Responsive Brief to Plaintiff's Supplemental Brief in Opposition to 24] MOTION to Dismiss First Amended Complaint by State Defendants ) filed by Jacob A Appelsmith, Edmund Brown, Jr, William Haraf, Kamala Harris, Traci Stevens, Robert Venchiarutti. (Attachments: # (1) Certificate/Proof of Service)(Related document(s)[24]) (Marcroft, Ryan) (Filed on 4/17/2015) Modified text on 4/20/2015 (dhmS, COURT STAFF).
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Page 1 Case5:11-cv-05496-HRL Document65 Filed04/17/15 Page1 of 7
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KAMALA D. HARRIS
Attorney General of California
MARC A. LEFORESTIER
Supervising Deputy Attorney General
RYAN MARCROFT
Deputy Attorney General
State Bar No. 230952
1300 I Street, Suite 125
P.O. Box 944255
Sacramento, CA 94244-2550
Telephone: (916) 323-5313
Fax: (916) 324-8835
E-mail: Ryan.Marcroft@doj.ca.gov
Attorneys for All Defendants
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IN THE UNITED STATES DISTRICT COURT
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FOR THE NORTHERN DISTRICT OF CALIFORNIA
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SAN JOSE DIVISION
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13
Think Computer Corporation,
5:11-cv-05496-HRL
14
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v.
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Plaintiff, DEFENDANTS’ RESPONSIVE BRIEF
TO PLAINTIFF’S SUPPLEMENTAL
BRIEF IN OPPOSITION TO
DEFENDANTS’ MOTION TO DISMISS
ROBERT VENCHIARUTTI, in his official
capacity as Deputy Commissioner of the
California Department of Financial
Institutions; WILLIAM HARAF, in his
official capacity as Commissioner of the
California Department of Financial
Institutions; TRACI STEVENS, in her
official capacity as Acting Secretary of the
California Business, Transportation and
Housing Agency; JACOB A.
APPELSMITH, in his official capacity as
Senior Advisor to the Governor of the State
of California; EDMUND G. BROWN, JR.,
in his official capacity as Governor of the
State of California; and KAMALA
HARRIS, in her official capacity as
Attorney General of the State of California,
Judge:
The Honorable Howard R.
Lloyd
Trial Date:
Not Set
Action Filed: November 14, 2011
Defendants.
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Defendants’ Responsive Brief To Plaintiff’s Supplemental Brief In Opposition
To Defendants’ Motion To Dismiss (5:11-cv-05496-HRL)Page 2 Case5:11-cv-05496-HRL Document65 Filed04/17/15 Page2 of 7
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INTRODUCTION
2
Think provides no meaningful support for its assertion that the amendments to the Money
3
Transmission Act “either increase the viability of Plaintiff’s constitutional claims or have no
4
effect on the case.” To the contrary, the arguments and concessions in Think’s brief underscore
5
that this action is not justiciable and without merit.
6
Think asserts that the Money Transmission Act does not apply to it, now that the
7
Legislature has carved out an exemption for certain goods or services payment transactions.
8
Because the exemption was enacted after this lawsuit commenced, and Think has not applied for
9
a license, the Department of Business Oversight (Department) never received sufficient
10
information or had an opportunity to determine whether Think’s activities would now fall within
11
the exemption. But absent an assertion by Think that it is actually subject to the law, it is clear
12
that Think’s challenges to the Money Transmission Act are merely abstract disagreements about
13
how the law might apply in hypothetical circumstances.
14
Think also argues that the amendments to California Financial Code section 2040
15
“increase the validity of [its] facial and as-applied constitutional challenges.” But Think’s own
16
arguments show that section 2040 is not subject to a facial challenge, and such a challenge would
17
be without merit in any event because the law can be applied constitutionally. Think’s “as-
18
applied” challenge is unripe because amended section 2040 has not been applied to Think.
19
Think senses that its claims are not justiciable now that the law has been amended, and
20
suggests that its arguments about the former law and its prayer for attorney fees “remain valid.”
21
But without a current justiciable or meritorious claim, there is no relief for this Court to grant, and
22
Think would not be entitled to fees. Accordingly, this action must be dismissed.
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I.
