Judge: James L. Crandall, Case: 21-1198190, Date: 2022-08-18 Tentative Ruling
Demurrer to Amended Complaint
Plaintiffs Images Luxury Nail Lounge, Inc., Summit Financial, Inc., and NTDH Holdings, Inc. own and operate nail salons.
Their first amended complaint (FAC) challenges certain Executive Orders and Public Health Directives which deprived Plaintiffs of the ability to operate their business during the COVID-19 pandemic.
The challenged orders are: Executive Orders issued on March 12, 2020, March 19, 2020, and May 4, 2020 (Executive Orders N-25-20, N-33-20, N-60-20, respectively).
Plaintiff also challenges two Health Directives issued on December 3, 2020 and December 6, 2020. (Complaint ¶ 3.)
Plaintiffs allege causes of action for:
(1) violation of Cal. Gov’t Code § 8572,
(2) just compensation under California Code;
(3) violation of the California Constitution, and
(4) violation of the Due Process Clause of the 5th and 15th Amendment of the United States Constitution.
Judicial Notice
Defendants’ request for judicial notice of State proclamations, executive orders, public health guidance, and public health orders (Exhibits A-P) is granted under Evidence Code section 452(a)-(c).
Defendants’ request for judicial notice of federal court records is granted under Evidence Code section 452(d).
Federal Court case
Plaintiffs initially filed suit in federal court in February 2021. The federal district court granted Defendants’ motion to dismiss on 7/13/21.
The federal court dismissed Plaintiffs’ claims against the State Defendants based on the doctrine of state immunity from suit in federal court based on state law violations. The federal court reached the merits of the federal constitutional claims, including due process and equal protection, finding the federal claims were not viable.
Demurrer to First Amended Complaint
The demurrer of Defendants State of California, Gavin Newsom, and Erica S. Pan, M.D., M.P.H., is OVERRULED as to the first and second causes of action and SUSTAINED with leave to amend as to the third and fourth causes of action.
First COA – Violation of Government Code § 8572
The first cause of action is against Governor Newsom for violation of Government Code section 8572, which states in part:
“In the exercise of the emergency powers hereby vested in him during a state of war emergency or state of emergency, the Governor is authorized to commandeer or utilize any private property or personnel deemed by him necessary in carrying out the responsibilities hereby vested in him as Chief Executive of the state and the state shall pay the reasonable value thereof.”
Plaintiffs contend that by issuing executive orders which restricted their ability to do business, “Defendant Newsom selectively commandeered and utilized Image Luxury Nail’s ‘non-essential’ businesses for the alleged purpose of slowing the spread of COVID-19,” but failed to compensate Plaintiffs for the reasonable value thereof. (FAC, ¶¶ 65, 66.)
Defendants rely on 640 Tenth, LP v. Newsom (2022) 78 Cal.App.5th 840, 865 (640 Tenth), in which the Fourth District, Division 1 of the Court of Appeal addressed similar allegations by restaurant and gym owners whose business were forced to close under the Governor’s March 4, 2020 “stay-at-home order.”
In an unpublished portion of the 640 Tenth decision, the appellate court addressed a commandeering claim under Government Code section 8572 similar to the claim raised by Plaintiffs here, citing state court decisions in Minnesota and New Jersey which held that restricting a private party’s use of their property wasn’t equivalent to “commandeering.”
However, neither party has cited a published California decision discussing whether section 8572 applies to the restrictions imposed by the Governor during the COVID-19 pandemic.
Nor does the Emergency Services Act, Government Code section 8555 et seq., specifically define “commandeering.”
Defendants have not cited any legal authority, binding on this court, holding that section 8572 can’t encompass an order to shut down a business under the Governor’s emergency powers, thereby triggering the statutory requirement that “ the state shall pay the reasonable value therof”.
Ferrick v. Santa Clara University (2014) 231 Cal.App.4th 1337, 1341, holds:
“It is not the ordinary function of a demurrer to test the truth of the plaintiff's allegations or the accuracy with which he describes the defendant's conduct. A demurrer tests only the legal sufficiency of the pleading. [Citation.]” (Committee On Children's Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 214, 197 Cal.Rptr. 783, 673 P.2d 660.)
In reviewing the ruling on a demurrer, “the question of plaintiff's ability to prove these allegations, or the possible difficulty in making such proof does not concern the reviewing court [citations]....” (Alcorn v. Anbro Engineering, Inc. (1970) 2 Cal.3d 493, 496, 86 Cal.Rptr. 88, 468 P.2d 216.)
“To survive a demurrer, the complaint need only allege facts sufficient to state a cause of action; each evidentiary fact that might eventually form part of the plaintiff's proof need not be alleged. [Citation.]” (C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 872, 138 Cal.Rptr.3d 1, 270 P.3d 699.)
A complaint's allegations are construed liberally in favor of the pleader. (Skopp v. Weaver (1976) 16 Cal.3d 432, 438, 128 Cal.Rptr. 19, 546 P.2d 307; see Code Civ. Proc., § 452.)
