Tag: Equal Protection

Local ordinance requiring conditional use permit for business selling alcohol not preempted by state liquor licensing law

Gary Taylor

by Gary Taylor

Lime Lounge, LLC v. City of Des Moines

Iowa Court of Appeals, February 8, 2023

Lime Lounge owns and operates a bar in the East Village of Des Moines. To sell alcoholic beverages in Iowa an establishment must obtain a liquor control license from the state Alcoholic Beverages Division (ABD). Among other requirements, the applicant for the license must first file the application with the local authority – in this case the city of Des Moines – for its approval. If the local authority disapproves of the application, the applicant has the ability to appeal the decision to the administrator of the ABD.

To sell alcoholic beverages in Des Moines an establishment must, among other things, be granted a conditional use permit (CUP), which places different requirements on establishments than the liquor control license. Depending on the type of business it is engaged in, a business is required to meet standards related to noise, litter, hours of operation, and others. The city will not consider a liquor control license application until the CUP is approved.

Lime Lounge obtained a CUP from the Des Moines Zoning Board of Adjustment (ZBA) and had their liquor control license approved in 2011. In 2015, the ZBA amended Lime Lounge’s CUP after multiple noise complaints. The ZBA revoked Lime Lounge’s CUP in March 2016. Lime Lounge challenged the revocation, but the revocation was upheld on appeal. On May 14, 2019, Des Moines filed a complaint with the ABD to revoke Lime Lounge’s state liquor license on the basis of the establishment’s failure to comply with local ordinances. Lime Lounge resisted the city’s complaint by filing a temporary injunction, but the district court dismissed Lime Lounge’s suit. Lime Lounge appealed.

Preemption. Lime Lounge’s first argument was that the Des Moines zoning code requirement of a CUP for an establishment selling liquor was preempted by the state alcoholic beverage control law found in chapter 123 of the Iowa Code because the zoning code requires an additional permit and fees in order to obtain a state liquor license. Lime Lounge asserted that the doctrine of express preemption, which “applies where the legislature has specifically prohibited local action in a given area,” rendered the Des Moines ordinance illegal.

Courts will look to the “specific language used by the legislature” to determine whether express preemption applies. Although Iowa Code section 123.37(1) provides, “The power to establish licenses and permits and levy taxes as imposed in this chapter is vested exclusively with the state. Unless specifically provided, a local authority shall not require the obtaining of a special license or permit for the sale of alcoholic beverages at any establishment….” the Court of Appeals determined that this did not apply to the city’s CUP permitting scheme because the zoning provisions related to the use of land. It agreed with the conclusion of the district court that “[t]he ordinance does not require a permit for the sale of alcohol, it requires a permit to use certain premises for the sale of alcohol. It’s a land-use regulation, not a regulation on the sale of alcohol. Thus, the requirement to obtain a CUP is not a permit requirement ‘for the sale of alcoholic beverages'” as contemplated by chapter 123. The Court of Appeals further observed that chapter 123 provides:

Local authorities may adopt ordinances or regulations for the location of the premises of liquor control licensed and retail wine or beer permitted establishments and local authorities may adopt ordinances, not in conflict with this chapter and that do not diminish the hours during which alcoholic beverages may be sold or consumed at retail, governing any other activities or matters which may affect the retail sale and consumption of alcoholic beverages and the health, welfare and morals of the community involved.

Iowa Code 123.39(2)

Equal Protection. Lime Lounge also asserted the the Des Moines zoning ordinance violates the Equal Protection clause of the Iowa and United State Constitutions, which has been interpreted by courts to direct that “all persons similarly situated should be treated alike.” Whether this ideal has been met in the context of economic legislation is determined through a “rational basis” test. If the regulation is “rationally related to a legitimate governmental purpose” then the regulation will be deemed valid.

Lime Lounge alleged the varied requirements—particularly the necessity of obtaining a CUP and the fees necessary to do so—imposed on different establishments such as restaurants, bars, and retail establishments are arbitrary, and that the municipal ordinance allows the ZBA to “impose virtually any condition which it can contemplate—and, more onerously—on an individualized basis.”

The court disagreed with both allegations. The city has a legitimate purpose in ensuring the health, welfare, and safety of the community. The distinctions drawn in the ordinance between bars, restaurants and other retail establishments is rationally related to that purpose because each has different characteristics of operation. For example, bars tend to operate later in the evening than restaurants, create more noise from music and patrons, and have increased law enforcement requirements. Requiring additional permitting for these and other businesses that are more likely to exhibit greater nuisance behaviors is rationally related to protecting the community.

The court also disagreed that the ordinance allows the ZBA “unfettered discretion” in imposing permitting restrictions. The ZBA is in fact constrained by criteria found in the ordinance for imposing conditions related to public health and safety, noise, traffic congestion, and nuisance prevention. The East Village of Des Moines is a mixed-use neighborhood, containing both commercial and residential buildings. Tailoring certain zoning restrictions related to noise, congestion, and other nuisance behavior to the specific circumstances of the area is rationally related to promoting the community’s welfare.

Spot zoning. Finally Lime Lounge asserted that the code section amounted to illegal spot zoning, but the court dismissed that assertion by noting the similarities between the city’s treatment of Lime Lounge and those of several of its East Village contemporaries. Furthermore, the noise restrictions and other directives limiting nuisance behavior fall squarely within the city’s police power.

Conditional Uses/Special Uses, Equal Protection claims, Iowa Court of Appeals, Preemption, Spot Zoning, Uncategorized , , , ,
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Field of Dreams site cleared for development of baseball complex and tourist attraction

Gary Taylor

by Gary Taylor

Residential and Agricultural Advisory Committee, LLC et al. v. Dyersville City Council
Iowa Supreme Court, December 9, 2016

The Dyersville City Council voted to rezone the area containing the site of the 1989 movie Field of Dreams from A-1 Agricultural to C-2 Commercial in order to facilitate the development of a  a 24-field baseball and softball complex, along with the farmhouse and original baseball field used for the movie which would continue to be maintained as a tourist attraction. Community members filed two writs of certiorari to challenge the rezoning on a number of grounds.  The District Court annulled the writs and found in favor of the city council.  This appeal followed.  The Iowa Supreme Court engaged in a 20-page recitation of the facts of the case on its way to its 44-page decision.  Only those relevant to the outcome of each challenge will be repeated here.

