Power Road-Williams Field LLC v. Gilbert, Town of et al

Filing 28

ORDER: Defendants' Motion to Dismiss 7 is granted in part; This case is remanded to Maricopa County Superior Court. Signed by Judge David G Campbell on 4/18/2014. (See Order for details) (Attachments: # 1 Remand Letter)(ALS)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Power Road-Williams Field LLC,
Plaintiff,

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ORDER

v.

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No. CV-13-02065-PHX-DGC

Gilbert, et al.,

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Defendants.

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Defendants Town of Gilbert, City of Mesa, and Maricopa County have filed a

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motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). Doc. 7. The

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motion is fully briefed. The Court will grant Defendants’ motion in part and remand this

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case to Maricopa County Superior Court.1

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I.

Background.

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Plaintiff Power Road-Williams Field, LLC brought this action in Arizona Superior

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Court on May 15, 2013. Doc. 1-1 at 3. Plaintiff alleges violations of state and federal

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law, including A.R.S. § 9-461.11(F) and 42 U.S.C. § 1983. Defendants removed the

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action to federal court on October 10, 2013. Doc. 1.

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Plaintiff owns approximately 73 acres of land located at the northwest corner of

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the intersection of Power Road and Williams Field Road in Maricopa County. Doc. 1-1,

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¶ 6. Power Road is a major arterial roadway that experiences heavy traffic, services the

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The requests for oral argument are denied because the issues have been fully
briefed and oral argument will not aid the Court’s decision. See Fed. R. Civ. P. 78(b);
Partridge v. Reich, 141 F.3d 920, 926 (9th Cir. 1998).

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larger metropolitan area, and serves as the common corporate boundary between Gilbert

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and Mesa. Id., ¶¶ 8-9.

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Defendants entered into an intergovernmental agreement (“IGA”) pursuant to

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A.R.S. § 11-951, et seq., to undertake a $30 million improvement project to widen and

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realign a segment of Power Road, creating a separate one-way, three-lane road in each

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direction. Doc. 1-1, ¶ 11. The gist of Plaintiff’s complaint is that the IGA did not

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comply with A.R.S. § 9-461.11(F) and that the process mandated by statute was not

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followed. Id., ¶ 21. Plaintiff alleges that the Town of Gilbert staff “decided to radically

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re-design and re-align the intersection of Power Road and Williams Field Road” in order

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to “retaliate against Plaintiff and deprive it of the economically viable use of Plaintiff’s

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property” because Plaintiff had refused to cooperate with Gilbert’s plan to annex part of

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the property. Id., ¶¶ 13, 57-58.

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The Gilbert General Plan states that arterial roads should provide reasonable levels

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of traffic services (“LOS”), that traffic signals and intersection design should create a safe

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and efficient flow of traffic to optimize travel and increase corridor capacity, and that

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public projects should reduce vehicle emissions. Id., ¶ 28. Plaintiff alleges that Power

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Road could have been widened to three lanes traveling in each direction by using the

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existing alignment and right of way (the “Existing Improved Alignment”). Id., ¶ 29.

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Multiple traffic impact analyses commissioned by Plaintiff and Defendants reported that

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the Existing Improved Alignment would be superior to the proposed realignment. Id.,

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¶¶ 34-44.

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intersection and construct an expensive and longer bridge over a floodway and canal (the

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“One Way Alignment”). Id., ¶ 30.

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Nevertheless, the Gilbert Town staff chose to redesign the roadway

Plaintiff alleges that the One Way Alignment does not conform to the Gilbert

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General Plan and significantly reduces the value of Plaintiff’s property.

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Plaintiff alleges that Defendants adopted the IGA without (1) reviewing the economic

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impact of the alignment on development potential for surrounding land; (2) considering

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the effect on area business or tax revenues; (3) determining whether the realignment of a

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Id., ¶ 45.

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major arterial roadway and construction of a multimillion dollar bridge would conform to

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the Gilbert Plan; (4) determining whether construction of the One Way Alignment would

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be cheaper than the Existing Improved Alignment; (5) considering the fact that the One

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Way Alignment will increase traffic wait times, reduce traffic service below acceptable

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LOS, and generate more air pollution; (6) analyzing the effect of the One Way Alignment

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design on traffic safety and intersection maintenance costs; and (7) determining whether

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the intersection design will fail before its ultimate design year due to the extremely short

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distances between signalized intersections. Id., ¶ 97. As a result of these failures,

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Plaintiff alleges that it was deprived of property without the process required by state law

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and is entitled to compensation of more than $7,100,000. Id., ¶¶ 118-19.

