Peters v. Yee

• Court: District Court, E.D. California
• Decided: February 15, 2024
• Docket: 2:22-cv-00266
• Status: Unknown

Opinion

1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT 8 EASTERN DISTRICT OF CALIFORNIA 9 10 JAN PETERS, No. 2:22-cv-00266-JAM-DB 11 Plaintiff, 12 v. ORDER DENYING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT AND 13 MALIA M. COHEN, in her GRANTING DEFENDANT’S MOTION FOR official capacity as SUMMARY JUDGMENT 14 Controller of the State of California, 15 Defendant. 16 17 This matter is before the Court on the parties’ cross- 18 motions for summary judgment under Rule 56(a) of the Federal 19 Rules of Civil Procedure. Plaintiff Jan Peters (“Plaintiff”) 20 filed his motion for summary judgment on October 3, 2023, Plf.’s 21 Mot. for Summary Judgment, ECF No. 63, and Defendant Malia Cohen, 22 sued in her official capacity as the California State Controller, 23 (“Defendant”) filed her cross-motion ten days later, Def.’s Mot. 24 for Summary Judgment, ECF No. 64. For the reasons stated below, 25 the Court DENIES Plaintiff’s motion for summary judgment and 26 GRANTS Defendant’s motion for summary judgment.1 27 1This motion is determined to be suitable for decision without 28 oral argument. E.D. Cal. L.R. 230(g). 1 I. BACKGROUND AND UNDISPUTED FACTS 2 Plaintiff is a citizen of Germany and has never resided in 3 California. Plf.’s Statement of Undisputed Facts (“SUF”) No. 1, 4 ECF No. 63-3. From 2000 to 2010, Plaintiff worked for Amazon.de, 5 a subsidiary of Amazon.com, Inc., in Munich, Germany. Def.’s SUF 6 No. 1, ECF No. 64-2. As an employee of Amazon.de, Plaintiff 7 received shares in Amazon.com, Inc. (the “Shares”), which were 8 held in an account managed by Charles Schwab & Co., Inc. 9 (“Charles Schwab”) Def.’s SUF No. 2. Charles Schwab filed a 10 “Holder Notice Report” and “Holder Remit Report” to the State 11 Controller’s Office after deeming Plaintiff’s stock as unclaimed 12 property under California’s Unclaimed Property Law (“UPL”), Cal. 13 Civ. Proc. Code § 1500, et seq. Def.’s SUF Nos. 7, 11. Charles 14 Schwab ultimately transferred the Shares to the State 15 Controller’s Office, Def.’s SUF No. 11, who then sold the Shares 16 as required under the UPL, Def.’s SUF No. 13. After the Shares 17 were sold, Plaintiff filed a claim with the State Controller’s 18 Office to recover the proceeds from the sale. Def.’s SUF No. 14. 19 The Controller’s Office reviewed Plaintiff’s claim and wired 20 Plaintiff the proceeds, less wire transfer fees. Def.’s SUF No. 21 14. 22 Dissatisfied with the amount of the proceeds he received, 23 Plaintiff filed his complaint in this action asserting two causes 24 of action under 42 U.S.C. section 1983. Compl., ECF No. 1. 25 Plaintiff seeks an injunction enjoining the future enforcement of 26 the UPL, declaratory relief that Plaintiff’s Fifth and Fourteenth 27 Amendment rights were violated, and attorney’s fees and costs 28 under 42 U.S.C. section 1988. Prayer for Relief, Compl. at 27. 1 Plaintiff also seeks an injunction ordering Defendant to return 2 the Shares. Id. However, because the Shares have already been 3 sold, Plaintiff actually seeks the difference between the current 4 value of the Shares and the sale price. Plf.’s Opp’n to Def.’s 5 Mot. for Summary Judgment (“Plf.’s Opp’n”), ECF No. 67 at 8, 20- 6 21; Exh. 14 to Def.’s Mot. for Summary Judgment, ECF No. 64-4 at 7 141-42. Plaintiff contends the Shares are currently more 8 valuable than when they were sold. See Plf.’s Opp’n at 8, 20-21; 9 Exh. 14 to Def.’s Mot. for Summary Judgment. 10 Plaintiff filed an opposition to Defendant’s cross-motion, 11 Plf.’s Opp’n, ECF No. 67, and Defendant filed a reply. Reply, 12 ECF No. 70. However, Plaintiff did not file a response to 13 Defendant’s statement of undisputed facts as required under this 14 Court’s Local Rule 260(b). See generally Plf.’s Opp’n. Rather 15 than deem all Defendant’s facts undisputed, the Court has 16 determined whether any of Plaintiff’s facts sufficiently dispute 17 Defendant’s facts and any facts insufficiently disputed have been 18 deemed admitted. Beard v. Banks, 548 U.S. 521, 527 (2006); Fed. 19 R. Civ. P. 56(e). 