Myrtle Street Flats LLC, v. City of Vallejo et al

Filing 33

ORDER signed by District Judge John A. Mendez on 11/27/2017 GRANTING-IN-PART 9 Motion for Preliminary Injunction. During the pendency of this litigation, Defendant City of Vallejo is ORDERED AND ENJOINED to remove the Emergency Summary Abatement is sued concerning 624 Marin on May 31, 2017, to restoreutility service to 624 Marin. The remainder of Plaintiffs Motion is DENIED. Defendants 12 Motion to Dismiss is GRANTED-IN-PART and DENIED-IN-PART. Individual Defendants Vincent Sproete, Jack McArthur, Daniel E. Keen, Lonell Butler, Robert Chambers, and Michelle Hightower are hereby DISMISSED from this action. (Hunt, G)

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 MYRTLE STREET FLATS LLC, d/b/a Sunrise Properties, No. 2:17-cv-1662-JAM-KJN 12 Plaintiff, 13 ORDER RE MOTION FOR PRELIMINARY INJUNCTION AND MOTION TO DISMISS v. 14 15 16 CITY OF VALLEJO, a public entity, et al., Defendants. 17 18 Myrtle Street Flats LLC (“Plaintiff”), doing business as 19 Sunrise Properties, owns multiple properties in downtown Vallejo. 20 Plaintiff embarked on a project to transform those properties 21 into live/work spaces following passage of a city ordinance 22 permitting such use. 23 Vincent Sproete, Jack McArthur, Daniel E. Keen, Lonell Butler, 24 Robert Chambers, and Michelle Hightower (collectively “City 25 Defendants”), as well as Emergency Construction Services (“ECS”), 26 for constitutional violations and declaratory relief due to the 27 Fire Department officials’ decision to evacuate and red tag two 28 of the properties and notice the other properties for evacuation. Plaintiff now sues the City of Vallejo, 1 1 Plaintiff seeks a preliminary injunction enjoining Vallejo 2 from evacuating the noticed properties and permitting Plaintiff 3 to operate all of the properties. 4 below, Plaintiff’s motion for preliminary injunction is DENIED in 5 part and GRANTED in part. 6 the individuals Plaintiff sued in their official capacity. For the reasons set forth Additionally, the Court DISMISSES all 7 8 I. 9 FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND Plaintiff alleges the following facts: 10 Vallejo passed a city ordinance allowing live/work 11 occupancies in 2001 and Plaintiff worked with the city to 12 determine what guidelines would apply to these unique 13 occupancies. 14 units located at 616, 620, 624, 628, and 630 Marin St., and 405 15 and 409 Virginia St., (collectively “Subject Properties”) into 16 spaces for live/work use. 17 and Vallejo got into a dispute over the business licensing 18 requirements for the units, which culminated in a letter, dated 19 September 8, 2004, from then-Chief Building Official Leon McNeil, 20 identifying three requirements for Plaintiff to meet for the 21 units to “be occupied in compliance with the Vallejo Building 22 Code.” 23 approvals for the permits governing the work performed pursuant 24 to the McNeil letter, plus the re-roofing Vallejo had also 25 indicated would be necessary. 26 completed additional work that Vallejo “demanded” in 2012 and 27 received final approval from the City that year. 28 30. Compl. ¶¶ 16–17. Id. at ¶¶ 21–22. Plaintiff began transforming Id. at ¶¶ 15, 19. In 2003, Plaintiff On April 27, 2007, Vallejo issued final Id. at ¶¶ 26–27. 2 Plaintiff Id. at ¶¶ 28– 1 During that period, Plaintiff also restored the Subject 2 Property’s historic façade and original design. 3 The Subject Property had previously been identified as a 4 structure of individual importance, if restored, in the 2005 5 Downtown Specific Plan. 6 work qualifies the building for protection under the California 7 Historic Building Code. 8 9 Id. at ¶ 24. Id. at ¶ 23. Plaintiff contends this Id. at ¶ 31. Plaintiff’s recent troubles began with an unwelcome guest (Ms. Cote) who would not vacate the premises of 616 Marin despite 10 efforts of the master lessee to evict her. 11 this time, on March 23, 2017, fire inspector William Tweedy 12 prepared a “Fire & Life Safety Inspection Report” identifying 13 eight issues that required attention for 616 Marin, along with 14 several issues with the other units. 