Topolewski America, Inc. v. State of California Employment Development Department

• Court: District Court, D. Nevada
• Decided: March 31, 2023
• Docket: 2:22-cv-02045
• Status: Unknown

Opinion

1 UNITED STATES DISTRICT COURT

2 DISTRICT OF NEVADA

3 TOPOLEWSKI AMERICA, INC., ) 4 ) Plaintiff, ) Case No.: 2:22-cv-02045-GMN-DJA 5 vs. ) ) ORDER 6 STATE OF CALIFORNIA EMPLOYMENT ) 7 DEVELOPMENT DEPARTMENT, ) ) 8 Defendant. ) ) 9

10 11 Pending before the Court is Defendant State of California Employment Development 12 Department’s (“Defendant’s”) Motion to Dismiss, (ECF No. 9). Plaintiff Topolewski America, 13 Inc. (“Plaintiff”) filed a Response,1 (ECF No. 12), and Defendant filed a Reply, (ECF No. 13). 14 For the reasons discussed below, the Court GRANTS Defendant’s Motion to Dismiss. 15 I. BACKGROUND 16 This case arises from Plaintiff’s contention that Defendant wrongfully levied Plaintiff’s 17 bank accounts and subjected it to tax levy fees. (Compl. ¶ 12–13, ECF No. 1). Plaintiff alleges 18 19 20 21 22

23 1 Plaintiff’s Response included a Countermotion for Leave to File Amended Complaint. (Resp. 3:8–4:22, ECF 24 No. 12). Pursuant to Local Rule IC 2-2(b), “for each type of relief requested or purpose of the document, a separate document must be filed.” LR IC 2-2(b). Thus, the Court does not have to consider Plaintiff’s 25 Countermotion until it is filed separately, as a motion. See Mutual of Enumclaw Insurance Company v. Vignola, No. 2:16-cv-2080, at *1 n.1 (D. Nev. May 25, 2017). Despite this procedural violation, the Court nevertheless considers Plaintiff’s Countermotion and DENIES it for the reasons set forth below. 1 it is a Nevada corporation with no California payroll.2 (Id. ¶ 7). Defendant is a government 2 entity in California. (Id. ¶ 9). 3 Plaintiff asserts that although it has no California payroll, Defendant “assessed wages 4 [against it] in California” despite Defendant having no “evidence to support any assessment.” 5 (Id. ¶ 12). Plaintiff further maintains that Defendant wrongfully levied Plaintiff’s bank 6 accounts and charged it with tax levy fees. (Id. ¶¶ 13–14). Plaintiff filed an administrative 7 appeal against Defendant, which was denied. (Id. ¶¶ 15–16). Plaintiff then filed an action 8 against Defendant in California Superior Court which was dismissed because Plaintiff failed to 9 exhaust its administrative remedies under California’s tax refund procedure. (See generally 10 Order Dismissing Action, Ex. D to Mot. Dismiss (“MTD”), ECF No. 9-4). Plaintiff 11 subsequently initiated the present action, bringing claims for (1) conversion; (2) abuse of 12 process; and (3) injunctive relief. (Id. ¶¶ 18–32). Defendant then filed the instant Motion to 13 Dismiss, (ECF No. 9), which the Court discusses below. 14 II. LEGAL STANDARD 15 Dismissal is appropriate under Rule 12(b)(6) where a pleader fails to state a claim upon 16 which relief can be granted. Fed. R. Civ. P. 12(b)(6); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 17 555 (2007). A pleading must give fair notice of a legally cognizable claim and the grounds on 18 which it rests, and although a court must take all factual allegations as true, legal conclusions 19 couched as factual allegations are insufficient. Twombly, 550 U.S. at 555. Accordingly, Rule 20 12(b)(6) requires “more than labels and conclusions, and a formulaic recitation of the elements 21 of a cause of action will not do.” Id. “To survive a motion to dismiss, a complaint must contain 22 sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its 23

