Opinion
CAUSE NO. 3:02-CV-1549-K
October 28, 2003
MEMORANDUM OPINION AND ORDER
Before the Court is Defendant Crow Brighton No. 18, Ltd.'s, ("Crow Brighton") Wyndham International, Inc.'s, Wyndham Management Corporation's (collectively referred to as "Wyndham"), Anatole Partners II, L.P.'s, Anatole Partners Independent Corp.'s, and Anatole Partners' (collectively referred to as "Anatole" or "Anatole Defendants") motion to dismiss and motion for summary judgment. Having reviewed the motions, the responses, the replies, the summary judgment evidence, and all other related filings, this Court finds, for the following reasons, the motion to dismiss should be GRANTED, and that the motion for summary judgment should be GRANTED.
MOTION TO DISMISS
This case arises from a dispute between Plaintiffs Verandah Salon, Inc. and Farouk Sidhom (collectively referred to as "Verandah Salon") and Defendants regarding a commercial lease. Specifically, Verandah Salon alleges Defendants terminated a lease with Verandah Salon and otherwise discriminated against Verandah Salon because Sidhom and his wife are Egyptian.
In their Amended Complaint, Verandah Salon has asserted claims of discrimination, retaliation, tortious interference with contract and prospective business relations, and breach of contract. As part of their discrimination and retaliation claims, Verandah Salon alleges violations of: Amendments V and XIV of the U.S. Constitution, 42 U.S.C. § 1981, Sections 3 and 3a of the Texas Constitution, Chapter 21 of the Texas Labor Code, Chapters 91, 93, and 301 of the Texas Property Code, Chapter 27 of the Texas Business and Commerce Code; and Section 20A-4 of the Dallas City Code.
Standards for Motion to Dismiss
In a 12(b)(6) motion to dismiss a claim, a defendant attacks the plaintiff's complaint, asserting it fails to state a legally cognizable claim. See FED. R. CIV. PRO. 12(b)(6). When reviewing a motion to dismiss for failure to state a claim, the Court may grant the motion only if it appears "beyond doubt that the plaintiff's would not be entitled to recover under any set of facts that they could prove in support of their claim." Growe v. Henry, 43 F.3d 198, 203 (5th Cir. 1995) (citing Conley v. Gibson, 355 U.S. 41, 45-46 (1957). In Rule 12(b)(6) motions, plaintiff's admit the facts alleged in the complaint, but challenge plaintiff's right to relief based upon those facts. Id. The Court must accept as true all factual allegations in the pleadings, but need not resolve unclear questions of law in favor of the plaintiff. Kansa Reinsurance Co. v. Congressional Mart. Corp., 20 F.3d 1362, 1366 (5th Cir. 1994).
Fifth or Fourteenth Amendments to the U.S. Constitution
Verandah Salon's second amended complaint sets forth no facts that would entitle them to relief for claims involving the Due Process Clauses of the Fifth and/or Fourteenth Amendments. It is well settled that the Fifth and Fourteenth Amendments operate only as a restraint upon the national government and upon the states, but are not directed against the actions of private individuals such as defendants. See Talton v. Mayes, 163 U.S. 376, 16 S.Ct. 986, 41 L.Ed. 196 (1896); Brentwood Academy v. Tennessee Secondary School Athletic Assoc., 531 U.S. 288, 295 (2001); see also Mantle v. Upper Deck Co., 956 F. Supp. 719, 734 (N.D. Tex. 1997) (constitutional due process protections do not extend to private conduct that abridges individual rights). To establish deprivation of a right protected by the Due Process Clause, a plaintiff must allege and prove "state action." Landry v. A-Able Bonding, Inc., 75 F.3d 200, 203 (5th Cir. 1996). Verandah Salon has failed to allege any facts or circumstances to support a conclusion that Defendants actions were in any manner "state action."
Therefore, to the extent Plaintiffs' claims arise from either the Fourth or Fifteenth Amendments to the U.S. Constitution, this Court DISMISSES those claims.