20 After this action was filed, Malia Cohen succeeded Betty Yee 21 as California’s State Controller. Ms. Cohen has thus replaced 22 Ms. Yee as the defendant in this action under Rule 25 of the 23 Federal Rules of the Civil Procedure. Def.’s Mot. for Summary 24 Judgment at 1 n.1. 25 /// 26 /// 27 /// 28 /// 1 II. OPINION 2 A. Legal Standard 3 A Court must grant a party’s motion for summary judgment 4 “if the movant shows that there is no genuine dispute as to any 5 material fact and the movant is entitled to a judgment as a 6 matter of law.” Fed. R. Civ. P. 56(a). The movant bears the 7 initial burden of “informing the district court of the basis for 8 its motion, and identifying [the documents] which it believes 9 demonstrate the absence of a genuine issue of a material fact.” 10 Celotex Corp v. Catrett, 477 U.S. 317, 323 (1986). A fact is 11 material if it “might affect the outcome of the suit under the 12 governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 13 248 (1986). Once the movant makes this initial showing, the 14 burden rests upon the nonmoving party to “set forth specific 15 facts showing that there is a genuine issue for trial.” Id. An 16 issue of fact is genuine if “the evidence is such that a 17 reasonable jury could return a verdict for the nonmoving party.” 18 Id. All reasonable inferences are drawn in favor of the non- 19 moving party. In re Oracle Corp. Sec. Litig., 627 F.3d 376, 387 20 (9th Cir. 2010) (citing Anderson, 477 U.S. at 255). 21 When parties file cross-motions for summary judgment, the 22 Court must consider each motion on its own merits and “the 23 appropriate evidentiary material identified and submitted in 24 support of both motions, and in opposition to both motions, 25 before ruling on each of them.” Fair Hous. Council of Riverside 26 Cnty., Inc. v. Riverside Two, 249 F.3d 1132, 1134-36 (9th Cir. 27 2001). 28 /// 1 B. Analysis 2 1. California’s Unclaimed Property Law 3 “[T]he purpose of the UPL is to locate owners of apparently 4 lost or abandoned property and restore their property to them; 5 but if these efforts are unsuccessful, to give the benefit of 6 any unclaimed property to California, rather than to financial 7 institutions or other private entities holding the property 8 (‘holders’).” Taylor v. Yee (Taylor V), 780 F.3d 928, 931 (9th 9 Cir. 2015). Holders must transfer property that meets the UPL's 10 definition of unclaimed property to the State, which is known as 11 escheatment. See UPL §§ 1510 et seq. 12 Before and after escheatment, the UPL requires multiple 13 forms of notice be given to the owners of unclaimed property to 14 comply with due process. See id. If the owner does not timely 15 respond and establish his right to the property, the property is 16 deemed unclaimed and escheats to the State. Id. §§ 1530, 17 1532(a)-(b). Under UPL section 1563(b), the Controller must 18 liquidate unclaimed, escheated securities that are listed on a 19 stock exchange at the prevailing prices on that exchange. Id. 20 § 1563(b). 21 Escheated property, including the proceeds from the sale of 22 securities, does not “permanently escheat to the state.” Id. 23 § 1501.5(a). Instead, the Controller holds the unclaimed 24 property, including the proceeds from a sale, in trust for the 25 owner. Those who “claim[ ] to have been the owner . . . of 26 property paid or delivered to the Controller under this chapter 27 may file a claim to the property or to the net proceeds from its 28 sale.” Id. § 1540(a). 1 Since the UPL was amended in 2007, the Ninth Circuit has 2 repeatedly found the UPL’s notice procedures facially 3 constitutional. Taylor v. Westly, 525 F.3d 1288, 1289 (9th Cir. 4 2008); Taylor V, 780 F.3d at 934-35 (citing Suever v. Connell 5 (Suever II), 579 F.3d 1047, 1054 n.4 (9th Cir. 2009)). Plaintiff 6 concedes and instead brings an as-applied challenge. Plf.’s 7 Opp’n at 11. 8 Although Plaintiff argues the UPL does not apply to German 9 citizens, e.g., Plf.’s Mot. for Summary Judgment at 2; Plf.’s 10 Opp’n at 8, a foreign national’s unclaimed property may escheat 11 to the State if the holder of that property is domiciled in 12 California. UPL § 1510(d). Therefore, Plaintiff’s argument that 13 the Controller lacks jurisdiction over a foreign citizen’s 14 property is legally unsupported. 