Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_06-cv-03135/USCOURTS-cand-3_06-cv-03135-1/pdf.json

Nature of Suit Code: 950
Nature of Suit: Constitutionality of State Statutes
Cause of Action: 28:1331 Fed. Question

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United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

DORRY COPPOLETTA, an individual; and

GEORGETTE GUTIERREZ, an individual, on

behalf of themselves and all others similarly

situated,

Plaintiffs,

 v.

THE STATE OF CALIFORNIA,

Defendants. /

No. C06-03135 WHA

ORDER GRANTING

DEFENDANTS’ MOTION TO

DISMISS

INTRODUCTION

In this putative class action challenging the constitutionality of California’s Unclaimed

Property Law, plaintiffs seek to circumvent an adverse state-court judgment against them. In

particular, plaintiffs challenge the constitutionality of California’s refusal to pay interest on

claims under California’s Unclaimed Property Law. Defendants have moved to dismiss the

complaint on several grounds: Sovereign immunity and the Eleventh Amendment, the RookerFeldman doctrine, the Younger abstention doctrine, res judicata and failure of plaintiffs to state

a claim. For the reasons stated below, this order GRANTS defendants’ motion to dismiss. 

Case 3:06-cv-03135-WHA Document 19 Filed 09/15/06 Page 1 of 10
United States District Court

For the Northern District of California

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STATEMENT

Dory Coppoletta and Georgette Gutierrez bring this action on behalf of themselves and

others similarly situated. They challenge the constitutionality of the state’s refusal to pay

interest under California’s Unclaimed Property Law. Cal. Civ. Proc. Code § 1540(c). 

California’s Unclaimed Property Law establishes a procedure where abandoned

property — property with no indication of ownership in three years or more — comes into the

possession of the State of California. The state must notify the property owners of the pending

escheat if the state has the owner’s address. If the owner does not make a claim on the property,

a report is made to the state controller. The controller then takes possession of the property. 

Holding the property as a custodian until the rightful owner is found, the controller may also

sell the escheated property. The state places the funds in a general account. If the owner makes

a claim at any point during this process, the controller is required to either return the property or

pay the owner the proceeds from its sale. The law expressly states that no interest shall be paid

on the property when the funds are returned. Cal. Code Civ. Proc. §§ 1500-1542. During the

2003-2004 year, the state held $4.1 billion in unclaimed property for which the state paid

$177.4 million in claims (Coppoletta Compl. Exh. C).

Ms. Coppoletta resides in California. Beginning in 1999, the State of California

acquired possession of Ms. Coppoletta’s property under California’s Unclaimed Property Law. 

She has subsequently settled her claims with the state, receiving over $500,000 in return for her

accounts that were possessed by the state. She brings this claim seeking damages of the interest

accrued on the funds while the state possessed the funds. 

Ms. Gutierrez is a resident of New York. The state has had possession of the money in

an abandoned bank account belonging to Ms. Gutierrez since at least 1990. In July 2005, Ms.

Gutierrez was notified that the state would pay her $255.03 to settle her claim but it would not

pay her any interest. Ms. Gutierrez has not received any interest payments from the state on the

funds that state held for her.

Case 3:06-cv-03135-WHA Document 19 Filed 09/15/06 Page 2 of 10
United States District Court

For the Northern District of California

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State Lawsuit

Ms. Coppoletta and Ms. Gutierrez filed a complaint against the State of California and

Controller Steve Westly on March 29, 2005 in San Francisco Superior Court. In response, the

State of California moved for summary judgment on April 17, 2006. Plaintiffs’ opposition to

the motion for summary judgment was due on May 10, 2006, but plaintiffs did not file an

opposition to the motion for summary judgment. One day after the unfiled opposition was due,

plaintiffs served a voluntary dismissal. Judge Warren of San Francisco Superior Court granted

the defendants’ motion for summary judgment and vacated the clerk’s erroneous entry of

dismissal on May 26, 2006. In granting the motion for summary judgment, Judge Warren

emphasized that plaintiffs could not avoid the court’s judgment by filing for a voluntary

dismissal. Allowing such voluntary dismissals would thwart the purpose of a motion for

summary judgment (Notice of Entry of Judgment, Superior Court of California, County of San

Francisco). In his declaration supporting plaintiffs’ opposition to the motion to dismiss

presented to this court, plaintiffs’ attorney Lawrence Salisbury explained that the plaintiffs had

honorable intentions in filing for voluntary dismissal: In plaintiffs’ view the Ninth Circuit’s

recent Taylor decision conferred jurisdiction on a federal court by finding Eleventh Amendment

exceptions applicable. Accordingly, plaintiffs wanted to re-file in federal court. He details the

alleged bad faith of Jill Bowers, attorney for the State of California. Mr. Salisbury states that

after the notice of dismissal was served on all parties, he sought and received confirmation that

the motion for summary judgment hearing was off calendar. Notwithstanding this, the hearing

went forward without plaintiffs’ counsel. The state’s motion for summary judgment was

granted after that hearing. 

