Flynt v. Shimazu

Decision Date07 October 2019
Docket NumberNo. 17-17318,17-17318
Citation940 F.3d 457
Parties 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.
CourtU.S. Court of Appeals — Ninth Circuit

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.


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.


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.


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 instance, alleges that prior to 2014 and as late as November 2015, he declined offers to purchase casinos in Nevada, Iowa, Colorado, Louisiana, and Mississippi because of California’s ownership restrictions. The Kelegians claim that they too declined to pursue similar opportunities to invest outside the state.

In 2010, for example, Kelegian Jr. acquired real property in the State of Washington for the purpose of opening a casino there. Together with his wife, Kelegian Jr. formed Kelco Gaming, LLC, which operated the casino. He owned a one-percent interest in the LLC, and his wife owned the remaining ninety-nine percent. At the same time, Kelegian Jr. applied to the California Gambling Commission to renew his licenses for two California cardrooms. The Commission, tasked with reviewing and issuing state gambling licenses, denied his applications on the grounds that his ownership interest in the Washington casino violated §§ 19858 and 19858.5. Kelegian Jr. divested his interest in the casino and requested a hearing on the denial of his applications. In a public decision issued on June 12, 2014, the Commission approved Kelegian Jr.’s applications but ordered him to pay a fine for his previous violation to the Bureau of Gambling Control, a division of the California Department of Justice that is charged with enforcing California’s gambling laws.


On November 30, 2016, Flynt and the Kelegians sued the Bureau of Gambling Control, members of the California Gambling Commission in their official capacities, and the Attorney General of California (collectively, "the State") under 42 U.S.C. § 1983 in the Eastern District of California. They alleged that §§ 19858 and 19858.5 were facially unconstitutional under the Dormant Commerce Clause because the statutes prohibit interstate investment and discriminate against out-of-state economic interests.2 Licensees sought declaratory and injunctive relief. The State moved to dismiss under Federal Rule of Civil Procedure 12(b)(6) on the ground that the suit was barred by the applicable statute of limitations.

The district court dismissed the suit, ruling that Licensees’ claims were time-barred because they failed to bring suit within two years of the Commission’s 2014 decision.

This timely appeal followed.


Licensees contend that the district court erred in dismissing their claims as time-barred. " Section 1983 does not contain its own statute of limitations." Butler v. Nat’l Comm. Renaissance of Cal. , 766 F.3d 1191, 1198 (9th Cir. 2014). Instead, claims brought under § 1983 are subject to the forum state’s statute of limitations for personal injury suits. See Wilson v. Garcia , 471 U.S. 261, 275–77, 105 S.Ct. 1938, 85 L.Ed.2d 254 (1985), superseded by statute on other grounds ; Butler , 766 F.3d at 1198. Citing Brown v. Board of Education , 347 U.S. 483, 74 S.Ct. 686, 98 L.Ed. 873 (1954), and Obergefell v. Hodges , ––– U.S. ––––, 135 S. Ct. 2584, 192 L.Ed.2d 609 (2015), Licensees note that courts have entertained facial challenges to the constitutionality of statutes long after their enactment. Licensees thus contend that a statute of limitations ought never to apply to facial challenges because "such challenges are litigated without regard to the particularities of the plaintiff or the case." But whether a statute of limitations applies to such claims and whether it ultimately bars them are different matters. Sometimes, as we explain below, a statute of limitations, though applicable, does not bar a facial challenge. See, e.g. , Maldonado v. Harris , 370 F.3d 945, 956 (9th Cir. 2004).

The Supreme Court has never limited the application of a statute-of-limitations period to as-applied challenges. Instead, it has construed 42 U.S.C. § 1988 broadly "as a directive to select, in each State, the one most appropriate statute of limitations for all § 1983 claims." See Wilson , 471 U.S. at 275–79, 105 S.Ct. 1938 (emphasis added). Accordingly, our cases routinely subject both as-applied and facial challenges brought under § 1983 to the forum state’s statute of limitations. See, e.g. , Scheer v. Kelly , 817 F.3d 1183 (9th Cir. 2016) (facial challenge under the First and Fourteenth Amendments); Lukovsky v. City & County of San Francisco , 535 F.3d 1044 (9th Cir. 2008) (as-applied challenge to racially discriminatory practices); Action Apartment Ass’n, Inc. v. Santa Monica Rent Control Bd. , 509 F.3d 1020 (9th Cir. 2007) (facial challenge under the Fifth and Fourteenth Amendments); Maldonado , 370 F.3d at 945 (facial challenge under the First Amendment); Barancik v. County of Marin , 872 F.2d 834 (9th Cir. 1988) (facial due process challenge).

Although our court has yet to apply a state statute of limitations to a facial challenge under the Dormant Commere Clause, we see no reason to treat such a claim differently from facial constitutional claims under the First, Fifth, or Fourteenth Amendments. Thus, consistent with our court’s case law, we conclude (as the district court did) that Licensees’ claims are subject to the forum state’s statute of limitations. Here, the relevant period is two years. See Cal. Code Civ. P. § 335.1 ; Action Apartment Ass’n , 509 F.3d at 1027.


Deciding that California’s statute of limitations applies—in the abstract—to Licensees’ claims does not end the inquiry, however, for we still must decide whether the limitations period ultimately bars such claims. In other words, we must consider when the limitations period began to run and whether, as the district court concluded, time had run out. To answer these questions, we look to federal law. See Wallace v. Kato , 549 U.S. 384, 388, 127 S.Ct. 1091, 166 L.Ed.2d 973 (2007).

A limitations period begins to run when the claim accrues. See Levald, Inc. v. City of Palm Desert , 998 F.2d 680, 687 (9th Cir. 1993). "It is the standard rule that accrual occurs when the plaintiff has a complete and present cause of action," Wallace , 549 U.S. at 388, 127 S.Ct. 1091 (internal quotation marks and alteration omitted), that is, when the plaintiff "knows or has reason to know of the actual injury," Scheer , 817 F.3d at 1188 (quoting Lukovsky , 535 F.3d at 1051 ).

Licensees urge us to reject this rule on accrual for facial constitutional challenges. But just as there is no justification to treat facial challenges differently for purposes of determining whether a statute of limitations applies , there is no reason to do so for purposes of determining when a...

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