Petition for Writ of Certiorari — Manta Management Management Management Corp. v. City of San Bernardino (No. 08-325)

\05

; Supreme Court, U.S.

FILED

No. _____ 99.375 SP 6- 2008

Jn the OFFICE OF THE CLERK

Supreme Court of the Anited States

MANTA MANAGEMENT CORPORATION,

Petitioner,

Vv.

CITY OF SAN BERNARDINO,

Respondent.

On Petition for Writ of Certiorari

to the Supreme Court of California

PETITION FOR WRIT OF CERTIORARI

ROGER JON DIAMOND

Counsel of Record

2115 MAIN STREET

Santa Monica, CA 90405

(310) 399-3259

Counsel for Petitioner

Becker Gallagher - Cincinnati, OH - Washington, D.C. - 800.890.5001

i

QUESTIONS PRESENTED

1. Can a municipality be held liable for damages

under the Federal Civil Rights Act (42 U.S.C. Section

1983) for obtaining a preliminary injunction to enforce

an ordinance that is later found to be invalid as an

unconstitutional impingement on the _ First

Amendment right to freedom of speech?

2. Did the California Supreme Court in the

decision below fail to following the teaching of this

Court in Malley v. Briggs, 475 U.S. 335, 344 footnote

7 (1986), where this Court stated with reference to

liability under the Federal Civil Rights Act that “...a

man [is] responsible for the natural consequences of

his action... .”

3. When state trial and appellate courts’ actions

(first in granting a preliminary injunction shutting

down an adult cabaret, second in granting a stay ofa

subsequent order dissolving the _ preliminary

injunction, and third, in delaying the final state

appellate court decision for a number of years to

enforce a city ordinance that violates the First

Amendment) damage an adult cabaret, may the adult

cabaret rely upon this Court’s statement in City of

Littleton v. Z.J. Gifts, 541 U.S. 774, 782, 124 S.Ct.

2219, 2225, 159 L.Ed.2d 84 (2004) that “. . . federal

remedies [42 U.S.C. Section 1983] would provide an

additional safety valve .. .” for problems caused by the

state judicial system?

il

PARTIES TO THE PROCEEDINGS

Petitioner: Manta Management Corporation is

the sole owner of the Flesh Club, an adult cabaret

in San Bernardino, California. Its stock is wholly

owned by Waldon Randall Welty.

Respondent: The City of San Bernardino is a

municipal corporation organized and existing under

the laws of the State of California and located in

San Bernardino County, California.

ill

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED ...................

PARTIES TO THE PROCEEDINGS ........... ii

TABLE OF CONTENTS ..................... iii

TABLE OF AUTHORITIES .................. v

PETITION FOR A WRIT OF CERTIORARI ..... 1

CMR LOW... 1

I ee a ae 2

CONSTITUTIONAL PROVISIONS INVOLVED IN

re ee, ee 2

PRNERAL STATUTE ....................... 2

STATEMENT OF THE CASE ................ 3

REASONS FOR GRANTING THE WRIT ....... 8

1. Certiorari Should Be Granted To Resolve The

Conflict Between The Decision of the California

Supreme Court Below And The Decisions of the

Tennessee Appellate Courts Regarding The

Application of the Federal Civil Rights Act To

State Court Preliminary Injunctions Which

Enforce Unconstitutional Ordinances ....... 8

lv

2. Certiorari Should Be Granted So This Court

May Clarify Its Decision in Malley v. Briggs,

475 U.S. 335, 106 S.Ct. 1092, 89 L.Ed.2d 271

CE CUS yc spree hig ee Oe ws 15

3. Certiorari Should Be Granted To Determine

Whether Or Not A City Should Be Required To

Post A Bond When It Seeks And Obtains A

Preliminary Injunction To Enforce An

Ordinance That Violates The _ First

PN ee ee econ cy ed ll Bie plained 19

RN oo i Wwe be eRe ee oO 22

APPENDIX

Appendix A: California Supreme Court Order

denying rehearing, dated June 18, 2008 ..... la

Appendix B: California Supreme Court

Modification of Opinion, dated June 18, 2008 2a

Appendix C: California Supreme Court Opinion,

GAGE Ge es a ek he ee BARS 4a

- Appendix D: California Court of Appeal, Fourth

District Opinion, dated May, 11, 2006, Modified

on Denial of Reheairng June 2, 2006 ...... 25a

Appendix E: Superior Court of California

Judgment After Jury Trial, dated September 23,

heck oe ke ee eee 58a

Vv

TABLE OF AUTHORITIES

CASES

City of Knoxville v. Entertainmer.t Resources,

2003 Tenn. App. LEXIS 821 (2003) ..... 10, 11

City of Knoxville v. Entertainment Resources,

166 S.W. 3d 650 (Tenn. 2005), cert.den.,

545 U.S. 1061, 163 L.Ed.2d 627,

Re ee. Fe I oo ee eee ks 9,11

City of Littleton v. Z.J. Gifts,

541 U.S. 774, 124 S.Ct. 2219,

159 L.Ed.2d 84 (2004)

City of Renton v. Playtime Theaters, Inc.,

475 U.S.41, 89 L.Ed.2d, 106 S.Ct. 925 (1986) . 4

F.C.C. v. Nextwave Personal Communications, Inc.,

537 U.S. 293, 154 L.Ed.2d 863,

Re ED fac kc Soe ch se cece aoesn 13

Malley v. Briggs,

475 U.S. 335, 89 L.Ed.2d 271,

PG | Ee re passim

Owen v. City of Independence,

445 U.S. 662, 100 S.Ct. 1398,

oer Ga PE ED sk eo eee ee eee en 14

Travelers Cas. & Surety Co., v. Pacific Gas,

US. , 127 S.Ct. 1399 Gee7) ...... 13

vi

Zuni Public School Dist., v. Dept. of Educ.,

RI, RE ee, Re CUT) one ee ees

CONSTITUTION

SF en ee SU vtech wean aue

U8; Comst., Fourteenth Amend. ..............

STATUTES AND RULES

I ny So ky eek aA eee ee ew

NE ee ie ve aed an ke ee eee

EE ME Fee oi ae OO RA OO OR

2

1

Manta Management Corporation, doing business as

the Flesh Club, respectfully prays that a Writ of

Certiorari issue to review the judgment and the

opinion of the California Supreme Court filed on April

24, 2008 and modified on June 18, 2008.

On June 18, 2008 the Supreme Court of California

denied Petitioner’s timely Petition for Rehearing.

OPINIONS BELOW

The order of the California Supreme Court denying

Petitioner’s Petition for Rehearing filed June 18, 2008

is reprinted in Appendix A hereto (“App. A”) at page

la. The June 18, 2008 modification of the prior

opinion is reprinted at Appendix B hereto (“App. B”) at

page 2a. The decision of the California Supreme Court

filed April 24, 2008, 43 Cal.4th 400; 75 Cal.Rptr.3d

353; 181 P.3d 159 (2008) is reprinted here in Appendix

C hereto (“App. C”) at page 4a.

The decision of the California Court of Appeal,

Fourth Appellate District, Division Two, filed May 11,

2006, 44 Cal.Rptr.3d 35 (2006) is reprinted in

Appendix D hereto (“App. D”) at page 25a.

Y

The judgment after jury trial filed by the Superior

Court of the State of California for the County of San

Bernardino on September 23, 2004 is reprinted at

Appendix E hereto (“App. E”) at page 58a. The

judgment after jury trial is not reported.

re Pa

?

2

JURISDICTION

This Court has certiorari jurisdiction by virtue of

Title 28, United States Code, Section 1257. Rule 13 of

this Court’s rules provides that this Petition may be

filed within 90 days of the date the California Supreme

Court denied a timely filed Petition for Rehearing.

The California Supreme Court denied a Petition for

Rehearing on June 18, 2008.

CONSTITUTIONAL PROVISIONS

INVOLVED IN CASE

The First Amendment to the United States

Constitution provides, in part, as follows:

“Congress shall make no law ... abridging the

freedom of speech ...”

The Fourteenth Amendment to the United States

Constitution provides, in part, as follows:

“No state shall .. . deprive any person of life,

liberty, or property, without due process of law.

FEDERAL STATUTE

Title 42, United States Code, Section 1983 provides,

in part, as follows:

“Every person who, under color of any .. .

ordinance .. . subjects, or causes to be

subjected, any ... other person .. . to the

deprivation of any rights, privileges, or

3

immunities secured by the Constitution and

laws, shall be liable to the party injured in an

action at law, suit in equity, or other proper

proceeding for redress. .. .”

STATEMENT OF THE CASE

The following facts are taken from the Decision of

the California Supreme Court in a published decision

filed April 24, 2008, Manta Management Corp., v. City

of San Bernardino, 43 Cal.4th 400 (2008).

In 1994 Petitioner Manta Management Corp.,

(hereinafter “Manta”) opened a comedy club nightclub

in the CR-3 zone of Res’ ondent City of San Bernardino

(hereinafter “the Cit ). The CR-3 zone allowed

nightclubs but not ad: it nightclubs. Adult nightclubs

were only permitted in the CH (Heavy Commercial) or

IL (Light Industrial) zones. Six months after Manta

opened its comedy nightclub, Manta converted it to an

adult cabaret and began presenting “topless

entertainment” in the place of comedy. The change

from comedy to adult entertainment meant that Manta

was no longer in compliance with the City’s zoning

code.

In January 1995 the City filed a lawsuit in the

state court seeking to enjoin the operation of Manta’s

cabaret on the ground that the presentation of topless

dancing was a violation of the City’s zoning laws and

therefore should be enjoined. The City sought and

obtained both a temporary restraining order and later

a preliminary injunction prohibiting the presentation

of adult entertainment in the form of topless dancing.

Manta appealed from the order granting the

4

preliminary injunction. While its appeal was pending

Manta filed a cross complaint in the state trial court

for damages under the Federal Civil Rights Act. By

stipulation the trial was bifurcated. The trial court

conducted a bench trial and deciared that the zoning

code was unconstitutional in violation of Manta’s First

Amendment right to free speech. The trial court

concluded, among other things, that the City’s zoning

code did not provide for reasonable alternative avenues

of communication. The trial court’s order dissolving

the preliminary injunction mooted the prior appeal

from the order granting the preliminary injunction.

The state trial court followed this Court’s decision in

City of Renton v. Playtime Theaters, Inc., 475 U.S. 41

(1986). The City appealed to the California Court of

Appeal, Fourth Appellate District, Division Two and

pending that appeal the City sought and obtained a

temporary stay and Writ of Supersedeas to prohibit

topless dancing while the City appealed from the order

dissolving the preliminary injunction, an order which

is appealable under California law. Thus, Manta was

precluded from resuming the presentation of topless

entertainment, an activity which is protected by the

First Amendment.

On January 26, 1999 the California Court of Appeal

in a non published decision affirmed the order of the

state trial court dissolving the preliminary injunction.

The Court of Appeal also dissolved the stay it

previously had issued in response to the request by the

City. However, the order dissolving the stay did not

become effective until the California Supreme Court

denied review en April 21, 1999 by a non published

order.

5

Thereafter, Manta proceeded on its cross complaint

for damages (lost profits for the time that it was

precluded from presenting topless entertainment

protected by the First Amendment). In a bench trial

the state trial court ruled that the initial issuance of

the temporary restraining order and preliminary

injunction by tke state trial court and the later

temporary stay and writ of supersedeas issued by the

California Court of Appeal, all to enforce the City’s

unconstitutional adult zoning code, violated Manta’s

federally protected rights and constituted a basis for

liability under the Federal Civil Rights Act, Title 42,

United States Code, Section 1983. The state trial

court found that the City’s ordinance itself was not the

basis for federal civil rights act liability. At the City’s

request, a jury was then impaneled to determine the

damages suffered by Manta and the jury rendered a

verdict in favor of Manta in the sum of $1,400,000.00

in damages for lost profits while Manta was subject to

the restraining order, preliminary injunction, and the

stay and writ of supersedeas.

The City appealed to the California Court of

Appeal, Fourth Appellate District, Division Two. The

California Court of Appeal affirmed the judgment of

the Superior Court. Specifically, the Court of Appeal

held that the City’s act of obtaining the injunction to

enforce the unconstitutional ordinance was an act in

violation of the First Amendment withir the meaning

of Section 1983 of the Federal Civil Rights Act. The

Court of Appeal specifically ruled that a city is liable

for damages under the Civil Rights Act if it chooses to

enforce an unconstitutional ordinance by means of a

preliminary injunction.

6

The City then asked the California Supreme Court

to review the case and the Supreme Court granted a

Petition for Review. The California Supreme Court

ruled that the Court of Appeal erred in concluding that

liability existed under the Federal Civil Rights Act

without considering causation. Although Manta relied

heavily upon this Court’s decision (footnote 7) in

Malley v. Briggs, 475 U.S. 335, 344, 89 L.Ed.2d 271,

106 S.Ct. 1092 (1986), the California Supreme Court

ignored this Court’s decision (footnote 7) completely in

its initial decision filed April 24, 2008. Manta had

argued before the Supreme Court in its Brief and also

during ora! argument that this Court in Malley v.

Briggs, in dictum, concluded that liability would exist

when a preliminary injunction violates the First

Amendment. Specifically, Manta quoted footnote 7 of

this Court’s decision in Malley v. Briggs, as follows:

“Petitioner has not pressed the argument that

in a case like this the officer should not be liable

because the judge’s decision to issue the

warrant breaks the causal chain between the

application for the warrant and the improvident

arrest. It should be clear, however, that the

District Ceurt’s ‘no causation’ rationale in this

case is inconsistent with our interpretation of

§1983. As we stated in Monroe v. Pape, 365

U.S. 167, 187, 81 S.Ct. 473, 484, 5 L.Ed.2d 492

(1961), §1983 ‘should be read against the

background of tort hability that makes a man

responsible for the natural consequences of his

action.’ Since the common law recognized the

causal link between the submission of a

complaint and an ensuing arrest, we read §1983

as recognizing the same causal link.”

7

In its decision the State Supreme Court ignored

footnote 7 quoted above and ruled that the California

Court of Appeal was wrong to find liability. The

California Supreme Court remanded the case to the

Superior Court to consider an alternative theory for

liability advanced by Manta - that the City in seeking

and obtaining the preliminary injunction

misrepresented the facts to the original trial court that

issued the preliminary injunction. The California

Supreme Court ruled that if the trial court was misled,

whether deliberately or negligently, then liability

would exist. However, in the absence of

misrepresentation by the City to obtain the

preliminary injunction and to obtain the stay and writ

of supersedeas from the Court of Appeal, there would

be no liability.

