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Landry's Inc. v. Sandoval

United States District Court, D. Nevada

March 28, 2017

LANDRY'S, INC. et al., Plaintiffs,
BRIAN SANDOVAL et al., Defendants.


          Gloria M. Navarro, Chief Judge United States District Court

         Pending before the Court are three Motions to Dismiss Plaintiffs Landry's, Inc.; Bubba Gump Restaurants, Inc.; Claim Jumper Acquisition Company, LLC's (collectively, “Plaintiffs'”) Second Amended Complaint (“SAC”). The first Motion to Dismiss was filed by Defendants Governor Brian Sandoval (“Governor” or “Sandoval”) and Labor Commissioner Shannon Chambers (“Labor Commissioner” or “Chambers”), and the second was filed by Defendant Nevada Insurance Commissioner Barbara Richardson (“Insurance Commissioner” or “Richardson”)[1] (collectively, “Defendants”). (ECF Nos. 54, 55). Intervenor Nevada State Federation of Labor, AFL-CIO (“Intervenor”) filed the third Motion to Dismiss. (ECF No. 76). All three motions are fully briefed.

         I. BACKGROUND

         This case arises as a challenge to the Nevada Minimum Wage Amendment, Article 15, Section 16 of the Nevada Constitution (“Minimum Wage Amendment” or “MWA”) and its related Regulations, Nevada Administrative Code (“NAC”) Chapter 608.100-108 (the “Regulations”). (SAC ¶ 1, ECF No. 50). The Minimum Wage Amendment was a ballot initiative enacted after voter approval in two general elections, 2004 and 2006. (Id. ¶ 22-25). Plaintiffs' SAC focuses on the following language from the MWA:

The rate shall be five dollars and fifteen cents ($5.15) per hour worked, if the employer provides health benefits as described herein, or six dollars and fifteen cents ($6.15) per hour if the employer does not provide such benefits. Offering health benefits within the meaning of this section shall consist of making health insurance available to the employee for the employee and the employee's dependents at a total cost to the employee for premiums of not more than 10 percent of the employee's gross taxable income from the employer.

Nev. Const. art. 15, § 16(A). From the MWA, Plaintiffs allege that “Nevada's Labor Commissioner began issuing regulations . . . found in NAC 608.100 through 608.108.” (SAC ¶ 29). These Regulations include further specification regarding the health benefits that qualify under the Nevada Wage Amendment. (Id. ¶¶ 30-32). Plaintiffs also allege that the Labor Commissioner enforces the Amendment while relying on the “Nevada Division of Insurance to determine whether an insurance plan offered by an employer ‘qualifies' as a health insurance [plan] under the two-tier minimum wage system established by the Minimum Wage Amendment.” (Id. ¶ 35).

         On June 19, 2015, Plaintiffs filed their Complaint in this Court, which they amended as a matter of course on July 15, 2015. (ECF Nos. 1, 17). Defendants filed two Motions to Dismiss (ECF Nos. 25, 27) asserting, inter alia, that Plaintiffs lacked standing. On March 31, 2016, the Court granted Defendants' Motions, explaining that Plaintiffs' allegations regarding pending lawsuits were not sufficient to establish concrete injury, as required under standing doctrine. (Order 6:1-21, ECF No. 47). The Court then allowed Plaintiff leave to file a SAC. (Id. 6:22-7:1). Plaintiffs timely filed their SAC, which alleges four causes of action: (1) Declaration that ERISA Preempts the Amendment and Regulations, under ERISA § 502(A)(3); (2) “Declaration Pursuant to 42 U.S.C. § 1983 that the Governor's Delegation of Authority to Promulgate the Regulations and Enforce the Regulations and Amendment Deprives Plaintiffs of Rights Secured by the Due Process Clause of the United States Constitution”; (3) “Declaration Pursuant to 42 U.S.C. § 1983 that the Regulations Are Unconstitutional Because They Exceed the Labor Commissioner's and the Insurance Commissioner's Authority and Thus Violate Plaintiffs' Right to Due Process Under the United States Constitution”; and (4) “Declaration Pursuant to Pursuant to 42 U.S.C. § 1983 that the Amendment and Regulations Violate Due Process Protected by the Fifth and Fourteenth Amendments to the United States Constitution.” (SAC ¶¶ 52-104, ECF No. 50). On May 31, 2016, Defendants brought their Motions to Dismiss under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). (ECF Nos. 54, 55).