Federal Lawsuit

Plaintiffs’ first claim alleges that the failure of the state to pay interest violates the Fifth

Amendment via the Fourteenth Amendment because it constituted a taking without just

compensation. Plaintiffs also claim that the Act violates Article I, Section 19 of the California

state Constitution. Plaintiffs seek a return of the interest and an injunction prohibiting the state

from retaining interest payments in the future. They also seek attorney’s fees under both federal

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United States District Court

For the Northern District of California

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and state theories. Mr. Salisbury has filed in federal court because he believes that his clients

have a viable claim (Salisbury Decl. ¶ 10).

In response to the complaint, defendants filed the instant motion to dismiss. Their

motion rests on ten separate grounds: 

(1) sovereign immunity and the Eleventh Amendment bar plaintiffs’ claims against

defendant State of California; 

(2) the Rooker-Feldman doctrine prevents the district court from exercising jurisdiction

because federal courts do not have the authority to review the final determinations of

state courts in judicial proceedings; 

(3) the Younger abstention doctrine requires the court to abstain from exercising

jurisdiction over the matter because this case remains pending in state court; 

(4) res judicata bars plaintiffs’ complaint because a state court entered judgment against

plaintiffs on the same claims; 

(5) plaintiffs are time-barred by California’s Unclaimed Property Law which requires

aggrieved claimants to bring an action within 90 days of the Controller’s decision on

their claim or within 270 days if the Controller has not made a decision; 

(6) plaintiffs cannot state a claim for deprivation of property because the Controller only

has possession of the property and not the right of ownership; 

(7) plaintiffs cannot seek damages related to their paid Unclaimed Property Law claims

because Section 1541 of the California Code of Civil Procedure specifically provides

that the exclusive remedy for these claims is the return of the escheated property or the

proceeds of its sale;

(8) Section 1566 of the California Code of Civil Procedure, preserving California’s

sovereign immunity against suit, holds the state immune from claims based upon the

Unclaimed Property Law once the claims have been paid; 

(9) any claims predicated on a trust theory must fail because the Unclaimed Property

Law does not create a trust fund; and

Case 3:06-cv-03135-WHA Document 19 Filed 09/15/06 Page 4 of 10
United States District Court

For the Northern District of California

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(10) plaintiffs are not entitled to an accounting of the state’s unclaimed property because

proceeds are deposited into a general fund and not held in individual accounts rendering

proceeds from an individual sale untraceable.

ANALYSIS

Pursuant to FRCP 12(b)(6), dismissal for failure to state a claim is proper if it appears

beyond doubt that plaintiff can prove no set of facts to support a claim entitling him to relief. A

motion to dismiss under FRCP 12(b)(6) tests for legal sufficiency of the claims alleged in the

complaint. Parks Sch. Of Business v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). 

Dismissal may be based on the lack of a cognizable legal theory or the absence of sufficient

facts alleged under a cognizable legal theory. Balistreri v. Pacifica Police Dept., 901 F.2d 696,

699 (9th Cir. 1990). Furthermore, all material allegations of the complaint are taken as true and

are construed in the light most favorable to the nonmoving party. Cahill v. Liberty Mut. Ins.

Co., 80 F.3d 336, 337-38 (9th Cir. 1996). If dismissal is granted, plaintiffs are only provided

leave to amend if they can cure the complaint’s defects. Noll v. Carlson, 809 F.2d 1446, 1448

(9th Cir. 1987).

1. THE ROOKER-FELDMAN DOCTRINE.

As courts of original jurisdiction, federal district courts have no authority to review the

final determinations of state courts in judicial proceedings. Rooker v. Fidelity Trust Co., 263

U.S. 413, 415–16 (1923); District of Columbia Court of Appeals v. Feldman, 460 U.S. 462, 482

(1983). A federal district court does not have the subject-matter jurisdiction to hear a direct

appeal from the final judgment of a state court. Noel v. Hall, 341 F.3d 1148, 1154-55 (9th Cir.

