Diamond S.J. Enter., Inc. v. City of San Jose

• Decision Date: 01 July 2019
• Docket Number: Case No. 18-CV-01353-LHK
• Citation: 395 F.Supp.3d 1202
• Parties: DIAMOND S.J. ENTERPRISE, INC., Plaintiff, v. The CITY OF SAN JOSE, Defendant.
• Court: U.S. District Court — Northern District of California

395 F.Supp.3d 1202

DIAMOND S.J. ENTERPRISE, INC., Plaintiff,

v.The CITY OF SAN JOSE, Defendant.

Case No. 18-CV-01353-LHK

United States District Court, N.D. California, San Jose Division.

Signed July 1, 2019

D. Gill Sperlein, Randazza Legal Group, PLLC, San Francisco, CA, for Plaintiff.

Kathryn Jennifer Zoglin, Office of the City Attorney, San Jose, CA, for Defendant.

ORDER GRANTING MOTION TO DISMISS AND GRANTING IN PART AND DENYING IN PART MOTION TO STRIKE

Re: Dkt. No. 55

LUCY H. KOH, United States District Judge

Plaintiff Diamond S.J. Enterprise, Inc. brings suit against Defendant the City of San Jose ("San Jose" or "City"). Plaintiff owns and operates a nightclub called SJ Live in San Jose, California. The City issued notice to Plaintiff revoking Plaintiff's entertainment permit to operate as a nightclub. After attempts to appeal the permit's revocation through administrative proceedings held by the City, Plaintiff brought suit here. Before the Court is the City's motion to dismiss and/or to strike. Having considered the parties' submissions, the relevant law, and the record in this case, the Court GRANTS Defendant's motion to dismiss, and GRANTS in part and DENIES in part Defendant's motion to strike.

I. BACKGROUND

A. Factual Background

Plaintiff owns and operates a nightclub called SJ Live. ECF No. 54 at ¶ 11 (second amended complaint, or "SAC."). On May 28, 2017, SJ Live was approached by Daniel Embay. Id. at ¶ 32. Embay had booked a performer named Lucci. Id. at ¶ 32. Originally, Lucci was supposed to perform at a club in San Francisco, but the club cancelled. Id. So, Embay approached SJ Live to see whether SJ Live could host Lucci. Id. SJ Live agreed to book Lucci for $10,000. Id. "Lucci would pay any booking agent fees to Mr. Embay directly." Id. The Plaintiff claims that Embay usually "holds himself out as an event promoter," though that was not the role he purportedly played in relation to the Lucci booking. Id. at ¶ 34. Plaintiff claims Embay was merely a booking agent, not an event promoter, because operating as an event promoter in San Jose requires a permit, whereas there is an exception to the permitting requirement for an "agent of an entertainer or performer who is compensated solely for negotiating his or her client's contract to perform at an event." Id. (citing San Jose Municipal Code ("SJMC") § 6.62.040(B)(4)).

Plaintiff has a dress code and provides table bottle service. Id. at ¶ 35. The bottle service is booked prior to an event through the club's owner and manager, Jenny Wolfes. Id. at ¶ 26, 35. Before the Lucci event, Embay had a disagreement with Wolfes over whether sneakers should be allowed. Id. at ¶ 36. In the past, the club's dress code did not allow for sneakers, and Wolfes did not make an exception for the Lucci event. Id. Once guests began to arrive, some guests stated that they had booked table bottle service. Id. at ¶ 37. Embay admitted that he went around the club's usual protocol of the manager taking reservations for table bottle service. Id. Instead, Embay sold tickets and table service on eventbright.com without the approval of anyone at SJ Live. Id. Because Wolfes was concerned that there would be double-bookings which would create conflict, she cancelled the Lucci event and closed SJ Live's doors, though she allowed about 150 guests who had already entered the club to stay until the club's regular closing time. Id. at ¶¶ 37-38. Wolfes also told Embay to leave. Id. at ¶ 37. Once the club doors were closed, security dispersed the crowd of people trying to enter the club within 15 to 20 minutes. Id. at ¶ 38. At 1:38 a.m. on the night of the Lucci event, gunshots were fired in a shared parking lot behind SJ Live. Id. at ¶ 39. There were no injuries. Id. Embay turned out to be a suspect in the shooting, so Wolfes provided Lieutenant Trayer of San Jose Special Investigations Vice Unit with security camera footage to assist in the criminal investigation. Id. at ¶¶ 37, 39. A few weeks after the Lucci incident, on July 17, 2017,¹ San Jose's chief of police Edgardo Garcia issued a Notice of Intended Action informing Plaintiff that the City intended to revoke SJ Live's entertainment permit. Id. at ¶ 13.

The Notice of Intended Action was based on the following alleged violations: (1) "using an unlicensed promoter (violation of SJMC § 6.62.200)"² ; (2) "leaving a significant group of patrons on the peripheral of the business exterior (violation of SJMC § 6.60.240 F)"; (3) "failing to have security in or near the adjacent parking lot at the time of the shooting (violation of SJMC§ 6.60.240 (C))"; (4) "[n]ot maintaining a valid conditional use permit (violation of SJMC § 6.60.200)"; (5) "[o]perating the business in such a way that it constitutes a public nuisance ... (violation of SJMC § 6.60.290)"; (6) "[c]reating a public nuisance by maintaining or using the property in a manner that jeopardizes or endangers health, safety, or welfare of persons on the premises or in the surrounding areas ... (violation of SJMC § 1.13.050)"; and "[o]perating a disorderly house (violation of Cal. Bus. [a]nd Prof. Code § 25601 )". Id. at ¶ 13.

