Rosenkrantz v. Arizona Board of Regents

1 WO [5] 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA [8] 9 Andrew Rosenkrantz, et al., No. CV-20-00613-PHX-JJT 10 Plaintiffs, ORDER 11 v. 12 Arizona Board of Regents, 13 Defendant. [14] 15 At issue is Defendant’s Rule 12(b)(6) Motion to Dismiss, Or In The Alternative, 16 Motion For Summary Judgment (Doc. 15, Mot.), to which Plaintiffs filed a Response (Doc. 17 20, Resp.) and Defendant filed a Reply (Doc. 22). For the following reasons, the Court 18 grants Defendant’s Motion. 19 I. BACKGROUND 20 Plaintiffs are parents of students who were enrolled at one of three public 21 universities in Arizona—the University of Arizona, Arizona State University, and Northern 22 Arizona University (collectively “Universities”)—during the Spring 2020 semester. (Doc. 23 8, First Am. Compl. (“FAC”) ¶¶ 8–14.) Defendant Arizona Board of Regents (“ABOR”) 24 is the governing board created under the Arizona Constitution as the governing body for 25 the Universities. (FAC ¶ 18.) 26 Plaintiffs allege that in March 2020, in response to the COVID-19 pandemic, the 27 Universities either encouraged or forced the students to move out of on-campus housing, 28 moved all classes to online, cancelled campus events, and ceased providing various 1 services. (FAC ¶¶ 47–70.) The Universities did not return to Plaintiffs the cost of room and 2 board and/or the fees for services. 3 Plaintiffs bring this class action on behalf of all people who paid the cost of room 4 and board and/or fees for the Spring 2020 semester at the Universities and who, in the wake 5 of the COVID-19 pandemic, lost the benefits of the room and board and/or services and 6 did not receive an unconditional refund. (FAC ¶ 1.) They assert two classes are appropriate 7 for certification: those who paid the cost of room and board for or on behalf of students, 8 and those who paid fees for services for or on behalf of students. The First Amended 9 Complaint (“FAC”) alleges claims for breach of contract, unjust enrichment, and 10 conversion on behalf of each of the two proposed classes, for a total of six claims. (FAC at 11 21–27.) In each of those claims, Plaintiffs assert they are entitled to a return of the pro12 rated, unused funds. Under a separate “Request for Relief” section, the FAC seeks a 13 declaration that Defendant “has wrongfully kept the monies paid for room and board and 14 fees” and injunctive relief “enjoining Defendant from retaining the pro-rated, unused 15 portion of monies paid for room and board and fees.” (FAC at 27.) 16 Defendant now moves to dismiss the FAC on the grounds that Plaintiffs failed to 17 file a pre-suit notice of claim as required by A.R.S. § 12–821.01(A). 18 II. LEGAL STANDARD 19 Federal Rule of Civil Procedure 12(b)(6) is designed to “test[] the legal sufficiency 20 of a claim.” Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). A dismissal under Rule 21 12(b)(6) for failure to state a claim can be based on either (1) the lack of a cognizable legal 22 theory or (2) insufficient facts to support a cognizable legal claim. Balistreri v. Pacifica 23 Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990). When analyzing a complaint under Rule 24 12(b)(6), the well-pled factual allegations are taken as true and construed in the light most 25 favorable to the nonmoving party. Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir. 2009). 26 Legal conclusions couched as factual allegations are not entitled to the assumption of truth, 27 Ashcroft v. Iqbal, 556 U.S. 662, 680 (2009), and therefore are insufficient to defeat a 28 motion to dismiss for failure to state a claim, In re Cutera Sec. Litig., 610 F.3d 1103 , 1108 1 (9th Cir. 2010). On a Rule 12(b)(6) motion, Rule 8(a) governs and requires that, to avoid 2 dismissal of a claim, Plaintiff must allege “enough facts to state a claim to relief that is 3 plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). 4 III. ANALYSIS 5 Arizona law requires a plaintiff to file a notice of claim with a public entity before 6 suing it for damages. A.R.S. § 12–821.01(A). The notice of claim must set forth “facts 7 sufficient to permit the public entity . . . to understand the basis on which liability is 8 claimed” and “a specific amount for which the claim can be settled and the facts supporting 9 that amount.” Id. It must be made within 180 days of when the cause of action accrues. Id. 10 Claims that do not comply with the statutory requirements are barred. Deer Valley Unified 11 Sch. Dist. No. 97 v. Houser, 152 P.3d 490 , 492 (Ariz. 2007); see § 12–821.01(A). 12 A. Claims for Damages 13 Resolution of the present Motion depends largely on the nature of Plaintiffs’ claims. 