2003). This is true even when the challenge to a state-court decision potentially involves

federal constitutional issues. Worldwide Church of God v. McNair, 805 F.2d 888, 891 (9th Cir.

1986). The Supreme Court recently cautioned that the Rooker-Feldman doctrine only prevents

a district court from exercising jurisdiction if certain conditions are met. Exxon Mobil Corp. v.

Saudi Basic Indus. Corp., 544 U.S. 280, 284 (2005). Rooker-Feldman only applies when

(1) the losing party in state court has filed a suit in federal court after the state proceedings have

ended, (2) complaining of an injury that was caused by the state-court judgment, and

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* The slight differences appear when plaintiffs assert the basis for each court’s jurisdiction over the

matter. This court takes judicial notice of the state complaint as a matter of public record not subject to

reasonable dispute. Fed. R. Evid. 201(b)(2).

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(3) seeking a review and rejection of that state court judgment. Ibid. The doctrine applies not

only to direct attempts to review a state-court decision but also to indirect reviews of a state

court decision when the federal claim is “inextricably intertwined” with the merits of the statecourt decision. Dubinka v. Judges of the Superior Court, 23 F.3d 218, 221 (9th Cir. 1994). The

crux of the “inextricably intertwined” question is whether there has already been actual

consideration of and a decision on the issue presented. Worldwide Church of God, 805 F.2d at

892 (citing Robinson v. Ariyoshi, 753 F.2d 1468, 1472 (9th Cir. 1985)). 

The Rooker-Feldman doctrine bars plaintiffs’ action. First, plaintiffs lost in state court

when Judge Warren entered summary judgment against them. They filed this suit in federal

court on the eve of summary judgment complaining of the same injuries they based their state

complaint on. Second, comparing plaintiffs’ state court complaint side by side with their

federal court complaint, it is glaringly apparent that these complaints rest upon the same injuries

as the complaints are literally verbatim in regard to the allegations.*

The only question concerns the third element: whether plaintiffs are seeking a review

and rejection of the state court judgment against them. Plaintiffs argue that they did not have

the opportunity to defend themselves on the motion for summary judgment. However, this is

not pertinent in this inquiry because this does not concern a question of whether the claims are

“inextricably intertwined.” They are the exact same claims. This is an attempt by plaintiffs to

directly review the state court judge’s decision by advising this court of how unfair it was for

the judge to issue that motion for summary judgment. The state court rendered its judgment on

the motion for summary judgment when it was presented before the state court. The plaintiffs

could have filed an opposition to the motion but they chose not to. The state court appellate

system is the proper place to review the superior court’s decision. A federal district court does

not have jurisdiction when plaintiffs seek a review and rejection of the state court’s judgment.

Plaintiffs argue that because federal courts have an obligation to exercise the jurisdiction

given to them, abstention is only to be used in extraordinary and narrow circumstances. This

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order does not dispute that assertion as this is precisely a circumstance where the Supreme

Court has stated that a district court must abstain from exercising its jurisdiction.

At hearing on this motion, plaintiffs tried to argue that Feldman allows federal courts to

exert jurisdiction over a state claim when a plaintiff generally challenges the constitutionality of

a state statute. In Feldman, the plaintiffs were challenging a decision by the District of

Columbia Court of Appeals. The District of Columbia Court of Appeals had denied the

plaintiffs’ request for a waiver of a bar admission rule that required applicants to have

graduated from an approved law school. The Supreme Court allowed the federal district court

to retain jurisdiction only over the claims that involved a general attack on the constitutionality

of the bar admission rule because those claims did not involve a review of state judicial

proceedings. A judicial proceeding involves a legal argument, determination in light of existing

law and an adjudication of one’s legal rights. Feldman, 460 U.S. at 480-481. United States

district courts do not have jurisdiction over a challenge to a state court decision when the

decision arises out of a judicial proceeding. Feldman, 460 U.S. at 486. If the state court

decision arises out of a nonjudicial proceeding, then a federal district court may review it. This

is the key distinction: Whether the proceeding challenged was judicial or nonjudicial. This

distinction is crucial because when a challenged rule or statute is made in a nonjudicial

proceeding,“the policies prohibiting United States district courts review of final state court

judgments are not implicated.” Ibid. The Court allowed some of the plaintiff’s claims, those

generally attacking the constitutionality of the bar admissions rule, because the bar admissions

rule had been created through a legislative rather than judicial process.