Quasi-judicial vs. legislative action.  The petitioners argued that the city council’s actions were quasi-judicial in nature rather than legislative, and therefore the council should have been required to conduct a more formal fact-finding proceeding and make findings of fact in support of its decision.  Quasi-judicial proceedings are also subject to greater judicial scrutiny when reviewed by an appellate court.  Petitioners relied on the Iowa Supreme Court’s decision in Sutton v. Dubuque City Council in support of their position. In contrast, the city council maintained that the action of  a legislative body in rezoning land is legislative in nature, which gives the legislative body wider latitude in the conduct of the proceedings.  Courts also give greater deference to legislative decisions made by city councils and county boards of supervisors.

In ruling on this issue the Iowa Supreme Court reviewed Sutton and several other past cases.  It recognized that in its Sutton decision the Court set forth three factors in determining whether zoning activities are quasi-judicial (versus legislative) in nature (1) [when the rezoning] occurs in response to a citizen application followed by a statutorily mandated public hearing; (2) [when] as a result of such applications, readily identifiable proponents and opponents weigh in on the process; and (3) the decision is localized in its application affecting a particular group of citizens more acutely than the public at large.   Recognizing that the Court “cited these factors with approval” in Sutton, it noted that at the time it chose not to hold that all public zoning hearings should be classified as adjudicatory.  It stated:

The Sutton Case dealt with a different situation than many of our previous zoning cases because it involved PUD zoning.  We noted the ‘quasi-judicial character of municipal rezoning is particularly evident in matters involving PUD zoning.’  We discussed the distinction between traditional rezoning and PUD zoning:

Creating zoning districts and rezoning land are legislative actions, and…trial courts are not permitted to sit as ‘super zoning boards’ and overturn a board’s legislative efforts….The [PUD] concept varies from the traditional concept of zoning classifications.  It permits a flexible approach to the regulation of land uses. Compliance must be measured against certain stated standards….Since the board was called upon to review an interpretation and application of a n ordinance…and the ordinance was not challenged per se, the board’s decision was ‘clearly quasi-judicial’.

Rather than follow Sutton, the Court found the present case to be “much more analogous” to the case of Montgomery v. Bremer County Board of Supervisors.  In Montgomery, the county Board rezoned two parcels of land from agricultural to industrial after two rezoning petitions were filed.  In Montgomery, the Court found that the zoning decision of the supervisors was “an exercise of its delegated police power,” and held that “the generally limited scope of review applicable to the case [was] to determine whether the decision by the Board to rezone [was] fairly debatable.”   In making the analogy, the Court observed:

The city council [in the present case] was acting in a legislative function in furtherance of its delegated police powers.  The council was not sitting ‘to determine adjudicative facts to decide the legal rights, privileges or duties of a particular party based on that party’s particular circumstances.  The [decision] was not undertaken to weigh the legal rights of one party (the All-Star Ballpark Heaven) versus another party (the petitioners).  The council weighed all of the information, reports, and comments available to it in order to determine whether rezoning was in the best interest of the city as a whole.

The Court held that the proper standard of review “in this case is the generally limited scope of review” utilized to “determine whether the decision…is fairly debatable.”  A decision is “fairly debatable” when “reasonable minds may differ, or where the evidence provides a basis for a fair difference of opinion as to its application to a particular property.”  If a rezoning decision is “fairly debatable” then a court will decline to substitute its judgment for that of the city council or board of supervisors.

Impartiality of the city council.  The Court noted that, while it was true that several council members viewed the rezoning and the project as an opportunity for the city, each council member attended all meetings, read reports, listened to citizens speak for and against the project, asked questions, and investigated issues and concerns.  Nothing in the record demonstrated that any council member had any conflict of interest.  Several members participated in an economic development bus trip to Des Moines to discuss the project with legislators and state officials, but the Court found that mere participation in such activities for the potential benefit of the city does not establish partiality or bias. “Rather, this is more akin to the council members upholding their public duty by performing their due diligence in determining what state aid might be available to help with the project before any formal action was taken.  The council make its decision based on what it believed was best for the community after a full and open discussion of the issues over many months.”

Decision was arbitrary, capricious, unreasonable. A decision is arbitrary, capricious, or unreasonable when it is not authorized by statute, or is unsupported by the facts.  For the reasons cited above, the Court declined to find in favor of the petitioners on these grounds.

Inconsistent with comprehensive plan.  Under Iowa Code 414.3, zoning regulations “shall be made in accordance with a comprehensive plan.”  The Court referred to its prior decision in Iowa Coal Mining Co. v. Monroe County for the principle that “compliance with the comprehensive plan requirement merely means that the zoning authorities have given ‘full consideration the problem presented, including the needs of the public, changing conditions, and the similarity of other land in the same area.'”  The Court referred to the boilerplate language found in every plan that says rezonings should be made with consideration of the unique character of the area, the suitability of the land for the proposed use, the conservation of buildings or value, and the encouragement of the most appropriate use of the land.  It noted that the Field of Dreams site is a unique parcel of land, and that the council considered the distinctiveness of the land and whether the proposed rezoning would be the best use of the site for the benefit of the community as a whole.  The city’s community builder plan also specifically addresses the importance of preserving the site in order to maintain and increase tourism.

Illegal spot zoning. To determine whether illegal spot zoning has occurred, a court must consider (1) whether the new zoning is germane to an object within the police power; (2) whether there is a reasonable basis for making a distinction between the spot zoned land and the surrounding property; and (3) whether the rezoning is consistent with the comprehensive plan.  Noting again the uniqueness of the Field of Dreams site, the Court refused to find this to be a case of illegal spot zoning even though the result is an island of commercial development surrounded by agriculturally zoned properties.

