DEAN D. PREGERSON, District Judge.
Presently before the Court are two motions to dismiss and/or strike portions of Plaintiff's First Amended Complaint ("FAC") in this case, from two groups of Defendants. Defendants California Department of Public Health ("CDPH") and Dr. Ron Chapman's motion to dismiss focuses primarily on the contract and property issues at play in this case, while Defendants California Highway Patrol ("CHP"), Office of the Attorney General ("OAG"), Joseph A. Farrow, and Kamala D. Harris's motion focuses on issues of unlawful seizure. Because the factual and legal questions involved in these two sets of claims are mixed, the Court considers the two motions together.
In 2010, CDPH purchased 13.7 million respirator masks, worth $9.8 million, from a company named Global Protection USA, Inc. ("GPI"). (Ex. 1, FAC.) Plaintiff alleges that after the purchase, CDPH requested that GPI store the masks for approximately two months. (FAC, ¶¶ 16-17.) However, after the two month period was over, CDPH did not retrieve the masks. Instead, they remained warehoused at GPI's facility for approximately two years. (
GPI, for apparently unrelated reasons, filed for Chapter 11 bankruptcy in March 2012. (
While the claim was pending with VCCB, Global Safety began negotiating to sell the masks themselves, to Leslee Sports, apparently in the belief that GPI had held a "warehouseman's lien" on the masks to secure payment of the storage fees. (
At some point in this process, the masks had been transferred to the care of a "third party warehouse in Los Angeles" belonging to American Export Lines ("American Export"). (
Plaintiff therefore presents claims against CDPH for breach of express, implied, or quasi-contract for failure to pay the fees; against CDPH and CHP for conversion and trespass to chattels; against CDPH, CHP, and OAG for violation of a statute prohibiting the use of violence or intimidation; against Ron Chapman, Kamala Harris, and Joseph Farrow individually for deprivation of Fourteenth Amendment due process rights, as well as unlawful seizure under the Fourth and Fourteenth Amendments, per 42 U.S.C. § 1983; against CDPH, CHP, and OAG for violations of the California Constitution; and for a declaratory judgment regarding "the rights and responsibilities of the parties arising from their ownership interests, if any, in the Masks." (FAC ¶¶ 39-123.)
Plaintiff requests compensatory and punitive damages, costs, attorneys' fees, prejudgment interest, declaratory judgment, and either an order directing the return of the masks to Plaintiff or an order directing Defendants to provide Plaintiff an appealable hearing on CDPH's interest in the masks.
A complaint may be dismissed under Rule 12(b)(6) only if it "either (1) lacks a cognizable legal theory or (2) fails to allege sufficient facts to support a cognizable legal theory."
At the heart of this case is the question of what rights, if any, Plaintiff acquired from its predecessors in interest. Plaintiff asserts that GPI had, at the time of its bankruptcy, a storage contract with CDPH: either an express/implied-in-fact contract, a modification of the original purchase order, or, at the very least, an equitable quasi-contract based on GPI's reasonable reliance on CDPH's representations that it would pay storage fees. (FAC ¶¶ 39-72.) Relatedly, Plaintiff asserts that GPI acquired, as the warehouser of CDPH's goods, a warehouseman's lien on the masks to secure payment of the storage fees. Alternatively, Plaintiff argues, CDPH affirmatively abandoned the masks, which would also allow GPI and its successors to claim ownership. Thus, under this theory, CDPH owes Plaintiff either the storage fees or the masks.
Were CDPH a private party, Plaintiff's contentions would suffice to survive a motion to dismiss. At the very least, resolving Plaintiff's claims would require a factual inquiry as to whether GPI made an offer of continuing storage and whether CDPH accepted the offer, either verbally or by continuing to store its masks with GPI.
However, because CDPH is a public entity, the matter is different. As a general rule, public entities in California may not contract in any manner other than that prescribed by statute-usually by approval of the Department of General Services.
Cal. Pub. Cont. Code § 10295 (emphases added). Plaintiff does not allege, even in its Opposition, that the purported contract was transmitted to or approved by the Department.