On April 28, 2008 Manta filed a timely Petition for

Rehearing with the California Supreme Court wherein

it specifically pointed out that the California Supreme

Court ignored this Court’s decision in Malley v. Briggs,

supra.

Without ordering a rehearing and without ordering

further briefing, the California Supreme Court

modified its opinion to include a reference to this

Court’s decision in Malley v. Briggs, supra. The

California Supreme Court added a footnote to its

decision wherein it stated that its decision was

consistent with the United States Supreme Court’s

comment in footnote 7 of its Opinion in Malley v.

Briggs, supra.

The judge of the trial court who issued the

temporary restraining order and_ preliminary

8

injunction, the Honorable Duane Lloyd, was not the

trial court judge who conducted the initial bench trial

on the constitutionality on the zoning code. That was

Superior Court Judge Carl Davis. Finally, the trial

court judge who conducted the trial on liability under

the Federal Civil Rights Act and who presided over the

jury trial on damages was still a third judge, the

Honorable Donald Alvarez.

REASONS FOR GRANTING THE WRIT

1. Certiorari Should Be Granted To Resolve

The Conflict Between The Decision of the

California Supreme Court Below And The

Decisions of the Tennessee Appellate Courts

Regarding The Application of the Federal Civil

Rights Act To State Court Preliminary

Injunctions Which Enforce Unconstitutional

Ordinances

Certiorari should be granted to resolve the conflict

over the proper interpretation and application of the

Federal Civil Rights Act to state court injunctions that

limit the First Amendment rights of adult businesses.

In the decision below by the California Supreme Court

an adult business was not allowed to recover damages

from the City which enforced by a preliminary

injunction its unconstitutional ordinance. The

California Supreme Court did limit the scope of its

ruling by declaring that if a City materially misleads

a state trial court judge who grants a preliminary

injunction based upon the deception then there would

be liability under the Federal Civil Rights Act. The

ruling by the California Supreme Court below

unnecessarily restricted the earlier ruling by the

9

California Court of Appeal, which had ruled that a city

is absolutely liable under the Civil Rights Act for

obtaining and enforcing a preliminary injunction based

upon an unconstitutional ordinance that the City itself

adopted.

The decision of the California Supreme Court

disapproved the ruling of the California Court of

Appeal even though the ruling of the California Court

of Appeal was consistent with the decisions of the

Court of Appeals of Tennessee and the Supreme Court

of Tennessee, City of Knoxville v. Entertainment

Resources, LLC, 166 S.W. 3d 650 (Tenn. 2005),

cert.den. 546 U.S. 1061, 163 L.Ed.2d 627, 126 S.Ct.

798 (2005). In the instant case, as the California

Supreme Court recognized, the California Court of

Appeal “. . . held that the city’s act of obtaining an

injunction to enforce an unconstitutional ordinance is

an act in violation of the First Amendment within the

meaning of Section 1983... .” Manta Management

Corp., v. City of San Bernardino, 43 Cal.4th 400, 406,

75 Cal.Rptr. 3d 353, 181 P.3d. 159 (2008). The

decision of the California Court of Appeal, described

above by the California Supreme Court, was consistent

with Tennessee court decisions.

In the Tennessee case Entertainment Resources,

the owner of a video tape movie rental store which

rented sexually explicit x-rated video tapes, was sued

by the City of Knoxville because Entertainment

Resources was considered by the City to be an adult

business and was operating in violation of Knoxville’s

adult zoning ordinance, which prohibited adult

businesses from being operated at the location of

Entertainment Resources. The Tennessee trial court

10

granted Knoxville’s request for a temporary injunction

to enforce Knoxville’s adult zoning ordinance pending

trial. This is exactly what happened to Manta

Management in the instant case.

In response to Knoxville’s lawsuit and temporary

injunction Entertainment Resources filed a

counterclaim which alleged that the Knoxville

ordinance was unconstitutional and which sought

damages “. .. as a result of its enforcement.” City of

Knoxville v. Entertainment Resources, 2003 Tenn.

App. LEXIS 821 (2003). Later, when the store closed,

Knoxville requested the Tennessee trial court to

dismiss the case on mootness grounds. The Tennessee

trial court dismissed the complaint for injunctive relief

but noted that Entertainment Resources “. . . retained

the right to seek damages should it turn out that the

temporary injunction was wrongfully issued.” City of

Knoxville v. Entertainment Resources, 2003 Tenn.

App. LEXIS 821 (2003).

Still later the trial court ruled that Entertainment

Resources was not wrongfully enjoined. The case was

dismissed and Entertainment Resources appealed. On

appeal the Court of Appea!s of Tennessee held that the

ordinance was unconstitutional. The Court of Appeals

of Tennessee then discussed the applicability of the

Federal Civil Rights Act (42 U.S.C. Section 1983) to

Entertainment Resources counterclaim for damages

for “. . . lost profits because of the entry of the

preliminary injunction... .”

The Tennessee Court of Appeals reversed the

judgment of the trial court and remanded the case for

a determination of damages. The Tennessee Court of

1]

Appeals quoted the Federal Civil Rights Act and stated

that “the remedial purpose of 42 U.S.C. Section 1983

is “to ‘ensure that individuals whose _ federal

constitutional or statutory rights are abridged may

recover damages or secure injunctive relief.” (2003

Tenn. App. LEXIS 821 (2003))

Thereafter, the Supreme Court of Tennessee

exercised its discretionary review authority and

granted Knoxville’s appeal to consider the case. The

Supreme Court of Tennessee then affirmed the ruling

of the Court of Appeals. Specifically, the Supreme

Court of Tennessee agreed with the Court of Appeals

that the adult zoning ordinance was unconstitutional.

The Supreme Court of Tennessee then reached the

damages issue. The Supreme Court of Tennessee

stated,

“Because the chancery court held that

Entertainment Resources had been properly

enjoined from operating Fantasy Video

‘pursuant to the ordinance, it did not address

Entertainment Resources’ damages. We agree

with the Court of Appeals that Entertainment

Resources is entitled to a determination of

damages .... We remand to the chancery court

to assess the amount of Entertainment

Resources’ damages and to determine the

propriety of awarding attorney’s fees.”

City of Knoxville v. Entertainment Resources, 166

S.W. 3d 650, 659 (2005), cert.den. 546 U.S. 1061, 163

L.Ed.2d 627, 126 S.Ct. 798 (2005).

12

The Supreme Court of Tennessee then concluded its

opinion with the following statement,

“Having considered the record and applicable

authority, we hold the Knoxville City Code

Section 16-468 is vague and unenforceable

under the United States and Tennessee

Constitutions. We remand to the chancery

court for a determination of Entertainment

Resources’ damages flowing from that court’s

injunction... .“ :

As can be seen from the discussion above, the

decision of the California Supreme Court, which

reversed the decision of the California Court of Appeal,

is totally at odds with the decisions of the Tennessee

appellate courts.

While this Court may be more concerned about

splits between the various Federal Circuit Courts of

Appeal, this Court should also grant certiorari when

there is a conflict among the highest courts of two

sovereign states with respect to the application of the

Federal Civil Rights Act.

The decision of the California Supreme Court below

unnecessarily carves an exception into a duly adopted

federal statute that state courts are obligated to

enforce under the Supremacy Clause of Article VI of

the United States Constitution:

“This Constitution, and the laws of the United

States which shall be made in pursuance

thereof ... shall be the supreme law of the

13

land; and the judges in every state shall be

bound thereby... .”

The California Court of Appeal below recognized

that there are no exceptions in the Federal Civil

Rights Act. The California Supreme Court, on the

other hand, carved an exception into the Federal Civil

Rights Act with respect to damages caused by state

court injunctions that enforce unconstitutional

ordinances. The Tennessee courts did not carve such

an exception into the Federal Civil Rights statute.

Likewise, this Court has refused requests to carve

exceptions into other federal statutes. If Congress

wants to carve exceptions into statutes that it has

adopted it should do so and not the judiciary. See

F.C.C. v. Nextwave Personal Communications, Inc.,

537 U.S. 293, 302, 154 L.Ed.2d 863, 123 S.Ct. 832, 839

(2003) (opinion by Justice Scalia) and Travelers Cas. &

Sur. Co., v. Pacific Gas, US. __, 127 S.Ct. 1199

(2007) (opinion by Justice Alito). See also dissenting

opinion of Justice Scalia (joined by the Chief Justice

and Justices Thomas and Souter)in Zuni Public School

Dist., v. Dept. of Educ., U.S. __, 127 S.Ct. 1534,

1551 (2007), where Justice Scalia wrote, “.. . [T]oday’s

decision is nothing other than the elevation of judge -

supposed legislative intent over clear statutory text.

Here we have no indication that Congress ever

intended to immunize cities from liability under the

Civil Rights Act for damages caused by their seeking

and obtaining preliminary injunctions to enforce their

unconstitutional ordinances. Congress never said that

a preliminary injunction issued by a court to enforce

14

an unconstitutional ordinance adopted by the very city

secking the injunction is an intervening cause that

eliminates city liability. Indeed, traditionally a

plaintiff who obtains a preliminary injunction but who

later loses at trial has to pay the defendant for the

damage caused by the preliminary injunction. So, itis

highly unlikely Congress intended to exempt cities

from liability. The Court of Appeal below relied upon

this Court’s decision in Owen v. City of Independence,

445 U.S. 622, 100 S.Ct. 1398, 63 L.Ed.2d 673 (1980) to

support its conclusion that a city should be liable for

damages caused by a preliminary injunction issued at

the request of the city to enforce its own

unconstitutional ordinance.

The decision below by the California Supreme

Court appears to be inconsistent with the decision of

this Court in City of Littleton v. Z.J. Gifts, 541 U.S.

774, 782, 124 S.Ct. 2219, 2225, 159 L.Ed.2d 84 (2004)

where this Court stated that the Federal Civil Rights

Act would provide a remedy in a case where state court

judges (including appellate judges) either take action

to violate the First Amendment or by inaction or delay

allow the First Amendment to be violated. It is not

entirely clear what this Court meant in the City of

Littleton v. Z.J. Gifts case with reference to remedies

under the Federal Civil Rights Act in the context of its

discussion regarding state trial and appellate judges.

15

2. Certiorari Should Be Granted So This

Court May Clarify Its Decision in Malley v.

Briggs, 475 U.S. 335, 106 S.Ct. 1092, 89 L.Ed.2d

271 (1986)

Edward Malley was a Rhode Island State Trooper

in charge of investigating a drug suspect. Trooper

Malley submitted complaints and affidavits to obtain

arrest warrants. After the respondents were arrested

pursuant to the arrest warrants the case was dropped

and the Grand Jury declined to return an Indictment.

The respondents then brought an action under the

Federal Civil Rights Act, Title 42, United States Code,

Section 1983 contending that Trooper Malley violated

the Fourth and Fourteenth Amendments. Trooper

Malley, the defendant in the Federal District Court

case, moved for a directed verdict and that motion was

granted by the U.S. District Court. The District Court

concluded that the act of the judge in issuing the

arrest warrants for the respondents broke the causal

chain between Malley’s filing of the complaint and

respondents’ arrests. The District Court also stated

that an officer who believes that the facts stated in his

affidavit are true and who submits them to a neutral

magistrate may thereby be entitled to immunity.

The United States Court of Appeals for the First

Circuit reversed, holding that an officer who seeks an

arrest warrant by submitting a complaint and

supporting affidavit to a judge is not entitied to

immunity unless the officer has an _ objectively

reasonable basis for believing that the facts alleged in

his affidavit are sufficient to establish probable cause.

This Court granted certiorari in order to review the

decision of the First Circuit. This Court affirmed the

16

judgment of the First Circuit, which had reversed the

decision of the District Court.

Trooper Malley was the petitioner in this Court. He

had been the defendant in the U.S. District Court. In

footnote 7 to this Court’s decision in Malley v. Briggs,

supra, this Court stated,

“Petitioner has not pressed the argument that

in a case like this the officer should not be liable

because the judge’s decision to issue the

warrant breaks the causal chain between the

application for the warrant and the improvident

arrest. It should be clear, however, that the

District Court’s ‘no causation’ rationale in this

case is inconsistent with our interpretation of

§1983. As we stated in Monroe v. Pape, 365

U.S. 167, 187, 81 S.Ct. 473, 484, 5 L.Ed.2d 492

1961 1983 ‘should be read against the

background of tort liability that makes a man

responsible for the natural consequences of his

action.’ Since the common law recognized the

causal link between the submission of a

complaint and an ensuing arrest, we read 81983

as recognizing the same causal link.”

Manta cited Malley v. Briggs in its briefs filed with

the California Supreme Court and during oral

argument. Manta relied heavily upon the Malley v.

Briggs decision. However, in its initial decision the

California Supreme Court ignored Malley v. Briggs in

its entirety.

Manta petitioned the California Supreme Court for

rehearing and pointed out the omission by the

17

Supreme Court of any discussion of Malley v. Briggs.

Although the California*° Supreme Court denied

Manta’s Petition for Rehearing it did file a

modification to its initial decision.

In its initial decision the California Supreme Court

stated, 43 Cal.4th at 412:

“... [W]e hold that, where a court is provided

with appropriate facts to adjudicate a motion for

preliminary injunction or a motion for a stay

pending appeal, the courts’ intervening exercise

of independent judgment breaks the chain of

causation for purposes of section 1983 liability.

We also hold that this general rule of

superseding causation does not apply when the

judicial officer reached an erroneous decision as

a result of being pressured or materially misled

as to the relevant facts.”

The initial decision of the California Supreme

Court read as indicated above. In response to Manta’s

Petition for Rehearing the California Supreme Court

added a footnote at the end of the sentence quoted

above. In the footnote the California Supreme Court

stated,

“Our conclusion here is consistent with the

United States Supreme Court’s comment in

Malley v. Briggs (1986) 475 U.S. 335, 344,

footnote 7, that section 1983 ‘should be read

against a background of tort liability that

makes a man responsible for the consequences

of his actions,’ and thus judicial action will not

constitute a superseding causation when the

18

party seeking the action provides materially

misleading information in its support.”