Plaintiff believes that the attempt to revoke SJ Live's entertainment permit was politically motivated. As evidence of this political motivation, it is alleged that SJ Live's owner/manager Jenny Wolfes' other attempts at opening other ventures in San Jose, such as a bar, were repeatedly subject to the San Jose City Council's interference. Id. at ¶¶ 27-28. Furthermore, SJ Live is in the San Jose Bank of Italy Building, which investors were able to purchase in its entirety subject to SJ Live's lease. Id. at ¶ 29. Plaintiff claims that city officials "specifically targeted SJ Live with the most severe sanctions available[, revocation of SJ Live's entertainment permit,] in order to clear the way for the redevelopment of the Bank of Italy Building." Id. at ¶ 31. Plaintiff believes that proposed revocation of the entertainment permit was disproportionate because "other permitted entertainment businesses had far worse violations in recent years, [and] the actions taken by the Police Department against those businesses were far less severe." Id. at ¶ 44.

B. Procedural History

After the July 17, 2017 notice of the intended revocation of SJ Live's entertainment permit effective July 28, 2017, SJ Live requested an administrative hearing to review Defendant's intended revocation of SJ Live's entertainment permit. Id. at ¶ 15. On October 11, 2017, an administrative hearing was held before deputy chief of police Mark Bustillos. Id. On November 17, 2017, Bustillos issued a "Notice of and Decision on Intended Action to Revoke Entertainment Permit, in which the City announced its decision to suspend SJ Live's entertainment permit for thirty days" as opposed to completely revoking the entertainment permit. Id. Bustillos found that Plaintiff violated the SJMC by: (1) hiring an unlicensed promoter for whom Plaintiff was responsible for, and creating or resulting in a public nuisance. Id.

SJ Live then appealed the suspension to the Appeal Hearings Board, which held a hearing on February 8, 2018. Id. at ¶ 16. In its written decision mailed on February 26, 2018, the Board rejected the administrative hearing's finding regarding the hiring of an unlicensed promoter, but upheld the public nuisance charge. Id. at ¶ 17. Thus, the Board upheld the suspension of SJ Live's entertainment permit for 30 days. Id.

On March 1, 2018, Plaintiff brought suit in this Court against Plaintiff. ECF No. 1. The complaint was accompanied by an ex parte motion for a temporary restraining order. ECF No. 2. The temporary restraining order was denied without prejudice on March 1, 2018.

On March 2, 2018, Plaintiff filed an amended motion for a temporary restraining order. ECF No. 15. That same day, the Court directed the Plaintiff to serve Defendant, and ordered Defendant to respond. ECF No. 18. Defendant filed a response on March 2, 2018. ECF No. 20. On March 2, 2018, the amended motion for a temporary restraining order was denied. ECF No. 22.

On March 12, 2018, Plaintiff filed a Writ of Administrative Mandamus in the Superior Court of Santa Clara County. ECF No. 37-1, Ex. C at i. On April 24, 2018, the Superior Court ruled that the administrative decision to suspend Plaintiff's entertainment permit was supported by substantial evidence. ECF No. 56, Ex. D at 2-3.

On April 6, 2018, Defendant answered Plaintiff's federal complaint in the instant case, but Plaintiff filed a first amended complaint ("FAC") on June 20, 2018. The City filed its motion to dismiss and/or strike the FAC on July 20, 2018. ECF No. 37.

In the FAC, the Plaintiff alleged 5 causes of action, FAC at ¶¶ 51-93: (1) violation of the First Amendment under 42 U.S.C. § 1983, id. at 12; (2) violation of due process under the Fifth Amendment under 42 U.S.C. § 1983, id. at 14; (3) denial of a fair hearing in violation of the Fourteenth Amendment under 42 U.S.C. § 1983, id. at 16; (4) interference with free speech and due process secured by Article 1, § 2 of the California Constitution, id. at 19; and (5) a partial taking under the Fifth Amendment, id. at 21.

On October 29, 2018, the Court filed an Order Granting-in-Part and Denying-in-Part as Moot Defendant's Motion to Dismiss, and Granting Defendant's Motion to Strike. ECF No. 51 (the "October 29, 2018 Order"). The October 29, 2018 Order dismissed the FAC's first claim—violation of the First Amendment—because "Plaintiff never allege[d] which subparts of the San Jose Municipal Code violate the First Amendment, only that entire chapters of the San Jose Municipal Code violate the First Amendment." Id. at 10. The Order struck Plaintiff's second cause of action—violation of due process under the Fifth Amendment—because the Fifth Amendment's due process clause only applies to the federal government, and all "allegations in the FAC are against municipal actors." Id. at 8. The Order dismissed Plaintiff's third cause of...