Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_15-cv-00908/USCOURTS-caed-2_15-cv-00908-1/pdf.json

Parties Involved:
Horizon Companies, LLC
Plaintiff
Horizon Financial, LLC
Plaintiff
Jan Lynn Owen
Defendant
Jason P. Shurnas
Plaintiff
State of California
Defendant

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

JASON P. SHURNAS, HORIZON 

COMPANIES, LLC, and HORIZON 

FINANCIAL, LLC,

Plaintiffs,

v.

JAN LYNN OWEN, in her official 

capacity as Commissioner of the 

CALIFORNIA DEPARTMENT OF 

BUSINESS OVERSIGHT (formerly 

STATE OF CALIFORNIA 

DEPARTMENT OF CORPORATIONS)

and THE STATE OF CALIFORNIA,

Defendants.

No. 2:15-cv-00908-MCE-KJN

MEMORANDUM AND ORDER

Plaintiffs Jason P. Shurnas, Horizon Companies, LLC, and Horizon Financial, LLC 

(collectively, “Plaintiffs”) allege that Defendants Jan Lynn Owen and the State of 

California (collectively, “Defendants”) violated Plaintiffs’ rights under the United States 

Constitution, California Constitution, and California’s Public Records Act. Pending 

before the Court is Defendants’ Motion to Dismiss. ECF No. 6. Plaintiffs filed an 

Opposition (ECF No. 20), and Defendants filed a Reply (ECF No. 21). For the reasons 

that follow, Defendants’ Motion to Dismiss is GRANTED.

///

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BACKGROUND 

The California Corporations Commissioner (“Commissioner”) issued a “Desist and 

Refrain Order” (“the Order”) to Plaintiffs on December 30, 2008. The Order alleged that 

Plaintiffs had violated California Corporations Code sections 25100 and 25401 and 

Financial Code section 22100. According to the Order, Plaintiffs advertised on a 

Sacramento-area Craigslist website that an unnamed “private company” was soliciting 

investors with at least $100,000 available in liquid funds to form a “secret investor 

syndicate.” That syndicate purportedly offered membership interests in a Las Vegas 

casino and real estate venture. The Order states that Plaintiff Shurnas placed a 

telephone call to a California resident who responded to the aforementioned Craigslist 

posting; in the course of their conversation, Plaintiff discussed details regarding how the 

resident’s contribution would be invested. 

Based on the above factual findings, the Commissioner determined that the 

membership interests that Plaintiffs had offered were securities subject to qualification 

under the California Corporate Securities Law of 1968 and were being offered without 

being qualified, in violation of section 25110 of the Corporate Securities Law of 1968. 

The Commissioner further found that those securities included untrue statements of 

material fact or omitted to state material facts necessary in order to make the statements 

made not misleading, in violation of section 25401 of the Corporate Securities Law of 

1968. Finally, according to the Commissioner, Plaintiffs engaged in business as a 

finance lender or broker without first obtaining a license in violation of California 

Financial Code section 22100.

In their Complaint, Plaintiffs allege that they were not properly served with the 

Commissioner’s Order. They also contend that the documents Defendants intended to 

serve failed to include any language regarding how to file a request for hearing or the 

timeline for doing so. According to Plaintiffs, the State of California does not provide 

such information on-line. Plaintiffs further allege that there is no provision within the 

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California Corporations Code or Financial Code which mandates what information must 

accompany a Desist and Refrain Order so that an individual would know how to respond 

or the consequences for failing to do so. 

Plaintiffs’ Complaint includes four causes of action: (1) violation of procedural due 

process (U.S. Const. amend. XIV, § 1); (2) violation of free speech (U.S. Const. amend. I 

§ 1); (3) violation of procedural due process under the California Constitution (Cal. 

Const. art. I, § 7(a)); and (4) violation of the Public Records Act of California (Cal. Gov’t 

Code §§ 6250-6276.48). Plaintiffs seek declaratory, injunctive, and monetary relief. 

In the pending Motion to Dismiss, Defendants argue that Plaintiffs’ first three 

causes of action are untimely under the applicable statutes of limitation. Defendants 

further argue that the Court should decline to exercise its supplemental jurisdiction over 

Plaintiffs’ remaining claim based on the California Public Records Act. 