15 2. Plaintiff’s Motion for Summary Judgment, ECF No. 63 16 Many material facts in support of Plaintiff’s motion for 17 summary judgment are disputed or unsupported by the evidence, 18 including but not limited to whether the holder of the Shares is 19 domiciled in California, whether Defendant failed to give 20 Plaintiff notice as prescribed by the UPL, and whether 21 Defendant’s agent modified Plaintiff’s address in the holder’s 22 records. E.g., Def.’s Response to Plf.’s SUF Nos. 2, 5, 11, 16, 23 22, 23, 27, 34, 35. Plaintiff also fails to meet his burden 24 demonstrating that escheatment of the Shares violates Federal or 25 state securities laws. See Plf.’s P. & A., ECF No. 63-1 at 30- 26 31. Given these genuine disputes of material fact and burden of 27 proof failures, Plaintiff’s motion for summary judgment is 28 denied. 1 3. Defendant’s Motion for Summary Judgment, ECF No. 64 2 Defendant moves for summary judgment on standing and 3 Eleventh Amendment grounds. Def.’s P. & A. (“Mot.”), ECF No. 4 64-1 at 5, 7. 5 a. Standing 6 Defendant argues Plaintiff lacks standing to maintain this 7 action because Plaintiff received the proceeds from the sale of 8 the Shares. Def.’s Mot. at 11; Def.’s SUF No. 14. 9 Plaintiff must satisfy three elements to establish 10 standing: (1) he suffered an “injury in fact” that is concrete, 11 particularized, actual, and imminent—not hypothetical; (2) there 12 exists a “causal connection between the injury and conduct 13 complained of;” and (3) “it must be likely, as opposed to merely 14 speculative, that the injury will be redressed by a favorable 15 decision.” Lujan v. Defs. of Wildlife, 504 U.S. 555, 560-61 16 (1992) (internal quotations omitted). 17 Plaintiff asserts he suffered an injury in fact when the 18 Shares were unconstitutionally transferred to, and liquidated 19 by, the State Controller’s Office. The amount Plaintiff 20 received from the liquidation is purportedly less than the 21 current market price of the Shares. Plf.’s Opp’n at 8, 20-21; 22 Exh. 14 to Def.’s Mot. for Summary Judgment at 141-42. Thus, 23 Plaintiff seeks to recover the appreciation he was not paid. 24 That Plaintiff was paid the proceeds from the sale only partly 25 redresses the harm sustained. The Court therefore finds 26 Plaintiff has standing to maintain this action. 27 Plaintiff also seeks an injunction enjoining the future 28 enforcement and administration of the UPL. Prayer for Relief, 1 Compl. at 27. However, Plaintiff has not identified that any 2 other property has been, or will imminently be, escheated to the 3 State. Def.’s SUF No. 16; Def.’s Response to Plf.’s SUF No. 10, 4 ECF No. 64-3. Rather, Plaintiff is merely concerned about the 5 possibility that other property may be treated as his Shares 6 were. Exh. 2 to Def.’s Mot. for Summary Judgment at 27-28. The 7 mere potential for future escheatment of unidentified property 8 is hypothetical and speculative. Plaintiff has not demonstrated 9 that he has suffered, or will imminently suffer, an actual 10 injury in which an injunction enjoining the future enforcement 11 of the UPL would likely redress. The injury Plaintiff suffered— 12 the loss in appreciation due to the forced liquidation of the 13 Shares—is insufficient to enjoin the future enforcement of the 14 UPL. Therefore, the Court finds Plaintiff lacks standing to 15 seek this remedy. 16 In sum, the Court finds Plaintiff has standing to seek the 17 difference between the current value of the Shares and the 18 proceeds from the sale of the Shares but lacks standing to 19 enjoin Defendant from prospectively enforcing the UPL. Whether 20 Plaintiff may recover the Shares’ post-liquidation gain is a 21 separate legal issue addressed by the Court in the next section. 22 b. Eleventh Amendment Immunity 23 Defendant argues she is entitled to judgment as a matter of 24 law because she is immune from suit under the Eleventh Amendment. 25 Def.’s Mot. at 14-16. Plaintiff asserts several reasons why the 26 Eleventh Amendment does not bar this action, but each is 27 unpersuasive, unsupported by legal authority, or has already been 28 rejected by the Ninth Circuit. 1 Under the Eleventh Amendment, a plaintiff cannot assert a 2 claim under 42 U.S.C. section 1983 against a state or a state 3 official sued in her official capacity absent a state’s waiver. 