R. Abcarian v. Meldon Levine ( 2020 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
R. ABCARIAN; R. REYES; H. REYES; No. 19-55129
J. PETRIE,
Plaintiffs-Appellants, D.C. No.
2:16-cv-07106-
v. FMO-JPR
MELDON EDISES LEVINE; WILLIAM
WATSON FUNDERBURK, JR.; JILL OPINION
BANKS BARAD; MICHAEL F.
FLEMING; CHRISTINA E. NOONAN;
DAVID H. WRIGHT; MARCIE L.
JAMES-KIRBY EDWARDS; JOSEPH A.
BRAJEVICH; ERIC GARCETTI;
GILBERT CEDILLO; PAUL
KREKORIAN; BOB BLUMENFIELD;
DAVID E. RYU; PAUL KORETZ; NURY
MARTINEZ; FELIPE FUENTES;
MARQUEECE HARRIS-DAWSON;
CURREN D. PRICE; HERB J. WESSON,
JR.; MIKE BONIN; MITCHELL
ENGLANDER; MITCH O’FARRELL;
JOSE HUIZAR; JOE BUSCAINO;
MICHAEL NELSON FEUER; AND
JAMES PATRICK CLARK,
Defendants-Appellees.
Appeal from the United States District Court
for the Central District of California
Fernando M. Olguin, District Judge, Presiding
2 ABCARIAN V. LEVINE
Argued and Submitted October 15, 2019
Pasadena, California
Filed August 25, 2020
Before: Kim McLane Wardlaw and Daniel P. Collins,
Circuit Judges, and Benjamin H. Settle, * District Judge.
Opinion by Judge Collins
SUMMARY **
Hobbs Act / RICO / Johnson Act
The panel affirmed the district court’s dismissal of an
action in which customers claimed that the Los Angeles
Department of Water and Power overcharged for electric
power and then transferred the surplus funds to the City of
Los Angeles, thereby allowing the City to receive what
amounted to an unlawful tax under California law.
The panel affirmed the district court’s dismissal of
plaintiffs’ claim under the Hobbs Act, which imposes
criminal punishment for the taking of property by extortion.
Agreeing with other circuits, the panel held that the Hobbs
Act does not create a civil cause of action.
*
The Honorable Benjamin H. Settle, United States District Judge
for the Western District of Washington, sitting by designation.
**
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
ABCARIAN V. LEVINE 3
The panel affirmed the dismissal of plaintiffs’ RICO
claim for reasons different from those given by the district
court. The panel held that municipal entities are not subject
to liability under RICO when sued in their official capacities,
but here the RICO claims were asserted against the
defendant City and DWP officials in their personal
capacities. Nonetheless, the RICO claim failed as a matter
of law because it did not adequately allege a predicate act in
extortion under California law or the Hobbs Act, mail and
wire fraud, or obstruction of justice.
The panel affirmed the dismissal of plaintiffs’ claims
under 42 U.S.C. § 1983 on the ground that under the Johnson
Act, the district court lacked jurisdiction over those claims
because the rate-setting ordinances at issue were orders
affecting rates chargeable by a public utility and were made
by a rule-making body of a State political subdivision.
Agreeing with the Second Circuit, the panel held that, at least
where all other federal statutory claims have been dismissed,
the Johnson Act does not permit a plaintiff to pursue a
constitutionally based § 1983 claim challenging state or
local rate orders. In addition, the DPW’s rates did not
interfere with interstate commerce and were made after
reasonable notice and hearing, and a plain, speedy and
efficient remedy could be had in the courts of California.
COUNSEL
Marion R. Yagman (argued) and Joseph Reichmann,
Yagman & Reichmann, Venice Beach, California, for
Plaintiffs-Appellants.
Michael Martin Walsh (argued), Deputy City Attorney;
Blithe S. Bock, Managing Assistant City Attorney; Michael
4 ABCARIAN V. LEVINE
N. Feuer, City Attorney; Office of the City Attorney, Los
Angeles, California; for Defendants-Appellees.
OPINION
COLLINS, Circuit Judge:
Plaintiffs are customers of the Los Angeles Department
of Water and Power (“DWP”) who claim that DWP
overcharged for electric power and then transferred the
surplus funds to the City of Los Angeles (“City”), thereby
allowing the City to receive what amounts to an unlawful tax
under California law. 1 Plaintiffs brought suit in federal
court, asserting claims under the Hobbs Act, the Racketeer
Influenced and Corrupt Organizations Act (“RICO”), and
42 U.S.C. § 1983, as well as claims under state law. The
district court dismissed Plaintiffs’ federal causes of action
for failure to state a claim, and it declined to retain
jurisdiction over the remaining state-law claims. We affirm.
I
In reviewing the district court’s dismissal under Federal
Rule of Civil Procedure 12(b)(6), we may consider only “the
complaint, materials incorporated into the complaint by
reference, and matters of which the court may take judicial
notice.” Metzler Inv. GMBH v. Corinthian Colls., Inc.,
540 F.3d 1049, 1061 (9th Cir. 2008). “[W]e take all well-
pleaded factual allegations in the complaint as true,
1
Although Plaintiffs allege that DWP overcharged for both water
and electric power, the operative complaint contains no allegations about
any comparable transfers involving excess water revenues. Accordingly,
the claims before us involve only electric power.