200-foot buffer zone.  Under Iowa Code 414.5, if 20% or more of the landowners immediately adjacent to the property proposed to be rezoned protest the change, then the city council must approve the rezoning by a four-fifths vote.  The rezoning applicants left out of the rezoning request a 200-foot buffer zone along the three sides of the perimeter of the property  (leaving it as A-1 Agricultural).  The petitioners challenged the use of this 200-foot buffer as a way to prevent nearby property owners from objecting to the project and thereby triggering the requirement of a unanimous vote.  While the Court acknowledged that “at first blush the buffer zone can appear to be unfair,” the Court concluded that the buffer in fact provides a benefit to adjacent landowners by addressing their expressed concerns about hunting and farming operations directly adjacent to the ballfields.  The Court also noted that other courts have validated the use of buffer zones to avoid supermajority requirements.  Regardless, even if the 200-foot buffer was improper, the rezoning was adopted by 4-1 vote of the city council.

Incorrect legal description.  While the notice of the original ordinance (Ordinance 770) contained errors in the legal description, the council corrected the legal description in the ordinance that ultimately rezoned the property (Ordinance 777).  No new notices were published, however, for Ordinance 777.  The Court does not require complete accuracy when providing notice.  Neither Iowa Code nor the city ordinances require the publication of a complete legal description.  The purpose of the notice requirement is to give the public reasonable notice of the pending action.  The public was well aware of the ongoing proceedings, and no one was confused or misled by the inaccuracy of the legal description.

Equal Protection.  Petitioners argued that all neighboring landowners were similarly situated, yet the 3-sided 200-foot buffer prevented those neighbors along the buffer from exercising the same right to object as the neighbors along the side of the property without the buffer.  The Court found that the council’s decision met the rational basis test required by the Equal Protection clause in this case.  The buffers, as described above, served a legitimate purpose of protecting the neighboring properties on the three sides.

Due Process.  Petitioners and the public in general were given adequate notice.  Further, they were heard in multiple public hearings.  All community members wishing to speak were allowed to do so.

Based on all preceding points, the Iowa Supreme Court affirmed the rezoning of the Field of Dreams property.

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Limiting percentage of rental units allowed per block was valid exercise of police power

by Rachel Greifenkamp and Gary Taylor

Dean v. City of Winona

(Minnesota Court of Appeals, February 24, 2014)

In the City of Winona, MN, there exists an ordinance that limits, in certain districts of the city, the number of lots on a block that are eligible to obtain certification as a rental property. Based on the findings from the city’s planning commission and a Parking Advisory Task Force that was formed to consider the issues of increased parking demands, the City found that rental-housing units comprised about 39% of the City’s total housing units, but that these rental properties comprised 52% of the complaints received by the Community Development Department. Based on data from 2004, the planning commission found that 95 of the 99 calls for police service based on noise and party-related complaints involved rental properties. They also found that 52% of the zoning violations that resulted in written violations were for rental properties. In 2005, the idea of restricting the number of rental properties per block was suggested. The Parking Advisory Task Force suggested that the number of rental units be restricted to 30% of the total properties on any given block. The task force adopted a motion to forward a “30% rule” to the planning commission for its consideration. The planning commission voted to recommend the 30% rule to city council, and the council subsequently passed the 30% rule.  The three appellants challenging the 30% rule in this case were the owners of three houses that were purchased after the 30% rule was adopted. In January of 2013 the district court denied the appellants’ motion that the 30% rule was an invalid exercise of the City’s broad police power, and that it violated their Equal Protection, Substantive Due Process, and Procedural Due Process rights under the Minnesota Constitution, and granted summary judgment to the city. The appellants then took their case to the Minnesota Court of Appeals.

Police Powers. The Court of Appeals determined that the 30% rule was, in fact, an authorized exercise of police power. The term “police power” means simply the power to impose such restrictions upon private rights as are practically necessary for the general welfare of all. “The development of the law relating to the proper exercise of the police power of the state clearly demonstrates that it is very broad and comprehensive, and is exercised to promote the general welfare of the state….[T]he public has a sufficient interest in rental housing to justify a municipality’s use of police power as a means of regulating such housing.”

Equal Protection. In order for an equal protection challenge to be valid the appellant must show that “similarly situated persons have been treated differently.” Similarly situated means that the two groups in question are alike in all relevant respects. The Court concluded that the 30% rule is not invalid on its face:

The ordinance is facially neutral and applies equally to all property owners in the regulated districts. The ordinance sets a 30% cap, but it does not define or predetermine which lots will be certified. That determination is made based on the changing facts and circumstances on each block, and not based on the ordinance or the characteristics of lot owners. The fact that the number of lots that may be certified might be less than the number of property owners who desire certification is not a class-based distinction between two groups of property owners.

The Court also concluded that the 30% rule was not discriminatory in the manner it was being applied by the city.  The Appellant did not show that the city “has done anything other than apply the mathematical formula on a first-come, first-served basis. Appellants’ real complaint is about the effect of an otherwise neutral ordinance on their particular circumstances, which does not give rise to an equal protection claim.”

Substantive and Procedural Due Process.  The substantive due process and procedural due process claims were also considered invalid. The appellants argued the the 30% rule violated their right to rent their property, but such a right is not a “fundamental right” protected by the Minnesota Constitution.  Unless a fundamental right is at stake, substantive due process requires only that the statute not be arbitrary or capricious.  The Court concluded that the 30% rule was adopted after a long, deliberate information-gathering process that considered public input, data, and expert review, and was thus not arbitrary or capricious.

As for procedural due process, the appellant’s argued that the 30% rule improperly delegates the power of deciding whether or not they may receive a license to their neighbors, but the Court reasoned otherwise because the “neighbors” (owners of certified rental properties) do not determine which other lots may be certified. “The certified-property owners’ views regarding whether a particular lot should be certified as a rental property are irrelevant; they can neither grant certification by consenting to it nor prevent certification by denying consent.”

The Minnesota Court of Appeals affirmed the district court’s award of summary judgment in favor of the city because the adoption of the ordinance was an authorized exercise of its police power and because the appellants did not met the burden to show that the ordinance is unconstitutional.