The footnote quoted above which the California

Supreme Court added to its opinion is wrong. To the

contrary, the conclusion of the California Supreme

Court is contrary to, not consistent with, this Court’s

decision in Malley v. Briggs and, in particular, with

this Court’s footnote 7 in the Malley v. Briggs case.

In Malley v. Briggs the District Court had stated

that the causal chain had been broken but the First

Circuit reversed the District Court and this Court

affirmed the First Circuit. The California Supreme

Court has completely disturted this Court’s footnote 7

in Malley v. Bri

This Court’s decision in Malley v. Briggs, supra,

has created some confusion among the lower courts.

Also it has been misconstrued. As footnote 7 of the

Malley v. Briggs case clearly points out, the District

Court had ruled that the chain of causation had been

broken but this Court stated that the District Court’s

“no causation” rationale was inconsistent -with this

Court’s interpretation of section 1983. It is apparent

from footnote 7 that this Court found the no causation

rationale of the District Court to be inconsistent with

this Court’s interpretation of Section 1983.

It was bad enough that the California Supreme

Court initially ignored this Court’s decision in Malley

v. Briggs notwithstanding the fact that it was

repeatedly cited to the California Supreme Court by

Manta. What is worse is the addition of the footnote

19

by the California Supreme Court. That footnote

contradicts this Court’s footnote 7 in Malley v. Briggs.

The California Supreme Court is a highly respected

Court. Numerous state appellate courts consider

California Supreme Court decisions. Accordingly, it is

especially important for this Court to grant certiorari

to correct this blatant misinterpretation of the Federal

Civil Rights Act and blatant misinterpretation of this

Court’s dictum in Malley v. Briggs, supra.

3. Certiorari Should Be Granted To

Determine Whether Or Not A City Should Be

Required To Post A Bond When It Seeks And

Obtains A Preliminary Injunction To Enforce An

Ordinance That Violates The First Amendment

The refusal by the California Supreme Court to

consider the related argument that there would have

been liability had the City posted a bond in this case is

especially disturbing. Moreover, Manta argued in the

alternative before the Supreme Court that since it had

requested that a bond be posted the judicial system

should have treated the case as though a bond had

been posted. The issue of the bond is closely related to

the issue the California Supreme Court did consider

because it demonstrated that with respect to

preliminary injunctions absolute liability is the norm.

Courts generally require a bond to be posted by a

plaintiff who seeks a_ preliminary injunction if the

preliminary injunction is to be granted. The bond

protects the defendant against whom the preliminary

injunction is issued irrespective of whether the

plaintiff who obtains the preliminary injunction mis-

leads the trial court or not. It does not matter. The

20

law regarding the issuance of preliminary injunctions

is unique in this respect. Most court orders including

search warrants and arrest warrants do not require

bonds to be posted by the officer seeking the warrants.

Thus, in those kinds of cases absolute liability is not

justified. Here, in contrast, the City obtained a

preliminary injunction and refused to post a bond. The

California judicial system should have treated the City

as though it had posted a bond in order to uphold

liability against the City.

In cases involving private parties trial courts

routinely require bonds to be posted by plaintiffs who

seek and obtain preliminary injunctions pending trial.

The purpose of the bond is to protect the defendant by

providing the defendant with compensation if it later

is determined after trial that the preliminary

injunction should not have been granted. Put another

way, a defendant who wins at trial is entitled to be

compensated for damages caused by an initially issued.

preliminary injunction. Manta submits that when a

city is a plaintiff and seeks to enforce its own

unconstitutional ordinance it must be required to post

a bond to protect the defendant. In a case such as this

where a bond request was made by the defendant

Manta Management, the City should be treated as

though it did post a bond or, in the alternative, forced

to pay damages caused by the preliminary injunction.

Preliminary injunctions are different than

wrongfully issued arrest warrants or search warrants.

Traditionally preliminary injunctions must be bonded.

While it is true that under California law a city is

exempt from the requirement that it post a bond when

it obtains a preliminary injunction, the exemption

21

should not operate to insulate the city from liability.

The reason cities are exempt from bonding

requirements is that they are solvent and therefore

there is no need to post a bond. Moreover, in most

cases cities are immune from lability under sovereign

immunity doctrines. However, when the Civil Rights

Act and the First Amendment are involved there

should be no exemption and no immunity. The

California Supreme Court refused to discuss this issue.

It was not discussed by the California Court of Appeal

because the California Court of Appeal affirmed the

judgment on different grounds.

The California Supreme Court should have

remanded the case to the California Court of Appeal to

consider the alternative theory of liability pursuant to

Manta’s argument regarding the bond. Instead of

remanding the case to the Court of Appeal to allow

that Court to decide the bond issue, the California

Supreme Court simply ducked the issue altogether and

remanded the matter to the trial court. The bond

issue is inextricably intertwined with the civil rights

issue. Manta has contended that the Civil Rights Act

required the City to post a bond and its refusal to post

a bond should not operate to immunize the City from

liability.

Since the California Supreme Court refused to

discuss the issue and since the California Supreme

Court did not remand the matter to the California

Court of Appeal for it to discuss the issue, this Court

is respectfully requested to grant certiorari, reverse

‘he judgment of the California Supreme Court, and

remand the case to that Court with instructions to

consider the application of the Federal Civil Rights Act

22

to the question of whether a city should be compelled

to post a bond when it seeks and obtains a preliminary

injunction to enforce its own ordinance which violates

the First Amendment and whether it should be held

liable under the Civil Rights Act if it refuses to post a

bond. Put another way, should liability under the

Civil Rights Act be absolute when a city refuses to post

a bond in a case where a preliminary injunction is

obtained to enforce its own ordinance which violates

the First Amendment?

CONCLUSION

For the foregoing reasons Petitioner Manta

Management respectfully requests this Honorable

Court to grant its Petition for Writ of Certiorari to

review the judgment below.

Respectfully submitted,

ROGER JON DIAMOND

Counsel of Record

2115 Main Street

Santa Monica, CA 90405

Phone: 310/399-3259

Attorney for Petitioner

APPENDIX

la

APPENDIX A

IN THE SUPREME COURT OF CALIFORNIA

En Banc

$144492

Court of Appeal, Fourth Appellate District

Div. 2 - No. E-036942

[Filed June 18, 2008]

MANTA MANAGEMENT CORPORATION,

Cross-complainant and Respondent,

CITY OF SAN BERNARDINO,

)

)

)

v. )

)

)

Cross-defendant and Appellant. )

)

The opinion is modified on the court’s own motion.

The petition for rehearing is denied.

George, C.J., was absent and did not participate.

Werdegar and Corrigan, JJ., were absent and did not

participate.

CHIN

Acting Chief Justice

2a

APPENDIX B

IN THE SUPREME COURT OF CALIFORNIA

S144492

Ct.App. 4/2 E036942

San Bernardino County

Super. Ct. No. SCV18157

[Filed June 18, 2008]

MANTA MANAGEMENT CORPORATION,

Cross-complainant and Respondent,

v.

CITY OF SAN BERNARDINO,

Cross-defendant and Appellant.

Nee Nee Nee eee eee ee”

MODIFICATION OF OPINION

THE COURT:

The opinion herein filed on April 24, 2008, and

appearing at 43 Cal.4th 400, is modified as follows:

After the last sentence of the first full paragraph on

page 412, a footnote is added stating: “Our conclusion

3a

here is consistent with the United States Supreme

Court’s comment in Malley v. Briggs (1986) 475 U.S.

335, 344, footnote 7, that section 1983 ‘should be read

against a background of tort liability that makes a

man responsible for the consequences of his actions,’

and thus judicial action will not constitute a

superseding causation when the party seeking the

action provides materially misleading information in

its support.”

This modification does not affect the judgment.

APPENDIX C

IN THE SUPREME COURT OF CALIFORNIA

No. 8144492

Ct.App. 4/2 ©036942

San Bernardino County

Super. Ct. No. SCV18157

[Filed April 24, 2008]

MANTA MANAGEMENT CORPORATION,

tienecsenbeiinanh and Respondent,

v.

CITY OF SAN BERNARDINO,

Cross-defendant and Appellant.

ee A a a a a ee

CHIN, J.

Under federal law, “[l]ocal governing bodies. . . can

be sued directly under [Title 42, United State Code]

§ 1983 for monetary ... relief where. . . the action that

is alleged to be unconstitutional implements or

executes a policy statement, ordinance, regulation, or

decision officially adopted and promulgated by that

body’s officers.” (Monell v. N.Y. City Dept. of Social

5a

Services (1978) 436 U.S. 658, 690, fn. omitted

(Monell).)

Here, Manta Management Corporation (Manta)

seeks monetary damages against the City of San

Bernardino (the city) for lost profits caused by a

preliminary injunction and a stay pending appeal that

the city sought and that a superior court and a Court

of Appeal, respectively, issued. Ultimately, those

courts held that the city’s ordinance that was the legal

basis for the preliminary injunction was

unconstitutional. We must decide whether the city is

lable under title 42 United States Code section 1983

(section 1983) for lost profits to Manta while the

injunction and stay were in effect. We conclude,

consistent with analogous federal and state court

decisions, that the courts’ intervening exercise of

independent judgment in issuing the preliminary

injunction and stay, though the former was dissolved

and the latter was lifted after the ordinance was

declared unconstitutional, breaks the chain of

causation for purposes of section 1983 liability in the

absence of evidence that the city materially misled or

pressured the judges who were expected to exercise

independent judgment. In this case, where the parties

dispute whether material misrepresentations were

made to the judges who issued the preliminary

injunction and the stay, we reverse the judgment of

the Court of Appeal and remand the case for further

proceedings on that factual issue.’

‘Manta argues that the city was required to post an injunction

bond and that the judgment of the trial court should be affirmed

on the ground that the city refused to post a bond. The bond issues

6a

I. FACTUAL AND PROCEDURAL HISTORY

The facts and procedural discussion are taken

largely from the Court of Appeal opinion,

supplemented by the entire record in San Bernardino

County Superior Court case No. SCV18157.”

The City of San Bernardino Municipal Code

regulates adult businesses, including adult cabarets.

(San Bernardino Mun. Code, § 19.06.030, subd. 2.A.)

As relevant here, a zoning ordinance (the ordinance) in

effect at the time in question prohibited adult

businesses, in regional commercial or “CR-3” zones

while permitting those businesses to be located in CH

(heavy commercial) or IL (light industrial) zones. In

1994, Manta opened a comedy nightclub (the Club) in

the city’s CR-3 zone, in which nightclubs were a

permitted use. Six months after the Club opened,

Manta converted it to an adult cabaret called The

Flesh Club and began to present “topless

entertainment” in place of comedy. Once Manta

converted its comedy club to an adult entertainment

business, the Club was not in compliance with the

city’s ordinance in effect at the time, which limited

adult businesses to CH and IL zones. On the day that

it began operating as an adult cabaret, Manta sued the

city in federal court, alleging, inter alia, that the city’s

discussed by the parties are irrelevant to our disposition of the

case. We therefore choose not to address them. (Cal. Rules of

Court, rule 8.516(b)(3).)

? We have taken judicial notice of the entire record in case No.

SCV18157, including the appellate records in case Nos. E019635

and E£015790.

Ta

location limitations were unconstitutionally

restrictive.

In January 1995, the city filed an action in state

court seeking to enjoin the operation of Manta’s

cabaret on the ground that it was a public nuisance

that violated the city’s zoning laws. (Code Civ. Proc.,

§ 731.)° In response to the city’s ex parte application

for a temporary restraining order and order to show

cause regarding a preliminary injunction, Manta

argued that the initial ordinance violated its free

speech rights under article I, section 2 of the California

Constitution, “as applied,” because it was “unduly

restrictive.”"* The superior court issued a temporary

restraining order and scheduled a hearing on the

motion for a preliminary injunction.

During the hearing on the motion for a preliminary

injunction, Manta again contended that the ordinance

violated its free speech rights under the California

* In its federal court action, Manta sought a judicial declaration

that it had the right to present topless entertainment at its

cabaret and a permanent injunction preventing the city from

enforcing the ordinance. After the city filed its own action in state

court, the city asked the federal court to refrain from deciding its

case pending the state court’s consideration of the city’s request

for an injunction. The federal lawsuit ultimately was dismissed on

abstention grounds and has no bearing on the issues before this

court.

* While Manta’s federal action was pending, Manta expressly

chose not to raise any federal issues in state court because it did

not want “to be compelled to litigate federal constitutional issues

in state court.”

8a

Constitution. The city argued the ordinance was

constitutional and asked the trial court “to enforce [it]

by means of injunctive relief.” The trial court

expressed its view that the ordinance’s “zone

restrictions” were consistent with the city’s general

plan policy “to control the location of adult businesses

based on proximity requirements.” It granted the

city’s motion for a preliminary injunction and ordered

Manta to cease adult cabaret performances at the

Club. In so doing, the trial court stated that the city

“has established that its likelihood of prevailing on the

merits is strong.” The court noted that allowing the

Club to continue as an adult business “could cause as

much harm to the surrounding businesses as to any

subjective harm to the adult entertainment business

as projected by [Manta].” The court expressly chose to

abate the challenged activity on a showing that Manta

violated the local zoning ordinance rather than allow

the activity to continue during the “judicial process

which can take up to ten years” to litigate the

constitutionality of the underlying ordinance. It added

that the Club could resume operation as a comedy club

because the injunction only restricted operation as an

adult business.

In November 1995, while Manta’s appeal from the

order granting the preliminary hearing was pending,

Manta filed a cross-complaint in the trial court. That

complaint included, in addition to state causes of

action that were eventually dismissed, a cause of

action in which Manta sought monetary relief

pursuant to section 1983 based on its allegation that

the ordinance and actions of the city violated Manta’s

federal civil rights.

9a

One year later, after a nonjury trial, the trial court

dissolved the preliminary injunction after ruling the

city’s ordinance an unconstitutional infringement on

Manta’s First Amendment right to free speech as

applied to Manta’s cabaret because it “neither serve[d]

a substantial governmental interest nor allow[ed] for

reasonable alternative avenues of communication.”

The city appealed and moved for a stay pending

appeal. In response, the Court of Appeal issued a writ

of supersedeas (the stay) that prevented Manta from

“operating as an adult business” pending resolution of

the appeal. It dismissed as moot Manta’s appeal from

the order granting the preliminary injunction.

