Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_13-cv-02881/USCOURTS-casd-3_13-cv-02881-0/pdf.json

Nature of Suit Code: 440
Nature of Suit: Other Civil Rights
Cause of Action: 28:1331 Fed. Question

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

HSH, INC., a California Corporation;

HS RAZUKI, INC., a California

Corporation; 3201 NATIONAL, INC.,

a California Corporation; and HAPPY

INVESTMENTS, LP, a California

Limited Partnership, 

Plaintiff,

CASE NO. 13cv2881 WQH-NLS

ORDER

vs.

THE CITY OF EL CAJON, a

California municipality,

Defendant.

HAYES, Judge:

The matter before the Court is the Motion to Dismiss filed by Defendant City of

El Cajon. (ECF No. 12). 

I. Background

On December 4, 2014, Plaintiffs HSH, Inc., HS Razuki, Inc., and 3201 National,

Inc. initiated this action by filing a Complaint in this Court. (ECF No. 1). On February

13, 2014, Plaintiffs, adding Happy Investments, LP as a plaintiff, filed the First

Amended Complaint (“FAC”) pursuant to Federal Rule of Civil Procedure 15(a)(1). 

(ECF No. 7). On March 13, 2014, Defendant filed the Motion to Dismiss First

Amended Complaint Pursuant to Federal Rules of Civil Procedure 12(b)(1) and

12(b)(6) (“Motion to Dismiss”), accompanied by a Request for Judicial Notice. (ECF

No. 12). On March 31, 2014, Plaintiffs filed an opposition. (ECF No. 13). On April

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7, 2014, Defendant filed a reply. (ECF No. 14). 

II. Allegations of the FAC

The FAC challenges the validity of the City of El Cajon’s (“the City”) Ordinance

4994, codified as Chapter 17.210 of Title 17 of the City’s municipal code (the

“Ordinance”). “The Ordinance purports to ‘protect the general health, safety, and

welfare of the residents of the city of El Cajon and to prevent nuisance activities where

alcoholic beverage sales occur.’” (ECF No. 7 at 2) (citing El Cajon Municipal Code

(“ECMC”) § 17.210.020). However, the Ordinance “picks favorites” by “heralding the

interests of big business and big-box retailers over those of the smaller neighborhood

businesses truly affected.” Id. The Ordinance applies to establishments that conduct

retail sales of alcoholic beverages for consumption off the premises where sold (“offsale alcoholic beverage retailers”). However, the Ordinance expressly exempts “bigbox retailers (who typically sell even more alcohol than the small neighborhood

retailers affected by this Ordinance).” Id. 

“The Ordinance presently requires that all new, modified, or redeveloped off-sale

alcoholic beverage retailers obtain a conditional use permit prior to engaging in any

alcoholic beverage sales activity unless the establishment consists of ‘a general retail

store, a grocery store, or a retail pharmacy, which has (1) at least 10,000 square feet or

gross floor space, and (2) a maximum of 10 percent of the gross floor area devoted to

the sales and display of alcoholic beverages.’” Id. at 6-7 (citing ECMC §

17.210.080(B)). Under the Ordinance, new, modified, or redeveloped off-sale alcoholic

beverage retailers’ (“new, modified, or redeveloped retailers”) sales activities must be

“be designed, constructed, and operated to conform to countless operational standards”

including restrictions on alcohol sales, alcohol displays, and signage. Id. at 7. The

“operational standards,” applicable to new, modified, or redeveloped retailers, prohibit,

among other things, the exterior advertising of alcohol, tobacco, and paraphernalia. 

“Conditional use permits may be suspended, modified, or revoked by the Planning

Commission for violation of the Ordinance.” Id. at 7. 

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Established off-sale alcoholic beverage retailers (“established retailers”) have

“deemed-approved” status under the Ordinance. Id. Established retailers may continue

to lawfully operate by satisfying a training requirement, paying an annual permit fee,

and complying with various performance standards. Id. at 8. “Deemed approved status

may be suspended, modified, or revoked by the Planning Commission for violation of

the Ordinance.” Id. at 9. 

Plaintiff HSH owns Fair Valley Liquor and Main Street Market #2, which both

have deemed approved status under the Ordinance. However, they are unable to send

their employees to the trainings required by the Ordinance. Main Street Market #2 will

become a modified establishment when it applies for a license to sell distilled spirits in

addition to wine. Main Street Market #2 will therefore be subject to “burdensome

restrictions” and suffer “economic diminution on the value and potential resale value.” 