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Denial of license to mobile food vendor not a violation of Equal Protection or Dormant Commerce Clauses

by Rachel Greifenkamp

The Dog Pound, LLC v. City of Monroe, Michigan

(Federal 6th Circuit Court of Appeals, March 10, 2014)

In Monroe, Michigan The Dog Pound, an aspiring hot dog vendor, applied for and was denied a license under Monroe’s Hawker, Peddler, and Transient Merchant ordinance. The ordinance, in 2009 when the license was applied for, regulated street-vendors’ operations and required additional permission (not just a license) if the vendor wanted to run their vending business in a specific Restricted Area (an area that covered most of downtown Monroe). It also established a 10 minute limit on any activity by a vendor at any one location within the city. The Dog Pound alleged that the ordinance was unconstitutional because it violated the Equal Protection Clause, the Due Process Clause, and the dormant Commerce clause (all appear in both the United States Constitution as well as the Constitution of Michigan). A district court granted the City of Monroe’s motion for summary judgment and dismissed the case.

The Dog Pound claimed that the ordinance violated the Equal Protection Clauses of both the United States and the Michigan Constitutions because it created an illegal classification, itinerant merchants, and treated them differently from permanent business owners. Originally, The Dog Pound sought a declaratory judgment that the ordinance was invalid or a writ of mandamus. In 2011 the City of Monroe and The Dog Pound began settlement negotiations, meanwhile, the city amended the ordinance, eliminating the restricted area. When the negotiations failed, the court took up the question of preliminary injunction, and ended up denying The Dog Pound’s motion stating that the amendment to the ordinance “essentially moots the plaintiff’s arguments.” The Dog Pound then filed two amended complaints. (1) A violation of the Due Process clauses of the United States and Michigan Constitutions, alleging that the sole purpose of the act was to protect local static businesses against competition, (2) A violation of the dormant Commerce Clause, alleging that the disparate treatment of itinerant merchants discriminates against and burdens out-of-state businesses in favor of local businesses. The federal district court granted the City’s motion for summary judgment.

The Sixth Circuit Court of Appeals heard the case on appeal and tackled each of the three claims separately. (1) Equal Protection. The Dog Pound applied for a license under the amended ordinance, in 2001, but the application was incomplete. The city pointed out the deficiencies in the application and how each could be fixed, but The Dog Pound failed to complete the application. Therefore, The Dog Pound couldn’t possibly prove that it had been treated differently from other businesses that had applied for the license. The court stated that “There is therefore no issue of material fact and the district court was correct to grant summary judgment.” (2) Dormant Commerce Clause. The Dormant Commerce Clause is designed to ensure that a state cannot place oppressive and unnecessary burdens on out-of-state businesses. Both in-state and out-of-state businesses had to apply for a license as well as were subject to the 10-minute rule. Because the ordinance did not treat out-of-state businesses any different from in-state businesses, this claim was considered irrelevant. (3) Due Process and Equal Protection, Michigan Constitution. Finally, The Dog Pound argued that the district court did not properly address its claims for relief arising under the Due Process and Equal Protection clauses of the Michigan Constitution. However, because The Dog Pound raised no argument for this on appeal, the issue was waived. The Court of Appeals for the Sixth Circuit ultimately affirmed the district court’s grant of summary judgment in favor of the City of Monroe.

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Council’s decision not to allow locking covers in lieu of fences around pools had rational basis

by Kaitlin Heinen and Gary Taylor

Gregory Frandsen, et al. v. City of North Oaks
(Minnesota Court of Appeals, February 19, 2013)

The City of North Oaks enacted an ordinance (§§ 150.055-.062) in 1989 that requires permits to build swimming pools and that swimming pools be enclosed by safety fences. Michael Johnson, James Rechtiene, and Gregory Frandsen (the appellants) own swimming pools not enclosed by fences, despite their permits being contingent upon compliance with the fencing requirement.  Instead all three have automatic locking pool covers. In April 2010, the City notified the appellants that they were in violation of the fencing requirement. The appellants asked the City to consider amending the ordinance so that it would allow automatic locking covers to serve as an alternative. The City agreed to suspend enforcement and research the alternative.

After forming subcommittees to research several alternatives, reviewing information from insurance companies, and hearing from citizens at public hearings the planning commission agreed to recommend to the city council that fences be required to enclose all pools built after 1989, that the back of a home could be used as one side of the enclosure, and that locking covers not be allowed as a substitute for the fencing requirement. At a December 2010 meeting, the city council voted in favor of the planning commission’s recommendation. The amended ordinance became effective in July 2011. So in April 2011, the City notified the appellants that they had until July 1 to comply with the amended ordinance. Appellants responded by bringing this suit against the City, alleging that the amended ordinance violates their equal protection rights and that the amended ordinance is arbitrary and capricious. The district court denied their appeal, so the appellants appealed to the Minnesota Court of Appeals.

The Minnesota Court of Appeals’ duty is to determine “whether the district court properly applied the law and whether there are genuine issues of material fact that preclude summary judgment.” The district court referred to the ordinance as one that “promote[s] the health, safety and general welfare of [the city’s] residents.” The Minnesota Court of Appeals agreed that the ordinance is a general safety ordinance.

By exempting pre-1989 pools from the ordinance, the appellants argued that their equal protection rights were violated. They argued that there is no rational reason for this exclusion when the purpose of the ordinance is to keep children from harm: “[W]hatever danger to children exists with respect to pools built after the effective date of the ordinance also exists with respect to pools built before the effective date of the ordinance.” Since the City’s pool safety-fence ordinance became effective in May 1989, building permits of pools prior to May 1989 were not conditioned to comply with this ordinance. But the appellants’ building permits were conditioned to comply with this ordinance because their pools were built after 1989. Therefore the appellants are not similarly situated to homeowners who built pools prior to 1989. In addition, “the practice of grandfathering non-conforming properties has been upheld in the face of equal-protection challenges since at least 1914.” The appellants failed to explain why grand-fathering is rational with respect to zoning ordinances, but irrational with respect to a general welfare ordinance, so the Minnesota Court of Appeals ruled that it was not a violation of equal protection for the City to treat its residents differently with respect to the law effective when their pools were built.

