Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_01-cv-01351/USCOURTS-cand-3_01-cv-01351-115/pdf.json

Nature of Suit Code: 440
Nature of Suit: Other Civil Rights
Cause of Action: 42:1983 Prisoner Civil Rights

---

United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

MARCIANO PLATA, et al.,

Plaintiffs,

v.

ARNOLD SCHWARZENEGGER,

et al.,

Defendants.

NO. C01-1351 TEH

ORDER DENYING

MEDICAL DEVELOPMENT

INTERNATIONAL’S

APPLICATION FOR LEAVE TO

SUE RECEIVER IN STATE

COURT

This matter comes before the Court on an application by Medical Development

International (“MDI”) for leave to sue the Receiver in state court. Upon careful

consideration of the issues presented, the Court DENIES MDI’s application for the reasons

discussed below.

BACKGROUND

The Court described the factual background underlying MDI’s proposed complaint

against the Receiver in its April 16, 2007 order and will not repeat that detailed factual

history here. See Apr. 16, 2007 Order Denying Mot. to Shorten Time at 2-6. In brief, MDI

challenges actions taken by the Receiver in connection with MDI’s provision of physician

and hospital services to inmates at two institutions within the California Department of

Corrections and Rehabilitation (“CDCR”): California State Prison, Los Angeles County

(“LAC”) and California Correctional Institution in Tehachapi (“CCI”).

Case 3:01-cv-01351-JST Document 1273 Filed 06/24/08 Page 1 of 7
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1

For the purposes of considering MDI’s application for leave to sue the Receiver, the

Court assumes the truth of the facts alleged in the complaint. As might be expected, the

Receiver, in his opposition papers, disputes some of those allegations, but the Court need not

resolve those disputes at this time.

2

The proposed complaint, attached as Exhibit 1 to the Dillon Declaration, alleges the

following:1

 After this Court appointed Robert Sillen as Receiver but prior to the effective

date of the Receiver’s appointment, MDI began negotiating with the CDCR to provide

services at LAC and CCI. MDI and the CDCR never executed a final contract, but MDI was

permitted to begin providing services on September 1, 2006.

A few months later, CDCR staff questioned whether MDI’s scope of work constituted

corporate practice of medicine in violation of California law. The CDCR worked with MDI

to prepare a restructured agreement that eliminated any such concerns. This contract had

been approved by the CDCR and MDI by December 26, 2006, but was “abruptly seized” by

the Receiver’s chief of staff in early January 2007. Proposed Compl. ¶ 39. The Receiver

“suspended the process of finalizing the restructured agreement and unilaterally stopped

payments on all invoices submitted by MDI.” Id. ¶ 40. The last payment MDI received from

the CDCR was on January 5, 2007.

The Receiver met with MDI on February 16, 2007, when the Receiver reiterated to

MDI his concerns that MDI was unlawfully practicing medicine without a license and

“represented that MDI could be paid for services rendered if it were determined that MDI

needed no medical license.” Id. ¶ 47. The Receiver also instructed MDI to continue working

at LAC and CCI without payment.

On March 7, 2007, MDI provided the Receiver with a legal opinion letter – prepared

by MDI’s own counsel – that MDI was engaged in non-medical administrative work and

therefore did not require a medical license. The Receiver “refused to accept the opinion and

alternative contract proposals previously accepted by the CDCR’s legal department.” Id.

¶ 51. On March 27, 2007, the Receiver “demanded that MDI procure an advisory opinion,

within ten days, from the Medical Board of California,” which MDI contends does not

provide such opinions within such short notice on request from private parties. Id. ¶ 52. The

Case 3:01-cv-01351-JST Document 1273 Filed 06/24/08 Page 2 of 7
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

3

Receiver also demanded that MDI produce certain contractual arrangements MDI had with

health care providers in its referral network. MDI was willing to provide this information if

the Receiver signed a confidentiality agreement, but the Receiver never agreed to do so. On

April 7, 2007, “the Receiver terminated all contact with MDI and physically expelled MDI

personnel from LAC and CCI without warning.” Id. ¶ 55.

Based on the above allegations, MDI filed suit against then-Receiver Sillen, in both

his individual and official capacities, and the CDCR on September 17, 2007, in Sacramento

County Superior Court. The Receiver removed the action to the United States District Court

for the Eastern District of California under the federal officer removal statute, 28 U.S.C.

§ 1442. The Receiver and the CDCR subsequently moved to dismiss the complaint, and the

Honorable William B. Shubb granted both motions on February 14, 2008. In his decision,

Judge Shubb concluded that the court lacked subject matter jurisdiction because: (1) MDI

failed to obtain leave to sue the Receiver from this Court and (2) 28 U.S.C. § 959(a), which

provides that receivers “may be sued, without leave of the court appointing them, with

respect to any of their acts or transactions in carrying on business connected with

[receivership] property,” did not apply to MDI’s claims. Med. Dev. Int’l v. Cal. Dep’t of

Corrections & Rehab., No. CIV. S-07-2199 WBS EFB, 2008 WL 436930 (E.D. Cal. Feb. 14,

2008) (also attached as Ex. 3 to Dillon Decl.) (hereinafter “MDI v. CDCR”). MDI appealed

the dismissal to the United States Court of Appeal for the Ninth Circuit, but the parties

stipulated to a stay of that appeal until September 15, 2008, to allow time for MDI to file the

instant application in this Court. MDI now seeks leave to sue the current Receiver, J. Clark

Kelso, in his official capacity in state court. The proposed complaint also names the CDCR

as a defendant.

