Polk v. Yee

481 F.Supp.3d 1060

Delores POLK, et al., Plaintiffs,

v.Betty YEE, et al., Defendants.

No. 2:18-cv-2900-KJM-KJN

United States District Court, E.D. California.

Signed August 24, 2020

William L. Messenger, Pro Hac Vice, National Right to Work Legal Defense Foundation, Springfield, VA, Rebekah Millard, Freedom Foundation, Olympia, WA, Steven R. Burlingham, Gary, Till, Burlingham & Lynch, Roseville, CA, for Plaintiffs.

Jeffrey A. Rich, Office Of Attorney General/Department of Justice, Sacramento, CA, for Defendant Betty Yee.

Rebecca Moryl Lee, Scott A. Kronland, Stacey M. Leyton, Altshuler Berzon LLP, San Francisco, CA, for Defendant SEIU Local 2015.

ORDER

Kimberly J. Mueller, CHIEF UNITED STATES DISTRICT JUDGE

In this § 1983 putative class action, defendants Betty Yee, State Controller of California, and SEIU Local 2015 ("SEIU" or "Union") have both filed motions to dismiss. For the following reasons, the court GRANTS both motions, with the leave to amend to the extent allowed below.

I. BACKGROUND

Plaintiffs are personal care providers to persons with disabilities who are enrolled in a Medicaid program called California's In-Home Support Services ("IHSS"). First Am. Compl. ("FAC"), ECF No. 14, ¶¶ 13–15, 27. Because plaintiffs are employed by IHSS recipients, they are paid by the State Controller and California law deems them public employees for unionization purposes. FAC ¶ 16. SEIU Local 2015 ("Union" or "SEIU") is the exclusive bargaining representative for IHSS providers in 47 California counties. Id. ¶ 17.

In joining the Union, plaintiffs consented to a dues deduction agreement that authorized the state to deduct union dues from plaintiffs’ paychecks for a certain period. Id. ¶¶ 20–22, 29 (Polk), 37 (Herrick), 43 (Loi), 48 (Loi), 53 (McKay), 58 (Montoya), 64 (Ungar). The agreements make the deduction authorization irrevocable except during an annual period ranging from ten to thirty days in duration, during which a person can send a revocation notice to SEIU. Id. ¶ 24. Plaintiffs all notified SEIU they no longer consented to the dues deduction, but they did so outside of the revocation period. See id. ¶¶ 69, 90; see, e.g. , ¶ 66–68 (Ungar). Accordingly, the State Controller continued to deduct union dues from plaintiffs’ paychecks, allegedly without their consent. Id. ¶¶ 26, 90.

Plaintiffs bring this suit under 42 U.S.C. § 1983 on behalf of themselves and two putative classes, alleging deprivation of their First Amendment right to refrain from subsidizing the union's speech through dues, as provided in Harris v. Quinn , 573 U.S. 616, 656, 134 S.Ct. 2618, 189 L.Ed.2d 620 (2014) and Janus v. Am. Fed'n of State, Cty., & Mun. Employees, Council 31 , ––– U.S. ––––, 138 S. Ct. 2448, 2486, 201 L.Ed.2d 924 (2018). Id. ¶¶ 1, 69. Plaintiffs allege defendants violate their First Amendment rights in two ways: (1) by deducting union dues from plaintiffs’ paychecks without a valid First Amendment waiver (claim one); and (2) by enforcing the Union's revocation policy with respect to the dues deductions (claim two). Id. at 17, 19. Plaintiffs also allege defendants violated the federal Medicaid statute, 42 U.S.C. § 1396a(a)(32), by diverting a portion of Medicaid payments to the union in the form of deducted dues (claim three). Id. at 20–21

Defendant Yee moved to dismiss under Rule 12(b)(1) and Rule 12(b)(6), Yee MTD, ECF No. 19, plaintiffs oppose, Yee Opp'n, ECF No. 31, and Yee replied, Yee Reply, ECF No. 35. Defendant SEIU filed a separate motion to dismiss, SEIU MTD ECF No. 24, plaintiffs oppose, SEIU Opp'n, ECF No. 32, and SEIU replied, SEIU Reply, ECF No. 34. Both motions overlap substantially, so the court addresses the motions together here.

On May 9, 2019, plaintiffs filed a notice of supplemental authority, notifying the court that the Centers for Medicare & Medicaid Services issued a Final Rule on May 6, 2019, regarding the reassignment of Medicaid provider claims, 8 Fed. Reg. 19718 (May 6, 2019). ECF No. 38. Plaintiffs filed an additional notice of supplemental authority on November 11, 2019. ECF No. 46, and SEIU responded, ECF No. 47. Defendant SEIU also filed seventeen notices of supplemental authority. ECF Nos. 36, 39, 41, 43, 45, 48, 50–59. Plaintiffs have responded to one of these notices. ECF No. 49. The court has considered the supplemental authority and, as necessary, addresses it below.

II. LEGAL STANDARDS

A party may move to dismiss a complaint for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). The court may grant the motion only if the complaint lacks a "cognizable legal theory" or if its factual allegations do not support a cognizable legal theory. Hartmann v. Cal. Dep't of Corr. & Rehab. , 707 F.3d 1114, 1122 (9th Cir. 2013). A complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief," Fed. R. Civ. P. 8(a)(2), though it need not include "detailed factual allegations," Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007).

