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Volume 32, Number 81 Full Case Listings updated daily at www.therecorder.com/cdos Thursday, April 26, 2018

RECORDER

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NINTH CIRCUIT COURT OF APPEALS

United States v. Garrison C.D. CA Criminal Law 3766Clinician’s active involvement in “pill mill” supported conviction for conspiracy to distribute controlled substances (Gould, J.)

In re Taggart OR Bankruptcy 3770Creditors’ good faith belief that bankruptcy injunction did not apply to their claims insulated them from sanctions (Bea, J.)

Colony Cove Properties, LLC v. City of Carson C.D. CA Constitutional Law 3774City’s denial of mobilehome park owner’s requests for rent increases not unconstitutional taking (Hurwitz, J.)

In re Bozic S.D. CA Civil Procedure 3779 “First-to-file” rule did not authorize transfer of case to district lacking proper venue (Friedland, J.)

April 26, 2018 CALIFORNIA DAILY OPINION SERVICE SummARIES 3763

SUMMARYBankruptcyCreditors’ good faith belief that bankruptcy injunction did not apply to their claims insulated them from sanctions (Bea, J.)

In re Taggart9th Cir.; April 23, 2018; 16-35402

The court of appeals affirmed a Bankruptcy Appellate Panel decision. The court held that creditors’ good faith be-lief that the bankruptcy court’s discharge injunction did not apply to their claims insulated them from sanctions, even if that belief was unreasonable.

Bradley Taggart, Terry Emmert, and Keith Jehnke each owned a 25% interest in Sherwood Park Business Center, LLC. When Taggart purportedly transferred his interest to a third party, without notice to Emmert and Jehnke, they sued him in state court for breach of the Sherwood Park operat-ing agreement. Shortly before trial in the state court action, Taggart filed a voluntary Chapter 7 bankruptcy petition. The state court action was stayed. After Taggart received his dis-charge in the bankruptcy proceedings, Emmert and Jehnke proceeded with the state court action. After trial, the state court issued findings of fact and conclusions of law that un-wound the transfer of Taggart’s interest in Sherwood Park and expelled Taggart from Sherwood Park. Emmert and Jehnke submitted a proposed judgment to which Taggart’s attorney objected. Taggart, who had not previously partici-pated in the state court proceedings, appeared at the hearing for entry of the judgment and provided testimony and argu-ment. Emmert, Jehnke, and Sherwood Park thereafter sought attorney fees against Taggart, arguing he could be held liable for fees incurred after his discharge because he had “returned to the fray.”

Taggart moved the bankruptcy court to reopen his bank-ruptcy proceeding and to hold Jehnke, Emmert, their attor-ney, and Sherwood Park (“the creditors”) in contempt for violating the discharge by seeking an award of attorneys’ fees against him in the state court action. The bankruptcy court reopened Taggart’s case and granted the request for sanc-tions. The Bankruptcy Appellate Panel reversed, finding the creditors did not knowingly violate the discharge injunction.

The court of appeals affirmed, holding that the bankruptcy court abused its discretion by concluding that the creditors knowingly violated the discharge injunction. The bankruptcy court erroneously concluded that the creditors’ alleged good faith belief that the discharge injunction was inapplicable to their claims was irrelevant for purposes of determining whether there was a “knowing” violation of the discharge injunction. To the contrary, even an unreasonable belief that a discharge injunction does not apply to a creditor’s claims precludes a finding of contempt. Here, as the BAP found,

the creditors possessed a good faith belief that the discharge injunction did not apply to their claims based on their con-tention that Taggart had “returned to the fray.” Although they were ultimately incorrect, their good faith belief, even if un-reasonable, insulated them from a finding of contempt.

Civil Procedure “First-to-file” rule did not authorize transfer of case to district lacking proper venue (Friedland, J.)

In re Bozic9th Cir.; April 25, 2018; 17-70614

The court of appeals denied a petition for writ of mandate. The court held that although the district court clearly erred in transferring her action to a different district, issuance of the writ would have no practical impact on the case in its current procedural posture, and any injury petitioner might face was purely speculative.

Regina Bozic purchased the weight-loss supplement Li-pozene in her home state of Pennsylvania. Disappointed by the product, Bozic filed a putative class action in the Southern District of California against the corporate entities and indi-viduals responsible for Lipozene’s production, distribution, and marketing. At the time Bozic filed suit, two related puta-tive class actions were already pending in California: Duran v. Obesity Research Institute, LLC, filed in the San Diego Superior Court, and Fernandez v. Obesity Research Institute, LLC, filed in the Eastern District. All three suits assert similar state law claims against a largely overlapping group of defen-dants. The defendants in Bozic’s case moved to transfer the case to the Eastern District for consolidation with Fernandez or, in the alternative, to stay the proceedings.

Finding that Bozic’s action was governed by the first-to-file rule, the court ordered the case transferred to the Eastern District for consolidation with Fernandez. Bozic filed a peti-tion for writ of mandate challenging that order.

The court of appeals denied Bozic’s petition, holding that even though the district court erred in transferring the case, mandamus relief was not appropriate. The district court’s dis-cretion to transfer Bozic’s action was limited under 28 U.S.C. §1404(a) to districts or divisions “where it might have been brought.” That putative class members may have purchased Lipozene in the Eastern District did not make venue there proper. The claims of unnamed class members can never make permissible an otherwise impermissible venue. Rather, in a class action, the “events” in question are only those in-volving the named plaintiffs. Otherwise, a nationwide class action could be transferred to any district in the country, thus abrogating the venue statute altogether. The first-to-file rule does not compel a different outcome. The plain language of §1404(a) makes clear that “a district court may transfer any


civil action to any other district or division where it might have been brought.” Because nothing in the record supported a finding of venue in the Eastern District, the district court committed clear error in granting defendants’ motion to transfer. Mandamus relief was nonetheless not appropriate. Issuance of the writ would have no practical impact on this case in its current procedural posture. The district court made clear that it would either transfer or stay the case. If transfer were not an available option, Bozic’s action would be stayed pending a final judgment in Duran. Because the case was already being stayed, along with Fernandez, in the Eastern District, any injury Bozic might face from the transfer was purely speculative. If and when that stay is lifted, Bozic may move the Eastern District to transfer her case back to the Southern District, or, if necessary, file a new petition for a writ of mandamus.

Constitutional LawCity’s denial of mobilehome park owner’s requests for rent increases not unconstitutional taking (Hurwitz, J.)

Colony Cove Properties, LLC v. City of Carson9th Cir.; April 23, 2018; 16-56255

The court of appeals reversed a district court judgment and remanded. The court held that a city’s denial of a mobile-home park owner’s requested rent increases did not constitute an unconstitutional taking.

Colony Cove Properties, LLC purchased a mobilehome park in the City of Carson. Most of the purchase price was funded by a loan. The annual debt service on that loan—$1,224,681—far exceeded the prior owner’s annual profit of $718,240. Colony accordingly petitioned the city’s Rent Review Board for a several hundred dollar rent adjustment, per space. Applying the guidelines set forth in the city’s Mo-bile Home Space Rent Control Ordinance, the board granted a rent increase of $36.74. The following year, Colony again petitioned for a several hundred dollar increase, and was thus time granted an increase of only $25.02.

Colony filed suit, arguing that the board’s rulings were an unconstitutional taking and violated Colony’s substan-tive due process rights. The district court dismissed all of Colony’s claims except for an as-applied regulatory takings claim, which went to trial. Following the court’s denial of the city’s motions for judgment as a matter of law, the jury returned a verdict in favor of Colony and awarded it over $3 million in damages.

The court of appeals reversed, holding that the district court erred in denying the city’s motions for judgment as a matter of law. Colony presented no evidence at trial about the property’s post-deprivation value. Even assuming that the lost

rental income asserted by Colony—$5.7 million—equates to diminution in property value, that reduction would constitute less than one-quarter of the property’s $23 million purchase price, an amount far too small to establish a regulatory tak-ing. Colony thus failed to present evidence sufficient to create a triable question of fact as to the economic impact caused by the City’s denial of larger rent increases. Colony similarly failed to present evidence to support its claim of investment-backed expectations; no objectively reasonable person could have expected that the board would always account for debt service when determining rent increases. Finally, the purpose of the city ordinance—to protect mobilehome park residents from excessive rent increases—argued against a finding that application of the ordinance constituted an unconstitutional taking. On the record presented, no reasonable finder of fact could conclude that the Board’s denials of Colony’s request-ed rent increases were the functional equivalent of a direct appropriation of the property. The court remanded with di-rection to enter judgment in favor of the city.

Criminal LawClinician’s active involvement in “pill mill” supported conviction for conspiracy to distribute controlled substances (Gould, J.)

United States v. Garrison9th Cir.; April 25, 2018; 15-50137

The court of appeals affirmed a judgment of conviction. The court held that defendant’s active involvement in an OxyContin “pill mill” was sufficient to support his conviction for conspiracy to distribute controlled substances.

Licensed physician’s assistant David Garrison worked at a clinic identified by federal law enforcement as a “pill mill” for OxyContin. Garrison, along with others, was indicted for conspiracy to distribute controlled substances. The evidence at trial showed that Garrison saw patients without physician oversight and prescribed OxyContin using pre-signed pre-scriptions. The clinic’s receptionist testified that the clinic’s operators directed that all of the clinic’s patients should be prescribed the highest strength OxyContin, even when there was no need for OxyContin. The jury found Garrison guilty.

Garrison appealed, challenging the sufficiency of the evi-dence to support his conviction.

The court of appeals affirmed, holding that the evidence was sufficient to support a finding that Garrison agreed to further the clinic’s scheme to illicitly distribute OxyContin. First, was expert testimony that Garrison acted outside the scope of usual medical practice and that he participated in distributing OxyContin in an alarmingly high volume and strength for no legitimate medical purpose. Further, Garri-son pre-signed prescriptions, filled out pre-signed prescrip-


tions, and wrote OxyContin prescriptions for people neither he nor anyone else at the clinic had ever examined. He also lied to an investigator about his standard practices. This evi-dence was sufficient to allow a reasonable jury to draw the inference that Garrison was prescribing OxyContin with the intent to do so for no legitimate medical purpose. Further, even though there was no direct evidence of Garrison’s entry into an agreement to participate in a drug conspiracy, it is well-established that “a jury may infer the existence of an agreement from circumstantial evidence, such as the defen-dant’s conduct.” It was undisputed that there was a conspir-acy to improperly distribute OxyContin, and the evidence showed that Garrison had much more than a slight connec-tion with the conspiracy. Garrison need not have been aware of or participated in the full scope of the scheme—so long as he had agreed to further a portion of its illicit operations by colluding in writing fraudulent prescriptions, he could be convicted. The court rejected Garrison’s remaining claims of error as similarly without merit.

April 26, 2018 CALIFORNIA DAILY OPINION SERVICE NINth CIRCuIt COuRt OF APPEAL 3766

FULL TEXT OPINIONNinth Circuit Court of Appeals

Cite as 18 C.D.O.S. 3766

UNITED STATES OF AMERICA, Plaintiff-Appellee,v.DAVID JAMES GARRISON, Defendant-Appellant.

No. 15-50137United States Court of Appeals for the Ninth CircuitD.C. No. 2:11-cr-00922-DDP-6Appeal from the United States District Court for the Central District of California Dean D. Pregerson, District Judge, Presiding Submitted March 6, 2018* Pasadena, California Filed April 25, 2018 Before: Ronald M. Gould and Mary H. Murguia, Circuit Judges, and Dana L. Christensen,**Chief District Judge.Opinion by Judge Gould

* The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2).

** The Honorable Dana L. Christensen, Chief United States District Judge for the District of Montana, sitting by designation.

COUNSELMichael R. Belter (argued), Salinas, California, for

Defendant-Appellant. Angela J. Davis, Assistant United States Attorney, Major

Frauds Section; Lawrence S. Middleton, Chief, Criminal Division; United States Attorney’s Office, Los Angeles, California; for Plaintiff-Appellee.

OPINIONGOULD, Circuit Judge:

After a jury trial, David James Garrison was convicted of conspiracy to distribute controlled substances in violation of 21 U.S.C. § 846. During trial, the government offered evi-dence that Garrison and his co-conspirators had abused their positions as healthcare providers by intentionally prescrib-ing OxyContin, a powerful opioid pain reliever, for no legiti-mate medical purpose as part of a scheme to sell the drug on the street. Garrison appeals his conviction, arguing (1) that

there was insufficient evidence to support his conviction, and (2) that the district court should have dismissed the charges against him, acquitted him, or granted him a mistrial because the government did not timely disclose certain information. We affirm.