4 U.S. Const. amend. XI; Will v. Michigan Dep’t of State Police, 5 491 U.S. 58, 71 (1989); Doe v. Lawrence Livermore Nat. Lab’y, 131 6 F.3d 836, 839 (9th Cir. 1997); Edelman v. Jordan, 415 U.S. 651, 7 662-63 (1974). Plaintiff does not contend California consented 8 to suit or otherwise waived its sovereign immunity. See 9 generally Plf.’s Opp’n. Here, Defendant is sued in her official 10 capacity as the State Controller of California. Compl. ¶ 4. 11 Therefore, this action is barred by the Eleventh Amendment unless 12 an exception applies. 13 Plaintiff correctly notes that the Eleventh Amendment does 14 not bar actions to recover one’s own property from a state if 15 (1) the public official acted beyond their statutory authority 16 (ultra vires) or (2) when the action leading to government 17 possession was unconstitutional. Malone v. Bowdoin, 369 U.S. 18 643, 647-48 (1962); Taylor v. Westly (Taylor I), 402 F.3d 924, 19 934-35 (9th Cir. 2005)); see also United States v. Lee, 106 U.S. 20 196 (1882). But in this context, where escheated property is 21 sold, Plaintiff cannot recover more than the proceeds from the 22 sale because it is indistinguishable from, and treated as, an 23 award of damages against the State—which is barred by the 24 Eleventh Amendment. Suever II, 579 F.3d at 1058-59; Edelman, 415 25 U.S. at 668; Seven Up Pete Venture v. Schweitzer, 523 F.3d 948, 26 956 (9th Cir. 2008), cert. denied, 555 U.S. 885 (2008) (Fifth 27 Amendment). In other words, while Lee and Malone allow a 28 plaintiff to sue a state to recover one’s own property, they do 1 not permit a plaintiff to recover anything greater than the 2 proceeds from a stock sale even if the state official’s conduct 3 was unconstitutional or ultra vires. Suever II, 579 F.3d at 4 1058-59. 5 Under the Ex Parte Young exception, a plaintiff may sue a 6 state official in their official capacity to obtain prospective 7 injunctive relief. Ex Parte Young, 209 U.S. 123, 159–160 (1908); 8 Taylor I, 402 F.3d 924; Will, 491 U.S. at 71 n.10; Kentucky v. 9 Graham, 473 U.S. 159, 167 n.14 (1985). A claim for damages, 10 however, remains barred by the Eleventh Amendment. Id. at 167 11 n.14. Plaintiff seeks an injunction ordering the return of the 12 difference between the proceeds from the sale of the Shares and 13 the current value of the Shares. Prayer for Relief, Compl. at 14 27; Plf.’s Opp’n at 8, 20-21; Exh. 14 to Def.’s Mot. for Summary 15 Judgment at 141-42. While this may appear prospective in nature, 16 the practical effect is no different than an award of damages and 17 is thus treated accordingly. Suever II, 579 F.3d at 1059; see 18 also Edelman, 415 U.S. at 662-63; Schweitzer, 523 F.3d at 956. 19 Therefore, Plaintiff’s claims do not fall within the Ex Parte 20 Young exception. Taylor I, 402 F.3d at 935; Schweitzer, 523 F.3d 21 at 956; Graham, 473 U.S. at 165. The same is true of Plaintiff’s 22 request for declaratory relief. Taylor I, 402 F.3d at 935 23 (holding a request for declaratory relief that property was 24 unconstitutionally taken does not fall within the Ex Parte Young 25 exception). 26 Lastly, Plaintiff’s argument that the Eleventh Amendment is 27 no bar to this action because the Unclaimed Property Fund is 28 comprised of private money, rather than funds of the State, ee DE III IRIE IE IIE ID IIE OE INO IEE IRIE IIR BONED IR EES eee

1 Plf.’s Opp’n at 27-28, has already been rejected by the Ninth 2 Circuit. Suever II, 579 F.3d at 1060 (holding that Plaintiff 3 cannot recover more than the proceeds from the liquidation even 4 though the Unclaimed Property Fund is not comprised of state 5 funds). 6 In sum, because Plaintiff has already received the proceeds 7 from the sale of the Shares, the Eleventh Amendment bars any 8 further relief to remedy the harm Plaintiff may have sustained in 9 connection with the transfer and liquidation of the Shares. 10 Til. ORDER 11 For the reasons set forth above, the Court DENIES 12 Plaintiff’s motion for summary judgment and GRANTS Defendant’s 13 | motion for summary judgment. 14 IT IS SO ORDERED. 15 Dated: February 14, 2024 16 ep JOHN A. MENDEZ 18 SENIOR UNITED*STATES DISTRICT JUDGE 19 20 21 22 23 24 25 26 27 28 11