Approximately two years later, on January 26,

1999, the Court of Appeal lifted its stay after we

denied review of its opinion affirming the trial court’s

order dissolving the preliminary injunction.°

In 2000, the parties agreed to a non-jury trial on

the issue of the city’s liability under section 1983 and

a separate trial on damages. In the liability phase, the

trial court ruled that the acts of “precipitating” the

preliminary injunction and stay were an effort to

enforce an unconstitutional zoning ordinance. It held

that those acts violated Manta’s federally protected

rights and constituted a basis for section 1983 liability.

On the other hand, the court did not find that the city’s

ordinance itself was a basis for section 1983 liability.

A jury awarded Manta $1.4 million in damages for

profits lost while subject to the injunction and the stay.

° People v. Manta Management Corp. (Jan. 26, 1999, E019635)

(nonpub. opn.) review denied April 21, 1999, S062091 (Manta).

10a

The city appealed and argued that it could not be

liable for damages under section 1983 because it had

sought redress through the courts. The Court of

Appeal affirmed the judgment obtained under section

1983. It held that the city’s act of obtaining an

injunction to enforce an unconstitutional ordinance is

an act in violation of the First Amendment within the

meaning of section 1983, and that, accordingly, “a city

is liable for damages under section 1983 if it chooses to

enforce an unconstitutional ordinance by means of a

preliminary injunction.” The Court of Appeal

concluded that “the city’s good faith reliance on the

trial court’s issuance of the preliminary injunction

does not provide it with immunity.” We granted

review.

Il. DISCUSSION

As relevant here, section 1983 provides that

“[elvery person who, under color of any . . . ordinance

. of any State ... , subjects, or causes to be

subjected, any citizen of the United States or other

person within the jurisdiction thereof to the

deprivation of any rights .. . secured by the

Constitution and laws, shall be liable to the party

injured in an action at law, suit in equity, or other

proper proceeding for redress... .”

As noted above, “[l]ocal governing bodies... can be

sued directly under § 1983 for monetary .. . relief

where .. . the action that is alleged to be

unconstitutional implements or executes a policy

statement, ordinance, regulation, or decision officially

adopted and promulgated by that body’s officers.”

(Monell, supra, 436 U.S. at p. 590, fn. omitted.) Section

lla

1983 was enacted to provide compensation “to those

deprived of their federal rights by state actors,” a

category that includes cities and other local

governments. (Felder v. Casey (1988) 487 U.S. 131,

141; see also Monell, supra, 436 U.S. at p. 690.) In

particular, cities are liable for damages resulting from

their actions that cause an infringement of free speech

as protected under the First Amendment to the federal

Constitution. (See, e.g., Gerritsen v. City of Los Angeles

(9th Cir. 1993) 994 F.2d 570, 575-578, cert. den. (1993)

510 U.S. 915 (city’s enforcement of an unconstitutional

ordinance restricting handbill distribution supported

a § 1983 action for monetary damages].)

“Section 1983 “is not itself a source of substantive

rights,” but merely provides “a method for vindicating

federal rights elsewhere conferred.” ([Citations.]”

(County of Los Angeles v. Superior Court (1999) 21

Cal.4th 292, 297.) Although section 1983 is silent as to

what remedies are available to those suing for a

violation of their civil rights, the United States

Supreme Court has held that monetary damages are

available under that section for actions that have

violated federal “constitutional rights and . . . have

caused compensabie injury... .’ [Citation.]” (Carey v.

Piphus (1978) 435 U.S. 247, 255, italics omitted.) Thus,

a city may be sued for monetary relief under section

1983 if it unconstitutionally implements an ordinance

adopted by its officers. “Because section 1983 does not

comprehensively dictate the procedures and remedies

applicable to actions brought under it, a state court

ordinarily applies state law in adjudicating those

actions. The supremacy clause of the federal

Constitution, however, prohibits a state court from

applying state law that is inconsistent with federal

12a

law. [Citations.]” (County of Los Angeles v. Superior

Court, supra, 21 Cal.4th at p. 298.)

The proper analysis of a section 1983 claim against

a municipality requires the examination of two

interrelated issues, namely, “(1) whether plaintiffs

harm was caused by a [federal] constitutional

violation, and (2) if so, whether the city is responsible

for that violation.” (Collins v. Harker Heights (1992)

503 U.S. 115, 120.) “[T]he fact that a § 1983 claimant

has demonstrated a violation of [his or] her federally

protected rights under color of state law does not

necessarily mean that a named defendant will be

found liable under § 1983. The liability of a § 1963

defendant depends upon (1) the rules governing

culpability and responsibility, including principles of

causation and the rule against respondeat superior

liability; (2) whether individual or governmental

liability is at issue; and (3) the available immunities

from liability.” (Schwartz, Section 1983 Litigation:

Claims and Defenses (Aspen Pub. 4th ed. 2003) § 6.01,

p. 6-3.) Of the three major issues concerning

culpability and responsibility, one is relevant here,

namely, “[t]he issue of causation: how closely related

a defendant’s action or inaction must be to the alleged

injury ....” (Jbid.) On the issue of causation, “[flederal

courts turn to the causation factors developed in the

common law of torts to supply the necessary causation

factor in the civil rights field.” (Stevenson v. Koskey

(9th Cir. 1989) 877 F.2d 1435, 1438.)

In the case before us, we assume, without deciding,

that the city’s ordinance as written violated Manta’s

First Amendment right to free speech because the

Court of Appeal affirmed the trial court’s decision to

13a

dissolve the preliminary injunction on_ First

Amendment grounds and we denied review of that

decision in Manta, supra, E019635. However, the

ordinance caused Manta no harm because Manta did

not abide by it. Manta suffered no monetary damages

until the trial court enjoined its operating an adult

cabaret where its comedy club had been located. The

issue before us is whether the city’s act of seeking an

injunction to enforce the ordinance dealing with the

location of adult businesses and its subsequent act of

filing a petition for writ of supersedeas to obtain a stay

pending appeal “caused” the harm suffered by Manta

to the extent that the city is liable for damages Manta

incurred during the 53 months the injunction and the

stay were in place.

In support of its judgment affirming Manta’s

damage award against the city, the Court of Appeal

focused on whether the city was immune from liability

because it had relied in good faith “on a preliminary

injunction duly issued by a trial court.” It relied upon

the holding in Owen v. City of Independence (1980) 445

U.S. 622, that “municipalities have no immunity from

damages liability flowing from their constitutional

violations” (id. at p. 657), as the basis for its conclusion

that the city’s act of obtaining an injunction to enforce

an unconstitutional ordinance is an act in violation of

the First Amendment within the meaning of section

1983, and that “the city’s good faith reliance on the

trial court’s issuance of the preliminary injunction

does not provide it with immunity.”

However, the critical question is not whether the

city is immune from liability, but whether the city’s

seeking a preliminary injunction and a stay were acts

l4a

in violation of the First Amendment that caused injury

to Manta for which the city could conceivably be liable

under section 1983. The question of immunity would

only become relevant if the defendant caused the

harm. Indeed, the city does not assert immunity in this

case. Instead, it questions “whether there is any initial

liability under federal law” for its actions in obtaining

a preliminary injunction and stay. In response, Manta

argues that the city caused the constitutional violation

because the courts would not have issued the

overbroad injunction and the stay unless the city had

requested them; Manta claims the city is liable for its

damages because the courts were enforcing the

unconstitutional ordinance “at the City’s request.”

Cities have been found liable for damages based on

official action to enforce an ordinance later determined

to be unconstitutional in a variety of contexts. (See,

e.g., RK Ventures, Inc. v. City of Seattle (9th Cir. 2002)

307 F.3d 1045, 1050-1063 [plaintiff could maintain

§ 1983 action for damages resulting from prosecution

of civil abatement action based on an unconstitutional

ordinance]; Grossman v. City of Portland (9th Cir.

1994) 33 F.3d 1200, 1203-1210 [city liable for arrest

pursuant to an unconstitutional ordinance]; Gerritsen

uv. City of Los Angeles, supra, 994 F.2d at pp. 575-578,

580 [city’s enforcement of unconstitutional ordinance

restricting handbill distribution supported § 1983

action for monetary damages]; Murray v. City of Sioux

Falls (8th Cir. 1989) 867 F.2d 472, 474, fn. 2.

[acknowledged that a city may be liable for damages

resulting from an arrest or criminal prosecution

pursuant to an ordinance later found

unconstitutional]; AAK, Inc. v. City of Woonsocket

(D.R.I. 1993) 830 F.Supp. 99, 100-101, 105 [imposition

15a

of higher licensing fee on an adult cabaret than on

similar entertainment businesses supported claim for

monetary damages]; Pesticide Public Policy v. Village

of Wauconda, Ill. (N.D.Ill. 1985) 622 F.Supp. 423,

433-434 [enforcement of invalid ordinance regulating

pesticide use supported claim for damages]; Negin v.

City of Mentor, Ohio (N.D.Ohio 1985) 601 F.Supp.

1502, 1505 [city liable for damages resulting from

unconstitutional application of zoning ordinance}.)

Significantly, however, none of the cases cited above

involved a situation in which a court sanctioned the

city’s enforcement of its ordinance before the ordinance

was found to be unconstitutional.

More closely analogous to our case is Townes v. City

of New York (2d Cir. 1999) 176 F.3d 138 (Townes).

There, the plaintiffs section 1983 complaint alleged

that he was subjected to an unconstitutional stop and

search by the defendant police officers while he was a

passenger in a taxicab. The plaintiff moved to suppress

the evidence found during that search in state criminal

proceedings, but the motion was denied. He was

convicted based on that evidence, but the conviction

was overturned by a state appellate court on the

ground that the evidence should have been suppressed

because it was obtained in violation of the plaintiffs

Fourth Amendment rights. The plaintiff did not seek

damages “for [the] specific invasions of his privacy, but

rather for injuries derivative of these invasions—his

arrest, conviction, and incarceration.” (/d. at p. 141.)

While agreeing that the stop and search had violated

the plaintiffs Fourth Amendment rights (7d. at p. 144),

the Second Circuit held that the al'eged injuries were

not “fairly traceable to the actual violations of his civil

rights.” (/d. at p. 141.) It held that the “state trial

16a

court’s exercise of independent judgment in deciding

not to suppress the evidence, though later ruled to be

erroneous, broke the chain of causation for purposes of

§ 1983 lability for the plaintiffs conviction and

incarceration.” (Jd. at p. 147.) The court relied on the

“well settled” principle “that. the chain of causation

between a police officer’s unlawful arrest and

subsequent conviction and incarceration is broken by

the intervening exercise of independent judgment...

in the absence of evidence that the police officer misled

or pressured the official who could be expected to

exercise independent judgment.” (Jbid., citations

omitted.) After noting that there was no claim of such

evidence, the court held that plaintiff Townes could not

recover damages for his conviction and incarceration

from the police officers who handled the stop and

search. ([bid.)

Recently, the Second Circuit revisited the

traditional tort concept of independent intervening

cause when considering whether the petitioner could

establish a claim against an officer for the erroneous

admission at trial of testimony regarding an unduly

suggestive identification. (Wray v. City of New York (2d

Cir. 2007) 490 F.3d 189.) Using language similar to

that in its Townes decision, the court ruled that

“extending liability to [the officer] is unprecedented

and unwarranted. In the absence of evidence that [the

officer] misled or pressured the prosecution or trial

judge, we cannot conclude that his conduct caused the

violation of Wray’s constitutional rights; rather, the

violation was caused by the ill-considered acts and

decisions of the prosecutor and trial judge.” (Id. at p.

193.)

17a

Another federal case in which the defendant’s

conduct was followed by a court’s exercise of

independent judgment is Egervary v. Young (3d Cir.

2004) 366 F.3d 238 (Egervary). In that case,

government officials, as well as attorneys, urged a

federal district court to make a particular decision.

The judge made that decision, which ultimately turned

out to be erroneous. In deciding whether the

government officials were liable for section 1983

damages suffered by the plaintiffs as a result of the

judge’s decision, the Third Circuit applied common law

tort causation principles in concluding that “an

intervening act of a third party, which actively

operates to produce harm after the first person’s

wrongful act has been committed, is a superseding

cause which prevents the first person from being liable

for the harm which his antecedent wrongful act was a

substantial factor in bringing about.” (Egervary,

supra, 366 F.3d at p. 246, citing Rest.2d Torts

§ 440-441; see also McCabe v. Ernst & Young, LLP (3d

Cir. 2007) 494 F.3d 418, 436.) With regard to the

specific factual situation before it, the court held that,

“where, as here, the judicial officer is provided with the

appropriate facts to adjudicate the proceeding but fails

to properly apply the governing Jaw and procedures,

such error must be held to be a superseding cause,

breaking the chain of causation for purposes of § 1983

. .. hiability.”. (Hgervary, supra, 366 F.3d at pp.

250-251, italics added.) Citing Townes, the circuit

court similarly exempted from its general holding

instances in which the judicial officer reached an

erroneous decision as a result of being misled as to the

televant facts. (/d. at p. 250.) The court added that its

conclusion was “not inconsistent with” the holding in

Lanter v. Sallas (5ti; Cir. 1985) 777 F.2d 321, 324-325,

18a

that “a judge’s decision to commit plaintiff to a mental

health facility did not sever the chain of causation

where that decision was based in part on a

misrepresentation made by defendants.” (Egervary,

supra, 366 F.3d at p. 249.)

The Fifth Circuit reached a similar result in

Murray v. Earle (5th Cir. 2005) 405 F.3d 278. There,

a plaintiff juvenile sought damages under section 1983

from defendant detectives. The juvenile alleged that a

confession coerced from her by the detectives was

improperly admitted into evidence in his delinquency

proceeding, in violation of the Fifth Amendment

privilege against self-incrimination and that the

violation of her civil rights caused “her later-reversed

conviction (and lengthy incarceration) for injury to a

child.” (Murray v. Earle, at p. 282.) The court

acknowledged the “fundamental tension” between two

“primary tenets of tort law: (1) An individual is liable

for reasonably foreseeable consequences of his actions,

and (2) an intervening decision of an informed, neutral

decision-maker ‘breaks’ the chain of causation.” (Jd. at

p. 292.) It then held that the trial judge’s ruling, albeit

an incorrect one, to admit the confession “constituted

a superseding cause of [the plaintiffs] injury, relieving

the defendants of liability under § 1983.” (Id. at p.