24 2 Defendant disputes whether Plaintiff is a Nevada corporation with no California payroll, (Mot. Dismiss 3:26– 25 28, ECF No. 9), but at this stage in the litigation, the Court assumes that the allegations in the Complaint are true (even if doubtful in fact). See Neitzke v. Williams, 490 U.S. 319, 327 (1989) (“Rule 12(b)(6) does not countenance . . . dismissals based on a judge’s disbelief of a complaint’s factual allegations.”). 1 face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). “A 2 claim has facial plausibility when the plaintiff pleads factual content that allows the court to 3 draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. This 4 standard “asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. 5 “Generally, a district court may not consider any material beyond the pleadings in ruling 6 on a Rule 12(b)(6) motion.” Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 7 1555 n.19 (9th Cir. 1990). “However, material which is properly submitted as part of the 8 complaint may be considered.” Id. Similarly, “documents whose contents are alleged in a 9 complaint and whose authenticity no party questions, but which are not physically attached to 10 the pleading, may be considered in ruling on a Rule 12(b)(6) motion to dismiss.” Branch v. 11 Tunnell, 14 F.3d 449, 454 (9th Cir. 1994). On a motion to dismiss, a court may also take 12 judicial notice of “matters of public record.” Mack v. S. Bay Beer Distrib., 798 F.2d 1279, 1282 13 (9th Cir. 1986). Otherwise, if a court considers materials outside of the pleadings, the motion 14 to dismiss is converted into a motion for summary judgment. Fed. R. Civ. P. 12(d). 15 If the court grants a motion to dismiss for failure to state a claim, leave to amend should 16 be granted unless it is clear that the deficiencies of the complaint cannot be cured by 17 amendment. DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir. 1992). Pursuant 18 to Rule 15(a), the court should “freely” give leave to amend “when justice so requires,” and in 19 the absence of a reason such as “undue delay, bad faith or dilatory motive on the part of the 20 movant, repeated failure to cure deficiencies by amendments previously allowed undue 21 prejudice to the opposing party by virtue of allowance of the amendment, futility of the 22 amendment, etc.” Foman v. Davis, 371 U.S. 178, 182 (1962). 23 24

25 1 III. DISCUSSION 2 Defendant now moves to dismiss Plaintiff’s Complaint, arguing that Plaintiff’s claims 3 are barred by the Eleventh Amendment, Tax Injunction Act, and comity doctrine. (MTD 7:9– 4 10:9). The Court addresses each argument in turn, beginning with an examination of whether 5 the Eleventh Amendment bars Plaintiff’s claims. 6 A. Eleventh Amendment 7 “[T]he Constitution does not provide for federal jurisdiction over suits against 8 nonconsenting states.” Kimel v. Florida Bd. of Regents, 528 U.S. 62, 73 (2000). The Eleventh 9 Amendment bars suits seeking either damages or injunctive relief “against a state, an ‘arm of 10 the state,’ its instrumentalities, or its agencies.” Franceschi v. Schwartz, 57 F.3d 828, 831 (9th 11 Cir. 1995) (per curiam) (quoting Durning v. Citibank, N.A., 950 F.2d 1419, 1422–23 (9th Cir. 12 1991)). Congress may limit this immunity, but only through Section 5 of the Fourteenth 13 Amendment and only where there is a “congruence and proportionality between the injury to be 14 prevent or remedied and the means adopted to that end.” Kimel, 528 U.S. at 81–82 (quoting 15 City of Boerne v. Flores, 521 U.S. 507, 520 (1997)). “Like a jurisdictional bar and unlike a 16 traditional immunity, however, the effect of the Eleventh Amendment must be considered sua 17 sponte by federal courts.” Charley’s Taxi Radio Dispatch Corp. v. SIDA of Hawaii, Inc., 810 18 F.2d 869, 873 n.2 (9th Cir. 1987); see also Jones v. Becerra, Smittick v. Cal. Workers 19 Compensation Appeals Bd., 10-cv-02251, 2010 WL 1929779, at *2 n.5 (C.D. Cal. May 11, 20 2010). 21 As relevant here, “the Ninth Circuit has already held that [California’s Employment 22 Development Department] is entitled to Eleventh Amendment immunity.” Fitzpatrick v. Cal. 23 Emp’t Dev. Dep’t/State Disability Ins. Program, No. 3:21-cv-01424, 2022 WL 3703857, at *2 24 (S.D. Cal. Aug. 26, 2022) (citing Wood v. Sargent, 694 F.2d 1159, 1161 (9th Cir. 1982) (“As to