ABCARIAN V. LEVINE 5
construing them ‘in the light most favorable to the
nonmoving party.’” Keates v. Koile, 883 F.3d 1228, 1234
(9th Cir. 2018) (quoting Silvas v. E*Trade Mortg. Corp.,
514 F.3d 1001, 1003 (9th Cir. 2008)). We review de novo
whether these allegations “‘plausibly give rise to an
entitlement to relief.’” Id. (quoting Ashcroft v. Iqbal,
556 U.S. 662, 679 (2009)).
A
DWP is governed by a Board of Water and Power
Commissioners composed of five members who are
ordinarily appointed by the Mayor with the approval of the
City Council. See L.A. City Charter §§ 502(a), 670. Under
the City Charter, the Board fixes the rates to be charged to
DWP customers for electric power, “[s]ubject to approval by
ordinance” of the City Council. See id. § 676(a); see also id.
§ 675(b)(3). Any city ordinance, including one approving
DWP rates, must “be presented to the Mayor for approval
and signature,” and if the Mayor vetoes the ordinance, the
Council may override the veto by a prescribed
supermajority. Id. § 250(b), (c). The Charter provides that
all revenues collected from the provision of electric power
service shall be deposited in a “Power Revenue Fund” in the
City Treasury. Id. § 679(b). These funds may be used only
for specified purposes, such as costs of operation and
maintenance, employee benefits, and business promotion.
Id. § 679(c).
The Charter provides, however, that if there is a
“surplus” in the Power Revenue Fund at the end of the City’s
fiscal year on June 30, then the City Council, acting by
ordinance and with the consent of the Board, may direct that
the surplus be transferred to the City Treasury’s Reserve
Fund. Id. § 344(a), (b); see also id. § 310 (City’s fiscal year
runs from July 1 through June 30 of the following year). The
6 ABCARIAN V. LEVINE
Reserve Fund may be used for “unanticipated expenditures
and revenue shortfalls in the City’s General Fund,” id.
§ 302(b); however, with the Mayor’s consent (or a two-
thirds vote), the City Council may approve a transfer of
funds from the Reserve Fund to the City’s General Fund, id.
§ 341. See also id. § 679(c)(9) (expressly authorizing
transfers, under these procedures, from the Power Revenue
Fund “to the City General Fund”). For purposes of a
potential transfer, a “surplus” is defined as “the amount
remaining in the . . . Power Revenue Fund, less outstanding
demands and liabilities payable out of the fund . . . as shown
by audited financial statements.” Id. § 344(b)(1). However,
if the Board concludes that such a transfer would have “a
material negative impact on [DWP’s] financial condition in
the year in which the transfer is to be made,” then the Board
can approve or disapprove the proposed transfer in whole or
in part. Id. § 344(b)(2), (3).
At the time that the district court ruled in this case, the
applicable rates for DWP electric power services were set by
a combination of two City ordinances, one of which had
been adopted in 2008, and the other in 2016. The 2016
ordinance, in turn, completely superseded a prior 2012
ordinance. All three ordinances were adopted by the City
Council, and approved by the Mayor, after a series of at least
three public meetings—one before the Council’s Energy and
Environment Committee to consider the rates, another
before the full Council to consider the rates, and a final
Council meeting to formally approve the ordinance setting
the rates. 2
2
We grant the City’s motion to take judicial notice of the 2008 and
2016 ordinances and of the official Council File for the 2008, 2012, and
2016 ordinances. Tollis, Inc. v. County of San Diego, 505 F.3d 935, 938
ABCARIAN V. LEVINE 7
Since at least 2010, the rates that DWP has charged its
utility customers for electric power have exceed DWP’s
costs for providing that service, thereby yielding a surplus at
the end of the fiscal year. Accordingly, each year over the
same time period, the City Council, with the approval of the
Board, has approved a transfer of surplus moneys from the
Power Revenue Fund to the City’s General Fund. The
amounts transferred from the Power Revenue Fund have
ranged from $254 million to $300 million.
B
Plaintiffs R. Abcarian, R. Reyes, H. Reyes, and J. Petrie 3
are individuals who have public utility accounts with DWP
for the provision of electric power. According to Plaintiffs,
DWP’s ability to make annual transfers from the Power
Revenue Fund to the City’s General Fund indicates that the
electric power rates charged by DWP have consistently
exceeded its reasonable costs of providing those services.
Plaintiffs allege that, as a result, the above-cost utility rates
constituted a “tax” within the meaning of Article XIII C of
the California Constitution and are therefore subject to the
voter-approval requirements established in that article. In
defining what counts as a “tax” that must be approved by
voters, Article XIII C broadly covers “any levy, charge, or
n.1 (9th Cir. 2007); Chaker v. Crogan, 428 F.3d 1215, 1223 n.8 (9th Cir.
2005); Rabkin v. Dean, 856 F. Supp. 543, 546 (N.D. Cal. 1994). We
otherwise deny the motion.