15 completed and Tweedy provided fire clearance to all seven units 16 on April 7, 2017. 17 undergone a change in use, Vallejo then issued a separate list of 18 requirements based on the 2016 building and fire codes “in a 19 letter [dated March 27, 2017] signed by Sproete and reflecting 20 involvement of McArthur and Butler.” 21 a June 1st compliance deadline. 22 these codes are inapplicable to the Subject Property. 23 ¶ 37. 24 Id. Id. at ¶ 33. Id. at ¶ 36. During The work was Contending that the Subject Property had Id. at 37. Id. at ¶ 38. The letter set Plaintiff believes Id. at Vallejo evicted the 616 Marin tenant and guests on May 23, 25 2017, and red-tagged the unit, preventing Plaintiff from entering 26 the premises and hiring Defendant ECS to board it up. 27 ¶¶ 38–39. 28 in the kitchen of this unit. Id. at Apparently, on May 22, 2017, Ms. Cote set a small fire Id. at ¶ 33. 3 Her complaints led to 1 the May 23rd inspection that, in turn, led to the declaration 2 that the unit was unsafe. 3 Vallejo officials, including Sproete, encouraged Ms. Cote to 4 manufacture safety concerns. 5 up of 616 Marin caused damage to the doors and frames and the 6 termination of services caused rotting food in refrigerators. 7 Id. at ¶ 39. 8 property after being informed that the tenant had terminated his 9 tenancy and the unit was vacant. 10 Id. at ¶¶ 33–35. Id. Plaintiff believes The red-tagging and boarding Vallejo continued to deny Plaintiff access to the Id. On May 31, 2017, Vallejo also red-tagged and boarded up 624 11 Marin, without any notice to Plaintiff. 12 Although Plaintiff assured Vallejo the unit was vacant commercial 13 space, Vallejo premised its actions on the fact that an 14 individual was observed residing in the unit. 15 Plaintiff had not authorized anyone to reside in the unit, had 16 shut off water service to the unit during its vacancy, had not 17 charged or collected rent from any person during the vacancy, and 18 had been close to entering a lease with a commercial tenant. 19 at ¶¶ 41–43. 20 Id. at ¶¶ 40–41. Id. at ¶¶ 40–42. Id. The following month, Vallejo issued evacuation notices, 21 signed by Sproete and McArthur, to the tenants at the five 22 occupied live/work storefronts at 620, 628, and 630 Marin and 405 23 and 409 Virginia (collectively “Occupied Units”). 24 The notices rely upon 2016 code requirements that, Plaintiff 25 believes, do not apply to the units and contain additional 26 unsupported demands. 27 authorize Vallejo to evict all tenants at the Subject Property 28 and to seize it in its entirety with no notice or opportunity to Id. Id. at ¶ 46. “The evacuation notices purport to 4 1 be heard[,] . . . and remain in effect to this day[.]” 2 ¶¶ 47, 52. 3 Plaintiff’s questions, observations, and requests relating to 4 these notices. 5 Id. at Vallejo allegedly has refused to respond to Id. at ¶ 46. On June 30, 2017, Vallejo issued administrative notices for 6 all Subject Property units, other than 624 Marin, on behalf of 7 Hightower, Sproete, and Butler. 8 cite to the 2016 code requirements as well as non-safety 9 concerns. Id. at 48. The notices also Id. 10 Plaintiff sent a letter to Vallejo on July 10, 2017, 11 asserting violations of its rights and, on July 14, 2017, 12 requested a hearing to challenge the building code violations 13 cited in the notices. 14 request and summarily denied Plaintiff’s other assertions in (a) 15 letter(s) dated July 18, 2017. 16 Vallejo purportedly authorized Plaintiff to possess and control 17 616 and 624 Marin, it has not authorized Plaintiff to use either 18 space the way Plaintiff intends without costly alterations and 19 payment of civil fines and charges, including ECS’s fees. 20 ¶ 53. 21 administrative citations against Plaintiff alleging the Occupied 22 Units must have fire sprinklers, unspecified changes to egress, 23 and unspecified changes to smoke alarms. 