But "sufficient factual matter" must make the claim at least plausible. Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). Conclusory or formulaic recitations of elements do not alone suffice. Id. (citing Twombly , 550 U.S. at 555, 127 S.Ct. 1955 ). In a Rule 12(b)(6) analysis, the court must accept well-pleaded factual allegations as true and construe the complaint in plaintiff's favor. Id. ; Erickson v. Pardus , 551 U.S. 89, 93–94, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007).

Under Federal Rule of Civil Procedure 12(b)(1), a defending party may move for dismissal for lack of subject matter jurisdiction. "A Rule 12(b)(1) jurisdictional attack may be facial or factual." Safe Air for Everyone v. Meyer , 373 F.3d 1035, 1039 (9th Cir. 2004) (citation omitted). A facial attack claims the "allegations contained in a complaint are insufficient on their face to invoke federal jurisdiction," whereas a factual attack "disputes the truth of the allegations that, by themselves, would otherwise invoke federal jurisdiction." Id. If there is ambiguity as to whether the attack is facial or factual, the court applies a facial analysis. See Wichansky v. Zoel Holding Co., Inc. , 702 F. App'x 559, 560–61 (9th Cir. 2017) (district court erred in construing defendants’ 12(b)(1) motion as factual, rather than facial, when ambiguity existed). The court treats a jurisdictional "facial attack as it would a motion to dismiss under Rule 12(b)(6) : Accepting the plaintiff's allegations as true and drawing all reasonable inferences in the plaintiff's favor, the court determines whether the allegations are sufficient as a legal matter to invoke the court's jurisdiction." Leite v. Crane Co. , 749 F.3d 1117, 1121 (9th Cir. 2014) (citation omitted).

If a motion to dismiss is granted, the question arises whether the court should grant leave to amend. Federal Rule of Civil Procedure 15(a)(2) states, "[t]he court should freely give leave [to amend pleadings] when justice so requires," and the Ninth Circuit has "stressed Rule 15 ’s policy of favoring amendments," Ascon Props. Inc. v. Mobil Oil Co. , 866 F.2d 1149, 1160 (9th Cir. 1989). "In exercising its discretion [to grant or deny leave to amend] ‘a court must be guided by the underlying purpose of Rule 15 —to facilitate decision on the merits rather than on the pleadings or technicalities.’ " DCD Programs, Ltd. v. Leighton , 833 F.2d 183, 186 (9th Cir. 1987) (quoting United States v. Webb , 655 F.2d 977, 979 (9th Cir. 1981) ). However, "the liberality in granting leave to amend is subject to several limitations." Ascon Props. , 866 F.2d at 1160 (citing Leighton , 833 F.2d at 186 ). "Leave need not be granted where the amendment of the complaint would cause the opposing party undue prejudice, is sought in bad faith, constitutes an exercise in futility, or creates undue delay." Id. In addition, a court should look to whether the plaintiff has previously amended the complaint, as "the district court's discretion is especially broad ‘where the court has already given a plaintiff one or more opportunities to amend [its] complaint.’ " Id. at 1161 (alteration in original) (quoting Leighton , 833 F.2d at 186 n.3 ).

III. DISCUSSION

A. State Action

1. Legal Standard

To state a claim under § 1983, a plaintiff must first show "the conduct complained of was committed by a person acting under color of state law." Parratt v. Taylor , 451 U.S. 527, 535, 101 S.Ct. 1908, 68 L.Ed.2d 420 (1981), overruled on other grounds , Daniels v. Williams , 474 U.S. 327, 106 S.Ct. 662, 88 L.Ed.2d 662 (1986). "[C]onstitutional standards are invoked only when it can be said that the State is responsible for the specific conduct of which the plaintiff complains."

Blum v. Yaretsky , 457 U.S. 991, 1004, 102 S.Ct. 2777, 73 L.Ed.2d 534 (1982).

A court decides whether defendant was acting under state law by using a two-part test established in Lugar v. Edmondson Oil Co. , 457 U.S. 922, 939, 102 S.Ct. 2744, 73 L.Ed.2d 482 (1982). First, the court asks "whether the claimed deprivation has resulted from the exercise of a right or privilege having its source in state authority." Id. Second, the court asks whether defendant "may be appropriately characterized as [a] ‘state actor[ ].’ " Id. State action can exist only when both questions are answered in the affirmative. See Collins v. Womancare , 878 F.2d 1145, 1151 (9th Cir. 1989) (citing Lugar , 457 U.S. at 937–39, 102 S.Ct. 2744 ).

"The Supreme Court has articulated four tests for determining whether a non-governmental person's actions amount to state action: (1) the public function test; (2) the joint action test; (3) the state compulsion test; and (4) the governmental nexus test." Tsao v. Desert Palace, Inc. , 698 F.3d 1128, 1140 (9th Cir. 2012) (citation omitted). Plaintiffs contend SEIU is a state actor only under the joint action test, SEIU Opp'n at 22–23, so the court limits its analysis accordingly. See Bain...