Opinion
Civil Action No. 3:03-CV-1145-B.
September 14, 2004
MEMORANDUM ORDER
Before the Court is The City of Dallas's (the "City") Motion to Dismiss for Lack of Jurisdiction and for Failure to State a Claim, filed March 3, 2004. For the reasons set forth in this order, the City's motion is DENIED in part and GRANTED in part.
I. Factual and Procedural Background
The background facts are derived from Azteca's First Amended Complaint and on undisputed facts gleaned from the parties' court papers and corresponding attachments. Where there may be a dispute over a stated fact the Court has so indicated by claiming the fact as one stated by that party to be true.
Plaintiff Mercado Azteca ("Azteca") is a Texas limited liability company that develops and operates Mercado Azteca shopping malls, which serve Hispanic communities in the United States. (Pl.'s Am. Compl. ("Compl.") ¶ 1) According to Azteca, in late 2002, Azteca and representatives of the Bronco Bowl Entertainment Center began negotiations to bring a Mercado Azteca location to the Bronco Bowl. (Compl. ¶ 13) The Bronco Bowl site was attractive to Azteca because it is situated in a predominantly Hispanic neighborhood in Dallas. (Compl. ¶ 14) Azteca alleges that all of its contemplated uses for the Bronco Bowl facility were permitted by then-existing Dallas zoning regulations. (Compl. ¶ 14)
Azteca claims that in early 2003 it reached an agreement with Center Funding, Inc., the operator of the Bronco Bowl, for the lease of a substantial part of the Bronco Bowl facility. (Pl.'s Mem. Opp'n Def.'s Mot. Dismiss ("Pl.'s Opp'n") 2) On January 15, 2003, Azteca and Center Funding signed a letter agreement establishing the terms of a 10-year lease. (Compl. ¶ 15) The letter agreement provided that no contractual liability was created, that the terms set forth in the letter were subject to final owner approval, and that any final lease agreement would be subject to a) the credit-worthiness of the tenant and its guarantor; and b) the approval of the lienholder. (Def.'s App. Supp. Mot. Dismiss. ("App."), Tab 6 at 46) Azteca later signed a commercial lease for the Bronco Bowl space, which Center Funding did not sign. (App., Tab 23 at 42-44)
Azteca states that Center Funding represented that the lease was a "done deal" and that the only remaining step was to obtain the approval of the bankruptcy court overseeing Chapter 11 proceedings for Bronco Group, Ltd., the owner of the Bronco Bowl. (Compl. ¶ 16) Azteca claims that, in reliance on Center Funding's representations, it began spending significant sums of money in planning and developing the Bronco Bowl facilities, and it began undertaking steps to obtain permits from the City to begin construction. (Compl. ¶ 16)
Azteca alleges that in March 2003, certain members of the Fort Worth Avenue Development Group (the "FW Group") caught wind of Azteca's intentions for the Bronco Bowl facility and quickly mobilized to kill the deal. (Compl. ¶ 18) Azteca complains that the FW Group circulated defamatory statements about Azteca, its merchants, and its Hispanic customers for the purpose of keeping Azteca, an Hispanic-owned and operated entity, from locating on Fort Worth Avenue. (Compl. ¶ 20) Azteca also maintains that members of the FW Group met privately with Dallas city council members and the mayor of Dallas to urge the City to stop Azteca's proposed development. (Compl. ¶ 21)
Azteca alleges that on March 26, 2003, the City enacted a moratorium on development on Fort Worth Avenue, ostensibly to conduct a land-use study of the area to be completed by July 2003. (Compl. ¶ 23) Azteca maintains that the City was aware of its plans for the Bronco Bowl site and instituted the moratorium for the plain and discriminatory purpose of preventing an Hispanic-owned business from locating there. (Compl. ¶ 24, 32) Azteca says that the City's purported reason for the moratorium — the need to conduct a land use study — was a pretext for discrimination, as evidenced by the fact that, to date, no land use study has been completed by the City. (Compl. ¶ 25) Azteca also contends that the City was instrumental in bringing another, non-Hispanic investor, Home Depot, to the Bronco Bowl property. (Compl. ¶ 26) Despite the moratorium, on April 28, 2003, the City announced that Home Depot would be building a store at the Bronco Bowl. (Compl. ¶ 26) Azteca never opened a location at the Bronco Bowl. (Pl.'s Opp'n 2)
On May 5, 2003, Azteca filed an action under 42 U.S.C. § 1983 against the City for violating its civil rights. Specifically, Azteca alleges that the City violated the Equal Protection and Due Process Clauses of the Fourteenth Amendment to the Constitution. (Compl. ¶ 32) The case was removed from the 298th Judicial District of Dallas County, Texas on May 23, 2003. The City filed a motion to dismiss Azteca's complaint on March 3, 2004. On April 5, 2004, Azteca amended its complaint. The Court will therefore consider the arguments raised in the City's motion to dismiss in light of Azteca's amended complaint.
