The opinion of the court was delivered by: Garland E. Burrell, Jr. United States District Judge
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS
On October 28, 2009, State Defendants Steve Hardy, Elizabeth Gavia, and Lori Ajax (collectively "Defendants") filed a motion under Federal Rule of Civil Procedure ("Rule") 12(b)(6) to dismiss with prejudice Plaintiffs' First Amended Complaint ("FAC"). The motion was heard on December 21, 2009. For the reasons stated below, Defendants' motion is granted in part and denied in part.
I. FACTUAL AND LEGAL ALLEGATIONS
Plaintiffs Carlos Perfino ("Perfino") and Jess Zuranich ("Zuranich") allege the following federal claims against Defendants: Fifth Amendment takings claims, federal procedural and substantive due process claims and federal Equal Protection Clause claims. Plaintiffs allege the following claims under California law against Defendants: interference with contractual relations and intentional inducement of breach of contract, inverse condemnation and negligence. Plaintiffs also seek injunctive and declaratory relief based on federal and state law.
Plaintiffs' claims are premised on Defendants' use of Title 4, Section 62 of the California Code of Regulations ("Section 62") as their basis for denying Plaintiffs a liquor license. Plaintiffs allege their federal and state rights were violated when Defendants prohibited them from owning a bar based on the conclusion that Section 62 precluded Perfino from being issued a liquor license because he was a correctional officer. Plaintiffs allege that Section 62 does not apply to correctional officers and that when Section 62 was used to deny Perfino a liquor license, Zuranich was also denied a liquor license because of Perfino's status as a correctional officer.
Plaintiffs sought a liquor license for a bar they desired to operate with two other men. Plaintiffs entered an "oral partnership agreement" with those men to own and operate a Latino-themed bar in January 2008 ("partners"). (FAC ¶¶ 12-14.) The partners formed a limited liability company, Linear Marketing Media Group LLC dba Playa Azul ("LLC"), to which one of the partners, Juan G. Ayala ("Ayala"), agreed to transfer a liquor license he had from a previously owned bar in exchange for a one fourth interest in the LLC. (Id. ¶¶ 14-16.) The partners, through the LLC, applied to the California Department of Alcoholic Beverage Company ("ABC") for the agreed-upon transfer and on April 1, 2008, the LLC received "a temporary ABC license." (Id. ¶¶ 17, 38.)
Plaintiffs allege difficulties concerning the temporary liquor license developed between them and Defendant Elizabeth Gavia ("Gavia") of the ABC around the opening night of the bar. Specifically, the temporary liquor license the LLC received did not authorize vendors to sell the bar liquor without clearance from the ABC and proof of clearance on the ABC's vendor database. Plaintiffs allege they informed Gavia of the bar "opening date via phone calls and e-mail," and Gavia responded that "it was going to be taken care of;" yet around March 28, 2008, Gavia refused to clear the bar for the purchase of alcohol, which resulted in the bar having no alcohol to sell on opening night or the rest of that weekend. (Id. ¶ 32.) Plaintiffs allege "Gavia knowingly withheld the temporary permit." (Id.)
Further, around the time the liquor license was to be transferred to the LLC, Gavia informed the partners that all of their names had to be on the liquor license and that "the application had to be submitted to her specified escrow company . . . Capital City Escrow, Inc." (Id. ¶ 18.) On April 10, 2008, however, Gavia informed Perfino that his name could not be "on the liquor license, lease, or anything because Perfino was a correctional officer employed at California State Penitentiary[,] also known as Folsom State Prison," and therefore Section 62 prohibited him from being involved with the bar. (Id. ¶ 19.) Section 62 provides, in relevant part:
No license authorized by the Alcoholic Beverage Control Act shall be held by, or issued or transferred to, any person holding office in, or employed by, any agency of the State of California or any of its political subdivisions when the duties of such person have to do with the enforcement of the Alcoholic Beverage Control Act or any other penal provisions of law of this State prohibiting or regulating the sale, use, possession or manufacture of alcoholic beverages. This rule is deemed to apply specifically, but without limiting its effect, to any persons employed in the Department of Justice of the State of California, in any district attorney's office, in any sheriff's office, in any local police department, or in the Department of Alcoholic Beverage Control. This rule shall not prohibit the ownership of any license interest by any local law enforcement officer or local reserve law enforcement officer where the licensed premises are located in a county other than that in which he is employed as a law enforcement officer.
This rule shall apply to any person mentioned herein who has any ownership interest, directly or indirectly, in any business to be operated or conducted under an alcoholic beverage license.
CAL. Code Regs. tit. 4, § 62 (emphasis added). Perfino told Gavia that Section 62 did not apply to him because correctional officers "do not have the power to make arrests once they are off duty and do not have duties to enforce the ABC laws." (Id. ¶ 20.) Gavia then agreed to "speak with her supervisor about the issue, and [returned] three or four minutes later." (Id. ¶ 22.) Gavia remained adamant that Perfino could not be on the liquor license application and "told [Zuranich] that he needed to sign a document that would remove [Perfino's] name from the application." (Id.)
Further, Plaintiffs allege "[d]uring approximately April 10, 2008[,] [to] May 16, 2008," Gavia "coached" Ayala to "get the other partners off the license, off the lease, off the insurance, and out of the partnership so that [Ayala] would be the only owner/holder of the ABC license." (Id. ¶ 23.) Gavia also informed Ayala that "if within one week, by April 18, 2008, the license/lease and insurance [was] not in [Ayala's] name alone, she would arrest Ayala and Perfino. (Id. ¶ 24.)
"Plaintiffs attempted to correct the situation" by speaking with Lori Ajax ("Ajax") of the ABC, who was recommended to Plaintiffs by someone "who worked in the legal department of the ABC." (Id. ¶ 25). On or around May 16, 2008, Ajax "advised Zuranich that everyone could be on the license and the lease, and [Perfino] was okay to be on the license and buy the liquor." (Id.) On June 2, 2008, the ABC public website listed the partners as temporary licensees, yet a day later, the partners were no longer listed as temporary licensees on the ABC website. (Id. ¶ 35).
Perfino wrote Ajax on July 3, 2008, notifying her of the situation and requesting that their names be added to the liquor license. However, "Plaintiffs believe that . . . Ajax is the person that caused [the partners] to be dropped as licensees." (Id. ¶¶ 34, 36.) Plaintiffs allege the partnership between Ayala and Plaintiffs dissolved and Ayala changed the locks on the bar in July 2008. (Id. ¶ 31.)
Plaintiffs allege that Gavia denied them a permanent liquor license to prevent Plaintiffs from competing for customers with her friend who owned a similarly-themed Mexican bar close to the location where Plaintiffs' bar was located. (Id. ¶ 27.) Further, Plaintiffs allege that Gavia, with full knowledge of their partnership, "improperly, wrongfully, and illegally interfered with the partnership agreement, as follows": advising [Ayala] on how to remove [Perfino] and [Zuranich] from the license application, from the lease and insurance, and partnership . . . [and] to breach [Ayala's] partnership agreement with [Plaintiffs]. . . (Id. ¶¶ 28, 29.) Plaintiffs allege [o]nce you obtain a temporary permit, the applicant is on his way to obtaining a permanent permit." (Id. ¶ 44.) Plaintiffs also name four correctional officers with ABC alcohol licenses as support for their allegations that denial of their application for a permanent liquor license was unlawful. (Id. ¶ 49.)
When deciding a motion to dismiss, the Court accepts "all material allegations in the complaint as true and contrue[s] them in light most favorable to [Plaintiffs]". NL Indus., Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir. 1986). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Dismissal is appropriate, however, where the plaintiff ...