293.) The court reasoned that, “as in the analogous

context of Fourth Amendment violations, an official

who provides accurate information to a_ neutral

intermediary, such as a trial judge, cannot ‘cause’ a

subsequent Fifth Amendment violation arising out of

the neutral intermediary’s decision.” (/bid., italics

added; see also Shields v. Twiss (5th Cir. 2004) 389

F.3d 142, 150 [placing facts supporting an arrest

before an independent intermediary breaks the chain

19a

of causation unless plaintiff affirmatively shows the

intermediary’s deliberations were tainted by actions of

the defendant].)

In Jones v. Cannon (11th Cir. 1999) 174 F.3d 1271,

1287, the court similarly held that “the grand jury

indictment broke the chain of causaticn for the

detention from the alleged false arrest . . . . (Citation.|

The intervening acts of the prosecutor in presenting

the murder case to the grand jury and of the grand

jury returning the indictment broke the chain of

causation for any detention of Jones that followed the

grand jury indictment.”

A sister state court considered questions similar to

those before us. After distinguishing its case from

those in which factual misrepresentations or

misconduct misled the court issuing the injunction, the

Michigan court concluded that “{t]he direct ‘cause’ of

the [First Amendment] violation here was the court’s

issuance of the overbroad injunction, not plaintiffs

pursuit thereof.” (Mayor of Lansing v. Knights of the

Ku Klux Klan (Mich.App. 1997) 564 N.W.2d 177, 180

(Mayor of Lansing).)

We note that, in our state, in a context other than

§ 1983 litigation, the Court of Appeal found the

exercise of independent judgment by a court

constitutes an independent superseding cause. (Brewer

v. Teano (1995) 40 Cal.App.4th 1024.) In that case,

according to the plaintiffs complaint and reasonable

inferences from its allegations, Teano negligently and

recklessly drove his car so that it repeatedly collided

with 2 car driven by Brewer. Fearful that he would be

assaulted by Teano if he stopped, Brewer left the

20a

scene. A bystander saw him leave the accident scene

and contacted the police. Brewer was arrested for

hit-and-run. Brewer stood trial for felony hit and run

and was acquitted. He then sued the estate of Teano,

who had died, seeking compensation for damage to his

car, for physical injury and emotional distress, and for

expenses incurred as a result of the arrest and

prosecution. (id. at p. 1027.) Relying on the

Restatement Second of Torts,® the appellate court

concluded that “the decision of the prosecutor to file

felony charges against plaintiff, and of the magistrate

to hold him to answer those charges, were superseding

acts for which Teano’s estate is not liable.” (Brewer,

supra, 40 Cal.App.4th at p. 1027.) After noting the

multiple separate steps that led to the prosecution of

a criminal trial, the court concluded that “it cannot be

said that the intervening force consisting of the

prosecution of formal criminal charges against plaintiff

was ‘foreseeable’ from Teano’s conduct, however

characterized. The harm from that proceeding was

different in kind from that which may be expected to

result from the kind of conduct alleged in this case.

({Restatement Second of Torts] § 442, com. (a).) It is an

extraordinary rather than a normal result of Teano’s

act. (/d., com. (b).) The decision of prosecutors to file

against plaintiff, and of the magistrate or grand jury

to hold him to answer on felony charges, operated

independently from anything that Teano did; they

® The Restatement Second of Torts, section 440, defines a

superseding cause as “an act of a third person or other force which

by its intervention prevents the actor from being liable for harm

to another which his antecedent negligence is a substantial factor

in bringing about.”

2la

cannot be described as a normal result of his negligent

driving. (/d., com. (c).)” (Ud. at p. 1037.)

We find the reasoning in the above federal and

state cases that have analyzed similar factual

situations in terms of independent superseding

causation to be persuasive. We also agree with those

cases that find an exception to the principle of

superseding causation when the party seeking an

injunction or stay pending appeal either misled or

pressured the court, which was expected to exercise

independent judgment. Accordingly, we hold that,

where a court is provided with appropriate facts to

adjudicate a motion for preliminary injunction or a

motion for a stay pending appeal, the courts’

intervening exercise of independent judgment breaks

the chain of causation for purposes of section 1983

liability.’ We also hold that this general rule of

superseding causation does not apply when the judicial

officer reached an erroneous decision as a result of

being pressured or materially misled as to the relevant

facts.

The city contends the only exception to the rule

that exercise of independent judgment by the court

breaks the chain of causation “is if material facts are

either intentionally misstated or intentionally

witnheld,” and it claims that Mayor of Lansing

recognized an exception to the rule if the party seeking

an injunction “intentionally misled the court.” To the

contrary, Mayor of Lansing, consistent with other

’To the extent that Gill v. Epstein (1965) 62 Cal.2d 611, 617-618,

held to the contrary, it is disapproved.

22a

cases on the issue of superseding intervening cause,

held that the court’s exercise of independent judgment

broke the chain of causation because che section 1983

defendants did not engage in any wrongdoing and

because they “did not make misrepresentations that

would have undermined the trial court’s ability to

perform its adjudicative function or to exercise its

discretion.” (Mayor of Lansing, supra, 564 N.W.2d at

p. 183.) Newman v. County of Orange (9th Cir. 2006)

457 F.3d 991, also cited by the city, similarly

recognizes that a plaintiff can produce evidence of

material omissions or conflicting evidence to rebut a

presumption that a court or prosecutor exercised

independent judgment. (/d. at p. 993-994.) In fact, the

majority of cases that discuss the exception to the

break in the chain of causation do not focus on

whether the party seeking the injunction intentionally

misled the official who could be expected to exercise

independent judgment. They hold, instead, that the

chain of causation is broken by the intervening

exercise of independent judgment in the absence of

evidence that the party seeking the injunction misled

or pressured the official, or did not provide him or her

with the appropriate facts to adjudicate the

proceeding. (See Townes, supra, 176 F.3d at p. 147;

Egervary, supra, 366 F.3d at pp. 250-251.) After

reviewing analogous federal and state cases that

discuss the principle of superseding causation and its

exception, we conclude Manta does not need to prove

that the city’s failure to provide the court with

accurate information was intentional. Instead, Manta

needs to show only that the misrepresentations were

material, in that they would have undermined the

courts’ ability to exercise independent judgment on the

issues presented.

23a

On the record before us, we cannot determine

whether the principle of superseding causation or its

exception applies in this case. The parties agree that

declarations submitted by the city in support of its

request for a preliminary injunction contained

misinformation regarding the number of sites and

acres within the city on which adult entertainment

businesses could operate under the city’s ordinance in

effect at the time Manta converted its comedy club to

an adult cabaret, and Manta asserts that. in support

of the issuance of a writ of supersedeas, the city

misrepresented to the appellate court that Manta

would suffer no irreparable harm because it had a

damage remedy. The parties dispute whether some of

the factual misstatements were actually misleading

and whether any misrepresentations that were made

were material in that they “would have undermined

the trial court’s ability to perform its adjudicative

function or to exercise its discretion.” (Mayor of

Lansing, supra, 564 N.W.2d at p. 183.)

As noted above, here, unlike the circumstances in

Townes, supra, 176 F.3d at page 147, there is a claim

that the city made material misrepresentations

regarding the factual basis upon which the

preliminary injunction and the writ of supersedeas

depended. We remand the matter to allow the trial

court to resolve any relevant factual issues and to

apply the principles of superseding intervening

causation in the first instance. (See, e.g., Zengen, Inc.

uv. Comerica Bank (2007) 41 Cal.4th 239, 259; People

v. Cahill (1993) 5 Cal.4th 478, 510.)

OT See

24a

lil. DISPOSITION

For the reasons stated above, we reverse the

judgment of the Court of Appeal, and remand the

cause to that court with directions to remand it in turn

to the superior court with directions to conduct

proceedings consistent with the views expressed

herein.

CHIN, J.

WE CONCUR:

GEORGE, C.J.

KENNARD, J.

BAXTER, J.

WERDEGAR, J.

MORENO, J.

CORRIGAN, J.

25a

APPENDIX D

IN THE COURT OF APPEAL OF THE

STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION TWO

No. E036942

(Super.Ct.No. SCVSS18157)

[Filed May 11, 2006]

As Modified on Denial of Rehearing

June 2, 2006

MANTA MANAGEMENT CORPORATION,

Cross-complainant and Respondent,

v.

CITY OF SAN BERNARDINO,

)

)

)

)

)

)

)

)

Cross-defendant and Appellant. )

)

APPEAL from the Superior Court of San Bernardino

County. Donald R. Alvarez, Judge. Affirmed.

Arias, Lockwood & Gray, Arias Aaen, Joseph Arias,

Riverside, Christopher D. Lockwood and Laura Tall

Liu, San Bernardino, for Cross-defendant and

Appellant.

26a

Roger Jon Diamond, for Cross-complainant and

Respondent.

OPINION

McKINSTER, Acting P.J.

INTRODUCTION

The City of San Bernardino (the city) appeals from

a judgment in the amount of $1.4 million, representing

damages incurred by Manta Management Corporation

(Manta) as a result of a preliminary injunction the city

obtained to enforce a zoning ordinance prohibiting

Manta’s operation of an adult cabaret. The preliminary

injunction was dissolved after this court upheld the

trial court’s ruling which declared the zoning

ordinance unconstitutional, and the California

Supreme Court denied review.

The city contends that damages are available for a

wrongfully issued preliminary injunction only ifa bond

has been posted or if the party wrongfully enjoined

prevails in a separate action for malicious prosecution.

Manta contends that the trial court correctly found

that it is entitled to recover damages resulting from

the injunction, despite the absence of an injunction

bond, via its cross-complaint for violation of its civil

rights pursuant to section 1983 of title 42 of the United

States Code.

The city also contends that the award of damages

is not supported by substantial evidence because there

was no factual basis for separating legal profits from

profits derived from illegal activities (i.e., prostitution),

27a

and that the trial court improperly placed the burden

of identifying “each dollar derived from prostitution”

on the city. Finally, it contends that because a large

portion of Manta’s profits are derived from activities

which violated a city ordinance, the court erred in

excluding any evidence concerning the ordinance.

We will affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

The following background is derived from the

record in an appeal in a related action (People v.

Manta Management Corp. (Jan. 26, 1999, E019635)

[nonpub. opn.]), and from the record in the present

appeal.

In November of 1993, the city issued Manta a

conditional use permit for the operation of a nightclub

to feature live entertainment and dancing at a location

on Hospitality Lane. The nightclub site is located in a

regional commercial, or “CR-3,” zone. Under the city’s

zoning ordinances as codified in its “Development

Code,” title 19 of its municipal code, nightclubs are

permissible land uses in CR-3 zones. (San Bernardino

Mun.Code (SBMC), § 19.06.010, subd. 2.K.) Manta

commenced operation of its nightclub in June of 1994,

featuring stand-up comedy acts. At the time, the club

was called The Rocket Theater.

Among the land uses regulated by the city’s code

are adult businesses. (SBMC, § 19.06.030, subd. 2.A.)

One of the business activities classified as an adult

business is that of an “adult cabaret.” (Jd., subd.

2.A.3.) An adult cabaret is defined as a nightclub

28a

which regularly features live performances in which

the performers dispiay specified anatomical areas or

engage in specified sexual activities. (Jbid.)

Under the code, adult businesses are not allowed in

CR-3 zones. (SBMC, § 19.06.030, subd. 2.A.)

Nevertheless, on November 14, 1994, Manta began

featuring topless female dancers in its nightclub,

thereby converting it into an adult cabaret. It was

renamed The Flesh Club.

The zoning provisions of the city’s code were

adopted in 1991 and periodically amended thereafter.

At the time Manta initiated the operation of an adult

cabaret, the most recent amendment of the zoning

provisions regulating adult businesses was ordinance

No. MC-909, adopted in August of 1994. Section

19.06.030, subdivision 2.A., as amended by ordinance

no. MC-909, is hereafter referred to as the “initial

ordinance.”

The initial ordinance severely limits the locations

at which adult businesses can be operated in the city.

Adult businesses are allowed only in CH (commercial

heavy) and IL (industrial light) zones. Moreover, adult

businesses cannot be established “within 2[,J000 feet

of another such business or within 1 [,]000 feet of any

religious institution, school or public park within the

city or within 1[,}000 feet of any property designated

for residential use or used for residential purposes.”

Distances between adult businesses are measured on

a straight line, building to building. Distances between

adult businesses and the other specified uses are

measured in a straight line, property line to property

line. Manta’s location complied with the distance

29a

limitations, but not with the provision restricting adult

cabarets to CH and IL zones.

On the same day that it started to operate the

nightclub as an adult cabaret, Manta sued the city in

federal court, alleging inter alia that the location

limitations are unconstitutionally restrictive. The

action sought both a judicial declaration that it has the

right to present topless entertainment at its nightclub,

and a permanent injunction preventing the city from

enforcing the initial ordinance.

In January of 1995, while the federal action was

pending, the city attorney brought an action in the

name of the People of the State of California (Code Civ.

Proc., § 731), alleging the operation of Manta’s adult

cabaret constitutes a public nuisance, and seeking to

abate the alleged nuisance through preliminary and

permanent injunctions. Thereafter, the city convinced

the district court to abstain from deciding the same

issue pending in the state court by dismissing the

federal action.

In February of 1995, the city amended its action by

adding a claim for civil penalties for engaging in

unlawful business practices. (Bus. & Prof. Code,

§§ 17200 & 17206.) That same month, the trial court

(Hon. Duane M. Lloyd) granted the city’s motion for

preliminary injunction and ordered Manta to cease

performances of the type characterizing adult cabarets.

Manta appealed from the order granting the

preliminary injunction. While that appeal was

pending, Manta cross-complained against the city for

declaratory relief and damages. The cross-complaint

30a

included several state causes of action and a cause of

action alleging that the “ordinances and code

provisions and actions” of the city violated its civil

rights under the federal and state constitutions, and

sought relief pursuant to section 1983 of title 42 of the

United States Code.

Trial commenced in July of 1996 before the Hon.

Carl Davis. The trial court bifurcated the issues, ruling

that the issue of whether the preliminary injunction

should be dissolved or made permanent would be tried

before any damage issues. During the trial on the

injunction issue, the city adopted an urgency

ordinance, No. MC-977, which further amended the

provisions of its code governing adult businesses by

slightly enlarging the areas in which adult businesses

could be located.

Following a lengthy nonjury trial, the trial court

ruled that the initial ordinance was constitutionally

invalid because it neither served a _ substantial

governmental interest nor allowed for reasonable

alternative avenues of communication. It also found

that the constitutionality of the code, as amended by

ordinance No. MC-977, was irrelevant because Manta

had established a prior nonconforming use before

ordinance No. MC-977 was adopted. Accordingly, it

dissolved the preliminary injunction.

