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Jonna Corp. v. City of Sunnyvale

United States District Court, N.D. California, San Jose Division

November 9, 2017



          LUCY H. KOH, United States District Judge

         Plaintiff Jonna Corporation (“Plaintiff”), doing business as Premier Recycling, sues Defendant City of Sunnyvale (“the City”) because the City refused to provide Plaintiff a license to collect construction and demolition debris in the City. Before the Court is the City's Motion to Dismiss the First Amended Complaint. ECF No. 34 (“Mot.”). Having considered the submissions of the parties, the relevant law, and the record in this case, the Court GRANTS the City's Motion to Dismiss the First Amended Complaint.

         I. BACKGROUND

         A. Factual Background

         In 1991, the City entered into an exclusive franchise agreement for the collection of solid waste in the City (“Exclusive Franchise Agreement”) with Bay Counties Waste Services, Inc. (“Bay Counties”), formerly Specialty Solid Waste & Recycling, Inc., for a term of ten years. First Amended Complaint (“FAC”), ECF No. 33 at 9; ECF No. 35-1 at 16; Sunnyvale Ordinance No. 2771-04.[1] The Exclusive Franchise Agreement has been amended and extended a number of times, and now extends through at least June 30, 2021. Sunnyvale Ordinance No. 2949-11. Under the Exclusive Franchise Agreement, Bay Counties is the sole collector of solid waste, including recyclable materials and construction debris, in the City. FAC at 9. The Sunnyvale Municipal Code forbids any party from collecting solid waste for a fee without a franchise or license. Sunnyvale Mun. Code § 8.16.150 (“It is unlawful for any person to engage in the business of collecting solid waste within the city, or to haul the same through any street or public right-of-way in the city, unless such person has been granted a franchise or license to do so by the city.”). Bay Counties is the only entity that has been awarded such a franchise or license. FAC at 9.

         Plaintiff is a California corporation based in Santa Clara County that “is in the business of collecting discarded wood, metal, asphalt, concrete, and drywall from commercial construction and demolition sites” (“construction and demolition debris”). FAC ¶¶ 3, 5. On October 19, 2016, Plaintiff applied to the City for a franchise or license to collect construction and demolition debris under Sunnyvale Municipal Code § 8.16.090. Id. ¶ 17; see also Sunnyvale Mun. Code § 8.16.090 (“The city council shall provide for the collection and disposal of solid waste and recyclable materials generated from residences within the city by the issuance of a franchise or license, or franchises and licenses, to disposal service operators.”). On November 7, 2016, the City denied Plaintiff's application for a franchise or license. FAC ¶ 18. The City's denial letter stated that “[w]hile the Sunnyvale Municipal Code does allow for the possibility of the City issuing multiple license holders/franchisees, the City's current policy is to issue an exclusive franchise to a single disposal service operator. This franchise extends to collection of all solid waste, including [construction and demolition] material, as described in more detail in Chapter 8.16 of the Code.” Id.

         B. Procedural History

         On February 24, 2017, Plaintiff filed the instant suit. See ECF No. 1. Plaintiff asserted two causes of action: declaratory relief and mandamus. The declaratory relief cause of action was based on the following theories: (1) violation of the Takings Clause of the U.S. Constitution; (2) violation of the guarantee of substantive due process of Fifth and Fourteenth Amendments to the U.S. Constitution; (3) violation of the Equal Protection Clause in the Fourteenth Amendment of the U.S. Constitution and Article I, Section 7 of the California Constitution; (4) violation of the Commerce Clause of the U.S. Constitution; (5) the City's use of the wrong definition of “solid waste” under California law; and (6) violation of California Public Resources Code § 40059. Id. ¶¶ 26-31. Plaintiff's mandamus cause of action stated that the City had a mandatory duty to issue a franchise or license to Plaintiff under Sunnyvale Municipal Code § 8.16.090, and thus the Court should compel the issuance of such a license. Id. ¶¶ 32-34.

         On March 4, 2017, the City filed a motion to dismiss the complaint. ECF No. 16. On April 18, 2017, Plaintiff filed an opposition. ECF No. 18. On April 25, 2017, the City filed a reply. ECF No. 19. On June 16, 2017, the Court granted the City's motion to dismiss after finding that Plaintiff had failed to satisfy the takings exhaustion requirement and had failed to allege that the City's exclusive franchise policy was arbitrary and capricious, as substantive due process would require. ECF No. 29 at 12-16. The Court also dismissed Plaintiff's equal protection theory based on Plaintiff's failure to plead that it was similarly situated to any other group that had been awarded a franchise or license and on Plaintiff's failure to adequately allege that the City's exclusive franchise policy was irrational. Id. at 16-20. The Court dismissed Plaintiff's dormant Commerce Clause theory because Plaintiff failed to adequately plead that the exclusive franchise policy discriminated against out-of-state interests or that it burdened interstate commerce. Id. at 25-26. Because the Court had dismissed all of the bases for declaratory relief over which it had original jurisdiction, the Court declined to exercise supplemental jurisdiction over Plaintiff's remaining state law theories for Plaintiff's declaratory relief cause of action and Plaintiff's mandamus cause of action, which was based on state law. Id. at 26-29.

         The Court provided Plaintiff leave to amend its complaint within thirty days. ECF No. 29 at 29. The Court cautioned that “[f]ailure to file an amended complaint within 30 days or failure to cure the deficiencies identified in this Order will result in dismissal with prejudice of the claims dismissed in this Order.” Id.

         Plaintiff filed its First Amended Complaint on July 16, 2017. In the FAC, Plaintiff alleged a declaratory relief cause of action premised on the Takings Clause of the U.S. Constitution and the Fourteenth Amendment's guarantee of substantive due process. Plaintiff abandoned its Equal Protection Clause and Commerce Clause theories and also abandoned the mandamus cause of action.