STANDARD

On a motion to dismiss for failure to state a claim under Federal Rule of Civil 

Procedure 12(b)(6), all allegations of material fact must be accepted as true and 

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). Rule 8(a)(2) “requires only 'a short and plain 

statement of the claim showing that the pleader is entitled to relief' in order to 'give the 

defendant fair notice of what the . . . claim is and the grounds upon which it rests.’” Bell 

Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 

47 (1957)). A complaint attacked by a Rule 12(b)(6) motion to dismiss does not require 

detailed factual allegations. However, “a plaintiff's obligation to provide the grounds of 

his entitlement to relief requires more than labels and conclusions, and a formulaic 

recitation of the elements of a cause of action will not do.” Id. (internal citations and 

quotations omitted). A court is not required to accept as true a “legal conclusion 

couched as a factual allegation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting 

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Twombly, 550 U.S. at 555). “Factual allegations must be enough to raise a right to relief 

above the speculative level.” Twombly, 550 U.S. at 555 (citing 5 Charles Alan Wright & 

Arthur R. Miller, Federal Practice and Procedure § 1216 (3d ed. 2004) (stating that the 

pleading must contain something more than “a statement of facts that merely creates a 

suspicion [of] a legally cognizable right of action”)).

Furthermore, “Rule 8(a)(2) . . . requires a showing, rather than a blanket

assertion, of entitlement to relief.” Id. at 555 n.3 (internal citations and quotations 

omitted). Thus, “[w]ithout some factual allegation in the complaint, it is hard to see how 

a claimant could satisfy the requirements of providing not only 'fair notice' of the nature 

of the claim, but also 'grounds' on which the claim rests.” Id. (citing Wright & Miller, 

supra, at 94, 95). A pleading must contain “only enough facts to state a claim to relief 

that is plausible on its face.” Id. at 570. If the “plaintiffs . . . have not nudged their claims 

across the line from conceivable to plausible, their complaint must be dismissed.” Id.

However, “[a] well-pleaded complaint may proceed even if it strikes a savvy judge that 

actual proof of those facts is improbable, and 'that a recovery is very remote and 

unlikely.’” Id. at 556 (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)).

A court granting a motion to dismiss a complaint must then decide whether to 

grant leave to amend. Leave to amend should be “freely given” where there is no 

“undue delay, bad faith or dilatory motive on the part of the movant, . . . undue prejudice 

to the opposing party by virtue of allowance of the amendment, [or] futility of the 

amendment . . . .” Foman v. Davis, 371 U.S. 178, 182 (1962); Eminence Capital, LLC v. 

Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003) (listing the Foman factors as those to 

be considered when deciding whether to grant leave to amend). Not all of these factors 

merit equal weight. Rather, “the consideration of prejudice to the opposing party . . . 

carries the greatest weight.” Id. (citing DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 

185 (9th Cir. 1987)). Dismissal without leave to amend is proper only if it is clear that 

“the complaint could not be saved by any amendment.” Intri-Plex Techs., Inc. v. Crest 

Group, Inc., 499 F.3d 1048, 1056 (9th Cir. 2007) (citing In re Daou Sys., Inc., 411 F.3d 

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1006, 1013 (9th Cir. 2005); Ascon Props., Inc. v. Mobil Oil Co., 866 F.2d 1149, 1160 (9th 

Cir. 1989) (“Leave need not be granted where the amendment of the complaint . . . 

constitutes an exercise in futility. . . .”)).

ANALYSIS

A. DOCUMENTS BEYOND THE PLEADINGS

Defendants support their Motion with a request that the Court take judicial notice 

of Exhibits 1 and 2 to the Declaration of Miranda LeKander, Senior Counsel in the 

Enforcement Division at the California Department of Business Oversight. Req. for 

Judicial Notice (“RJN”), ECF No. 6-2. Exhibit 1 is an email from Plaintiff Shurnas to 

LeKander, and Exhibit 2 is a response to that email signed and sent by LeKander to 

Plaintiff Shurnas. Defendants argue that the Court may take judicial notice of those 

documents under Federal Rule of Evidence 201 because the fact that Shurnas sent the 

August 14, 2012 email cannot reasonably be questioned, and because the contents of 

these exhibits are contained in the certified records of the California Department of 

Business Oversight. 