I

There is now an epic crisis of deadly opioid abuse and overuse. In 2016, roughly 11.5 million people in the United States misused prescription opioids. U.S. Dep’t of Health and Human Services, About the U.S. Opioid Epidemic (2018), https://www.hhs.gov/opioids/about-the-epidemic/(last vis-ited March 8, 2018). That same year, 116 people on average died every day from opioid-related drug overdoses. Id. And in 2017, the Acting Secretary of Health and Human Services declared the national opioid abuse epidemic a public health emergency. U.S. Dep’t of Health and Human Services, HHS Acting Secretary Declares Public Health Emergency to Ad-dress National Opioid Crisis (2017), https://www.hhs.gov/about/news/2017/10/26/hhs-acting-secretary-declares-pub-lic-health-emergency-address-national-opioid-crisis.html (last visited March 8, 2018).

In the midst of this crisis, we trust doctors and health-care professionals to be conscientious gatekeepers to these dangerous and potentially fatal drugs. But unfortunately some medical professionals betray their duty to do no harm as healthcare providers and abuse their prescription pads. This is exactly what happened at the Lake Medical Group clinic (the “Clinic”), where Garrison worked as a licensed physician’s assistant from summer 2009 until the Clinic was closed in February 2010.

The Clinic was what is often described as a “pill mill,” and the activities of people working there led to the illicit street-sale of more than a million maximum-strength OxyContin tablets. From August 2008 to September 2010, the Clinic generated 13,207 prescriptions for OxyContin— all but six of which were for the drug’s maximum dosage. The Clinic employed “patient recruiters” who induced people living in homeless shelters and rescue missions to visit the Clinic. These of course were not true “patients” in the ordinary sense of that word. The Clinic would then use the names and Medi-care or Medi-Cal cards of the recruited patients to generate fraudulent OxyContin prescriptions. The recruited patients did not retain the OxyContin that they were prescribed. In-stead, people working for the Clinic retrieved the drug from participating pharmacists or from the recruited patients, and the Clinic operators then had the pills sold illegally. The gov-ernment learned of the Clinic’s operations and took steps to shut the Clinic down and prosecute those it believed respon-sible for the scheme.

A

On September 28, 2011, Garrison and eleven other code-fendants were indicted. Garrison was indicted for conspiracy to distribute controlled substances in violation of 21 U.S.C.


§ 846, based on his alleged role in the conspiracy to distrib-ute OxyContin for no legitimate medical purpose.1 A second superseding indictment was filed, and the case proceeded to trial. Garrison was tried with four alleged co-conspirators: Elza Budagova, who acted as a medical assistant at the Clin-ic, and pharmacists Theodore Yoon, Phic Lim, and Perry Tan Nguyen.

An expert testified that there were indications from the Clinic’s medical files that the prescriptions from the Clinic were not for a proper medical purpose. Many files had mini-mal patient histories and in other files the patient histories were virtually identical, indicating that they had been forged. Further, there was expert testimony that immediately pre-scribing maximum strength OxyContin, as was done at the Clinic, was not a proper medical practice.

At trial, the government offered documentary and testi-monial evidence against Garrison. Garrison stipulated that he wrote and signed hundreds of prescriptions for OxyCon-tin with similar diagnoses on the prescription pads of other medical professionals. Garrison also agreed that it was his handwriting on numerous prescriptions for OxyContin that appeared to have been pre-signed by other persons working at the Clinic. He also signed and left blank prescription forms in his own name, apparently for the use of others in making prescriptions to the phony patients.

Recruited patients testified at trial that they had never been examined by anyone at the Clinic, yet their medical files reflected that they had been given an OxyContin pre-scription in Garrison’s handwriting, though on other phy-sicians’ prescription pads. There was also video evidence of Garrison prescribing OxyContin to a person posing as a recruited patient after a six minute interaction. A medical expert testified that there was no medical need for that Oxy-Contin prescription.

Garrison also lied to an investigator about the extent of the physician oversight he received at the Clinic—claiming that almost all of his patient examinations were signed off on by a physician, whereas the investigator found that the vast majority of Garrison’s examinations were not cosigned by a licensed physician.

Two cooperating witnesses testified against Garrison: El-eanor Santiago and Julie Shishalovsky. Santiago, a former licensed physician, had pled guilty to health care fraud af-ter falsifying Medi-Cal claims while she was working at the Clinic. Santiago testified that the Clinic was a pain manage-ment clinic with a focus on people suffering from chronic pain, which meant that many of the patients had already tried to use less intense pain medications. She testified that Garri-son saw patients without her oversight and that Garrison had prescribed OxyContin on a prescription slip that Santiago had pre-signed. Santiago also testified that Garrison would

1. Other codefendants were charged with conspiracy to commit health care fraud, 18 U.S.C. § 1349; unlicensed wholesale distribution of prescription drugs, 21 U.S.C. §§ 331(t), 333(b)(1)(D), 353(e)(2)(A); and aiding and abetting, 18 U.S.C. § 2.

sometimes give her medical charts to cosign, and that she had noticed that he had prescribed all his patients OxyCon-tin. She told Garrison that some of the patients did not need that drug, but he continued prescribing OxyContin for them anyway.

Shishalovsky worked as a receptionist at the Clinic and testified that the Clinic’s operators directed that all of the Clinic’s patients should be prescribed the highest strength OxyContin, even when there was no need for OxyContin. She also testified that Garrison completed pre-signed prescrip-tions “very often,” and also pre-signed his own prescriptions.

Garrison made extensive efforts to impeach the credibil-ity of both of these witnesses, stressing that they both had criminal records and had engaged in fraudulent conduct in the past. Garrison did not call any witnesses of his own in his defense. Garrison’s main line of defensive argument was that he was not aware of the conspiracy and that he did not knowingly participate in the conspiracy.

B

Before and during trial, the government made grave mis-takes in its prosecution of the case by repeatedly failing to timely disclose information to the defense, as was required by law. First, a witness who testified at trial, Bernard Har-ris, admitted at trial that he had submitted a false medical report to his probation officer and to a judge, and Harris said that Santiago and Shishalovsky helped him fabricate the re-cord. The government questioned Santiago about Harris’s statement the morning before she testified, and she admitted that she had helped falsify the medical records. But the gov-ernment did not turn over its notes documenting Santiago’s statement to the defense, although it questioned Santiago about assisting in the falsification during her trial testimony. Santiago testified that she had helped falsify a letter regarding Harris’s medical records. Shishalovsky also admitted during trial to falsifying medical records, and the government stated that Shishalovsky had told them about this months before trial, although, the interview report from that discussion did not contain this pertinent disclosure.

Also, the government delayed turning over to the defense documents relating to Shishalovsky’s plea negotiations with the government until a couple of days before Shishalovsky testified. The government has conceded that it should have turned over this information much sooner pursuant to Giglio v. United States, 405 U.S. 150 (1972), which requires the disclosure of promises made to witnesses in exchange for their testimony. Importantly, the newly-disclosed negotia-tions informed the defense for the first time that in exchange for testimony, the government agreed that Shishalovsky would be able to continue working in the healthcare field. The government failed to disclose this agreement, either dur-ing Shishalovsky’s sentencing or during her direct testimony at trial. The district judge was also belatedly informed of this agreement, and during a break in Shishalovsky’s testimony the court advised the jury of the government’s and Shisha-


lovsky’s failure to disclose this agreement, and told the jury that it could consider this background in evaluating Shisha-lovsky’s credibility. The judge also commented to the jury on the irregularity of the agreement.

There were other problems with disclosure. Matthew Cho was an alleged co-conspirator and a former pharmacist. Cho and two other codefendants, Yoon and Lim, entered into a joint defense agreement.2 Shortly before trial, Cho’s counsel emailed a letter to the government and to counsel for Yoon and Lim that appeared to cover information shielded by the joint defense agreement. The government then realized that other letters that it had received from Cho’s counsel might also contain information that should have been protected un-der the joint defense agreement.

The government also learned that Cho had been forward-ing confidential information that was potentially covered by the joint defense agreement to his FBI agent brother. Those emails concerned how Cho might get a deal from prosecutors in exchange for his testimony. The district court character-ized those emails as material that should have been turned over pursuant to Brady v. Maryland, 373 U.S. 83 (1963), which requires a prosecutor to turn over potentially exonerat-ing evidence to the defense. The government agreed that it did not timely inform the defense of Cho’s discussions with his FBI agent brother. Cho was not called as a trial witness.

Weeks into trial, the government moved to dismiss its charges against Yoon and Lim. The government conceded that it had repeatedly failed to timely turn over Brady and Gi-glio evidence, and that it accepted Yoon’s and Lim’s counsel’s representation that Cho’s counsel had wrongfully disclosed evidence that prejudiced Yoon and Lim. The district court granted the motion and also dismissed the charges against pharmacist defendant Nguyen that had also been brought against Yoon and Lim, leaving only the charge against Nguy-en for financial structuring of transactions to avoid report-ing requirements in violation of 31 U.S.C. § 5324(a)(3). The district court then gave an instruction telling the jury not to read anything into the fact that Yoon and Lim were no longer part of the case and that counts had been dismissed against Nguyen.

Garrison moved for a dismissal or mistrial arguing that the government’s discovery violations prejudiced him and that Yoon’s and Lim’s sudden absences from the trial inescapably would lead the jury to assume that Garrison was guilty. Al-though the government conceded that it had failed to timely produce all of the material to which the defense was entitled, it argued that any prejudice would be cured by jury instruc-tions. The government also noted that Garrison was not a party to the joint defense agreement. The district court denied Garrison’s motion.

2. A joint defense agreement extends attorney-client privilege to disclosures made between the attorneys for codefendants, between codefendants, and between one codefendant to another codefendant’s attorney. See United States v. Gonzalez, 669 F.3d 974, 978 (9th Cir. 2012).

At the close of trial, the district court instructed the jury by advising of the government’s failure to timely comply with its constitutional obligations, and telling the jury that it could draw adverse inferences from this failure. The court also ad-vised the jury that this consideration could lead the jury to find reasonable doubt as to Garrison’s and his codefendants’ guilt.3 The jury was again instructed not to speculate as to the reason for Yoon’s and Lim’s absences from the trial or to draw inferences for or against the remaining defendants based on Yoon’s and Lim’s absences.4 Upon being instructed, the jury deliberated and delivered a verdict finding all the remaining defendants guilty.

Garrison again moved for a new trial or for an acquittal, arguing (1) that the government’s Brady and Giglio viola-tions required a new trial; (2) that Yoon’s and Lim’s dismissal in the midst of the trial and the dismissal of a portion of the charges against Nguyen prejudiced Garrison; and (3) that there was insufficient evidence to convict Garrison. The dis-trict court denied this motion, explaining that it considered Garrison to be differently situated from the pharmacist defen-dants and that it was not uncommon for some defendants to be dismissed from a multi-defendant trial during trial. Addi-tionally, the district court reasoned that there was significant documentary evidence against Garrison separate and apart from any witness testimony. The parties then proceeded to sentencing where Garrison received a 120-month sentence. Garrison appeals.

II

When faced with a sufficiency of the evidence challenge, we “must consider the evidence presented at trial in the light most favorable to the prosecution” and then must determine whether the evidence is sufficient to allow “any rational trier of fact to find the essential elements of the crime beyond a reasonable doubt.” United States v. Nevils, 598 F.3d 1158, 1164 (9th Cir. 2010) (internal citations, quotation marks, and

3. The instruction the district court gave was as follows: Under the United States Constitution, in order for the de-

fendant to receive a fair trial, the Government must inform the Defense of any information known to the Government that tends to suggest the defendant might not have commit-ted the crimes or crime charged . . . and any information that casts doubt on the credibility of the Government’s own evi-dence. In this case, the Government violated those important Constitutional principles upon which the fair administra-tion of our system of justice depends on multiple occasions. In evaluating the merits of this case, you can decide what weight, if any, to give to the Government’s violations of these Constitutional principles. The Government’s actions stand-ing alone or in combination with other facts presented in this case, may create a reasonable doubt in your mind about the defendant’s guilt.4. The instruction the district court gave was as follows:

For reasons that do not concern you, the case[s] against defendants Theordore Yoon and Phic Lim are no longer be-fore you. Do not speculate why. This fact should not influ-ence your verdicts with reference to the remaining defen-dants. And you must base your verdict solely on the evidence against the remaining defendants.


alterations omitted) (en banc). Nevils applied the well-known standard developed by the Supreme Court in Jackson v. Vir-ginia, 443 U.S. 307 (1979), which vests in the jury a great deal of leeway in reaching its verdict, and promises that a jury verdict will be sustained when a rational trier of fact, viewing the evidence in the light most favorable to the government, could find all elements of the crime proved beyond a reason-able doubt. Id. at 318–19. Our decision on sufficiency of the evidence is made de novo. United States v. Green, 592 F.3d 1057, 1065 (9th Cir. 2010).