Azteca also brought claims against the FW Group and Center Funding, which are not the subject of this order. On June 22, 2004, upon the agreement of the parties, Judge Solis entered an order dismissing without prejudice Azteca's claims against the FW Group.
Azteca acknowledges that its claim under the Due Process Clause is a substantive due process claim and that no procedural due process claim is asserted. (Pl.'s Opp'n 10-11)
II. Analysis
A. Standards for dismissal under Rules 12(b)(1) and 12(b)(6)
A court must dismiss a case for lack of subject matter jurisdiction under Rule 12(b)(1) where it lacks the statutory or constitutional power to adjudicate the case. Home Builders Ass'n of Miss., Inc. v. City of Madison, Miss., 143 F.3d 1006, 1010 (5th Cir. 1998). Where, as here, a motion attacks subject matter jurisdiction based on the face of the complaint, the plaintiff is afforded safeguards similar to those enjoyed when a complaint is challenged under Rule 12(b)(6) for failure to state a claim — the Court must consider the complaint's allegations as true. Williamson v. Tucker, 645 F.2d 404, 412 (5th Cir. 1981). In reviewing a facial attack, the Court may consider, in a light most favorable to the plaintiff, the allegations of the complaint and documents referenced therein, as well as matters of public record such as court records. Gould Elec. Inc. v. United States, 220 F.3d 169, 176 (3d Cir. 2000); Falzett v. Pocono Mountain Sch. Dist., 150 F.Supp.2d 699, 701 (M.D. Pa. 2001).
Motions to dismiss under Rule 12(b)(6) are disfavored and rarely granted. Kaiser Aluminum Chem. Sales, Inc. v. Avondale Shipyards, Inc., 677 F.2d 1045, 1050 (5th Cir. 1982). The Court liberally construes the complaint in the plaintiff's favor, and all pleaded facts are taken as true. Campbell v. Wells Fargo Bank, N.A., 781 F.2d 440, 442 (5th Cir. 1986). Unless it appears beyond doubt that the plaintiff cannot prove any set of facts entitling it to relief, the complaint should not be dismissed. Conley v. Gibson, 355 U.S. 42, 45 (1957).
In considering a Rule 12(b)(6) motion, the Court cannot look beyond the pleadings and any attachments thereto. FED. R. CIV. P. 12(b)(6). Documents attached to a defendant's motion to dismiss, however, are considered part of the pleadings if they are central to plaintiff's claims and are referenced in the complaint. Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 498-99 (5th Cir. 2000); Sheppard v. Tex. Dep't of Transp., 158 F.R.D. 592, 595-96 (E.D. Tex. 1994). Furthermore, the Court may refer to matters of public record when deciding a Rule 12(b)(6) motion. Davis v. Bayless, 70 F.3d 367, 372 n. 3 (5th Cir. 1995).
