People of the State of California et al vs Vincent Armenta et al

Case Number

23CV05728

Case Type

Hearing Date / Time

Mon, 06/02/2025 - 10:00

Nature of Proceedings

CMC; Motion: Quash and/or Dismiss First Amended Complaint - No Jurisdiction

Tentative Ruling

Steve Pappas v. Vincent Armenta, et al.                             

Case No. 23CV05728

           

Hearing Date: June 2, 2025                                                    

HEARING:              Motion To Quash And/Or Dismiss First Amended Complaint – No Jurisdiction

ATTORNEYS:        For Qui Tam Plaintiff Steve Pappas: Matthew Clarke, Kelley Clarke, PC

                                    For Defendants Kenny Kahn, Vincent Armenta, and John Elliott: Richard I. Wideman; Matthew Benedetto, Wilmer Cutler Pickering Half & Dorr LLP

TENTATIVE RULING:

The motion of defendants to quash or dismiss plaintiff’s first amended complaint is granted, in part. The court orders this action dismissed without prejudice. Defendants shall submit a corrected proposed order that conforms to the court’s ruling herein.

Background:

On August 14, 2024, qui tam plaintiff Steve Pappas filed a first amended complaint (the FAC) in this action against defendants Vincent Armenta (Armenta), Kenneth Khan (Khan), and John Elliott (Elliot) (collectively, defendants), alleging four separate causes of action under Government Code section 12651, subdivision (a)(1), (2), (4), and (8).

The causes of action alleged in the FAC, which is the operative pleading, arise from what plaintiff Pappas contends are violations of the False Claims Act (the Act), codified as Government Code section 12650 et seq., with respect to claims purportedly made by defendants regarding their custody and control of underground water reserves in the Santa Ynez Valley (the Valley), and whether 75 and three-quarters acres of land (the Land) in the Valley, on which a casino is located, is held in trust by the United States. (FAC, ¶¶ 1-2.) As alleged in the FAC:

Elliot is the Chief Executive Officer of “Chumash Enterprises”, which has a principal place of business at 585 McMurray Road in Buellton, California. (FAC, ¶¶ 3-4 & 9.) Khan and Armenta are current or former agents, executives, and officials of the Santa Ynez Band of Chumash Indians (the Band), which built a casino and hotel enterprise (the Casino) on the Land. (FAC, ¶¶ 3 & 5-6.) Khan and Armenta also acted as employees or officials of Chumash Enterprises. (FAC, ¶ 69.)

In 2016, the Band sought to expand the Casino’s operation on the Land. (FAC, ¶¶ 7 & 50.) Among other things, the Band published an Environmental Evaluation (the EE), as required under a “Compact” between the Band and the State of California, in which the Band claimed a right to groundwater under the Land, that the Land is held in trust by the United States, and that state and local regulations and various financial obligations do not apply to the Land. (FAC, ¶¶ 7 & 51.)

Armento signed a document in which Armento adopted and approved the statements made by the Band in the EE. (FAC, ¶ 55.) As the Chief Executive Officer of Chumash Enterprises, Elliot claimed that he had the right to use and control water resources in the Valley, and that the Land is held in trust by the United States. (FAC, ¶¶ 63-64.)

The State of California relied on the claims described above by, among other things, granting the Band benefits under the Compact, including the right to operate the Casino on the Land. (FAC, ¶¶ 71 & 73.) In addition, the claims described above, including those asserted or adopted by Khan, Elliot, and Armenta, enabled the Band to build and expand the Casino on the Land, and to avoid financial obligations owed to various political subdivisions including the State of California, as well as zoning and land use regulations. (FAC, ¶¶ 11, 55, 69, & 73.)

Historical and current public records show that the Land is held in fee simple by the United States, and not held in trust. (FAC, ¶¶ 11 & 56-61.) In addition, a “CLTA Title Guarantee” issued by First American Title Insurance Company shows that the tract on which the Casino was constructed is held in fee by the United States, and a preliminary title report issued by Chicago Title shows that the Casino is located on a parcel of the Land which is owned by the United States in fee. (FAC, ¶¶ 56-59 & § 15 [p. 16].) Further, the United States made a judicial admission during a court proceeding that the Land is held in fee simple. (FAC, ¶¶ 60-61.)

Khan, Elliot, and Armenta had actual knowledge that the Land was held by the United States in fee simple and not in trust, and that the water beneath the surface of the Land belongs to the State of California and not the Band. (FAC, ¶ 71.) Defendants, as employees or officials of the Chumash Enterprises or the Band, ratified, presented, or caused to be presented the purportedly false claims described above “off reservation”, including in annual and other reports to the State of California. (FAC, ¶¶ 69-70.)