“The court may judicially notice a fact that is not subject to reasonable dispute 

because it . . . can be accurately and readily determined from sources whose accuracy 

cannot reasonably be questioned.” Fed. R. Evid. 201(b). Evidence that “a purported 

public record or statement is from the office where items of this kind are kept” is 

sufficient to authenticate a public record. Fed. R. Evid. 901(b)(7)(B). “A copy of an 

official record [is self-authenticating] . . . if the copy is certified as correct by the 

custodian or another person authorized to make the certification.” Fed. R. Evid. 

902(4)(A). Exhibits 1 and 2 meet the above-listed requirements, as they are 

incorporated into the public record. Therefore, the Court takes judicial notice of

Defendants’ Exhibits 1 and 2.

///

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B. Plaintiffs’ 42 U.S.C. § 1983 Claims

Plaintiffs allege that the Order violates their First Amendment and Procedural Due 

Process rights as guaranteed by the United States Constitution. Plaintiffs further allege 

that California Corporations Code section 2500 and Financial Code section 2200 et seq. 

fail to provide adequate post-deprivation remedies in accordance with the requirements 

of the Procedural Due Process clause. Plaintiffs consequently seek injunctive relief 

through 42 U.S.C. § 1983.

1. Statute of Limitations

Defendants argue that Plaintiffs’ § 1983 claims must be dismissed as untimely. 

“The applicable statute of limitations for actions brought pursuant to 42 U.S.C. § 1983 is 

the forum state’s statute of limitations for personal injury actions.” Carpinteria Valley 

Farms, Ltd. v. Cty. of Santa Barbara, 344 F.3d 822, 828 (9th Cir. 2003) (citing Knox v. 

Davis, 260 F.3d 1009, 1012 (9th Cir. 2001)). The relevant statute of limitations is 

therefore two years. See Maldonado v. Harris, 370 F.3d 945, 955 (9th Cir. 2004) (citing 

Cal. Civ. Proc. Code § 335.1); see also Jones v. Blanas 393 F.3d 918, 927 (9th Cir. 

2004) (“[A] § 1983 action filed in California today would clearly be governed by 

California’s new two-year statute of limitations for personal injury actions . . .”). 

Furthermore, “[a]lthough California law determines the length of the limitations period, 

federal law determines when a civil rights claim accrues.” Lukovsky v. City & Cty. of 

S.F., 535 F.3d 1044, 1048 (9th Cir. 2008). “Under federal law, a claim accrues ‘when 

the plaintiff knows or has reason to know of the injury which is the basis of the action.’” 

Id. (quoting TwoRivers v. Lewis, 174 F.3d 987, 991 (9th Cir. 1999)).

Defendants contend that Plaintiff Shurnas “admitted knowledge of the Order in an 

email to the [Department] dated August 14, 2012, showing that he knew of the Order 

and the injury it purportedly caused him.” Defs.’ Mot., ECF No. 6, at 6-7; Defs.’ RJN, 

ECF No. 6-2, Ex. 1. Therefore, Plaintiffs’ § 1983 claims accrued no later than August 14, 

2012. Because Plaintiff did not file his Complaint until April 27, 2015—more than eight 

///

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months after the expiration of the two-year limitations period—his § 1983 claims are 

untimely.

Accordingly, the statute of limitations bars Plaintiffs’ First Amendment and Due 

Process challenges to the Order itself. Plaintiffs’ as-applied constitutional challenges to 

the Order brought under § 1983 are consequently DISMISSED without leave to amend.

2. Facial Procedural Due Process Challenges

Defendants recognize that “in dicta, the Ninth Circuit has expressed doubts 

regarding the application of the statute of limitations to facial challenges to a statute.” 

Pls.’ Reply, ECF No. 21, at 4 (citing Maldonado, 370 F.3d at 955). Defendants argue the 

Court must nevertheless dismiss Plaintiffs’ due process challenge to California 

Corporations Code section 2553(f) and California Financial Code section 22712 because 

the post-deprivation remedies available under California law to challenge a desist and 

refrain order issued under those statutes satisfy the demands of due process under both 

state and federal law. 