         The City filed a motion to dismiss on July 28, 2017. See Mot. The City also filed a request for judicial notice. ECF No. 35 (“RJN”). On August 11, 2017, Plaintiff filed an opposition and objections to the City's RJN. ECF No. 37 (“Opp.”). In its opposition, Plaintiff withdrew its Takings Clause theory. Opp. at 2. The City replied on August 18, 2017. ECF No. 38 (“Reply”).


         A. Motion to Dismiss Pursuant to Federal Rule of Civil Procedure 12(b)(6)

         Pursuant to Federal Rule of Civil Procedure 12(b)(6), a defendant may move to dismiss an action for failure to allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The plausibility standard is not akin to a ‘probability requirement, ' but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal citations omitted). For purposes of ruling on a Rule 12(b)(6) motion, the Court “accept[s] factual allegations in the complaint as true and construe[s] the pleadings in the light most favorable to the nonmoving party.” Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008).

         However, a court need not accept as true allegations contradicted by judicially noticeable facts, Shwarz v. United States, 234 F.3d 428, 435 (9th Cir. 2000), and the “[C]ourt may look beyond the plaintiff's complaint to matters of public record” without converting the Rule 12(b)(6) motion into one for summary judgment, Shaw v. Hahn, 56 F.3d 1128, 1129 n.1 (9th Cir. 1995). Nor is the Court required to assume the truth of legal conclusions merely because they are cast in the form of factual allegations.” Fayer v. Vaughn, 649 F.3d 1061, 1064 (9th Cir. 2011) (per curiam) (quoting W. Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981)). Mere “conclusory allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss.” Adams v. Johnson, 355 F.3d 1179, 1183 (9th Cir. 2004); accord Iqbal, 556 U.S. at 678. Furthermore, “‘a plaintiff may plead [him]self out of court'” if he “plead[s] facts which establish that he cannot prevail on his . . . claim.” Weisbuch v. County of Los Angeles, 119 F.3d 778, 783 n.1 (9th Cir. 1997) (quoting Warzon v. Drew, 60 F.3d 1234, 1239 (7th Cir. 1995)).

         B. Leave to Amend

         Under Rule 15(a) of the Federal Rules of Civil Procedure, leave to amend “shall be freely granted when justice so requires, ” bearing in mind “the underlying purpose of Rule 15 to facilitate decision on the merits, rather than on the pleadings or technicalities.” Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (en banc) (ellipses omitted). However, a court “may exercise its discretion to deny leave to amend due to ‘undue delay, bad faith or dilatory motive on part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party . . ., [and] futility of amendment.'” Carvalho v. Equifax Info. Servs., LLC, 629 F.3d 876, 892-93 (9th Cir. 2010) (alterations in original) (quoting Foman v. Davis, 371 U.S. 178, 182 (1962)).


         The City has requested judicial notice of a range of legislative enactments including sections of the Sunnyvale Municipal Code, public record documents, and correspondence. ECF No. 35. The Court may take judicial notice of matters that are either “generally known within the trial court's territorial jurisdiction” or “can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned.” Fed.R.Evid. 201(b). Public records, including judgments and other publicly filed documents, are proper subjects of judicial notice. See, e.g., United States v. Black, 482 F.3d 1035, 1041 (9th Cir. 2007). However, to the extent any facts in documents subject to judicial notice are subject to reasonable dispute, the Court will not take judicial notice of those facts. See Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001), overruled on other grounds by Galbraith v. County of Santa Clara, 307 F.3d 1119 (9th Cir. 2002).

         With the exception of the November 7, 2016 letter, the City previously requested judicial notice of these documents in connection with its first round motion to dismiss. ECF No. 17 at 1-3. Plaintiff did not object to the City's request for judicial notice at that time. See ECF No. 18. In its Order on June 16, 2017, the Court granted the City's request for judicial notice of these documents. ECF No. 29 at 6-8. In its June 16, 2017 Order, the Court concluded that these “documents are legislative enactments, ordinances, or regulations that are subject to judicial notice, ” or “are of public record, and thus are documents for which judicial notice is appropriate.” ECF No. 29 at 7 (citing Long Beach Area Peace Network v. City of Long Beach, 574 F.3d 1011, 1026 (9th Cir. 2009) (taking judicial notice of a local ordinance, a local regulation, and a local municipal code); Abdullah v. U.S. Sec. Assocs., Inc., 731 F.3d 952, 959 n.10 (9th Cir. 2013) (taking judicial notice of opinion letters of California Division of Labor Standards Enforcement); and Law v. City of Berkeley, No. 15-cv-05343-JSC, 2016 WL 4191645, at *4 (N.D. Cal. Aug. 9, 2016) (taking judicial notice of city council minutes)).

         The November 7, 2016 letter, in which the City denied Plaintiff's application for a license to collect construction and demolition debris, was referenced on page 9 of the FAC. See FAC at 9; RJN Exh. J. A court may consider documents that were referenced but not attached to the complaint for purposes of deciding a Rule 12(b)(6) motion. Davis v. HSBC Bank Nev., NS., 69 l F .3d 1152, 1159-1160 (9th Cir. 2012); Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir. 1994).

         Plaintiff now objects to the City's request for judicial notice of two documents: the January 11, 2005 Extended and Second Restated Agreement (“the Agreement”), and the February 15, 2011 Staff Report (“the Report”). Opp. at 15. Plaintiff argues that the Court cannot take judicial notice of the recitals in the Agreement because the facts in the recitals are themselves disputed. Opp. at 16. It appears to make a similar argument as to the Report. Accordingly, the Court has not considered ...

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