With respect to its Rule 12(b)(6) motion, the City urges the Court to consider a supporting appendix, which contains a variety of materials, including those from a related bankruptcy proceeding and certain documents referred to in Azteca's complaint. As public records, the Court may consider the motions, orders, responses and various other filings from the In re Bronco Group Ltd. bankruptcy litigation that are attached to the City's motion to dismiss. Davis, 70 F.3d at 372 (finding that district court did not err in considering state court orders). Having reviewed those materials, however, the Court finds that they are largely irrelevant to the disposition of this motion. The Court may also consider the exhibits attached at Tabs 6 and 23 of the appendix, which include the letter agreement between Azteca and Center Funding and excerpts of the partially-executed Standard Commercial Lease and unendorsed checks. Azteca refers to those documents in paragraph 15 of its amended complaint, and they are central to Azteca's claim that it had a lease agreement with Center Funding, and hence, a property interest with respect to its substantive due process claim. See Venture Assoc. Corp. v. Zenith Data Sys. Corp., 987 F.2d 429, 431-32 (7th Cir. 1993) (finding that district court did not err in considering letter of intent and letters relating to contractual relationship attached to defendant's motion to dismiss where such documents were referred to in plaintiff's complaint and constituted the core of the parties' contractual relationship at issue).
B. Ripeness — Rule 12(b)(1)
The City challenges this Court's subject matter jurisdiction by arguing that Azteca's claims against it are premature because the moratorium of which Azteca complains is only a temporary measure. It is true that due process and equal protection claims are not ripe until there has been a final decision by the governmental entity. Mont Belvieu Square, Ltd. v. City of Mont Belvieu, Tex., 27 F.Supp.2d 935, 940 (S.D. Tex. 1998) (citing Williamson Planning Comm'n v. Hamilton, 473 U.S. 172, 186-87 (1985)). As pointed out in Mont Belvieu, "[t]he question is whether the decisionmaker has reached a final definitive position that inflicts injury"; however, a party is not required to make futile efforts to get the governmental agency to change its position. Id.
Although the City does not cast its ripeness argument as a challenge to this Court's subject matter jurisdiction, it is appropriately considered as such because the ripeness inquiry is determinative of this Court's jurisdiction. See S. Pac. Transp. Co. v. City of Los Angeles, 922 F.2d 498, 502 (9th Cir. 1990); Certain Underwriters at Lloyd's London v. A D Interests, Inc., 197 F.Supp.2d 741, 749 (S.D. Tex. 2002).
The City fails to describe what Azteca should have done, but did not, to challenge the moratorium, nor does it contend that the moratorium was ever formally lifted. In any event, the Court finds that Azteca's allegations show that its claims against the City are ripe. This is not the situation in which a local governmental body institutes a moratorium and then a developer, its plans merely suspended, files a lawsuit claiming injury before a final zoning decision has been reached. Rather, Azteca is claiming that the City imposed a moratorium for the sole purpose of frustrating Azteca's development plans, and then, notwithstanding the moratorium, actively participated in bringing in a non-Hispanic company to develop the very same site Azteca had intended to develop. Taking the pleadings in the light most favorable to Azteca, the injury Azteca alleges to have suffered was not caused by the moratorium per se, but by the City's actions in instituting the moratorium and then foreclosing Azteca's ability to lease the Bronco Bowl by bringing in Home Depot to purchase the property. The Court thus finds that the City's purported actions constituted a "final definitive position" that allegedly inflicted injury upon Azteca.
C. Standing — Rule 12(b)(1)
The City contends that this Court also lacks jurisdiction over this cause because Azteca lacks standing to lodge its claims. Barrett Computer Serv., Inc. v. PDA, Inc., 884 F.2d 214, 220 (5th Cir. 1989) (standing issues are governed by standards controlling a court's subject matter jurisdiction). The standing inquiry is jurisdictional and focuses on the ability of a party to bring claims before a federal court, not on the issues on which adjudication is sought. James v. City of Dallas, Tex. 254 F.3d 551, 562-63 (5th Cir. 2001). For Article III standing to exist, three elements must be satisfied. "First, the plaintiff must have suffered an `injury in fact' — an invasion of a legally protected interest that is (a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical. Second, there must be a causal connection between the injury and the conduct complained of. . . . Third, it must be likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision." Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61, (1992) (internal quotations and citations omitted).
