 666,670 (1999). Eleventh Amendment Immunity exists not only for the state, but also for its 11 agencies and its officials sued in their official capacities. See Edelman v. Jordan, 415 U.S. at 12 666-667. 13

An exception to the rule of sovereign immunity exists where the suit is one for the

14 return of property. Taylor v. Westley, 402 F.3d 924, (9th Cir. 2005). As suggested, the threshold 15 requirement is that the suit be interpreted as one for the return of property. Id. at 933; see also 16 United States v. Lee, 106 U.S. 196,208-209 (1882) [sovereign immunity did not bar claim where 17 a descendant of General Robert E. Lee merely sought possession of land taken by federal 18 government as opposed to seeking government property as a remedy]. In the case at bar, 19 although plaintiffs' complaint seeks the return of$29,881.59, mainly from stocks, dividends and 20 21 22 23 24 25 26
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insurance proceeds allegedly held by defendants, it also seeks much more. In fact, plaintiffs have set forth a demand of $750,000.00, making the return of funds representing their alleged property a relatively insignificant portion of what they actually seek by this lawsuit. As a result, the bulk of plaintiffs, complaint seeks money damages that would necessarily come from the State's treasury, which really makes this a suit against the State, thus barred by the Eleventh Amendment. Even assuming the lawsuit was initially interpreted as one for the return of property,
plaintiffs' complaint fails to satisfy the exception to the rule for sovereign immunity. The Taylor

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decision explained that in order for a suit, such as the present one, to fall outside of the ordinary
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rule of sovereign immunity, one of two conditions must be met: "(1) it must be based on the

2 public official having acted beyond his statutory authority (the 'ultra vires exception') or (2) the 3 plaintiffs theory must be that the action leading to the government's possession of the property 4 was constitutionally infirm." Taylor at 933Y

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In the case at bar, plaintiffs' complaint fails to satisfy the first condition set forth

6 above. Importantly, the complaint lacks any allegations suggesting that any of the defendants 7 acted outside of their valid statutory authority. Allegations that defendants represented that the 8 claims were in the final stage of processing, as well as assertions that defendants failed to return 9 plaintiffs' phone calls, simply do not suggest that defendants acted outside of their statutory 10 authority. At most, plaintiffs' complaint indicates that the alleged failure to return plaintiffs' 11 property was due to a mistake of fact or law, which is not enough to satisfy the first thread of the

12 Lee-Malone exception. See Taylor at 934.
13 The second condition that must be satisfied in order to circumvent the rule of sovereign

14 immunity requires allegations that the "action leading to the government's possession was 15 constitutionally infirm." Taylor at 933. Again, similar to the first condition, the complaint fails 16 to set forth any allegations suggesting that defendants acquired the subject property or allegedly 17 failed to deliver it in an unconstitutional manner. Moreover, plaintiffs' conclusory allegations of 18 defendants' unconstitutional actions in Counts I and II do not correct the deficiencies in this 19 regard. 20 21 Therefore, the Eleventh Amendment to the United States Constitution bars the present suit against defendants.

22 / / / 23 / / / 24 / / / 25 1. This exception to sovereign immunity is commonly referred to as the Lee-Malone 27 exception, which allows a plaintiff to assert a claim for the return of property if the claim falls into one of the two categories. See United States v. Lee, 106 U.S. 196 (1882); Malone v. 28 Bowdoin, 369 U.S. 643 (1962).
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B.

Plaintiffs' 42 U.S.c. § 1983 Claims

Section 1983 provides, in relevant part: Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory or the District of Columbia, subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress. The United States Supreme Court has ruled that a sovereign state cannot be sued under Section 1983. Will v. Michigan Dept. ofState Police, 491 US 58,66 (1989). Moreover, "[s]tate

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10 officers in their official capacities, like states themselves, are not amenable to suit for damages 11 under Section 1983." Arizonansfor Official English v. Arizona, 520 U.S. 43, 69, fn. 24 (1997);

12 Doe v. Lawrence Livermore Nat t Lab, 131 F .3d 836, 839 (9th Cir. 1997) ["[S]tate officials sued
13 in their official capacities are not a 'person' within the meaning of section 1983."] Official 14 capacity suits filed against state officials are merely an alternative way of pleading an action 15 against the state. Kentucky v. Graham, 473 U.S. 159, 167 fn.14 (1985). 16 Here, defendants Chiang, Carrola and Gilman are all sued in their official capacities

17 and, thus, are not considered "person[s]" amenable to suit under Section 1983. The instant case 18 is properly considered a lawsuit against the State of California. As such, the complaint fails to 19 state a claim upon which relief can be granted. Moreover, as already concluded, there are no 20 21 22 23 24 25 26
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facts alleged, and presumably none will be offered, to suggest any actions taken by defendants outside their official capacities. There is thus no basis for allowing plaintiffs leave to amend to assert their claims against defendants in their individual capacities.

C.

Plaintiffs' Remaining State Law Claims Must Be Dismissed

Plaintiffs' State law claims in Counts III and IV against defendants in their official capacities fail for the same reasons explained above in that they are barred by the Eleventh Amendment. See Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 106 (1984).
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Conclusion
Based on the foregoing, IT IS HEREBY ORDERED THAT Defendants' Motion to

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IT IS SO ORDERED.

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The Honorable Saundra B. Armstrong United States District Court Judge

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