Flynt v. Shimazu, 100719 FED9, 17-17318

Docket Nº:17-17318
Opinion Judge:O'SCANNLAIN, CIRCUIT JUDGE.
Party Name:Larry C. Flynt; Haig Kelegian, Sr.; Haig T. Kelegian, Jr., Plaintiffs-Appellants, v. Stephanie K. Shimazu, in her official capacity as the Director of the California Department of Justice, Bureau of Gambling Control; Jim Evans, in his official capacity as Chairman of the California Gambling Control Commission; Trang To, in his official capacity...
Attorney:Paul J. Cambria Jr. (argued) and Erin McCampbell Paris, Lipsitz Green Scime Cambria LLP, Buffalo, New York, for Plaintiffs-Appellants. James G. Waian (argued) and Peter H. Kaufman, Deputy Attorneys General; Sara J. Drake, Senior Assistant Attorney General; Xavier Becerra, Attorney General; Office...
Judge Panel:Before: Mary M. Schroeder, Diarmuid F. O'Scannlain, and Johnnie B. Rawlinson, Circuit Judges. RAWLINSON, Circuit Judge, dissenting
Case Date:October 07, 2019
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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Larry C. Flynt; Haig Kelegian, Sr.; Haig T. Kelegian, Jr., Plaintiffs-Appellants,

v.

Stephanie K. Shimazu, in her official capacity as the Director of the California Department of Justice, Bureau of Gambling Control; Jim Evans, in his official capacity as Chairman of the California Gambling Control Commission; Trang To, in his official capacity as Commissioner of the California Gambling Control Commission; Xavier Becerra, in his official capacity as Attorney General of the State of California; Paula D. LaBrie, in her official capacity as Commissioner of the California Gambling Control Commission, Defendants-Appellees.[*]

No. 17-17318

United States Court of Appeals, Ninth Circuit

October 7, 2019

Argued and Submitted February 13, 2019 San Francisco, California

Appeal from the United States District Court for the Eastern District of California John A. Mendez, District Judge, Presiding D.C. No. 2:16-cv-02831-JAM-EFB

Paul J. Cambria Jr. (argued) and Erin McCampbell Paris, Lipsitz Green Scime Cambria LLP, Buffalo, New York, for Plaintiffs-Appellants.

James G. Waian (argued) and Peter H. Kaufman, Deputy Attorneys General; Sara J. Drake, Senior Assistant Attorney General; Xavier Becerra, Attorney General; Office of the Attorney General, San Diego, California; for Defendants-Appellees.

Before: Mary M. Schroeder, Diarmuid F. O'Scannlain, and Johnnie B. Rawlinson, Circuit Judges.

SUMMARY[**]

Civil Rights

The panel reversed the district court's dismissal, on statute of limitations grounds, of a lawsuit brought pursuant to 42 U.S.C. § 1983.

Plaintiffs hold gambling licenses to own and to operate cardrooms in California and wish to invest substantially in out-of-state casinos. They alleged that California Business & Professions Code §§ 19858 and 19858.5 prohibit them from doing so because, pursuant to the statutes, a licensee of a California cardroom may not own more than a one-percent interest in any out-of-state entity that engages in casino-style gambling activities, even if such activities are lawful where the entity operates. Thus, in 2010, for example, the California Gambling Commission determined that plaintiff Kelegian Jr. violated the statutes through his ownership interest in an out-of-state casino and denied his application to renew his licenses for two California cardrooms. Kelegian Jr. thereafter divested his out-of-state ownership interest and on June 12, 2014, the Commission approved his renewal applications, but ordered him to pay a fine for his previous violations.

On November 30, 2016, plaintiffs brought suit for declaratory and injunctive relief alleging, in part, that §§ 19858 and 19858.5 were facially unconstitutional under the Dormant Commerce Clause. The district court dismissed the suit, ruling that the claims were time-barred because plaintiffs failed to bring suit within two years of the Commission's 2014 decision.