ARGUMENT
THIS ACTION IS PREMATURE IN LIGHT OF THE NEW LICENSING EXEMPTION
Think asserts that the licensing exemption in section 2010(l) “is so broad as to render the
25
Act meaningless,” and that under its “plain language . . ., a payment processor, like Plaintiff, . . .
26
is exempt from the MTA.” (Docket No. 63, p. 3.) Defendants do not agree that the new
27
exemption renders the Money Transmission Act “meaningless,” but agree that it renders all of
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Think’s claims too abstract and premature for this Court’s review.
2
Section 2010(l) wholly exempts certain goods or services payment activities from the
3
Money Transmission Act. Think has the burden of showing that this Court retains jurisdiction
4
over its claims, but Think asserts that it is not presently subject to the amended law. Kokkonen v.
5
Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994); Thornhill Publ’g. Co., Inc. v. Gen. Tel.
6
& Elecs., 594 F.2d 730, 733 (9th Cir. 1979). Because the exemption was enacted after this
7
lawsuit commenced, and Think has yet to apply for a license, the Department has never received
8
sufficient information or determined whether Think’s activities would now qualify for the
9
exemption. It never took any evidence, made any findings of fact or issued any orders on the
10
subject. This factual development and legal evaluation would be performed as part of the license
11
application process. Cal. Fin. Code, §§ 2032(b)(3), (21).
12
If the matter is not dismissed, however, the Court would be required to decide in the first
13
instance the scope of the state’s new licensing exemption and whether it applies to Plaintiff—but
14
without the benefit of the state agency’s prior findings and application of state law. See Pub.
15
Serv. Comm’n of Utah v. Wycoff Co., Inc., 344 U.S. 237, 247 (1952). In view of Think’s own
16
assertion that it is not subject to the law, it should not be permitted to skip the state process and
17
remove the Department’s ability to first determine the statute’s application to its business activity.
18
II.
19
THINK’S “FACIAL” AND “AS-APPLIED” CHALLENGES TO NEW SECTION 2040 ARE
NOT JUSTICIABLE AND WITHOUT MERIT
Think does not address the material changes to the law that render its challenge moot, and
20
instead asserts in conclusory fashion that the current version of section 2040 is unconstitutional
21
because it vests discretion in the Commissioner to decide on a case-by-case basis the appropriate
22
amount of tangible shareholder equity necessary for licensure. (Docket No. 63, p. 2.) As Think’s
23
own authorities demonstrate, however, Think cannot maintain a “facial” challenge to section
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2040. In all events, a facial challenge would fail on the merits. And Think has no “as-applied”
25
challenge, because the amended statute has never been applied to Think.
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A.
The Money Transmission Act Is Not Subject to a Facial Challenge
Think cites to City of Lakewood v. Plain Dealer Publ’g. Co., 486 U.S. 750, 769-770
(1988), in support of its claim that the current version of section 2040 is unconstitutional because
2
Defendants’ Responsive Brief To Plaintiff’s Supplemental Brief In Opposition
To Defendants’ Motion To Dismiss (5:11-cv-05496-HRL)Page 4 Case5:11-cv-05496-HRL Document65 Filed04/17/15 Page4 of 7
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it vests discretion in the Commissioner. City of Lakewood does not support Think’s claims, and
2
instead confirms that Think must apply for a license before seeking federal judicial review.
3
The first issue before the court in City of Lakewood was whether a newspaper could bring
4
a facial First Amendment challenge to a city ordinance that gave the mayor discretionary
5
authority to grant or deny annual newsrack permit applications. City of Lakewood, 486 U.S. at
6
753, 755. The court noted that in the First Amendment context, “our cases have long held that
7
when a licensing statute allegedly vests unbridled discretion in a government official over
8
whether to permit or deny expressive activity, one who is subject to the law may challenge it
9
facially without the necessity of first applying for, and being denied, a license.” Id. at 755-756.
