JERRY JAMGOTCHIAN; THETA HOLDING I, INC., Plaintiffs-Appellants, v. GREGORY L. FERRARO; OSCAR GONZALES; DENNIS ALFIERI; DAMASCUS CASTELLANOS; BRENDA DAVIS; THOMAS C. HUDNUT; WENDY MITCHELL; KIMBERLY SAWYER; LUIS JAUREGUI; RICHARD WILLIAMS, Defendants-Appellees, and CALIFORNIA HORSE RACING BOARD, Defendant.
No. 23-55735
UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT
February 26, 2024
D.C. No. 8:22-cv-01893-FWS-KES
FOR PUBLICATION
OPINION
Fred W. Slaughter, District Judge, Presiding
Submitted January 8, 2024*
San Francisco, California
Filed February 26, 2024
Before: Marsha S. Berzon, Johnnie B. Rawlinson, and Daniel A. Bress, Circuit Judges.
Opinion by Judge Bress
SUMMARY**
Civil Rights/Issue Preclusion
The panel reversed the district court‘s holding that the decision of the California Horse Racing Board (CHRB), the state agency responsible for administering all laws, rules, and regulations related to horse racing, precluded plaintiffs’
The panel held that the district сourt erred by concluding that the CHRB‘s decision precluded plaintiffs’
action. For a state administrative agency decision to have the same preclusive effect as a state court judgment, the administrative proceeding must be conducted with sufficient safeguards and satisfy the requirements of fairness outlined in United States v. Utah Construction and Mining Co., 384 U.S. 394 (1966). Applying those fairness requirements, the panel held that the CHRB did not and could not properly resolve plaintiffs’ claims because under California law, the CHRB lacked the authority to decide constitutional claims. Accordingly, the agency decision had nо preclusive effect.
The panel held that plaintiffs’ decision not to seek review of the CHRB‘s decision in state court did not imbue that decision with preclusive effect because any requirement that plaintiffs go to state court before filing suit under
COUNSEL
John R. Sommer, John R. Sommar Attorney at Law, Villa Park, California, for Plaintiffs-Appellants.
Kayi Okine, Deputy Attorney General; Kenneth C. Jones, Supervising Deputy Attorney General; Chris A. Knudsen, Senior Assistant Attorney General; Rob Bonta, Attorney General of California; Office of the California Attorney General, Los Angeles, California; for Defendants-Appellees.
OPINION
BRESS, Circuit Judge:
A dispute ovеr a horse‘s name has led to this appeal about preclusion. The question is whether a state agency decision precludes the plaintiffs’
I
Plaintiffs Jerry Jamgotchian and Theta Holdings I (collectively, Jamgotchian) own a thoroughbred racehorse named Malpractice Meuser. California law requires that all thoroughbreds racing in California be registered with a private organization called the Jockey Club of New York. See
The Jockey Club refused registration. It concluded that the name Malpractice Meuser violated the Principal Rules and Requirements of the American Studbook Rule 6.F.11, which makes ineligible for use horse names “designed to harass, humiliate, or disparage a specific individual.” The Jockey Club believed that Malpractice Meuser was named
for Michael D. Meuser, a Kentucky lawyer specializing in equine law. The Club instructed Jamgotchian to seek registration for the horse under a different name.
Jamgotchian did not do so and thus never obtained Jockey Club registration. Nevertheless, Jamgotchian sought to enter Malpractice Meuser in a race at California‘s Los Alamitos Race Course. The Los Alamitos Board of Stewards denied entry. Stewards “have general authority and supervision over all licensees and other persons attendant on horses” and are responsible “for the conduct of the race meeting[s] in every particular.”
