Case 2:14-cv GMN-PAL Document 36 Filed 03/30/15 Page 1 of 10

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1 ADAM PAUL LAXAL T Nevada Attorney General 2 RAELENE K. PALMER

Deputy Attorney General 3 Nevada Bar No. 8602

Office of the Attorney General 4 555 E. Washington Ave., Ste. 3900

Las Vegas, NV 89101 5 P: (702) 486-3420

F: (702) 486-3773

6 Attorneys for Defendants, Kevin Ingram, David Spencer, Mark Zane, James Nadeau, 7 James Colbert, and Robert Uithoven

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10 UNITED STATES DISTRICT COURT

11 DISTRICT OF NEVADA

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13 TROY CASTILLO, ) Case No. 2: 14-cv-00332-GMN-PAL

)

14 Plaintiff, )

) DEFENDANTS'RESPONSETO

15 v.

) PLAINTIFF'S MOTION FOR

16 KEVIN INGRAM; eta/., ) PRELIMINARY INJUNCTION

) (FRCP 651 28 U.S.C. §§ 16511 2283)

17 Defendants. )

18 COME NOW, Defendants, Kevin Ingram, David Spencer, Mark Zane, James Nadeau, 19 James Colbert, and Robert Uithoven, by and through their attorneys, Adam Paul Laxalt, 20 Attorney General, and Raelene K. Palmer, Deputy Attorney General, of the State of Nevada, 21 Office of the Attorney General, and hereby respond to Plaintiffs Motion for Preliminary 22 Injunction (FRCP 65, 28 U.S. C.§§ 1651, 2283), (Court Dockets "CD" #30- #30-1).

23 This Opposition is brought with the following Memorandum of Points and Authorities, 24 and all papers and pleadings contained in the Court record in this matter.

25 MEMORANDUM OF POINTS AND AUTHORITIES

26 I. PROCEDURAL HISTORY

27 On February 5, 2015, the Court issued an Order granting Defendants' Motion to 28 Dismiss (CD #21 ), without prejudice, allowing Plaintiff until February 25, 2015, to file an

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1 amended complaint. (CD #28). On February 25, 2015, Plaintiffs Verified First Amended 2 Complaint for Declaratory Relief- Civil Rights [42 U.S. C. § 1083], ("FAG") (CD #29), and 3 Plaintiff's Motion for Preliminary Injunction (FRCP 65; 28 U.S.C. §§ 1651, 2283), (CD #30), 4 were filed. On February 26, 2015, Defendants' former counsel, Deputy Attorney General 5 Colleen L. Platt, filed an unopposed Motion for Extension of Time, seeking until March 30, 6 2015, to file responses to both Plaintiffs FAC, (CD #29), and Motion, (CD #30). (CD #31). 7 The Court granted Defendants' motion the following day. (CD #32). On March 12, 2015, the 8 undersigned counsel was reassigned to represent Defendants in this matter, (CD #33) and 9 accordingly, contacted opposing counsel regarding the need for an additional enlargement to 10 respond to the complaint only, which remains pending. (CD #34). This timely response to 11 Plaintiff's Motion for Preliminary Injunction now follows.

8 ~ 12 II. INTRODUCTION AND FACTUAL BACKGROUND

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_. ~~ 13 'We mustn't give trouble a shape before it throws its shadow." But this is precisely

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~ ~~ 14 what Plaintiff Troy Castillo has done through this litigation. In 2012, Plaintiff was licensed as a t' ~~

~ ~ ~ 15 Nevada Private Investigator, and his license was held in abeyance until 2013 when he retired ~~

"' 16 from the Palm Springs Police Department. (CD #1 at 6, ~ 24}. At that time, Plaintiff was a 17 member of the Nevada Society of Private Investigators ("NSPI"}, and through this 18 organization, he learned of proposed legislation that its members intended to introduce during 19 the 2013 Nevada legislative session? Plaintiff said that initially he was not concerned about 20 the proposal, because he understood that it was only intended to apply to private investigators 21 that had employees in the state of Nevada, and the purpose of the legislation was to ensure 22 that licensees were physically present in this state to supervise them. /d. Perplexingly, 23 despite claims of not being concerned, Plaintiff spoke directly with the President of the NSPI 24 and informed him that he was opposed to the legislation. /d. Plaintiff explained that he might 25

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IRENE HUNT, ACROSS FIVE APRILS 94 (Berkeley Publishing Group 1964).