The appellants also argued, without explanation, that the amended ordinance was arbitrary and capricious because it allowed a wall of a building to serve as one side of the enclosure, which they argued increased the risk of harm to children. The appellants cited a unidentified report from “US Public Safety Commission” that supported the conclusion that a house should never be considered part of the fence. But the court could not verify the existence of a “US Public Safety Commission.” To the contrary, the U.S. Consumer Product Safety Commission report considered by the planning commission stated that “when a door opens directly onto the pool area, ‘the wall of the house is an important part of the pool barrier.'” Amending an ordinance is a legislative power in which the municipality has discretion as long as there is a rational basis for its decision. The court held that the City’s decision is rational because it is directly related to promoting prevention of trespassing children gaining access to pools. The City’s decision is not arbitrary as long as one valid reason exists.

Finally, the appellants contested the City’s decision to not allow pool covers as an alternative to the fence requirement. They pointed to evidence that showed that a pool cover is a safe and viable alternative to a fence. This evidence does not mandate that the City to allow pool covers as an alternative, however. The City researched the issue for more than six months and considered numerous resources before reaching a decision. The City expressed concern for pool covers’ susceptibility to mechanical failures, human errors, and enforcement issues. The decision to require fences and not allow locking covers as substitutes is a rational decision.

The Minnesota Court of Appeals affirmed the district court’s decision to deny the appellants’ claims.

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City council corruption does not give rise to Constitutional claims in rezoning denial

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by Kaitlin Heinen

EJS Properties, LLC v. City of Toledo; Robert McCloskey
(Federal 6th Circuit Court of Appeals, September 5, 2012)

In April of 2002, EJS Properties entered into a conditional agreement with Pilkington Corporation to purchase 20 acres of a 43-acre lot that Pilkington owned, which included a technical center that EJS intended to convert into a charter school. This agreement was expressly contingent on obtaining a zoning change from industrial to one that could contain a school. EJS also entered into a non-conditional lease agreement with Lake Erie Academy to open the charter school. In May 2002, EJS filed a re-zoning petition with the Toledo-Lucas County Plan Commission. The Plan Commission recommended the re-zoning and passed the request onto the Toledo City Council. The City Council’s Zoning and Planning Commission held a public hearing on July 17, 2002, where everyone agreed to re-zone only the portion of Pilkington’s lot that would be needed for the school. The Committee voted unanimously to recommend the request for full vote by the Council, which was placed on the City Council’s agenda for August 13, 2002. During this re-zoning process, EJS had obtained an early-start building permit to begin $200,000 worth of repairs and improvements on the technical center.

Prior to August 13, Pilkington executives John Keil and Randy Berg had a lunch meeting with City Council member Robert McCloskey, who represented the district containing the Pilkington lot. McCloskey asked Pilkington to donate $100,000 to assist local retirees at the community center—Keil and Berg declined. At the next council meeting, member Peter Gerken moved to table consideration of the re-zoning for two weeks. EJS claims that McCloskey lobbied the other members to reverse their vote, but when he could not get enough to defeat the measure, he asked Gerken to table the matter. (McCloskey was a former Pilkington union negotiator, who had helped negotiate a labor agreement that capped healthcare benefits for retirees, for which he faced significant criticism upon being elected to City Council.) McCloskey then proceeded to call Keil, Berg, and Erich Speckin, the owner of EJS, and left questionable voicemails that sought the money for the retirement center in connection with the pending re-zoning. On August 22, Keil sent a letter to all of the City Council members and Mayor, seeking support for the re-zoning request and to consider the unrelated issues between Pilkington and McCloskey: “Such issues have the potential for exploitation to the detriment of the zoning request.” Pilkington and EJS never reported McCloskey’s request to the police.

On August 27, 2002, the City Council voted 7-4 against re-zoning (4 members had changed their vote from committee, including McCloskey). Only one member testified that he had been approached by McCloskey, who discouraged voting for the ordinance. EJS did not appeal the denial. Two months later, Toledo voters passed a levy, mandating the building of two new middle schools on the east side of Toledo. Toledo Public Schools (TPS) won an eminent domain lawsuit against Pilkington in November 2003 for the entire 43-acre lot. The Plan Commission, the City Council’s Zoning and Planning Committee, and the City Council approved a re-zoning in January 2004 to build a TPS middle school there.

EJS filed a complaint against the City and McCloskey in May 2004 for deprivation of substantive and procedural due process, deprivation of equal protection, deprivation of its property rights and its First Amendment right to petition in violation of 42 U.S.C.A. §1983, and wrongful interference with a business expectation in violation of state law. The district court granted summary judgment to the City and McCloskey on EJS’ constitutional claims. The court denied McCloskey summary judgment on EJS’ tortious interference claim (the district court actually stayed legal proceedings at one point to see the outcome of McCloskey’s 2006 indictment on federal criminal corruption charges, for which he pleaded guilty and received a 27-month prison sentence). After first dismissing EJS’ appeal for jurisdictional reasons, EJS dropped the state-law claim for wrongful interference. Then the U.S. 6th Circuit Court was able to hear the case.

In arguing for the deprivation of substantive and procedural due process, EJS argues that it had property interests at stake in the ordinance for re-zoning, in its contracts, and in its early-start building permit. The City Council never approved the re-zoning ordinance; rather, the City’s Planning Commission and Committee did. The 6th Circuit found that the only way for EJS to have a property interest in the re-zoning ordinance then is if the City Council lacked the discretion to approve it. However, the Toledo Municipal Code’s use of the word ‘may,’ grants the City Council discretionary authority over zoning regulation. Therefore EJS had no property interest in the re-zoning ordinance. Absent a property interest, EJS had no recognizable rights subject to due process protections.  As for its contracts, EJS argues that the contract options created property interests subject to due process protections; however, the purchase agreement explicitly states that “prior to the Closing Date, [EJS] has no title or estate in the Property…and will not claim any such interest…over any part of the Property.” The contract was explicitly contingent upon obtaining a re-zoning for the property, which did not happen–therefore, EJS possesses no interest in the property as a result of its contract. Finally, in regards to the early-start building permit, the permit did not entitle EJS to a re-zoning change, and the improvement work done on the building was “performed at the applicant’s own risk,” according to Toledo Municipal Code.