Id. at 4. Main Street Market #2 will also be operating in “violation of various

operational standards contained in section 17.210.100 of the Ordinance” upon receipt

of its new license. Id.

Plaintiff HS Razuki owns Main Street Liquor. Main Street Liquor recently

received a conditional use permit under the Ordinance as a modified or redeveloped

retailer. Main Street Liquor suffers and will continue to suffer economic diminution of

value from the “burdensome restrictions on alcoholic beverage sales.” Id. “Also, as

Main Street Liquor will operate in the same manner in which it has been operating, it

will be in violation of various operational standards contained in section 17.210.100 of

the Ordinance.” Id. 

Plaintiff 3201 National owns Main Street Liquor #3. Main Street Liquor #3 has

deemed approved status, but it cannot send its employees to the required trainings. Id.

at 5. Main Street Liquor #3 presently suffers economic diminution due to burdensome

restrictions it would face, should “the business want to modify or redevelop its store.” 

Id.

Plaintiff Happy Investments owns 3 Brothers Liquor. 3 Brothers Liquor has

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deemed approved status, but it cannot send its employees to the required trainings. Id.

3 Brothers Liquor presently suffers economic diminution due to the prospective

burdensome restrictions it would face, should “the business want to modify or

redevelop its store.” Id.

Plaintiffs challenge the statute on the following grounds: (1) violation of the

Equal Protection Clause (brought by HSH and HS Razuki only), (2) void for vagueness

under the Due Process Clause, (3) violation of the Due Process Clause, (4) preemption

by California Business & Professions Code § 23790, (5) preemption by Article XX of

the California Constitution, (6) violation Article XIII C, § 2(b) of the California

Constitution, as amended by Proposition 26, and (7) violation Article XIII C, § 2(d) of

the California Constitution. For each claim, Plaintiffs request: (1) a declaratory

judgment that the Ordinance is “unlawful, void and unenforceable,” (2) a permanent

injunction, temporary injunction, or temporary restraining order prohibiting

enforcement, and (3) attorney’s fees and costs. Id. at 16-18.

III. Article III Standing

Defendant contends that Plaintiffs lack standing because they have failed to

allege an injury in fact. Defendant contends that the alleged injuries stemming from

violating the Ordinance are hypothetical because Plaintiffs have not alleged that they

plan to violate the ordinance. Defendant further contends that simply not wanting to

comply with regulations is not harm to a legally protected interest because Plaintiffs do

not have a right “to operate their business as they see fit.” (ECF No. 14 at 3). Finally,

Defendant contends that the complained of injury is not particularized because it is an

injury common to “all alcoholic beverage sales establishments in the City.” Id. at 4. 

Plaintiffs assert that they have adequately alleged actual economic diminution on

the value of their businesses as a result of the Ordinance. Plaintiffs also assert that they

have adequately alleged imminent future harm in their inability to comply with the

Ordinance’s requirement of employee trainings, and Main Street Market #2 and Main

Street Liquor’s plans to continue operating as before in violation of the Ordinance. 

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Rule 12(b)(1) of the Federal Rules of Civil Procedure allows a defendant to move

for dismissal on grounds that the court lacks jurisdiction over the subject matter. Fed.

R. Civ. P. 12(b)(1). The burden is on the plaintiff to establish that the court has subject

matter jurisdiction over an action. Assoc. of Med. Colls. v. United States, 217 F.3d 770,

778-779 (9th Cir. 2000). In resolving an attack on a court’s jurisdiction, the court may

go outside the pleadings and consider evidence beyond the complaint relating to

jurisdiction without converting the motion to dismiss into a motion for summary

judgment. Safe Air For Everyone v. Doyle, 373 F.3d 1035, 1039 (9th Cir. 2004). 

“Federal courts are courts of limited jurisdiction. They possess only that power

authorized by Constitution and statute, which is not to be expanded by judicial decree. 

It is to be presumed that a cause lies outside this limited jurisdiction, and the burden of

establishing the contrary rests upon the party asserting jurisdiction.” Kokkonen v.

Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994) (citations omitted). The party

invoking federal jurisdiction bears the burden of establishing Article III standing. Lujan

v. Defenders of Wildlife, 504 U.S. 555, 561 (1992). This party must establish (1) an

“‘injury in fact’—an invasion of a legally protected interest which is (a) concrete and

particularized . . . and (b) ‘actual or imminent, not conjectural or hypothetical,’” (2) a

causal connection between the injury and the conduct complained of, and (3) a

likelihood that the injury will be redressed by a favorable decision. Id. at 560-61

(citations omitted). “[A] plaintiff must demonstrate standing for each claim he seeks

to press.” DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 352 (2006). In the absence

of a plaintiff’s Article III standing, a court lacks subject matter jurisdiction to entertain

the lawsuit. Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 109-110 (1998). 

“When . . . the plaintiff defends against a motion to dismiss at the pleading stage,

general factual allegations of injury resulting from the defendant’s conduct may suffice

because we presume that general allegations embrace those specific facts that are

necessary to support the claim.” Oregon v. Legal Servs. Corp., 552 F.3d 965, 969 (9th

Cir. 2009) (citations and internal quotations omitted); see also Carrico v. City and Cnty.

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of San Francisco, 656 F.3d 1002, 1006 (9th Cir. 2011) (noting that, at the pleading

stage, standing analysis is based “on the allegations of the . . . complaint, which we

accept as true”). 

A. Equal Protection (First Claim)

The equal protection claim is asserted by HSH and HS Razuki. HSH “is applying

for a license to also sell distilled spirits” for its Main Street Market #2. (ECF No. 7 at

3). “Because Main Street Market #2 will, as a result, be a modified establishment under

the Ordinance, it will apply for a conditional use permit.” Id. HS Razuki’s Main Street

Liquor “recently received a conditional use permit under the Ordinance because it has

been modified and/or redeveloped and will be operating as a modified and/or

redeveloped establishment.” Id. at 4. The FAC alleges that the Ordinance violates the

Equal Protection Clause because new, modified and/or redeveloped small retailers are

required to obtain a conditional use permit, while new, modified, and/or redeveloped 

“big box” retailers are exempted from this requirement. (ECF No. 7 at 9). The FAC

further alleges that new, modified, and/or redeveloped small retailers are subject to

“penalties and an annual alcohol sales regulatory fee” that do not apply to “larger

businesses.” Id. 

HSH and HS Razuki have alleged that they are subjected to burdens that the “bigbox” retailers are exempt from, despite the fact that “big-box” retailers may sell a larger

volume of alcohol. Those burdens include a conditional use permit requirement and “an

annual alcohol sales regulatory fee.” These allegations of unequal treatment between

competing businesses are sufficient to confer standing. See Arkansas Writers’ Project,

Inc. v. Ragland, 481 U.S. 221, 227 (1987) (holding that the plaintiff had standing to

challenge a state statute that adversely affected it, where “others similarly situated [are]

exempt from” its requirements); Ne. Fla. Chapter of Associated Gen. Contractors of

Am. v. City of Jacksonville, 508 U.S. 656, 666 (1993) (noting that the “injury in fact”

in an equal protection case is the imposition of a barrier that others are not subject to);

Barnes-Wallace v. City of San Diego, 704 F.3d 1067, 1086 (9th Cir. 2012) (“[W]hen

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the government imposes a discriminatory barrier making it more difficult for members

of a group to obtain a benefit (such as a government contract), the injury of unequal

opportunity to compete confers standing.”). HSH and HS Razuki have alleged

sufficient facts to establish standing to pursue an equal protection claim. 

B. Void for Vagueness under the Due Process Clause (Second Claim)

The FAC alleges that the Ordinance is void for vagueness because several

phrases and terms are undefined and “unnecessarily ambiguous.” (ECF No. 7 at 10-11). 

Specifically, Plaintiffs allege that the vague phrases include: “adverse effects,” “health,

peace or safety of persons,” “jeopardize or endanger,” “public health or safety of

persons,” “repeated nuisance activities,” “compatible with and not adversely affect [sic]

the livability or appropriate development,” “disturbance of the peace,” “excessive loud

noises,” and “late night or early morning hours.” Id. at 10. Plaintiffs allege that the

vague words include: “adverse,” “repeated,” “peace,” “excessive,” “late,” and “early.” 

