Bala v. State Of N.D., 20090312.

• Decision Date: 23 August 2010
• Docket Number: No. 20090312.,20090312.
• Citation: 2010 ND 164,787 N.W.2d 761
• Parties: Susan BALA and RSI Holdings, Inc., a Delaware Corporation, Plaintiffs and Appellantsv.STATE of North Dakota, Defendant and Appellee.
• Court: North Dakota Supreme Court

787 N.W.2d 761
2010 ND 164

Susan BALA and RSI Holdings, Inc., a Delaware Corporation, Plaintiffs and Appellants
v.
STATE of North Dakota, Defendant and Appellee.

No. 20090312.

Supreme Court of North Dakota.

Aug. 23, 2010.

787 N.W.2d 762

Bruce A. Schoenwald, Moorhead, MN, for plaintiffs and appellants.

787 N.W.2d 763

Douglas Alan Bahr, Solicitor General, Office of Attorney General, Bismarck, N.D., for defendant and appellee.

KAPSNER, Justice.

[¶ 1] Susan Bala and RSI Holdings, Inc., appeal from a judgment dismissing their action for damages and declaratory relief based on the State's alleged taking of their property without just compensation in violation of the state and federal constitutions. We affirm, concluding the district court did not err in dismissing Bala and RSI's complaint for failure to state a claim upon which relief can be granted.

I

[¶ 2] Bala is the sole shareholder and president of RSI Holdings, and RSI Holdings is the sole shareholder of Racing Services, Inc. Bala is also the president of Racing Services, which in 1993 became the sole licensed provider of simulcast horse racing services to charitable parimutuel wagering sites in North Dakota. In 2001, the Legislature authorized Racing Services to conduct parimutuel “account wagering,” which allowed bettors to establish accounts and place simulcast parimutuel wagers electronically from anywhere. Racing Services established a separate call center in Fargo to handle the wagering accounts.

[¶ 3] In 2003, state and federal authorities began investigating RSI's account wagering activities. The State, through the North Dakota Racing Commission, determined nearly $9 million from approximately $99 million in account wagering bets was owed as excise taxes and brought a civil lawsuit against Bala and RSI to collect the taxes, and a receiver was appointed to manage RSI. RSI paid almost $2 million of the taxes, and after Bala filed for bankruptcy on behalf of RSI, the State made a priority claim for the remainder of the excise taxes in the bankruptcy court. State and federal criminal charges were also brought against Bala, RSI, and others involved. After Bala was convicted of numerous federal law violations by a federal court jury, the state criminal proceedings were dismissed. Bala's federal court convictions were ultimately overturned based on insufficiency of the evidence. See United States v. Bala, 489 F.3d 334 (8th Cir.2007). However, Bala and RSI's subsequent petition for a certificate of innocence, a prerequisite to seeking damages against the United States for wrongful imprisonment, was denied. See United States v. Racing Services, Inc., 580 F.3d 710, 714 (8th Cir.2009) (“RSI and Bala secretly collected and distributed $99,000,000 of parimutuel account wagers without paying one penny to charities, to the Racing Commission, or to the state treasurer, as North Dakota's gambling laws required.”).

[¶ 4] In April 2009, Bala and RSI brought this action against the State, claiming the State took RSI's property without just compensation in violation of the takings clauses of the state and federal constitutions. They alleged:

Plaintiffs' valuable and protectable interests were completely taken by the Defendant without any compensation in violation of the Fifth and Fourteenth Amendments to the Constitution of the United States and Article I, Sections 3 and 16 of the Constitution of the State of North Dakota by the actions of the governmental entity Defendants in collecting various cash assets including $1,482,189.64 and $450,000 in unauthorized excise taxes, the April 28, 2003 raiding of RSI facilities and taking of its property, in the appointment of the receiver without sufficient legal justification who took over the operations of RSI after August 21, 2003, the commencement

787 N.W.2d 764

of criminal proceedings for acts which were not crimes forcing a diversion of assets and property to defend the ill-fated criminal charges, the forcing of RSI into Chapter 7 bankruptcy liquidation which resulted in the loss of all viability for the continuation of RSI as an entity and the take-over of all of its remaining assets, and the fact that the State of North Dakota continues to assert a specious claim for excise taxes in the alleged amount of $6,726,872.72.

They also claimed the excise taxes were “confiscatory” and sought a declaratory judgment that there was “no lawful basis” for “the excise taxes allegedly due from RSI.”

[¶ 5] The State moved to dismiss the complaint for failure to state a claim upon which relief can be granted under N.D.R.Civ.P. 12(b). Bala and RSI sought summary judgment on their claim for declaratory relief. The district court ruled the three-year statute of limitations in N.D.C.C. § 28-01-22.1 was applicable in this case and barred Bala and RSI's inverse condemnation claim. The court further ruled the complaint “fails to state a valid constitutional takings claim as a matter of law.” The court denied Bala and RSI's summary judgment motion because, based on its rulings, the motion was “moot.”

II

[¶ 6] The dispositive issue on appeal is whether the district court erred in ruling Bala and RSI's complaint failed to state a valid constitutional takings claim as a matter of law.

[¶ 7] We review de novo a district court's decision granting judgment on the pleadings under N.D.R.Civ.P....