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II.

Legal Standard.

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When analyzing a complaint for failure to state a claim under Rule 12(b)(6), the

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well-pled factual allegations are taken as true and construed in the light most favorable to

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the nonmoving party. Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir. 2009). Legal

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conclusions couched as factual allegations are not entitled to the assumption of truth,

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Ashcroft v. Iqbal, 556 U.S. 662, 680 (2009), and therefore are insufficient to defeat a

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motion to dismiss for failure to state a claim, In re Cutera Sec. Litig., 610 F.3d 1103,

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1108 (9th Cir. 2010) (citation omitted).

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complaint must plead enough facts to state a claim to relief that is plausible on its face.

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Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). This plausibility standard “is not

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akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a

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defendant has acted unlawfully.” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at

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556). “[W]here the well-pleaded facts do not permit the court to infer more than the mere

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possibility of misconduct, the complaint has alleged – but it has not ‘show[n]’ – ‘that the

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pleader is entitled to relief.’” Id. at 679 (quoting Fed. R. Civ. P. 8(a)(2)).

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III.

To avoid a Rule 12(b)(6) dismissal, the

Analysis.

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Defendants argue that the complaint must be dismissed for three reasons: (1) it is

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barred by res judicata; (2) it is barred by the statute of limitations; and (3) it fails to state

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a claim under 42 U.S.C. § 1983 or A.R.S. § 9-461.11(F). Doc. 23 at 1; Doc. 7 at 2-3.

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The Court will address each argument below.

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A.

Res Judicata.

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Plaintiff instituted an action in Arizona Superior Court in March 2011, suing

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Defendants for alleged violations of A.R.S. § 11-952 and § 9-461.11(F) (the “Previous

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Action”). Doc. 22 at 1; Doc. 22-1 at 1. Plaintiff alleged that Defendants had violated the

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Gilbert General Plan (Doc. 22-1 at 28), failed to follow statutory procedures (Doc. 22-1

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at 32), and failed to enter into an IGA (Doc. 22-1 at 33). Plaintiff sought declaratory,

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injunctive, and mandamus relief, but no monetary relief, presumably because the

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improvements had not yet been built. The Superior Court granted Defendants’ motions

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to dismiss three of Plaintiff’s four claims for failure to state a claim and later granted

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summary judgment on the remaining claim. Doc. 22 at 2. Before final judgment had

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been entered, Plaintiff filed this action, alleging that Defendants’ IGA was defective and

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adding a claim for damages under 42 U.S.C. § 1983 and a state law claim for negligence.

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The Superior Court entered judgment on August 8, 2013. Id. Plaintiff appealed to the

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Arizona Court of Appeals and briefing is now underway. Id.

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“To determine the preclusive effect of a state court judgment, federal courts look

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to state law.” Intri-Plex Techs., Inc. v. Crest Group, Inc., 499 F.3d 1048, 1052 (9th Cir.

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2007) (citation omitted). “Under Arizona law, a claim is barred by res judicata if a court

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previously issued a final judgment on the merits involving the same cause of action with

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the same parties.” Chaney Bldg. Co. v. City of Tucson, 716 P.2d 28, 30 (Ariz. 1986).

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Arizona uses the “same evidence” test for determining whether an earlier action is the

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same as the current action. Phoenix Newspapers, Inc. v. Dep’t of Corrections, State of

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Ariz., 934 P.2d 801, 804 (Ariz. Ct. App. 1997). Under this test, “[i]f no additional

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evidence is needed to prevail in the second action than that needed in the first, then the

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second action is barred.” Id.; see also Rousselle v. Jewett, 421 P.2d 529, 531 (1966).

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The “same evidence” test is quite liberal, and permits a plaintiff to avoid preclusion

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“merely by posturing the same claim as a new legal theory,” even if both theories rely on

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the same underlying occurrence. Phoenix Newspapers, Inc., 934 P.2d at 805.

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The claims asserted in this case are not barred by res judicata. Although the

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claims asserted in the Previous Action arise from the same underlying dispute and within

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the same administrative and statutory framework, Plaintiff’s claims in this case are

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legally and factually distinct. The Previous Action sought redress for harms stemming

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from Defendants’ failure to enter into an IGA, failure to conform to the Gilbert General

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Plan, and arbitrary and capricious exercise of governmental powers. Doc. 23 at 3;

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Doc. 22-1 at 28-35. This case seeks redress for harms stemming from an allegedly

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deficient IGA that Defendants entered into after the Previous Action was filed, asserts a

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claim under 42 U.S.C. § 1983 for depriving Plaintiff of property without due process of

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law, and claims negligent use of governmental power to retaliate against Plaintiff.

