Stone River Lodge, LLC et al v. The Village of North Utica et al
MEMORANDUM OPINION AND ORDER signed by the Honorable Matthew F. Kennelly on 11/15/2020: For the reasons stated in the accompanying Memorandum Opinion and Order, the Court grants defendants' motion to dismiss in part [dkt. no. 19]. The Court di smisses count 1 in part (except for what the Court has called the plaintiffs' as-applied equal protection claim) and counts 2, 4, and 6 in their entirety for failure to state a claim upon which relief may be granted. The motion to dismiss is en tered and continued as to the plaintiffs' remaining claims. The parties should be prepared to discuss at the upcoming status hearing whether the Court should continue to exercise supplemental jurisdiction over the plaintiffs' state-law claims. (mk)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
STONE RIVER LODGE, LLC;
TAYCAN HOLDINGS LLC; T&S
DEVELOPMENTS, LLC; BARBARA
TOMCZAK; CHRISTOPHER FLOOD;
ALAN GOLDFARB; TYLER
TOMCZAK; BEATRIZ VALLE; FAYE
DAVIS; and STEVEN DAVIS,
VILLAGE OF NORTH UTICA; DAVID
STEWART; and RODNEY DAMRON,
Case No. 20 C 3590
MEMORANDUM OPINION AND ORDER
MATTHEW F. KENNELLY, District Judge:
Stone River Lodge, LLC and the nine other plaintiffs in this case all own vacation
villas and cabins in the Village of North Utica, which is near Starved Rock State Park.
They contend that ordinances adopted by the Village inappropriately restrict their right
to rent their property to others and violate their federal constitutional rights in various
ways. They have sued to enjoin enforcement of the ordinances and for damages. The
defendants—the Village, its president, and its chief of police—have moved to dismiss
the complaint under Federal Rule of Civil Procedure 12(b)(6) for failure to a claim. In
considering the defendants' motion, the Court takes the complaint's factual allegations
as true and draws reasonable inferences in the plaintiffs' favor. See, e.g., O'Boyle v.
Real Time Resolutions, Inc., 910 F.3d 338, 342 (7th Cir. 2018).
In 2004, Grand Bear Lodge, LLC purchased land near North Utica to develop a
hotel. North Utica annexed the land. According to the plaintiff, the annexation
agreements between the village and the property owner granted special use zoning
classification for the development of a hotel and a number of buildings that each would
include multiple vacation villas. The villas were to be individually owned. The village
ordinances approving the annexation agreements incorporated "declarations of
covenants." The covenants provided, among other things, that no owner would be
prohibited from renting his or her unit and that this right (among others) would run with
the land and would inure to subsequent owners.
The plaintiffs allege that until 2020, they were able to rent out their units on their
own, "without any mandates from the Village." Compl. ¶ 41. In February 2020,
however, the village adopted an ordinance regulating short term rentals of villas. The
plaintiffs contend that the ordinance barred villa owners from renting out their units
unless the owner agreed to rent the unit through the Grand Bear Lodge hotel. This, the
plaintiffs allege, resulted from the insistence of the hotel's new owner that it could not
operate profitably unless the owners of the villas participated in a "rental pool" through
which the villas would be rented through the hotel.
The plaintiffs have attached a copy of the ordinance, Ordinance No. 2020-1, to
their complaint. See Compl., Ex. 10. On its face, the ordinance is not targeted at the
plaintiffs' villas. Rather, it makes it unlawful for anyone in the village to operate a
"vacation rental unit" without a current, valid license from the village. The term
"vacation rental unit" is defined as a dwelling unit or portion thereof offered for rent for a
period of less than thirty days, not including hotels, motels, lodging houses, boarding
houses, or bed-and-breakfast establishments that are licensed under other provisions of
the North Utica Village Code. The ordinance also establishes standards and
procedures for application and issuance of licenses.