25 the defendants California Employment Development Department . . . the action is barred by the 1 Eleventh Amendment to the United States Constitution)). “Nor is this the first case where [a] 2 [c]ourt has ruled that [California’s Employment Development Department] is immune from suit 3 under the Eleventh Amendment.” Id.; see Nelson v. Cal. Emp. Dev. Dep’t, No. 21-cv-2145, 4 2022 WL 687150, at *4 (S.D. Cal. Mar. 8, 2022) (“Plaintiff’s suit against the [Employment 5 Development Department] is barred by the Eleventh Amendment.”); Perryman v. Emp’t Dev. 6 Dep’t Cal., No. 19-cv-01152, 2020 WL 6587243, at *3 (C.D. Cal. Aug. 26, 2020) (“[The 7 Employment Development Department] is a state entity that enjoys Eleventh Amendment 8 immunity.”); Taylor v. Cal. Emp’t Dev. Dept., No. 2:11-cv-0602, 2013 WL 1281745, at *5 9 (E.D. Cal. Mar. 25, 2013). Accordingly, Plaintiff’s claims are barred by the Eleventh 10 Amendment. 11 B. Tax Injunction Act & Comity Doctrine 12 Additionally, Defendant contends that Plaintiff’s claims are barred by the Tax Injunction 13 Act and comity doctrine. (MTD 8:25–10:9); (Reply 11:21–13:7, ECF No. 13). Here, Plaintiff’s 14 allegations amount to a complaint that Defendant wrongfully levied Plaintiff’s bank accounts 15 and charged it with tax levy fees. (See generally Compl.). Plaintiff thereby seeks money 16 damages as well as injunctive relief to enjoin Defendant from “issuing any further levies upon 17 any and all bank accounts held by” Plaintiff. (Id.). 18 Under 28 U.S.C. § 1341, also called the Tax Injunction Act (“TIA”), “[t]he district 19 courts shall not enjoin, suspend, or restrain, the assessment, levy or collection of any tax under 20 State law where a plain, speedy and efficient remedy may be had in the courts of such State.” 21 28 U.S.C. § 1341. “Based on a plain reading of the statute, the district court does not have 22 jurisdiction over [a] Taxpayers’ action if it seeks district court interference with California’s tax 23 assessment and collection process.” Jerron West, Inc. v. Cal. State Bd. of Equalization, 129 24 F.3d 1334, 1337 (9th Cir. 1997).