10
The court, however, distinguished between laws that do not implicate special First Amendment
11
concerns, and are therefore not “vulnerable to facial challenge,” and those that are subject to a
12
facial challenge because they implicate the First Amendment: “a facial challenge lies whenever a
13
licensing law gives a government official or agency substantial power to discriminate based on
14
the content or viewpoint of speech by suppressing disfavored speech or disliked speakers.” Id. at
15
759. According to the court, discretionary licensing statutes that do not raise these First
16
Amendment concerns do not “warrant judicial intervention prior to an allegation of actual
17
misuse.” Id. at 761; see also id. at 776 & n. 4 (White, J., dissenting) (ripeness concerns animate
18
“the usual rule . . . that a law requiring permits for specified activities is not unconstitutional
19
because it vests discretion in administrative officials to grant or deny the permit. The
20
Constitution does not require the Court to assume that such discretion will be illegally
21
exercised”).
22
The Ninth Circuit Court of Appeals also recognized the distinction between licensing
23
statutes that implicate the First Amendment and those that do not: “a facial challenge is proper
24
only if the statute by its terms seeks to regulate spoken words or patently expressive or
25
communicative conduct, such as picketing or handbilling, [citations], or if the statute significantly
26
restricts opportunities for expression.” S. Oregon Barter Fair v. Jackson Cnty., 372 F.3d 1128,
27
1135 (9th Cir. 2004) (italics added). “‘[L]aws of general application that are not aimed at
28
conduct commonly associated with expression and do not permit licensing determinations to be
3
Defendants’ Responsive Brief To Plaintiff’s Supplemental Brief In Opposition
To Defendants’ Motion To Dismiss (5:11-cv-05496-HRL)Page 5 Case5:11-cv-05496-HRL Document65 Filed04/17/15 Page5 of 7
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made on the basis of ongoing expression or the words about to be spoken,’ such as laws requiring
2
building permits, pose little danger of censorship and may therefore be challenged only by the
3
usual as-applied method.” Id. (quoting City of Lakewood, 489 U.S. at 760-761) (italics added).
4
Here, Think does not challenge section 2040 on First Amendment grounds, and section
5
2040 does not implicate the First Amendment in any event. Accordingly, there is no basis to
6
apply the special First Amendment rule in City of Lakewood and depart from the usual rule that
7
Think must file an application and get a final agency decision to ripen its claims. See Pac. Legal
8
Found. v. State Energy Resources Conserv. & Dev. Comm’n, 659 F.2d 903, 916 (9th Cir. 1982)
9
(“[a] case or controversy is not presented simply because a party is subject to a general regulatory
10
process which, when applied to the specific facts developed in some future administrative
11
proceeding, might cause a state agency to take a particular action which some court might
12
thereafter determine to be unconstitutional”).
13
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B.
Think’s “Facial” Challenge to New Section 2040 Would Fail on the Merits
Even If the Court Considered It
Think could not succeed on a facial challenge even if it were proper. Facial challenges are
15
“the most difficult challenge[s] to mount successfully, since the challenger must establish that no
16
set of circumstances exists under which the Act would be valid. The fact that the [legislative act]
17
might operate unconstitutionally in some conceivable set of circumstances is insufficient to
18
render it wholly invalid.” U.S. v. Salerno, 481 U.S. 739, 745 (1987).
19
Think’s facial challenge to amended section 2040 would fail because Think cannot show
20
that it is unconstitutional in all of its applications. The amendments provide the Commissioner
21
with discretion to adjust the required amount of shareholder equity based on ten enumerated
22
criteria, in addition to “[a]ny other factor the commissioner considers relevant.” Cal. Fin. Code, §
23
2040(c). Contrary to Think’s assertion, the criteria are clear, and Think has offered no
24
explanation for why the criteria are uncertain. Moreover, not all of the criteria would necessarily
25
apply in every case. For instance, in cases where there are no other relevant factors for the
26
Commissioner to consider, this element of the statute would not apply to an applicant, and
27
therefore could not render the statute facially invalid in all circumstances.
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C.
Think Has No “As-Applied” Challenge to New Section 2040 Because It Has
Not Yet Applied For a License
Think also argues that the amendments to section 2040 “increase the validity of Plaintiff’s
. . . as-applied constitutional challenges.” (Docket No. 63, p. 1.) But Think has no as-applied
challenge to section 2040, because the amended statute has never been applied to Think.