Sections 3 or 3a of Article 1 of the Texas Constitution
Verandah Salon also alleges claims of discrimination and retaliation based on Sections 3 and 3a of Article 1 of the Texas Constitution. Verandah Salon fails to allege facts to support a cause of action under either of these provisions.Sections 3 and 3a, the Texas Equal Rights Amendments, provide for equality under the law. The words "under the law" require that the discrimination complained of be state action or private conduct that is encouraged by, enabled by, or closely interrelated in function with state action. Junior Football Ass'n v. Gaudet, 546 S.W.2d 70, 71 (Tex.Civ.App.-Beaumont 1976, no writ); see also Cedilla v. Ewlin Enterprises, Inc., 744 S.W.2d 217, 219 (Tex.App.-Corpus Christi 1987) (Texas Equal Rights Amendment does not apply "to activities involving purely private discrimination"), writ denied per curiam, 756 S.W.3d 724 (Tex. 1988). Verandah Salon has failed to allege any facts to support a finding that any type of "state action" was involved here.
Because Verandah Salon would not be entitled to recover under Section 3 or 3a of Article 1 of the Texas Constitution under any set of facts alleged against these Defendants, its claims arising under Article 1 of the Texas Constitution are hereby DISMISSED.
Texas Labor Code
Verandah Salon further alleges violations of Chapter 21 of the Texas Labor Code, which deals with employment discrimination. TEX. LAB. CODE ANN. 21.001-.306 (Vernon 1996 Supp. 2003). Defendants contend Verandah Salon cannot allege facts to support claims under Chapter 21, because no employment relationship exists between Verandah Salon and Defendants. This Court agrees. The records establishes that Verandah Salon's complaints all arise from a landlord-tenant relationship, not an employment relationship. Therefore, Verandah Salon's claims based on Chapter 21 of the Texas Labor Code are DISMISSED.
Texas Fair Housing Act and Dallas Fair Housing Ordinance
Verandah Salon also alleges discrimination and retaliation under the Texas Fair Housing Act, Chapter 301 of the Texas Property Code, and the Dallas Fair Housing Ordinance, Dallas City Code, Section 20A-4. These two provisions are designed to provide and promote fair housing practices with respect to rental or sale of "dwellings" or "housing accommodations." TEX. PROP. CODE § 301.001, DALLAS CITY CODE SECTION 20A-2. The retail property leased to Verandah Salon, as a matter of law, does not fit into the definitions of "dwelling" and/or "housing accommodation" in the statutes. See TEX. PROP. CODE § 301.003(8); DALLAS CITY CODE SECTION 20A-3(14).
Because the property leased to Verandah Salon was commercial and not residential, neither the Texas Fair Housing Act or the Dallas Fair Housing Ordinance can provide a basis upon which Verandah Salon can claim relief. Verandah Salon's claims arising from the Texas Fair Housing Act or the Dallas Fair Housing Ordinance are therefore DISMISSED.
Chapters 91 and 93 of the Texas Property Code
Plaintiffs also cite Chapters 91 and 93 of the Texas Property Code as a basis for their claims of discrimination and retaliation. While both chapters relate to landlord-tenant relationships, neither provide a cause of action for claims arising from race or national origin discrimination. See TEX. PROP. CODE §§ 91.001 et seq., and 93.001 et seq., Verandah Salon's claims under Chapters 91 and 93 of the Texas Property Code are DISMISSED.
Chapter 27 of the Texas Business and Commerce Code
Verandah Salon also cites Chapter 27 of the Texas Business and Commerce Code as a basis for their discrimination and retaliation claims. Not only is this Chapter inapplicable to discrimination and retaliation claims, Verandah Salon also fails to allege facts supporting an inference of fraud as required. See TEX. BUS. COMM. CODE §§ 93.001 et seq.; Herrmann Holdings Ltd. v. Lucent Technologies, Inc., 302 F.3d 552, 565 (5th Cir. 2002). Therefore, Verandah Salon's claims under Chapter 27 of the Texas Business and Commerce Code are hereby DISMISSED.
SUMMARY JUDGMENT
Defendants also filed a motion for summary judgment, asserting that Verandah Salon cannot recover on (1) any of their discrimination claims against Defendants, because they cannot establish that any of Defendants' actions were discriminatory; (2) their claims for tortious interference with contract or tortious interference with business relationship, because Wyndham was acting as an agent for Anatole; (3) their claims for breach of contract, because the lease was month-to-month and was terminated according to the law. According to Defendants, the summary judgment evidence establishes the absence of fact issues, entitling them to judgment as a matter of law on all Verandah Salon's claims.