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Doc. 23 at 4-5; Doc. 1-1 at 26-31. Although the claims arise from some of the same facts

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as the Previous Action, they are new legal theories based on some additional facts and

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therefore are not barred by res judicata under Arizona law. See Phoenix Newspapers, 934

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P.2d at 805 (explaining that the same evidence test allows litigants to “implicat[e]

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somewhat different facts” and “recast their claims under new theories”).

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B.

Statute of Limitations.

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Defendants argue that all of Plaintiff’s state law claims are barred by a one-year

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statute of limitation. Doc. 7 at 11. Defendants assert that the state law claims accrued on

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May 10, 2012, “at the very latest,” and that Plaintiff filed its complaint on May 15, 2013.

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Id. at 11-12. Both of Plaintiff’s state law claims stem from Defendants’ execution of the

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allegedly deficient IGA. Plaintiff’s complaint alleges that the IGA was recorded on

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May 10, 2012, but that Plaintiff’s counsel did not and could not receive a copy of the

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IGA until May 16, 2012. Doc. 1-1, ¶¶ 86-87. Plaintiff argues that the causes of action

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did not accrue until May 16, 2012, the day Plaintiff’s counsel received a copy of the IGA.

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Doc. 11 at 16.

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In Arizona, any action against a public entity or public employee must be brought

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within one year after the accrual of a cause of action. A.R.S. § 12-821. The related 180-

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day deadline for presenting a notice of claim to the public entity, set forth in A.R.S. § 12-

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821.01, provides that the cause of action accrues “when the damaged party realizes he or

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she has been damaged and knows or reasonably should know the cause, source, act,

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event, instrumentality or condition which caused or contributed to the damage.” A.R.S.

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§ 12-821.01(B) (emphasis added). Arizona courts have applied this trigger to both the

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one-year statute of limitation and the 180-day notice of claim period for claims against

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public entities. See Long v. City of Glendale, 93 P.3d 519, 525 (Ariz. Ct. App. 2004)

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(reversing dismissal based on both § 12-821 and § 12-821.01); Flood Control Dist. of

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Maricopa Cnty. v. Gaines, 43 P.3d 196, 202 (Ariz. Ct. App. 2002) (“a cause of action

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under § 12-821 does not accrue until it is ‘discovered’”).

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Thus, Plaintiff’s claim did not accrue until it realized it had been damaged by

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Defendants’ actions. “The requirement that a claimant ‘realize’ he has been damaged is

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inconsistent with the idea that claimants can be deemed to have notice of a claim as a

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matter of law regardless of their actual knowledge of the claim. One does not ‘realize’

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something because there is a legal presumption that he knows it.” Long, 93 P.3d at 525.

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Arizona courts additionally have noted that although “official records may give

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constructive notice of some facts, they do so only to those who are bound to search those

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records.” Id. at 526 (citation omitted). Defendants cite no law that compelled Plaintiff to

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search public records for the content of the IGA. Thus, the Court cannot conclude as a

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matter of law that Plaintiff’s state law claims accrued on May 10, 2012 due to the

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recording of the IGA.

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Defendants have also provided the Court with a copy of Plaintiff’s claim letter to

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Mayor John W. Lewis of the Town of Gilbert, dated November 2, 2012, which states that

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“[t]he date of the actual triggering event for the accrual of [the relevant claims] is

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Thursday, May 10, 2012. This is the date on which the IGA was recorded in the official

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records of the Maricopa County Recorder . . . . The recording of the IGA gave

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constructive notice to [Plaintiff] of the IGA[.]” Doc. 7-1 at 5. Plaintiff argues that the

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Court may not consider this letter because “[a] motion to dismiss may not rely upon

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evidence outside the pleadings.” Doc. 11 at 17. The Court does not agree. Because

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Plaintiff’s complaint refers to the letter and Plaintiff does not question its authenticity, the

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Court may consider it in ruling on this motion. Knievel v. ESPN, 393 F.3d 1068, 1076

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(9th Cir. 2005).

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Defendants argue that Plaintiff’s statement in the notice of claim letter that its

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claim accrued on May 10, 2012 is dispositive on the timeliness issue. It is not. Plaintiff’s

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claim accrued when Arizona law says it accrued, not when Plaintiff thought it accrued.