By contrast, we review for abuse of discretion a district court’s decision about what sanction to impose for the un-timely disclosure of Brady and Giglio material. See United States v. Struckman, 611 F.3d 560, 577 (9th Cir. 2010); see also United States v. Sterling, 724 F.3d 482, 512 (4th Cir. 2013).

III

Garrison was charged with conspiracy to distribute Oxy-Contin in violation of 21 U.S.C. § 846 on the grounds that he had distributed OxyContin outside the course of usual medi-cal practice and for no legitimate medical purpose in viola-tion of 21 U.S.C. § 841. “To establish a drug conspiracy, the government must prove (1) an agreement to accomplish an illegal objective; and (2) the intent to commit the underlying offense.” United States v. Duenas, 691 F.3d 1070, 1085 (9th Cir. 2012) (internal citations and quotation marks omitted). Further, to demonstrate the underlying violation of § 841 the government must prove three elements:

(1) that the practitioner distributed controlled substanc-es, (2) that the distribution of those controlled substanc-es was outside the usual course of professional practice and without a legitimate medical purpose, and (3) that the practitioner acted with intent to distribute the drugs and with intent to distribute them outside the course of professional practice.

United States v. Feingold, 454 F.3d 1001, 1008 (9th Cir. 2006). Here, Garrison is not challenging that there was a con-spiracy to run a pill mill out of the Clinic; rather, he contends that there was inadequate evidence at trial to demonstrate that he was aware of the conspiracy or knowingly participated in the conspiracy.

We do not consider this to be a close case on sufficiency of evidence. As to the underlying violation, there was expert tes-timony that Garrison acted outside the scope of usual medical practice and that he participated in distributing OxyContin in an alarmingly high volume and strength for no legitimate medical purpose. Further, Garrison pre-signed prescriptions, filled out pre-signed prescriptions, and wrote OxyContin pre-scriptions for people neither he nor anyone else at the clinic had ever examined. He also lied to an investigator about his standard practices. Inconsistencies or lying can lead a jury to infer intent. United States v. Haro-Portillo, 531 F.2d 962,

963 (9th Cir. 1976). This evidence was sufficient to allow a reasonable jury to draw the inference that Garrison was pre-scribing OxyContin with the intent to do so for no legitimate medical purpose. See Feingold, 454 F.3d at 1007.

Even though there was no direct evidence that Garrison had entered into an agreement to participate in a drug con-spiracy, it is well-established that “a jury may infer the ex-istence of an agreement from circumstantial evidence, such as the defendant’s conduct.” United States v. Reed, 575 F.3d 900, 924 (9th Cir. 2009). There is no dispute here that there was a conspiracy to improperly distribute OxyContin. “[O]nce a conspiracy is established only a slight connection to the conspiracy is necessary to support a conviction,” meaning “that a defendant need not have known all the conspirators, participated in the conspiracy from its beginning, participat-ed in all its enterprises, or known all its details.” United States v. Herrera-Gonzalez, 263 F.3d 1092, 1095 (9th Cir. 2001).

Here, Garrison had much more than a slight connection with the conspiracy. He was a major actor in it. He filled out prescriptions for OxyContin that had been pre-signed by oth-er medical professionals—often repeating similar diagnoses to support those prescriptions—and he pre-signed his own prescription pad, apparently so others could draw prescrip-tions from it. Coordination like this is “strong circumstantial proof of agreement” in a conspiracy case. Reed, 575 F.3d at 924 (internal citation and quotations omitted). Garrison need not have been aware of or participated in the full scope of the scheme—so long as he had agreed to further a portion of its illicit operations by colluding in writing fraudulent pre-scriptions, he could be convicted. See Herrera-Gonzalez, 263 F.3d at 1095. There was sufficient evidence to lead a reason-able jury to conclude that Garrison had agreed to further the scheme run out of the Clinic to illicitly distribute OxyContin.

IV

Garrison next contends that because charges were dis-missed against Yoon, Lim, and Nguyen, charges should also have been dismissed against him. He further contends that because the government repeatedly failed to timely disclose evidence revealing weaknesses in its case, there is “little doubt” that, if that evidence been timely disclosed, Garrison would have been acquitted. Garrison also argues that Yoon’s and Lim’s sudden absence from the trial prejudiced him and implied his guilt. We disagree on all these points.

District courts have discretion in shaping the remedies for Brady and Giglio violations. See Struckman, 611 F.3d at 577. Remedies for such violations, however, “should be tailored to the injury suffered from the constitutional violation and should not unnecessarily infringe on competing interests.” Id. (quoting United States v. Morrison, 449 U.S. 361, 364 (1981)). Because dismissing an indictment is a “drastic step,” it is “disfavored.” Id. (internal citations omitted). But, where a defendant was prejudiced by the late disclosure and there was flagrant prosecutorial misconduct, dismissal with preju-dice may be an appropriate remedy. Id.


At the outset, none of the issues regarding Cho were rel-evant to Garrison—Garrison was not a party to the joint de-fense agreement and Cho did not testify at Garrison’s trial. Indeed, during the hearing on Garrison’s motion for acquittal and a new trial, his counsel said that the issues regarding Cho “really had nothing to do with Mr. Garrison.” In this way, Yoon and Lim were differently situated from Garrison. Nguyen was also differently situated because, unlike Gar-rison but like Yoon and Lim, he was a pharmacist, not an insider at the Clinic. It was not inconsistent for the district court to dismiss the charges against Yoon, Lim, and Nguyen, while leaving the charges against Garrison in place.

There is no dispute here that the government failed to comply with the requirements of Brady and Giglio when it disclosed evidence late regarding Santiago and Shishalovsky falsifying records for Harris, and failed to timely disclose the side deal with Shishalovsky. All of the late disclosed evidence, however, was given to the jury. And the district court gave a jury instruction telling the jury that the gov-ernment had disclosed evidence late and that the jury could draw adverse inferences from that late disclosure. From the instruction it is clear that the jury was empowered to exoner-ate Garrison because of the government’s misconduct, if it chose to do so. But the jury instead found Garrison guilty. In light of the extensive evidence against Garrison, we cannot conclude that any prejudice stemmed from the late disclo-sure. See United States v. Howell, 231 F.3d 615, 627 (9th Cir. 2000) (finding no prejudice where the defendant was able to effectively cross-examine witnesses about the evidence the prosecutor disclosed only during trial and there was signifi-cant other evidence of the defendant’s guilt).

Finally, Yoon’s and Lim’s sudden absences from trial and the dismissal of charges against Nguyen, were not prejudi-cial to Garrison. In instances where defendants depart from a multi-defendant trial late in the trial, we have stated that “the best course may be simply to tell the jury that the defen-dant is no longer part of the case.” United States v. Bussell, 414 F.3d 1048, 1053 (9th Cir. 2005). This is exactly what was done here. The district court also instructed the jury not to speculate as to the reason for Yoon’s and Lim’s absences and the dismissal of charges against Nguyen, and specifically highlighted that the absences and the dismissal of charges in no way weighed toward a finding of guilt as to the remaining codefendants. There is an “almost invariable assumption of the law that jurors follow their instructions,” Richardson v. Marsh, 481 U.S. 200, 206 (1987), and Garrison has offered no reason to depart from this assumption here.

We conclude that there was sufficient evidence to sustain Garrison’s conviction. We also conclude that there is no error here in the remedies the trial court crafted for the govern-ment’s late disclosures or in the jury instructions the court gave regarding the abrupt departure of Yoon and Lim, and the dismissal of some charges against Nguyen.

AFFIRMED.


IN RE BRADLEY WESTON TAGGART, Debtor,SHELLEY A. LORENZEN, Executor of Estate of Stuart Brown; TERRY W. EMMERT; KEITH JEHNKE; SHERWOOD PARK BUSINESS CENTER, LLC, Appellants,v.BRADLEY WESTON TAGGART, Appellee.

No. 16-35402United States Court of Appeals for the Ninth CircuitD.C. No. 3:12-cv-00236-MOAppeal from the United States District Court for the District of Oregon Michael W. Mosman, Chief District Judge, Presiding

IN RE BRADLEY WESTON TAGGART, Debtor,BRADLEY WESTON TAGGART, Appellant,v.SHELLEY A. LORENZEN, Executor of Estate of Stuart Brown; TERRY W. EMMERT; KEITH JEHNKE; SHERWOOD PARK BUSINESS CENTER, LLC, Appellees.

No. 16-60032United States Court of Appeals for the Ninth CircuitBAP No. 15-1158

IN RE BRADLEY WESTON TAGGART, Debtor,BRADLEY WESTON TAGGART, Appellant,v.TERRY W. EMMERT; KEITH JEHNKE; SHERWOOD PARK BUSINESS CENTER, LLC; SHELLEY A. LORENZEN, Executor of Estate of Stuart Brown, Appellees.

No. 16-60033


United States Court of Appeals for the Ninth CircuitBAP No. 15-1119

IN RE BRADLEY WESTON TAGGART, Debtor,SHELLEY A. LORENZEN, Executor of the Estate of Stuart Brown, Appellant,v.BRADLEY WESTON TAGGART, Appellee.


IN RE BRADLEY WESTON TAGGART, Debtor,TERRY W. EMMERT; KEITH JEHNKE; SHERWOOD PARK BUSINESS CENTER, LLC, Appellants,v.BRADLEY WESTON TAGGART, Appellee.


IN RE BRADLEY WESTON TAGGART, Debtor,SHELLEY A. LORENZEN, Executor of Estate of Stuart Brown, Appellant,v.BRADLEY WESTON TAGGART, Appellee.


IN RE BRADLEY WESTON TAGGART, Debtor,TERRY W. EMMERT; KEITH JEHNKE; SHERWOOD PARK BUSINESS CENTER, LLC, Appellants,v.

BRADLEY WESTON TAGGART, Appellee.

No. 16-60043United States Court of Appeals for the Ninth CircuitBAP No. 15-1158Appeal from the Ninth Circuit Bankruptcy Appellate PanelKirscher, Jury, and Faris, Bankruptcy Judges, PresidingArgued and Submitted October 3, 2017Portland, OregonFiled April 23, 2018Before: Edward Leavy, Richard A. Paez,and Carlos T. Bea, Circuit Judges.Opinion by Judge Bea

COUNSEL

John Martin Berman (argued) and Damon J. Petticord, Tigard, Oregon, for Bradley Weston Taggart.

Janet M. Schroer (argued), Hart Wagner LLP, Portland, Oregon; James Ray Streinz, Streinz Law Office, Portland, Oregon, for Shelley Lorenzen.

Hollis Keith McMilan (argued), Hollis K. McMilan P.C., Portland, Oregon, for Terry W. Emmert, Keith Jehnke, and Sherwood Park Business Center LLC.

OPINIONBEA, Circuit Judge:

This case arises out of a complex set of bankruptcy pro-ceedings. Appellant Bradley Taggart was a real estate devel-oper who owned a 25% interest in Sherwood Park Business Center, LLC (“SPBC”). Appellees and Cross-Appellants Ter-ry Emmert and Keith Jehnke also each owned a 25% interest in SPBC. In 2007, Taggart allegedly transferred his share of SBPC to his attorney in this action, John Berman.

When Emmert and Jehnke learned that Taggart had trans-ferred his interest in SPBC to Berman, they sued Taggart and Berman in Oregon state court, asserting that the transfer breached SPBC’s operating agreement because Taggart did not provide the notice required to allow Emmert and Jehnke to exercise their right of first refusal to buy Taggart’s interest at the agreed upon price. The state court action also sought attorneys’ fees pursuant to the operating agreement. Taggart filed an answer to the state court action, sought to dismiss the action, and filed a counterclaim for attorneys’ fees pursuant to the operating agreement.