Section 2040 applies to applicants for licensure and licensees. An applicant is “a person
that files an application for a license . . . under this division.” Cal. Fin. Code, § 2003(c). Section
2040(a) permits the Commissioner to determine the appropriate amount of equity necessary for
licensure applicants between $250,000 and $500,000, depending on estimated or actual
transaction volume. Cal. Fin. Code, § 2040(a). Think has not applied for a license since the
Legislature amended the statute, and it is impossible to know how the Commissioner might
exercise her discretion in the future with respect to Think’s yet-to-be-submitted application. (See
FAC, ¶ 72.) Because section 2040 has not been applied to Think, it cannot make out any ripe
claims to section 2040. See Pac. Legal Found., 659 F.2d at 916.
III. THINK’S PRIOR CHALLENGES TO THE FORMER LAW AND ITS PRAYER FOR
ATTORNEY FEES DO NOT SAVE ITS CASE
Think senses that its claims are not justiciable, and asserts that even if the Court concludes
that it has no current viable claim, its claims prior to December 31, 2014 and its prayer for
attorney fees “remain valid.” (Docket No. 63, p. 3.) This is not correct. The law has changed,
and there is no basis for the Court to render an advisory opinion about the former law or to
provide prospective relief as to former statutes. Green v. Mansour, 474 U.S. 64, 73 (1985)
(“There is no claimed continuing violation of federal law, and therefore no occasion to issue an
injunction”). Moreover, Think would only have a claim to attorney fees if it prevailed on the
merits of its case. Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep’t of Health & Human Res., 532 U.S. 598, 604-606 (2001) (plaintiff who obtains no judicial relief does not qualify as
prevailing party). But because Think’s claims are not justiciable and meritless, Think’s prayer for
attorney fees does not save its case.
CONCLUSION
Defendants respectfully request that the Court dismiss this action with prejudice.
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Dated: April 17, 2015
Respectfully submitted,
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KAMALA D. HARRIS
Attorney General of California
MARC A. LEFORESTIER
Supervising Deputy Attorney General
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s/ Ryan Marcroft
RYAN MARCROFT
Deputy Attorney General
Attorneys for Defendant
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Defendants’ Responsive Brief To Plaintiff’s Supplemental Brief In Opposition
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Case5:11-cv-05496-HRL Document65 Filed04/17/15 Page1 of 7
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KAMALA D. HARRIS
Attorney General of California
MARC A. LEFORESTIER
Supervising Deputy Attorney General
RYAN MARCROFT
Deputy Attorney General
State Bar No. 230952
1300 I Street, Suite 125
P.O. Box 944255
Sacramento, CA 94244-2550
Telephone: (916) 323-5313
Fax: (916) 324-8835
E-mail: Ryan.Marcroft@doj.ca.gov
Attorneys for All Defendants
8
9
IN THE UNITED STATES DISTRICT COURT
10
FOR THE NORTHERN DISTRICT OF CALIFORNIA
11
SAN JOSE DIVISION
12
13
Think Computer Corporation,
5:11-cv-05496-HRL
14
15
v.
16
17
18
19
20
21
22
23
24
25
26
Plaintiff, DEFENDANTS’ RESPONSIVE BRIEF
TO PLAINTIFF’S SUPPLEMENTAL
BRIEF IN OPPOSITION TO
DEFENDANTS’ MOTION TO DISMISS
ROBERT VENCHIARUTTI, in his official
capacity as Deputy Commissioner of the
California Department of Financial
Institutions; WILLIAM HARAF, in his
official capacity as Commissioner of the
California Department of Financial
Institutions; TRACI STEVENS, in her
official capacity as Acting Secretary of the
California Business, Transportation and
Housing Agency; JACOB A.
APPELSMITH, in his official capacity as
Senior Advisor to the Governor of the State
of California; EDMUND G. BROWN, JR.,
in his official capacity as Governor of the
State of California; and KAMALA
HARRIS, in her official capacity as
Attorney General of the State of California,
Judge:
The Honorable Howard R.
Lloyd
Trial Date:
Not Set
Action Filed: November 14, 2011
Defendants.
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28
Defendants’ Responsive Brief To Plaintiff’s Supplemental Brief In Opposition
To Defendants’ Motion To Dismiss (5:11-cv-05496-HRL)
PDF Page 3
Case5:11-cv-05496-HRL Document65 Filed04/17/15 Page2 of 7
1
INTRODUCTION
2
Think provides no meaningful support for its assertion that the amendments to the Money
3
Transmission Act “either increase the viability of Plaintiff’s constitutional claims or have no
4
effect on the case.” To the contrary, the arguments and concessions in Think’s brief underscore
5
that this action is not justiciable and without merit.
