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Brayshaw v. Terraces of Sausalito Homeowner's Association


May 17, 2005


The opinion of the court was delivered by: Claudia Wilken United States District Judge


Defendants Terraces of Sausalito Homeowners Association (the Association), Lydia Cameron, Anna Roberts, Richard Kernan and David Feingold (collectively Defendants) move to dismiss Plaintiff David Brayshaw's claims for violation of the Contract Clause of the United States Constitution, Art. I § 10, as well as conspiracy to defraud and violation of fiduciary duty toward Association members. Plaintiff is proceeding pro se; however, he is an attorney. Plaintiff opposes the motion.

The matter was heard by this Court on January 7, 2005. Having considered all the papers filed by the parties and oral argument on the motion, the Court grants Defendants' motion to dismiss.


Plaintiff owns a home in the Terraces of Sausalito, a condominium project. Defendant Association is a nonprofit corporation representing the twenty three condominium units in the Terraces. Defendants Cameron and Roberts are Association members, former Terraces Officers and members of the Association's Board of Directors. Defendant Kernan is an Association member who allegedly acted as a "legal liason" for the Board. Defendant Feingold is an attorney who represents the Association.

The rules governing the Association are set forth in the September, 1986 Declaration of Covenants, Conditions and Restrictions for Terraces of Sausalito. Feingold Decl. Ex. A (hereinafter Declaration). The Association is also governed by its Bylaws. Feingold Decl. Ex. B.*fn1

Plaintiff and the Association have a history of State court litigation. On February 3, 1998, Plaintiff filed his first action against the Association in Marin County Superior Court, Brayshaw v. Terraces of Sausalito Homeowners' Assoc. (Brayshaw I), alleging unauthorized special assessments (in this instance, for planting shrubs and for investigating a possible suit against a developer). Feingold Decl. Ex. C. That suit was settled by Association's insurance company for $15,000 according to Plaintiff. In August, 2001, Plaintiff brought a second State court lawsuit against the Association (Brayshaw II), in which he alleged new grievances, including inter alia a failure to maintain the property and breach of fiduciary duty. The Association filed a cross-complaint for an injunction allowing it to enter Plaintiff's unit to conduct repairs, and for breach of the terms of the earlier settlement agreement and the Declaration. Brayshaw II concluded in favor of the Association, and it filed a motion to recover attorneys' fees and costs from Plaintiff. The Association later filed in State court a separate complaint against Plaintiff and his wife, Nora Brayshaw, on November 19, 2003. Feingold Decl. Ex. G, Terraces of Sausalito Homeowners Assoc. v. Brayshaw (Terraces). In Terraces, the Association seeks to set aside what it alleges was a fraudulent conveyance of title to Mrs. Brayshaw for the purpose of avoiding the potential consequences of Association's then-pending motion for attorneys' fees in Brayshaw II. On December 23, 2003, the Marin County court did indeed award the Association $72,504 in attorneys' fees and $5,401 in costs on the Brayshaw II cross-complaint. At the time the matter before this Court was heard, the Association's fraudulent conveyance claim was still pending.

The facts set forth in Plaintiff's federal complaint arose in December, 2002, when the Terraces Board proposed a special assessment for the purpose of paying its litigation costs associated with Plaintiff's lawsuits. The assessment was approved on December 22, 2002, in the amount of $2,239 per Association member. The membership voted on the assessment by a written ballot.

At issue in the instant lawsuit is the Association's authority to levy that special assessment. Plaintiff alleges that the rules governing the Association do not provide for special assessments for the purposes of payment of litigation expenses; for levying such special assessments against all Association members; or for approval of such assessments by a majority of a quorum. Plaintiff further alleges that in the absence of authority under the Declaration and Bylaws, the Association must have relied for its authority on California Civil Code § 1366(a), as amended in 1988, which provides that a condominium association "shall levy regular and special assessments sufficient to perform its obligations under the governing documents and this title." Civil Code § 1366(b) further provides that special assessments may be levied by a majority of a quorum (at least fifty percent) of all members. Plaintiff claims this statute as amended violates the United States Constitution Art. I, § 10, which forbids any State from passing a law "impairing the obligation of contracts." Plaintiff asks for damages on his constitutional claim in the amount of $2,239, his share of the special assessment.

Plaintiff's complaint also alleges two State law claims. He claims that the individual Defendants engaged in fraud and violated their fiduciary duties by falsely telling Association members that the special assessment was necessary to pay costs associated with Terraces' defense against Plaintiff's complaint, when in fact the money raised went to pay for prosecution of the Brayshaw II cross-complaint.


Defendants argue that the Court lacks subject matter jurisdiction over the complaint because, although it is framed as stating a constitutional claim, in truth it is a veiled attempt to continue the State court litigation in federal court. Defendants move for dismissal of Plaintiff's constitutional claim under Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction and for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6).