On November 4, 2009, shortly before trial in the state court action, Taggart filed a voluntary Chapter 7 Bankruptcy petition (the “Petition”). The state court action was stayed pending the resolution of Taggart’s bankruptcy Petition. On February 23, 2010, Taggart received his discharge in the bankruptcy proceedings.

After the discharge, Emmert and Jehnke, represented by attorney Stuart Brown, continued the state court action


against Berman and Taggart. As part of the litigation, Brown served Taggart with a subpoena for a deposition. Taggart, represented by Berman, moved for a protective order that would allow him not to appear at the deposition, but the state trial court never ruled on the motion. Nonetheless, Taggart appeared for his deposition.

Prior to trial, Berman moved on Taggart’s behalf to dis-miss the claims against Taggart in light of the bankruptcy discharge. The state court denied the motion, finding that Taggart was a necessary party to Emmert and Jehnke’s claims seeking to expel Taggart from SPBC, but the parties agreed that no monetary judgment would be awarded against Tag-gart. Taggart did not appear at or participate in the trial, but Berman orally renewed his motion to dismiss on Taggart’s behalf at the close of evidence. The state court once again denied the motion.

After trial, the state court issued findings of fact and con-clusions of law that unwound the transfer of Taggart’s inter-est in SPBC to Berman and expelled Taggart from SPBC. Brown submitted a proposed judgment, to which Berman objected. Taggart appeared at the hearing for entry of the judgment and provided testimony and argument.

Following the hearing, the state court entered a judgment that allowed any party to petition for attorneys’ fees. The litigation regarding attorneys’ fees spawned a complex, inter-related web of litigation in both state and federal court.

First, Brown filed a petition for attorneys’ fees in state court on behalf of SPBC, Emmert, and Jehnke. Brown’s fee petition sought to recover fees against both Berman and Tag-gart, but limited the request for fees against Taggart to those fees that had been incurred after the date of Taggart’s bank-ruptcy discharge. In the fee petition, Brown alerted the state court to the existence of Taggart’s bankruptcy discharge and argued that Taggart could still be held liable for attorneys’ fees incurred after Taggart’s discharge because Taggart had “returned to the fray.” That is, SPBC, Emmert, and Jehnke claimed Taggart had willingly engaged in opposing them in the state court action after Taggart obtained his bankruptcy discharge. Taggart opposed Brown’s petition for attorneys’ fees, arguing his bankruptcy discharge barred any claim for attorneys’ fees, whether they were incurred before or after his discharge in bankruptcy.

While the attorneys’ fee petition was pending in state court, Taggart moved the bankruptcy court to reopen his bankruptcy proceeding. The day the bankruptcy court re-opened Taggart’s bankruptcy proceeding, Taggart filed a motion seeking to hold Brown, Jehnke, Emmert, and SPBC (collectively, the “Creditors”) in contempt for violating the discharge by seeking an award of attorneys’ fees against him in the state court action.

Meanwhile, the state trial court issued a ruling awarding attorneys’ fees to SPBC, but not Jehnke and Emmert. The state court ruled that Taggart could be held liable for attor-neys’ fees that were incurred after his bankruptcy discharge

because he had “returned to the fray.”1 Taggart appealed the state court’s determination to the Oregon Court of Appeals. See Sherwood Park Bus. Ctr., LLC v. Taggart, 341 P.3d 96 (Or. Ct. App. 2014).

Subsequently, the bankruptcy court denied Taggart’s mo-tion for contempt, finding that the state court had correctly decided the issue: whether Taggart had indeed “returned to the fray.” Taggart appealed the bankruptcy court’s ruling to the district court. The district court reversed, finding that Taggart’s actions were insufficient to constitute a “return to the fray” and, as a result, the discharge injunction barred the attorneys’ fee claim. The district court remanded to the bankruptcy court for a determination of whether the Credi-tors “knowingly violated the discharge injunction in seeking attorney fees.”2

On remand, the bankruptcy court found the Creditors had knowingly violated the discharge injunction by seeking at-torneys’ fees in the state action and entered an order hold-ing them in contempt. Following further proceedings, the bankruptcy court awarded sanctions against SPBC, Emmert, Jehnke, and Brown’s estate,3 pursuant to the court’s contempt ruling.

The Creditors appealed the bankruptcy court’s contempt ruling to the Bankruptcy Appellate Panel (“BAP”). On ap-peal, the BAP reversed the bankruptcy court’s finding of con-tempt. The BAP reasoned that the Creditors could not be held in contempt unless they “knowingly” violated the discharge injunction. Because the BAP found that the Creditors had a good faith belief that the discharge injunction did not apply to their attorneys’ fee claim, it concluded that they had not “knowingly” violated the discharge injunction.

In the meantime, the Oregon Court of Appeals reversed the state trial court’s ruling regarding attorneys’ fees. See Taggart, 341 P.3d at 102–04. In line with the district court, the Oregon Court of Appeals held that Taggart’s actions were not sufficiently affirmative or voluntary to constitute a “re-turn to the fray.” Id. As a result, the court concluded that the discharge injunction barred the recovery of attorneys’ fees. Id.

Ultimately, the Creditors were barred from pursuing attor-neys’ fees against Taggart by the rulings of both the district court and the Oregon Court of Appeals. Additionally, due to the BAP’s ruling, the Creditors were not liable for sanctions for knowingly violating the discharge injunction by seeking attorneys’ fees against Taggart in the state court litigation.

1. Whether Taggart had “returned to the fray” was significant be-cause if a debtor “returns to the fray” by engaging in post-bankruptcy petition litigation, a creditor may seek an attorneys’ fee award if the new litigation was not within the “fair contemplation of the parties” prior to the bankruptcy petition. See In re Castellino Villas, A. K. F. LLC, 836 F.3d 1028, 1034–37 (9th Cir. 2016).

2. Emmert, Brown, Jehnke, and SPBC filed a notice of appeal of the district court’s decision. This court dismissed the appeal because the district court’s ruling was not a final order.

3. Brown passed away in 2013. Shelley Lorenzen represents Brown in this litigation as the executor of his estate.


Taggart filed a notice of appeal challenging the BAP’s de-cision to reverse the bankruptcy court’s contempt findings against the Creditors. The Creditors filed a notice of cross-appeal challenging the district court’s ruling that Taggart had not returned to the fray in the state court litigation.

I

We begin with Taggart’s appeal, in which he argues that the BAP committed reversible error when it held that the Creditors could not be held in contempt because they did not knowingly violate the discharge injunction. A discharge un-der Chapter 7 of the bankruptcy code “discharges the debtor from all debts that arose before the date of the” bankruptcy petition. 11 U.S.C. § 727(b). Once issued, the discharge “op-erates as an injunction against the commencement or con-tinuation of an action . . . to collect, recover or offset any such debt as a personal liability of the debtor.” 11 U.S.C. § 524(a)(2). A bankruptcy court may enforce the discharge injunc-tion by holding a party in contempt for knowingly violating the discharge. In re Zilog, Inc., 450 F.3d 996, 1007 (9th Cir. 2006).

In this case, after the district court concluded that Tag-gart had not “returned to the fray,” it remanded the case to the bankruptcy court for a determination of whether the Creditors should be held in contempt. The bankruptcy court determined that the Creditors were aware of the discharge order, but proceeded with their efforts to recover attorneys’ fees from Taggart. The bankruptcy court concluded that it was irrelevant whether the Creditors held a subjective good faith belief that the discharge injunction did not apply to their claim. As a result, the bankruptcy court held that the Credi-tors had committed a knowing violation of the discharge in-junction and it held them in contempt.

On appeal, the BAP reversed. The BAP concluded that the Creditors had a subjective good faith belief that their claim was exempt from the discharge injunction. In light of this good faith belief, the BAP held that the Creditors did not “knowingly” violate the discharge injunction, even though an actual violation had occurred.

We review the BAP’s decisions de novo. In re Filtercorp, Inc., 163 F.3d 570, 576 (9th Cir. 1998). The bankruptcy court’s decision to impose contempt sanctions is reviewed for an abuse of discretion. In re Dyer, 322 F.3d 1178, 1191 (9th Cir. 2003). A bankruptcy court abuses its discretion if its decision is based on an incorrect legal rule, or if its “ap-plication of the correct legal standard was (1) ‘illogical,’ (2) ‘implausible,’ or (3) without ‘support in inferences that may be drawn from the facts in the record.’” United States v. Hink-son, 585 F.3d 1247, 1262 (9th Cir. 2009) (quoting Anderson v. City of Bessemer, 470 U.S. 564, 577 (1985)).

“The standard for finding a party in civil contempt is well settled: The moving party has the burden of showing by clear and convincing evidence that the contemnors violated a spe-cific and definite order of the court. The burden then shifts to the contemnors to demonstrate why they were unable to

comply.” In re Bennett, 298 F.3d 1059, 1069 (9th Cir. 2002) (quoting F.T.C. v. Affordable Media, 179 F.3d 1228, 1239 (9th Cir.1999)). As noted above, a bankruptcy court may hold a party in contempt for knowingly violating the discharge in-junction. Zilog, 450 F.3d at 1007. We have adopted a two-part test for determining the propriety of a contempt sanction in the context of a discharge injunction: “[T]o justify sanctions, the movant must prove that the creditor (1) knew the dis-charge injunction was applicable and (2) intended the actions which violated the injunction.” Bennett, 298 F.3d at 1069.

Only the first prong of the test is at issue here. To satisfy the first prong, knowledge of the applicability of the injunc-tion must be proved as a matter of fact and may not be in-ferred simply because the creditor knew of the bankruptcy proceeding. Zilog, 450 F.3d at 1007–08; see also Dyer, 322 F.3d at 1191–92 (rejecting an attempt to infer knowledge of the automatic stay based on knowledge of the bankruptcy proceedings in the context of a contempt ruling).4 Addition-ally, the creditor’s good faith belief that the discharge injunc-tion does not apply to the creditor’s claim precludes a find-ing of contempt, even if the creditor’s belief is unreasonable. Zilog, 450 F.3d at 1009 n.14 (“To the extent that the deficient notices [from the bankruptcy court and opposing counsel] led the [creditors] to believe, even unreasonably, that the dis-charge injunction did not apply to their claims because they were not affected by the bankruptcy, this would preclude a finding of willfulness.”).

In this case, the bankruptcy court abused its discretion by concluding that the Creditors knowingly violated the dis-charge injunction. Specifically, the bankruptcy court abused its discretion by applying an incorrect rule of law. See Hink-son, 585 F.3d at 1262. The bankruptcy court held that a good faith belief that the discharge injunction was inapplicable to the Creditors’ claims was irrelevant for purposes of determin-ing whether there was a “knowing” violation of the discharge injunction. This holding conflicts with Zilog, where we stated that even an unreasonable belief that the discharge injunction did not apply to a creditor’s claims would preclude a finding of contempt. 450 F.3d at 1009 n.14.

It is true, as Taggart points out, that language from our prior opinions in Bennett and Dyer appears to be somewhat in tension with Zilog.5 However, neither Bennett nor Dyer held that a creditor’s subjective good faith belief that the dis-

4. Although Dyer dealt with a violation of the automatic stay, rath-er than a violation of the discharge injunction, the sanctions at issue were not imposed under the bankruptcy code provision that specifi-cally allows sanctions for a violation of the automatic stay, 11 U.S.C. § 362(h). Dyer, 322 F.3d at 1189. Rather, sanctions were imposed under the bankruptcy court’s 11 U.S.C. § 105(a) contempt authority, thereby invoking the standard that applies when there is a violation of the dis-charge injunction. Id.

5. Taggart specifically highlights language from Dyer, which states: “In determining whether the contemnor violated the stay, the focus ‘is not on the subjective beliefs or intent of the contemnors in complying with the order, but whether in fact their conduct complied with the order at issue.’” 322 F.3d at 1191 (quoting In re Hardy, 97 F.3d 1384, 1390 (11th Cir. 1996)).


charge injunction is inapplicable is irrelevant to the contempt analysis. In fact, Bennett expressly states that the creditor must know that the discharge injunction is “applicable” to the creditor’s claims, and Dyer cited that holding with approval. Bennett, 298 F.3d at 1069; Dyer, 322 F.3d at 1192. Regard-less, Zilog’s statement of the law is clear, directly addresses the question at issue in here, and is binding on this court.