6
Think asserts that the Money Transmission Act does not apply to it, now that the
7
Legislature has carved out an exemption for certain goods or services payment transactions.
8
Because the exemption was enacted after this lawsuit commenced, and Think has not applied for
9
a license, the Department of Business Oversight (Department) never received sufficient
10
information or had an opportunity to determine whether Think’s activities would now fall within
11
the exemption. But absent an assertion by Think that it is actually subject to the law, it is clear
12
that Think’s challenges to the Money Transmission Act are merely abstract disagreements about
13
how the law might apply in hypothetical circumstances.
14
Think also argues that the amendments to California Financial Code section 2040
15
“increase the validity of [its] facial and as-applied constitutional challenges.” But Think’s own
16
arguments show that section 2040 is not subject to a facial challenge, and such a challenge would
17
be without merit in any event because the law can be applied constitutionally. Think’s “as-
18
applied” challenge is unripe because amended section 2040 has not been applied to Think.
19
Think senses that its claims are not justiciable now that the law has been amended, and
20
suggests that its arguments about the former law and its prayer for attorney fees “remain valid.”
21
But without a current justiciable or meritorious claim, there is no relief for this Court to grant, and
22
Think would not be entitled to fees. Accordingly, this action must be dismissed.
23
24
I.
ARGUMENT
THIS ACTION IS PREMATURE IN LIGHT OF THE NEW LICENSING EXEMPTION
Think asserts that the licensing exemption in section 2010(l) “is so broad as to render the
25
Act meaningless,” and that under its “plain language . . ., a payment processor, like Plaintiff, . . .
26
is exempt from the MTA.” (Docket No. 63, p. 3.) Defendants do not agree that the new
27
exemption renders the Money Transmission Act “meaningless,” but agree that it renders all of
28
1
Defendants’ Responsive Brief To Plaintiff’s Supplemental Brief In Opposition
To Defendants’ Motion To Dismiss (5:11-cv-05496-HRL)
PDF Page 4
Case5:11-cv-05496-HRL Document65 Filed04/17/15 Page3 of 7
1
Think’s claims too abstract and premature for this Court’s review.
2
Section 2010(l) wholly exempts certain goods or services payment activities from the
3
Money Transmission Act. Think has the burden of showing that this Court retains jurisdiction
4
over its claims, but Think asserts that it is not presently subject to the amended law. Kokkonen v.
5
Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994); Thornhill Publ’g. Co., Inc. v. Gen. Tel.
6
& Elecs., 594 F.2d 730, 733 (9th Cir. 1979). Because the exemption was enacted after this
7
lawsuit commenced, and Think has yet to apply for a license, the Department has never received
8
sufficient information or determined whether Think’s activities would now qualify for the
9
exemption. It never took any evidence, made any findings of fact or issued any orders on the
10
subject. This factual development and legal evaluation would be performed as part of the license
11
application process. Cal. Fin. Code, §§ 2032(b)(3), (21).
12
If the matter is not dismissed, however, the Court would be required to decide in the first
13
instance the scope of the state’s new licensing exemption and whether it applies to Plaintiff—but
14
without the benefit of the state agency’s prior findings and application of state law. See Pub.
15
Serv. Comm’n of Utah v. Wycoff Co., Inc., 344 U.S. 237, 247 (1952). In view of Think’s own
16
assertion that it is not subject to the law, it should not be permitted to skip the state process and
17
remove the Department’s ability to first determine the statute’s application to its business activity.
18
II.
19
THINK’S “FACIAL” AND “AS-APPLIED” CHALLENGES TO NEW SECTION 2040 ARE
NOT JUSTICIABLE AND WITHOUT MERIT
Think does not address the material changes to the law that render its challenge moot, and
20
instead asserts in conclusory fashion that the current version of section 2040 is unconstitutional
21
because it vests discretion in the Commissioner to decide on a case-by-case basis the appropriate
22
amount of tangible shareholder equity necessary for licensure. (Docket No. 63, p. 2.) As Think’s
23
own authorities demonstrate, however, Think cannot maintain a “facial” challenge to section
24
2040. In all events, a facial challenge would fail on the merits. And Think has no “as-applied”
25
challenge, because the amended statute has never been applied to Think.