Id. at 11. However, Plaintiffs do not allege that they have been injured or will be

injured in any way by enforcement of any of these allegedly vague provisions. See

Carrico, 656 F.3d at 1006-07 (holding that the allegation that the plaintiffs are “subject

to the legal and constitutional infirmities of [a] municipal ordinance” is insufficient to

confer standing to bring First Amendment and void for vagueness challenges to a

statute because “[the plaintiff] has not demonstrated that its members have ‘an intention

to engage in a course of conduct arguably affected with a constitutional interest,’ that

what they wish to do is ‘proscribed by [the ordinance],’ or that they face ‘a credible

threat of prosecution thereunder’”) (citing Babbitt v. United Farm Workers Nat. Union,

442 U.S. 289, 298 (1979)). Without an actual or imminent injury resulting from the

alleged vagueness of the Ordinance, Plaintiffs lack standing to challenge the Ordinance

on vagueness grounds. See Lujan, 504 U.S. at 560 (“[T]here must be a causal

connection between the injury and the conduct complained of—the injury has to be

‘fairly ... trace[able] to the challenged action of the defendant....”) (citing Simon v.

Eastern Ky. Welfare Rights Org., 426 U.S. 26, 41-42 (1976)). 

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The injuries that Plaintiffs have identified in the complaint are not alleged to stem

from the Ordinance’s allegedly vague provisions. The conclusory allegation that HS

Razuki “will operate in the same manner in which it has been operating . . . in violation

of various operational standards” does not demonstrate that HS Razuki will be injured

because the Ordinance is vague. Similarly, the conclusory allegation that Plaintiffs will

be unable to attend the required employee trainings cannot confer standing here because

the employee training provision, ECMC §17.210.230(G), is not alleged to be vague. 

Finally, the allegation that Plaintiffs’ businesses suffer “diminution in value” is not an

injury that the void for vagueness doctrine aims to prevent. See Grayned v. City of

Rockford, 408 U.S. 104, 109 (1972) (noting that vague laws “may trap the innocent by

not providing fair warning” and “impermissibly delegate[] basic policy matters to

policemen, judges, and juries for resolution on an ad hoc and subjective basis, with the

attendant dangers of arbitrary and discriminatory application”). 

Plaintiffs have failed to demonstrate that any of their alleged injuries are the

result of vagueness. Plaintiffs lack standing to bring a void for vagueness challenge. 

C. Due Process (Third Claim)

Plaintiffs allege that the Ordinance violates the Due Process Clause because it

allows for the commencement of revocation proceedings before imposing additional

conditions. (ECF No. 7 at 12). Plaintiffs further allege that the City’s Planning

Commission may revoke a conditional use permit or deemed approved status at the first

hearing without first imposing “conditions to remedy this situation.” Id. Finally,

Plaintiffs allege that “in order to challenge any imposed suspension, modification, or

revocation of a conditional use permit or deemed-approved status, it requires the

accused to seek an administrative hearing which is inherently unfair and violates Due

Process under the Fifth and Fourteenth Amendments.” (ECF No. 7 at 11). 

“The requirements of procedural due process apply only to [government]

deprivation of interests encompassed by the Fourteenth Amendment's protection of

liberty and property.” Board of Regents v. Roth, 408 U.S. 564, 569 (1972). For a

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procedural due process claim, a plaintiff must establish that (1) the type of government

action is one to which due process applies, and (2) the plaintiff was deprived of a

protected property interest. Harris v. Cnty. of Riverside, 904 F.2d 497, 501 (9th Cir.

1990). “An elementary and fundamental requirement of due process in any proceeding

which is to be accorded finality is notice reasonably calculated, under all the

circumstances, to apprise interested parties of the pendency of the action and afford

them an opportunity to present their objections.” Mullane v. Cent. Hanover Bank &

Trust Co., 339 U.S. 306, 314 (1950). Due process requires consideration of the

following factors: (1) “the private interest that will be affected by the official action,”

(2) “the risk of an erroneous deprivation of such interest through the procedures used, 

and the probative value, if any, of additional or substitute procedural safeguards,” and

(3) “the Government’s interest, including the function involved and the fiscal and

administrative burdens that the additional or substitute procedural requirement would

entail.” Mathews v. Eldridge, 424 U.S. 319, 334-35 (1976). 