Because both California Corporations Code section 2553(f) and California 

Financial Code section 22712 invoke the California Administrative Procedure Act, 

Plaintiffs’ challenge to the adequacy of these post-deprivation remedies “amounts to an 

attack of California’s administrative review procedures as a whole.” Baffert v. Cal. Horse 

Racing Bd., 332 F.3d 613, 619 (9th Cir. 2003). However, the Ninth Circuit has held that 

California law offers an adequate opportunity for judicial review of administrative orders. 

Id. at 619-20. Therefore, Plaintiffs’ conclusory allegations fail to state a plausible facial 

procedural due process claim. See Kenneally v. Lungren, 967 F.2d 329, 332-33 (9th 

Cir. 1992) (holding that California offers an adequate opportunity for judicial review of 

administrative orders). However, Defendants have not demonstrated that amendment 

would necessarily be futile. Accordingly, Plaintiffs are granted leave to amend their 

claims challenging the facial constitutionality of California Corporations Code section

2553(f) and California Financial Code section 22712.

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C. Plaintiffs’ Claims Under the California Constitution

Plaintiffs also argue that Defendants violated Plaintiffs’ freedom of speech and 

due process rights under the California Constitution. 

The same two-year limitations period applicable to federal claims under § 1983 

applies to Plaintiffs’ claims under the California Constitution. Acuna v. Regents of Univ. 

of Cal., 56 Cal. App. 4th 639, 646 (1997). As stated above Plaintiffs’ as-applied free 

speech and due process challenges are time barred under the applicable two-year 

limitations period. Because Plaintiffs did not file their Complaint until after the expiration 

of that two-year limitations period, Plaintiffs’ challenges to the Order under the California 

Constitution’s Free Speech and Due Process provisions are DISMISSED without leave 

to amend. 

D. Plaintiffs’ Claims Under The California Public Records Act

Plaintiffs allege that Defendants’ failure to make requested documents available 

for inspection violates Plaintiffs’ rights under the California Public Records Request Act, 

Cal. Gov’t Code §§ 6250-6276.48. See Compl., ECF No. 1, at 23-24. Plaintiffs seek a 

declaration that “[t]he Department of Business Oversight violated the California Public 

Records Act . . . by providing blanket objections, and/or not following timelines to 

produce documents, and/or failing to produce relevant and unprotected documents.” Id.

at 25.

“[A] federal suit against state officials on the basis of state law contravenes the 

Eleventh Amendment . . . .” Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 

117 (1984). “A claim that state officials violated state law in carrying out their official 

responsibilities is a claim against the State and is protected by the Eleventh Amendment 

. . . this principle applies as well to state-law claims brought into federal court under 

pendent jurisdiction.” Id. at 121. Although 28 U.S.C. § 1367(a) provides for 

supplemental jurisdiction over state-law claims, “§ 1367(a)’s grant of jurisdiction does not 

extend to claims against nonconsenting state defendants.” Raygor v. Regents of Univ. 

of Minn., 534 U.S. 533, 542 (2002).

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Plaintiffs seek a declaration that Defendants violated the California Public 

Records Act and names the State of California as the party against whom relief is 

sought. If granted, this Court would be directing a state agency to comply with state 

law—a result that violates the Eleventh Amendment. See Pennhurst State, 465 U.S. at 

117. Thus, Plaintiffs’ Public Records Act claim is DISMISSED, without leave to amend,

for lack of subject matter jurisdiction.

CONCLUSION

Defendants’ Motion to Dismiss (ECF No. 6) is GRANTED as follows:

1. Plaintiffs’ § 1983 claims based upon the Order, claims under the California 

Constitution, and claims under the Public Records Act are DISMISSED without leave to 

amend. 

2. Plaintiffs’ facial due process claim under § 1983 claim is DISMISSED with 

leave to amend. 

Plaintiffs are granted fourteen (14) days from the date this Order is electronically

filed to file an amended complaint addressing the deficiencies in the single claim for 

which Plaintiffs have been granted leave to amend. Plaintiffs are warned that this action 

may be dismissed with prejudice under Federal Rule of Civil Procedure 41(b) if they fail 

to file an amended complaint within the prescribed time period.

IT IS SO ORDERED.

Dated: February 16, 2016

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