The Stewards informed Jamgotchian that Malpractice Meuser was ineligible to race because the horse was not registered with the Jockey Club, as
Jamgotchian appealed the Stewards’ decision to the California Horse Racing
Adopting a hearing officer‘s written ruling, the CHRB affirmed the Stewards’ determination that Malpractice Meuser could not race absent Jockey Club registration. The CHRB also offered commentary on why it believed that Jamgotchian‘s constitutional claims were not colorable. But, importantly, the CHRB found that it lacked jurisdiction
to decide Jamgotchian‘s constitutional claims. It explained that, because the California Constitution bars state agencies from declaring a statute unconstitutional or refusing to enforce a statute on constitutional grounds unless an appellate court has made that determination, Jamgotchian was required to go to court for resolution of his constitutional claims. See
The CHRB decision advised Jamgotchian that a California superior court would have authority to address his constitutional claims. But Jamgotchian did not seek review of the CHRB‘s decision in state court. See
Although the defendants had not raised the issue, the district court requested briefing on whether the CHRB proceеdings were preclusive of Jamgotchian‘s constitutional claims. The district court subsequently concluded that because the CHRB had already considered Jamgotchian‘s constitutional claims and Jamgotchian had not challenged the CHRB‘s decision in state court, the CHRB decision precluded Jamgotchian‘s
thus found that Jamgotchian was unlikely to succeed on the merits and denied his request for a preliminary injunction.
Jamgotchian appealed. While his appeal was pending, the district court dismissed Jamgotchian‘s complaint with prejudice under
Because the denial of Jamgotchian‘s request for a preliminary injunction merged into the final judgment, we dismissed Jamgotchian‘s first appeal as moot. See, e.g., Am. Soc‘y of Journalists & Authors, Inc. v. Bonta, 15 F.4th 954, 959 (9th Cir. 2021). Before us now is Jamgotchian‘s second appeal, of the judgment of dismissal. We review the district court‘s dismissal of a complaint under
The district court erred in concluding that the CHRB decision, in combination with Jamgotchian not seeking review of that decision in state court, precludes this
A
The CHRB‘s dеcision does not preclude Jamgotchian‘s constitutional claims. Under
Supreme Court has held that, as a matter of federal common law, federal courts must sometimes accord preclusive effect to state agency decisions. See id. at 797–98; see also Astoria Fed. Savings & Loan Assoc. v. Solimino, 501 U.S. 104, 107–08, 110 (1991); Miller, 39 F.3d at 1032; Guild Wineries & Distilleries v. Whitehall Co., 853 F.2d 755, 758 (9th Cir. 1988). Although Congress may direct otherwise (and has done so for some statutes), Congress “presumрtively intends” state agency determinations to have preclusive effect in federal court. B & B Hardware, Inc. v. Hargis Indus., Inc., 575 U.S. 138, 151 (2015) (citing Elliott, 478 U.S. at 796–99). This presumption applies to
To decide whether federal common law entitles a state agency decision to preclusive effect, we proceed in two steps. Our “threshold” task is “to determine whether the state administrative proceeding was conducted with sufficient safeguards to be equated with a state court judgment.” Plaine v. McCabe, 797 F.2d 713, 719 (9th Cir. 1986). For an administrative proceeding to “rise to [this] level,” id., it must “satisf[y] the requirements of fairness outlined in” the Supreme Court‘s decision in United States v. Utah Construction and Mining Co., 384 U.S. 394, 422 (1966). Miller, 39 F.3d at 1032–33 (brackets omitted) (quoting Guild Wineries, 853 F.2d at 758). The so-called Utah Construction “fairness requirements” are: “(1) that the administrative agency act in a judicial capacity, (2) that the agency resolve disputed issues of fact properly before it, and (3) that the parties have an adequate opportunity to litigate.” Id. at 1033 (citing Utah Construction, 384 U.S. at 422). The second prong of Utah Construction—about the capacity of
the agency to resolve disputed facts—“encompass[es] disputed issues of law as well.” Guild Wineries, 853 F.2d at 759 & n. 7 (citing Eilrich v. Remas, 839 F.2d 630, 633–34 & n.2 (9th Cir. 1988)); see also Miller, 39 F.3d at 1032.