The plaintiffs allege, however, that they have not been allowed to obtain licenses
for rental of their villas. They attach to the complaint a March 30, 2020 letter from the
village clerk to a villa owner stating that the village
provides for only one Hotel License issued to Grand Bear Lodge & Resort
P.U.D., and per Village Ordinance 2020-01, private rentals of the Villas
and Cabins located throughout the P.U.D. are not Licensed nor permitted.
. . . Property owners that would like to rent out their property for overnight
and short-term rental accommodations are required to utilize the rental
pool provided directly by Grand Bear Lodge & Resort.
Compl., Ex. 12.
According to the complaint, the village's chief of police issued two citations for
violation of the ordinance in early March 2020. Id. ¶ 76. The plaintiffs also allege that
on two occasions before the filing of the present suit in June 2020—the dates are not
stated—the chief of police "approached an Owner's Unit, rang the bell and stated 'I'm
just curious if you're renting this for the weekend' or words to that effect." Id. ¶ 77.
Later, citations seeking $750 fines were issued to villa owners for days on which neither
the chief of police or other village employees visited the units cited. Id. In addition, the
plaintiffs allege, during the first few weekends of June 2020, the owner of the hotel set
up barriers that prevented the plaintiffs from freely entering and exiting their property.
The plaintiffs include twelve claims in their complaint. Count 1 is a claim under
42 U.S.C. § 1983 for violation of the Fourteenth Amendment's Equal Protection Clause.
Count 2 is a claim under section 1983 for violation of the Fourteenth Amendment's Due
Process Clause. Count 4 is a claim under section 1983 for violation of the Fourth
Amendment. Count 6 is a claim for violation of the Sherman Antitrust Act. Count 11 is
a claim seeking a declaratory judgment based on the just-mentioned federal
constitutional provisions, as well as parallel state constitutional provisions.
remaining claims are state-law claims. Count 3 is a claim for violation of the Illinois
Constitution's equal protection and due process provisions. Count 6 is based on the
Illinois Antitrust Act. Counts 8, 9, and 10 are claims of equitable estoppel, promissory
estoppel, and for specific performance. And count 12 is a claim for mandamus seeking
a declaration that the village ordinance is void.
The defendants have moved to dismiss all of the plaintiffs' claims for failure to
state a claim under Federal Rule of Civil Procedure 12(b)(6).
To overcome a motion to dismiss under Rule 12(b)(6) motion, a plaintiff must
allege facts sufficient "to state a claim to relief that is plausible on its face." Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007). "[W]ell-pleaded facts" are accepted "as
true and [the Court] draw[s] all reasonable inferences in the [plaintiffs'] favor." Shipley v.
Chi. Bd. of Election Comm'rs, 947 F.3d 1056, 1060–61 (7th Cir. 2020). "A claim has
facial plausibility when the plaintiff pleads factual content that allows the court to draw
the reasonable inference that the defendant is liable for the misconduct alleged."
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). In this decision, the Court will focus on the
plaintiffs' federal claims.
Federal due process claim
The Court begins with count 2, the plaintiffs' claim for violation of the Fourteenth
Amendment's Due Process Clause. The plaintiffs allege that the adoption of the
ordinance impaired their ability to rent their villas and thus violated their due process
rights. See Compl. ¶ 111. They also allege that the ordinance impairs the value of their
property and that it does not promote the health, safety, or welfare of the public. See id.
¶ 113. The plaintiffs also contend that the ordinance allows the village to suspend or
revoke a license without adequate procedural protections, see Compl. ¶ 112, but
because there is no allegation in the complaint that any of the plaintiffs have been given
a license, let alone had one revoked or suspended, they have suffered no injury from
this aspect of the ordinance.
It is not entirely clear whether the plaintiffs are asserting a procedural due
process claim or a substantive due process claim regarding the ordinance, so the Court
will deal with both possibilities. To state a claim for a violation of procedural due
process, a plaintiff must plausibly allege that it was deprived by the government of a
liberty or property interest and that there were "insufficient procedural protections
surrounding that deprivation." See, e.g., Cannici v. Village of Melrose Park, 885 F.3d
476, 479 (7th Cir. 2018) (internal quotation marks omitted).