Standards for Summary Judgment
Summary judgment is appropriate when the pleadings, affidavits and other summary judgment evidence show that no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. FED.R.CIV.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2551 (1986). The moving party bears the burden of identifying those portions of the record it believes demonstrate the absence of a genuine issue of material fact. Celotex, 477 U.S. at 322-25, 106 S.Ct. at 2551-54. Once a movant makes a properly supported motion, the burden shifts to the nonmovant to show that summary judgment should not be granted; the nonmovant may not rest upon allegations in the pleadings, but must support the response to the motion with summary judgment evidence showing the existence of a genuine fact issue for trial. Id. at 321-25, 106 S.Ct. at 2551-54; Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255-57, 106 S.Ct. 2505, 2513-14 (1986). All evidence and reasonable inferences must be viewed in the light most favorable to the nonmovant. United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993 (1962). If the nonmoving party fails to present probative evidence with respect to an essential element of his case, on which he bears the burden of proof at trial, summary judgment is mandatory. Celotex, 477 U.S. at 322-24; Washington v. Armstrong World Indus., Inc., 839 F.2d 1121, 1122 (5th Cir. 1988).
Factual Background
The Anatole Hotel and the Verandah Club are owned by Anatole Partners, II, L.P. ("Partners"), with the Hotel and Verandah Club being managed and operated by Wyndham Management Corp. ("Wyndham"). Crow Holdings is the managing partner of Partners. The Verandah Club, a full service spa and health club, operates for the benefit of its private membership and guests of the Anatole Hotel. From 1984 to February of 2002, Verandah Salon, a Texas corporation wholly owned by Sidhom, operated a beauty salon in the Verandah Club.
Verandah Salon occupied the space within the Verandah Club according to a series of written leases up to December 31, 1997, when Partners and Wyndham let the written lease expire. Verandah Salon continued possession of the space on a "month-to-month" or "tenant at will" basis. This relationship was referred to in written communications between Partners and Verandah Salon, where Partners stated it did not desire a "more formal" arrangement but wanted to continue the leases as month-to-month/tenancy at will.
While Verandah Salon operated under written leases within the Verandah Club, Verandah Club provided it with trash pick-up service and linen service. In the spring of 2001, Wyndham reviewed its operations and, according to Wyndham, in an effort to reduce operating expenses, first reduced Verandah Salon's linen and trash service, and eventually stopped providing either service. According to Verandah Salon, although the written leases had expired, the parties had an oral agreement that included supply of linens and removal of trash.
Verandah Salon, through legal counsel, wrote Partners a letter alleging the cessation of services to Verandah Salon was improper and motivated by discriminatory practices arising from the race and national origin ("Egyptian-American") of Sidhom. Representatives of Wyndham met with Sidhom. According to Sidhom, Wyndham advised Sidhom it was tripling Verandah Salon's rent and would not allow Verandah Salon to receive a lease on the premises in the future. After the meeting, Wyndham notified Verandah Salon it was terminating Verandah Salon's occupancy of the premises effective February 17, 2002.
Verandah Salon contends that Anatole's actions in stopping linen and trash service was discriminatory, and that subsequent actions of Wyndham in terminating the lease were discriminatory and taken in retaliation for Sidhom's complaints about Anatole's earlier actions.