The above summary of the FAC’s allegations, which are set forth in 95 separate paragraphs, is not intended to be exhaustive. In the FAC, plaintiff seeks all relief available under subdivisions (a) and (b) of Government Code section 12651 and section 12655, subdivision (a), as well as attorney’s fees and costs of suit. (FAC at p. 22, ¶¶ 1-4.)

On September 6, 2024, and May 22, 2025, plaintiff filed errata as to, respectively, hyperlinks and clerical errors appearing in the FAC.

On October 15, 2024, defendants filed a motion for an order quashing and dismissing the FAC. The motion is made the grounds that defendants have sovereign immunity; that plaintiff has failed and is unable to join the United States and the Band, each of whom defendants contend are necessary and indispensable parties with sovereign immunity; and that the allegations of the FAC are nearly identical to a case filed in 2019 by Save the Valley, LLC, are time-barred, and are precluded by the Act’s public disclosure bar.

Plaintiff opposes the motion. Plaintiff’s opposition is made on the grounds that sovereign immunity does not bar a suit seeking only monetary damages against defendants, that the United States is not an indispensable party because plaintiff seeks money damages only and not an adjudication of property rights in the Land, that plaintiff is the original source of the facts on which this lawsuit is based, and that defendants have consented to the jurisdiction of the court by asserting substantive defenses to the claims alleged in the FAC.

Analysis:

Noted above, defendants contend that the United States is a necessary and indispensable party to this action because plaintiff challenges whether tribal lands which are the subject of the action are held in trust by the United States.

Under Code of Civil Procedure section 389, a person “shall be joined as a party in the action if (1) in his absence complete relief cannot be accorded among those already parties or (2) he claims an interest relating to the subject of the action and is so situated that the disposition of the action in his absence may (i) as a practical matter impair or impede his ability to protect that interest or (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of his claimed interest.” (Code Civ. Proc., § 389, subd. (a).) If that person has not been joined in the action, “the court shall order that he be made a party.” (Ibid.)
 

If a person described in subdivision (a), set forth above, cannot be made a party to the action, “the court shall determine whether in equity and good conscience the action should proceed among the parties before it, or should be dismissed without prejudice, the absent person being thus regarded as indispensable.” (Code Civ. Proc., § 389, subd. (b).)

“Under the compulsory joinder statute, the basic rule is that, ‘ “[w]henever feasible, the persons materially interested in the subject of an action ... should be joined as parties so that they may be heard and a complete disposition made.” ’ [Citations.] But if it is not feasible to join a necessary person as a party—for example, because that person is beyond the personal jurisdiction of the court—then the court must proceed to consider whether, ‘in equity and good conscience,’ the action should proceed in that person’s absence. [Citation.] If the person is found to be essential, or ‘indispensable,’ to the action, then the action must be dismissed. [Citation.]” (Bianka M. v. Superior Court (2018) 5 Cal.5th 1004, 1018.)

Plaintiff alleges in the FAC that a casino which is located on land held in trust by the United States for the benefit of an Indian tribe is not subject to all state and local laws, tax obligations or fees. (FAC, ¶ 2.) As further detailed above, the causes of action alleged in the FAC arise from what plaintiff contends are false “Claims” asserted by defendants, as that term is defined under section 12650, subdivision (b)(1) of the Act, regarding the chain of title to and ownership status of the Land, specifically whether the Land is owned by the United States in trust or in fee. Plaintiff further alleges that, because the Land is held by the United States in fee simple and not in trust, the claims made by defendants and described above are false, and were made or presented by defendants for the purpose of avoiding California state and local laws, fees, charges, and other financial obligations which would otherwise be owed by the Band to various political subdivisions, in violation of the Act. (See also FAC, ¶¶ 2, 75-81, 83-8, & 92-94.)

“Restricted Indian land is property in which the United States has an interest.” (U.S. v. Hellard (1944) 322 U.S. 363, 366.) “Further, the United States is a necessary party to any action in which the relief sought might interfere with its obligation to protect Indian lands against alienation.” (Carlson v. Tulalip Tribes of Washington (9th Cir. 1975) 510 F.2d 1337, 1339.)

The allegations of the complaint show that the United States has an interest in the Land, including with respect to whether or not the Land is held in trust or, as plaintiff contends, in fee simple by the United States. Though plaintiff seeks monetary damages under section 12651 of the Act, the resolution of plaintiff’s causes of action, which arise from the assertion of purportedly false claims by defendants regarding the manner in which the Land is held by the United States, would necessarily require the court to first determine whether the Land is held by the United States in fee or in trust. As the interests of the United States in, and its obligations with respect to, the Land would necessarily be affected by a determination of the truth of defendants purportedly false claims regarding the manner in which the Land is held by the United States, the United States is a necessary party to this action. (County of San Joaquin v. State Water Resources Control Bd. (1997) 54 Cal.App.4th 1144, 1156, fn. 5.)