The Court assumes for purposes of discussion that the covenants, via the
annexation ordinance, establish a legitimate claim by the plaintiffs of entitlement to rent
out their property and that this is a property right protected by the Due Process Clause.
This, the Court notes, is far from clear. Nothing in the covenants entitled the plaintiffs to
be forever free from regulation. Indeed, the annexation agreements specifically
provided that the village retained the right to enact zoning changes. And the ordinance
in question almost certainly qualifies as a zoning change within the meaning of the
annexation agreements, even if it does not include the term "zoning" in its title or text.
That aside, there is no violation of procedural due process arising from the
village's adoption of the ordinance. The adoption of the ordinance was a legislative act
of general applicability, not a judicial or quasi-judicial act. It has been clear for over a
century that in such situations, "the legislative determination provides all the process
that is due." Logan v. Zimmerman Brush Co., 455 U.S. 422, 433 (1982) (citing BiMetallic Inv. Co. of State Bd. of Equalization, 239 U.S. 441, 445-46 (1915)). This is so,
as Bi-Metallic makes clear, even if the legislative enactment impacts an individual's
property rights. As the Supreme Court stated in that case:
When a rule of conduct applies to more than a few people, it is
impracticable that everyone should have a direct voice in its adoption.
The Constitution does not require all public acts to be done in town
meeting or an assembly of the whole. General statutes within the state
power are passed that affect the person or property of individuals,
sometimes to the point of ruin, without given them a chance to be heard.
Their rights are protected in the only way that they can be in a complex
society, by their power, immediate or remote, over those who make the
Bi-Metallic, 239 U.S. at 445.
In their brief in opposition—though not in their complaint—the plaintiffs also
appear to contend that their procedural due process rights were violated in connection
with their applications for licenses because they "were denied outright and they were
told that the only way they could rent is through the rental pool agreement." Resp. to
Mot. to Dismiss. at 12. There is no violation of procedural due process here. The
process due in a zoning case—and the licensing requirement is, or is closely akin to a
zoning regulation—"is minimal and normally must be pursued in state courts."
Muscarello v. Ogle Cty. Bd. of Comm'rs, 610 F.3d 416, 423 (7th Cir. 2010). Plaintiffs do
not contend, nor could they, that they lack a state-court remedy for any denial of a rental
To state a substantive due process claim, the plaintiffs must plausibly allege that
the ordinance is not rationally related to a legitimate governmental interest or is
arbitrary. See, e.g., Lee v. City of Chicago, 330 F.3d 456, 461 (7th Cir. 2003); see
generally County of Sacramento v. Lewis, 523 U.S. 833, 846 (1998). The plaintiffs'
argument regarding this claim includes no citation of authority and is so cursory that, in
the Court's view, it has been forfeited. See, e.g., Oneida Nation v. Village of Hobart,
968 F.3d 664, 689 (7th Cir. 2020).
Even if this were not the case, there is nothing arbitrary about an ordinance that
regulates short-term rentals of property—in this case, to require a license. See, e.g.,
Nguyen v. City of Buena Park, No. 8:20-cv-00348, 2020 WL 5991616, at *6 (C.D. Cal.
Aug. 18, 2020). When an economic or business regulation is at issue, a court's review
involves determining whether there is a rational basis for the regulation. See, e.g.,
Minerva Dairy, Inc. v. Harsdorf, 905 F.3d 1047, 1053 (7th Cir. 2018). This does not
require a detailed factual inquiry but only the finding of "a reasonably conceivable state
of facts that could provide a rational basis" for the regulation. Id. (internal quotation
marks omitted). In this case, the ordinance itself includes a legitimate state interest for
its adoption: it says the village adopted the regulation based on the belief that "vacation
rental units possess certain specific concerns that can cause negative impact on
surrounding properties and the Village as a whole, such as life-safety concerns, quality
of neighborhood and related life concerns, security concerns, fire safety concerns, and
tax revenue concerns." Compl., Ex. 10, Ord. No. 2020-01, preamble. And the terms of
the ordinance are rationally related to this interest. The ordinance imposes a licensing
requirement; prohibits rental for less than a 24-hour period; bars service of food or
beverages to guests; requires the availability of off-street parking; sets an occupancy
limit for any given unit; and requires posting of applicable rules and regulations
(including noise, trash disposal, and the like).