EJS also argued that it possessed two liberty interests that were violated: 1) a liberty interest in a government decision free from corruption and 2) a liberty interest in engaging in business contracts without unlawful interference. As to the first claim, corruption only affects procedural due process, which EJS could not be deprived of since the court ruled that EJS never possessed a  property interest of any kind. The court rejected the second claim on the same grounds as its ruling on property interests in relation to EJS’ contracts, holding that the defendants did not interfere with EJS’ right to contract because the contracts were contingent on discretionary zoning.  Additionally, the Supreme Court of the United States has upheld only a short list of liberty interests, and the circuit court here could not find any support for a liberty interest in a discretionary government decision free from corruption or unlawful interference.

In addition, EJS argued that corrupt zoning decisions “shock the conscience” and violate substantive due process as a result, regardless of whether or not a property or liberty interest is at stake. However, the court dismissed this claim, stating, “Our prior precedent makes clear that in the context of a discretionary zoning decision, government action will not shock the conscience unless the arbitrary and capricious action touches on a protectable interest.” With neither a property nor a liberty interest at stake, EJS had no merits for this claim. Even if EJS had a property or liberty interest, the court reasoned that “although we can condemn McCloskey for his misconduct, we simply cannot say that his behavior is so shocking as to shake the foundations of this country,” which was the original purpose for establishing the “shocks the conscience” standard.

Finally, EJS’ last two claims involved its right to petition and its right to equal protection. The court conceded that seeking redress from a government official qualifies as petitioning, for which a zoning request also qualifies. Specifically in regards to its right to petition, EJS argued that its right to meaningful access was violated. The court countered that EJS was equating meaningful access with meaningful process. Process is associated with violations of substantive or procedural due process, which was already decided to not have occurred in this case because EJS lacked both a property and a liberty interest. As for equal protection, the court ruled that EJS and TPS were not similarly situated, which does not grant adequate merits for an equal protection claim. Unlike EJS, TPS owned the relevant property at the time of their re-zoning request. TPS also intended to use the entirety of the property rather than part of it. And TPS planned to build a financially stable public school rather than a private school. These are rational bases for the City Council to have treated EJS differently than TPS.

Having dismissed all of EJS’ constitutional claims, the U.S. 6th Circuit Court upheld the district court’s decision to grant summary judgment to the defendants.

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Retrial of Equal Protection “class-of-one” claim proper when city’s size cap limitation ended landowner’s deal with Wal-Mart

Gary Taylor

by Gary Taylor

Loesel, et al, v. City of Frankenmuth (MI)
(Federal 6th Circuit Court of Appeals, August 20, 2012)

Plaintiffs, (Ronald Loesel and others), are the co-owners of a 37-acre tract of land that borders Main Street just outside the Frankenmuth city limits. They inherited the property from their mother when she died in 2003. A 2003 property-tax appraisal valued the land at $95,000.  Although not within the City’s boundaries, the property is within the urban growth area that was established jointly by the City and the Township in 1985 to confine and guide urban growth in order to retain the character of the Frankenmuth community. The City and Township first adopted the Joint Growth Management Plan (the Plan) in 1985, and amended the plan in 2005.  The Loesels’ property lies within an urban limit line established by the Plan to “[p]romote compact residential and commercial development in and near the city limits. To implement the Plan, the western portion of the Loesels’ property along Main Street, approximately 15 acres in size, was zoned as Commercial Local Planned Unit Development (CL-PUD), with the remaining 22 acres to the east designated as Residential Planned Unit Development (R-PUD). Permitted uses for CLPUD-zoned properties include developments that “provide principally for sale of goods and services to meet the general needs of the residents of the Frankenmuth community, including but not limited to grocery, department, drug and hardware stores, financial institutions, professional and personal service offices and transportation sale and service businesses.”

In 2004, the Loesels were approached by Wal-Mart, which was interested in purchasing the property because the western portion abuts Main Street and is commercially zoned.  In late May 2005 the Loesels entered into a conditional agreement to sell 23.55 acres to Wal-Mart for $2,943,750.  Under the agreement Wal-Mart had 180 days to determine the feasibility of the project and pull out without penalty.

Forces within city government and citizens learned of the agreement and marshaled opposition.  in August 2005 the city council adopted a 120-day moratorium on the construction of any facility with an area of 70,000 or more.  The city manager recognized that the commercial zoning classification of the property would allow Wal-Mart to build, but explored the possibility of a permanent ordinance limiting the square footage of commercial establishments, including  the potential legal liability of adopting such an ordinance.  A business group supported the size cap, but only on the north side of the city (Loesels’ property), not in other location (their properties).  A version of the size cap limitation (65,000 square feet) was settled on that only applied in the CL-PUD district, effectively limiting its reach to Loesels’ property and a handful of much smaller parcels.  It was adopted on December 7, 2005.  Wal-Mart pulled out of its agreement with the Loesels, citing the 65,000 square foot restriction.

The Loesels sued the city under 42 U.S.C. § 1983, alleging that the City’s 65,000-square-foot zoning restriction violated their rights under the Equal Protection, Due Process, Privileges or Immunities, and Commerce Clauses of the U.S. Constitution. As a remedy, they sought $4 million in compensatory damages (the sale price of the property under an amended agreement reached by Loesels and the city prior to Wal-Mart pulling out).  The district court granted summary judgment in favor of the city on all claims but Equal Protection.  The Equal Protection claim was allowed to go forward to a jury trial, where the jury found in favor of the Loesels and awarded damages of $3.6 million.  The city appealed, arguing that the district court should have awarded judgment as a matter of law in favor of the city on the Equal Protection claim.