The City contends that Azteca fails to meet the first prong of standing because Azteca's claimed injury is merely speculative and conjectural inasmuch as Azteca did not have a binding agreement to lease the Bronco Bowl site, and even if it did, that agreement was subject to numerous contingencies, including the approval of the lienholder, the owner, and the bankruptcy court. Whether Azteca had a binding lease agreement is irrelevant to the question of whether it suffered a cognizable injury. In Village of Arlington Heights v. Metropolitan Housing Development Corporation, a developer that had contracted to build a low-income housing project on property it did not own, sued local authorities claiming that their refusal to re-zone the subject property was racially motivated. 429 U.S. 252 (1977). The defendants argued that the developer did not suffer an economic injury from the failure to re-zone because the developer did not own the property in question. Village of Arlington Heights, 429 U.S. at 262. The Supreme Court, however, found that the developer had suffered an economic injury because it had expended thousands of dollars on the development project which would be of no value were re-zoning not granted. Id.; Kennedy Park Homes Assoc. v. City of Lackawanna, 436 F.2d 108, 111-12 (2nd Cir. 1970) (finding that association had standing where it had a "commitment" to purchase a site and where a housing consultant and engineer has already been engaged). Likewise, here Azteca alleges to have spent hundreds of thousands of dollars towards the development of the Bronco Bowl in furtherance of a business opportunity it had, and it claims that the City's actions worked to interfere with that opportunity, thereby wasting its investment. (Compl. ¶ 17, 30) The Court thus finds that Azteca has sufficiently alleged an injury.
Nor, as the City suggests, does the fact that Azteca's planned project was contingent on the unfolding of a number of events deprive Azteca of standing. The defendants in Arlington Heights argued that the developer suffered no cognizable injury because the completion of the project at issue was subject to several contingencies — the developer still needed to secure financing, qualify for federal subsidies, and construct the project. Id. at 261-62. But, the Court held, "all housing developments are subject to some extent to similar uncertainties[,]" and "a court is not required to engage in undue speculation as a predicate for finding that the plaintiff has the requisite personal stake in the controversy." Id.; see also Heritage Commons Partners v. Village of Summit, 1987 WL 6598, at *3 (N.D. Ill. Feb. 12, 1987) (finding that numerous contingencies to which completion of project was subject did not deprive plaintiffs of standing). Thus, simply because the successful completion of Azteca's planned development project was dependent on receiving the approval of various parties does not mean that Azteca has failed to articulate a concrete injury.
The City next argues that Azteca fails to meet the second prong of the constitutional standing test because its actions did not cause Azteca's alleged injuries. Causation requires that the injury be "fairly traceable to the challenged action of the defendant, and not the result of the independent action of some third party not before the court." Louisiana ACORN Fair Housing v. LeBlanc, 211 F.3d 298, 304 (5th Cir. 2000) (quoting Lujan, 504 U.S. at 561). According to Azteca, it was the City's combined actions of instituting the moratorium and then working to bring in another developer to the Bronco Bowl that caused its injuries. (Compl. ¶ 26) Thus, the Court finds that, assuming Azteca's pleaded facts as true, the City's actions are "fairly traceable" to Azteca's purported injury.
Certain prudential requirements also bear on the question of standing. Valley Forge Christian Coll. v. Americans United for Separation of Church and State, Inc., 454 U.S. 464, 474-75 (1982). "[P]laintiffs generally must assert [their] own legal rights and interests, and their complaint must fall within the zone of interests to be protected or regulated by the statute or constitutional guarantee in question." Apache Bend Apartments, Ltd. v. U.S. Through I.R.S., 987 F.2d 1174, 1176 (5th Cir. 1993) (internal quotations and citations omitted). The City contends that Azteca does not, as a limited liability company, have a racial identity entitling it to assert discrimination claims. In support of that contention the City relies upon Justice Powell's statement in dictum in Arlington Heights that "as a corporation, [the plaintiff] has no racial identity and cannot be the direct target of the petitioners' alleged discrimination." Village of Arlington Heights, 429 U.S. at 263. As Azteca points out, however, other courts have found that a corporation can acquire "an imputed racial identity sufficient to take it out of the general observation about corporations made by Justice Powell in Arlington Heights." Thinket Ink Info. Res., Inc. v. Sun Microsystems, Inc., 368 F.3d 1053, 1059 (9th Cir. 2004) (finding that corporation had imputed racial identity where, among other things, it alleged to have suffered racial discrimination because all of its shareholders were African-American).