26
27
28
A.
The Money Transmission Act Is Not Subject to a Facial Challenge
Think cites to City of Lakewood v. Plain Dealer Publ’g. Co., 486 U.S. 750, 769-770
(1988), in support of its claim that the current version of section 2040 is unconstitutional because
2
Defendants’ Responsive Brief To Plaintiff’s Supplemental Brief In Opposition
To Defendants’ Motion To Dismiss (5:11-cv-05496-HRL)
PDF Page 5
Case5:11-cv-05496-HRL Document65 Filed04/17/15 Page4 of 7
1
it vests discretion in the Commissioner. City of Lakewood does not support Think’s claims, and
2
instead confirms that Think must apply for a license before seeking federal judicial review.
3
The first issue before the court in City of Lakewood was whether a newspaper could bring
4
a facial First Amendment challenge to a city ordinance that gave the mayor discretionary
5
authority to grant or deny annual newsrack permit applications. City of Lakewood, 486 U.S. at
6
753, 755. The court noted that in the First Amendment context, “our cases have long held that
7
when a licensing statute allegedly vests unbridled discretion in a government official over
8
whether to permit or deny expressive activity, one who is subject to the law may challenge it
9
facially without the necessity of first applying for, and being denied, a license.” Id. at 755-756.
10
The court, however, distinguished between laws that do not implicate special First Amendment
11
concerns, and are therefore not “vulnerable to facial challenge,” and those that are subject to a
12
facial challenge because they implicate the First Amendment: “a facial challenge lies whenever a
13
licensing law gives a government official or agency substantial power to discriminate based on
14
the content or viewpoint of speech by suppressing disfavored speech or disliked speakers.” Id. at
15
759. According to the court, discretionary licensing statutes that do not raise these First
16
Amendment concerns do not “warrant judicial intervention prior to an allegation of actual
17
misuse.” Id. at 761; see also id. at 776 & n. 4 (White, J., dissenting) (ripeness concerns animate
18
“the usual rule . . . that a law requiring permits for specified activities is not unconstitutional
19
because it vests discretion in administrative officials to grant or deny the permit. The
20
Constitution does not require the Court to assume that such discretion will be illegally
21
exercised”).
22
The Ninth Circuit Court of Appeals also recognized the distinction between licensing
23
statutes that implicate the First Amendment and those that do not: “a facial challenge is proper
24
only if the statute by its terms seeks to regulate spoken words or patently expressive or
25
communicative conduct, such as picketing or handbilling, [citations], or if the statute significantly
26
restricts opportunities for expression.” S. Oregon Barter Fair v. Jackson Cnty., 372 F.3d 1128,
27
1135 (9th Cir. 2004) (italics added). “‘[L]aws of general application that are not aimed at
28
conduct commonly associated with expression and do not permit licensing determinations to be
3
Defendants’ Responsive Brief To Plaintiff’s Supplemental Brief In Opposition
To Defendants’ Motion To Dismiss (5:11-cv-05496-HRL)
PDF Page 6
Case5:11-cv-05496-HRL Document65 Filed04/17/15 Page5 of 7
1
made on the basis of ongoing expression or the words about to be spoken,’ such as laws requiring
2
building permits, pose little danger of censorship and may therefore be challenged only by the
3
usual as-applied method.” Id. (quoting City of Lakewood, 489 U.S. at 760-761) (italics added).
4
Here, Think does not challenge section 2040 on First Amendment grounds, and section
5
2040 does not implicate the First Amendment in any event. Accordingly, there is no basis to
6
apply the special First Amendment rule in City of Lakewood and depart from the usual rule that
7
Think must file an application and get a final agency decision to ripen its claims. See Pac. Legal
8
Found. v. State Energy Resources Conserv. & Dev. Comm’n, 659 F.2d 903, 916 (9th Cir. 1982)
9
(“[a] case or controversy is not presented simply because a party is subject to a general regulatory
10
process which, when applied to the specific facts developed in some future administrative
11
proceeding, might cause a state agency to take a particular action which some court might
12
thereafter determine to be unconstitutional”).