DISCUSSION

As an initial matter, MDI contends that it does not need permission from this Court to

sue the Receiver. However, MDI properly does not ask this Court to re-visit that issue –

which was already decided adversely to MDI by Judge Shubb and is currently on appeal – 

Case 3:01-cv-01351-JST Document 1273 Filed 06/24/08 Page 3 of 7
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

4

and the Court focuses its discussion on the only issue presented for resolution: whether the

Court should grant MDI leave to sue the Receiver in state court.

The Court first notes that even if MDI filed suit against the Receiver in state court, the

Receiver appears to have an absolute right to remove the case to federal court under 28

U.S.C. § 1442(a)(1), which allows a federal officer sued in state court “in an official or

individual capacity for any act under color of such office” to remove the case to federal

court. See also 28 U.S.C. § 1442(a)(3) (allowing removal by “[a]ny officer of the courts of

the United States for any act under color of office or in the performance of his duties”). MDI

does not and cannot dispute that the Receiver, as an appointee of this Court, qualifies as a

federal officer, and MDI cites no authority for the proposition that granting leave to sue the

Receiver would foreclose the Receiver’s statutory right to removal.

Turning to the merits of MDI’s application, the Court may refuse MDI’s request for

leave to sue if MDI fails to set forth a prima facie case against the Receiver or if MDI’s

claims are without foundation. In re Kashini, 190 B.R. 875, 885 (B.A.P. 9th Cir. 1995)

(cited with approval by In re Crown Vantage, Inc., 421 F.3d 963 (9th Cir. 2005));

Dunscombe v. Loftin, 154 F.2d 963, 966 (5th Cir. 1946). Put another way, leave to sue

should be granted only “where it is made to appear that a cause of action is stated upon

which it can be said there is reasonable probability of recovery.” Driver-Harris Co. v. Indus.

Furnace Corp., 12 F. Supp. 918, 919 (W.D.N.Y. 1935). Even if MDI makes out a prima

facie case, this Court may nonetheless exercise its discretion to deny leave to sue the

Receiver in another court and instead choose to maintain jurisdiction over MDI’s claims

based on “the balancing of the interests of all parties involved.” Kashini, 190 B.R. at 886-87

(cited with approval by Crown Vantage, 421 F.3d at 976).

After careful review of MDI’s proposed complaint, the Court concludes that MDI has

failed to set forth a prima facie case on which there is a reasonable probability of recovery

because the Receiver would be immune from MDI’s suit. MDI does not contest that this

Court acted within its jurisdiction to appoint the Receiver, nor does MDI contest that the

Receiver is generally entitled to invoke quasi-judicial immunity to bar suits for damages. 

Case 3:01-cv-01351-JST Document 1273 Filed 06/24/08 Page 4 of 7
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2

In Kohlrautz v. Oilmen Participation Corporation, the Ninth Circuit held that state

law governs official immunity issues “where a state court-appointed receiver has been sued

under state law for alleged tortious abuse of process using state courts.” 441 F.3d 827, 833

(9th Cir. 2006). However, it is not disputed that federal law should govern this case

involving a federal receiver appointed by a federal court, nor does MDI argue that “there is a

material difference between the federal and state law for official immunity,” as there was in

Kohlrautz, id. at 831.

5

Instead, MDI contends that the Receiver is not entitled to immunity in this case because the

acts complained of are not judicial in nature. The Court rejects MDI’s argument for the

reasons discussed below.

 MDI is, of course, correct that absolute judicial or quasi-judicial immunity “does not

apply to non-judicial acts, i.e., the administrative, legislative, and executive functions that

judges may on occasion be assigned to perform.” Duvall v. County of Kitsap, 260 F.3d 1124,

1133 (9th Cir. 2001) (citing Forrester v. White, 484 U.S. 219, 227 (1988)).2

 Thus, in

Forrester, the Supreme Court held that a judge “was not entitled to absolute immunity for his

decisions to demote and discharge” a probation officer because such decisions “were not

themselves judicial or adjudicative”; instead, the judge “was acting in an administrative

capacity when he demoted and discharged” the probation officer. Forrester, 484 U.S. at

229-30. In determining whether an act may form the basis for immunity, “the relevant

inquiry is the ‘nature’ and ‘function’ of the act, not the ‘act itself.’” Mireles v. Waco, 502

U.S. 9, 13 (1991) (quoting Stump v. Sparkman, 435 U.S. 349, 362 (1978)) (case noting that

the relevant “act” was “directing police officers to bring counsel in a pending case before the

court,” rather than directing “police officers to carry out a judicial order with excessive

force”). “[I]f only the particular act in question were to be scrutinized, then any mistake of a

judge in excess of his authority would become a ‘nonjudicial’ act, because an improper or

erroneous act cannot be said to be normally performed by a judge. If judicial immunity

means anything, it means that a judge ‘will not be deprived of immunity because the action

he took was in error . . . or was in excess of his authority.” Id. at 12-13 (quoting Stump, 435

U.S. at 362).