Regardless of whether the Court finds that Azteca has an imputed racial identity, "if a corporation can suffer harm from discrimination, it has standing to litigate that harm." Id. at 1060 (quoting Gersman v. Group Health Ass'n, 931 F.2d 1565, 1568 (D.C. Cir. 1991), vacated on other grounds, 502 U.S. 1068 (1992), reinstated 975 F.2d 886 (D.C. Cir. 1992), cert. denied 511 U.S. 1068 (1994). Because Azteca alleges to have suffered direct harm as a result of the City's allegedly discriminatory actions, the Court finds that it has prudential standing to bring a section 1983 claim. (Compl. ¶¶ 16, 30, 33); Thinket Ink, 368 F.3d at 1055 (holding that "if a corporation either suffers discrimination harm cognizable under § 1981, or has an imputed racial identity, it is sufficiently within the statutory zone of interest to have prudential standing. . . ."); Cardinal Towing Auto Repair, Inc. v. City of Bedford, Tex., 991 F.Supp. 573, 576-77 (N.D. Tex. 1998) (assuming that corporation would have a section 1983 cause of action if its bid was rejected because of the race of its sole shareholder).
D. Azteca's Equal Protection Claim — Rule 12(b)(6)
The Equal Protection Clause directs that "all persons similarly situated should be treated alike." Rolf v. City of San Antonio, 77 F.3d 823, 828 (5th Cir. 1996) (citing City of Cleburne, Texas v. Cleburne Living Ctr., 473 U.S. 432, 439 (1985)). As the City points out, to make out an equal protection claim Azteca must allege that the City treated it differently from those similarly situated. Samaad v. City of Dallas, 940 F.2d 925, 941 (5th Cir. 1991); Jackson v. City of Auburn, 41 F.Supp.2d 1300, 1308 (M.D. Ala. 1999) (requiring that, to prove equal protection claim, plaintiffs had to show that city treated them differently from similarly situated persons and that city unequally applied its zoning laws for the purpose of discriminating against them). The City contends that the moratorium applied equally to all prospective businesses seeking to purchase, locate or develop property on Fort Worth Avenue. But as Azteca has alleged the facts, the City did not apply the moratorium equally to all similarly situated persons. According to Azteca, the moratorium was put in place on March 26, 2003. (Compl. ¶ 23) Just over one month later, the City announced that Home Depot, a company without any apparent Hispanic affiliation, would be developing an area embraced by the moratorium, the very area that Azteca was planning to develop. (Compl. ¶ 26) If Azteca's allegations are true, Azteca was not treated the same as Home Depot because the City mounted an effort to frustrate the Azteca project while actively working behind the scenes to advance the Home Depot project. Thus, the Court finds that Azteca has adequately alleged differential treatment by the City from those similarly situated.
The Court notes that the parties contest whether the City's actions should be subject to a rational basis or a strict scrutiny analysis. To invoke strict scrutiny in a case involving a facially neutral law, Azteca must prove that the City intentionally discriminated against it on the basis of race. Hunt v. Cromartie, 526 U.S. 541, 546 (1999); Kawaoka v. City of Arroyo Grande, 17 F.3d 1227, 1239 (9th Cir. 1994). The Court finds that, to survive a motion to dismiss, Azteca's pleadings sufficiently allege that the City intentionally discriminated against it.