In this case, as the BAP found, the Creditors possessed a good faith belief that the discharge injunction did not apply to their claims based on their contention that Taggart had “re-turned to the fray,” and Taggart does not contend otherwise. Much like the creditors in Zilog relied on statements by the debtor’s counsel and the bankruptcy court in concluding that their claims were not impacted by the discharge injunction, the Creditors relied on the state court’s judgment that the discharge injunction did not apply to their claim for post-petition attorneys’ fees. Although the Creditors—like the creditors in Zilog—were ultimately incorrect, their good faith belief, even if unreasonable, insulated them from a finding of contempt. Zilog, 450 F.3d at 1009 n.14. As a result, the BAP did not err when it reversed the contempt sanctions entered by the bankruptcy court against the Creditors.

II

Because we have determined that the Creditors cannot be held in contempt for any alleged violation of the discharge injunction, we need not reach the arguments raised in the Creditors’ cross-appeal regarding the district court’s holding that the Creditors violated the discharge injunction by seek-ing an attorneys’ fee award in the state court litigation.6 Even if the Creditors did violate the discharge injunction— and we express no opinion as to whether they did or did not—they cannot be held in contempt for that alleged violation. As dis-cussed above, they acted pursuant to their good faith belief that, due to Taggart’s “return to the fray,” the discharge in-junction did not apply to their claims. As a result, we decline to reach the issues raised by the Creditors’ Cross-Appeal.

III

In light of the above, we AFFIRM the BAP’s opinion re-versing the bankruptcy court’s order entering contempt sanc-tions against the Creditors.

6. After the district court’s decision in this case, but before the par-ties completed their briefing in our court, another Ninth Circuit panel issued an opinion in In re Castellino Villas, A. K. F. LLC, 836 F.3d 1028, 1034 (9th Cir. 2016). Lorenzen’s briefing to this court recog-nized the Castellino Villas opinion and noted that, in Lorenzen’s view, Castellino Villas commands resolution of whether Creditors violated the discharge against the Creditors. At the time of briefing in this case, Castellino Villas had been decided, but could have been reheard by an en banc panel of this court or overturned or modified by the Supreme Court. Lorenzen requested that we deem her cross-appeal withdrawn if Castellino Villas was not overturned or modified. Because Castellino Villas has neither been overturned nor modified, we grant Lorenzen’s request to withdraw her cross-appeal. Therefore, we do not address it.


COLONY COVE PROPERTIES, LLC, a Delaware limited liability company, Plaintiff-Appellee,v.CITY OF CARSON, a municipal corporation; CITY OF CARSON MOBILEHOME PARK RENTAL REVIEW BOARD, a public administrative body, Defendants-Appellants.

No. 16-56255United States Court of Appeals for the Ninth CircuitD.C. No. 2:14-cv-03242-PSG-PJWAppeal from the United States District Court for the Central District of California Philip S. Gutierrez, District Judge, Presiding Argued and Submitted February 9, 2018 Pasadena, California Filed April 23, 2018 Before: Susan P. Graber and Andrew D. Hurwitz, Circuit Judges, and Edward R. Korman,*District Judge. Opinion by Judge Hurwitz

*The Honorable Edward R. Korman, United States Dis-trict Judge for the Eastern District of New York, sitting by designation.

COUNSELMatthew Dwight Zinn (argued) and Andrew W. Schwartz,

Shute Mihaly & Weinberger LLP, San Francisco, California; Jeff M. Malawy, Stephen R. Onstot, June S. Ailin, William W. Wynder, and Sunny K. Soltani, Aleshire & Synder LLP, Irvine, California; for Defendants-Appellants.

Anton Matlitsky (argued), O’Melveny & Myers LLP, New York, New York; Adam P. Wiley, Thomas W. Casparian, and Richard H. Close, Gilchrist & Ruiter PC, Santa Monica, California; Daniel J. Tully, Dimitri Portnoi, and Matthew W. Close, O’Melveny & Myers LLP, Los Angeles, California; for Plaintiff-Appellee.

Christine Van Aken, Chief of Appellate Litigation; Dennis J. Herrera, City Attorney; City Attorney’s Office, San Francisco, California; for Amici Curiae League of California Cities and California Chapter of the American Planning Association.

Navneet Grewal and Sue Himmelrich, Western Center on Law and Poverty, Los Angeles, California; Shirley Gibson, Legal Aid Society of San Mateo County, Redwood City, California; for Amici Curiae California Rural Legal Assistance Inc., California Coalition for Rural Housing, Community Legal Services of East Palo Alto, The Golden


State Manufactured-Home Owners League Inc., Housing California, Legal Aid Foundation of Los Angeles, Legal Aid Society of San Mateo County, National Housing Law Project, Public Advocates, Public Counsel Law Center, The Public Interest Law Project, Tenants Together, Western Center on Law and Poverty, and Theresa L. Forsythe.

OPINIONHURWITZ, Circuit Judge:

The Takings Clause of the Fifth Amendment, made ap-plicable to the States by the Due Process Clause of the Four-teenth Amendment, provides that “private property” may not “be taken for public use, without just compensation.” The is-sue in this case is whether a California city engaged in an un-constitutional taking when it approved a lower rent increase for a mobile home park than the park had requested.

After a jury trial, the district court entered a judgment finding an unconstitutional taking and awarding the park more than $3 million in damages. We reverse and instruct that the district court enter judgment in favor of the City.

I. BACKGROUND

A. The Rent Control Ordinance In 1979, the City of Carson adopted a “Mobile Home

Space Rent Control Ordinance,” establishing a seven-mem-ber Rent Review Board to “hear and determine applications of property owners for rent adjustments.” The ordinance directs the Board to grant property owners a “fair, just and reasonable” rent increase, one that both “protects Homeown-ers from excessive rent increases and allows a fair return on investment to the Park Owner.”

To balance these competing concerns, the ordinance lists several factors to be considered when evaluating a proposed rent increase, including changes in the Consumer Price In-dex (“CPI”), rent at comparable parks, capital improvements conducted since the last increase, and changes in operating and maintenance expenses. The listed factors, however, are neither exclusive nor dispositive.

To assist the Board, the City Council adopted Implemen-tation Guidelines in 1998. The original Guidelines permitted, but did not require, the Board to conduct a “Gross Profits Maintenance Analysis” (“GPM Analysis”) in evaluating a rent increase application. A GPM Analysis “compares the gross profit level expected from the last rent increase granted to the park prior to the current application . . . to the gross profit shown by the current application.” The Analysis “provide[s] an estimate of whether a park is earning the profit estimated to provide a fair return, as established by the im-mediately prior rent increase, with some adjustment to reflect any increase in the CPI.” Acquisition debt service can be a relevant expense under the GPM Analysis “if the purchase price paid was reasonable in light of the rents allowed under the Ordinance and involved prudent and customary financ-ing practices.” But the Guidelines expressly state that a GPM

Analysis “is not intended to create any entitlement to any particular rent increase.”

In October 2006, the City amended the Implementation Guidelines to permit the Board also to conduct a “Mainte-nance of Net Operating Income Analysis” (“MNOI Analy-sis”) when considering applications for rent increases. The MNOI Analysis “compares the net operating income (NOI) level expected from the last rent increase granted to a park owner and prior to any pending rent increase application . . . to the NOI demonstrated in any pending rent increase ap-plication.” “[C]hanges in debt service expenses are not to be considered in the” MNOI Analysis.

B. Colony’s Purchase of the Mobile Home Park and Requested Rent Increases

On April 4, 2006, Colony Cove Properties, LLC (“Col-ony”) purchased Colony Cove Mobile Estates (“the Prop-erty”), a mobile home park in Carson, for $23,050,000; $18,000,000 of the purchase price was obtained through a loan. The annual debt service on that loan—$1,224,681— far exceeded the prior owner’s annual profit of $718,240.

At the time of purchase, the Implementation Guidelines provided only for the GPM Analysis. Colony first filed an application for a rent increase in 2007, after the Guidelines were revised to also allow an MNOI Analysis. That applica-tion sought a rent increase of $618.05 per space; it was later amended to seek only $200 per space. The Board’s GPM Analysis suggested a rent increase of $200.93 per space, driv-en largely by the post-acquisition debt service. The Board’s MNOI Analysis, which did not account for the debt service, suggested a rent increase of only $36.74. The Board adopted the MNOI Analysis and approved the $36.74 increase. In 2008, Colony requested a $342.46 rent increase. The Board again conducted both a GPM and an MNOI Analysis, ad-opted the latter, and granted an increase of $25.02.

C. Colony’s Previous Litigation

In 2008, Colony sued the City, asserting facial and as-applied takings and due process claims with respect to the Board’s 2007 decision. See Colony Cove Props., LLC v. City of Carson, 640 F.3d 948, 953–54 (9th Cir. 2011). The district court dismissed the facial attack as time-barred and the as-applied takings claim as unripe; we affirmed. Id. at 956–57, 959.

The same day it appealed the first district court order, Colony also “filed a petition for writ of administrative man-date seeking review of the Board’s 2008 determination of its September 2007 rent increase applications” in state court; Colony later filed a similar second petition concerning the 2008 application. See Colony Cove Props., LLC v. City of Carson, 163 Cal. Rptr. 3d 499, 515 (Ct. App. 2013). The state trial court denied Colony’s petitions, and the California Court of Appeal affirmed, holding that state law allowed use of MNOI Analysis and that the Board’s failure to take debt service into account did not deprive Colony of a fair rate of


return. Id. at 521–24, 530. The California Supreme Court denied review.1

D. The Current Litigation

Having exhausted its state-law claims,2 Colony returned to federal court, alleging that the 2007 and 2008 Board deci-sions were an unconstitutional taking and violated Colony’s substantive due process rights. The district court dismissed all of Colony’s claims except for an as-applied regulatory takings claim premised on Penn Central Transportation Co. v. City of New York, 438 U.S. 104 (1978).

Over the City’s objection, the district court allowed a jury trial. At trial, Colony presented expert testimony that the Board’s use of the MNOI Analysis and the consequent fail-ure to take debt service into account in setting the 2007 and 2008 rents would cause Colony to lose rental income of ap-proximately $5.7 million. Colony’s owner, James Goldstein, also testified that, when he bought the Property, he expected the Board to consider debt service in future rent increase de-terminations, and he would not have paid $23 million for the park absent that expectation.

The City moved for judgment as a matter of law after both the close of Colony’s case and the close of evidence. After the district court denied the motions, the jury found that the Board’s 2007 and 2008 decisions were regulatory takings and awarded Colony $3,336,056 in damages. The City then filed a renewed Federal Rule of Civil Procedure 50(b) motion for judgment. The court denied the motion and awarded Colony prejudgment interest, attorneys’ fees, and costs, entering a final judgment of $7,464,718.41.3

The City timely appealed. We have jurisdiction under 28 U.S.C. § 1291, and we review de novo the district court’s denial of a motion for judgment as a matter of law. United States ex rel. Hopper v. Anton, 91 F.3d 1261, 1268 (9th Cir. 1996). In doing so, “[w]e must view the evidence in the light most favorable to the nonmoving party . . . and draw all rea-sonable inferences in that party’s favor.” Ostad v. Or. Health Scis. Univ., 327 F.3d 876, 881 (9th Cir. 2003). “Judgment as a matter of law is proper when the evidence permits only one

1. The state trial court struck Colony’s England reservation of its federal takings claims, but the Court of Appeal reinstated the reserva-tion. Colony Cove Props., 163 Cal. Rptr. 3d at 529–30; see England v. La. State Bd. Of Exam’rs, 375 U.S. 411, 421 (1964).

2. A “writ of administrative mandate” is a judicial avenue for relief from rent control decisions created by the California Supreme Court. See Kavanau v. Santa Monica Rent Control Bd., 941 P.2d 851 (Cal. 1997). If the writ is granted, the property owner may seek a future rent adjustment “that takes into consideration past confiscatory rents.” Id. at 866. “[T]he Kavanau adjustment process” satisfies the exhaustion requirements of Williamson County Regional Planning Commission v. Hamilton Bank of Johnson City, 473 U.S. 172, 195 (1985). See Equity Lifestyle Props., Inc. v. Cty. of San Luis Obispo, 548 F.3d 1184, 1192 (9th Cir. 2008).