//

//

Case 3:01-cv-01351-JST Document 1273 Filed 06/24/08 Page 5 of 7
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

3

MDI contends that Mullis is inapplicable to this case because it is “limited to claims

brought against a receiver personally,” Reply at 3 n.4, and MDI seeks leave to sue the

Receiver in his official capacity only. However, nothing in Mullis indicates that the trustee

was sued only in his individual capacity. Moreover, the Ninth Circuit has elsewhere

explicitly applied absolute immunity analysis to cases involving claims brought against

officials in their official capacity. E.g., Duvall, 260 F.3d 1124 (individual defendants named

in their official capacities only); see also, e.g., Sadoski v. Mosley, 435 F.3d 1076 (9th Cir.

2006) (individual defendants sued in both official and individual capacities, but no

distinction made between these two capacities when discussing absolute immunity); Olsen v.

Idaho State Bd. of Med., 363 F.3d 916 (9th Cir. 2004) (same).

6

MDI attempts to analogize this case to the sort of administrative action at issue in

Forrester. However, as the Ninth Circuit has explained:

Forrester simply acknowledged that “[r]unning through our

cases, with fair consistency, is a ‘functional’ approach to

immunity questions. . . .” 108 S. Ct. at 542. The cases

recognizing absolute immunity for court-appointed receivers are

all premised on this same functional approach to immunity. The

cases reason that the receiver functions as an arm of the court by

making decisions about the operation of a business that the judge

otherwise would have to make. A receiver operates a business

only because the court has directed him to do so in connection

with a case pending before the court. This situation is

dramatically different from a judge’s administrative hiring and

firing decisions for subordinate court personnel, which have no

connection to litigation pending before the court.

New Alaska Dev. Corp. v. Guetschow, 869 F.2d 1298, 1303 n.6 (9th Cir. 1989) (emphasis

added). Consequently, a receiver is absolutely immune from suit for functions “intimately

connected with his receivership duties.” Id. at 1304 (finding absolute immunity based on

charges of mismanagement but not for allegations of theft or slander); see also Mullis v. U.S.

Bankruptcy Court, 828 F.2d 1386, 1390-91 (9th Cir. 1987) (finding absolute immunity for a

bankruptcy trustee for alleged “acts or omissions within the ambit of the trustee’s official

duties”).3

Here, as Judge Shubb correctly explained:

. . . [This Court] charged the receivership with the “duty to

control, oversee, supervise, and direct all administrative,

personnel, financial, accounting, contractual, legal, and other

operational functions of the medical delivery component of the

[CDCR].” [Feb. 14, 2006 Order Appointing Receiver] OAR at 2

(emphasis added). [This Court] supplemented this responsibility

by explicitly providing that, in deployment of the aforementioned

duties and directives, “the Receiver and his staff shall have the

status of officers and agents of this Court, and as such shall be

vested with the same immunities as vest with this Court.” Id. at 6.

Case 3:01-cv-01351-JST Document 1273 Filed 06/24/08 Page 6 of 7
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

7

Because [MDI’s] lawsuit challenges [the Receiver’s] conduct in

terminating whatever quasi-contractual relationship may have

existed when he suspected illegality on the part of [MDI], the

lawsuit challenges [the Receiver’s] conduct in performing the

very duties [this Court] set up the receivership to perform.

MDI v. CDCR, 2008 WL 436930, at *4. Put another way: 

[MDI’s] causes of action against [the Receiver] do not arise from

tortious conduct or negligent acts pursuant to day-to-day, routine,

or ordinary business operations unrelated to his official

responsibilities. Rather, [MDI] challenges the very core of [the

Receiver’s] authority and administration of the CDCR medical

services system – i.e., duties explicitly prescribed in [this

Court’s] creation of the receivership.

Id. at *3 (citation omitted). This is in contrast to cases in which “a receiver or trustee has

been sued in his/her capacity as an employer, or for torts committed by agents of the

estate/business in receivership during the course of routine or day-to-day operations distinct

from the receiver’s official responsibilities.” Id.

Because MDI challenges actions taken by the Receiver that go to the core of his

judicially conferred duties, the Receiver is immune from suit based on MDI’s allegations

under the Ninth Circuit precedent cited above. Consequently, MDI has failed to state a prima

facie case against the Receiver in which there is a reasonable probability of recovery, and the

Court does not find good cause to grant MDI leave to sue the Receiver.

CONCLUSION

With good cause appearing for the reasons discussed above, MDI’s application for

leave to sue the Receiver in state court is hereby DENIED.

IT IS SO ORDERED.

Dated: 06/24/08 

THELTON E. HENDERSON, JUDGE

UNITED STATES DISTRICT COURT

Case 3:01-cv-01351-JST Document 1273 Filed 06/24/08 Page 7 of 7