Of course, it is not necessarily the responsibility of a party suing a state agency to allege the details of internal communications of the state government. But in this case, where the entire contract would have arisen passively—"CDPH accepted GPI's offer of further storage . . . by maintaining the Masks at GPI's warehouse without objection" (FAC ¶ 43)—Plaintiff cannot rely on a presumption that the contract had gone through the proper channels. Because, absent a statutory exception,
Plaintiff nonetheless argues that some form of quasi-contract must apply to this situation. "Under Defendants' logic," Plaintiff avers, "by agreeing to store the masks for two months, GPI became forever obligated to hold the Masks for CDPH and had no means to collect payment or cause the state to recognize its obligation. That cannot be the law." (Opp'n at 25:25-27.)
That is not the law. Although in general quasi-contract cannot be found where the method of government contracting is established by statute,
Here, however, there is little in the way of injustice that will be wrought should the Court not apply estoppel. GPI was not "forever obligated to hold the Masks for CDPH." It could, for example, have picked up the phone and demanded that CDPH come collect its goods—a simple action that, surprisingly, is nowhere alleged by Plaintiff. If a direct request failed, GPI could have sought injunctive relief based on trespass. Cal. Gov't Code § 814 (excluding claims for injunctive relief from general provisions of government immunity). Instead, GPI decided to respond to CDPH's neglect by invoicing in the hope of collecting storage fees. That is understandable—had it worked, GPI might have been much the richer. But that is not how government contracts are formed, and GPI's gamble that it could collect storage fees without a valid contract does not compel the Court to set aside the important public policy considerations embodied in the statutory limitations placed on state agency contracting.
Public policy considerations similarly counsel against finding that GPI had a warehouseman's lien, or that CDPH had abandoned the masks. It is well-established under California law that mechanic's and materialmen's liens cannot be asserted against public property,
Plaintiff does argue that real estate is specially protected from liens because it is "irreplaceable," while the masks in question are "fungible." (Opp'n at 30:22,26.) But while they may be fungible in a technical sense, it is not necessarily the case that CDPH would be able to lay hands on 13.7 million such masks at a moment's notice in case of a public emergency. Indeed, that fact is presumably what motivated the agency to purchase these masks in advance of any such emergency. Although it certainly appears, on Plaintiff's facts, that the agency was negligent in taking possession of its property, that negligence did not entitle GPI to claim ownership of state property.
In short, absent specific statutory authorization, policy considerations and general principles of sovereign immunity counsel against finding that private parties can impose liens on personal property owned by the state government.
For similar reasons, a court cannot presume that long-unused government property has been abandoned, absent an "official action" affirmatively showing intent to abandon.
Plaintiff argues that CDPH's failure to intervene or otherwise assert its rights in the masks during GPI's bankruptcy proceedings is an official action showing intent to abandon. But that argument must be rejected, as it relies on a failure to take action when it might have been prudent—i.e., negligence, which does not suffice to show intent to abandon. Plaintiff relies on
The Court accordingly grants the motions to dismiss the first through fourth and seventh causes of action. Because the Court finds that neither GPI nor any of its successors in interest had any property right in the masks, this effectively also resolves the thirteenth cause of action, for declaratory judgment as to the parties' rights in the masks. The fifth cause of action (conversion) and sixth cause of action (trespass to chattels) rely on a property right in the masks which, as a matter of law, does not exist, and therefore the Court grants the motions to dismiss as to these claims as well.
Plaintiff asserts a claim under the Bane Act, Cal. Civ. Code § 52.1, which provides for damages and injunctive relief for an individual "whose exercise or enjoyment of rights secured by the Consitution or laws of the United States, or of rights secured by the Constitution or laws of this state, has been interfered with." The intimidation must be accomplished "by threats, intimidation, or coercion."
Defendants primarily argue that Plaintiff cannot assert the Act's protection because any alleged threats were against the third party warehouse, not against Plaintiff, and because the state believed at the time of the alleged actions that Leslee Sports, not Plaintiff, was holding the masks. (CHP Defs.' Mot. Dismiss at 8-9; CHP Defs.' Reply at 11-13.) However, because the Court finds an independent reason to dismiss the claim on the face of the Bane Act statute, it need not reach that issue here.
Plaintiff alleges that, during a phone conversation, the Defendants threatened to shut down its third-party warehouser's business. This is not enough to satisfy § 52.1(j)'s threat-of-violence requirement. Even taking into account that the violence may be against "property," the plain meaning of the word "violence" clearly involves some physical, destructive act, which would not include administratively shutting down a business. A mere statement that an official may take official action is not a threat of violence.