         On August 16, 2016, the Court granted Intervenor's Motion to Intervene. (ECF No. 79). The next day, Intervenor filed its Motion to Dismiss (ECF No. 76), along with its Complaint against Plaintiffs (ECF No. 77).


         A. 12(b)(1)

         Rule 12(b)(1) of the Federal Rules of Civil Procedure permits motions to dismiss for lack of subject matter jurisdiction. Fed.R.Civ.P. 12(b)(1). When subject matter jurisdiction is challenged, the burden of proof is placed on the party asserting that jurisdiction exists. Scott v. Breeland, 792 F.2d 925, 927 (9th Cir. 1986) (holding that “[t]he party seeking to invoke the court's jurisdiction bears the burden of establishing that jurisdiction exists”). Accordingly, courts will presume a lack of subject matter jurisdiction until the plaintiff proves otherwise in response to the motion to dismiss. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994).

         A motion to dismiss under Rule 12(b)(1) may be construed in one of two ways. Thornhill Publ'g Co., Inc. v. Gen. Tel. & Elec. Corp., 594 F.2d 730, 733 (9th Cir. 1979). It may be described as “facial, ” meaning that it attacks the sufficiency of the allegations to support subject matter jurisdiction. Id. Alternatively, it may be described as “factual, ” meaning that it “attack[s] the existence of subject matter jurisdiction in fact.” Id.

         When, as here, a court considers a ‘facial' attack made pursuant to Rule 12(b)(1), it must consider the allegations of the complaint to be true and construe them in the light most favorable to the plaintiff. Love v. United States, 915 F.2d 1242, 1245 (9th Cir. 1989).

         B. 12(b)(6)

         Dismissal is appropriate under Rule 12(b)(6) where a pleader fails to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). A pleading must give fair notice of a legally cognizable claim and the grounds on which it rests, and although a court must take all factual allegations as true, legal conclusions couched as a factual allegations are insufficient. Twombly, 550 U.S. at 555. Accordingly, Rule 12(b)(6) “requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Id.

         “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 555). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. This standard “asks for more than a sheer possibility that a defendant has acted unlawfully.” Id.

         “Generally, a district court may not consider any material beyond the pleadings in ruling on a Rule 12(b)(6) motion.” Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1555 n. 19 (9th Cir. 1990). “However, material which is properly submitted as part of the complaint may be considered.” Id. Similarly, “documents whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the pleading, may be considered in ruling on a Rule 12(b)(6) motion to dismiss” without converting the motion to dismiss into a motion for summary judgment. E.g., Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir. 1994) overruled on other grounds by Galbraith v. Cty. of Santa Clara, 307 F.3d 1119, 1123-24 (9th Cir. 2002). On a motion to dismiss, a court may also take judicial notice of “matters of public record.” Mack v. S. Bay Beer Distrib., 798 F.2d 1279, 1282 (9th Cir. 1986). Otherwise, if a court considers materials outside of the pleadings, the motion to dismiss is converted into a motion for summary judgment. Fed.R.Civ.P. 12(d).

         If the court grants a motion to dismiss for failure to state a claim, leave to amend should be granted unless it is clear that the deficiencies of the complaint cannot be cured by amendment. DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir. 1992). Pursuant to Rule 15(a), the court should “freely” give leave to amend “when justice so requires, ” and in the absence of a reason such as “undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of the amendment, etc.” Foman v. Davis, 371 U.S. 178, 182 (1962).