If a state agency proceeding satisfies the Utah Construction factors, we then turn to state law to “determine if, under [state law], the [agency‘s] decision would be given preclusive effect.” Guild Wineries, 853 F.2d at 761. At this step, “we will defer to the considered judgment of the courts of [the state] that an unreviewed agency determination ... is equivalent to a state court judgment entitled to res judicata and collateral estoppel effect.” Miller, 39 F.3d at 1038. If an agency proceeding does not meet the “minimum criteria of Utah Construction,” however, we deny preclusive effect, state law notwithstanding. Id.; see also id. at 1033 (explaining that “although
In this case, the district court‘s preclusion determination runs aground on Utah Construction‘s second prong: the requirement that the agency resolve disputed issues of fact and law “properly before it.” Guild Wineries, 853 F.2d at 759 & n.7. “An issue is ‘properly before an administrative tribunal if that body has jurisdiction to decide it,’ [as] a
matter of state law.” Misischia v. Pirie, 60 F.3d 626, 630 (9th Cir. 1995) (quoting Guild Wineries, 853 F.2d at 759). Thus, “[w]e deny preclusive effect, in general, when the adjudicator lacks jurisdiction to determine an issue.” Miller, 39 F.3d at 1038.
Here, the CHRB expressly recognized that it lacked the authority to decide Jamgotchian‘s constitutional claims, because California law provides that state agencies like the CHRB have “no power” to refuse to enforce a statute on constitutional grounds, or to declare a statute unconstitutional unless a court has already done so.
It is irrelevant for preclusion purposes that the CHRB also offered its extra-jurisdictional thoughts on the constitutional questions. The inquiry under Utah Construction prong two is not whether the state agency pontificated on the issues, but whether it “ha[d] jurisdiction to decide” them. Misischia, 60 F.3d at 630 (quoting Guild Wineries, 853 F.2d at 759). Here, it did not—by its own reckoning, as well as on our independent understanding of California law. See
Our precedent is clear: because the CHRB “lack[ed] jurisdiction to determine” Jamgotchian‘s constitutional claims, “[w]e deny preclusive effect.” Miller, 39 F.3d at 1038 (citing Shaw v. Calif. Dept. of Alcoholic Beverage
Control, 788 F.2d 600, 608 (9th Cir. 1986)). And because the federal Utah Construction factors are not all satisfied, it is beside the point whether California law would accord preclusivе effect to the CHRB decision in the circumstances presented. See Olson, 188 F.3d at 1086; Miller, 39 F.3d at 1033; Plaine, 797 F.2d at 719 & n.13.1
B
Jamgotchian‘s decision not to seek review of the CHRB‘s ruling in state court
The district court‘s contrary conclusion effectively imposed on Jamgotchian the requirement that he exhaust state court remedies to avoid the CHRB decision precluding this lawsuit. That requirement is contrary to the “settled rule” that “exhaustion of state remedies is not a prerequisite to an action under
(quotations omitted); Pakdel v. City & Cnty. of S.F., Cal., 141 S. Ct. 2226, 2230 (2021) (per curiam); Patsy v. Bd. of Regents of Fla., 457 U.S. 496, 501 (1982). If a litigant pursues and obtains state court or state agency resolution of a matter, those decisions can be preclusive in a later
Such an exhaustion requirement springs an improper “preclusiоn trap” for
phrased its holding in terms of the exhaustion of state remedies, “its error would have been clear.” Id. at 2173.
If we accepted the district court‘s view that Jamgotchian was required to pursue state court mandamus review of the CHRB‘s decision to prevent that decision from precluding his
Our cases have noted that “[i]n California, ‘exhaustion of judicial remedies is necessary to avoid giving binding effect to an administrative agеncy‘s decision.‘” Doe, 891 F.3d at 1155 (quoting Johnson v. City of Loma Linda, 5 P.3d 874, 879 (Cal. 2000)) (internal alterations omitted). But California courts decline to afford preclusive effect to agency decisions over which the agency lacked jurisdiction. In City & County of San Francisco v. Padilla, 23 Cal. App. 3d 388, 400 (1972), for example, the California Court of Appeals concluded that a decision by a Board of Permit Appeals did not have preclusive effect in a state court nuisance action because the Board lacked subject matter jurisdiction over the decision. And in applying the Utah Construction factors to a decision by the Department of
Social Services, the California Supreme Court recited the requirement that the Department must have “had jurisdiction to decide th[e] issue” under its governing statute for its decision to be given preclusive effect. People v. Sims, 32 Cal.3d 468, 481 (1982); see also Murray v. Alaska Airlines, Inc., 237 P.3d 565, 571 (Cal. 2010) (reaffirming the Utah Construction analysis conducted in Sims). Under California law, “[t]he doctrine of exhaustion of judicial remedies applies where the prior administrative proceedings possessed the requisite judicial character such that they yielded decisions or findings that could later be given preclusive effect.” Alborzi v. Univ. of S. Cal., 269 Cal. Rptr. 3d 295, 310 (Cal. Ct. App. 2020) (emphasis added and internal quotation marks omitted). Because judicial exhaustion is a requirement for avoiding the preclusive effect оf agency decisions, it logically is inapplicable where the agency decision would not be given preclusive effect in the first place.