3
Neither the initial complaint nor any other document in the record
sets forth the full names of the Plaintiffs. Because J. Petrie was not added
as a plaintiff until the filing of the First Amended Complaint, the term
“Plaintiffs,” as used in this opinion, does not include Petrie when
referencing procedural actions taken prior to the filing of that amended
complaint.
8 ABCARIAN V. LEVINE
exaction of any kind imposed by a local government,” except
for, inter alia, a “charge imposed for a specific government
service or product provided directly to the payor that is not
provided to those not charged, and which does not exceed
the reasonable costs to the local government of providing the
service or product.” See Cal. Const. art. XIII C, § 1(e)(2)
(emphasis added). It is undisputed that the City has not
submitted the relevant electric power rates to the electorate
for its approval.
On September 21, 2016, Plaintiffs filed a putative class
action complaint against various City and DWP officials,
alleging that DWP “illegally overcharges its customers” for
electric service and that the defendants were liable to rate-
payers on a variety of federal and state-law grounds.
Plaintiffs sought a preliminary injunction shortly thereafter,
and Defendants opposed that motion and moved to dismiss
or stay the action. Defendants’ motion argued, among other
grounds, that the case should be stayed or dismissed under
Colorado River Conservation District v. United States,
424 U.S. 800 (1976), in light of a parallel state court class
action challenging the legality of the City’s electric rates
under Article XIII C, see Eck v. City of Los Angeles, No.
BC577028 (L.A. Super. Ct.). On November 28, 2016, the
district court stayed this case pending resolution of Eck,
concluding that Plaintiffs’ action “is essentially a dressed-up
version of the Eck complaints.” In light of the stay, the
district court denied Plaintiffs’ request for a preliminary
injunction. Shortly thereafter, the district court denied
Plaintiffs’ separate motion to enjoin the Eck action. Plaintiff
appealed these orders, and we affirmed. See Abcarian v.
Levine, 693 F. App’x 487 (9th Cir. 2017). Our memorandum
affirming the district court’s orders expressed no view of the
underlying merits of Plaintiffs’ claims.
ABCARIAN V. LEVINE 9
After the state court subsequently granted preliminary
approval for a class action settlement in the Eck litigation,
Plaintiffs successfully moved to lift the stay of this action.
Plaintiffs thereafter filed the operative First Amended
Complaint (“FAC”) against the following 27 City officers
and employees (“Defendants”): the five members of the
DWP Board; three “operating head[s] of DWP”; DWP’s in-
house legal counsel; the fifteen members of the City
Council; the Mayor; and the City Attorney and his chief
deputy. The FAC asserts nine claims, three of which
expressly arise under federal law. 4
First, Plaintiffs allege that Defendants are personally
liable under 42 U.S.C. § 1983 in their individual capacities,
on the theory that the City’s unlawful overcharges deprived
Plaintiffs of property without due process of law. Second,
Plaintiffs allege that Defendants are liable for these same due
process violations under 42 U.S.C. § 1983 in their official
capacities “pursuant to the principles set forth in Monell v.
Dep’t of Social Services,” 436 U.S. 658 (1978). Third,
Plaintiffs assert a claim under the civil action provision of
RICO, 18 U.S.C. § 1964. Specifically, Plaintiffs allege that,
by overcharging for electric power services and threatening
to terminate service for customers who did not pay,
Defendants committed multiple “civil RICO predicates,
including at least fraud, wire fraud, mail fraud, extortion, and
obstruction of justice.”
The FAC alleged six additional claims, five of which
(fraud, conspiracy, conversion, breach of contract, and
interference with economic relations) rested solely on state
4
The FAC actually contains two versions of these nine claims,
depending upon whether or not Plaintiffs’ challenges to the overcharges
are found to constitute a challenge to a “rate” order for utility services.
10 ABCARIAN V. LEVINE
law. The last claim, for “extortion,” was expressly “charged
both as a tort, as a violation of the Hobbs Act, [18 U.S.C.
§ 1951,] and as a RICO predicate” (emphasis added). The
district court and the parties construed this claim as alleging
not only a state-law tort claim and a RICO predicate but also
a direct federal cause of action for a violation of the Hobbs
Act.
The district court dismissed the four federal claims with
prejudice and the state law claims without prejudice.
Plaintiffs timely appealed.
II
We first address Plaintiffs’ assertion of a direct cause of
action under the Hobbs Act, 18 U.S.C. § 1951. That statute
imposes criminal punishment on:
Whoever in any way or degree obstructs,
delays, or affects commerce or the movement
of any article or commodity in commerce, by
robbery or extortion or attempts or conspires
so to do, or commits or threatens physical
violence to any person or property in
furtherance of a plan or purpose to do
anything in violation of this section . . . .
18 U.S.C. § 1951(a). Plaintiffs contend that this criminal
statute creates a private civil right of action in favor of those
persons from whom property is taken by extortion, and they
allege that by threatening to turn off Plaintiffs’ utility
services unless they paid DWP’s unlawful utility rates,
Defendants have obtained money from Plaintiffs by
“extortion.” The district court properly dismissed this claim.