13
14
B.
Think’s “Facial” Challenge to New Section 2040 Would Fail on the Merits
Even If the Court Considered It
Think could not succeed on a facial challenge even if it were proper. Facial challenges are
15
“the most difficult challenge[s] to mount successfully, since the challenger must establish that no
16
set of circumstances exists under which the Act would be valid. The fact that the [legislative act]
17
might operate unconstitutionally in some conceivable set of circumstances is insufficient to
18
render it wholly invalid.” U.S. v. Salerno, 481 U.S. 739, 745 (1987).
19
Think’s facial challenge to amended section 2040 would fail because Think cannot show
20
that it is unconstitutional in all of its applications. The amendments provide the Commissioner
21
with discretion to adjust the required amount of shareholder equity based on ten enumerated
22
criteria, in addition to “[a]ny other factor the commissioner considers relevant.” Cal. Fin. Code, §
23
2040(c). Contrary to Think’s assertion, the criteria are clear, and Think has offered no
24
explanation for why the criteria are uncertain. Moreover, not all of the criteria would necessarily
25
apply in every case. For instance, in cases where there are no other relevant factors for the
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Commissioner to consider, this element of the statute would not apply to an applicant, and
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therefore could not render the statute facially invalid in all circumstances.
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Defendants’ Responsive Brief To Plaintiff’s Supplemental Brief In Opposition
To Defendants’ Motion To Dismiss (5:11-cv-05496-HRL)
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C.
Think Has No “As-Applied” Challenge to New Section 2040 Because It Has
Not Yet Applied For a License
Think also argues that the amendments to section 2040 “increase the validity of Plaintiff’s
. . . as-applied constitutional challenges.” (Docket No. 63, p. 1.) But Think has no as-applied
challenge to section 2040, because the amended statute has never been applied to Think.
Section 2040 applies to applicants for licensure and licensees. An applicant is “a person
that files an application for a license . . . under this division.” Cal. Fin. Code, § 2003(c). Section
2040(a) permits the Commissioner to determine the appropriate amount of equity necessary for
licensure applicants between $250,000 and $500,000, depending on estimated or actual
transaction volume. Cal. Fin. Code, § 2040(a). Think has not applied for a license since the
Legislature amended the statute, and it is impossible to know how the Commissioner might
exercise her discretion in the future with respect to Think’s yet-to-be-submitted application. (See
FAC, ¶ 72.) Because section 2040 has not been applied to Think, it cannot make out any ripe
claims to section 2040. See Pac. Legal Found., 659 F.2d at 916.
III. THINK’S PRIOR CHALLENGES TO THE FORMER LAW AND ITS PRAYER FOR
ATTORNEY FEES DO NOT SAVE ITS CASE
Think senses that its claims are not justiciable, and asserts that even if the Court concludes
that it has no current viable claim, its claims prior to December 31, 2014 and its prayer for
attorney fees “remain valid.” (Docket No. 63, p. 3.) This is not correct. The law has changed,
and there is no basis for the Court to render an advisory opinion about the former law or to
provide prospective relief as to former statutes. Green v. Mansour, 474 U.S. 64, 73 (1985)
(“There is no claimed continuing violation of federal law, and therefore no occasion to issue an
injunction”). Moreover, Think would only have a claim to attorney fees if it prevailed on the
merits of its case. Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep’t of Health & Human Res.,
532 U.S. 598, 604-606 (2001) (plaintiff who obtains no judicial relief does not qualify as
prevailing party). But because Think’s claims are not justiciable and meritless, Think’s prayer for
attorney fees does not save its case.
CONCLUSION
Defendants respectfully request that the Court dismiss this action with prejudice.
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Defendants’ Responsive Brief To Plaintiff’s Supplemental Brief In Opposition
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Dated: April 17, 2015
Respectfully submitted,
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KAMALA D. HARRIS
Attorney General of California
MARC A. LEFORESTIER
Supervising Deputy Attorney General
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s/ Ryan Marcroft
RYAN MARCROFT
Deputy Attorney General
Attorneys for Defendant
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Defendants’ Responsive Brief To Plaintiff’s Supplemental Brief In Opposition
To Defendants’ Motion To Dismiss (5:11-cv-05496-HRL)
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