24 Id. at ¶ 49. Vallejo denied the hearing Id. at ¶¶ 50–51. Although Id. at On August 2, 2017, Vallejo and Sproete issued Id. at ¶ 54. Plaintiff filed its Complaint in this Court asserting five 25 claims: (1) Unreasonable seizure under the Fourth and Fourteenth 26 Amendments; (2) Violation of Due Process under the Fifth and 27 Fourteenth Amendments; (3) Declaratory Relief; (4) Inverse 28 Condemnation under the Fifth Amendment; and (5) Inverse 5 1 Condemnation under the California Constitution. 2 for a preliminary injunction, ECF Nos. 4 & 9, and City Defendants 3 moved to dismiss, ECF No. 12. 4 for a hearing on the pending motions on November 7, 2017. 5 No. 25. 6 Plaintiff to further brief the question of whether the 7 individually named City Defendants sued in their official 8 capacities should be dismissed from the lawsuit. 9 gave the parties an opportunity to resubmit proposed orders for Plaintiff moved The parties came before the Court ECF The Court ruled on the motion to dismiss, but permitted 10 the preliminary injunction. 11 The Court also injunction motion under submission. 12 II. The Court took the preliminary OPINION 13 A. 14 “To obtain a preliminary injunction, a party must show that Legal Standard 15 ‘he is likely to succeed on the merits, that he is likely to 16 suffer irreparable harm in the absence of preliminary relief, 17 that the balance of equities tips in his favor, and that an 18 injunction is in the public interest.’” 19 v. Weber, 767 F.3d 936, 942 (9th Cir. 2014) (quoting Winter v. 20 Natural Res. Def. Council, 555 U.S. 7, 20 (2008)). “If a 21 plaintiff can only show that there are ‘serious questions going 22 to the merits’—a lesser showing than likelihood of success on the 23 merits—then a preliminary injunction may still issue if the 24 ‘balance of hardships tips sharply in the plaintiff's favor,’ and 25 the other two Winter factors are satisfied.” 26 omitted). 27 party has ‘a fair chance of success on the merits.’” 28 Line, Inc. v. Phoenix Software, Inc., 739 F.2d 1415, 1421 (9th Friends of the Wild Swan Id. (citations “Serious questions” are ones “as to which the moving 6 Sierra On- 1 Cir. 1984) (citing Benda v. Grand Lodge of the Int’l Ass’n of 2 Machinists, 584 F.2d 308, 315 (9th Cir. 1978)). 3 B. 4 Both parties submitted exhibits and declarations for the Judicial Notice and Evidentiary Objections 5 Court’s review. 6 the declarations of Alan Wofsy and George Leake. 7 They contend Mr. Wofsy’s declaration is argumentative and that 8 many of his statements lack foundation. 9 at the hearing, portions of Mr. Wofsy’s declaration are ECF Nos. 5–8, 19. City Defendants objected to ECF No. 19-3. As the Court indicated 10 argumentative. But, rather than ruling on each individual 11 objection, the Court has self-policed in reviewing and 12 considering its contents. 13 objection for lack of foundation because Mr. Wofsy has personal 14 knowledge of the facts to which he attested. 15 approached Mr. Leake’s declaration similarly. 16 on the motion does not rely upon any of the declarants’ 17 statements that are argumentative or lack foundation. The Court did not find merit to the The Court The Court’s ruling 18 C. 19 This case presents unique legal and factual circumstances. 20 Neither party directed the Court to a case with analogous facts 21 and theories of relief. 22 clearly favor either party. 23 on whether Plaintiff has shown irreparable harm is likely in the 24 absence of a preliminary injunction with respect to the units. 25 Analysis 1. 26 The merits analysis, thus, does not The Court’s analysis, instead, turns 616 Marin and the Occupied Units Plaintiff argues that a loss of interest in real property, 27 even rental rights, constitutes an irreparable injury. 28 22. Mot. at City Defendants concede that deprivation of property 7 1 interests constitutes irreparable harm, but argue that the 2 doctrine of unclean hands bars relief. 3 concedes that it has access to its properties and thus the only 4 present deprivation to Plaintiff is rental income. 5 10–11. 6 the same deprivation will result. 