ABCARIAN V. LEVINE 11
Prior to its decision in Alexander v. Sandoval, 532 U.S.
275 (2001), the Supreme Court “followed a different
approach to recognizing implied causes of action than it
follows now.” Ziglar v. Abbasi, 137 S. Ct. 1843, 1855
(2017). Under this “‘ancien regime,’ the Court assumed it
to be a proper judicial function to ‘provide such remedies as
are necessary to make effective’ a statute’s purpose,” and the
Court routinely implied causes of action “not explicit in the
statutory text itself.” Id. (citations omitted). But the Court
has now clarified that, “when deciding whether to recognize
an implied cause of action, the ‘determinative’ question is
one of statutory intent.” Id. at 1855–56 (quoting Sandoval,
532 U.S. at 286). That is, a cause of action may now be
recognized under a statute only where the language Congress
used “displays an intent to create not just a private right but
also a private remedy.” Sandoval, 532 U.S. at 286. This
“interpretive inquiry begins with the text and structure of the
statute and ends once it has become clear that Congress did
not provide a cause of action.” Id. at 288 n.7 (citation
omitted); see also Northstar Fin. Advisors, Inc. v. Schwab
Invs., 615 F.3d 1106, 1115 (9th Cir. 2010). Thus, if the
statutory language “itself does not ‘display an intent’ to
create ‘a private remedy,’ then ‘a cause of action does not
exist and courts may not create one, no matter how desirable
that might be as a policy matter, or how compatible with the
statute.’” Ziglar, 137 S. Ct. at 1856 (quoting Sandoval,
532 U.S. at 286–87) (alteration marks omitted) (emphasis
added).
Here, the text of the Hobbs Act merely defines a criminal
offense and the prescribed punishment for that offense, and
it contains no “‘rights-creating’ language” manifesting an
intent to create an accompanying civil private right of action
for victims of extortion (or anyone else, for that matter).
Sandoval, 532 U.S. at 288 (citing Cannon v. University of
12 ABCARIAN V. LEVINE
Chicago, 441 U.S. 677, 690 n.13 (1979)). Indeed, even prior
to Sandoval, the Supreme Court noted that it “has rarely
implied a private right of action under a criminal statute, and
where it has done so ‘there was at least a statutory basis for
inferring that a civil cause of action of some sort lay in favor
of someone.’” Chrysler Corp. v. Brown, 441 U.S. 281, 316
(1979) (quoting Cort v. Ash, 422 U.S. 66, 79 (1975))
(emphasis added).
Plaintiffs nonetheless argue that, as alleged victims of
Hobbs Act extortion, they are “members of the class for
whose especial benefit the statute was enacted,” and a cause
of action in their favor should therefore be implied. But the
fact that a federal criminal statute protects victims of the
offense defined by that statute does not, without more, make
such victims the sort of “‘especial’ beneficiary” who may
assert an implied private civil cause of action. Logan v. U.S.
Bank N.A., 722 F.3d 1163, 1171 (9th Cir. 2013) (quoting
California v. Sierra Club, 451 U.S. 287, 294 (1981)). As we
explained in Logan, if being a victim of the offense
described in a criminal statute were sufficient to assert an
implied cause of action, then “the victim of any crime would
be an especial beneficiary of the criminal statute’s
proscription” who could then assert a civil claim. Id.(emphasis added). The Supreme Court has emphatically
rejected that sweeping view, which “would work a
significant shift in settled interpretive principles regarding
implied causes of action.” Central Bank of Denver, N.A. v.
First Interstate Bank of Denver, N.A., 511 U.S. 164, 191
(1994); see also id. at 190–91 (“There would be no logical
stopping point to this line of reasoning: Every criminal
statute passed for the benefit of some particular class of
persons would carry with it a concomitant civil damages
cause of action.”).
ABCARIAN V. LEVINE 13
Plaintiffs also contend that Congress’s intent to allow
civil actions under the Hobbs Act is confirmed by the fact
that Congress expressly included violations of the Hobbs Act
within the definition of “racketeering activity” for purposes
of a civil RICO claim. 18 U.S.C. § 1961(1). On the
contrary, this fact negates any intention to create a civil
cause of action directly under the Hobbs Act. The inclusion
of Hobbs Act violations as predicates for a civil RICO Act
claim confirms that “when Congress wished to provide a
private damages remedy, it knew how to do so and did so
expressly.” Touche Ross & Co. v. Redington, 442 U.S. 560,
572 (1979). Congress’s failure to include any comparable
language in the Hobbs Act itself “indicates a deliberate
congressional choice with which the courts should not
interfere.” Central Bank, 511 U.S. at 184.
We thus agree with our sister circuits that the Hobbs Act
does not support a private civil right of action, see Eliahu v.
Jewish Agency for Israel, 919 F.3d 709, 713 (2d Cir. 2019);
Wisdom v. First Midwest Bank, of Poplar Bluff, 167 F.3d
402, 408–09 (8th Cir. 1999), and we affirm the dismissal of
Plaintiffs’ Hobbs Act claim. 5
III
We likewise affirm the dismissal of Plaintiffs’ RICO
claim, but we do so for reasons different from those given by
the district court.