In short, the ordinance represents a legitimate exercise of the village's police
power, and it is readily apparent that its requirements are rationally related to the
village's stated interest. For these reasons, the plaintiffs have no viable substantive due
process claim under the U.S. Constitution regarding the village's adoption of the
ordinance. The plaintiffs' complaints regarding the manner in which licenses have been
issued or denied sounds in equal protection, not due process, and will be addressed
later in this decision.
Fourth Amendment claim
In count 4 of their complaint, the plaintiffs challenge the village ordinance's
provision stating that every vacation rental unit "shall be subject to inspection" by the
village's police department, zoning enforcement officer, and fire protection district, as
well as the LaSalle County Health Department. The ordinance also requires vacation
rental unit operators to maintain a register of guests and to make this "freely accessible"
to the village. The plaintiffs contend that these provisions run afoul of the Fourth
Amendment because they do not require probable cause or reasonable suspicion prior
to an inspection.
The Court agrees with the defendants that the plaintiffs' allegations are
insufficient to establish their standing to challenge these provisions. Standing requires
an actual, concrete injury, traceable to the defendant, that would be redressed by a
favorable outcome in the lawsuit. See, e.g., Lujan v. Defenders of Wildlife, 504 U.S.
555, 560-61 (1992). An allegation of a possible future injury is insufficient. See, e.g.,
Clapper v. Amnesty Int'l USA, 568 U.S. 398, 409 (2013). The complaint does not allege
that the village has conducted any actual inspection of a short-term rental unit without a
warrant or has demanded production of any rental logs. And the Court is unwilling to
assume, in a vacuum, that village authorities would enter a dwelling without a warrant or
other legal process. Under the circumstances, the plaintiffs have experienced no actual
or concrete injury from these provisions of the ordinance, and thus they lack standing to
challenge them at this point.
Though the plaintiffs offer no real argument to the contrary in their response to
the motion to dismiss—they simply state, in conclusory fashion and without support, that
they have been injured, see Pls.' Resp. to Mot. to Dismiss at 17-18—their complaint
does identify one point that merits discussion. Specifically, they allege that the police
chief has come to the front door of villa units on two occasions to make inquiry. See
Compl. ¶ 77. Assuming this is so, this activity does not run afoul of the Fourth
Amendment. Under Florida v. Jardines, 569 U.S. 1 (2013), the area immediately
surrounding and associated with a home—the "curtilage"—is considered part of the
home itself for Fourth Amendment purposes. Id. at 7. A government official's uninvited
physical intrusion into the curtilage may therefore implicate the Fourth Amendment. But
the Court concluded in Jardines that there is an "implicit license" that "permits [a] visitor
to approach the home by the front path, knock promptly, wait briefly to be received, and
then (absent invitation to linger longer) leave." Id. at 8. "Thus, a police officer not
armed with a warrant may approach a home and knock, precisely because that is no
more than any private citizen might do." Id. (internal quotation marks omitted). This is
all the plaintiffs have alleged in their complaint: they contend that the police chief came
to the front doors of one or more villas, knocked, and asked a few questions. There is
no allegation in the complaint that the chief or any other village employee stayed within
the curtilage of the property of any of the plaintiffs any longer than a brief period, and no
allegation that they made an entry into any dwelling.
For these reasons, the Court dismisses count 4 of the plaintiffs' complaint.