         In the instant Motions to Dismiss, Defendants seek to dismiss Plaintiffs' claims for lack of standing, along with being barred by the Eleventh Amendment, legislative immunity, or statute of limitations, and failure to state a claim.

         A. Standing

         “[S]tanding is an essential and unchanging part of the case-or-controversy requirement of Article III.” Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992). As such, to survive a motion to dismiss, a plaintiff bears the burden of alleging sufficient facts to show the existence of each of three elements. Id.

First, the plaintiff must have suffered 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. Second, there must be a causal connection between the injury and the conduct complained of-the injury has to be fairly traceable to the challenged action of the defendant, and not the result of the independent action of some third party not before the court. Third, it must be likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.

Id. at 560-61 (internal quotation marks and citations omitted). The Supreme Court recently further explained the terms particularized and concrete: “Particularized” means the injury “must affect the plaintiff in a personal and individual way, ” while “concrete” means “it must actually exist[;] . . . ‘real' and not ‘abstract.'” Spokeo, Inc. v. Robins, 136 S.Ct. 1540, 1548 (2016).

         When analyzing a motion to dismiss for lack of standing, courts must accept the allegations in the complaint as true and construe the complaint in favor of the complaining party. Maya v. Centex Corp., 658 F.3d 1060, 1068 (9th Cir. 2011). Indeed, at the pleading stage, “general factual allegations of injury resulting from the defendant's conduct may suffice” because on a motion to dismiss, courts “presume that general allegations embrace those specific facts that are necessary to support the claim.” Id. (citing Lujan, 504 U.S. at 561). While the Ninth Circuit in Maya differentiated between the standard for dismissal due to standing compared with a 12(b)(6) dismissal under the standards of Twombly and Iqbal, the Court nonetheless clarified: “This is not to say that [a] plaintiff may rely on a bare legal conclusion to assert injury-in-fact.” Id.

         Plaintiffs' SAC asserts the following injury:

(1) increased administrative costs of offering a separate health insurance plan in Nevada apart from the ERISA-governed, Affordable Healthcare Act (“ACA”) compliant plan they offer nationally, (2) paying $8.25 per hour to their employees rather than the $7.25 otherwise required, and (3) harm to their reputation and business goodwill in the eyes of their employees and the public based on their inability to comply with the vague, unconstitutional laws.

(SAC ¶ 5). Plaintiffs explain that their injury stems from “a false choice imposed by the preempted and unconstitutionally adopted Amendment and Regulations . . . between incurring certain liability and sanctions under these challenged laws or paying $1.00 more to each minimum wage earner in Nevada.” (Id. ¶ 45, 51). Defendants argue that the SAC “suffers from the same fatal flaws as the First Amended Complaint . . . [and] Plaintiffs have alleged no new facts demonstrating standing.” (Sandoval-Chambers MTD 2:13, 5:27, ECF No. 54).

         The Court finds that Plaintiffs' alleged increased administrative costs are sufficient to confer standing. Plaintiffs assert that they “must alter their ERISA-governed health plans and the administration of those plans in Nevada to comply with state law.” (SAC ¶ 48). Then, “[t]his alteration causes (1) an increase in administrative costs and (2) an increase in the cost of funding separate healthcare plans in Nevada that impose more stringent requirements and cost more than the ERISA-governed, ACA-compliant plans Plaintiffs offer nationally.” (Id.). None of the three motions to dismiss address Plaintiffs' injury of increased administrative costs. Accepted as true and construed in favor of Plaintiffs, Plaintiffs are personally suffering an added cost. Such an alleged cost is real, not abstract. As such, the Court finds that this injury is sufficiently particularized and concrete. Further, the injury is causally connected and redressable by a favorable ruling from the Court because if the Court finds the MWA is preempted by ERISA, then Plaintiffs will no longer need to pay the alleged increased administrative costs to satisfy the MWA's allegedly more stringent requirements. Accordingly, the Court finds that Plaintiffs have sufficiently asserted standing in their SAC.[2]

         B. ...

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