5
Moreover, as we later explain in connection with Plaintiffs’ RICO
claim, Plaintiffs have failed to allege “extortion” within the meaning of
the Hobbs Act. See infra section III(B). Thus, even if the Hobbs Act did
provide a private right of action, any claim by Plaintiffs under that statute
would still fail as a matter of law.
14 ABCARIAN V. LEVINE
A
In dismissing the RICO claim, the district court relied
primarily on Ninth Circuit precedent holding that municipal
entities are not subject to liability under RICO. See Pedrina
v. Chun, 97 F.3d 1296, 1300 (9th Cir. 1996); Lancaster
Cmty. Hosp. v. Antelope Valley Hosp. Dist., 940 F.2d 397,
404 (9th Cir. 1991). While the district court was correct in
concluding that this rule would necessarily extend to a suit
against municipal officers in their official capacities, see
Center for Bio-Ethical Reform, Inc. v. Los Angeles County
Sheriff Dep’t, 533 F.3d 780, 799 (9th Cir. 2008) (“An official
capacity suit against a municipal officer is equivalent to a
suit against the entity.”), the rule has no application here,
because Plaintiffs’ RICO claims are asserted against
Defendants in their personal capacities. The district court
thought it was sufficient that the FAC relies upon actions that
Defendants performed within the scope of their official
duties, but that is wrong. In the context of § 1983 actions,
for example, the Supreme Court has expressly rejected the
view that a suit against state officials “in their personal
capacity for actions they take in their official capacity” is
equivalent to a suit against the state itself. Hafer v. Melo,
502 U.S. 21, 27 (1991). We see no reason why a similar
distinction would not apply here.
Indeed, our rationale for concluding that civil RICO does
not apply to municipal entities—that “government entities
are incapable of forming a malicious intent,” see Lancaster
Cmty. Hosp., 940 F.2d at 404—is obviously inapplicable to
natural persons. In invoking this rationale with respect to
RICO, Lancaster Community Hospital relied heavily on City
of Newport v. Fact Concerts, Inc., 453 U.S. 247 (1981),
which rejected punitive damages against municipalities
under § 1983 based in part on contemporaneous
ABCARIAN V. LEVINE 15
“‘respectable authority’ to the effect that municipal
corporations ‘can not, as such, do a criminal act or a willful
and malicious wrong and they cannot therefore be made
liable for exemplary damages.’” City of Newport, 453 U.S.
at 261 (quoting Hunt v. City of Boonville, 65 Mo. 620, 624
(1877)). Importantly, however, City of Newport emphasized
that this rationale did not apply to personal-capacity suits
against municipal officials and that “juries and courts” are
allowed “to assess punitive damages in appropriate
circumstances against the offending official, based on his
personal financial resources.” Id. at 269. The express
distinction drawn by City of Newport further confirms that
our rule categorically exempting municipalities from civil
RICO liability does not extend to personal-capacity suits
against municipal officials acting in their official capacities.
The district court erred in concluding otherwise.
B
Although we thus agree with Plaintiffs that the district
court’s rationale was legally flawed, we nonetheless
conclude that the RICO claim was properly dismissed. See
Steckman v. Hart Brewing, Inc., 143 F.3d 1293, 1295 (9th
Cir. 1998) (“If support exists in the record, the dismissal may
be affirmed on any proper ground, even if the district court
did not reach the issue or relied on different grounds or
reasoning.”). In our view, Plaintiffs’ RICO claim fails as a
matter of law because it does not adequately allege a
cognizable predicate act.
To state a civil RICO claim under 18 U.S.C. § 1964(c),
a plaintiff must allege “(1) conduct (2) of an enterprise
(3) through a pattern (4) of racketeering activity (known as
‘predicate acts’) (5) causing injury to the plaintiff’s ‘business
or property.’” Grimmett v. Brown, 75 F.3d 506, 510 (9th
Cir. 1996) (citations omitted). Plaintiffs’ FAC relies on four
16 ABCARIAN V. LEVINE
specific crimes that fall within the definition of “racketeering
activity,” namely, extortion under California law, see
18 U.S.C. § 1961(1)(A); extortion under the Hobbs Act, id.§ 1961(1)(B) (citing 18 U.S.C. § 1951); mail fraud and wire
fraud, id. (citing 18 U.S.C. §§ 1341, 1343); and obstruction
of justice, id. (citing 18 U.S.C. § 1503). The latter two can
be readily dismissed. Plaintiffs’ allegations of mail and wire
fraud rest on the theory that Defendants caused DWP to send
electric bills that falsely implied that the charges were
consistent with California law. But especially given the
open and public process by which the electric rates were set
and the later transfers were made, Plaintiffs cannot
repackage the underlying legal dispute under Article XIII C
of the California Constitution as mail fraud or wire fraud.
See Miller v. Yokohama Tire Corp., 358 F.3d 616, 620–22
(9th Cir. 2004). As for obstruction of justice, the FAC
contains only a conclusory assertion devoid of factual
enhancement, which is plainly inadequate. Iqbal, 556 U.S.
at 678.