The panel first held that although this Circuit had yet to apply a state statute of limitations to a facial challenge under the Dormant Commerce Clause, it saw no reason to treat such a claim differently from facial constitutional claims under the First, Fifth, or Fourteenth Amendments. Thus, the panel concluded that plaintiffs' claims were subject to the forum state's statute of limitations. Here, the relevant period was two years.

The panel rejected the State's argument that plaintiffs' claims accrued in 2014 when the Commission issued its adverse decision on Kelegian Jr.'s investment. The panel held that when the continued enforcement of a statute inflicts a continuing or repeated harm, a new claim arises (and a new limitations period commences) with each new injury. The panel held that assuming for the sake of analysis that §§ 19858 and 19858.5 violated the Dormant Commerce Clause, plaintiffs demonstrated a continuing violation. The panel reasoned that sections 19585 and 19858.5 operate on an ongoing basis to prohibit plaintiffs from investing significantly in numerous casinos outside of California. And every two years, the Commission stands ready to enforce such prohibition as part of the state's license renewal process. The panel concluded that plaintiffs continue to be precluded from exploring other investment opportunities not as a consequence of the Commission's 2014 decision, but rather a result of the continued existence of the statutes themselves and the realistic threat of future enforcement.

Dissenting, Judge Rawlinson agreed with the district court that plaintiffs' claims were barred by the applicable two-year statute of limitations. Judge Rawlinson stated that the majority's view that the injury continues because the Gambling Commission stands ready to continue to enforce the statute is patently at odds with this Circuit's consistently articulated analysis of the continuing violation doctrine.

OPINION

O'SCANNLAIN, CIRCUIT JUDGE.

We must decide whether California's statute of limitations for personal injury suits bars a facial challenge to the constitutionality of certain California gambling laws.

I

Larry Flynt, Haig Kelegian Sr., and Haig Kelegian Jr. (collectively "Licensees") hold gambling licenses to own and to operate cardrooms-establishments that "allow patrons to engage in non-banked or non-percentage card games during which the players play against each other and pay the cardroom a fee to use its facilities."[1] In addition to owning cardrooms in California, they wish to invest substantially in out-of-state casinos. They complain, however, that California law prohibits them from doing so.

A

California has long permitted in-state gambling, subject to certain restrictions. Relevant here, the state requires cardrooms to obtain a license to operate, see Cal. Bus. & Prof. Code § 19850, and to renew such license every two years, Cal. Bus. & Prof. Code § 19876(a). To maintain operations, cardroom owners must comply with state gambling laws. See Cal. Bus. & Prof. Code § 19922.

This case concerns the intersection of three such laws. First, California Penal Code § 330 prohibits cardrooms from engaging in casino-like activities, including blackjack, roulette, and other house-banked or percentage games. Second, California Business and Professions Code § 19858(a) prohibits a person from "hold[ing] a state gambling license to own a gambling establishment if," among other things, he "has any financial interest in any business or organization that is engaged in any form of gambling prohibited by Section 330 of the Penal Code, whether within or without [the] state." (emphasis added). Finally, California Business & Professions Code § 19858.5 permits a limited exception to § 19858's broad prohibition. Under § 19858.5, an applicant or licensee who "has a financial interest in another business that conducts lawful gambling outside the state that, if conducted within California, would be unlawful," may still "hold a state gambling license" so long as he does "not own, either directly or indirectly, more than a 1 percent interest in, or have control of, that business." (emphasis added).

The upshot of §§ 19858 and 19858.5 is that a licensee of a California cardroom may not own more than a one-percent interest in any out-of-state entity that engages in casino-style gambling activities, even if such activities are lawful where the entity operates.

B

With these laws on the books, Flynt and the Kelegians allege that they have been unable to pursue numerous investment opportunities in out-of-state casinos, despite having a "keen interest" in doing so and being "ready, willing, and able to compete for the opportunity." Flynt, for...

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