27 2

Pac. Legal Found., Nevada puts out unwelcome mat for out-of-state Pis, at 2:46-6:58 (March 5, 2014),

http://traffic.libsyn.com/pacificlegal/3414_castillo.mp3 (An authenticated, downloaded copy of the podcast has 28 been provided to the Court and opposing counsel on a compact disc for ease of reference. See attached Exhibit

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1 have employees in the future and preferred that the NSPI did not pursue the statutory 2 changes. /d. Despite his communication, the NSPI submitted the proposal to an assemblyman to whom Plaintiff again communicated his opposition. /d. Plaintiff claims that his opinion "fell on deaf ears" and was unanimously approved by the legislature and subsequently signed into law by Nevada's governor. /d.

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Plaintiff said the passage of the bill was very upsetting to him because, as a private investigator, he does not need "a brick and mortar office," given that much of his work is done at his computer in his home or on his laptop in his car. /d. He admits that he is operating as a sole proprietor rather than a corporation with employees and admits further that "many times [he] would not need to step foot in Nevada to conduct Nevada investigations." /d. Plaintiffs rationale for why he did not begin work as a private investigator in Nevada after he retired from the police department is seemingly chimerical. He claims, that at the time he brought his license out of abeyance, months before the law's passage and just one year prior to filing the instant lawsuit, rumors had surfaced about the proposed legislation, and he did not want to solicit business in Nevada, without having an office in Nevada, while he lobbied against the draft bill for fear of violating a law that had not yet been adopted or enacted. /d. at 9:05-11:29. Plaintiff said that he sought legal help after the Nevada law was passed, because he could not gamer support from his own California private investigators' association for fear of strained relations between the two states' private investigators. /d. at 15:10-16:34. Plaintiff claims that at the time and at least through May 14, 2014, that he did not even maintain an office in California, and he could not afford one in Nevada, leaving him with only two options-to soptions-top doing business in Nevada or options-to initiate litigation.3 But Plaintiff did have other options, particularly because there was no indication that his business practice of operating as a sole proprietor without Nevada employees would result in adverse consequences. In fact, dozens

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Pac. Legal Found., PLF challenges Nevada's PI law, YouTUBE, at 1:46-4:10 (May 14, 2014), https://www.youtube.com/watch?v=SF6blppHD2g&feature=youtu.be; Pac. Legal Found., Nevada can't put out an

"unwelcome" mat to entrepreneurs, YouTUBE (June 18, 2014),

https://www.youtube.com/watch?v=feju2mhh778&feature=youtu.be; (An authenticated, downloaded copy of the podcast has been provided to the Court and opposing counsel on a compact disc for ease of reference. See attached Exhibit A-Declaration of Adam B. Brannon).

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of out-of-state private investigators who were similarly situated to Plaintiff made inquiries to the Private Investigator's Licensing Board ("PILB") staff about the effect that the new legislation would have on them.4 Each of them were told that if they did not have employees operating in Nevada that virtual offices providing communication and address services would suffice to meet the law's requirement without necessitating the need for dedicated office space. /d. With the exception of a couple of private investigators who opted to surrender their license due to insufficient business in Nevada, all others adapted to the minimal requirements articulated by PILB staff for compliance with the law. /d. at 2,

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7. To date, following the passage of the 2013 legislation, there have been no adverse, disciplinary consequences to any private investigator without Nevada employees who is operating with a Nevada license outside the state of Nevada. /d., 1J8.

Plaintiff has taken great liberty with the articulated, factual allegations and implied inferences in both his Motion for Preliminary Injunction and in his First Amended Complaint ("FAC"), resulting in the false and misleading conclusion that there is, in fact, a controversy for this Court to resolve. It begins with the Introduction and Factual Background section of Plaintiffs Motion stating that Plaintiff received notification from Defendants on January 21, 2015, that his mandatory certificate of liability insurance was deficient because it did not list a Nevada address, and that this, together with material from Defendants' board meetings and monthly newsletters evidence Defendants' intention to enforce the challenged laws against Plaintiff. (CD #30 at 8: 15-25). But if Plaintiff had been fully forthcoming with the Court, the only valid conclusion to be reached is that the evidence proves the opposite to be true- that Defendants clearly articulated to Plaintiff that he is not in danger of threatened enforcement action, because he is not employing individuals in the state of Nevada without supervising them. This is evidenced by a plain reading of the email communication from Defendants' staff to which Plaintiff refers but intentionally omits from his FAC, thereby otherwise precluding the

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See attached Exhibit B-Declaration of Kevin L. Ingram, at 1-2, 1[6.