Plaintiffs’ remaining theory—that Defendants’
collection of unlawfully high charges for DWP electric
service amounted to extortion under the Hobbs Act or
California law—fails as a matter of law under Wilkie v.
Robbins, 551 U.S. 537 (2007). In Wilkie, the Supreme Court
held that the Hobbs Act incorporates “the common law
conception of ‘extortion,’” which drew a sharp “line
between public and private beneficiaries” in defining what
counts as “extortion.” Id. at 563–64. Because extortion at
common law “focused on the harm of public corruption, by
the sale of public favors for private gain,” and “not on the
harm caused by overzealous efforts to obtain property on
behalf of the Government,” id. at 564, the Court rejected the
plaintiff’s effort in that case to assert extortion-based civil
RICO claims against government officials who aggressively
ABCARIAN V. LEVINE 17
sought to obtain an easement for the government from the
plaintiff, id. at 541, 567. Plaintiffs’ RICO claim here
likewise rests on the theory that Defendants wrongfully
sought to obtain money for DWP and the City from DWP
customers, and it therefore fails as a matter of law under
Wilkie.
Plaintiffs’ three arguments for evading Wilkie all fail.
First, Plaintiffs’ theory that Defendants’ ordinary municipal
compensation supplies the necessary private gain would
apply to any government official (who is likewise paid by
the government for which he or she acts) and would simply
obliterate Wilkie’s clear “line between public and private
beneficiaries.” 551 U.S. at 564. Second, Plaintiffs argue
that, because Wilkie involved federal officials and the federal
government, its holding does not apply to extortion-based
civil RICO claims against state and local officials. This
ignores the Court’s reasoning in Wilkie, which was based on
the widely accepted common-law understanding of extortion
by officials generally, and not merely by federal officials.
Id. at 564–67. Third, Plaintiffs are wrong in contending that
Wilkie does not preclude their reliance on California-law
extortion; on the contrary, Wilkie rejected a similar effort to
invoke a Wyoming-law predicate in that case. Id. at 567. As
the Court explained, even if the conduct in question is a
crime punishable by more than one year in prison under state
law, it cannot serve as a RICO extortion predicate unless it
satisfies the generic federal definition of extortion. Id.(citing Scheidler v. National Org. for Women, Inc., 537 U.S.
393, 409–10 (2003)). Here, as in Wilkie, “the conduct
alleged does not fit the traditional definition of extortion, so
[Plaintiffs’] RICO claim does not survive on a theory of
state-law derivation.” Id.18 ABCARIAN V. LEVINE
IV
We also agree with the dismissal of Plaintiffs’ § 1983
claims, but our reasoning again differs from the district
court’s. See Steckman, 143 F.3d at 1295. The district court
held that these claims failed as a matter of law on their
merits, but we do not reach that issue because we conclude
that, under the Johnson Act, 28 U.S.C. § 1342, the court
lacked jurisdiction over these claims. 6
The Johnson Act provides, in full:
The district courts shall not enjoin,
suspend or restrain the operation of, or
compliance with, any order affecting rates
chargeable by a public utility and made by a
State administrative agency or a rate-making
body of a State political subdivision, where:
(1) Jurisdiction is based solely on
diversity of citizenship or repugnance of
the order to the Federal Constitution; and,
6
We reject Plaintiffs’ contention that, having lost on this
jurisdictional issue below and not having filed a cross-appeal,
Defendants cannot raise the Johnson Act in this court. Because that Act
goes to the subject matter jurisdiction of the court, see US West, Inc. v.
Nelson, 146 F.3d 718, 721–22 (9th Cir. 1998), it can be raised at any
stage of the case, and we have an independent obligation to consider it,
see Arbaugh v. Y & H Corp., 546 U.S. 500, 514 (2006). We review this
issue de novo, considering not just the complaint, but also the evidence
submitted by the parties in connection with the motion to dismiss under
Federal Rule of Civil Procedure 12(b)(1). See US West, 146 F.3d at 721,
724.
ABCARIAN V. LEVINE 19
(2) The order does not interfere with
interstate commerce; and,
(3) The order has been made after
reasonable notice and hearing; and,
(4) A plain, speedy and efficient
remedy may be had in the courts of such
State.
28 U.S.C. § 1342. Even if Plaintiffs are correct that the three
rate-setting ordinances at issue here violate the California
Constitution, those ordinances on their face are still “order[s]
affecting rates chargeable by a public utility” and they were
“made by . . . a rate-making body of a State political
subdivision.” Id. 7 And although the text of the Johnson Act
mentions only injunctive relief, we have broadly construed
the statute as “preclud[ing] federal court jurisdiction over all
suits affecting state-approved utility rates, including actions
seeking declaratory relief and compensatory damages.”
Brooks v. Sulphur Springs Valley Elec. Coop., 951 F.2d
1050, 1054 (9th Cir. 1991); see also Miller v. N.Y. State Pub.
Serv. Comm’n, 807 F.2d 28, 33 (2d Cir. 1986); Tennyson v.
Gas Serv. Co., 506 F.2d 1135, 1139 (10th Cir. 1974).