The procedures of a legislative enactment may also be challenged facially. 

United States v. Salerno, 481 U.S. 739, 751-52 (1987). “[T]he challenger must

establish that no set of circumstances exists under which the Act would be valid.” Id.

at 745. “The fact that [a legislative act] might operate unconstitutionally under some

conceivable set of circumstances is insufficient to render it wholly invalid.” Id. In

other words, if the procedures would be adequate as to some persons, the statute is to

be upheld. Id. at 751. 

Whether cast as a procedural due process claim or a facial challenge to the

Ordinance’s procedures, Plaintiffs allege no facts to show they have been subjected to

the Ordinance’s allegedly “unfair and unbalanced” procedures that “fail to protect

businesses’ vested rights to continued to operate their stores.” (ECF No. 7 at 12). 

Plaintiff’s challenge is therefore a pre-enforcement challenge. Lopez v. Candaele, 630

F.3d 775, 785 (9th Cir. 2010). For pre-enforcement challenges, the Ninth Circuit

considers the following three factors:

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First, we have considered whether pre-enforcement plaintiffs have failed to show a reasonable likelihood that the government will enforce the challenged law against them. Second, we have considered whether the

plaintiffs have failed to establish, with some degree of concrete detail, that they intend to violate the challenged law. We have also considered a third

factor, whether the challenged law is inapplicable to the plaintiffs, either by its terms or as interpreted by the government.

Id. at 786. 

In this case, Plaintiffs allege, in conclusory fashion, that they will be unable to

comply with the Ordinance’s employee trainings requirement, and HS Razuki alleges

that it “will operate in the same manner in which it has been operating” and “it will be

in violation of various operational standards contained in section 17.210.100 of the

Ordinance.” (ECF No. 7 at 4). These vague allegations do not provide any “degree of

concrete detail” as to how Plaintiffs will violate the ordinance. Lopez, 630 F.3d at 786;

see also Carrico, 656 F.3d at 1007 (“Without any description of intended . . . conduct,

we cannot analyze what [the plaintiff’s members] would like to do.”). Second,

Plaintiffs have failed to allege any facts demonstrating a credible threat of prosecution. 

See Lopez, 630 F.3d at 786-87 (noting that the government communicating a specific

warning or threat to initiate proceedings or a history of past prosecution suffice, but

“general threats” do not suffice.). 

Finally, Plaintiff’s alleged injuries remain “hypothetical” and “conjectural.” 

Lujan, 504 U.S. at 561. Plaintiff’s alleged injuries depend on at least three events

happening. First, Plaintiffs will need to remain unable to send their employees to the

required trainings and HS Razuki will need to remain unwilling to comply with the

Operational Standards. Second, the City will need to commence revocation,

modification, or commencement proceedings. Third, the City will need to suspend,

modify, or revoke Plaintiff’s conditional use permits or deemed approved status in the

manner in which Plaintiffs complain, namely, by suspending, modifying, or revoking

without first imposing conditions to remedy the violation. The Court concludes that

Plaintiffs have failed to allege “a plausible injury in fact” or a “credible threat of

prosecution” flowing from the Ordinance’s allegedly “unfair and unbalanced”

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procedures that “fail to protect businesses’ vested rights to continued to operate their

stores,” (ECF No. 7 at 12). 

Whether or not Plaintiffs will be able to allege a plausible, pre-enforcement

injury in fact, Plaintiff’s due process claim is unripe. Enforcement of the Ordinance

without the allegedly necessary procedural safeguards remains entirely hypothetical. 

See Witt v. Dep’t of Air Force, 527 F.3d 806, 812-13 (9th Cir. 2008) (holding that

procedural due process record was unripe because the alleged deprivation of a property

interest had not yet occurred). 

iv. Conclusion

Defendant’s Motion to Dismiss for lack of standing is denied as to Plaintiffs HSH

and HS Razuki’s equal protection claim (First Claim). Defendant’s Motion to Dismiss

for lack of standing is granted as to Plaintiffs’ void for vagueness and due process

claims (Second and Third Claims). 

