Shree Shiva, LLC v. City of Redding ( 2021 )

1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 EASTERN DISTRICT OF CALIFORNIA 8 9 SHREE SHIVA, LLC, No. 2:21-cv-00211-JAM-KJN 10 Plaintiff, 11 v. ORDER GRANTING DEFENDANT GRISWOLD’S MOTION TO DISMISS 12 CITY OF REDDING, ET AL., 13 Defendants. 14 15 I. FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND1 16 Plaintiff Shree Shiva LLC, the former owner of the Americana 17 Lodge in Redding, brought this action against Richardson 18 Griswold, among others, for his role as receiver in the nuisance 19 abatement proceedings against the property. See generally 20 Compl., ECF No. 1. Specifically, Plaintiff alleged: 21 (1) violation of its substantive due process rights; 22 (2) violation of its equal protection rights; (3) an 23 unconstitutional taking of its property; (4) fraud; and 24 (5) punitive damages against the City of Redding, Debra Wright, 25 James Wright, Brent Weaver, Building Adventures, Inc., Richardson 26 27 1 This motion was determined to be suitable for decision without oral argument. E.D. Cal. L.R. 230(g). The hearing was scheduled 28 for September 28, 2021. 1 Griswold and Does 1 to 100. See generally id. Additionally, 2 Plaintiff brought a claim for breach of fiduciary duty against 3 Richardson Griswold. Id. at 29. The Court previously granted 4 the City of Redding’s, James Wright’s, Deborah Wright’s, and 5 Brent Weaver’s motion to dismiss with prejudice all of 6 Plaintiff’s claims against them. See August 2021 Order, ECF No. 7 42. Richardson Griswold (“Defendant”) now moves to dismiss all 8 the claims against him. See Griswold’s Mot. to Dismiss (“Mot.”), 9 ECF No. 37. Plaintiff opposed this motion. See Opp’n, ECF No. 10 43. Defendant replied. See Reply, ECF No. 44. For the reasons 11 set forth below, the Court grants Defendant’s motion and 12 dismisses all claims against him with prejudice. 13 II. OPINION 14 A. Judicial Notice 15 Defendant requests the Court take judicial notice of seven 16 exhibits: (1) a January 22, 2016 Order on Receivership 17 Stipulation filed in State Court; (2) a September 24, 2018 Order 18 Discharging the Receiver filed in State Court; (3) a September 19 7, 2018 Ruling denying Bhupindrasinh Thakor and Sudhaben Thakor 20 permission to sue the receiver filed in the State Court action; 21 (4) the California Court of Appeal Docket confirming the 22 dismissal of Narendra Sharma’s appeal regarding his request to 23 sue the receiver and file a separate action; (5) Narendra 24 Sharma’s, as assignee of Shree Shiva, voluntary dismissal of 25 Richardson Griswold filed in the Federal Court case No. 2:19-cv- 26 00601-TLN-DB-PS; (6) Magistrate Judge Newman’s March 27, 2020 27 Findings and Recommendation in the Federal Court case No. 2:19- 28 cv-1731-MCE-KJN; and (7) Judge England’s Order Granting 1 Richardson Griswold’s Motion to Dismiss Narendra Sharma’s First 2 Amended Complaint with Prejudice on June 29, 2020. Def.’s 3 Request for J. Notice (“RJN”), ECF No. 37-2. 4 These documents are all matters of public record and 5 therefore proper subjects of judicial notice. See Lee v. City 6 of Los Angeles, 250 F.3d 688, 689 (9th Cir. 2001). Accordingly, 7 the Court GRANTS Defendant’s Request for Judicial Notice. In 8 doing so the Court takes judicial notice only of their 9 existence, not any disputed or irrelevant facts within these 10 documents. Id. at 689-90. 11 B. Legal Standard 12 Federal Rule of Civil Procedure 12(b)(1) authorizes a 13 motion to dismiss for lack of subject matter jurisdiction. Fed. 14 R. Civ. P. 12(b)(1). When a motion is made pursuant to Rule 15 12(b)(1), the plaintiff has the burden of proving that the court 16 has subject matter jurisdiction. Tosco Corp v. Cmtys. for a 17 Better Env’t, 236 F.3d 495, 499 (9th Cir. 2001) overruled on 18 other grounds by Hertz Corp v. Friend, 559 U.S. 77 (2010). “A 19 jurisdiction challenge under Rule 12(b)(1) may be made either on 20 the face of the pleadings or by presenting extrinsic evidence.” 21 Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136, 1139 (9th 22 Cir. 2003). In other words, a motion to dismiss for lack of 23 subject matter jurisdiction pursuant to Rule 12(b)(1) can be 24 facial or factual. Safe Air for Everyone v. Meyer, 373 F.3d 25 1035, 1039 (9th Cir. 2004). “In a facial attack, the challenger 26 asserts that the allegations contained in a complaint are 27 insufficient on their face to invoke federal jurisdiction.” Id. 28 “Dismissal for lack of subject matter jurisdiction is 1 appropriate if the complaint, considered in its entirety, on its 2 face fails to allege facts sufficient to establish subject 3 matter jurisdiction.” In re Dynamic Random Access Memory (DRAM) 4 Antitrust Litig., 546 F.3d 981, 984-85 (9th Cir. 2008). 