“The Equal Protection Clause prohibits discrimination by government which either burdens a fundamental right, targets a suspect class, or intentionally treats one differently than others similarly situated without any rational basis for the difference.”  Loesels pursued their claim under the “class-of-one” theory which, although recognized by the US Supreme Court in 2000, is generally viewed skeptically for their potential to turn into an exercise in which juries are second-guessing the legislative process.  To prove a class-of-one case the Loesels bear the “heavy burden” of proving that they were treated differently than those similarly situated in all material respects.  In addition, they must show that the adverse treatment they experienced

was so unrelated to the achievement of any combination of legitimate purposes that the court can only conclude that the government’s actions were irrational. This showing is made either by negativing every conceivable reason for the government’s actions or by demonstrating that the actions were motivated by animus or ill-will.

Similarly situated.  To determine whether the Loesels were treated differently than those similarly situated in all material respects, the 6th Circuit determined that the proper comparison is between the Loesels’ property and the properties on which two other similarly-sized commercial establishments sit.  The Court rejected the city’s arguments that the properties were not similarly situated because of differing zoning classifications, because of the fact that the Loesels’ property was the only one of the three that was vacant, and because the traffic capacities of the serving roads were different (road capacity could have been addressed by means other than a size cap).  The 6th Circuit concluded that  district court did not err in denying the City’s renewed motion for judgment as a matter of law on this issue.

No-conceivable basis theory. The city’s expert testified with several reasons why the size cap was only appropriate for properties in the CL-PUD district, which the city asserted provided the rational basis for its decision; however, the Court pointed out that the jury rejected the expert’s testimony on a number of contentions, and that the city manager himself contradicted the expert’s opinions.  The Court concluded that a genuine dispute exists as to whether the ordinance lacked a rational basis.  Denial of the city’s motion for judgment as a matter of law was again proper.

Animus or ill-will.  On this claim the city prevailed.  The Court noted that the animus must be directed toward the Loesels personally to be actionable.  City officials’ animus was not directed at the Loesels, but rather the Wal-Mart project itself.  Judgment as a matter of law for the city on this count should have been granted.

Because the record did not reflect which theory the jury used to find the city liable, the Court vacated the judgment and remanded it back to the district court for a new trial, excluding “animus or ill-will” as possible grounds for a verdict favoring the Loesels.

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US Supreme Court finds rational basis for Indianapolis special assessment action

Gary Taylor

by Gary Taylor

Armour, et al. v. City of Indianapolis
(US Supreme Court, June 4, 2012)

For decades, Indianapolis (City) funded sewer projects using Indiana’s Barrett Law, which permitted cities to apportion a public improvement project’s costs equally among all abutting lots. Under that system, a city would create an initial assessment, dividing the total estimated cost by the number of lots and making any necessary adjustments. Upon a project’s completion, the city would issue a final lot-by-lot assessment. Lot owners could elect to pay the assessment in a lump sum or over time in installments. After the City completed a particular sewer project, it sent affected homeowners formal notice of their payment obligations. Of the 180 affected homeowners, 38 elected to pay the lump sum. The following year, the City switched from the Barrett Law method of financing and adopted the Septic Tank Elimination Program (STEP),which financed projects in part through bonds, thereby lowering individual owner’s sewer-connection costs. In implementing STEP, the City’s Board of Public Works enacted a resolution forgiving all assessment amounts still owed pursuant to Barrett Law financing. The 38 homeowners who elected to pay their assessments in a lump sum on the prior year’s project received no refund, while homeowners who had elected to pay in installments were under no obligation to make further payments. The 38 homeowners who paid the lump sum asked the City for a refund, but the City denied the request. Thirty-one of these homeowners brought suit in Indiana state court claiming that the City’s refusal violated the Equal Protection Clause of the US Constitution. The trial court granted summary judgment in favor of the homeowners, and the State Court of Appeals affirmed. The Indiana Supreme Court reversed, holding that the City’s distinction between those who had already paid and those who had not was rationally related to its legitimate interests in reducing administrative costs, providing financial hardship relief to homeowners, transitioning from the Barrett Law system to STEP, and preserving its limited resources.  The homeowners appealed to the US Supreme Court.

The Supreme Court held that the City had a rational basis for its distinction and thus did not violate the Equal Protection Clause. The City’s distinction does not violate the Equal Protection Clause as long as “there is any reasonably conceivable state of facts that could provide a rational basis for the classification,” and the “burden is on the one attacking [the classification] to negative every conceivable basis which might support it.” The distinction between the homeowners who already paid their assessments and those who did not does not involve a fundamental right or suspect classification. Its subject matter is local, economic, social, and commercial. It is a tax classification, and there was no claim that the City has discriminated against out-of-state commerce or new residents.

Administrative concerns can ordinarily justify a tax-related distinction, and the City’s decision to stop collecting outstanding Barrett Law debts finds rational support in the City’s administrative concerns. After the City switched to the STEP system, any decision to continue Barrett Law debt collection could have proved complex and expensive. It would have meant maintaining an administrative system for years to come to collect debts arising out of 20-plus different construction projects built over the course of a decade, involving monthly payments as low as $25 per household, with the possible need to maintain credibility by tracking down defaulting debtors and bringing legal action. The rationality of the City’s distinction draws further support from the nature of the line-drawing choices that confronted it. To have added refunds to forgiveness would have meant adding further administrative costs, namely the cost of processing refunds. And limiting refunds only to the homeowners in the subject project would have led to complaints of unfairness, while expanding refunds to the apparently thousands of other Barrett Law project homeowners would have involved an even greater administrative burden. Finally, the rationality of the distinction draws support from the fact that the line that the City drew—distinguishing past payments from future obligations—is well known to the law.

The homeowners further argued that administrative considerations alone should not justify a tax distinction lest a city justify an unfair system through insubstantial administrative considerations. Here it was rational for the City to draw a line that avoided the administrative burden of both collecting and paying out small sums for years to come. Petitioners have not shown that the administrative concerns are too insubstantial to justify the classification.

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African American residents of subdivision fail to prove they are similarly situated to unprotected class

Gary Taylor

by Victoria Heldt

Bishop Harvey, Jr., et al., v. Town of Merrillville
(Federal 7th Circuit Court of Appeals, July 11, 2011)

The residents of Innsbrook, a subdivision in Merrillville, Indiana had several complaints regarding a retention pond near their property as a source of mosquitoes, algae, and flooding.  They feared that a proposed expansion of the subdivision would only enhance the problem, so they attempted to voice their opinions to the Merrillville town council.  The homeowners, who were predominantly African-American, felt they were ignored by the council and claimed to have been victim to racial epithets from a council member (who was also African-American.)