Section 1981
To prevail on a claim for discrimination and/or retaliation under § 1981, a plaintiff must first establish a prima facie case of discrimination or retaliation. Wallace v. Texas Tech Univ., 80 F.3d 1042, 1047 (5th Cir. 1996). If the plaintiff presents no direct evidence of purposeful discrimination, as in this case, the burden-shifting analysis used for Title VII cases applies. McDonnell-Douglas Corp. v. Green, 411 U.S. 792, 802-804 (see also Wallace, 80 F.3d at 1047 (McDonnell-Douglas framework applies to § 1981 cases). Under the McDonnell-Douglas burden-shifting analysis, the defendant may rebut the plaintiff's prima facie case by articulating a legitimate, non-discriminatory reason for the challenged action. Id. Once the defendant has set forth a legitimate, non-discriminatory reason, the plaintiff can avoid summary judgment only if he presents evidence that the reasons proffered by the defendant were merely pretexts for discrimination. Id.1. Discrimination
To establish a violation of § 1981 race discrimination, a plaintiff must show that (1) he is a member of a protected class; (2) the defendants intended to discriminate against him on the basis of race; and (3) the discrimination concerns one or more of the activities enumerated in the statute. Felton v. Polles, 315 F.3d 470, 483 (5th Cir. 2002); Green v. State Bar of Tex., 27 F.3d 1083, 1086 (5th Cir. 1994). The enumerated activities include the right "to make and enforce contracts." See 42 U.S.C. § 1981. Liability under § 1981 requires proof of purposeful discrimination. General Bldg. Contractors Ass'n Inc. v. Pennsylvania, 458 U.S. 375, 390 (1982); Bluitt v. Houston ISD., 236 F. Supp.2d 703, 719 (S.D.Tex. 2002).
Verandah Salon alleges that they were discriminated against because of Sidhom's race, and that the discrimination adversely affected Verandah Salon's lease with Anatole. Verandah Salon contends they can prove intentional discrimination by the fact that Verandah Salon was denied linen and trash services while the Anatole Salon, also a tenant of Anatole, was not. Verandah Salon contends the reason for the disparate treatment is that Sidhom is Egyptian and his wife is Lebanese.
The summary judgment evidence, however, fails to raise a fact issue supporting a finding that Anatole Salon was not in the protected group and similarly situated to Verandah Salon. Although Mrs. Sidhom testified the Anatole Salon was in the same business as Verandah Salon and that the people who ran it were "white," the undisputed evidence shows Anatole Salon was significantly different from Verandah Salon, and there were legitimate business reasons for treating Anatole Salon differently, even assuming the individuals operating the Anatole Salon were not in the protected class. Specifically, Marc Messina, the Vice President and General Manager of the Anatole Hotel, and Kevin Buck, Director of Rooms at the Hotel, both testified by affidavit that after the hotel began experiencing a decrease in revenues, management began looking for ways to cut expenses. As part of this review, management had explored discontinuing both Verandah Salon and Anatole Salon's linen and trash service. Because Anatole Salon was a much smaller salon, situated inside the hotel, management determined that the services provided to Anatole Salon were "minimal in impact" upon general housekeeping, while services to Verandah Salon were a significant expense. Further, Anatole Salon's linens came from the general housekeeping while Verandah Salon, which was in a separate building, received linens from the hotel laundry. Because Verandah Salon used significantly more towels that came from a different source, the economic impact to the hotel was greater for Verandah Salon than for Anatole Salon. Buck further testified that, unlike Verandah Salon, Anatole Salon operated under a written lease that expires in December 2004.
Further, Ted Arps, a Director of Crow Holdings and responsible for the management of the Anatole Hotel, testified that the Anatole Salon was different from Verandah Salon in that it was located in a low-traffic space near the accounting offices of the Hotel and was less than half the size of Verandah Salon, while Verandah Salon operated on the ground floor of the Verandah Club in a high traffic area.
The Court finds Verandah Salon has failed to present summary judgment evidence raising a fact issue supporting their claim that Anatole intentionally discriminated against them in discontinuing linen and trash services. The record, failing to support Verandah Salon's claim that similarly situated persons not in the protected class were treated differently than Verandah Salon, is bereft of evidence of "purposeful discrimination."
Even if Verandah Salon presented a prima facie case of discrimination, Anatole responded with a legitimate, non-discriminatory reason for the adverse action. See McDonnell-Douglas Corp. v. Green, 411 U.S. at 802-804. Several representatives of Anatole testified that the decision to discontinue linen and trash service to Verandah Salon was purely economic, motivated by a desire to reduce expenses. To show that an explanation is a pretext for discrimination, a plaintiff must show the defendant's proffered reason was false and offer evidence creating a reasonable inference that discrimination was the determinative factor for its action. See Vadie v. Miss. St. Univ., 218 F.3d 365, 374 n. 23 (5th Cir. 2000) (citing Reeves v. Sanderson Plumbing Co., 530 U.S. 133 (2000)). Verandah Salon presented no evidence, other than Sidhom's own speculation, that the decision was a pretext for discrimination. See id.; see also Nichols v. Loral Vought Sys. Corp., 81 F.3d 38, 42 (5th Cir. 1996) (plaintiff's own subjective belief of discrimination, no matter how genuine, cannot serve as basis for judicial relief).