25 /// 1 The statute’s “primary purpose is to prevent federal court intrusion into state tax 2 collection, an area which deserves ‘the utmost comity to state law and procedure.’” Milpitas 3 Cab Co. v. Emp’t Dev. Dep’t of the State of Cal., No. 15-cv-00730, 2015 WL 3750189, at *3 4 (N.D. Cal. June 12, 2015) (quoting Jerron West, Inc., 129 F.3d at 1338). The TIA prohibits 5 declaratory and injunctive relief, see California v. Grace Brethren Church, 457 U.S. 393, 411 6 (1982) (“[B]ecause Congress’ intent in enacting the Tax Injunction Act was to prevent federal- 7 court-interference with the assessment and collection of state taxes, we hold that the Act 8 prohibits declaratory as well as injunctive relief.”), as well as “actions that also seeks refunds or 9 damages.” Tonya Washington v. Franchise Tax Board, No. 15-cv-1254, 2016 WL 3167717, at 10 *7 (C.D. Cal. May 5, 2016) (citing Marvin F. Poer & Co. v. Cnts. of Alameda, 725 F.2d 1234, 11 1235 (9th Cir. 1984). 12 The Supreme Court and the Ninth Circuit have held that California’s refund procedures 13 constitute a plain, speedy and efficient remedy for taxpayers. See Grace Brethren Church, 457 14 U.S. at 413 (holding that state law remedy was “plain, speedy and efficient” because appellees 15 could seek a refund of their unemployment taxes through state administrative and judicial 16 procedures and obtain state judicial review of their constitutional claims); Franchise Tax Bd. v. 17 Alcan Aluminum, 493 U.S. 331, 338 (1990) (“California's [franchise tax] refund procedures 18 constitute a plain, speedy, and efficient remedy.”); Jerron West, Inc, 129 F.3d at 1339 (“The 19 Supreme Court and this court have concluded that California's tax refund remedy is generally a 20 ‘plain, speedy and efficient’ remedy under the Act.”); Mandel v. Hutchinson, 494 F.2d 364, 367 21 (9th Cir. 1974) (“We have held previously that the California refund procedure is a plain, 22 speedy and efficient remedy.”). 23 The California Court of Appeal outlined the applicable administrative process Merch v. 24 Concept Group, Inc. v. Cal. Unemp. Ins. Appeals Bd.. 181 Cal. App. 4th 1274, 1281 (2010).

25 To challenge a tax, a party must first file a claim for refund or credit. Cal. Unemp. Ins. Code. 1 §§ 1178(a), 1241(a). If the director of the Employment Development Department denies the 2 claim for refund or credit, the claimant may file a petition for review with an administrative law 3 judge. Id. §§ 1180, 1222. The administrative law judge will then review the matter and render 4 a decision or order. Id. § 1223. The parties may file an appeal to the Board, and the Appeals 5 Board will issue a decision. Id. §§ 1224, 1241. Once taxpayers have sought and been denied a 6 refund, they may file an action in California Superior Court to challenge the validity of the tax 7 and seek a refund for taxes paid. Id. § 1241; Grace Brethren Church, 457 U.S. 393, 413–14 8 (1982). 9 Here, Plaintiff does not contend that California lacks a plain, speedy, and efficient 10 process, but rather, asserts it is exempted from this process because it is not a California 11 corporation and “there are no California employees in order to exhaust its remedies.” (Compl. ¶ 12 14); (see generally Resp., ECF No. 12). What Plaintiff omits is that the California Superior 13 Court rejected this precise argument, explaining that California’s administrative process does 14 not distinguish between “California and out of state entities” and that “Plaintiff does not 15 provide any case law in support of this assertion.” (Order Dismissing Action at 4, Ex. D to 16 MTD). Plaintiff presents no reason for the Court to deviate from the California Superior 17 Court’s conclusion. As the Complaint does not otherwise demonstrate that Plaintiff exhausted 18 its administrative remedies, the proper channel for Plaintiff to bring any claim is through the 19 administrative procedures provided under California law. 20 Therefore, to the extent Plaintiff seeks to enjoin Defendant from taking action to levy 21 Plaintiff’s bank accounts and charge it with tax levy fees, the TIA would bar such relief. And 22 as to Plaintiff’s request for money damages pursuant to its conversion and abuse of process 23 claims, the TIA and comity doctrine would preclude such relief. See Frederickson v. Starbucks 24 Corp., 840 F.3d 1119, 1124 (9th Cir. 2016) (“The comity doctrine extends to claims seeking