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Under Arizona law, Plaintiff’s cause of action accrued when Plaintiff “realized” it had

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been damaged. Defendant has not argued or otherwise shown that Plaintiff realized it

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had been damaged before May 15, 2012.

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C.

Failure to State a Claim under 42 U.S.C. § 1983.

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Defendants argue that Plaintiff’s complaint fails to state a claim under § 1983.

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Plaintiff alleges that Defendants’ failure to adopt an IGA in conformity with the

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procedural requirements of A.R.S. § 9-461.11(F) deprived Plaintiff of a protected

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property right – “a reasonable expectation that Plaintiff would be accorded certain

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procedural due process prior to the time Defendants adopted and implemented this joint

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development plan” – without due process of law in violation of the Fourteenth

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Amendment. Doc. 1-1, ¶ 120-21. Defendants argue that Plaintiff’s claim alleges a “mere

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failure of Defendants to follow state law,” and that this cannot form the basis for a § 1983

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claim. Doc. 7 at 7-8.

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The Due Process Clause forbids governmental deprivation of substantive rights

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without constitutionally adequate procedure. See Cleveland Bd. of Educ. v. Loudermill,

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470 U.S. 532, 541 (1985). To obtain relief on a procedural due process claim, the

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plaintiff must establish the existence of “(1) a liberty or property interest protected by the

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Constitution; (2) a deprivation of the interest by the government; [and] (3) lack of

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process.” Portman v. Cnty. of Santa Clara, 995 F.2d 898, 904 (9th Cir. 1993); see also

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Board of Regents v. Roth, 408 U.S. 564, 569 (1972). “Not every procedural requirement

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ordained by state law, however, creates a substantive property interest entitled to

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constitutional protection.” Shanks v. Dressel, 540 F.3d 1082, 1091 (9th Cir. 2008). “A

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protected property interest is present where an individual has a reasonable expectation of

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entitlement deriving from ‘existing rules or understandings that stem from an

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independent source such as state law.’” Wedges/Ledges of Cal., Inc. v. City of Phoenix,

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24 F.3d 56, 62 (9th Cir. 1994) (quoting Roth, 408 U.S. at 577)).

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expectation of entitlement is determined largely by the language of the statute and the

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extent to which the entitlement is couched in mandatory terms.” Ass’n of Orange Cnty.

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Deputy Sheriffs v. Gates, 716 F.2d 733, 734 (9th Cir. 1983). “Although procedural

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requirements ordinarily do not transform a unilateral expectation into a protected

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property interest, such an interest is created ‘if the procedural requirements are intended

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to be a significant substantive restriction on . . . decision making.’” Wedges/Ledges, 24

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F.3d at 62 (quoting Goodisman v. Lytle, 724 F.2d 818, 820 (9th Cir. 1984)).

“A reasonable

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In the Ninth Circuit, procedural due process claims generally fail where the

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relevant law does not contain mandatory language that significantly constrains the

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decision maker’s discretion. Shanks, 540 F.3d at 1090. “Only if the governing statute

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compels a result upon compliance with certain criteria, none of which involve the

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exercise of discretion by the reviewing body, does it create a constitutionally protected

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property interest.” Id. at 1091 (internal quotation marks and citation omitted). For

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example, in Wedges/Ledges, the property interest at stake was a license to operate

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amusement games. Under the controlling section of the Phoenix City Code, the City

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Treasurer was required to determine whether or not a coin-operated game qualified as a

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“game of skill.” Wedges/Ledges, 24 F.3d at 63. If it did, the Code provided that a game

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license tag “shall be issued.” Id. The court concluded that the use of the imperative in

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the provision without the presence of any open-ended discretionary factors created an

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expectation and protected property interest that could form the basis of a due process

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claim. Id.

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In Shanks, by contrast, a homeowners and community organization sued to enjoin

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construction of a duplex that it feared would devalue the neighborhood. The organization

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alleged that it was denied a procedural due process right when the city of Spokane failed

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to enforce provisions of its zoning code intended to preserve historic districts. Shanks,

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540 F.3d at 1084. Shanks held that no protected property interest was at stake because

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the relevant law granted the city wide discretion in negotiating the content of building

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permits and because the city was directed to guide its discretion by considering “factors

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of public interest” in an unspecified way that did not mandate any outcome. Id. at 1091.