IV. Failure to State a Claim

A. 12(b)(6) Standard

Federal Rule of Civil Procedure 12(b)(6) permits dismissal for “failure to state

a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). “A pleading that

states a claim for relief must contain ... a short and plain statement of the claim showing

that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). Dismissal under Rule

12(b)(6) is appropriate where the complaint lacks a cognizable legal theory or sufficient

facts to support a cognizable legal theory. See Balistreri v. Pac. Police Dep’t, 901 F.2d

696, 699 (9th Cir. 1990).

“[A] plaintiff’s obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’

requires more than labels and conclusions, and a formulaic recitation of the elements

of a cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)

(quoting Fed. R. Civ. P. 8(a)(2)). When considering a motion to dismiss, a court must

accept as true all “well-pleaded factual allegations.” Ashcroft v. Iqbal, 556 U.S. 662,

679 (2009). However, a court is not “required to accept as true allegations that are

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merely conclusory, unwarranted deductions of fact, or unreasonable inferences.” 

Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). “In sum, for a

complaint to survive a motion to dismiss, the non-conclusory factual content, and

reasonable inferences from that content, must be plausibly suggestive of a claim

entitling the plaintiff to relief.” Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir.

2009) (quotations omitted).

B. Equal Protection (First Claim)

Defendant contends that Plaintiffs have failed to state an equal protection claim

on the grounds that the ordinance requires the same performance standards for “bigbox” retailers and other off-site retail stores with deemed approved status. (ECF No.

12-1 at 18-19). Defendant also contends that the Ordinance is a proper exercise of the

City’s police power in protecting against the harmful effects attributable to the sale of

alcoholic beverages and preventing nuisance. Plaintiffs contend that they have stated

an equal protection claim by alleging the existence of a facially discriminatory

ordinance, and their burden of establishing a lack of a rational basis need not be met at

this stage in the proceedings. Plaintiffs also contend that there is no rational basis for

limiting the exemption to establishments over a certain square footage. (ECF No. 13

at 16). 

“The first step in equal protection analysis is to identify the [defendant’s]

classification of groups.” Freeman v. City of Santa Ana, 68 F.3d 1180, 1187 (9th Cir.

1995) (quoting Country Classic Dairies, Inc. v. State of Mont., Dep’t of Commerce Milk

Control Bureau, 847 F.2d 593, 596 (9th Cir. 1988)). “To accomplish this, a plaintiff

can show that the law is applied in a discriminatory manner or imposes different

burdens on different classes of people.” Freeman, 68 F.3d at 1187 (citing Christy v.

Hodel, 857 F.2d 1324, 1331 (9th Cir. 1988), cert. denied, 490 U.S. 1114 (1989)). 

“Once the plaintiff establishes governmental classification, it is necessary to identify

a ‘similarly situated’ class against which the plaintiff’s class can be compared.” 

Freeman, 68 F.3d at 1187. 

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The next step is to identify the proper level of scrutiny. Id. “[U]nless a

classification warrants some form of heightened review because it jeopardizes exercise

of a fundamental right or categorizes on the basis of an inherently suspect characteristic,

the Equal Protection Clause requires only that the classification rationally further a

legitimate state interest.” Nordlinger v. Hahn, 505 U.S. 1, 10 (1992). Under the

rational basis test, “a classification must be upheld against equal protection challenge

if there is any reasonably conceivable state of facts that could provide a rational basis

for the classification.” Heller v. Doe by Doe, 509 U.S. 312, 320 (1993) (citation and

internal quotations omitted). 

The FAC alleges that the Ordinance violates the Equal Protection Clause because

new, modified and/or redeveloped small retailers are required to obtain a conditional

use permit, while new, modified, and/or redeveloped “big box” retailers are exempted

from this requirement. (ECF No. 7 at 9). The FAC further alleges that new, modified,

and/or redeveloped small retailers are subject to “penalties and an annual alcohol sales

regulatory fee” that do not apply to “larger businesses.” Id. The FAC alleges that only

“small off-sale alcoholic beverage retailers (new, modified, and or/redeveloped) can be

denied their vested right to operate their business for not complying with the

Ordinance.” Id. at 10. The FAC further alleges that “[t]he Ordinance is not rationally

related to any legitimate goal because the right to operating an off-sale alcoholic

beverage business is based solely on the basis of the establishment’s size, not the

volume of alcohol sales and/or frequency of nuisance activities.” Id. 