25 damages based on the same federalism concerns animating the Tax Injunction Act’s limits on 1 declaratory and injunctive relief.”). The Court’s adjudication of Plaintiff’s claims that 2 Defendant is unlawfully levying Plaintiff’s bank accounts and charging it with a tax lev fee 3 “would risk disrupting California’s administration of its tax system.” Sohmer v. Internal 4 Revenue Service, No. 18-cv-01172, 2018 WL 6133724, at *6 (C.D. Cal. Oct. 5, 2018); see 5 Chaudry v. Cnty. of San Diego, No. 21-cv-1847, 2022 WL 4373418, at *7 (S.D. Cal. Sept. 20, 6 2022) (“Because the gravamen of Plaintiff’s relief for damages interferes with the state’s 7 administration of its tax system, the TIA bars the relief Plaintiff seeks.”). Accordingly, the 8 Court may not consider Plaintiff’s tax-related claims against Defendant pursuant to the TIA and 9 comity doctrine. 10 In sum, Plaintiff’s claims are barred by the Eleventh Amendment, TIA, and comity 11 doctrine. Therefore, Defendant’s Motion to Dismiss is GRANTED. 12 C. Leave to File Amended Complaint 13 Plaintiff’s Response included a Countermotion for Leave to File Amended Complaint. 14 (Resp. 3:8–4:22). Pursuant to Local Rule IC 2-2(b), “for each type of relief requested or 15 purpose of the document, a separate document must be filed.” LR IC 2-2(b). The Local Rules 16 illustrate this rule with the following example: “separate documents must be filed for a 17 response to a motion and a countermotion . . . rather than filing a response and a countermotion 18 in one document.” Id. Thus, Plaintiff’s Countermotion violates Local Rule IC 2-2(b). See 19 Pribyl v. Allstate Ins. Co., No. 2:17-cv-2068, 2018 WL 4088015, at *4 (D. Nev. Aug. 27, 20 2018); Georgiou Family Trust v. Ruthen, No. 2:21-cv-1060, 2021 WL 5441137, at *2 (D. Nev. 21 Nov. 19, 2021) (“Alternatively, plaintiffs request leave to amend the operative complaint in the 22 event the court strikes the first amended complaint . . . . The court cannot consider plaintiffs' 23 request for leave to amend their complaint unless it is filed separately, as a motion.”). 24 Although this procedural violation is a sufficient reason to deny the Countermotion, the Court

25 will nevertheless evaluate the merits of the Countermotion. 1 Plaintiff’s Amended Complaint seeks to add a claim under 42 U.S.C. § 1983 for 2 violation of its due process rights under the Fourteenth Amendment, and Defendant’s 3 individual employees (in their official and individual capacity) who “acted outside the scope of 4 their authority in levying [Plaintiff’s] accounts without notice and an opportunity to respond.” 5 (Resp. 3:10–11). In response, Defendant contends the Court should decline leave to amend 6 because the Eleventh Amendment, TIA, and comity doctrine bars Plaintiff’s Amended 7 Complaint. (Reply 11:21–12:13). 8 Under Fed. R. Civ. P. 15(a), a court should freely give leave to amend a pleading when 9 justice so requires. Five factors, otherwise known as the Factors, should be weighed when 10 deciding whether to give leave to amend: (1) undue delay; (2) bad faith or dilatory motive on 11 the moving party’s behalf; (3) repeated failure to cure deficiencies by previously allowed 12 amendments; (4) undue prejudice to the opposing party caused by allowing amendment; and (5) 13 futility of amendment. Although prejudice to the opposing party “carries the great weight[,] . . . 14 a strong showing of any of the remaining Forman factors” can justify the denial of leave to 15 amend.” See Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003) (per 16 curiam). 17 “A motion for leave to amend should be denied on futility grounds when ‘no sets of 18 facts can be proved under the amendment . . . that would constitute a valid and sufficient claim 19 or defense.” Thimes Solutions Inc. v. TP Link USA Corp., No. 19-cv-10374, 2020 WL 6154192, 20 at *2 (C.D. Cal. Aug. 31, 2020) (quoting B-K Lighting, Inc. v. Fresno Valves & Casting, No. 21 06-cv-02825, at *3 (C.D. Cal. Jan. 7, 2008); see Lockheed Martin Corp. v. Network Solutions, 22 Inc., 194 F.3d 980, 986 (9th Cir. 1999) (“Where the legal basis for a cause of action is tenuous, 23 futility supports the refusal to grant leave to amend.”). “A proposed amendment is futile if the 24 new claim could be defeated by a motion to dismiss or a motion for summary judgment.”