2. Retaliation
Similarly, Verandah Salon's retaliation claims fail. To prevail on a retaliation claim, a plaintiff must show that he opposed unlawful activity, and such opposition was a motivating or determining factor in the adverse action taking by the defendant. Jack v. Texaco Research Ctr., 743 F.2d 1129, 1131 (5th Gr. 1984).
First, Verandah Salon failed to present a prima facie case of retaliation. Specifically, Verandah Salon presented no evidence demonstrating a causal connection between protected activity and an adverse action. There is no evidence, other than Sidhom's own speculation, that Defendants terminated Verandah Salon's lease because Sidhom had complained that he was discriminated against in the decision to discontinue linen and trash service. Further, representatives of Defendants testified that their motivation in terminating the lease was a desire to rent the space for a higher rate, more in line with the current market demands. According to Arps, Verandah Salon's rent was "well below market rent rates received for similar retail property within the Dallas market."
Even if Verandah Salon established a prima facie case of retaliation, they failed to present evidence to rebut Anatole's legitimate, nondiscriminatory reason for its action. They fail to show evidence that any Defendant acted with discriminatory animus in making the decision to terminate Verandah Salon's month-to-month lease.
Although Verandah Salon alleges Buck made false statements regarding his instructions to offer a new lease to Sidhom, the record fails to support such a conclusion. To support their allegations, Verandah Salon points to deposition excerpt testimony they claim is testimony of Ted Arps, where he states he instructed Buck to offer a lease to Sidhom, and later understood the lease was being terminated because Sidhom did not agree to the terms of the new offer. Buck, on the other hand, testified by deposition that it was his understanding, before he met with Sidhom to discuss Sidhom's lease, that Anatole did not wish to extend a lease offer to Sidhom. According to Buck, Sidhom made it clear that he would not pay a higher rent as required by Anatole and he therefore never offered a lease to Sidhom.
Verandah Salon contends this evidence raises an inference that although Buck was instructed to offer a lease to Sidhom, he lied to Sidhom and told him Anatole did not want to offer Sidhom a lease, and then later lied to Arps about having offered Sidhom a lease. The Court disagrees the evidence raises such an inference. First, Ted Arps' deposition excerpt appears to be somewhat unreliable, because at some point in the testimony the witness begins referring to "Ted Arps" in a manner indicating Ted Arps is not the witness, and it is not entirely clear throughout the excerpt who the witness is. See Exhibit G to Plaintiff's Response to Defendants' Motion for Summary Judgment, (no page numbers). Additionally, the record includes an affidavit of Ted Arps, wherein he makes statements that conflict with the deposition testimony. See Defendants' Appendix, Pgs. 3-11. Specifically, Arps testified by Affidavit that although he suggested Buck offer Sidhom a new lease with "market competitive rates," his directions were "simply advisory" and by no means mandatory. Even assuming the deposition excerpt is reliable, however, it does not support an inference that Buck intentionally lied to Sidhom because of discriminatory motives. At most, the evidence could raise the inference that there was some confusion about whether Buck was instructed to offer Sidhom a lease; confusion that would be cleared up by the fact that Sidhom was not willing to pay any more to continue leasing the space.
The Court concludes the summary judgment record does not support Verandah Salon's retaliation claim. Even if Verandah Salon could present a prima facie case of retaliation, the evidence fails to rebut Defendants' legitimate, nondiscriminatory reason for terminating the lease.
Because Verandah Salon failed to raise a genuine issue of material fact as to their claims of retaliation and discrimination under § 1981, Defendants are entitled to summary judgment on these claims.
Common Law Claims
1. Tortious Interference with Contract and Tortious Interference with Prospective Business Relationship
Verandah Salon claims that Wyndham tortiously interfered with Verandah Salon's contractual landlord/tenant relationship with Anatole and that Wyndham tortiously interfered with its prospective relationship with Crow. Defendants contend Verandah Salon cannot prevail on this claim as a matter of law because the summary judgment evidence establishes that, with respect to Verandah Salon's lease, Wyndham was acting as the agent of Anatole.