Plaintiff also brings two claims under different provisions of the California Constitution. First, Plaintiff alleges a violation of Cal. Const. art. 1, § 7, which reads, in pertinent part, "A person may not be deprived of life, liberty, or property without due process of law. . . ." Parties are agreed that Plaintiff may not seek money damages for such a violation, and Plaintiff now seeks only injunctive relief. (Opp'n at 35:17-20.) However, the injunctive relief Plaintiff seeks is return of the masks, presumably in order to sell them or seek storage fees from CDPH. (FAC ¶ 115.) As the Court has now determined that, as a matter of law, the masks belong to the state and no storage fees are due, any claim for injunctive relief is moot. This claim is therefore dismissed.
Second, Plaintiff alleges a violation of Cal. Const. art. 1, § 13, which reads, in pertinent part, "The right of the people to be secure in their persons, houses, papers, and effects against unreasonable seizures and searches may not be violated. . . ." Absent a claim under a statute like the Bane Act, Plaintiff essentially alleges a freestanding constitutional tort.
The California Supreme Court has laid out a test for determining whether such a tort exists. The court must first consider whether there is evidence of an affirmative intent to create such a tort; if so, the court gives effect to that intent.
Federal courts in California have reached contradictory conclusions about whether such a tort based on § 13 actually exists. Those that have found a constitutional tort have generally done so based on an inference of intent on the part of the drafters of the California Constitution, relying on language in Katzberg suggesting that the tort remedy for unlawful searches and seizures is an ancient one incorporated into American law from the English common law.
Defendants argue that
But the Katzberg court in fact appears to have been pointing to a general understanding that where a state constitution is adopted that preserves the common law, it is appropriate for courts to infer the existence of "constitutional torts" based on historical tort remedies for the wrongs contemplated by specific constitutional provisions:
The California Constitution, like the New York Constitution, appears to have been drafted against a background expectation that common law remedies would continue to be available. Indeed, shortly after the adoption of the Constitution, California affirmed by statute that "[t]he Common Law of England, so far as it is not repugnant to or inconsistent with the Constitution of the United States, or the Constitution or laws of the State of California, shall be the rule of decision in all the Courts of this State." Cal. Stats. 1850, ch. 95.
In the absence of an actual California Supreme Court decision, this Court "must predict how the California Supreme Court would decide the issue" and rule accordingly.
Defendants' motions to dismiss are therefore denied as to this claim.
Finally, Plaintiff alleges that Defendants violated the Fourth and Fourteenth Amendments of the United States Constitution by seizing the masks, and it brings a claim for damages under 42 U.S.C. § 1983. The seizure itself was unlawful, Plaintiff argues, and it was also deprivation of property without due process of law. Defendants argue that these claims "fail to state plausible claims on which relief may be granted because, as a matter of law, Plaintiff had no lawful right to possession or ownership of the property that it claims was unlawfully seized by the Defendants." (CHP Defs.' Mot. Dismiss at 2:14-20.)
But Plaintiff's claim on the masks had not yet been adjudicated at the time of seizure. It had a non-frivolous, if ultimately unavailing, legal argument for a lien and the right to hold or sell the masks to recoup storage costs.
Where property rights are disputed or imperfect, at the very least a party is entitled to appropriate due process before the property is seized. As the Supreme Court has explained in the context of the use of replevin by private parties:
Nor does the right to be heard depend on whether the adverse claimant is the state. Although case law is sparse on this particular point, courts have been reluctant to deny private parties due process in property disputes solely because the other party is the government.
Similarly, the Fourth Amendment protects against unlawful searches and seizures even when title to the property is unclear, and even when the adverse claimant is the government.
In short, both the guarantee of due process of law under the Fourteenth Amendment and the protection from unreasonable seizure under the Fourth Amendment apply to seizures of property held by a private party to which the government asserts a claim.
As the Defendants offer no other grounds for dismissal of these claims, the motions to dismiss are denied as to the § 1983 claims.
The motions are granted and Plaintiff's First Amended Complaint is dismissed as to its First through Eighth, Eleventh, and Thirteenth Causes of Action. However, the motions are denied as to the Ninth, Tenth, and Twelfth Causes of Action.