The city appealed from the order dissolving that

injunction. In response to the city’s petition for writ of

supersedeas, we stayed the trial court’s order. On our

own motion, we dismissed as moot Manta’s appeal

from the order granting the preliminary injunction. We

concluded that the trial court correctly determined

3la

that the zoning ordinances violated Manta’s First

Amendment right of expression and affirmed the trial

court’s order dissolving the injunction. We also lifted

the stay imposed by our writ of supersedeas.

Following the issuance of our opinion in People v.

Manta Management Corp., supra, E019635, the city

filed a motion for judgment on the pleadings. The court

denied the motion, holding that the cross-complaint

was not based “solely on injunctive relief remedies,”

but instead on “a separate and distinct action for

violation of constitutional rights . . . through the

issuance of unconstitutionally vague ordinances

designed to thwart those rights.” The city’s

subsequent motion for summary adjudication of issues

was granted as to all causes of action except the civil

rights cause of action. The court found that it was

undisputed that Manta did not claim any damages

except those caused by the preliminary injunction and

the writ of supersedeas.

The parties agreed to hold a two-step trial, first to

determine liability and second to determine damages.

Prior to the commencement of the bench trial, Manta

filed an amended cross-complaint, alleging only the

civil rights violation.

In the liability phase, the court (Hon. Donald R.

Alvarez) found that the act of requesting and obtaining

the preliminary injunction and the stay pending

appeal constituted a basis for liability under section

1983 of title 42 of the United States Code (hereafter

section 1983). In the subsequent trial on damages, the

32a

jury awarded Manta $1.4 million in damages for lost

profits."

Following denial of its motions for judgment

notwithstanding the verdict and for a new trial, the

city filed a timely notice of appeal.

DISCUSSION

THE CITY’S ACT OF OBTAINING AN

INJUNCTION TO ENFORCE AN

UNCONSTITUTIONAL ORDINANCE IS AN ACT

IN VIOLATION OF THE FIRST AMENDMENT

WITHIN THE MEANING OF SECTION 1983

Introduction

Under most circumstances, if a_ preliminary

injunction is dissolved as having been improperly

granted, the formerly enjoined party may recover

damages only by proceeding against the injunction

bond or surety. If no bond was required as a condition

of issuance of the preliminary injunction, or if the

amount of the bond was insufficient to compensate the

enjoined party, the party may recover his damages

only if he can prevail in an independent action for

malicious prosecution, i.e., by showing that the

injunction was obtained maliciously and without

probable cause. This is true both under California’s

statutory scheme relating to injunctions and under

federal law. (Dickey v. Rosso (1972) 23 Cal.App.3d

493, 497-498, 100 Cal.Rptr. 358; Coyne-Delany Co.,

" Facts pertaining to the damages issues will be discussed below.

33a

Inc. v. Capital Development Bd. of State of Ill.(7th Cir.

1983) 717 F.2d 385, 393 (Coyne-Delany).)

Because cities are exempt from the requirement of

posting a bond as a condition of issuance of a

preliminary injunction (Code Civ. Proc., § 995.220; City

of South San Francisco v. Cypress Lawn Cemetery

Assn. (1992) 11 Cal.App.4th 916, 920-922, 14

Cal.Rptr.2d 323), the city did not post an injunction

bond. On appeal, it argues that because there was no

bond, it cannot be liable to Manta on its

cross-complaint for damages from the injunction and

the stay on appeal (hereafter referred to collectively as

the injunction) because Manta did not include a cause

of action for malicious prosecution in_ its

cross-complaint.

The trial court found, however, that the acts of

seeking anc obtaining the injunction were an effort to

enforce the unconstitutional zoning ordinance and

thus subjected the city to liability under section 1983

as a violation of Manta’s First Amendment rights. For

that reason, it found that Manta’s right to damages

was independent of the normal remedies for wrongful

issuance of an injunction. On appeal, the city contends

that it is not a violation of the First Amendment to

seek redress through the courts and that it cannot be

liable for damages under section 1983 on that basis.

Standard of Review

The pertinent facts are undisputed, and we

therefore independently review the issue as a question

of pure law. (Ghirardo v. Antonioli (1994) 8 Cal.4th

791, 799, 35 Cal. Rptr.2d 418, 883 P.2d 960.)

34a

Discussion

We address first the city’s contention that it cannot

be liable for damages under section 1983 based on its

action of seeking to enforce its unconstitutional

ordinance by means of a preliminary injunction.

As relevant to this case, section 1983 provides:

“Every person who, under color of any statute,

ordinance, regulation, custom, or usage, of any State or

Territory or the District of Columbia, subjects, or

causes to be subjected, any citizen of the United States

or other person within the jurisdiction thereof to the

deprivation of any rights, privileges, or immunities

secured by the Constitution and laws, shall be liable to

the party injured in an action at law, suit in equity, or

other proper proceeding for redress ... .” Section 1983

was enacted specifically to provide compensation “to

those deprived of their federal rights by state actors.”

(Felder v. Casey (1988) 487 U.S. 131, 141, 108 S.Ct.

2302, 101 L.Ed.2d 123.) Monetary damages are

available under section 1983 for “actions ‘found . . . to

have been violative .. . of constitutional rights and to

have caused compensable injury.’ [Citation.]” (Carey

v. Piphus (1978) 435 U.S. 247, 255, 98 S.Ct. 1042, 55

L.Ed.2d 252, italics omitted.)

Local governments, including cities, are “state

actors” within the meaning of section 1983. (Monell v.

Department of Social Services of City of New York

(1978) 436 U.S. 658, 690, 98 S.Ct. 2018, 56 L.Ed.2d

611 (Monell); Felder v. Casey, supra, 487 U.S. at p.

139, 108 S.Ct. 2302.) Thus, a city may be sued for

“monetary, declaratory or injunctive relief’ under

section 1983 if it “unconstitutional[{ly} implements or

35a

executes a policy statement, ordinance, regulation, or

decision officially adopted and promulgated by [the

city’s] officers.” (Monell, at p. 690, 98 S.Ct. 2018 italics

added.)

“Implementation” of an ordinance necessarily

includes official action to enforce it. Thus, a city is

liable for damages which result from an arrest or

criminal prosecution pursuant to an ordinance which

is later determined to be unconstitutional. (Grossman

v. City of Portland (9th Cir. 1994) 33 F.3d 1200,

1203-1210; Murray v. City of Sioux Falls (8th Cir.

1989) 867 F.2d 472, 474, fn. 2.) Cities are also hable for

damages resulting from civil actions brought to enforce

unconstitutional ordinances. In RK Ventures, Inc. v.

City of Seattle (9th Cir. 2002) 307 F.3d 1045, the Ninth

Circuit held that the plaintiff could maintain a section

1983 action for damages resulting from prosecution of

a civil abatement action based on an unconstitutional

ordinance. (Jd. at pp. 1050-1063.) In Gerritsen v. City

of Los Angeles (9th Cir. 1993) 994 F.2d 570, 575-578,

580, certiorari denied (1993) 510 U.S. 915, 114 S.Ct.

306, 126 L.Ed.2d 253, the same court held that a city’s

enforcement of an _ unconstitutional ordinance

restricting handbill distribution supports a section

1983 action for monetary damages. Other courts have

applied section 1983 to civil enforcement of

unconstitutional ordinances in a variety of contexts.

(See AAK, Inc. v. City of Woonsocket (D.R.1. 1993) 830

F.Supp. 99, 100-101, 105 [imposition of a higher

licensing fee on an adult cabaret than on other similar

entertainment businesses supports claim for monetary

damages]; Pesticide Public Policy Foundation ov.

Village of Wauconda, Ill. (N.D.Ill. 1985) 622 F.Supp.

423, 433-434 |enforcement of invalid ordinance

36a

regulating use of pesticide supports claim for

damages]; Negin v. City of Mentor, Ohio (N.D.Ohio

1985) 601 F.Supp. 1502, 1505 [city is liable for

damages resulting from unconstitutional application

of zoning ordinance}.)

None of these cases, nor any others we have found,

involves a situation similar to this case, in which the

city’s enforcement of its ordinance was sanctioned by

a court before the ordinance was found to be

unconstitutional. During oral argument, it was

suggested that the city is immune from liability

because it enforced the ordinance in good faith reliance

on an injunction duly issued by the trial court.2, We

have found no cases which are directly on point.°

2 In a similar vein, the city contends that it cannot be liable for

damages resulting from the preliminary injunction in the absence

of a showing that it acted maliciously. However, the cases the city

relies on in support of that contention do not involve claims

arising under section 1983. Malice is not an element of a section

1983 claim based on enforcement of an unconstitutional

ordinance: As we discuss below, a city is liable for damages

resulting from its enforcement of an unconstitutional ordinance

even if it acts in good faith.

3 In Dennis v. Sparks (1980) 449 U.S. 24, 101 S.Ct. 183, 66

L.Ed.2d 185 (Dennis ), the United States Supreme Court accepted,

without discussion, that if a state actor is involved in the

procurement of an injunction which violates the constitutional

rights of the party enjoined, section 1983 may be invoked in an

action for damages resulting from the injunction. However, Dennis

is factually distinct from this case. In Dennis, the plaintiffs

brought an action for damages under section 1983 against a state

court judge and other individuals who allegedly conspired to bribe

the judge to issue an injunction prohibiting the plaintiffs from

37a

However, we conclude that the city’s good-faith

reliance on the trial court’s issuance of the preliminary

injunction does not provide it with immunity.

In Owen v. City of Independence, Mo. (1980) 445

U.S. 622, 100 S.Ct. 1398, 63 L.Ed.2d 673 (Owen), the

United States Supreme Court addressed the question

whether section 1983 affords qualified immunity to a

municipality if the city official or employee responsible

for the unconstitutional action would be entitled to

such immunity, i.e. if the official or employee was

acting in good faith, based on an objectively reasonable

belief that his or her conduct was lawful. (See Harlow

uv. Fitzgerald (1982) 457 U.S. 800, 818, 819, 102 S.Ct.

producing minerals from certain oil leases, thus depriving the

plaintiffs of property without due process of law. The defendants

moved for dismissal, arguing that the judge was immune from

damages for his official, albeit corrupt, acts, and that his dismissal

from the action compelled the conclusion that the remaining

defendants did not act under color of law. (Dennis, at pp. 25-26,

101 S.Ct. 183.) The Supreme Court held that although the judge

was immune from damages because he acted within his official

capacity, his intentional involvement in a conspiracy to obtain an

injunction by corrupt means constituted state action, and the

private parties who conspired with him acted “under color of law”

within the meaning of section 1983. (Dennis, at pp. 27-30, 101

S.Ct. 183.) In this case, there is no issue of bad faith on the part

of the city, and certainly no suggestion of corruption on the part

of the court which issued the injunction. Moreover, because it does

not explicitly address the question of whether the procurement of

an injunction which in itself violates the enjoined party’s

constitutional rights is actionable under section 1983, Dennis is

not citable as authority on the issue. (Paterno v. State of

California (1999) 74 Cal.App.4th 68, 88, 87 Cal. Rptr.2d 754 [case

is not authority for points not decided].)

38a

2727, 73 L.Ed.2d 396.) After reviewing the language

of section 1983 and its legislative history, the Supreme

Court held that even if employees or officials may be

entitled to qualified immunity, municipalities

themselves have no immunity from damages liability

“flowing from their constitutional violations.” (Owen,

at p. 657, 100 S.Ct. 1398.)

The court explained that section 1983 “creates a

species of tort liability that on its face admits of no

immunities. [Citation.] Its language is absolute and

unqualified; no mention is made of any privileges,

immunities, or defenses that may be asserted.” (Owen,

supra, 445 U.S. at p.635, 100 S.Ct. 1398.) Despite the

expansive language of section 1983 and the absence of

any express incorporation of any common-law

immunities, the court noted that it had on several

occasions “found that a tradition of immunity was so

firmly rooted in the common law and was supported by

such strong policy reasons that ‘Congress would have

specifically so provided had it wished to abolish the

doctrine.’ [Citation.]” (Owen, at p. 637, 100 S.Ct.

1398.) Thus, the court has interpreted section 1983 to

encompass certain immunities that were well

established at common law and which were compatible

with the purposes of section 1983. However, there is no

tradition of immunity for municipalities. (Owen, at pp.

638-650, 100 S.Ct. 1398.) Congress enacted section

1983 to provide a broad remedy of compensation for

violation of federally protected civil rights and

intended it to be broadly and liberally construed in

favor of providing redress (Owen, at p. 650, 100 S.Ct.

1398 citing Monell, supra, 436 U.S. at p. 685, 98 S.Ct.

2018), and the court found no reason “to suppose that

injuries occasioned by a _municipality’s

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unconstitutional conduct were not also meant to be

fully redressable through [section 1983’s] sweep.”

(Owen, at p. 650, 100 S.Ct. 1398.)

Moreover, to afford such an immunity even for

good-faith constitutional violations would be contrary

to the purposes of section 1983. Section 1983 was

intended not only to provide compensation to the

victims of past abuses, “but to serve as a deterrent

against future constitutional deprivations, as well.”

(Owen, supra, 445 U.S. at p. 651, 100 S.Ct. 1398.) The

court held that the knowledge that a city will be liable

“for all of its injurious conduct, whether committed in

good faith or not, should create an incentive for

officials who may harbor doubts about the lawfulness

of their intended actions to err on the side of protecting

citizens’ constitutional rights.” (/d. at pp. 651-652, 100

S.Ct. 1398.)

In summary, the court held, “municipalities have

no immunity from damages liability flowing from their

constitutional violations.” (Owen, supra, 445 U.S. at p.

657, 100 S.Ct. 1398.) With respect to governmental!

responsibility, “No longer is_ individual

‘blameworthiness’ the acid test of lability; the

principle of equitable loss-spreading has joined fault as

a factor in distributing the costs of official misconduct.

. . . [I]n the scenario of the [section] 1983 cause of

action .. . [t]he innocent individual who is harmed by

an abuse of governmental authority is assured that he

will be compensated for his injury. The offending

official, so long as he conducts himself in good faith,

may go about his business secure in the knowledge

that a qualified immunity will protect him from

personal liability for damages that are more

40a

appropriately chargeable to the pepulace as a whole.