Specifically, the evidence includes an agreement between Anatole and Wyndham, charging Wyndham with the operation of the hotel property, including the Verandah Club. See Defendant's Appendix Pages 13, ¶ 6, 131. The agreement gives Wyndham the right to enter into or amend certain leases and to perform all of the obligations of Anatole under existing leases. See Defendant's Appendix Page 131. As a matter of law, an agent cannot tortiously interfere with the contracts of its principal and a third party, unless the agent is acting solely for its own interests and the principal has objected to the acts of the agent. Latch v. Gratty, Inc., 107 S.W.2d 543, 545 (Tex. 2003).
Verandah Salon contends they have presented summary judgment evidence, by way of the deposition of Ted Arps, that Wyndham did not have the authority to terminate Verandah Salon's lease without the approval of Anatole. First, such argument is based on the questionable deposition excerpt of Arps that directly conflicts with statements in his affidavit. See Exhibit G to Plaintiff's Response to Defendants' Motion for Summary Judgment, (no page numbers); see also Defendants' Appendix, pg. 2. Secondly, even if Arps did testify that Wyndham did not have the authority to terminate Verandah Salon's lease without the approval of Anatole, such statement does not support the conclusion that Buck was acting in his own interest and his actions were objected to by Anatole. In fact, Arps testified by Affidavit that although he had advised Buck to offer Sidhom a new lease with "market competitive rates" or terminate the lease, Buck was given discretion in the performance of his duties and, therefore, Arps' suggestions were advisory. He stated that he had not and did not object to Buck's actions in terminating Sidhom's lease.
Consequently, the summary judgment evidence fails to raise a fact issue as to tortious interference with contract or with prospective business relationship, and Defendants are entitled to summary judgment on this issue.
2. Breach of Contract
Verandah Salon also claims that Defendants breached the lease agreement when they terminated Verandah Salon's lease. Although Sidhom contends that a representative from Anatole told Sidhom the oral lease would continue until the premises were renovated (which never occurred) or until the premises were leased to a third party, the evidence does not support such a claim. The record reflects that upon expiration of the written lease, possession became month-to-month pursuant to the terms of the written lease, which stated that upon expiration of the lease term, continued possession would become a month-to-month tenancy. See Defendant's Appendix Pg. 105 ¶ 25. The month-to-month status was confirmed in writing several times, including letters of June 1997, February 2000, and April 2001. See Defendant's Appendix Pgs. 114, 115, 116. The April 2001 notice to Verandah Salon advised that Verandah Salon would received termination notice "at least 30 days in advance." The record also shows that Verandah Salon's month-to-month tenancy was terminated with 32 days notice, in accordance with Texas Property Code § 91.001.
Because the summary judgment evidence establishes Verandah Salon was leasing the premises on a month-to-month basis, Verandah Salon fails to raise a fact issue as to their breach of contract claim, and Defendants are entitled to summary judgment on this claim.
CONCLUSION
Having determined that Defendants' motion to dismiss has merit in all respects, this Court DISMISSES the following claims for failure to state a cause of action: (1) Fifth Amendment of the U.S. Constitution; (2) Fourteenth Amendment of the United States Constitution; (3) Texas Constitution, Article 1, Sec. 3; (4) Texas Constitution, Article 1, Sec. 3a; (5) Texas Labor Code Chapter 21; (6) Texas Property Code, Chapter 91; (7) Texas Property Code; Chapter 93; (8) Texas Property Code, Chapter 301; (9) Texas Business and Commerce Code, Chapter 27; and (10) Dallas City Code, Section 20A-4.
Having determined no genuine issue of material fact exists on this summary judgment record, the Court finds merit in Defendants' Motion for Summary Judgment, and ORDERS summary judgment be granted in favor of Defendants on all Verandah Salon's and Sidhom's claims against them. It is, therefore, ORDERED that Verandah Salon and Sidhom take nothing on their claims against Defendants, and that Plaintiffs' claims of discrimination, retaliation, tortious interference with contract, tortious interference with prospective business relationship, and breach of contract are DISMISSED with prejudice.
SO ORDERED.