Dismissal is appropriate under Rule 12(b)(1) when the district court lacks subject matter jurisdiction over the claim. Fed. R. Civ. P. 12(b)(1). Federal subject matter jurisdiction must exist at the time the action is commenced. Morongo Band of Mission Indians v. Cal. State Bd. of Equalization, 858 F.2d 1376, 1380 (9th Cir. 1988), cert. denied, 488 U.S. 1006 (1989). A Rule 12(b)(1) motion may either attack the sufficiency of the pleadings to establish federal jurisdiction, or allege an actual lack of jurisdiction which exists despite the formal sufficiency of the complaint. Thornhill Publ'g Co. v. Gen. Tel. & Elecs. Corp., 594 F.2d 730, 733 (9th Cir. 1979); Roberts v. Corrothers, 812 F.2d 1173, 1177 (9th Cir. 1987).

Subject matter jurisdiction is a threshold issue which goes to the power of the court to hear the case. Therefore, a Rule 12(b)(1) challenge should be decided before other grounds for dismissal, because they will become moot if dismissal is granted. Alvares v. Erickson, 514 F.2d 156, 160 (9th Cir.), cert. denied, 423 U.S. 874 (1975); 5A Charles Alan Wright & Arthur R. Miller, Fed. Prac. & Pro. § 1350, p. 210 (2d ed. 1990).

A federal court is presumed to lack subject matter jurisdiction until the contrary affirmatively appears. Stock West, Inc. v. Confederated Tribes, 873 F.2d 1221, 1225 (9th Cir. 1989). An action should not be dismissed for lack of subject matter jurisdiction without giving the plaintiff an opportunity to amend unless it is clear that the jurisdictional deficiency cannot be cured by amendment. May Dep't Store v. Graphic Process Co., 637 F.2d 1211, 1216 (9th Cir. 1980).


I. Subject Matter Jurisdiction: Contract Clause Claim

At the hearing, the Court ordered Plaintiff to submit supplemental briefing on the threshold question not addressed in the briefs of whether the Contract Clause provides him with a direct cause of action against non-governmental Defendants, based on Defendants' alleged reliance on State law.

Plaintiff argues that Energy Reserves Group, Inc., v. Kan. Power & Light Co., 459 U.S. 400 (1983), provides precedent for a finding of jurisdiction on the grounds that it involved a private company filing an action for declaratory judgment "in the District Court." Plaintiff misstates the procedural posture of Energy Reserves. That case was initially brought in State court, and the parties sought declaratory judgment of the validity of their contract in light of legislative enactments. See Energy Reserves Group, Inc., v. Kan. Power & Light Co., 230 Kan. 176, 177 (1981) (summarizing the initial action as "involving the construction of the terms of two natural gas purchase contracts in the light of certain federal and state statutes"). Energy Reserves provides no support for Plaintiff's effort to establish a direct federal cause of action under the Contract Clause. To the contrary, it suggests that the proper place for this dispute to begin is State court.

Plaintiff further argues that the Association should not be treated as a private party because, in certain circumstances, common interest developments are analogous to municipalities and thus have been found to be bound by certain State constitutional obligations. This point is inapposite. None of the cases cited by Plaintiff suggests that condominium associations should be treated as public entities for purposes of jurisdiction and, indeed, virtually all are State court decisions.

For these reasons, the Court finds that it lacks subject matter jurisdiction over Plaintiff's complaint.

II. Potential 42 U.S.C. § 1983 Claim

In the alternative, Plaintiff argues that any dismissal should be with leave to amend, because Plaintiff could cure his lack of subject matter jurisdiction by pleading a claim based on violation of 42 U.S.C. § 1983. Section 1983 provides a federal cause of action for any plaintiff deprived of rights, privileges or immunities secured by the Constitution or federal law by a person acting under color of State law. A deprivation of rights under the Contract Clause may give rise to a cause of action under § 1983. S. Cal. Gas Co. v. City of Santa Ana, 336 F.3d 885, 887 (9th Cir. 2003).

In order to state a claim under § 1983, Plaintiff must show that Defendants were acting under color of State law. A person acts under color of State law if he or she "exercised power possessed by virtue of state law and made possible only because the wrongdoer is clothed with the authority of state law." West v. Atkins, 487 U.S. 42, 49 (1988) (citation and internal quotation marks omitted).

Plaintiff argues that Defendants were acting under color of State law when they allegedly relied on State law as authority for their conduct. Action by private persons may be under color of State law when "there is 'significant' State involvement in the action." Johnson v. Knowles, 113 F.3d 1114, 1118 (9th Cir. 1997). The Ninth Circuit treats the color of State law requirement of a § 1983 claim and the State action requirement for establishing a constitutional claim as equivalent. Id. Thus, to determine whether a private action is done under color of State law, the Ninth Circuit employs the four tests articulated by the Supreme Court for determining whether the action of a private individual amounts to State action: (1) the public function test; (2) the joint action test; (3) the State compulsion test; and (4) the governmental nexus test. Id.