Accordingly, the Johnson Act deprived the district court of
subject matter jurisdiction if each of these four conditions is
7
Plaintiffs argued below that this aspect of the Johnson Act was not
satisfied here, because they assertedly challenge only the transfer of the
surplus funds and not the underlying ordinances setting the electric rates.
This argument cannot be squared with Plaintiffs’ theory as to the
underlying illegality of Defendants’ actions, which is that the “charge[s]
imposed” for electric service “exceed the reasonable costs to the local
government of providing the service.” CAL. CONST. art. XIII C, § 1(e)(2)
(emphasis added).
20 ABCARIAN V. LEVINE
satisfied here. We hold that they are with respect to
Plaintiffs’ remaining § 1983 claims.
A
In light of the dismissal of all of Plaintiffs’ federal
statutory claims, see supra sections II and III, we conclude
that jurisdiction here “is based solely on . . . repugnance of
the order[s] to the Federal Constitution.” 28 U.S.C.
§ 1342(1).
As an initial matter, there is no question that Plaintiffs’
§ 1983 claims rest solely on the assertion that Defendants
have deprived Plaintiffs of property without due process of
law in violation of the Fourteenth Amendment. See US
West, 146 F.3d at 723 & n.4 (holding that a § 1983 action
resting solely on constitutional violations satisfies
§ 1342(1)). Although Plaintiffs’ § 1983 claims are thus
“based solely on . . . repugnance of the order[s] to the
Federal Constitution,” 28 U.S.C. § 1342(1), the district court
nonetheless held that the Johnson Act did not apply because,
in light of the two other federal statutory claims asserted in
the FAC, jurisdiction over the action did not rest “solely” on
repugnance to the federal Constitution. In so concluding, the
district court erred.
In barring federal courts from exercising “[j]urisdiction”
to interfere with state rate orders in specified circumstances,
the text of the Johnson Act necessarily focuses on the
jurisdictional basis on which the court is asked to grant such
relief. The happenstance that there may or may not be other
claims in the case is irrelevant—especially given the fact
that, in light of the generous rules governing joinder of
claims, the additional claims asserted in the action may have
nothing to do with state rate orders at all. See Fed. R. Civ.
P. 18; id. advisory committee’s note to 1937 adoption
ABCARIAN V. LEVINE 21
(noting that Rule 18 was “patterned upon [former] Equity
Rule 26”). Indeed, the Johnson Act would be a nullity if it
could be evaded through the simple artifice of adding some
other federal claim to the complaint.
But even if the inquiry under the Johnson Act focuses on
the bases for asserting jurisdiction to grant relief concerning
the rate orders and not on the complaint as a whole, the fact
remains that, alongside their constitutionally-based § 1983
claims, Plaintiffs here did assert federal statutory claims as
a basis for challenging the rates collected by DWP—namely,
their Hobbs Act and RICO claims. Although these latter
claims fail on their merits, jurisdiction over them is not
barred by the Johnson Act, which “does not apply to claims
based upon a congressional statute or federal administrative
rulings, even though these commands are ultimately backed
up by the Supremacy Clause (and are therefore arguably
‘constitutional’ claims).” Public Serv. Co. of N.H. v. Patch,
167 F.3d 15, 25 (1st Cir. 1998); see also International Bhd.
of Elec. Workers v. Public Serv. Comm’n (IBEW), 614 F.2d
206, 209–11 (9th Cir. 1980) (same). Had those federal
statutory claims survived, we would then have to confront
the question whether the Johnson Act should be applied on
a claim-by-claim basis, such that Plaintiffs’ challenge to the
rates could proceed with respect to those statutory claims but
not with respect to the constitutional claims asserted under
§ 1983. Cf. Patch, 167 F.3d at 25 (declining to decide
whether “the statute permits relief based on constitutional
claims, even though other claims may support jurisdiction”).
As explained above, however, those statutory claims have
not survived. As the case is now configured, the sole
remaining federal basis for challenging the rate orders is the
asserted “repugnance of the order[s] to the Federal
Constitution.” 28 U.S.C. § 1342(1). Were the district court
now to exercise jurisdiction to enjoin or otherwise interfere
22 ABCARIAN V. LEVINE
with the rate orders, it would be doing precisely what the
Johnson Act forbids it to do. See IBEW, 614 F.2d at 211(stating that the purpose of the Johnson Act was to stop
federal courts from interfering in state rate challenges,
“‘usually on substantive due process grounds’” (quoting
Swift & Co. v. Wickham, 382 U.S. 111, 127 (1965))).
Accordingly, we agree with the Second Circuit that, at
least where all other federal statutory claims have been
dismissed, the Johnson Act does not permit a plaintiff to
pursue a constitutionally based § 1983 claim challenging
state or local rate orders. See Evans v. N.Y. State Pub. Serv.
Comm’n, 287 F.3d 43, 46–47 (2d Cir. 2002); 8 cf. Hill v.
Kansas Gas Serv. Co., 323 F.3d 858, 868–69 (10th Cir.