25 California v. Neville Chem. Co., 213 F. Supp. 2d 1142, 1144–45 (C.D. Cal. 2002) (quotation 1 omitted). “Futility alone can justify a court’s refusal to grant leave to amend.” Novak v. United 2 States, 795 F.3d 1012, 1020 (9th Cir. 2015). 3 Plaintiff’s Countermotion only contends that the First Amended Complaint can plausibly 4 allege that Defendant and its individual employees are not immune under the Eleventh 5 Amendment. (Resp. 4:11–15). But Plaintiff’s claims are barred by more than just the Eleventh 6 Amendment. Even assuming Plaintiff’s argument is correct, the Court is unable to adjudicate 7 Plaintiff’s Amended Complaint under the TIA and comity doctrine. 8 As stated, the TIA prohibits declaratory and injunctive relief. In addition to the TIA’s 9 bar on interfering with a state’s tax assessment, the Supreme Court has also recognized that 10 principles of comity bar a suit for damages brought in federal court under 42 U.S.C. § 1983 11 challenging a state tax assessment. Fair Assessment in Real Estate Ass’n, Inc. v. McNary, 454 12 U.S. 100, 113, 116 (1981). Replying on McNary, the Ninth Circuit rejected the taxpayer’s 13 argument that section 1983 is an exception to the bar under the TIA. See Hawaii Tel. Co. v. 14 State Dept. of Labor and Indus. Rels, 627 F.2d 905, 910 (9th Cir. 1982) (noting that McNary 15 did not definitely resolve the relationship between section 1983 and the [TIA] but “held that the 16 principle of comity alone bars taxpayers’ damages actions brought in federal courts under 17 section 1983 to redress the allegedly unconstitutional administration of a state tax system”). 18 By the Amended Complaint, Plaintiff seeks damages under 42 U.S.C. § 1983 for 19 violation of his Due Process Rights under the Fourteenth Amendment. Because Plaintiff’s 20 relief interferes with the state’s administration of its tax system, the TIA bars the relief Plaintiff 21 seeks. See Chaudry, 2022 WL 4373418, at *7; Docken v. City of Edgewood, No. 14-cv-5365, 22 2015 WL 1529528, at *2 (W.D. Wash. Apr. 2, 2015) (“The TIA prohibits both declaratory and 23 injunctive relief, as well as § 1983 suits for damages.”). Further, even if the TIA does not 24 explicitly bar this claim, it “must still be barred under the doctrine of comity.” Id. (citing

25 McNary, 454 U.S. at 116.”). “Because of principles of comity and federalism, Congress never 1 authorized federal courts to entertain damages actions under § 1983 against state taxes when 2 state law furnishers an adequate legal remedy.” Nat’l Private Truck Council, Inc. v. Oklahoma 3 Tax Comm’n, 515 U.S. 582, 587 (1995) (citing McNary, 454 U.S. at 116). And the Court has 4 already determined that Plaintiff has an adequate remedy under California’s refund procedure. 5 Accordingly, any damages claim under 42 U.S.C. § 1983 is barred by the TIA.3 6 D. NRS § 18.010(2)(b) 7 Defendant argues it is entitled to attorney’s fees and costs incurred in defending this 8 lawsuit because Plaintiff had no “reasonable grounds” to file this action following the 9 California Superior Court dismissal of its first lawsuit for failure to exhaust administrative 10 remedies. (MTD 10:11–13:1). 11 In diversity actions, like this case here, “federal courts are required to follow state law in 12 determining whether to allow attorneys’ fees.” Swallow Ranches, Inc. v. Bidart, 525 F.2d 995, 13 999 (9th Cir. 1975). NRS § 18.010(2)(b) provides that a prevailing party can obtain an award 14 of attorneys’ fees if the court finds the action was “brought or maintained without reasonable 15 ground.” The Supreme Court of Nevada has often expressed that the decision to award 16 attorneys’ fees under section NRS § 18.010(2)(b) is “within the sound discretion of the district 17 court.” Kahn v. Morse & Mowbray, 117 P.3d 227, 238 (Nev. 2005). However, the statute also 18 gives considerable guidance touching on how the Legislature intended courts to exercise their 19 discretion: 20 The court shall liberally construe the provisions of this paragraph in favor of awarding attorney’s fees in all appropriate situations . . . to punish for and deter 21 frivolous or vexatious claims and defenses because such claims and defenses overburden limited judicial resources, hinder the timely resolution of meritorious 22 claims and increase the costs of engaging in business and providing professional 23 services to the public.