In addition, as the allegations of the FAC demonstrate that the purportedly false claims at issue relate to the manner in which the United States holds the Land, any judgment for money damages under the Act rendered in favor of plaintiff must necessarily require an adjudication of, and therefore affect, the United States’ ownership interest in the Land. Before the court “could bind the United States by such an order, the United States must be a party.” (Paiute-Shoshone Indians of Bishop Community of Bishop Colony, Cal. v. City of Los Angeles (9th Cir. 2011) 637 F.3d 993, 998 (Paiute-Shoshone).)  

Though plaintiff contends that he does not seek an adjudication of property rights, plaintiff fails to explain why the court may accord to plaintiff monetary relief under the Act without first making a binding determination as to the manner in which the Land is held by the United States, and consequently, the United States’ rights, interests, and obligations with respect to, the Land. (McClure, on Behalf of Caruthers v. Donovan (1949) 33 Cal.2d 717, 725 [improper for court to attempt to adjudicate rights of a necessary party interested in the controversy without effecting that party’s joinder]; see also Paiute-Shoshone, supra, 637 F.3d at p. 998.)

For all reasons further discussed above, the United States claims a material interest in the Land which is the subject of the purportedly false claims asserted by defendants. The court cannot accord complete relief to plaintiff without adjudicating the United States’ interest in the Land, including as to whether that interest is held in fee or in trust. For these reasons, the disposition of this action in the absence of the United States may, as a practical matter, impair or impede the ability of the United States to protect its interest in the Land from interference. Therefore, and for all reasons further discussed above, and notwithstanding whether complete monetary relief could be given to plaintiff even if the United States was not a party, the United States is a necessary party to and should be joined in this action. (People ex rel. Lungren v. Community Redevelopment Agency (1997) 56 Cal.App.4th 868, 875-876 [court may decline to proceed without absent party for discretionary and equitable reasons].)

Though the court finds that the United States is an indispensable party under Code of Civil Procedure section 389, “[a]bsent a waiver, sovereign immunity shields the Federal Government and its agencies from suit.” (F.D.I.C. v. Meyer (1994) 510 U.S. 471, 475.) Plaintiff offers no reasoned argument showing why the United States has waived sovereign immunity. As the United States cannot be made a party to this action, the court must determine “whether in equity and good conscience the action should proceed among the parties before it, or should be dismissed without prejudice, the absent person being thus regarded as indispensable.” (Code Civ. Proc., § 389, subd. (b).)

To determine whether equity and good conscience require the action to proceed or be dismissed, the court must consider “to what extent a judgment rendered in the person’s absence might be prejudicial to him or those already parties[,] the extent to which, by protective provisions in the judgment, by the shaping of relief, or other measures, the prejudice can be lessened or avoided[,] whether a judgment rendered in the person’s absence will be adequate[,] whether the plaintiff or cross-complainant will have an adequate remedy if the action is dismissed for nonjoinder.” (Code Civ. Proc., § 389, subd. (b).)

For all reasons discussed above, any judgment rendered in plaintiff’s favor. and in the absence of the United States, may be prejudicial to the United States’ interests in the Land to the extent the court must adjudicate the question of whether the Land is held in trust or in fee simple by the United States, for the purpose of determining whether defendants violated the Act as plaintiff contends. There is no information in the present record that would suggest whether or how any prejudice to the United States can be avoided or lessened. In light of these factors, and considering that plaintiff is not the real party in interest with respect to the causes of action for violations of the Act, the court finds, in equity and good conscience, that the action should not proceed in the absence of the United States, and should be dismissed without prejudice in accordance with Code of Civil Procedure section 389, subdivision (b). (MMM Holdings, Inc. v. Reich (2018) 21 Cal.App.5th 167, 180 [government is the real party in interest in qui tam actions]; Tracy Press, Inc. v. Superior Court (2008) 164 Cal.App.4th 1290, 1298-1299 [general discussion, also noting that “potential prejudice to that unjoined person is of critical importance”].)

For all reasons discussed above, the court will grant the present motion, in part, and order that the action be dismissed without prejudice. As the court will grant the motion, it is not necessary for the court to determine the remaining points and arguments raised in by defendants or by plaintiff in plaintiff’s opposition to the motion.

The court has reviewed the proposed order submitted by defendants, which provides that this lawsuit will be dismissed with prejudice, and does not intend to sign it. (See Code Civ. Proc., § 389, subd. (b) [court determines whether action should be dismissed without prejudice].) The court will order defendants to submit a proposed order pursuant to California Rules of Court, rule 3.1312, for the court’s approval.