They brought forth a claim under the Fourteenth Amendment, claiming that the council violated their equal protection rights when it was more responsive to another group of people filing similar complaints.  They listed the Town of Merrillville, 16 Merrillville employees (Town Defendants), and the Town’s engineer (Warmelink) in their filing.  They also made a total of 31 state claims against the defendants.  Three years later, the residents moved for summary judgment on twelve issues, one of them being the Fourteenth Amendment claim.  The Town responded with a similar request for summary judgment.  Warmelink made a separate request for summary judgment.  The district court eventually ruled in favor of the Town, finding that the residents “failed to identify a similarly situated class that the Town and Town Defendants treated more favorably.”  The court then remanded the case to the state court to rule on the remaining state claims.  Soon after, Warmelink sought a clarification in the ruling, since he was not listed within the opinion.  The court released an order (December 3 order) that granted summary judgment to Warmelink on the same grounds as the ruling for the Town.

The residents appealed, but failed to mention the December 3 order in their claim.  Subsequently, Warmelink contended that the Court did not have jurisdiction over him because the residents failed to “designate the judgment, order, or part thereof being appealed.”  The Court disagreed.  It noted that incomplete attempts to follow the rule will not be contested as long as the appellee is not harmed.  Since Warmelink gave no evidence that he was harmed or misled by the residents’ appeal (in which is he was specifically named), the Court denied Warmelink’s argument.

The residents’ primary substantive argument rested on the belief that they raised a “genuine issue of material fact” that they were treated differently than a group of Caucasian homeowners making similar complaints regarding a subdivision.  The Court noted that, in order to prevail with an equal protection claim, the party must show that:  1) they are a member of a protected class; 2) they were similarly situated to members of an unprotected class in all relevant respects; and 3) they were treated differently from members of the unprotected class.  The Court admitted that the residents were members of a protected class (all were non-white individuals.)  Yet, the residents failed to establish that they were similarly situated to the members of an unprotected class.

The Insbrook residents attempted to liken themselves to residents of Southmoor (another subdivision) where construction was proposed and opposed.  The Court first noted that the Insbrook residents failed to provide any concrete evidence that the Southmoor residents were white, they only made conclusory allegations.  In addition, the Insbrook expansion was to consist of only single-family homes and was to be zoned R-2, which was the current zoning classification of the development.  On the other hand, the Southmoor residents were opposing a plan that was to consist of duplexes zoned R2 and R3.  The developments being contested were not of the same type.  Additionally, the Merrillville town council granted the Insbrook residents a private meeting at which to object the expansion while it did not do the same for the Southmoor residents.  So it would appear that the Insbrook residents were treated more favorably than the group to which they were comparing themselves.  As a last note, the Court mentioned that the Southmoor subdivision does not even contain a retention pond, which was the catalyst of this case.  The Court found that the residents’ case did not stand since they failed to prove that they were similarly situated to an unprotected class.

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Yes, we’re back, and with a case on …. spot zoning

Gary Taylor

by Gary Taylor

Ely v. City of Ames
(Iowa Court of Appeals, June 30, 2010)

The Elys own a tire and automotive service center on Lincoln Way.  Next door is the Martin House.  From approximately 1920 to the late forties the Martins provided room and board to African-American students attending Iowa State University when the students were denied housing elsewhere.  George Washington Carver, distinguished botanist and the first African American to graduate from Iowa State University, often visited the Martin’s home when he returned to Ames.  The house is also an example of the Craftsman architectural style, and is one of the few remaining houses on Lincoln Way, which has become a major commercial arterial.  The property is zoned “Highway-Oriented Commercial” but exists as a legal nonconforming residential use. 

The Archie and Nancy Martin Foundation submitted an application for Ames to designate the home as an historic landmark.  Over objections by the Elys, the Ames city council approved the designation and rezoned the Martin property as a “Historic Preservation Overlay District.”  The Elys sued, raising issues of (1) procedural due process, (2) equal protection, and (3) spot zoning.  The district court found in favor of the city on all three issues, and the Elys appealed.

Procedural due process.  On the procedural due process claim the Iowa Court of Appeals started by stating the well-settled legal principle that “a person is only entitled to procedural due process when a state action threatens to deprive a person of a protected property or liberty interest.”  The Elys argued that they have a protected interest in maintaining the value of their land, but the Court of Appeals disagreed.  “An abstract desire or expectation of a benefit is not sufficient,” but rather “a property interest is only protected if there is a legitimate claim of entitlement.”  The Court further ventured to state that even if it could somehow be shown that the Elys had protected property interests that were implicated by the historic landmark zoning of the neighboring property, the public hearing at which the rezoning was discussed and decided by the city council gave the Elys sufficient opportunity to be heard to satisfy procedural due process.

Equal protection.  The Elys next claimed that because the historic landmark designation fails to require the Martins to adequately maintain the property, it results in differing treatment between historic landmarks and surrounding properties and thus violates the Ely’s right to equal protection of the law.  The Court dismissed this argument by first recognizing that differing treatment under the law is permissible if parties are not similarly situated.  The Court concluded that promoting preservation of historical and cultural landmarks is a legitimate governmental interest sufficient to support differing treatment of properties.  Further, the Court observed that the Martin property was, in fact, held to a higher standard of maintenance than the Ely’s because the Martin property was subject to Ames’s rental code. 

Spot zoning.  The Court dismissed the Ely’s final issue of spot zoning by observing that illegal spot zoning results when “like tracts or similar lots are subject to reclassification” without reasonable grounds for treating the subject property differently.  “If a [city council or county board] could determine the subject property is distinguishable from the surrounding area [the court] will uphold its decision.”  The facts that the property had historical and cultural significance to Ames, and that it was a legal nonconforming residence in a residential structure were sufficient grounds for a zoning classification different from its surrounding properties.

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