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1 The electronic communication to which Plaintiff refers was sent to him at 8:34 A.M. on 2 January 21, 2015, by Lacey L. Hix, PILB Administrative Assistant I, along with the attached 3 newsletter that Plaintiff subsequently incorporated into his FAC as CD #29-1. /d., Att. I. The 4 newsletter, she explains, will clarify for Plaintiff the necessity of having a Nevada address and 5 certificate of liability insurance. /d. The newsletter states that "virtual offices would meet the 6 criteria described in the law for licensees not having employees;" and "all licensees with

7 registered employees working in Nevada are required to comply immediately. Failure to 8 comply is grounds for possible suspension, revocation, or denial of an application for 9 licensure." /d. (bold emphasis added). No mention is made of any criminal enforcement

10 action that might result even for those private investigators who do have employees in 11 Nevada. /d. 12 13 14 15 16

Less than seven hours later, Ms. Hix sent a follow-up email to Plaintiff, along with a copy of his certificate of liability insurance, acknowledging that he does not have any employees associated with his Nevada license, and therefore, she informs, the PILB does not require him to have a Nevada address reflected on the certificate. /d., Att. II. No further request is made of Plaintiff to comply with Nevada law, and no communication in regards to 17 disciplinary action is reflected therein. /d. Moreover, Plaintiff makes no allegations, 18 whatsoever, that at any time, either before or subsequent to his filing this litigation, that 19 Defendants or any member of their staff ever threatened him with disciplinary action. This fact 20 alone provides strong evidence that no controversy exists; but it is further bolstered by 21 subsequent actions that the PILB has taken that will, if adopted into law, unequivocally 22 address the harms sought to be remedied through the 2013 legislation and eliminate any 23 unintended hardship to out-of-state licensees without employees in Nevada.6

24 As Plaintiff admitted in his 2014 podcast interview, the 2013 NSPI proposed legislation 25 put forth as Assembly Bill ("AB") 306 was intended to ensure that licensees were physically 26 present in this state to supervise their employees. Furthermore, testimony given in support of 27 the bill identified that many of these employees are not insured for worker's compensation or 28

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unemployment. Specifically, Defendant Ingram testified that at the time, Nevada had 538 licensed private investigators, 218 of which were from out-of-state, and 77 of which employed individuals in Nevada with no supervision, and for whom no workers' compensation insurance or unemployment taxes were being paid. 7 One such licensee had 391 unsupervised employees. /d. Defendant Ingram further testified that in order to comply with the proposed legislation, a virtual office, in which his or her business license could be hung, would suffice for an out-of-state private investigator without employees. /d. at 5.

At its March 4, 2015 meeting, the PILB members voted unanimously to seek certain legislative changes to Chapter 648 of the Nevada Revised Statutes, including NRS 648.148.8 The proposed revisions will further refine the statutory language designed to address the harms identified during testimony taken for AB 306 in 2013, and it will alleviate the in-state-office requirement for any licensee who is operating without employees in the state of Nevada, including Plaintiff. /d.,

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In his Motion for Preliminary Injunction, Plaintiff concedes that the Defendants "allowed [him] to use his California address," but avers that "they did so contrary to state law." (CD #30-1 at 8:18-20). The paradoxical nature of Plaintiffs argument is puzzling, and one can only imagine how far Plaintiff might go to engage in battle where none can be found. Might he seek a writ from the state court demanding enforcement of the virtual office provision in the statute in order to gain standing in federal court to challenge the constitutionality of a law 20 whose enforcement he doesn't want?

21 The simple fact is that Plaintiff lacks standing for this suit. The Court has already told 22 him this, (CD #28), and his FAC does nothing to change this reality. He has suffered no 23 injury, and there is no intended enforcement action against an out of state, Nevada licensed,

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private investigator operating without employees in Nevada, including Plaintiff. There will be

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7 Hearings on Assembly Bill 306 (1st Reprint): Revises provisions relating to private investigators and

related professions. (BDR 54-677) Before the Senate Committee on Commerce, Labor and Energy, 77th Sess. 4

(April 29, 2013) (statement of Kevin Ingram, Executive Director, Private Investigator's Licensing Board), http://www .leg.state.nv .us/Sessionn7th2013/Minutes/Senate/CUFinal/993.pdf.