7 Opp’n at 19. Plaintiff See Mot. at If City Defendants evict tenants from the Occupied Units, The Court finds Plaintiff’s lost rental income does not 8 constitute irreparable harm. 9 support a finding of irreparable harm[] because such injury can “[E]conomic injury alone does not 10 be remedied by a damage award.” 11 Television & Appliance Rental, Inc., 944 F.2d 597, 603 (9th Cir. 12 1991). 13 therefore, is not irreparable harm. 14 Aurora Loan Services, LLC, No. C11-5393BHS, 2011 WL 2357644, at 15 *2 (W.D. Wash. June 13, 2011) (finding the loss of rental income 16 is not irreparable harm); Park v. Wachovia Mortg., FSB, No. 17 10CV1547-WQH-RBB, 2010 WL 5088826 (S.D. Cal. Dec. 7, 2010) 18 (same); Rhodes v. Wells Fargo Home Mortg., Inc., No. 09-CV-1042 W 19 (CAB), 2009 WL 10672064 (S.D. Cal. June 3, 2009) (same). 20 Court cannot award preliminary relief on this basis. 21 Rent-A-Center, Inc. v. Canyon Lost rental income may be remedied through damages and, See Gerber-Williams v. The Plaintiff also argues that City Defendants’ conduct harms 22 Plaintiff’s business reputation as landlord of the Subject 23 Properties. 24 Units, Plaintiff only offers Mr. Wofsy’s conclusory statements in 25 support. 26 control over business reputation and damage to goodwill could 27 constitute irreparable harm, the moving party may not rely on 28 unsupported and conclusory statements regarding harm the party With respect to 616 Marin Street and the Occupied See Wofsy Decl. ¶ 56. “Although evidence of loss of 8 1 might suffer.” 2 470-JLS (KESx), 2016 WL 9049647, at *5 (C.D. Cal. June 15, 2016) 3 (quoting Herb Reed Enters., LLC v. Fla. Entm’t Mgmt., Inc, 736 4 F.3d 1239, 1250 (9th Cir. 2013)) (internal quotation marks 5 omitted). 6 establish that irreparable harm to its business reputation and 7 goodwill is likely rather than speculative as to these units. 8 9 10 11 iFreedom Direct Corp. v. McCormick, No. SACV 16- The Court finds Plaintiff’s evidence fails to 2. 624 Marin Street In contrast, the Court finds the evidence sufficient to support an injunction with respect to 624 Marin. First, Plaintiff has at least a fair chance of success on 12 the merits on his claims regarding this unit. 13 residential use Mr. Sproete observed during his inspection may 14 have justified an emergency evacuation, City Defendants have 15 failed to justify the continued deprivation and limitations on 16 use of this property. 17 units, including 624 Marin, fire clearance after the April 7, 18 2017, re-inspection). 19 additional requirements City Defendants have sought to impose on 20 the unit pertain to residential units or units that have 21 undergone a change in use. 22 (letter regarding all units, indicating that because the units 23 are being used for residential purposes, they must meet 2016 code 24 requirements); Sproete Decl. ¶¶ 9–10 (attesting that he noticed 25 emergency summary abatement for 624 Marin and secured the 26 property after observing individuals residing there), Exh. A 27 (Fire & Life Safety Inspection Report listing 624 Marin as “Type 28 of Business: B – vacant store”), Exh. C (Emergency Summary While the See Wofsy Decl. ¶ 38, Exh. X (giving all The property is a commercial unit and the See Wofsy Decl. ¶¶ 44–50, Exh. Y 9 1 Abatement notice for 624 Marin, noting a change in use due to 2 residential occupancy and additional requirements). 3 shows Plaintiff has a fair chance of success in prevailing on its 4 claims with respect to 624 Marin Street. 5 Inc., 739 F.2d at 1421. 6 The evidence See Sierra On-Line, Second, Plaintiff has shown that irreparable harm is likely. 7 Plaintiff has already missed out on business opportunities, 8 including signing a lease with a commercial tenant and securing a 9 business license, due to City Defendants actions. See Wofsy Decl. 10 ¶¶ 44–50. 11 opportunities. 12 in damages, harm to potential business relationships and lost 13 business opportunities—in the present circumstances—are not. See 14 Celsis In Vitro, Inc. v. CellzDirect, Inc., 664 F.3d 922 (Fed. 15 Cir. 2012) (affirming district court’s finding of irreparable 16 harm based on price erosion, damage to ongoing customer 17 relationships, loss of customer goodwill, and loss of business 18 opportunities). 