3. In the final judgment, the district court noted its agreement with the jury’s verdict: “Having independently weighed and considered the evidence, the Court agrees with the jury’s finding that a taking oc-curred, as well as the amount of damages that the jury awarded . . . .”

reasonable conclusion and the conclusion is contrary to that reached by the jury.” Id.

II. DISCUSSION

“The Takings Clause of the Fifth Amendment provides that private property shall not ‘be taken for public use, with-out just compensation.’” Murr v. Wisconsin, 137 S. Ct. 1933, 1942 (2017). Although the paradigm of an unconstitutional taking is the direct appropriation of property, the Supreme Court has long acknowledged that “if regulation goes too far it will be recognized as a taking.” Penn. Coal Co. v. Mahon, 260 U.S. 393, 415 (1922).

“[T]he Court for the most part has refrained from elabo-rating . . . definitive rules” about when regulation goes so far as to become a taking. Murr, 137 S. Ct. at 1942. Judicial decisions considering regulatory takings claims are typically “characterized by essentially ad hoc, factual inquiries, de-signed to allow careful examination and weighing of all the relevant circumstances.” Tahoe-Sierra Pres. Council, Inc. v. Tahoe Reg’l Planning Agency, 535 U.S. 302, 322 (2002) (internal quotation marks and citations omitted). The goal is to determine whether regulatory actions “are functionally equivalent to the classic taking in which government directly appropriates private property.” MHC Fin. Ltd. P’ship v. City of San Rafael, 714 sF.3d 1118, 1127 (9th Cir. 2013) (quoting Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 539 (2005)).

The Penn Central factors ground our regulatory takings analysis. Penn Central instructs us to consider “[1] the regu-lation’s economic impact on the claimant, [2] the extent to which the regulation interferes with distinct investment-backed expectations, and [3] the character of the government action.” MHC Fin., 714 F.3d at 1127. The question is whether Colony presented sufficient evidence on these factors to al-low a reasonable finder of fact to conclude that the Board’s denials of Colony’s requested rate increases were the func-tional equivalent of the direct appropriation of the Property. We address each factor in turn.

A. Economic Impact

In considering the economic impact of an alleged taking, we “compare the value that has been taken from the prop-erty with the value that remains in the property.” Keystone Bituminous Coal Ass’n v. DeBenedictis, 480 U.S. 470, 497 (1987). Penn Central stresses that, “[i]n deciding whether a particular governmental action has effected a taking, this Court focuses rather both on the character of the action and on the nature and extent of the interference with rights in the parcel as a whole.” 438 U.S. at 130–31. If “an owner possesses a full ‘bundle’ of property rights, the destruction of one ‘strand’ of the bundle is not a taking, because the ag-gregate must be viewed in its entirety.” Andrus v. Allard, 444 U.S. 51, 65–66 (1979).

The jury concluded that Colony would have received approximately $3.3 million in additional income over an 8-year period if the Board had adopted the alternative GPM


Analysis and factored debt service into the 2007 and 2008 rent increases. But the mere loss of some income because of regulation does not itself establish a taking. Rather, economic impact is determined by comparing the total value of the af-fected property before and after the government action. See MHC Fin., 714 F.3d at 1127. Projected income streams can contribute to a method for determining the post-deprivation value of property, but the severity of the loss can be deter-mined only by comparing the post-deprivation value to pre-deprivation value. Id.

Not every diminution in property value caused by a gov-ernment regulation rises to the level of an unconstitutional taking. “Government hardly could go on if to some extent values incident to property could not be diminished without paying for every such change in the general law.” Penn. Coal Co., 260 U.S. at 413. Although no litmus test determines whether a taking occurred, we start from the premise that the Penn Central factors seek “to identify regulatory actions that are functionally equivalent to the classic taking in which gov-ernment directly appropriates private property or ousts the owner from his domain.” See Lingle, 544 U.S. at 539. Thus, we have observed that diminution in property value because of governmental regulation ranging from 75% to 92.5% does not constitute a taking. MHC Fin., 714 F.3d at 1127–28. The Federal Circuit has noted that it is “aware of no case in which a court has found a taking where diminution in value was less than 50 percent.” CCA Assocs. v. United States, 667 F.3d 1239, 1246 (Fed. Cir. 2011). Nor are we.

There was no evidence before the district court allowing a comparison of the pre-deprivation and post-deprivation values of the Property. Colony purchased the Property for approximately $23 million, and we assume that this number establishes the pre-deprivation value. But Colony presented no evidence, expert or otherwise, about the Property’s post-deprivation value. Rather, the only evidence concerned the amount of rent claimed to be lost over an 8-year period be-cause of the Board’s refusals to approve higher increases. Even assuming that the lost rental income asserted by Colo-ny—$5.7 million—equates to diminution in property value, that reduction would only be 24.8% of the assumed $23 mil-lion pre-deprivation value of the Property, far too small to establish a regulatory taking.4

Colony argues that post-deprivation “sale value is not the only permissible basis to consider economic loss.” We agree—for example, the discounted future cash flows pro-duced by an income-producing property can provide an appropriate valuation methodology. See, e.g., Cienega Gar-dens v. United States, 503 F.3d 1266, 1282 (Fed. Cir. 2007) (determining economic impact by “compar[ing] the lost net income due to the restriction (discounted to present value at the date the restriction was imposed) with the total net in-come without the restriction over the entire useful life of the

4. The jury, whose award Colony does not challenge on appeal, found that the lost rental income was only $3.3 million, which would equate to a 14.3% reduction in the Property’s value.

property (again discounted to present value)”). But Colony presented no evidence, by virtue of analyzing diminished in-come streams or otherwise, of the post-deprivation value of the Property.

Colony also asserts that the Board took its property be-cause it suffered annual operating losses in 2007 and 2008. But those losses resulted directly from Colony’s decision to incur a large debt when purchasing the property and cannot alone establish a taking. Even if Colony’s decision to borrow was commercially reasonable, it serves only to establish that the purchase price of $23 million is the pre-deprivation value. The post-deprivation value of the Property cannot be dictated by debt service; otherwise, two identical mobile home prop-erties would have different values, depending on how their owners chose to finance the acquisitions. See Colony Cove Props., 163 Cal. Rptr. 3d at 521 (praising the MNOI Analysis “for its fairness and ease of administration” in contrast to the GPM Analysis, which can be “problematic to administer, be-cause an owner’s equity can be greatly affected by individual differences in methods and costs of financing” (internal quo-tation marks omitted)).

Thus, on the first Penn Central prong, Colony did not present sufficient evidence to create a triable question of fact as to the economic impact caused by the City’s denial of larger rent increases. We therefore turn to the second prong.

B. Distinct Investment-Backed Expectations

Colony argues that, when it acquired the Property, it had a distinct investment-backed expectation that the Board would use the GPM Analysis and account for debt service in deter-mining future rent increases. It is this expectation, Colony argues, with which the City interfered, and the jury therefore properly awarded Colony the rent increases it expected. Even accepting Colony’s argument that we should focus only on the lost rental income, rather than the post-deprivation value of the Property as a whole,5 the argument fails.

To form the basis for a taking claim, a purported distinct investment-backed expectation must be objectively reason-able. See CCA Assocs., 667 F.3d at 1247; see also Lucas v. S.C. Coastal Council, 505 U.S. 1003, 1035 (1992) (Ken-nedy, J., concurring in the judgment) (noting that invest-ment-backed “expectations protected by the Constitution are based on objective rules and customs that can be understood as reasonable by all parties involved”); Chancellor Manor v. United States, 331 F.3d 891, 907 (Fed. Cir. 2003) (hold-ing that courts must use “an objective analysis to determine the reasonable investment-backed expectations of the Own-ers”). Colony claims that, when it purchased the Property, it reasonably expected that debt service would be recognized in future rent increases because (1) the existing Implemen-tation Guidelines then provided only for a GPM Analysis; (2) the Board had always recognized debt service as a factor

5. Cf. Penn Cent., 438 U.S. at 130 n.27 (stating that in determin-ing whether a regulatory taking occurred, the government’s action is measured against “the parcel as a whole”).


when granting rent increases on another mobile home park owned by Goldstein; and (3) two California Court of Ap-peal opinions—Palacio de Anza v. Palm Springs Rent Review Commission, 257 Cal. Rptr. 121 (Ct. App. 1989), and Carson Gardens, L.L.C. v. City of Carson Mobilehome Park Rental Review Board, 37 Cal. Rptr. 3d 768 (Ct. App. 2006)—re-quired consideration of debt service. We address each argu-ment in turn.

1. The Implementation Guidelines—even before the 2006 Amendment allowing MNOI Analysis—clearly could not have formed the basis for an objectively reasonable expecta-tion that the Board would always account for debt service in considering future rent increases. The Guidelines plainly stated that “[n]o one factor in the Ordinance is determinative and the facts must be considered together and balanced in light of the purposes of the Ordinance and all the relevant evidence.” More importantly, the Guidelines stressed that the GPM Analysis “is not intended to create any entitlement to any particular rent increase.” Indeed, Colony concedes that “Carson does not permit an automatic rent increase based on a set formula.”

2. Goldstein’s experience as an owner of another mobile home park in Carson in the two decades before his purchase of the Property did not establish a reasonable expectation that the Board would consider debt service in all rent increase applications. As a general matter, an investor must account for “the burden of rent control” in its expectations about fu-ture increased rental income. Guggenheim v. City of Goleta, 638 F.3d 1111, 1120–21 (9th Cir. 2010) (en banc). And, the Implementation Guidelines, adopted in 1998—long before the purchase of the Property—made plain that use of a GPM Analysis created no expectation to a particular rent increase. Moreover, the Board did not consider acquisition interest ex-penses in Goldstein’s first application for a rent increase at his other park. Goldstein initially applied for a $57.85 rent increase for that park, $41.38 of which related to increased debt service. The Board, however, granted only a $12 rent increase, which did not account for the debt service. Thus, an objectively reasonable person could not have expected that all future rent increase applications seeking increases because of debt service would be granted.6

3. Colony’s contention that the two California Court of Appeal decisions require “the City to take debt service into account in considering rent-increase applications, and . . . preclude[d] the City from . . . using MNOI,” misreads both opinions. Neither mandates that a rent control board account for debt service in determining rent increases. Rather, both merely hold that a Board must conduct the analyses it repre-

6. Colony’s purported expectation of a $200 increase in 2007 would have resulted in a 49.5% per-space rent increase for Colony Gardens. Such an increase would have been twice as large as the largest increase ever previously granted by the Board and signifi-cantly larger than the largest increase Goldstein’s other properties ever received—$58.70.

sented it would conduct, without requiring the adoption of a particular method of analysis.

Palacio de Anza simply required a rent control board to apply its guidelines when considering a rent increase applica-tion. 257 Cal. Rptr. at 124. There is no contest that the Board did so here. And, in Carson Gardens, the Court of Appeal expressly held:

[N]othing in the [City of Carson’s] ordinance requires the Board to apply any particular formula or methodol-ogy without deviation. Indeed, the city’s Guidelines spe-cifically state that the [GPM] analysis ‘is an aid to assist the Board in applying the factors in the Ordinance and is to be considered together with the factors in [the ordi-nance], other relevant evidence presented and the pur-poses of the Ordinance,’ and is not intended to create any entitlement to any particular rent increase.

37 Cal. Rptr. 3d at 777 (fourth alteration in original). At most, Carson Gardens compels the Board only to consider a GPM Analysis, see id. at 776–77, and in affirming the trial court’s dismissal of Colony’s petition, the Court of Appeal here expressly acknowledged that the Board did precisely that in evaluating both the 2007 and 2008 Colony applica-tions, see Colony Cove Props., 163 Cal. Rptr. 3d at 504–11.7

In Carson Gardens the plaintiff sued the Board, claiming in part that the Board did not conduct a GPM Analysis. 37 Cal. Rptr. 3d at 770–76. A trial court ordered the Board to conduct the analysis and remanded the case, but the Board failed to conduct the GPM Analysis on remand. Id. at 772– 73. On the second challenge, the trial court granted the plain-tiff’s proposed rent increase based on its GPM Analysis, but the Court of Appeal reversed. Id. at 774–75, 777. Although the initial trial court’s order required consideration of debt service costs, the Court of Appeal remanded the case “so that the Board c[ould] exercise its discretion on the question of whether passing through the entire amount of debt service costs was necessary to provide a fair return.” Id. at 776.