5 C. Analysis 6 The Barton doctrine provides that “before suit can be 7 brought against a court-appointed receiver, ‘leave of the court 8 by which he was appointed must be obtained.’” In re Crown 9 Vantage, Inc., 421 F.3d 963, 970-71 (9th Cir. 2005) (quoting 10 Barton v. Barbour, 104 U.S. 126, 127 (1881)). “[A] party must 11 first obtain leave of the [appointing] court before it initiates 12 an action in another forum” against a receiver. Id. at 970. 13 This ensures the appointing court maintains appropriate control 14 over the administration that is the subject of the receivership. 15 See In re DeLorean Motor Co., 991 F.2d 1236, 1240 (6th Cir. 16 1993). If such leave is not obtained, then the other forum 17 lacks subject matter jurisdiction over the suit. Barton, 104 18 U.S. at 127. 19 There are, however, two exceptions to the Barton doctrine. 20 First, the Barton doctrine does not preclude suit where a court- 21 appointed officer engages in conduct beyond his authority. See 22 Leonard v. Vrooman, 383 F.2d 556, 560 (9th Cir. 1976). Second, 23 a limited statutory exception exists under 28 U.S.C. § 959(a) 24 where a court-appointed officer operates a business in a 25 receivership or bankruptcy estate. See 28 U.S.C. § 959(a); see 26 also In re Crown Vantage, Inc., 421 F.3d at 971-72. Plaintiff 27 does not allege it received leave of the state court to sue the 28 receiver. Instead, it contends it was not required to, as both 1 exceptions apply. See Opp’n at 9-10. 2 First, under the ultra vires exception to the Barton 3 doctrine, a plaintiff is not required to get leave from the 4 appointing court to sue a receiver who acts in excess of his 5 authority or in an unofficial capacity. Leonard, 383 F.2d at 6 560. This “exception, however, is a narrowly defined concept 7 that applies only to actions which are completely outside the 8 scope of a receiver’s duties and responsibilities.” Cox v. 9 Mariposa Cty., No. 19-CV-01105-AWI-BAM, 2020 WL 1689706, at *6 10 (E.D. Cal. Apr. 7, 2020). “It does not apply to claims brought 11 against a receiver acting in its official capacity, even where 12 the alleged wrongdoing involves civil rights violations, 13 intentional torts or other egregious conduct.”2 Id. 14 For example, in Leonard, the Ninth Circuit found a 15 bankruptcy trustee had acted outside his authority when he 16 forcibly took a third party’s property that did not belong to 17 the estate. 383 F.2d at 560. Accordingly, the third-party did 18 not need to seek leave of the Bankruptcy court before filing an 19 action against the trustee. See id. at 561. Similarly, Barton 20 itself stated that “if, by mistake or wrongfully, the receiver 21 takes possession of property belonging to another, such person 22 may bring suit therefore against him personally as a matter of 23 right; for in such case the receiver would be acting ultra 24 2 Plaintiff also claims to sue Defendant in his individual 25 capacity. But this it cannot do. See Med. Dev. Int’l v. Cal. Dep’t of Corr. & Rehab., 585 F.3d 1211, 1219 (9th Cir. 2009) 26 (noting “actions against the receiver are in law actions against 27 the receivership or the funds in the hands of receiver, and his contracts, malfeasances, negligences, and liabilities are 28 official, and not personal”). 1 vires.” Barton, 104 U.S. at 134. 2 Here, contrastingly, the actions complained of by Plaintiff 3 were taken by Defendant while overseeing the management and sale 4 of the property of which he was appointed receiver. See Compl. 5 ¶¶ 16, 70, 71, 75; RJN Ex 1. However wrongful Plaintiff 6 contends his actions were, they plainly relate to the execution 7 of his duties as receiver. See Cox, 2020 WL 1689706, at *6. 8 Accordingly, the Court finds the ultra vires exception does not 9 apply. 