Here, construing Plaintiffs’ allegations in the first cause of action liberally, Defendants have not shown that the first cause of action is not viable as a matter of law.
Therefore, the demurrer to the first cause of action is overruled.
Second COA – Just Compensation
The second cause of action is against all Defendants for “just compensation under California Code.” This section cites Government Code section 8572, discussed above, as well as Health and Safety Code §§ 101025, 101040, and 120210. Plaintiffs allege a right to reimbursement for losses incurred by compliance with the disputed orders, and further allege that “Images Luxury Nail, a nail salon, was singled out by Defendant Newsom, when Newsom knowingly made the false, baseless, public assertion that nail salons started the community spread of COVID-19 in California.” (¶¶ 71, 74.)
Health and Safety Code section 101025 states,
“The board of supervisors of each county shall take measures as may be necessary to preserve and protect the public health in the unincorporated territory of the county, including, if indicated, the adoption of ordinances, regulations and orders not in conflict with general laws, and provide for the payment of all expenses incurred in enforcing them.”
Section 101025 applies to county government, not state-level government officials. Plaintiffs have not cited any legal authority holding that section 101025 creates a private right of action against the State or its officials in this context.
Health and Safety Code section 101040 provides,
“(a) The local health officer may take any preventive measure that may be necessary to protect and preserve the public health from any public health hazard during any “state of war emergency,” “state of emergency,” or “local emergency,” as defined by Section 8558 of the Government Code, within his or her jurisdiction.
(b) “Preventive measure” means abatement, correction, removal or any other protective step that may be taken against any public health hazard that is caused by a disaster and affects the public health. Funds for these measures may be allowed pursuant to Sections 29127 to 29131, inclusive, and 53021 to 53023, inclusive, of the Government Code and from any other money appropriated by a county board of supervisors or a city governing body to carry out the purposes of this section.
(c) The local health officer, upon consent of the county board of supervisors or a city governing body, may certify any public health hazard resulting from any disaster condition if certification is required for any federal or state disaster relief program.”
Section 101040 applies to the local health officer and governing bodies of cities or counties. Again, Plaintiffs haven’t shown that this section is applicable to the State Defendants.
Health and Safety Code section 120210 states,
“Whenever in the judgment of the department it is necessary for the protection or preservation of the public health, each health officer shall, when directed by the department, do the following:
(a) Quarantine or isolate and disinfect persons, animals, houses or rooms, in accordance with general and specific instructions of the department.
(b) Destroy bedding, carpets, household goods, furnishings, materials, clothing, or animals, when ordinary means of disinfection are considered unsafe, and when the property is, in the judgment of the department, an imminent menace to the public health.
When the property is destroyed pursuant to this section, the governing body of the locality where the destruction occurs may make adequate provision for compensation in proper cases for those injured thereby.”
Section 120210 applies to destruction of property by local government agencies. It doesn’t create a right of action against the State Defendants.
Finally, Plaintiffs allege that they are entitled to compensation for Governor Newsom’s alleged statement that “nail salons started the community spread of COVID-19 in California.” (FAC, ¶ 74.) However, Civil Code section 47 states in part, “A privileged publication or broadcast is one made: [¶] (a) In the proper discharge of an official duty.” “In order for government to function effectively, state officials must have the freedom to make tough policy decisions and tell the public about the reasons behind those decisions, without fear that their statements will expose them to tort liability.
For this reason, Civil Code section 47, subdivision (a)1 cloaks all acts in the proper discharge of an official's duty with an absolute privilege.” (Maranatha Corrections, LLC v. Department of Corrections & Rehabilitation (2008) 158 Cal.App.4th 1075, 1079.) “[T]he official duty privilege is absolute and applies to public statements made by high-ranking governmental officers in the discharge of their official duties.” (Tutor-Saliba Corp. v. Herrera (2006) 136 Cal.App.4th 604, 613, citing Kilgore v. Younger (1982) 30 Cal.3d 770, 778.)
Here, Governor Newsom’s alleged statement is absolutely privileged under Civil Code section 47.
However, for the reasons discussed under the first cause of action, Plaintiffs have adequately pled a violation of the commandeering provision of Government Code section 8572. The second cause of action seeks compensation for the reasonable value of such property under section 8572. Therefore, the demurrer is overruled as to the second cause of action.
Third Cause of Action – Violation of California Constitution
The third cause of action is for violation of the California Constitution, Article 1, section 19, which states at subdivision (a), “Private property may be taken or damaged for a public use and only when just compensation, ascertained by a jury unless waived, has first been paid to, or into court for, the owner. The Legislature may provide for possession by the condemnor following commencement of eminent domain proceedings upon deposit in court and prompt release to the owner of money determined by the court to be the probable amount of just compensation.”
The Court of Appeal in 640 Tenth, supra, 78 Cal.App.5th at 860-865, discussed at length whether businessowners could allege an unconstitutional taking based on the State of California’s COVID-19 business restrictions. The appellate court concluded, “Owners have not alleged a legally sufficient regulatory taking claim.” (Id. at 861.)