2003) (dismissing remaining § 1983 claim on Johnson Act
grounds after dismissing all other federal claims as “wholly
insubstantial and frivolous” (citation and internal quotation
marks omitted)).
We disagree with the district court’s suggestion that this
approach to the Johnson Act would contravene our
observation that “[w]e have construed the term ‘solely’ in
§ 1342(1) narrowly.” Hawaiian Tel. Co. v. Public Utils.
Comm’n, 827 F.2d 1264, 1273 (9th Cir. 1987) (citing IBEW,
614 F.2d at 210–11). In Hawaiian Telephone and IBEW, the
defendants sought to bar a federal statutory challenge to state
rates in federal court on the theory that, because the statute’s
8
Because the Second Circuit’s opinion in Evans affirmed the
Johnson-Act-based dismissal of the § 1983 claims before affirming the
dismissal of the remaining claims on the merits, see 287 F.3d at 46–47,
it is arguable that Evans implicitly endorsed the claim-by-claim approach
to the Johnson Act—i.e., that a constitutional challenge to rates may not
go forward in federal court even if there are other meritorious federal
claims. But the Second Circuit ultimately was not presented with the
latter scenario, and any such implicit view would at best be dicta.
ABCARIAN V. LEVINE 23
preemptive effect ultimately rested on the Supremacy
Clause, the claim was actually a constitutional one for
purposes of § 1342(1). Hawaiian Tel., 827 F.2d at 1273;
IBEW, 614 F.2d at 210–11. We concluded that any such
implicit constitutional underpinning did not detract from the
fundamentally statutory nature of the challenge and
therefore that the challenge was not based “solely” on
repugnance to the federal Constitution. See IBEW, 614 F.2d
at 210–11; see also Hawaiian Tel., 827 F.2d at 1273.
Because these decisions addressed only the proper
jurisdictional characterization of a federal statutory claim,
they had no occasion to address the question whether an
indisputably constitutional claim may go forward even when
it is the “sole” claim remaining in the case. Even under a
narrow construction of “solely,” the solitary federal claim
remaining in this case is “based solely on . . . repugnance of
the order[s] to the Federal Constitution.” 28 U.S.C.
§ 1342(1). See US West, 146 F.3d at 723 & n.4.
B
The remaining three enumerated requirements under the
Johnson Act are all likewise satisfied here.
Although the DWP’s rates for electrical service to its
customers may have an effect on interstate commerce, we
have held that “it is not enough that an intrastate rate-making
policy merely ‘affect[s]’ interstate commerce.” US West,
146 F.3d at 724. Rather, the Johnson Act bars jurisdiction
unless the challenged orders “interfere with interstate
commerce.” 28 U.S.C. § 1342(2) (emphasis added).
Defendants presented evidence confirming that the rates
here are all for intrastate service, and as a general matter,
such state or local “orders setting intrastate [utility] rates do
not interfere with interstate commerce.” US West, 146 F.3d
at 724. In US West, we placed the burden on the plaintiffs to
24 ABCARIAN V. LEVINE
rebut this general presumption that intrastate rate orders do
not interfere with interstate commerce, and we found that the
plaintiffs there failed to carry that burden. Id. Plaintiffs here
relied below on evidence showing that DWP obtains
electricity from out of state and that higher electric rates lead
to “out-of-state tourists” being “charged higher prices by the
businesses they patronize,” but these considerations merely
establish an effect on interstate commerce, not interference.
Consequently, the Johnson Act’s requirement that the orders
must not interfere with interstate commerce is satisfied here.
The official records of the City Council confirm that the
three rate-setting ordinances at issue were indisputably
“made after reasonable notice and hearing.” 28 U.S.C.
§ 1342(3); see supra section I(A). Plaintiffs below made no
effort to show otherwise.
Finally, we conclude that a “plain, speedy and efficient
remedy may be had in the courts” of California. 28 U.S.C.
§ 1342(4). In US West, we described this element as
follows:
Succinctly put, the state remedy is “plain” as
long as the remedy is not uncertain or unclear
from the outset; “speedy” if it does not entail
a significantly greater delay than a
corresponding federal procedure; and
“efficient” if the pursuit of it does not
generate ineffectual activity or unnecessary
expenditures of time or energy.
146 F.3d at 724–25. Given that other DWP customers have
challenged the same ordinances under Article XIII C in state
court through the Eck litigation, see supra section I(B), the
California courts clearly provide for a plain, speedy, and
ABCARIAN V. LEVINE 25
efficient remedy under these standards. US West, 146 F.3d
at 725.
Because all of the elements of the Johnson Act are
satisfied here, the district court lacked jurisdiction over
Plaintiffs’ § 1983 claims.
V
Plaintiffs have provided no basis for concluding that any
of these deficiencies could be cured by an amendment of the
complaint, and based upon our own thorough review of the
record, we agree that amendment would be futile. The
district court therefore did not err in denying leave to amend
and in dismissing Plaintiffs’ federal claims with prejudice.
See Thinket Ink Info. Res., Inc. v. Sun Microsystems, Inc.,
368 F.3d 1053, 1061 (9th Cir. 2004).
The judgment of the district court is AFFIRMED.