And the public [as represented by the municipal

entity] will be forced to bear only the costs of injury

inflicted by the ‘execution of a government’s policy or

custom, whether made by its lawmakers or by those

whose edicts or acts may fairly be said to represent

official policy.” [Citation].” (Ud. at pp. 657-658, 100

S.Ct. 1398.)

Owen, supra, 445 U.S. 622, 100 S.Ct. 1398, 63

L.Ed.2d 673 makes it abundantly clear that a city has

no immunity for constitutional violations, and that it

is no defense to a section 1983 action that the city

acted based on a good-faith belief that its actions were

lawful. Reliance on existing law does not confer

immunity. Rather, a city is liable for violations of

constitutional rights “even if those rights had not been

clearly established when the violation occurred. Such

a determination merely makes municipalities, like

private individuals, responsible for anticipating

developments in the law. We noted that such liability

would motivate each of the city’s elected officials to

‘consider whether his decision comports with

constitutional mandates and... weigh the risk that a

violation might result in an award of damages from

the public treasury.’ [Citation.]” (American Trucking

Associations, Inc. v. Smith (1990) 496 U.S. 167, 185,

110 S.Ct. 2323, 110 L.Ed.2d 148.) It is only where

changes in the law are not reasonably foreseeable that

a city may avoid liability if its conduct comported with

the law as it existed at the time of the conduct in

question. (/bid.) Similarly, good-faith reliance on a

preliminary injunction or other order of a trial court

does not confer such a defense. Rather, a city must

anticipate that a trial court ruling may be overturned

4la

on appeal and must weigh the risk that proceeding in

reliance on the trial court order may result in an

award of damages.

For the foregoing reasons, we conclude that a city

is liable for damages under section 1983 if it chooses to

enforce an unconstitutional ordinance by means of a

preliminary injunction. It is no defense that the

injunction was sought in good faith, nor does the city’s

reliance on a preliminary injunction duly issued by a

trial court insulate it from liability.

We next address the city’s contention that Manta

has no remedy for the improperly issued injunction

because it failed to obtain an injunction bond.

The city is correct that under both California and

federal law, a party which is subjected to an improper

preliminary injunction may, as a general rule, recover

its damages only by an action to recover on an

injunction bond. (Dickey v. Rosso, supra, 23

Cal.App.3d at p. 497, 100 Cal.Rptr. 358;

Coyne-Delany, supra, 717 F.2d at p. 393.) An

exception to thai rule lies, however, if the party which

obtained the injunction did so maliciously and without

probable cause. (Robinson v. Kellum (1856) 6 Cal. 399,

399-400; Dickey v. Rosso, supra, 23 Cal.App.3d at p.

497, 100 Cal.Rptr. 358; Meyers v. Block (1887) 120

U.S. 206, 211-212, 7 S.Ct. 525, 30 L.Ed. 642; Buddy

Systems, Inc. v. Exer-Genie, Inc. (1976) 545 F.2d 1164,

1168.) Under those circumstances, the wrongfully

enjoined party can sue for malicious prosecution and

can recover damages even if there was no injunction

bond. (Buddy Systems, Inc. v. Exer-Genie, Inc., supra,

545 F.2d at p. 1168.) Because the act of seeking the

42a

injunction maliciously and without probable cause is

itself a tort, the action is not subject to the statutory

rules which limit recovery of damages for the mere

erroneous issuance of a preliminary injunction. (See

Robinson v. Kellum, supra, 6 Cal. at p. 400.)

Similarly, a section 1983 claim is a “species of tort.”

(Owen, supra, 445 U.S. at p. 635, 100 S.Ct. 1398.)

Thus, just as the act of seeking an injunction

maliciously and without probable cause is a tort, so too

is the act of seeking and obtaining an injunction to

enforce an unconstitutional ordinance. The trial court

recognized this, holding that the injunction was the

vehicle by which the city sought to enforce an

unconstitutional ordinance, and that Manta’s

cross-complaint was thus based not on the mere

wrongful issuance of an injunction but on “a separate

and distinct action for violation of [Manta’s]

constitutional rights” by means of the injunction. By

analogy to the rule that damages for a maliciously

obtained injunction are available regardless of the

existence of an injunction bond, a section 1983 action

based on a city’s act of obtaining an injunction to

enforce an unconstitutional ordinance is also not

subject to the rule that damages may be recovered only

in an action on a bond.

The city cites Coyne-Delany, supra, 717 F.2d 385 as

authority that the rule that damages for an improperly

obtained injunction are available only if an injunction

bond has been obtained applies in section 1983

litigation. However, Coyne-Delany does not state such

a rule. Moreover, its facts are the converse of the facts

in this case. In that case, a manufacturer sued a public

entity for alleged deprivation of a constitutionally

we

43a

protected property right in connection with a state

contract to replace plumbing fixtures in an Illinois

state prison. The manufacturer obtained a temporary

restraining order to prevent the’ threatened

deprivation of its rights. When the subsequent

preliminary injunction was dissolved, the court held

that the defendant -- the public entity -- could obtain

damages only up to the amount of the injunction bond.

(id. at pp. 388-390, 393-394.) Thus, in that case, the

party which alleged a deprivation of its civil rights was

also the party which sought and obtained the

preliminary injunction. In this case, the injunction was

not issued to enjoin an alleged violation of Manta’s

civil rights but rather was the means of depriving

Manta of its civil rights. Coyne-Delany is thus

inapposite.

In summary, we conclude that the section 1983

action is a tort action independent of the statutory

remedies for improperly issued _ preliminary

injunctions, and that the absence of a bond is

irrelevant to Manta’s claim for damages.*

* There is an independent reason that section 995.220 of the Code

of Civil Procedure cannot be applied to defeat Manta’s claim.

Section 995.220 was enacted to provide municipalities with

immunity from damages resulting from improperly issued

injunctions. (City of South San Francisco v. Cypress Lawn

Cemetery Assn., supra, 11 Cal.App.4th at p. 922, 14 Cal.Rptr.2d

323.) However, the United States Supreme Court has held that

conduct which is wrongful under section 1983 cannot be

immunized by state law. (Martinez v. State of California (1980)

444 U.S. 277, 284, fn. 8, 100 S.Ct. 553, 62 L.Ed.2d 481.) “A

construction of the federal statute which permitted a state

immunity defense to have controlling effect would transmute a

44a

The city next contends that Manta waived its right

to damages because it failed to “invoke the federal

supremacy clause” and demand an injunction bond

under rule 65 of the Federal Rules of Civil Procedure.

Rule 65 provides in pertinent part that “no

preliminary injunction shall issue except upon the

giving of security by the applicant, in such sum as the

court deems proper, for payment of such costs and

damages as may be incurred or suffered by any party

who is found to have been wrongfully enjoined or

restrained. No such security shall be required of the

United States or of an officer or agency thereof.” (Fed.

Rules Civ.Proc., rule 65(c), 28 U.S.C.) A state public

entity, such as a city, is apparently not exempt from

this requirement. However, federal procedural rules

are generally not applicable in state court proceedings

(Washington-Baltimore Newspaper Guild, Local 35 v.

Washington Post Co. (D.C.Cir. 1971) 442 F.2d 1234,

1239; Rader v. Baltimore & O.R. Co. (7th Cir. 1940)

108 F.2d 980, 986), and the city provides no authority

or argument which supports its claim that Manta

could have invoked rule 65 of the Federal Rules of

Civil Procedure to require the city to post a bond.

Moreover, because we have determined that Manta’s

section 1983 claim is not subject to the rules

concerning damages resulting from an erroneously

issued preliminary injunction, the availability of a

bond is irrelevant, and we need not resolve this issue.

basic guarantee into an illusory promise; and the supremacy

clause of the Constitution insures that the proper construction

may be enforced. [Citation.] The immunity claim raises a question

of federal law.’ [Citation.]” (/bid.)

45a

Finally, the city argues that under federal law,

there is “good cause” for denying damages based on

Manta’s failure to oppose the injunction on the

grounds on which it ultimately prevailed at trial, i.e.,

that the ordinance violated Manta’s civil rights. It cites

Coyne-Delaney, supra, 717 F.2d 385 and Page

Communications Engineers, Inc. v. Froehlke (D.C.Cir.

1973) 475 F.2d 994. Both cases hold that in an action

to recover on an injunction bond, the trial court has

the discretion to deny or limit recovery based on

equitable considerations. (Coyne-Delaney, supra, at pp.

381-383; Page Communications Engineers, Inc. v.

Froehlke, supra, at p. 997.)

In our tentative opinion, we pointed out that the

city did not provide any citation to the record to

demonstrate that the issue was raised below, and we

therefore declined to address it. (Hepner v. Franchise

Tax Bd. (1997) 52 Cal.App.4th 1475, 1486, 61

Cal.Rptr.2d 341.) Prior to oral argument, the city

submitted a document which included citations to the

record demonstrating that it did raise the issue during

the bench trial on hability under section 1983. The

trial court did not rule directly on that contention, but

rejected, as we have done, the city’s argument that the

section 1983 action was subject to the rules applicable

to claims for damages resulting from the erroneous

issuance of an injunction. We can infer, therefore, that

the court concluded that the rule the city now asserts

does not apply to Manta’s claim under section 1983.

We agree, for the reasons stated above, i.e., that

because Manta’s section 1983 claim is a tort action, it

is not subject to the rules which apply to actions for

erroneously issued injunctions.

46a

ISSUES PERTAINING TO BURDEN OF PROOF

AND SUFFICIENCY OF THE EVIDENCE

Introduction

The city makes three arguments which are related:

that Manta was not entitled to recover any damages

based on profits it would have made from illegal

activities; that the court incorrectly allocated to it the

burden of proving how much of Manta’s profits were

derived from illegal activities; and that the evidence

was insufficient to allow the jury to determine the

amount of profit from legal activities Manta lost. The

following background pertains to those issues.

Approximately 53 months elapsed between the time

Manta was forced by the preliminary injunction to

cease operating as an adult cabaret and the time it

reopened. By the time the damages trial commenced,

Manta had been back in operation as an adult cabaret

for approximately the same length of time. For this

reason, the trial court decided that the profit Manta

had made since reopening was the most appropriate

basis for determining the profit Manta would have

made during the period the club was not operating.

Accordingly, Manta’s case in chief consisted of

evidence of the expenses it incurred in maintaining its

premises while it was unable to operate as an adult

cabaret and the profit it had earned since it reopened.

Its expenses during the shutdown, for items such as

rent, maintenance of the building and landscape

maintenance, totaled $943,208. Its net profits after

reopening totaled $1,669,064. Manta thus requested

damages in the amount of $2,612,272.

47a

The city challenged the accounting basis for

Manta’s claimed damages’, and also presented

evidence that a number of the dancers at the club

engaged in prostitution, with the knowledge and

encouragement of Manta’s owner, Waldon Randall

Welty, and the club’s management. Manta rebutted

the city’s evidence concerning prostitution by

testimony from several dancers that while some of the

women engaged in prostitution, the majority of them

engaged only in legal lap dances, and that Manta’s

management did not countenance prostitution.

Manta’s evidence included testimony from one of its

managers that she reprimanded, suspended and

occasionally terminated dancers who went beyond the

bounds of legality.

A special verdict required the jury to answer four

questions pertaining to damages. The jury answered

“yes” to the question, “Do you find that any net profits

earned between July 9, 1999 and March 31, 2004 were

earned from illegal activities?” and the question, “Are

you able to reasonably allocate Manta Management,

Inc.’s net profit as between lawfully earned net profit

and unlawfully earned net profit?” The jury awarded

Manta $1.4 million in damages, but was not required

to specify how it arrived at that figure.

° Although the city challenged Manta’s expert as to the propriety

of adding Manta’s out of pocket expenses during the shutdown to

the profits it earned during the period after it reopened to

determine its total damages, the city’s accounting expert agreed

that this was appropriate.

48a

Discussion

1. Manta Was Entitled to Recover Profits It Would

Have Earned from Its Legal Activities

The city contends that because some of Manta’s

income was earned from prostitution, it should be

barred from recovering any of its lost profits. The city

relies on cases which illustrate the principle that no

person or entity is entitled to sue to recover damages

incurred in connection with illegal activity. (See, e.g.,

Homami v. Iranzadi (1989) 211 Cal.App.3d 1104,

1109-1113, 260 Cal.Rptr. 6 and cases discussed

therein.) It also relies by analogy on cases which hold

that illegal contracts cannot be enforced.

We agree that Manta is not entitled to recover any

portion of its profits that were generated by illegal

activity. However, just as contracts which have both

legal and illegal objectives may be enforced if the

illegal objectives can be severed from those which are

legal (Armendariz v. Foundation Health Psychcare

Services, Inc. (2000) 24 Cal.4th 83, 122-123, 99

Ca) Rptr.2d 745, 6 P.3d 669), a business which engages

iss some illegal conduct should be allowed to recover its

legally-earned profits.

With respect to contracts that are partially illegal

in their terms or objectives, the California Supreme

Court has held that “. .. [wJhether a contract is entire

or separable depends upon its language and subject

matter .... If the contract is divisible, the first part

may stand, although the latter is illegal. [Citation.]’

[Citations.] ... Thus, the rule relating to severability

of partially illegal contracts is that a contract is

49a

severable if the court can, consistent with the intent of

the parties, reasonably relate the illegal consideration

on one side to some specified or determinable portion

of the consideration on the other side.” (Keene v.

Harling (1964) 61 Cal.2d 318, 320-321, 38 Cal.Rptr.

513, 392 P.2d 273; see Armendariz v. Foundation

Health Psychcare Services, Inc., supra, 24 Cal.4th at p.

122, 99 Cal.Rptr.2d 745, 6 P.3d 669.)

These principles apply to contracts which involve

subject matter which is subject to criminal

prosecution. Thus, in Keene v. Harling, supra, the

court held that a contract for the sale of coin-operated

machines was severable and _ thus partially

enforceable, even though some of the machines were .

illegal gambling machines. Because the contract

specified the consideration to be paid for each machine,

the legal portion of the contract could be severed from

the illegal portion, and the seller was entitled to the

agreed-upon consideration for the legal machines.

(Keene v. Harling, supra, 61 Cal.2d at pp. 319-321, 38

Cal.Rptr. 513, 392 P.2d 273.) It is only where the

agreement is “permeated by an unlawful purpose” to

the extent that the illegality cannot be purged from the

contract without reforming it that it must be declared

void. (Armendariz v. Foundation Health Psychcare

Services, Inc., supra, 24 Cal.4th at pp. 124-125, 99

Cal.Rptr.2d 745, 6 P.3d 669.)

