Jamgotchian v. Ferraro

93 F.4th 1150

Jerry JAMGOTCHIAN; Theta Holding I, Inc., Plaintiffs-Appellants, v. Gregory L. FERRARO; Oscar Gonzales; Dennis Alfieri; Damascus Castellanos;Brenda Davis; Thomas C. Hudnut; Wendy Mitchell; Kimberly Sawyer;Luis Jauregui; Richard Williams, Defendants-Appellees,andCalifornia Horse Racing Board, Defendant.

No. 23-55735

United States Court of Appeals, Ninth Circuit

Submitted January 8, 2024^* San Francisco, California

Filed February 26, 2024

Appeal from the United States District Court for the Central District of California Fred W. Slaughter, District Judge, Presiding, D.C. No. 8:22-cv-01893-FWS-KES

John R. Sommer, John R. Sommar Attorney at Law, Villa Park, California, for Plaintiffs-Appellants.

Kayi Okine, Deputy Attorney General; Kenneth C. Jones, Supervising Deputy Attorney General; Chris A. Knudsen, Senior Assistant Attorney General; Rob Bonta, Attorney General of California; Office of the California Attorney General, Los Angeles, California; for Defendants-Appellees.

Before: Marsha S. Berzon, Johnnie B. Rawlinson, and Daniel A. Bress, Circuit Judges.

OPINION

BRESS, Circuit Judge:

A dispute over a horse's name has led to this appeal about preclusion. The question is whether a state agency decision precludes the plaintiffs' § 1983 lawsuit. The answer is "no." The agency decision has no preclusive effect because the agency lacked jurisdiction to decide the constitutional issues that the plaintiffs now raise. Nor were the plaintiffs required to seek review of the state agency's decision in state court before suing under § 1983. Two of our past decisions created some confusion on these settled issues in the court below. Taking this opportunity to address those decisions, we reverse the district court's dismissal of the plaintiffs' complaint and remand for further proceedings.

I

Plaintiffs Jerry Jamgotchian and Theta Holdings I (collectively, Jamgotchian) own a thoroughbred racehorse named Malpractice Meuser. California law requires that all thoroughbreds racing in California be registered with a private organization called the Jockey Club of New York. See Cal. Bus. & Prof. Code § 19416; Cal. Code Regs. tit. 4, § 1588(a)(1). Jamgotchian wanted to race Malpractice Meuser in California, so he applied to register the horse with the Jockey Club.

The Jockey Club refused registration. It concluded that the name Malpractice Meuser violated the Principal Rules and Requirements of the American Studbook Rule 6.F.11, which makes ineligible for use horse names "designed to harass, humiliate, or disparage a specific individual." The Jockey Club believed that Malpractice Meuser was named for Michael D. Meuser, a Kentucky lawyer specializing in equine law. The Club instructed Jamgotchian to seek registration for the horse under a different name.

Jamgotchian did not do so and thus never obtained Jockey Club registration. Nevertheless, Jamgotchian sought to enter Malpractice Meuser in a race at California's Los Alamitos Race Course. The Los Alamitos Board of Stewards denied entry. Stewards "have general authority and supervision over all licensees and other persons attendant on horses" and are responsible "for the conduct of the race meeting[s] in every particular." Cal. Code Regs. tit. 4, § 1527. The Stewards informed Jamgotchian that Malpractice Meuser was ineligible to race because the horse was not registered with the Jockey Club, as California Business and Professions Code § 19416 requires.

Jamgotchian appealed the Stewards' decision to the California Horse Racing Board (CHRB), the state agency responsible for administering "all laws, rules, and regulations affecting horse racing." Cal. Bus. & Prof. Code § 19440(a)(3). Among other claims, Jamgotchian alleged that the Stewards' enforcement of the Jockey Club registration requirement in § 19416 resulted in impermissible viewpoint discrimination, contrary to the First Amendment. Cf. Matal v. Tam, 582 U.S. 218, 243-44, 137 S.Ct. 1744, 198 L.Ed.2d 366 (2017) (holding that the Lanham Act's prohibition on disparaging trademarks violates the First Amendment).

Adopting a hearing officer's written ruling, the CHRB affirmed the Stewards' determination that Malpractice Meuser could not race absent Jockey Club registration. The CHRB also offered commentary on why it believed that Jamgotchian's constitutional claims were not colorable. But, importantly, the CHRB found that it lacked jurisdiction to decide Jamgotchian's constitutional claims. It explained that, because the California Constitution bars state agencies from declaring a statute unconstitutional or refusing to enforce a statute on constitutional grounds unless an appellate court has made that determination, Jamgotchian was required to go to court for resolution of his constitutional claims. See Cal. Const. Art. III. § 3.5. The CHRB concluded that although it regarded Jamgotchian's constitutional claims as "unfounded," they were "beyond the purview of the CHRB in any event."