14 The notice of claim statute functions to allow public entities to investigate and assess 15 liability, consider the possibility of settlement prior to litigation, and assist in financial 16 planning and budgeting. Deer Valley, 152 P.3d at 492; see also Falcon ex rel. Sandoval v. 17 Maricopa Cty., 144 P.3d 1254, 1256 (Ariz. 2006). As these implicate fiscal considerations, 18 the statute applies only to claims for money damages and does not apply when declaratory 19 or injunctive relief is the “primary purpose of the litigation.” Martineau v. Maricopa Cty., [20] 86 P.3d 912, 915 (Ariz. Ct. App. 2004); Madrid v. Concho Elementary Sch. Dist. No. 6 of 21 Apache Cty., No. CV-07-8103-PCT-DGC, 2010 WL 1980329 , at *1 (D. Ariz. May 17, 22 2010), aff’d, 439 F. App’x 566 (9th Cir. 2011). 23 However, this distinction does not sanction form over substance. Courts have made 24 clear that a plaintiff cannot file an action for monetary damages under the guise of seeking 25 declaratory relief to circumvent the notice of claim requirement. See Martineau, 86 P.3d at 26 917 n.7. In Stallings, the plaintiff sued the Director of the Arizona Department of 27 Corrections alleging the defendant breached a settlement agreement from a prior lawsuit 28 that involved serious injuries to the plaintiff’s feet. Stallings v. Ryan, 2014 WL 127406 , at 1 *2 (Ariz. Ct. App. Jan. 14, 2014). The plaintiff, who did not file a pre-suit notice of claim, 2 attempted to characterize the relief requested as “injunctive relief in the form of an order 3 for immediate nerve testing and recommended treatment, for a refund of money charged 4 for his follow-up medical visits for his feet and a cessation of future charges, and for the 5 timely filling of pain medications.” Id. The court firmly rejected this. “Whether 6 characterized as injunctive relief or something else, the requests would require the State to 7 expend funds or forgo collecting funds, which in either case would affect financial planning 8 and budgeting . . . Because government funds would be involved in any relief granted, [the 9 plaintiff’s claim] is barred for failure to file a notice of claim.” Id. 10 Here, Plaintiffs’ breach of contract claims allege the parties entered into agreements 11 in which Plaintiffs paid monies and/or fees, and in exchange, the Universities, as directed 12 by ABOR, would provide housing and a meal plan and/or services. (FAC ¶¶ 86, 94.) 13 Plaintiffs “fulfilled their end of the bargain,” but Defendant failed to uphold theirs. (FAC 14 ¶¶ 87–88, 95–99.) The FAC requests “disgorgement” of the pro-rated unused monies 15 already paid, a “declaration” that Defendant is unlawfully withholding the funds, and an 16 “injunction” enjoining Defendant from retaining them. (E.g., FAC ¶¶ 84, 100.) However, 17 an equitable remedy is inappropriate where, as here, an adequate legal remedy exists in the 18 form of money damages. See, e.g., Sonner v. Premier Nutrition Corp., 962 F.3d 1072 , 1074 19 (9th Cir. 2020) (dismissing restitution claim because a claim for damages in the same 20 amount was available). Plaintiffs’ attempt to camouflage a legal remedy—i.e., money 21 damages—by labeling it as an equitable one is revealed by the very form their claims take: 22 breach of contract seeking “the benefit of their bargain” and requesting a jury trial. (FAC 23 ¶¶ 88, 99.) See Madrid, 2010 WL 1980329 , at *1 (concluding the plaintiff’s claim was 24 “nothing more than a breach of contract claim brought under the guise of seeking 25 declaratory relief” and dismissing it for failure to file a notice of claim). 26 Plaintiffs’ claims for conversion are similarly problematic. The FAC alleges 27 Defendant deprived Plaintiffs of the value they paid for room and board and/or services. 28 This interference “damaged” Plaintiffs, who assert they are entitled to the return of the pro1 rated unused funds and/or fees allegedly converted. (FAC ¶¶ 118, 127.) The remedy is, 2 again, money damages. Metro Phoenix Bank Inc. v. RPM Private Wealth LLC, 2020 WL 3 1312879, at *3 (Ariz. Ct. App. Mar. 19, 2020) (“[U]nder Arizona law, the measure of 4 damages for conversion is the value of the property plus other damage suffered because of 5 the wrongful detention or deprivation such as damages for loss of use.”). 6 More fundamental to Arizona’s notice of claim statute, the relief requested for all 7 six of Plaintiffs’ claims—regardless of the label Plaintiffs use or theory they assert— 8 directly involves government funds and would undoubtedly affect financial planning. The 9 claims are therefore subject to the notice of claim statute. Arpaio v. Maricopa Cty. Bd. of 10 Supervisors, 238 P.3d 626, 630 (Ariz. Ct. App. 2010) (noting a victory in the plaintiffs’ 11 declaratory relief action would enable them to seek $24 million from the defendant public 12 entity, and therefore concluding the suit is subject to the notice of claim statute). Plaintiffs’ 13 argument that because they merely seek return of their own money, as opposed to new or 14 reallocated funds, is unavailing. See Stallings, 2014 WL 127406 , at *2 (holding the 15 plaintiff’s request for a refund of his own money implicated government funds and 16 budgetary issues).1 17 Because a legal remedy is available to Plaintiffs, they are required to comply with 18 Arizona’s notice of claim statute as a prerequisite to this action. 