Here, the state court acted judicially when it ruled on the defendants’ motion for

summary judgment on May 26, 2006. The state court heard plaintiffs’ and defendants’ legal

argument on plaintiffs’ claims and made a legal determination that defendants were entitled to

summary judgment. Although plaintiffs seek to characterize Feldman as allowing a general

constitutional challenge of a state statute, Feldman only allows this when the state decision was

made in a nonjudicial proceeding. Because the state court proceeding here involved a judicial

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proceeding, there is no right under Feldman for this court to retain jurisdiction over a general

challenge to the constitutionality of California’s Unclaimed Property Law.

In conclusion, this court does not have subject-matter jurisdiction to review the state

court’s Coppoletta decision. At oral argument, counsel discussed the potential effect of an

order vacating judgment by the state court at the state court hearing scheduled for September

27, 2006. This court has considered the possibility of postponing a ruling on this motion until

the conclusion of those proceedings, but, after hearing argument from counsel, this court is

convinced that no matter how the state court rules on September 27, 2006, there will be

interminable appeals and no clean cut termination of the state court proceedings. At all events

on the present record, it is undisputed that litigation has been commenced and litigated between

parties at state court. Rooker-Feldman accordingly applies to the immediate record.

2. RES JUDICATA.

The State of California also argues that res judicata bars plaintiffs’ claims in federal

court. Plaintiffs argue that res judicata is inappropriate under FRCP 8(c) because defendants

did not raise the issue in their responsive pleading. Affirmative defenses can be raised on a

FRCP 12(b)(6) motion to dismiss as long as the complaint clearly shows on its face that the

affirmative defense bars the action. 27A FEDERAL PROCEDURE, LAWYER’S EDITION § 62:514

(2006). 

"Res judicata bars all grounds for recovery which could have been asserted, whether

they were or not, in a prior suit between the same parties on the same cause of action." Clark v.

Bear Stearns & Co., Inc., 966 F.2d 1318, 1320 (9th Cir. 1992). In determining whether a claim

is barred as res judicata, courts should consider: 

(1) whether rights or interests established in the prior judgment would be destroyed or

impaired by prosecution of the second action; (2) whether substantially the same

evidence is presented in the two actions; (3) whether the two suits involve infringement

of the same right; and (4) whether the two suits arise out of the same transactional

nucleus of facts. Ibid.

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The Ninth Circuit has held that a court cannot judicially notice matters in issue that are the same

as those in a former action. Those matters must be pleaded and proved. Guam Invest. Co. v.

Central Bldg., Inc., 288 F.2d 19, 23 (9th Cir. 1961). In Guam, the complaint contained

allegations of events that had occurred after the state court had rendered its decision. In

contrast, the record before this court clearly shows there is no difference between the issues in

state court and the issues presented here. 

Plaintiffs assert that they have not had the full and fair opportunity to present their

argument in light of what occurred with the hearing on the motion for summary judgment in

state court. However, these factors support a finding that plaintiffs’ claims herein are barred by

the doctrine of res judicata. Defendants' rights, previously adjudicated, would be destroyed by

permitting plaintiffs to re-litigate the claims dismissed on May 26, 2006. Plaintiffs had the

opportunity to respond to defendants’ motion to dismiss but chose not to. Consequently, the

San Francisco Superior Court granted defendants’ motion for summary judgment. The same

evidence and underlying rights are central to the common claims. Plaintiffs allege precisely the

same transactional nucleus of facts in each lawsuit. The doctrine of res judicata clearly applies. 

Hence, any and all claims stemming from plaintiffs’ allegations that it is

unconstitutional for California to retain interest on unclaimed property under the Unclaimed

Property Law are barred. 

3. INSUFFICIENCY OF PLAINTIFFS’ ALLEGATIONS.

This court must abstain from exercising jurisdiction for the aforementioned reasons. 

Even if the Rooker-Feldman doctrine did not apply prohibiting this court from reviewing a state

court determination, plaintiffs’ claims are still barred by res judicata. This court is unable to

reach the defendants’ assertions that the plaintiffs have failed to state a claim under FRCP

12(b)(6). 

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CONCLUSION

For the aforementioned reasons, the defendants’ motion to dismiss is GRANTED. 

Judgment will be entered accordingly.

IT IS SO ORDERED.

Dated: September 14, 2006. WILLIAM ALSUP

UNITED STATES DISTRICT JUDGE

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