In this case, Plaintiffs challenge the classification made in the Ordinance between

“an alcoholic beverage establishment consisting of a general retail store, a grocery store,

or a retail pharmacy, which has (1) at least 10,000 square feet of gross floor space, and

(2) a maximum of 10 percent of the gross floor area devoted to the sales and display of

alcoholic beverages” (hereinafter “big-box retailers”) and other “off-sale alcoholic

beverage establishments” (hereinafter “other retailers”). ECMC §§ 17.210.070-80. The

Ordinance requires that new, modified, or redeveloped other retailers obtain a

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conditional use permit before operating. ECMC § 17.210.070. Big-box retailers are

exempt from this requirement (the “exemption”). ECMC § 17.210.080. Big-box

retailers are “deemed to have been approved to conduct alcoholic beverage sales

commercial activity subject to the terms and conditions of a conditional use permit

required under this chapter provided, however, that if it is found to be in violation of

this chapter such an exempt establishment may lose its exemption and be required to

obtain a conditional use permit.” Id. (emphasis added). 

Under the Ordinance, big-box retailers may change their activities or open a new

location without having to apply for a conditional use permit, while new, modified, and

redeveloped other retailers must apply for a conditional use permit. Conditional use

permits are governed by section 17.50. Section 17.50.060 provides that “[b]efore any

conditional use permit or minor conditional use permit may be approved, the decisionmaking body shall find,” inter alia, that “[t]he proposed use is consistent with

applicable goals, policies, and programs of the general plan, and with any applicable

specific plan.” ECMC § 17.50.060. Other retailers, therefore, cannot “redevelop” or

“modify” without facing the possibility that a conditional use permit will be denied,

while big-box retailers do not face this same hurdle. 

The next step in the equal protection analysis is to identify the proper level of

scrutiny. Freeman, 68 F.3d at 1187. Because the distinction drawn between big-box

retailers and other retailers does not “jeopardize[] exercise of a fundamental right or

categorize[] on the basis of an inherently suspect characteristic,” Nordlinger, 505 U.S.at

10, the rational basis test applies. See Isbell v. City of San Diego, 258 F.3d 1108, 1116

(9th Cir. 2001) (“[A] classification of adult businesses therefore does not impinge on

a fundamental right, nor does it involve a suspect classification.”). The Ordinance’s

classification between big-box retailers and other retailers “must be upheld against

equal protection challenge if there is any reasonably conceivable state of facts that could

provide a rational basis for the classification.” Heller, 509 U.S. at 320. Defendant “has

no obligation to produce evidence to sustain the rationality” of the Ordinance. Id. The

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Ordinance is presumed constitutional, and the burden is on Plaintiffs to “negative every

conceivable basis which might support it.” Id. (citing Lehnhausen v. Lake Shore Auto

Parts Co., 410 U.S. 356, 364 (1973)). 

The rational basis test may be applied on a motion to dismiss. See Fields v.

Palmdale Sch. Dist., 427 F.3d 1197, 1208-11 (9th Cir. 2005). However, “rational basis

review at the motion to dismiss stage poses unique challenges.” Immaculate Heart

Central Sch. v. N.Y. State Pub. High Sch. Athletic Ass’n, 797 F. Supp. 2d 204, 211

(N.D.N.Y. 2011). A court should “take as true all of the complaint’s allegations and

reasonable inferences that follow,” but the “plaintiff must allege facts sufficient to

overcome the presumption of rationality that applies to government classifications.” 

Wroblewski v. City of Washburn, 965 F.2d 452, 460 (7th Cir. 1992). In applying the

rational basis test at the motion to dismiss stage, a court may go beyond the pleadings

to hypothesize a legitimate governmental purpose. Mahone v. Addicks Utility Dist. of

Harris Cnty., 836 F.2d 921, 936 (5th Cir. 1988). However, “the rational relationship

must be real.” Id. at 937. “The appropriateness of looking beyond the pleadings to

perform a rational relationship analysis” depends on (1) “the specific facts pleaded by

the plaintiff[,]” (2) “the state of knowledge of the court making the analysis[,] and (3)

“the complexity of the official action which is being challenged.” Id. 