Of course, even assuming that the exhaustion requirement would apply under California law, we “defer to the considered judgment of the courts of California” only “[s]o long as the minimum criteria of Utah Construction are met.” Miller, 39 F.3d at 1038. As we have explained, those “minimum criteria” are not met here.
The State argues on appeal that the district court‘s ruling sets no preclusion trap because Jamgotchian chose to appeal the Stewards’ decision to the CHRB, as oppоsed to going directly to federal court first. On this view, Jamgotchian‘s election to seek relief before the CHRB subjected him to the remaining requirements of California‘s legal system, including the alleged requirement that Jamgotchian pursue his remedies in state court through a
to avoid preclusion by a decision of an agency that lacked jurisdiction to decide the relevant issues.
The State is mistaken. By seeking relief before the CHRB, Jamgotchian did expose himself to the risk that the CHRB‘s decision would preclude a later
That type of exhaustion requirement is improper under
C
The district court reached its contrary result on these questions by relying principally on our past decisions in Miller v. County of Santa Cruz, 39 F.3d 1030 (9th Cir. 1994), and Doe v. Regents of the University of California, 891 F.3d 1147 (9th Cir. 2018). Neither case supports treating Jamgotchian‘s
Miller concerned a plaintiff, Miller, who was dismissed from his position in the Santa Cruz County Sheriff‘s Department and then contested his dismissal before the County‘s Civil Service Commission. 39 F.3d at 1032. After an evidentiary hearing, the Commission ruled against Miller and notified him of his right to seek judicial review of its decision in California state court under
We affirmed because the Commission‘s proceeding satisfied both Utah Construction and California preclusion law. Id. at 1032–38. Unlike in this case, there was no suggestion that the Commission lacked jurisdiction to decide Miller‘s claims. Indeed, in listing reasons why an agency proceeding might fail to pass muster undеr Utah Construction, Miller specifically recognized that “[w]e deny preclusive effect ... when the adjudicator lacks jurisdiction.” 39 F.3d at 1038. Here, as we have explained, the CHRB lacked jurisdiction in all relevant respects.
Nor does Miller require
judicial review in state court of the Commission‘s decision. Id. at 1033, 1038. For example, we stated that “[w]here, as here, the agency adjudication meets the requirements of due process, and de novo judicial review is available, concerns of comity and finality counsel against denying preclusive effect.” Id. at 1038 (citation omitted). But we did not thereby impose an exhaustion requirement that would be contrary to Supreme Court precedent.
Instead, Miller generally reiterated a far more modest proposition from our past cases: that a state agency decision can have preclusive effect in future federal lawsuits even though the plaintiff did not seek review of the agency decision in state court. See id. at 1033. That this principle was determinative is made apparent by Miller‘s reliance on our earlier decisions in Plaine v. McCabe, 797 F.2d 713 (9th Cir. 1986) and Eilrich v. Remas, 839 F.2d 630, 633–34 & n.2 (9th Cir. 1988). See Miller, 39 F.3d at 1033 (discussing these two cases). In Plaine, we noted that the plaintiff‘s decision not to seek state court review of a state agency decision “d[id] not diminish [the agency decision‘s] preclusive effect in federal court.” 797 F.2d at 719 n.12. In Eilrich, we similarly rejected the argument that an “administrative decision was not preclusive because it was not reviewed by the California courts,” when the plaintiff failed to seek state court review of the agency decision. 839 F.2d at 632. Plaine and Eilrich merely confirm that for a state agency decision to have preclusive effect in federal court, it is not a prerequisite that plaintiffs have sought state court review of the agency decision. In other words, when such judicial review is available, plaintiffs cannot “obstruct the preclusive use of the state administrative decision simply by foregoing the right to appeal.” Miller, 39 F.3d at 1033 (quoting Eilrich, 839 F.2d at 632).