25 3 Further, for the reasons set forth above, any claim for injunctive relief pursuant to a claim under 42 U.S.C. § 1983, or any of Plaintiff’s other causes of action for that matter, are barred by the TIA and comity doctrine. 1 NRS § 18.010(2)(b). The Court is mindful that a claim, “though ultimately unsuccessful,” is 2 not necessarily frivolous. Schneider v. Elko cnty. Sheriff’s Dept., 17 F. Supp. 2d 1162, 1164 (D. 3 Nev. 1998). As the Ninth Circuit observed, there exists a “middle ground where failing 4 claims—non-frivolous and made in good faith—are not entitled to attorney’s fees.” Jensen v. 5 City of San Jose, 806 F.2d 899, 901 (9th Cir. 1986). 6 Here, the Court finds that the circumstances of this case show that Plaintiff lacked 7 reasonable grounds to bring and maintain this suit. Plaintiff’s bad faith is evinced by two 8 separate but related facts. See Semenza v. Caughlin Crafted Homes, 901 P.2d 684, 687 (Nev. 9 1995) (stating that a court’s decision to award fees is discretionary, but “there must be evidence 10 in the record supporting the proposition that the complaint was brought without reasonable 11 grounds or to harass the other party). 12 First, Plaintiff began the administrative appeal process in California by filing an appeal 13 against Defendant but abandoned this process prior to completing exhaustion. (Compl. ¶ 15– 14 16). This abandonment demonstrates that Plaintiff knew the administrative process existed and 15 was readily available. Second, Plaintiff initiated this action following the dismissal of its case 16 before the California Superior Court. As stated, the California Superior Court rejected 17 Plaintiff’s argument that it is exempted from California’s administrative process because it is an 18 out of state corporation and thus not a taxpayer of the state. (Order Dismissing Action at 4, Ex. 19 D to MTD). If Plaintiff disagreed with this conclusion, the proper course of action would have 20 to appeal, not file a new action in this Court. Further, this decision again notified Plaintiff that 21 it had a plain and speedy process outside this Court. 22 Based on the foregoing, the Court finds that Plaintiff’s action was frivolous when 23 initiated because it knew that it failed to exhaust its administrative remedies, and a plain and 24 speedy process existed outside the Court through California’s tax refund procedure. See

25 Chemeon Surface Tech. v. Metalast Int’l, Inc., No. 3:15-cv-00294, 2021 WL 2345350, at *5 (D. 1 Nev. June 8, 2021) (“The claim will only be found if it is not well grounded in fact or is not 2 warranted by existing law or by a good faith argument for the extension, modification, or 3 reversal of existing law.”). 4 Accordingly, the Court awards Defendant attorney’s fees and costs incurred in 5 defending this action under NRS § 18.010(2)(b). Defendant shall submit a motion for 6 reasonable attorney’s fees and costs that complies with Local Rule 54–16. 7 IV. CONCLUSION 8 IT IS HEREBY ORDERED that Defendant’s Motion to Dismiss, (ECF No. 9), is 9 GRANTED. 10 IT IS FURTHER ORDERED that the Clerk of Court is instructed to close the case and 11 enter judgment in favor of Defendant California Employment Development Department. 12 DATED this __3_1__ day of March, 2023. 13 14 ___________________________________ Gloria M. Navarro, District Judge 15 UNITED STATES DISTRICT COURT 16 17 18 19 20 21 22 23 24 25