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The statute in this case contains mandatory procedural language. See, e.g., A.R.S.

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§ 9-461.11(F)(1)(d) (“A property owner shall be afforded the opportunity at a public

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hearing . . . to present [evidence]. If on the basis of the [evidence] presented there is

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reason to believe . . . the [plan] may result in a significant [reduction in value or

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productive use], adoption or implementation of the plan shall be postponed pending

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investigation and resolution of the alleged deprivation.”) (emphasis added).

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mandatory language does not, however, dictate any particular outcome. It merely states

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that adoption or implementation of the plan “shall be postponed” for further investigation

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and resolution. Plaintiff does not complain in this case about a lack of postponement.

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Plaintiff complains that the project went forward as planned. And yet the statue says

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nothing about whether the governing body was required to modify the project on the

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basis of evidence presented at the public hearing. On that question, the governing body

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retains discretion. The Court concludes, therefore, that A.R.S. § 9-461.11(F) creates no

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procedural entitlement that rises to the level of a property right protected under the

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Constitution. See James v. Rowlands, 606 F.3d 646, 656 (9th Cir. 2010) (“To create a

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right protected by the Due Process Clause, the state law must provide more than merely

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procedure; it must protect some substantive end.”) (internal quotation marks and citation

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omitted); accord Olim v. Wakinekona, 461 U.S. 238, 250 n.12 (1983) (“[A]n expectation

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of receiving process is not, without more, a liberty interest protected by the Due Process

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Clause.”).

The

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Additionally, even if the Court found that Plaintiff possessed a protectable

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property interest, Defendants’ conduct did not violate due process. It is the Due Process

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Clause, not state law, which determines what process is due. Halverson v. Skagit Cnty.,

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42 F.3d 1257, 1260 (9th Cir. 1994). “Ordinarily, due process of law requires [notice and]

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an opportunity for some kind of hearing prior to the deprivation of a significant property

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interest.” Sinaloa Lake Owners Ass’n v. City of Simi Valley, 882 F.2d 1398, 1405 (9th

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Cir. 1989) (internal quotations omitted). Plaintiff’s complaint alleges that it was provided

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notice of Defendants’ proposed action and that it was able to appear at multiple public

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hearings and present evidence. Even if Defendants’ conduct did not perfectly accord

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with state law, due process was satisfied by this notice and opportunity to be heard. See

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Walker v. Sumner, 14 F.3d 1415, 1420 (9th Cir. 1994) (noting that “if state procedures

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rise above the floor set by the due process clause, a state could fail to follow its own

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procedures yet still provide sufficient process to survive constitutional scrutiny.”)

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(internal quotations marks and citation omitted) (overruled on other grounds, Sandin v.

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Conner, 515 U.S. 472, 483-84 (1995)).

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The Court will dismiss Plaintiff’s § 1983 claim.

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D.

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This case was removed from state court on the basis of the federal question

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presented by the § 1983 claim, with supplemental jurisdiction over the state law claims.

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Doc. 1, ¶ 2. A district court may decline to exercise supplemental jurisdiction if “the

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district court has dismissed all claims over which it has original jurisdiction.” 28 U.S.C.

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§ 1367(c)(3). The Supreme Court has instructed that “‘if the federal claims are dismissed

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before trial . . . the state claims should be dismissed as well.’” Carnegie-Mellon Univ. v.

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Cohill, 484 U.S. 343, 350 n.7 (1988) (quoting United Mine Workers of America v. Gibbs,

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383 U.S. 715, 726 (1966)). While not a hard-and-fast rule, the statement has come to

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mean that “in the usual case in which all federal claims are eliminated before trial, the

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balance of factors . . . will point toward declining to exercise jurisdiction over the

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remaining state-law claims.” Id.

Remand.

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The Court concludes that this action should be remanded. With dismissal of the

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§ 1983 claim, the basis for this Court’s federal question jurisdiction no longer exists. The

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remaining state-law claims, particularly the claim under A.R.S. § 9-461.11(F), present

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complicated questions of statutory interpretation that are best addressed by Arizona trial

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and appellate courts. Those courts have a greater interest and expertise in resolving state

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law claims and applying state statutes. Additionally, remand will benefit the federal

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system by allowing this Court to devote its scarce resources to resolving federal issues.

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IT IS ORDERED:

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Defendants’ motion to dismiss (Doc. 7) is granted in part.

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2.

This case is remanded to Maricopa County Superior Court.

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Dated this 18th day of April, 2014.

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