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no ''fines, penalities, or potential incarceration," as Plaintiff contends (CD #30-1 at 13:6-9) for his failure to maintain an office in Nevada, so long as he does not employ persons in Nevada to work for him. For this, he would either need to maintain a physical presence in this state or, utilizing his California private investigator's license, seek authorization under NAG 648.280, on a case-by-case basis, to work in conjunction with a Nevada licensee much like his counselors have had to do pro hac vice in this case. In the end, Plaintiff claims that "[h]e merely wants to speak and work freely in Nevada without having to open up an office [here] first." /d. at 28:25-26. This, he can do; and the electronic communication that he received from the PILB staff on January 15, 2015, that he failed to provide to the Court, as much as told him so. For these reasons, his Motion for Preliminary Injunction is moot and need not be granted.

Ill. LAW AND ANALYSIS

An injunction can be either prohibitory or mandatory. A prohibitory injunction preserves the status quo while litigation is pending, while a mandatory injunction provides preliminary relief well beyond maintaining that status quo. Stanley v. University of Southern California, 13 F .3d 1313, 1320 (9th Cir.1994 ). Mandatory preliminary injunctions are disfavored, and "the district court should deny such relief 'unless the facts and law clearly favor the moving party.'"

/d. (quoting Martinez v. Matthews, 544 F.2d 1233, 1243 (5th Cir.1976).

The proper legal standard for preliminary injunctive relief requires a party to demonstrate (1) that he is likely to succeed on the merits; (2) that he is likely to suffer irreparable harm in the absence of preliminary relief; (3) that the balance of equities tips in his favor; and (4) that an injunction is in the public interest." Stormans, Inc. v. Selecky, 586 F.3d 1109, 1127 (9th Cir. 2009) (citing, Winter v. Natural Resources Defense Council, Inc., 129 S.Ct. 365, 374 (2008)).

A. Request for Relief

Plaintiff contends that the Court should enjoin Defendants from enforcing a requirement that he maintain a principal place of business in Nevada or take other actions that might interfere with this Court's resolution of the case. (CD #30 at 3,

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-7-1) Like lih o o d o f S u c c e s s o n th e Me rits

1 B. Application of Legal Standard 2

3 Plaintiff avers that he has "alleged a credible threat of prosecution." (CD #30-1 at 4 14:20). Defendants agree that he has alleged a threat of prosecution, but it is far from 5 credible and arguably borders on sanctionable misrepresentation to the tribunal. In fact, 6 Defendants have informed Plaintiff that he may operate without a physical office in Nevada 7 because he does not have employees working in Nevada. 9 Defendants are also seeking 8 statutory changes in the legislature that will model their current enforcement actions and 9 better address the specific harms designed to be curbed through that effort.10 Therefore,

10 there is no action to be enjoined or, for that matter, any controversy to be litigated.

11 Besides being moot, Plaintiffs case was never ripe, and he, therefore, lacks standing. 12 Specifically, Plaintiff challenges three provisions of Nevada Revised Statute, Chapter

648-16

NRS 648.012, defining private investigators; NRS 648.060, which requires private investigators to obtain a license; and NRS 648.148, requiring private investigators to maintain an office in Nevada. CD #29 at 9-14.

In his first cause of action, Plaintiff alleges that NRS 648.060 does not permit him to 17 work without obtaining a license, and the requirement in NRS 648.140 that he maintain an 18 office in Nevada has a discriminatory effect on him as an out-of-state resident. (CD #29 at 9-19 12}. He contends that this violates the Commerce Clause and the Privileges and Immunities 20 Clause of Article IV, and the Due Process Clause of the Fourteenth Amendment. /d. In his 21 second cause of action, Plaintiff alleges that the three statutes combined violate his First 22 Amendment right to speak freely. /d. at 12-13. Lastly, in his third cause of action, Plaintiff 23 alleges that NRS 648.012 is overbroad and therefore violates the First Amendment by 24 threatening a protected amount of free speech. /d. at 13-14.

25 Plaintiff claims that he has standing because of Defendants' enforcement of the 26 licensing requirement that he maintain an office in Nevada. (CD #30-1 at 12:8-17). But 27

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HIX, supra note 5, Att. 2.

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INGRAM, supra note 4, at 2, ,-r 9.

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