No objectively reasonable person confronted with this evidence in 2006 could have expected that the Board would always account for debt service when determining rent in-creases.8 Colony failed to present sufficient evidence sup-porting its investment-backed expectations claim under Penn Central’s second prong.

7. The Court of Appeal also noted that “the MNOI approach has been upheld by every court to have considered it.” Colony Cove Props., 163 Cal. Rptr. 3d at 522.

8. Colony also claims that its expectations were reasonable be-cause a former City employee testified that the Implementation Guide-lines were “more important, at least for day-to-day operation[s]” than the ordinance. But the Guidelines, even before their amendment, made clear that a property owner had no right to a rent increase based on the GPM Analysis. And Colony does not contend that it relied on this statement, which was made in a deposition in this litigation, in deter-mining whether to purchase the Property.


C. Character of the Government Action

Penn Central instructs that “[a] ‘taking’ may more readily be found when the interference with property can be char-acterized as a physical invasion by government than when interference arises from some public program adjusting the benefits and burdens of economic life to promote the com-mon good.” 438 U.S. at 124 (citation omitted).9 The City’s rent control ordinance is precisely such a program, striving to “protect[ ] Homeowners from excessive rent increases and allow[ ] a fair return on investment to the Park Owner.” This central purpose of rent control programs “counsels against finding a Penn Central taking.” MHC Fin., 714 F.3d at 1128.

Citing Lingle, 544 U.S. at 539, and David Hill Develop-ment, LLC v. City of Forest Grove, No. 3:08-CV-266-AC, 2012 WL 5381555 (D. Or. Oct. 30, 2012), Colony argues that the 2006 amendment to the Guidelines should be character-ized as a taking because it targeted Colony’s acquisition of the Property and the consequent large debt service. But these cases are inapposite. Lingle simply held that a plaintiff could not claim that a regulation constituted a taking merely be-cause it did not substantially advance a legitimate state inter-est. 544 U.S. at 547–48. And David Hill dealt with an express exaction. 2012 WL 5381555, at *9–12. More importantly, government action is legitimately prompted by changes in regulated areas. Even assuming that the 2006 Amendment to the Guidelines was prompted by the large amount of debt service involved in Colony’s acquisition and the City’s re-alization that a more sophisticated analysis than the GPM might be needed to address requests for rent increases, the character of the government regulation remains the same. The third Penn Central prong therefore is not satisfied.

III. CONCLUSION

On the evidence in this case, no reasonable finder of fact could conclude that the Board’s denials of Colony’s request-ed rent increases were the functional equivalent of a direct appropriation of the Property. Accordingly, the district court should have granted the City’s motion for judgment as a mat-ter of law. We therefore REVERSE the judgment of the dis-trict court and REMAND with instructions to enter judgment in favor of the City.10

9. The Supreme Court also stressed that the first two Penn Central factors are the most important. See Lingle, 544 U.S. at 538–39 (“Pri-mary among those factors are the economic impact of the regulation on the claimant and, particularly, the extent to which the regulation has interfered with distinct investment-backed expectations.” (internal quotation marks and brackets omitted)).

10. We therefore need not consider the City’s alternative argu-ment that a district court, not a jury, is the appropriate finder of fact in regulatory takings cases.


IN RE REGINA BOZIC,REGINA BOZIC, on behalf of herself and all others similarly situated, Petitioner,v.UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF CALIFORNIA, SAN DIEGO, Respondent,HENNY DEN UIJL, an individual; SANDRA DEN UIJL, an individual; BRYAN CORLETT, an individual; OBESITY RESEARCH INSTITUTE, a California Limited Liability Company; CONTINUITY PRODUCTS, a Delaware Limited Liability Company; NATIONAL WEIGHT LOSS INSTITUTE, a California Limited Liability Company; ZODIAC FOUNDATION, a California Limited Liability Company; INNOTRAC CORPORATION, a Georgia Corporation, Real Parties in Interest.

No. 17-70614United States Court of Appeals for the Ninth CircuitD.C. No. 3:16-cv-00733-BAS-MDDPetition for Writ of Mandamus to the United States District Court for the Southern District of California Argued and Submitted January 8, 2018 Pasadena, California Filed April 25, 2018 Before: Milan D. Smith, Jr. and Michelle T. Friedland, Circuit Judges, and Jed S. Rakoff,*Senior District Judge. Opinion by Judge Friedland

*The Honorable Jed S. Rakoff, Senior United States District Judge for the Southern District of New York, sitting by designation.

COUNSELMichael T. Houchin (argued) and Ronald A. Marron,

Law Office of Ronald A. Marron, San Diego, California, for Petitioner.

Richard P. Sybert (argued), Hazel Mae B. Pangan, and Patrick J. Mulkern, Gordon & Rees LLP, San Diego, California, for Real Parties in Interest.

OPINIONFRIEDLAND, Circuit Judge:


Plaintiff-Petitioner Regina Bozic requests mandamus re-lief to reverse an order transferring her putative consumer class action from the United States District Court for the Southern District of California (“Southern District”) to the United States District Court for the Eastern District of Cali-fornia (“Eastern District”), where her action was consolidat-ed with a similar one previously filed in the Eastern District. These two federal actions are stayed pending the outcome of a third class action that is proceeding in California state court.

Although we agree with Bozic that it was clear error to transfer her action to the Eastern District, issuance of the writ would have no practical impact on this case in its current procedural posture, and any injury Bozic might face is purely speculative. We therefore hold that the extraordinary remedy of mandamus is unwarranted at this time.

I.

In 2015, Plaintiff-Petitioner Regina Bozic purchased the weight-loss supplement Lipozene in her home state of Penn-sylvania. Disappointed by the product, Bozic filed a putative class action in the Southern District against the corporate entities and individuals (collectively, “Defendants”) respon-sible for the production, distribution, and marketing of Li-pozene. In addition to asserting a series of state law claims, Bozic sought a declaratory judgment defining Lipozene purchasers’ rights under a 2005 Federal Trade Commission (“FTC”) consent decree that restricts Defendants’ ability to sell weight-loss products. The Southern District, where the decree was entered and where Defendants reside, retains ju-risdiction over matters involving “construction, modification, and enforcement” of that decree.

Bozic’s case is the third of its kind. At the time she filed suit, two related putative class actions were already pending in California: Duran v. Obesity Research Institute, LLC, filed in the San Diego Superior Court, and Fernandez v. Obesity Research Institute, LLC, filed in the Eastern District.1 All three suits assert similar state law claims against a largely overlapping group of defendants, although Bozic’s request for declaratory relief under the FTC consent decree is unique to the current action. Fernandez has been stayed since Au-gust 2013 pending the resolution of Duran.2

1. We GRANT Bozic’s request for judicial notice of three minute orders from Duran and Fernandez. See United States v. Howard, 381 F.3d 873, 876 n.1 (9th Cir. 2004) (explaining that we may take judicial notice of records in other court proceedings).

2. In Duran, the San Diego Superior Court approved a final settle-ment in March 2015, but that judgment was successfully appealed. Duran v. Obesity Research Inst., LLC, 204 Cal. Rptr. 3d 896, 900 (Ct. App. 2016). A set of objectors—themselves the named plaintiffs in Fernandez—argued that the settlement was defective due to lack of notice, among other alleged flaws. Id. The California Court of Appeal agreed and reversed. Id. (“The erroneous notice injected a fatal flaw into the entire settlement process and undermines the court’s analysis of the settlement’s fairness.”). The case is currently pending again be-fore the Superior Court.

After Bozic filed this action in March 2016 in the South-ern District, Defendants moved in that court to transfer the case to the Eastern District for consolidation with Fernandez or, in the alternative, to stay the proceedings. The court held that Bozic’s action was governed by the first-to-file rule, a judicially created “doctrine of federal comity,” Pacesetter Sys., Inc. v. Medtronic, Inc., 678 F.2d 93, 94–95 (9th Cir. 1982), which applies when two cases involving “substan-tially similar issues and parties” have been filed in different districts, Kohn Law Grp., Inc. v. Auto Parts Mfg. Miss., Inc., 787 F.3d 1237, 1239 (9th Cir. 2015). Under that rule, “the second district court has discretion to transfer, stay, or dis-miss the second case in the interest of efficiency and judicial economy.” Cedars-Sinai Med. Ctr. v. Shalala, 125 F.3d 765, 769 (9th Cir. 1997).

Reasoning that “the Fernandez Court [had] already deter-mined that venue [was] proper” in the Eastern District, the district court chose to transfer. Bozic then filed a petition for a writ of mandamus asking our court to vacate the transfer order.

II.

“The writ of mandamus is a ‘drastic and extraordinary’ remedy.” In re Van Dusen, 654 F.3d 838, 840 (9th Cir. 2011) (quoting Ex parte Fahey, 332 U.S. 258, 259–60 (1947)). A mandamus petitioner bears the burden of establishing that “right to issuance of the writ is ‘clear and indisputable.’” Cheney v. U.S. Dist. Court, 542 U.S. 367, 381 (2004) (quot-ing Kerr v. U.S. Dist. Court, 426 U.S. 394, 403 (1976)). Even when a petitioner has carried this burden, we may not grant relief unless we are “satisfied that the writ is appropriate un-der the circumstances.” Id.

We consider five factors, first outlined in Bauman v. Unit-ed States District Court, 557 F.2d 650 (9th Cir. 1977), when assessing whether mandamus relief is appropriate:

(1) whether the petitioner has other adequate means, such as a direct appeal, to attain the relief he or she de-sires; (2) whether the petitioner will be damaged or prejudiced in a way not correctable on appeal; (3) whether the district court’s order is clearly erroneous as a matter of law; (4) whether the district court’s order makes an “oft-repeated error,” or “manifests a persistent disregard of the federal rules”; and (5) whether the dis-trict court’s order raises new and important problems, or legal issues of first impression.

In re Van Dusen, 654 F.3d at 841 (quoting Bauman, 557 F.2d at 654–55). Clear legal error is necessary, but not sufficient, for issuance of the writ. See Cheney, 542 U.S. at 380 (holding that the writ is appropriate only when the petitioner has “no other adequate means to attain the relief he desires” (quoting Kerr, 426 U.S. at 403)); In re Henson, 869 F.3d 1052, 1058 (9th Cir. 2017) (“[S]atisfying the third Bauman factor—clear error—is necessary for granting the writ.”).


III.

Applying these standards, we conclude that although the district court committed clear legal error by transferring this action to the Eastern District, mandamus relief is not appro-priate. Issuance of the writ would have no practical impact on this case in its current procedural posture. The district court made clear that it would either transfer or stay this case under the first-to-file rule, which the parties do not dispute applies. If transfer were not an available option, Bozic’s action there-fore would be stayed pending a final judgment in Duran—which is the same state it is in now in the Eastern District. As a result, any injury Bozic might face from the transfer is purely speculative at this point. If the stay were eventually lifted in circumstances in which she could proceed with her case, thus making her asserted injury less speculative, Bozic could then file a motion in the Eastern District to transfer her case back to the Southern District and, if necessary, file a new petition for a writ of mandamus in our court.

A.

The district court clearly erred by transferring this case to the Eastern District because, under the general venue stat-ute, 28 U.S.C. § 1391, venue is not proper there.3 The dis-trict court had discretion to transfer Bozic’s action, but only “to any other district or division where it might have been brought.” 28 U.S.C. § 1404(a). The phrase “where it might have been brought” refers solely to districts where Bozic could have originally filed suit. See Hoffman v. Blaski, 363 U.S. 335, 344 (1960). This category cannot be expanded by Defendants, even if they favor transfer to a district where the action could not have been brought. Id.

Relying on the class character of Bozic’s claims, Defen-dants argue that venue is proper in the Eastern District be-cause some putative class members presumably purchased Lipozene in that district. And even if venue is improper under § 1404(a), they insist that the requirements of § 1404(a) do not control where, as here, an action is transferred pursuant to the first-to-file rule. We reject both contentions.