This reasoning does not impose an exhaustion requirement for
It follows that when we stated in Miller that “the availability of judicial review, even if not always determinative, is of critical importance here,” id. at 1038, we likewise did not impose an exhaustion requirement for
have been, determined” regarding those arguments before the CHRB that would preclude this
Our prior decision in Doe also does not authorize the district court‘s preclusion determination. In Doe, an adjudicatory committee at the University of California Santa Barbara (UCSB) found that Doe, a student, had sexually assaulted another student during a trip to Lake Tahoe. The committee decided that, as punishment, Doe should be suspended from school. 891 F.3d at 1150. Like Miller, Doe could have sought mandamus review of the committee‘s decision in California state court under
We concluded that Doe‘s
Because California has adopted the Utah Construction standard, we give preclusive effect to a state administrative decision if the California courts would do so. In California,
exhaustion of judicial remedies ... is necessary to avoid giving binding effect to an administrative agency‘s decision. A party must exhaust judicial remedies by filing a
§ 1094.5 petition, the exclusive and established process for judicial review of an agency decision. UCSB‘s suspension of Doe is the sort of adjudicatory, quаsi-judicial decision that is subject to the judicial exhaustion requirement.It is undisputed that Doe has not filed a
§ 1094.5 petition in state court. .... Therefore, Doe has not exhausted his judicial remedies.
Id. at 1155 (quotations, citations, and brackets omitted). On this basis, we held that the district court should have dismissed Doe‘s
In seemingly imposing a judicial exhaustion requirement on a
But we need not reach the issue of Doe‘s continued vitality after Knick or decide whether we would be permitted to reach that issue as a three-judge panel. See Miller v. Gammie, 335 F.3d 889, 893 (9th Cir. 2003) (en banc) (holding that a three-judge panel does not follow circuit precedent when “the reasoning or theory of our prior circuit authority is clearly irreconcilable with the reasoning or theory of intervening higher authority“). Those are important questions. But because we can resolve this appeal without confronting them, they are matters for another day.
Doe does not govern this case for the basic reason that, again, the agency here lacked jurisdiction to decide the claims that Jamgotchian now seeks to raise in his
In addition, and more generally, although Doe relied on California preclusion law based on California‘s own adoption of Utah Construction, see 891 F.3d at 1155, Doe did not, and again could not, reject our case law recognizing that preclusion does not apply when the Utah Construction factors are not all met. See Olson, 188 F.3d at 1086; Miller, 39 F.3d at 1033; Plaine, 797 F.2d at 719 & n.13. And as to California preclusion law, Doe did not address whether California would require a plaintiff to seek state court review to avoid the supposed preclusive effect of an agency decision that lacked jurisdiction over the relevant issues. As we have noted, it does not appear that California courts would impose such a requirement.
True, when discussing the factual background of the case, Doe did mention that in the district court, Doe had alleged “that UCSB lacked jurisdiction over the Lake Tahoe trip.” 891 F.3d at 1151. This was apparently a reference to the possibility that UCSB could not punish Doe for off-campus conduct. But Doe did not rely on this allegation in its merits discussion, and it is not apparent that Doe, which focused on exhaustion, evaluated the Utah Construction factors in any meaningful way. It certainly did not do so as to Utah Construction prong two. Doe, which did not address the preclusion implications of a lack of jurisdiction at the administrative level, thus cannot be considered authoritative on that point. See, e.g., United States v. Corrales-Vazquez, 931 F.3d 944, 954 (9th Cir. 2019) (“Cases are not precedential for propositions not considered, or for questions which merely lurk in the record.“) (citations, alterations, and quotations omitted). In any evеnt, in Doe the argument appears to have been that UCSB in issuing its suspension decision exceeded its authority. In this case, the CHRB
clearly lacked jurisdiction and so recognized, disclaiming its ability to decide the relevant issues.
We have never held that an agency‘s jurisdiction-wanting non-decision has preclusive effect in a later
For the foregoing reasons, the CHRB‘s decision does not preclude Jamgotchian‘s
REVERSED AND REMANDED.