E. Azteca's Substantive Due Process Claim — Rule 12(b)(6)
To maintain a cause of action for violation of substantive due process, a plaintiff must show (1) the existence of a protected property or liberty interest; and (2) an arbitrary or capricious deprivation of that interest. Honore v. Douglas, 833 F.2d 565, 568 (5th Cir. 1987). To constitute a property interest, one must have some legitimate claim of entitlement, not just a unilateral expectation. Mahone v. Addicks Util. Dist. of Harris County, 836 F.2d 921, 929-30 (5th Cir. 1988). The existence of a property interest is determined by reference to state law. Bd. of Regents of State Coll. v. Roth, 408 U.S. 564, 577 (1972); Hidden Oaks Ltd. v. City of Austin, 138 F.3d 1036, 1046-47 (5th Cir. 1998).
Azteca claims a property interest in its agreement with Center Funding to lease the Bronco Bowl facility, and it contends that by passing the moratorium, the City arbitrarily and capriciously deprived it of that interest. The City, in turn, argues that Azteca never had a binding lease agreement with Center Funding, and thus had no property interest. The City points to the fact that the parties never signed a formal contract for the lease of the property, but only a non-binding letter agreement. (App., Tab 6 at 45-47) The letter agreement specifically provided that no contractual liability was created thereby and that nothing in the letter should be construed to imply a lease agreement at a later time. (App. at 46) Under Texas law, the inclusion of this provision in the letter agreement ensured its unenforceability. John Wood Group USA, Inc. v. Ico, Inc., 26 S.W.3d 12, 19 (Tex.App.-Houston [1st Dist.] 2000, pet. denied) (holding that agreement at issue was non-binding as a matter of law because the agreement expressly stated that it was non-binding).
Azteca urges the Court to disregard the documents upon which the City relies (i.e. the letter agreement, the partially-executed lease, and the unendorsed checks (App. Tabs 6, 23)). As explained earlier, however, because Azteca referred to those documents in its amended complaint, the Court is entitled to consider them. Collins, 224 F.3d at 498-99; see also Wright v. Assoc. Ins. Cos., Inc., 29 F.3d 1244, 1248 (7th Cir. 1994) (where section 1983 plaintiff referred to insurance agreement in complaint and alleged that such agreement created property interest of which defendants allegedly deprived him in violation of due process, court appropriately considered the agreement in ruling on motion to dismiss).
Thus, the letter agreement did not create a binding contract under Texas law, and the Standard Commercial Lease signed by Azteca also appears unenforceable because, as the City notes, it was not signed by the party to be charged — Center Funding — as required by the Texas statute of frauds for leases extending beyond one year. TEX. BUS. COM. CODE § 26.01(a)(2), (b)(5); (App., Tab 23 at 42-44). Azteca fails to point the Court to any authority under Texas law establishing that either the letter agreement or the partially-executed lease is enforceable in law or equity, or that Azteca has any other claim of entitlement rising to the level of a property interest for substantive due process purposes. Having found that Azteca has failed to argue any basis under Texas law by which it can claim a protected property interest, the Court finds that Azteca has failed to sufficiently allege a substantive due process claim.
At this juncture, in the absence of briefing on the issue, the Court declines to opine on whether Azteca and Center Funding had any enforceable agreement under Texas principles of contract, fraud, equity, or estoppel.
Instead, Azteca starkly asserts that it has a liberty interest in being free from discrimination, but no authority is cited for this proposition. Azteca cites to Allen v. Wright, 468 U.S. 737, 755 (1984), and Walker v. City of Mesquite, 169 F.3d 973, 980 (5th Cir. 1999), but those references deal with whether a plaintiff has standing to bring a claim of racial discrimination, not whether the plaintiff has alleged a proper substantive due process claim. Indeed, Walker dealt with whether homeowners had standing to assert an equal protection claim and whether the remedial order at issue violated equal protection, not substantive due process.
III. Conclusion
For the reasons set forth in this order, the City's motion to dismiss Azteca's substantive due process claim is GRANTED; Azteca's substantive due process claim is therefore DISMISSED without prejudice. In all other respects, the City's motion is DENIED.
SO ORDERED.