 The Ordinance’s stated “specific purposes” include, inter alia, “[t]o provide that

alcoholic beverage sales establishments are not to become the source of undue public

nuisances in the community . . . [t]o provide for properly maintained alcoholic beverage

sales establishments so that the secondary effects of negative impacts generated by these

activities on the surrounding environment are mitigated . . . [and] [t]o monitor deemed

approved establishments to ensure they do not substantially change in mode or character

of operation.” ECMC §§ 17.210.020(D),(E),(F). One of the stated purposes of the

Ordinance, nuisance prevention, is a legitimate exercise of a local government’s police

powers. See City of Oakland v. Superior Court, 45 Cal. App. 4th 740, 757 (1996) (“A

municipality retains the right to abate nuisances and enforce its criminal laws even in

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the face of grandfather rights.”); cf. Keystone Bituminous Coal Ass’n v. DeBenedictis,

480 U.S. 470, 492 (1987) (reaffirming that “the public interest in preventing activities

similar to public nuisances is a substantial one”). 

The goal of preventing alcohol-related nuisances is rationally furthered by

treating retailers substantially dedicated to alcohol sales differently than retailers with

less than ten percent of their floor space dedicated to alcohol sales. In addition, the

FAC repeatedly contrasts big-box retailers with what it terms “smaller neighborhood

businesses” or “small neighborhood establishments.” (ECF No. 7 at 2-3). Defendant

has a rational basis in regulating “small neighborhood establishments” more closely

than big-box retailers because the former are commonly found in residential

neighborhoods, while the latter are not. The requirement that only other retailers (and

not big-box retailers) obtain a conditional use permit is rationally related to the

legitimate governmental purpose of preventing alcohol-related nuisances. Plaintiffs

have failed to meet their burden in showing that there is no “reasonably conceivable

state of facts that could provide a rational basis for the classification.” Heller, 509 U.S.

at 320.

As to the other alleged classification, “penalties and an annual alcohol sales

regulatory fee,” the FAC fails to plausibly allege a classification at all. The FAC

alleges no facts and cites no portions of the Ordinance demonstrating how these fees

and penalties apply and to which establishments they apply. It is impossible to tell from

the FAC whether, with regard to fees and penalties, the Ordinance “imposes different

burdens on different classes of people.” Freeman, 68 F.3d at 1187. Furthermore, the

FAC alleges no facts demonstrating that the imposition of these fees and penalties on

certain establishment while not on others is without a rational basis. 

Defendant’s Motion to Dismiss Plaintiffs’ equal protection claim (First Claim)

is granted. 

C. State Law Claims

The FAC’s remaining claims assert violations of California law: preemption by

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California Business & Professions Code § 23790, preemption by Article XX of the

California Constitution, violation of Article XIII C, § 2(b) of the California Constitution

as amended by Proposition 26, and violation of Article XIII C, § 2(d) of the California

Constitution. The FAC does not allege that this Court has diversity jurisdiction; the

FAC alleges that this Court has supplemental jurisdiction over the state law claims. 

(ECF No. 7 at 6).

The federal supplemental jurisdiction statute provides: “[I]n any civil action of

which the district courts have original jurisdiction, the district courts shall have

supplemental jurisdiction over all other claims that are so related to claims in the action

within such original jurisdiction that they form part of the same case or controversy

under Article III of the United States Constitution.” 28 U.S.C. § 1367(a). A district

court may decline to exercise supplemental jurisdiction over a state law claim if:

(1) the claim raises a novel or complex issue of State law,

(2) the claim substantially predominates over the claim or claims over

which the district court has original jurisdiction

(3) the district court has dismissed all claims over which it has original jurisdiction, or

(4) in exceptional circumstances, there are other compelling reasons for declining jurisdiction.

28 U.S.C. § 1367(c). Having dismissed the federal claims asserted by Plaintiffs against

Defendant, the Court declines to exercise supplemental jurisdiction over the state law

claims pursuant to 28 U.S.C. § 1367(c). See San Pedro Hotel Co., Inc. v. City of Los

Angeles, 159 F.3d 470, 478 (9th Cir. 1998).

///

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V. Conclusion

IT IS HEREBY ORDERED that Defendant’s Motion to Dismiss (ECF No. 12)

is GRANTED. No later than thirty (30) days from the date this Order is filed, Plaintiffs

may file a motion for leave to amend the First Amended Complaint, accompanied by

a proposed second amended complaint. 

DATED: September 4, 2014

WILLIAM Q. HAYES

United States District Judge

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