19 B. Plaintiffs’ Remaining Arguments 20 Although the FAC alleges Plaintiffs and other putative class members demanded 21 the return of money “through a number of channels,” (FAC ¶ 71), it does not allege they 22 1 Plaintiffs rely heavily on Kromko v. Ariz. Bd. of Regents, 146 P.3d 1016 (Ariz. Ct. App. 2006). That case involved a lawsuit brought by university students against the 23 Arizona state legislature and ABOR challenging a nearly 40% tuition increase. The Arizona Court of Appeals held ABOR was not immune under the immunity statutes 24 because the students’ request for a tuition refund was not a claim for monetary damages. Id. at 1024 . Plaintiffs’ reliance on this case is unavailing for several reasons. First, the 25 portion of the opinion concerning ABOR’s immunity was vacated by the Arizona Supreme Court, which held the issue of setting tuition is a political question that is not suitable for 26 judicial resolution. See Kromko v. Ariz. Bd. of Regents, 165 P.3d 168, 195 (Ariz. 2007). Thus, the reasoning partially underlying the Court of Appeals decision—that a tuition 27 refund request is not damages—is at best, not controlling, and at worst, wrong. Second, the statute at issue was an immunity statute, not A.R.S. § 12-821.01, and the Court of Appeals 28 specifically noted it construes the immunity statute narrowly. Finally, unlike here, the students in Kromko had filed a proper pre-suit notice of claim. 1 ever filed a notice of claim with ABOR. Plaintiffs do not dispute this in their Response or 2 contend they filed a statutorily sufficient notice of claim. Instead, they raise a number of 3 arguments suggesting they should be excused from doing so. 4 First, Plaintiffs state that because noncompliance with the statute is an affirmative 5 defense, dismissal for lack of compliance with the same is premature. (Resp. at 10.) The 6 Court disagrees. Failure to comply with the statute bars an action, and courts in Arizona 7 routinely dismiss actions that were not preceded by a proper notice of claim. See, e.g., 8 Nored v. City of Tempe, 614 F. Supp. 2d 991, 998 (D. Ariz. 2008); Deer Valley, 152 P.3d 9 at 496 . 10 Plaintiffs next argue Defendant waived its right to rely on the notice of claim statute 11 because Plaintiffs and potential class members requested refunds and ABOR and the 12 Universities steadfastly refused to provide them. (Resp. at 10.) This argument lacks merit. 13 “Actual notice and substantial compliance do not excuse failure to comply” with the 14 statute. Falcon, 144 P.3d at 1256 . Thus, whether ABOR (as opposed to the Universities) 15 knew of certain demands made by Plaintiffs—which the FAC does not actually allege—is 16 irrelevant.2 Moreover, Defendant’s first action in this case was to file the present Motion 17 to Dismiss for failure to comply with the notice of claim statute. This can hardly be 18 considered a waiver of the defense. Cf. Jones v. Cochise Cty., 187 P.3d 97, 105 (Ariz. Ct. 19 App. 2008 ) (finding waiver when the defendant had served its disclosure statement, 20 answered interrogatories, and participated in seven depositions before raising the notice of 21 claim defense almost a year after the complaint was filed). 22 Finally, without analysis, Plaintiffs suggest Defendant should be equitably estopped 23 for the same reason, i.e., Plaintiffs made demands for refunds and ABOR refused. 24 Equitable estoppel precludes a party from asserting a right inconsistent with a position 25 previously taken to the detriment of another who acted in reliance on the party’s initial 26 position. McLaughlin v. Jones in & for Cty. of Pima, 401 P.3d 492 , 501 (Ariz. 2017). The [27] 2 Plaintiffs also speculate that ABOR may have received and rejected notices of 28 claims from potential class members. (Resp. at 11.) The proposed classes are not certified, and thus only the actions of the named Plaintiffs matter. 1 || Court fails to see how this doctrine is applicable to the present case and Plaintiffs do not □□ attempt to demonstrate that it is. 3 Pursuant to A.R.S. § 12—821.01(A), Plaintiffs were required to file a notice of claim 4|| before filing the present suit. They did not, and therefore this action is barred. 5 IT IS THEREFORE ORDERED granting Defendant’s Rule 12(b)(6) Motion to 6|| Dismiss (Doc. 15). 7 IT IS FURTHER ORDERED denying Plaintiffs’ Motion for Transfer 8 || Consolidation, Appointment of Interim Class Counsel, and Setting Deadline for Filing a □□ Consolidated Complaint (Doc. 23) as moot. The instant case being hereby dismissed, the 10 || Court has no basis under the Local Rules to grant transfer or consolidation of other cases addressing similar subject matter. 12 IT IS FURTHER ORDERED directing the Clerk of Court to close this case. 13 Dated this 29th day of July, 2020. 14 6 = ] 74. 15 Hon le J Tuchi 16 United StatesDistrict Judge [28] -7-