10 Second, the statutory exception to the Barton doctrine 11 under 28 U.S.C. § 959(a) states that a receiver “may be sued, 12 without leave of the court appointing them, with respect to any 13 of their acts or transactions in carrying on business connected 14 with such property.” It “is intended to permit actions— 15 typically by third parties—redressing [wrongs] committed in 16 furtherance of a business under the control of a receiver, 17 bankruptcy trustee or other such court-appointed officer.” Cox, 18 2020 WL 1689706, at *9. “By its terms, this limited exception 19 applies only if the trustee or other officer is actually 20 operating the business and only to acts or transactions in 21 conducting the [] business in the ordinary sense of the words or 22 in pursuing that business as an operating enterprise.” In re 23 Crown Vantage, 421 F.3d at 971-72 (internal quotation marks and 24 citation omitted). Thus, section 949(a) does not apply where a 25 receiver “acting in his official capacity conducts no business 26 [. . .] other than perform administrative tasks necessarily 27 incident to the consolidation, preservation and liquidation of” 28 property. In Lehal Realty Assocs., 101 F.3d 272, 276 (2nd Cir. 1 1996). 2 Here, again, Plaintiff’s claims relate to Defendant’s 3 management and sale of the property as receiver, not for acts in 4 pursuing the business as an operating enterprise. For example, 5 the Complaint alleges Defendant: failed to carry general 6 liability insurance for the property; failed to pay contractors 7 for their work in abating the nuisances; submitted a false 8 report that the property was inspected; improperly used receiver 9 funds; and conspired to sell the property to a company 10 affiliated with Brent Weaver, the mayor, for a lower price. 11 Compl. ¶¶ 16, 70, 71, 75. None of these acts constitute the 12 operations of a motel but rather relate to Defendant’s duties to 13 abate the property as receiver. See Muratore v. Darr, 375 F.3d 14 140, 145 (1st Cir. 2004)(finding section 959(a) did not apply 15 where the complaint alleged trustees misconduct in discharging 16 his duties such as accounting for and sale of property, the 17 filing of tax returns, and payment of taxes). Accordingly, this 18 statutory exception to the Barton rule does not apply.3 19 As Plaintiff did not receive leave from the state court to 20 sue Defendant, and neither exception applies, this Court is 21 without jurisdiction mandating dismissal of all claims against 22 Defendant. See Barton, 104 U.S. at 137. Additionally, “because 23 all issues concerning the receiver’s actions are fully 24 adjudicated as part of the final accounting, it is well settled 25 3 The Court also notes that there is doubt as to whether this exception even applies to state appointed receivers. See e.g. 26 Freeman v. Cty. of Orange, No. SACV 14-107-JLS (ANx), 2014 WL 27 12668679, at *4 (C.D. Cal. May 29, 2014); Republic Bank of Chicago v. Lighthouse Mgmt. Grp., Inc., 829 F. Supp. 2d 766, 773 28 (D. Minn. 2010). eee RII I EE ERM IERIE NIE OS EIS IE ED EO 1 the discharge order operates as res judicata as to any claims of 2 liability against the receiver in his or her official capacity” 3 | warranting dismissal with prejudice. S. Cal. Sunbelt Devs., 4 Inc. v. Banyan Ltd. P’ship, 8 Cal. App. Sth 910, 926 (2017); see 5 also RJN Ex. 2. Plaintiff’s arguments to the contrary rest on a 6 | misunderstanding that res judicata can only bar claims actually 7 raised and litigated. See Opp’n at 7. However, res judicata 8 precludes relitigation of not only claims previously raised but 9 also those that could have or should have been raised. DKN 10 Holdings LLC v. Faerber, 61 Cal. 4th 813, 818 (2015) (“Claim 11 preclusion, the primary aspect of res judicata, acts to bar 12 claims that were, or should have been, advanced in a previous 13 suit involving the same parties); see also Aviation Brake Sys., 14 Ltd. v. Voorhis, 133 Cal. App. 3d 230, 235 (1982) (finding 15 claims of receiver’s misconduct and mismanagement of the estate 16 | were barred by res judicata because the claims could and should 17 have been raised as objections to the receiver’s final report 18 and account). Because the Court finds these reasons support 19 dismissal with prejudice, it does not reach the parties other 20 arguments. See Mot. at 5, 8, 9, 12; Opp’n at 5, 6, 8, 9, 11-14. 21 IIl. ORDER 22 For the reasons set forth above, the Court GRANTS Defendant 23 | Richardson Griswold’s Motion to Dismiss all claims against him 24 WITH PREJUDICE. 25 IT IS SO ORDERED. 26 Dated: November 24, 2021 ft 28 HN A. MENDEZ, ad UNITED STATES DISTRICT