Although the analogy between illegal contracts and

the situation before us is not exact, the underlying

principle applies to both situations. Ifa business earns

profits from some activities which are legal and some

which are illegal, it should be entitled to recover legal

profits it would have made but for the wrongful

50a

conduct of another, unless the legal profits cannot be

separated from the illegal profits or the illegality so

permeates the business that a trier of fact could

conclude that it is essentially a criminal enterprise.

Here, the jury found that it was possible to

separate Manta’s legal revenue from the revenue it

derived from illegal activities. We address the

sufficiency of the evidence supporting that

determination below.

2. The Instructions on Burden of Proof

The city complains that the jury instructions

erroneously placed on it the burden to prove the

portion of Manta’s lost profits which resulted from

illegal activity. It contends that once it proved that

some of Manta’s profits resulted from prostitution, the

burden should have shifted to Manta to prove what

portion of its profits resulted from legai activities.

Instead, it complains, the instructions told the jury

that “it was the City’s burden to prove each dollar of

income which came from prostitution, and told the jury

that Manta was entitled to every dollar the City could

not expressly prove came from prostitution.”

This is patently untrue. Not only do_ the

instructions not place the burden on the city to prove

that “every dollar that came from prostitution,” the

instructions implicitly, if not explicitly, placed the

burden of proof on Manta.

After explaining that lost profits can be recovered

only when the evidence shows with reasonable

certainty both that profits would have been earned and

Hla

the amount of those profits, the court instructed that

the party which seeks damages based on lost profits

“has the burden of presenting the best evidence

available under the circumstances to attempt to

establish a claim for lost profits.” It went on to

instruct that if the jury found that the profits Manta

contended it would have earned during the shutdown

“were generated in whole or in part from illegal

activities, you may consider that fact in evaluating

what percentage, if any, of such profits should be

excluded from {[Manta’s) lost-profits-damages claim.”

Finally, it reiterated that a party “cannot recover

damages .. . if the profits would have been earned

from illegal activities.” Nowhere in the instructions

did the court state that the city had any burden

whatsoever. We conclude that the jury would have

understood the instructions quoted above to require

Manta to prove, with reasonable certainty, the amount

of legal profits it lost as a result of the injunction.

Thus, assuming that the burden of proc? should have

been on Manta, as the city contends, the instructions

correctly allocated the burden.

We do agree with the city that the court erred in

instructing the jury that if it found that any of Manta’s

profits resulted from illegal activities, it “may”

consider that fact in evaluating the percentage of

profits which should be excluded from the damage

award. Because Manta was not entitled to recover any

lost profits which were derived from illegal activities

(Homami v. Iranzadi, supra, 211 Cal.App.3d at pp.

1109-1113, 260 Cal.Rptr. 6), the language should have

been mandatory rather than permissive. However, in

light of the fact that the jury awarded Manta $1.4

million rather than the $2.6 million Manta sought, it

52a

is obvious that the jury did factor in the percentage of

profits it determined to have been derived from

prostitution. Thus, there is no rezsonable probability

that the city would have fared better if the jury had

been instructed that it was required to deduct illegal

profits from any award of damages, and the error was

not prejudicial. (Sargent Fletcher, Inc. v. Able Corp.

(2003) 110 Cal.App.4th 1658, 1674, 3 Cal. Rptr.3d 279

[failure to give burden-shifting instruction not

prejudicial pursuant to Cal. Const., art. VI, § 13].)

3. Substantial Evidence Supports the Award of

Damages

The city contends that if Manta was entitled to

damages based on income it derived from legal

activities, the evidence was insufficient to permit the

jury to determine what portion of Manta’s income was

derived from legal activities.

On a claim of insufficient evidence, we review the

entire record to determine whether there was

substantial evidence in support of the judgment. We

review the evidence in the light most favorable to the

respondent and resolve all evidentiary conflicts and

indulge all reasonable inferences in support of the

judgment. If there is substantial evidence, contradicted

or uncontradicted, which will support the judgment,

we must uphold it. (Bickel v. City of Piedmont (1997)

16 Cal.4th 1040, 1053, 68 Cal. Rptr.2d 758, 946 P.2d

427; Bowers v. Bernards (1984) 150 Cal.App.3d 870,

873-874, 197 Cal. Rptr. 925.)

We do not know, of course, how the jury arrived at

the amount it awarded. However, there were two

53a

components to Manta’s damages: the expenses it

incurred during the shutdown and the profits it would

have made during that period. The city does not

dispute that there was substantial evidence as to the

expenses, nor docs it claim that the expenses were

tainted by illegality. An award of the full amount of

the expenses would therefore be supported by

substantial evidence. Assuming that the jury did

award Manta the full amount of its expenses, the

balance of the damages it awarded based on lost

profits is $456,792 ($1,400,090 - $943,208). This is

slightly more than 25 percent of the amount of Manta’s

claim for lost profits. If there is substantial evidence

which supports the conclusion that approximately 25

percent of Manta’s income was derived from legal

activities, we must affirm the judgment.

There was substantial evidence that some of

Manta’s income was derived from legal activities. In

addition to fees charged for lap dances, ti. ? club also

obtained income from admission fees and sales of scft

drinks at greatly inflated prices. Lap dancing which

did not involve any acts amounting to prostitution was

lega! during the period that Manta was shut down.

(See discussion in next section.) The club also had a

stage show, which was legal. Although there is

evidence that a great deal of sexual activity took place

under the guise of lap dances, the evidence also

showed that some customers did not purchase lap

dances, but merely watched the stage show. Others

who paid for lap dances did not actually have the

dancer perform, but merely engaged in conversation

with the dancer. Furthermore, not all of the lap

dancers engaged in prostitution. The evidence

concerning the extent to which prostitution occurred

54a

during lap dances was conflicting. Some of the dancers

or former dancers who testified said it was rampant

and blatant while others said they saw sexual activity

or evidence of sexual activity, such as empty condom

wrappers on the floor, only occasionally.

We agree that the evidence does not permit a

precise apportionment between the legal and illegal

sources of Manta’s income. However, such precision is

not necessary: A business is not required to prove lost

profits with precision, but only with “reasonable

certainty.” (S.C. Anderson, Inc. v. Bank of America

(1994) 24 Cal.App.4th 529, 537-538, 30 Cal.Rptr.2d

286.) Resolution of conflicts in the evidence and

determinations as to the credibility of witnesses are

the exclusive province of the jury. (Reichardt uv.

Hoffman (1997) 52 Cal.App.4th 754, 766, 60

Cal.Rptr.2d 770.) The evidence permitted a range of

inferences as to the extent of the prostitution which

took place at The Flesh Club. It certainly supports the

inference that Manta derived about 75 percent of its

profits from illegal activities and about 25 percent

from legal activities.

THE TRIAL COURT PROPERLY EXCLUDED

REFERENCE TO SAN BERNARDINO

MUNICIPAL CODE SECTION 5.14

The city contends that the court erred by refusing

to admit evidence and to instruct the jury that Manta

violated San Bernardino Municipal Code section 5.14,

which prohibits lap dancers from touching customers.

It contends that because the evidence showed that

many, perhaps most, of the dancers did touch their

55a

customers while performing lap dances, the majority

of Manta’s income was illegal.

The city does not make clear the legal basis for its

argument that the trial court erred, nor does it state

the applicable standard of review. However, since -- as

we discuss below -- the trial court determined that the

evidence pertaining to section 5.14 was not relevant,

we review the court’s ruling for abuse of discretion.

(People v. Rodriguez (1999) 20 Cal.4th 1, 8, 82

Cal.Rptr.2d 413, 971 P.2d 618.)

The city argued below that it should be allowed to

adduce evidence that San Bernardino Municipal Code

section 5.14 prohibits lap dancers from touching

customers. The trial court ruled that the ordinance or

any violation of its provisions was irrelevant because,

as the city conceded, the ordinance was enacted only

after Manta resumed operations in July 1999. Thus,

any lap dances which involved touching the customers,

but falling short of prostitution, would have been legal

during the period Manta was shut down. Even if

Manta’s post-July 1999 earnings for such dances were

illegal, this did not preclude Manta from using its

post-July 1999 earnings and expenses as the basis for

establishing the profit it would have made during the

shutdown because Manta was not seeking to recover

profits based on activities which were illegal when

they were performed. Rather, it was merely using its

post-July 1999 activities as a model to establish as

nearly as possible the profits it would have earned for

the same activities during the earlier period, when

they undisputedly were legal. The court also declined

the city’s request to instruct on the ordinance.

56a

Evidence Code section 350 precludes the admission

of any evidence except relevant evidence. Relevant

evidence is that which has a tendency in reason to

prove a disputed fact which is of consequence to the

determination of the action. (Evid. Code, § 210.) The

trial court has broad discretion to determine what

evidence is relevant. (People v. Cash (2002) 28 Cal.4th

703, 726, 122 Cal.Rptr.2d 545, 50 P.3d 332.) Here,

there was no abuse of discretion.

The city cites no authority which establishes the

relevance of evidence that Manta’s post-July 1999

activities violated the ordinance. It relies by analogy

on cases which hold that a person may not seek to

recover damages for breach of contract where the

contract itself was illegal, or where actions performed

pursuant to the contract were illegal. It also argues

that the fact that the sale of opium and cocaine was

legal at one time would not permit a seller of those

drugs to bring an action for breach of contract for

goods sold after they became illegal.

These analogies are inapt, primarily because

Manta is not seeking compensation for acts which

were illegal when they were performed. Rather, it is

seeking damages for profits it would have earned from

activities it would have engaged in at a time when

those activities were legal, had the city not prevented

it from doing so.

We find no abuse of discretion in the trial court’s

decision to allow Manta to use its post-July 1999

income and expenses as the basis for proving the profit

it would have earned if it had been allowed to operate

during the 53-month shutdown, nor any abuse of

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discretion in determining that it was not relevant that

some of activities it engaged in post-July 1999 were

illegal solely by virtue of an ordinance which was

enacted in July 1999. Those activities were legal prior

to July 1999, and any profits Manta might have

earned based on those activities would also have been

legal.

DISPOSITION

The judgment is affirmed. Manta is to recover its

costs on appeal.

We concur: RICHLI and KING, J.J.

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APPENDIX E

SUPERIOR COURT OF CALIFORNIA

COUNTY OF SAN BERNARDINO

Case No.: SCVSS 18157

[Filed September 23, 2004]

PEOPLE OF THE STATE OF CALIFORNIA,

Plaintiff,

VS.

MANTA MANAGEMENT CORPORATION,

A CALIFORNIA CORPORATION, et al.

Defendants.

MANTA MANAGEMENT CORPORATION,

Cross-complainant,

V.

CITY OF SAN BERNARDINO,

Cross-defendant.

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This action as filed by the City Attorney of the City

of San Bernardino on behalf of the Plaintiff, The

People of the State of California on January 20, 1995.

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On January 23, 1995 the court issued an order to

show cause and temporary restraining order which

prevented Manta Management Corporation from

presenting live entertainment at 100 West Hospitality

Lane which shows any specified anatomical areas,

pending hearing on a motion for preliminary

injunction. On February 9, 1995 the court issued a

preliminary injunction which prevented Manta

Management Corporation from regularly featuring live

entertainment at 100 West Hospitality Lane which are

characterized by exposure of specified anatomical

areas, pending a trial on the merits.

On January 19, 1996 Manta Management

Corporation filed a cross-complaint which sought both

a declaration that ordinances of the City of San

Bernardino are invalid and damages.

Trial of the civil nuisance abatement action began

on July 22, 1996. On November 15, 1996 the Court

determined the zoning provision in question to be

invalid and ordered the preliminary injunction

dissolved.

The City/People filed a notice of appeal of the order

dissolving the preliminary injunction. The City/People

also filed applications for a temporary stay and writ of

supersedeas pending the decision on appeal. On

December 19, 1996 the court of appeal issued a

temporary stay, and on February 4, 1997 the court of

appeal issued a writ of supersedeas. Both orders

enjoined the operation of an adult business at 100

West Hospitality Lane pending resolution of the

appeal on the merits.

60a

On January 26, 1939 the court of appeal filed an

opinion which affirmed the decision of the trial court.

The California Supreme Court denied a petition for

review on April 21, 1999.

On February 18, 2003 the court granted summary

adjudication of the second, third, fourth and fifth

causes of action of the cross-complaint.

Trial of the remaining issues presented by the

cross-complaint began on April 19, 2004. By

stipulation of the parties, the liability issues were tried

to the court. The Court ordered Manta Management

Corporation to file a first amended cross-complaint

which clearly stated its remaining theory of liability.

On April 26, 2004 Manta Management Corporation

filed a first amended cross-complaint which stated a

single cause of action based on 42 U.S.C. § 1983.

On April 28, 2004 the court found the portion of the

cross-complaint which seeks declaratory injunctive

relief to be moot. The court found the City of San

Bernardino liable for the amount of damages, if any,

caused by the temporary. restraining order,

preliminary injunction, temporary stay and writ of

supersedea-.

The damages phase of the trial was tried to the jury

starting on May 5, 2004. The jury returned the

following answers to the questions presented to it:

1. Do you find that Manta Management, Inc.

would have earned a net profit between the period of

January 23, 1995 and July 18, 1999, but for the

temporary restraining order, preliminary injunction

6la

temporary stay and writ of supersedeas? Answer:

Yes.

2. Do you find that any net profits earned between

July 9, 1999 and November 30, 2003 were earned from

illegal activities? Answer: Yes.

3. Are you able to reasonably fix Manta

Management Inc.’s lawful net profits as defined in

instruction number 3903N after excluding profits

found to be derived from illegal activity? Answer: Yes.

4. What amount of damages do you find were

caused by the temporary restraining order,

preliminary injunction, temporary stay and writ of

supersedeas between January 23, 1995 and July 18,

1999? Answer: $1,400,000.

Judgment is therefore entered on the cross-

complaint as follows:

1. Manta Management Inc. is entitled to recover

$1,400,000 from the City of San Bernardino.

2. Any post-judgment requests by either party

which pertain to, and include but are not limited to

pre-judgment interest, attorneys’ fees and costs will be

considered by the court as provided by law.

Dated this 23 day of SEPTEMBER, 2004.

/s/

Donald Alvarez

Judge of the Superior Court