The CHRB decision advised Jamgotchian that a California superior court would have authority to address his constitutional claims. But Jamgotchian did not seek review of the CHRB's decision in state court. See Cal. Code. Civ. Proc. § 1094.5 (procedures for writs of mandamus). Under California law, a § 1094.5 writ petition is the "ordinary means" for challenging a state agency decision in state court. Chen Through Chen v. Albany Unified Sch. Dist., 56 F.4th 708, 724 n.6 (9th Cir. 2022). Instead of filing a § 1094.5 petition, Jamgotchian brought this lawsuit in federal court under 42 U.S.C. § 1983 against individual Stewards and CHRB members. In his complaint, Jamgotchian advanced the constitutional claims he had presented to the CHRB and sought a preliminary injunction permitting Malpractice Meuser to race in California.

Although the defendants had not raised the issue, the district court requested briefing on whether the CHRB proceedings were preclusive of Jamgotchian's constitutional claims. The district court subsequently concluded that because the CHRB had already considered Jamgotchian's constitutional claims and Jamgotchian had not challenged the CHRB's decision in state court, the CHRB decision precluded Jamgotchian's § 1983 lawsuit. The district court thus found that Jamgotchian was unlikely to succeed on the merits and denied his request for a preliminary injunction.

Jamgotchian appealed. While his appeal was pending, the district court dismissed Jamgotchian's complaint with prejudice under Rule 12(b)(6), based on the same preclusion rationale by which it had denied Jamgotchian's request for a preliminary injunction. Jamgotchian then separately appealed that judgment of dismissal.

Because the denial of Jamgotchian's request for a preliminary injunction merged into the final judgment, we dismissed Jamgotchian's first appeal as moot. See, e.g., Am. Soc'y of Journalists & Authors, Inc. v. Bonta, 15 F.4th 954, 959 (9th Cir. 2021). Before us now is Jamgotchian's second appeal, of the judgment of dismissal. We review the district court's dismissal of a complaint under Rule 12(b)(6) de novo. Pardini v. Unilever U.S., Inc., 65 F.4th 1081, 1084 (9th Cir. 2023).

II

The district court erred in concluding that the CHRB decision, in combination with Jamgotchian not seeking review of that decision in state court, precludes this § 1983 lawsuit.

A

The CHRB's decision does not preclude Jamgotchian's constitutional claims. Under 28 U.S.C. § 1738, federal courts "give the same preclusive effect to state court judgments as they would be given in the state in which they are rendered." Miller v. Cnty. of Santa Cruz, 39 F.3d 1030, 1032 (9th Cir. 1994). This statutory provision does not apply to state administrative agency decisions. Univ. of Tenn. v. Elliott, 478 U.S. 788, 796-97, 799, 106 S.Ct. 3220, 92 L.Ed.2d 635 (1986). Nevertheless, the Supreme Court has held that, as a matter of federal common law, federal courts must sometimes accord preclusive effect to state agency decisions. See id. at 797-98, 106 S.Ct. 3220; see also Astoria Fed. Savings & Loan Assoc. v. Solimino, 501 U.S. 104, 107-08, 110, 111 S.Ct. 2166, 115 L.Ed.2d 96 (1991); Miller, 39 F.3d at 1032; Guild Wineries & Distilleries v. Whitehall Co., 853 F.2d 755, 758 (9th Cir. 1988). Although Congress may direct otherwise (and has done so for some statutes), Congress "presumptively intends" state agency determinations to have preclusive effect in federal court. B & B Hardware, Inc. v. Hargis Indus., Inc., 575 U.S. 138, 151, 135 S.Ct. 1293, 191 L.Ed.2d 222 (2015) (citing Elliott, 478 U.S. at 796-99, 106 S.Ct. 3220). This presumption applies to § 1983 suits. See Elliott, 478 U.S. at 799, 106 S.Ct. 3220. Still, whether an agency decision has preclusive effect in a given § 1983 case requires a detailed inquiry.

To decide whether federal common law entitles a state agency decision to preclusive effect, we proceed in two steps. Our "threshold" task is "to determine whether the state administrative proceeding was conducted with sufficient safeguards to be equated with a state court judgment." Plaine v. McCabe, 797 F.2d 713, 719 (9th Cir. 1986). For an administrative proceeding to "rise to [this] level," id., it must "satisf[y] the requirements of fairness outlined in" the Supreme Court's decision in United States v. Utah Construction and Mining Co., 384 U.S. 394, 422, 86 S.Ct. 1545, 16 L.Ed.2d 642 (1966). Miller, 39 F.3d at 1032-33 (brackets omitted) (quoting Guild Wineries, 853 F.2d at 758). The so-called Utah Construction "fairness requirements" are: "(1) that the administrative agency act in a judicial capacity, (2) that the agency resolve disputed issues of fact properly before it, and (3) that the parties have an adequate opportunity to litigate." Id. at 1033 (citing Utah Construction, 384 U.S. at 422, 86 S.Ct. 1545). The second prong of Utah Construction—about the capacity of the agency to resolve disputed facts—"encompass[es] disputed issues of law as well." Guild Wineries, 853 F.2d at 759 & n. 7 (citing ...