19 The restrictions on the unit continue to preclude such Id. Although lost rental income is quantifiable Finally, the balance of the equities and public interest 20 favor issuing a preliminary injunction. 21 abated when the City evicted the occupants from the premises. 22 See Sproete Decl. ¶ 9; Wofsy Decl. ¶ 50. 23 offered no other evidence that the unit is a residential space 24 that should be subject to the same requirements as the other 25 units or that the unit otherwise contains fire hazards. 26 Wofsy Decl. Exh. X (giving the unit fire clearance). 27 this situation persists, the property will remain a vacant space 28 instead of housing a business that Vallejo residents can 10 The emergency situation City Defendants have See As long as 1 frequent. 2 justification for keeping the property in this state. 3 finds a preliminary injunction is warranted as to 624 Marin 4 insofar as Plaintiff continues to use it only for commercial 5 purposes. Wofsy Decl. ¶ 49. Defendants have failed to show any The Court 6 D. 7 At the November 7th hearing, the Court ruled on Defendants’ Motion to Dismiss 8 (other than ECS) motion to dismiss. 9 granting this motion with respect to the Occupied Units on The Court affirms its ruling 10 Plaintiff’s first, second, fourth, and fifth claims. 11 the motion with respect to 616 and 624 Marin on all claims (other 12 than Plaintiff’s Fifth Amendment due process claim which is 13 dismissed because Defendants are not federal actors). The Court 14 also denies the motion to dismiss with respect to the Occupied 15 Units on the third claim for declaratory relief. 16 permitted Plaintiff to submit additional briefing on whether the 17 individual defendants sued in their official capacity should be 18 dismissed from the action. 19 briefing on the issue. 20 It denies The Court Plaintiff did not submit further ECF No. 28. Official-capacity suits are treated as suits against the 21 entity. 22 JAM-AC, 2013 WL 3992497, at *3 (E.D. Cal. Aug. 2, 2013). 23 “Therefore, if individuals are being sued in their official 24 capacities as municipal officials and the municipal entity itself 25 is also being sued, then the official capacity claims against the 26 individuals are redundant and should be dismissed.” 27 Accordingly, the claims against the City officials in their 28 official capacities are dismissed with prejudice. See Herrera v. City of Sacramento, No. 2:13-cv-00456 11 Id. This ruling 1 does not bar amendment, upon proper motion, to add any of these 2 defendants in their individual capacities at a later date. 3 III. ORDER 4 For the reasons set forth above, the Court GRANTS 5 Plaintiff’s Motion for Preliminary Injunction in part: 6 During the pendency of this litigation, Defendant City of 7 Vallejo is ORDERED AND ENJOINED to remove the Emergency Summary 8 Abatement issued concerning 624 Marin on May 31, 2017, to restore 9 utility service to 624 Marin, and to take no further action to 10 enforce that Emergency Summary Abatement or otherwise to 11 interfere with Sunrise’s commercial use and enjoyment of that 12 property based on that Emergency Summary Abatement or the grounds 13 stated therein without further order of this Court. 14 does not prohibit the City of Vallejo from the ordinary 15 enforcement of applicable law with respect to this property based 16 on facts arising subsequent to the issuance of this order and 17 consistent with the City of Vallejo’s legal and constitutional 18 obligations. This order 19 The remainder of Plaintiff’s Motion is DENIED. 20 Defendants Motion to Dismiss is GRANTED in part and DENIED 21 in part as set forth above. Individual Defendants Vincent 22 Sproete, Jack McArthur, Daniel E. Keen, Lonell Butler, Robert 23 Chambers, and Michelle Hightower are hereby DISMISSED from this 24 action. 25 26 IT IS SO ORDERED. Dated: November 27, 2017 27 28 12

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