1. Defendants assert that purchases by putative class mem-

bers in the Eastern District comprise “a substantial part of the events or omissions giving rise to” Bozic’s claims, and that venue in the Eastern District is therefore proper under 28 U.S.C. § 1391(b)(2). Even putting aside whether the pur-

3. We previously held in In re United States, 791 F.3d 945 (9th Cir. 2015), that “we should only offer guidance to the district court if the writ would have been an appropriate remedy at the time the petition was filed.” Id. at 954. There, however, the petitioner did not identify any “specific act the [petitioner] would have us compel the district court to do . . . nor [was] there any order we m[ight] vacate.” Id. at 953. By comparison, Bozic has requested that we return her action to the Eastern District, and this would be an appropriate remedy if we believed the requirements for mandamus relief were satisfied. We thus see no problem in evaluating the basis for the transfer order when assessing whether the “clear legal error” Bauman factor is satisfied.

chase of Lipozene by some fraction of putative class mem-bers might qualify as “a substantial part of the events”—and further that no members of Bozic’s putative class have so far been identified—Defendants’ argument fails. Whether before or after class certification, the claims of unnamed class mem-bers can never make permissible an otherwise impermissible venue. Rather, in a class action, the “events” in question are only those involving the named plaintiffs. See Abrams Shell v. Shell Oil Co., 343 F.3d 482, 490 (5th Cir. 2003) (explaining that “all named plaintiffs to a class action must satisfy the venue requirements”); see also 2 Newberg on Class Actions § 6:36 (5th ed.) (“The analysis of where a substantial part of the events took place, in a class action, looks to the events concerning the named plaintiffs’ claims, not all of the class members’ claims.”). Otherwise, a nationwide class action could be transferred to any district in the country, thus abro-gating the venue statute altogether.

Nothing in Bozic’s Complaint suggests that a substantial part of the events giving rise to her individual claims—or, indeed, any event giving rise to her individual claims— oc-curred in the Eastern District. Nor have Defendants offered any evidence or legal theory connecting Bozic’s individual claims to the Eastern District. Bozic purchased Lipozene in Pennsylvania, and Defendants’ Lipozene business operations are based entirely in the Southern District. By contrast, venue is proper in the Eastern District in Fernandez, the related federal class action, because several of the named plaintiffs in Fernandez purchased Lipozene in the Eastern District. Fer-nandez v. Obesity Research Inst., LLC, No. 2:13-cv-00975-MCE-KJN, 2013 WL 4587005, at *3 (E.D. Cal. Aug. 28, 2013). Contrary to Defendants’ argument, it is irrelevant that Bozic is herself a member of the putative class in Fernandez; whether venue is proper under § 1391(b)(2) in this action depends only on the events surrounding Bozic’s claims.

Nor does § 1391(b)(1) or (b)(3) provide a basis for venue in the Eastern District. None of the seven defendants in this action reside in the Eastern District, as would be required for venue under § 1391(b)(1). And § 1391(b)(3) applies only if there is no district where venue lies under § 1391(b)(1) or (b)(2). Because venue is proper in the Southern District, this residual provision does not apply. Thus, the Eastern District is not an available venue for this action.

2.Defendants also contend that the first-to-file rule negates §

1404(a)’s requirement that an action may be transferred only to a district where it “might have been brought.” We disagree.

Defendants’ argument on this score presents what appears to be an issue of first impression in the courts of appeals. But Defendants’ argument is foreclosed by the plain language of § 1404(a), which provides in relevant part that “a district court may transfer any civil action to any other district or division where it might have been brought.” See Van Dusen v. Barrack, 376 U.S. 612, 616 (1964) (explaining that the “transfer power is . . . expressly limited by the final clause


of § 1404(a) restricting transfer to those federal districts in which the action ‘might have been brought’”). A contrary understanding of the interaction between the first-to-file rule and § 1404(a) would allow a judge-made doctrine to con-travene a congressionally enacted statute—a result that the Supreme Court has made clear we cannot countenance. See Nostrand v. Little, 362 U.S. 474, 477 (1960) (“Where the lan-guage of a statute is plain, unambiguous, and well understood according to its natural and ordinary sense and meaning, the statute itself furnishes a rule of construction beyond which the court cannot go.”). Although the first-to-file rule guides the district court’s exercise of discretion in handling related cases, the requirements of § 1404(a) cabin the exercise of that discretion.4

Because the district court could only transfer this action to a district “where it might have been brought” under § 1404(a)—a requirement that excludes the Eastern District—we conclude that the district court committed clear legal error by granting Defendants’ motion to transfer.

B.

Despite the presence of a clear legal error, we hold that Bozic is not entitled to mandamus relief. Mandamus may sometimes be appropriate to correct a clearly erroneous transfer order. See Commercial Lighting Prods., Inc. v. U.S. Dist. Court, 537 F.2d 1078, 1079 (9th Cir. 1976); Pac. Car & Foundry Co. v. Pence, 403 F.2d 949, 951–52 (9th Cir. 1968). But if clear legal error were sufficient for mandamus relief, every erroneous interlocutory order would warrant issuance of the writ. See Bankers Life & Cas. Co. v. Holland, 346 U.S. 379, 382–83 (1953) (rejecting the notion that “every interloc-utory order which is wrong might be reviewed under the All Writs Act” and declining to issue a writ of mandamus where the court’s order, “even if erroneous,” “involved no abuse of judicial power”). That is why, when deciding whether to is-sue the writ, we also look to “whether the petitioner has other adequate means . . . to attain the relief he or she desires,” “whether the petitioner will be damaged or prejudiced in a way not correctable on appeal,” “whether the district court’s order makes an ‘oft-repeated error,’ or ‘manifests a persis-tent disregard of the federal rules,’” and “whether the district court’s order raises new and important problems, or legal issues of first impression.” In re Van Dusen, 654 F.3d 838, 841 (9th Cir. 2011) (quoting Bauman v. U.S. Dist. Court, 557 F.2d 650, 654–55 (9th Cir. 1977)). And here, these remaining Bauman factors collectively weigh against issuing the writ. See Bauman, 557 F.2d at 654–55.

4. Defendants’ reliance on Pacesetter Systems, Inc. v. Medtron-ic, Inc., 678 F.2d 93 (9th Cir. 1982), is unavailing. There the district court dismissed, rather than transferred, the second-filed action. Id. at 94. We therefore had no cause to consider the interaction between § 1404(a) and the first-to-file rule.

1.

In evaluating the remaining Bauman factors, we first con-sider whether the “party seeking the writ has no other ad-equate means, such as a direct appeal, to attain the relief he or she desires,” and, relatedly, whether the “petitioner will be damaged or prejudiced in a way not correctable on ap-peal.” Id. at 654; see also Cheney v. U.S. Dist. Court, 542 U.S. 367, 380 (2004). These factors are not satisfied here. Indeed, Bozic cannot even attain the relief she desires—the opportunity to litigate her own case immediately in a proper forum—through issuance of the writ. Because it would be inappropriate to wield “one of ‘the most potent weapons in the judicial arsenal,’” Cheney, 542 U.S. at 380 (quoting Will v. United States, 389 U.S. 90, 107 (1967)), when a petitioner faces no imminent injury— and will have other options avail-able if that ever changes— these circumstances weigh heav-ily against granting mandamus relief.

Bozic does not dispute that the first-to-file rule applies here. That rule allows a court to transfer, stay, or dismiss a later-filed suit in deference to an earlier-filed suit, see All-trade, Inc. v. Uniweld Prods., Inc., 946 F.2d 622, 623 (9th Cir. 1991), and the district court made clear that it would do one of those things here. If we were to grant mandamus relief and return Bozic’s action to the Southern District hav-ing held that transfer is not an option, the court would there-fore almost certainly stay the case pending the outcome in Duran.5 Bozic’s case would thus remain in the same pos-ture regardless of the transfer—namely, stayed pending the outcome in Duran. Bozic’s petition might have been more responsive to her articulated concern had she also requested that we reverse the district court’s conclusion that the first-to-file rule applied, thereby precluding any subsequent stay in the Southern District. Bozic has expressly acknowledged, though, that a stay pursuant to the first-to-file rule is appropri-ate in this case.

If Duran were eventually resolved in a manner that would have preclusive effect on the federal actions, Bozic’s options for challenging the Duran judgment would remain the same regardless of whether we had granted this petition. Bozic argues that she will suffer irreparable harm absent the writ because any resolution of Duran will not provide sufficient relief.6 But Bozic’s ability to contest the Duran judgment in no way depends on where her case is stayed. Duran is still a putative class action. If the class in Duran were ever certi-fied—whether as a settlement class or a litigation class—then

5. Because Defendants did not move to dismiss, the Southern District would presumably stay the case if it had occasion to choose between the remaining options provided by the first-to-file rule. Of course, if the Southern District chose to dismiss instead, our having granted Bozic’s mandamus petition would only have moved her far-ther from her requested relief.

6. Duran in fact shows the opposite, by demonstrating that noth-ing irreparable would follow from an initial resolution in that case. There the Court of Appeal reversed the settlement after the named plaintiffs from the Fernandez action filed objections that identified significant flaws in the initial settlement agreement. See Duran v. Obe-sity Research Inst., LLC, 204 Cal. Rptr. 3d 896, 900 (Ct. App. 2016).


Bozic would be able to choose to opt out or intervene regard-less of whether her own separate case was pending in the Southern or Eastern District. See Cal. Civ. Code § 1781(e); Hernandez v. Restoration Hardware, Inc., 409 P.3d 281, 288–89 (Cal. 2018) (“Potential class members in [California] can opt out of the class action litigation and pursue their own litigation against the same class defendant, timely intervene in the action or proceeding, or move to set aside the judg-ment.”). This petition thus has no effect on Bozic’s options.

Moreover, in the event Duran were resolved in a manner that did not preclude Bozic’s claims and the stay of her ac-tion were lifted—for example, if she opted out of any certi-fied class in Duran—then Bozic could, in reliance on our opinion, file a motion in the Eastern District to transfer her case back to the Southern District. If that motion were unsuc-cessful, she could then refile for mandamus. At that point, any potential injury from her case remaining in the Eastern District would be far less speculative,7 and we could evalu-ate whether she would be prejudiced in a way that warranted mandamus relief.8

2.The rest of the Bauman factors similarly do not support

granting the writ. Bozic has no colorable argument that “[t]he district court’s order is an oft-repeated error, or manifests a persistent disregard of the federal rules.” Bauman, 557 F.2d at 655. And although it appears that the interaction of the first-to-file rule and § 1404(a) is a question of first impres-sion, see id., we have now decided that question in the process of evaluating the “clear legal error” Bauman factor. Thus, the “first impression” Bauman factor has little relevance here. See Christensen v. U.S. Dist. Court, 844 F.2d 694, 697 (9th Cir. 1988) (“All factors are not relevant in every case and the factors may point in different directions in any one case.”).

7. Bozic’s primary argument for why she is prejudiced by having her case in the Eastern District is that the Southern District has exclu-sive jurisdiction to adjudicate her claim regarding the FTC consent decree. But Bozic lacks standing to enforce that decree, meaning an inability to pursue enforcement in the Eastern District cannot injure her in any relevant way. See United States v. FMC Corp., 531 F.3d 813, 821 (9th Cir. 2008) (holding that a third party lacks standing to enforce a governmental consent decree where, as here, the decree does not include “a clear expression of a different intent”). We have not defini-tively resolved whether third-party beneficiaries always lack standing to enforce a consent decree or, rather, whether third-party beneficiaries are presumed to lack standing absent a clear statement to the contrary. See id. But because the FTC consent decree contains no indication that third-party beneficiaries have enforcement rights, Bozic’s petition does not require exploring this ambiguity.

Moreover, there is no dispute that the Eastern District has both subject matter jurisdiction over the remainder of this dispute and per-sonal jurisdiction over Defendants. There is thus no risk that the East-ern District might adjudicate an action when it lacks the power to do so. See Libby, McNeill, & Libby v. City Nat’l Bank, 592 F.2d 504, 510 (9th Cir. 1978) (“Venue is not jurisdictional.”).

8. Even then, it is not clear that mandamus relief would be ap-propriate. Cf. Wash. Pub. Utils. Grp. v. U.S. Dist. Court, 843 F.2d 319, 325 (9th Cir. 1987) (declining to issue a writ of mandamus to order a change in venue even though the petitioners might have been “required to endure the expense and inconvenience of a second massive trial”).

IV.

For all these reasons, we conclude that Bozic has not shown the necessary clear and indisputable right to issuance of the writ. The petition is therefore DENIED.

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