People v. Severance (2006) 138 Cal.App.4th 305, 314–315, holds:
“Decisions of every division of the District Courts of Appeal are binding ... upon all the superior courts of this state.... Courts exercising inferior jurisdiction must accept the law declared by courts of superior jurisdiction. It is not their function to attempt to overrule decisions of a higher court.” (Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 455, 20 Cal.Rptr. 321, 369 P.2d 937.)”
Here, Plaintiffs raise arguments nearly identical to those raised by the businessowner plaintiffs in 640 Tenth. However, they don’t cite any court decision reaching a conclusion contrary to 640 Tenth in the context of California’s COVID-19 shutdown order and business restrictions. The 640 Tenth decision is binding on this Court, and Plaintiffs have failed to distinguish it. Therefore, under 640 Tenth the Court must sustain the demurrer to the third cause of action.
Fourth COA – Violation of Procedural Due Process
The fourth cause of action alleges violations of Plaintiffs’ procedural due process rights under the Fifth and Fourteenth Amendments to the U.S. Constitution.
Plaintiffs initially filed suit in federal district court on 2/26/21. (Defendants’ Request for Judicial Notice, Exhibit Q.) Plaintiffs’ federal complaint included first and third claims for relief under the due process clauses of the Fifth and Fourteenth Amendments to the U.S. Constitution. On 7/13/21, the district court granted Defendants’ motion to dismiss, including the first claim for relief (substantive due process) and the third claim for relief (procedural due process). (Defendants’ Request for Judicial Notice, Exhibit R.)
As to the third claim, the district court stated, “In this case, the Executive Orders affect large areas and are not directed at one or few individuals, and, therefore, do not give rise to the constitutional requirements of individual hearing and notice.”
Defendants contend the fourth cause of action is barred by res judicata.
Boeken v. Philip Morris USA, Inc. (2010) 48 Cal.4th 788, 797, holds:
““As generally understood, ‘[t]he doctrine of res judicata gives certain conclusive effect to a former judgment in subsequent litigation involving the same controversy.’ [Citation.] The doctrine ‘has a double aspect.’ [Citation.] ‘In its primary aspect,’ commonly known as claim preclusion, it ‘operates as a bar to the maintenance of a second suit between the same parties on the same cause of action. [Citation.]’ [Citation.] ‘In its secondary aspect,’ commonly known as collateral estoppel, ‘[t]he prior judgment ... “operates” ’ in ‘a second suit ... based on a different cause of action ... “as an estoppel or conclusive adjudication as to such issues in the second action as were actually litigated and determined in the first action.” [Citation.]’ [Citation.] ‘The prerequisite elements for applying the doctrine to either an entire cause of action or one or more issues are the same: (1) A claim or issue raised in the present action is identical to a claim or issue litigated in a prior proceeding; (2) the prior proceeding resulted in a final judgment on the merits; and (3) the party against whom the doctrine is being asserted was a party or in privity with a party to the prior proceeding. [Citations.]’ ” (People v. Barragan (2004) 32 Cal.4th 236, 252–253, 9 Cal.Rptr.3d 76, 83 P.3d 480.)”
To the extent Plaintiffs seek to relitigate their claims based on federal constitutional due process violations which were previously adjudicated by the federal court, their fourth cause of action is precluded under the doctrine of res judicata.
However, Plaintiffs contend res judicata does not apply because the federal court dismissed Plaintiffs’ state law claims against the State Defendants based on their immunity in federal court, but those state law claims can still be pursued in state court.
The only state law violation pled in the fourth cause of action is Defendants’ alleged violation of procedural due process caused by their “ignoring California law as to the promulgation of administrative regulations as set forth in the California Administrative Procedures Act (Cal. Gov. Code § 11340 et seq.), including but not limited to the procedures for enacting emergency regulations (Cal. Gov. Code § 11346.1).” (FAC, ¶ 100.)
The question of whether California’s COVID-19 restrictions violated the Administrative Procedures Act is discussed at length in 640 Tenth, supra, Cal.App.5th at 855-859, finding that the Governor’s orders issued during a state of emergency were not subject to the Act.
Plaintiffs have not cited any authority distinguishing 640 Tenth on this point. Therefore, the Court is bound to follow the reasoning of 640 Tenth as to the validity of Plaintiffs’ claim for violation of the Administrative Procedures Act.
Therefore, the demurrer is sustained as to the fourth cause of action.
Equitable Relief
Defendants contend Plaintiffs aren’t entitled to equitable relief because the statewide COVID-19 business restrictions have been rescinded for approximately one year. However, “[a] demurrer must dispose of an entire cause of action to be sustained.” (Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 119.)
Here, Plaintiffs do not allege an independent cause of action for equitable relief, so the claim for equitable relief is not the proper subject of Defendants’ demurrer.
Plaintiff has 20 days leave to amend as to the 3rd and 4th causes of action.
Future hearing dates
9/2/22 – MSC
10/3/22 – Jury Trial