(1) Public Function

State action is present "'in the exercise by a private entity of powers traditionally exclusively reserved to the State.'" Johnson, 113 F.3d at 1118 (quoting Jackson v. Metropolitan Edison Co., 419 U.S. 345, 352 (1974)). That a private entity performs a function which serves the public is not enough, however. Brunette v. Humane Society of Ventura County, 294 F.3d 1205, 1214 (9th Cir. 2002) (gathering of news is "quintessential private activity," and media was not engaged in public function during search of residence); Rendell-Baker v. Kohn, 457 U.S. 830, 842 (1982) (education not exclusive prerogative of State, and discharge decisions of private school subsidized by State not State action); Fred Meyer, Inc. v. Casey, 67 F.3d 1412, 1414-16 (9th Cir. 1995) (private citizens collecting signatures for ballot not State actors because legislation, while traditional State function, not exclusive prerogative of the State).

Plaintiff could not establish under the public function test that Defendants were acting under color of State law, because governance of a condominium association is not a traditional government function, much less an exclusive government function.

(2) Joint Action

State action may be found where private individuals are willful participants in joint activity with the State or its agents that effects a constitutional deprivation. Johnson, 113 F.3d at 1119. An agreement or conspiracy between a government actor and a private party is sufficient to satisfy the test. Dennis v. Sparks, 449 U.S. 24, 29 (1980) (private individual jointly acting with State officials may be engaged in conspiracy and acting under color of State law); Jensen v. Lane County, 222 F.3d 570, 575-76 (9th Cir. 2000) (private doctor acted under color of State law when involved with county in complex and deeply intertwined process of evaluating and detaining individuals who are mentally ill); United States v. Cleaveland, 38 F.3d 1092, 1093 (9th Cir. 1994) (Fourth Amendment implicated where private party acts as instrument or agent of State in effecting a search or seizure). Invoking State legal procedures does not constitute "joint participation" or "conspiracy" with State officials sufficient to satisfy the State action requirement. Schucker v. Rockwood, 846 F.2d 1202, 1205 (9th Cir. 1988) (mere invocation of State judicial process does not convert private party's action into State action even if "conspiracy" between private parties and judge alleged).

Just as mere invocation of State judicial processes does not convert private party action into State action, here, mere reliance on State law would not convert Defendants' actions into State action.

(3) State Compulsion

State action may be found where the State has exercised coercive power or has provided such significant encouragement, either overt or covert, that the private individual's choice must in law be deemed to be that of the State. Blum v. Yaretsky, 457 U.S. 991, 1004 (1982); Johnson, 113 F.3d at 1119.

Plaintiff has not alleged that the State encouraged Defendants to take the actions of which Plaintiff complains. Therefore, Plaintiff could not establish that Defendants acted under color of State law under the State compulsion test.

(4) Government Nexus

Plaintiff appears to argue that Defendants' conduct would meet the government nexus test for State action. Such conduct would constitute action under color of State law if it is "fairly attributable" to the State. West, 487 U.S. at 49-50. Conduct that allegedly caused the deprivation of a federal right may be fairly attributable to the State if (1) the deprivation is caused by the exercise of some right or privilege created by the State or by a rule of conduct imposed by the State or by a person for whom the State is responsible; and (2) the party charged with the deprivation is a person who may fairly be said to be a State actor. Fred Meyer, Inc., 67 F.3d at 1414 (citing Lugar v. Edmonson Oil Co., Inc., 457 U.S. 922, 937 (1982)). The question of what action is fairly attributable to a State depends on a variety of factors, e.g. whether a nominally private entity is "entwined with governmental policies" or when government is "entwined in [its] management or control." Brentwood Academy v. Ten. Secondary School Athletic Ass'n, 531 U.S. 288, 296 (2001) (citing Evans v. Newton, 382 U.S. 296, 299 (1966)).

None of the law cited by Plaintiff supports the proposition that Defendants' acts as or in connection with a condominium association are fairly attributable to the State of California. Other than allegedly relying on State law, none of Defendants' acts have been entwined with government policies or are in any other way fairly attributable to the State. If Plaintiff can truthfully allege additional facts or point to law to the contrary, he may file a motion for leave to amend his complaint within two weeks of this Order. If Plaintiff does not do so, the case will be dismissed without prejudice to refiling in State court, because, absent a viable federal claim, the Court will also lack supplemental jurisdiction over the State claims.


For these reasons, Defendants' motion for dismissal is hereby GRANTED (Docket No 4). If Plaintiff does not file a motion for leave to amend the complaint within two weeks of this order, the case will be closed.


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