Federal equal protection claim
Count 1, the plaintiffs' Equal Protection Clause claim, appears to the Court to
involve the short-term rental ordinance both on its face and as applied. On the face of
the ordinance, there is no viable equal protection issue: it treats all short-term renters
the same way. There is nothing in the ordinance itself that appears to treat the plaintiff
villa owners differently. 1 And there is no plausible equal protection violation in "singling
out" short-term rentals for licensing requirements. Specifically, the regulations imposed
by the ordinance upon owners of short-term rental property unquestionably are
rationally related to a legitimate state interest, as discussed in the Due Process Clause
section of this decision. That is all the Equal Protection Clause requires when it comes
to regulation of economic activity. See City of Cleburne v. Cleburne Living Ctr., 473
In particular, there is nothing in the ordinance that appears to provide additional or
different requirements for short-term rentals by property owners in a "planned unit
development," a term used by the defendants in their briefs on the motion to dismiss. If
some term of the ordinance provides such an exception in a way that is not readily
apparent from the face of the ordinance, one would have expected the parties to explain
this—and they did not.
U.S. 432, 440 (1985); Smith v. City of Chicago, 457 F.3d 643, 650-51 (7th Cir. 2006).
The plaintiffs also allege that they have been singled out for less-favorable
treatment with regard to the actual issuance of short-term rental licenses. It appears
that this claim is not based on the terms of the ordinance itself; rather, the claim is
based on how licensing for short-term rentals has been carried out in practice. The
plaintiffs say that they, as villa owners, have been precluded from obtaining licenses
unless they agree to join a "rental pool" administered by the Grand Bear Lodge. See
Compl., Exs. 12, 13. In other words, the plaintiffs say they are being treated differently
from others in the village who may wish to rent out their property on a short-term basis.
As the Court has indicated, it does not appear that there is anything in Ordinance
2020-1 that establishes such a distinction. The plaintiffs contend that this state of affairs
resulted from pressure (for want of a better word) by the hotel owners, who may have
believed their revenues were being hurt by villa owners renting out their property. The
defendants seem to say that the differential treatment is justified by the fact that the
villas are in a "planned unit development," but this explanation and what it means in
determining the existence of a rational basis is not found in the complaint (or, for that
matter, elsewhere in the record relating to the motion to dismiss) and thus is not
appropriately considered on a Rule 12(b)(6) motion.
Based on the extremely thin record, the Court cannot say as a matter of law at
this juncture that this claimed differential treatment is rationally related to a legitimate
state interest. This claim—which the Court will refer to as the plaintiffs' as-applied equal
protection claim—survives defendants' motion to dismiss, though the plaintiffs' equal
protection claim based on the face of the ordinance does not.
Federal antitrust claim
The plaintiffs' claim under the Sherman Act lacks merit, as the defendants argue.
The Sherman Act does not apply to allegedly anticompetitive restraints imposed by a
state "as an act of government," Parker v. Brown, 317 U.S. 341, 352 (1943), and this
same immunity extends to actions by local governments like the village when they are
acting pursuant to authority conferred by a state. See City of Columbia v. Omni
Outdoor Advertising, Inc., 499 U.S. 365, 371-72 (1991). A local governmental entity like
the village is authorized by Illinois law to impose zoning and land use restrictions as
appropriate for public health, safety, and welfare. See 65 ILCS 5/11-13-1. And such
provisions necessarily "displace unfettered business freedom in a manner that regularly
has the effect of preventing normal acts of competition." Omni Outdoor Advertising, 499
U.S. at 373. The defendants are therefore entitled to Parker immunity on the plaintiffs'
Sherman Act claim. Contrary to the plaintiffs' contention, the application of Parker
immunity is a legal issue, not a factual issue.
The plaintiffs have also asserted a variety of state-law claims, most if not all of
which turn on the specifics of the annexation agreements and related documents or on
the interpretation of state statutes. The Court is inclined to decline the exercise of
supplemental jurisdiction over these claims and to require the parties to litigate them in
state court, particularly given the dismissal of virtually all of the plaintiffs' federal claims.
See 28 U.S.C. § 1367(c). The Court will address this point with the parties at the
upcoming status hearing.
For the reasons stated above, the Court grants defendants' motion to dismiss in
part [dkt. no. 19]. The Court dismisses count 1 in part (except for what the Court has
called the plaintiffs' as-applied equal protection claim) and counts 2, 4, and 6 in their
entirety for failure to state a claim upon which relief may be granted. The motion to
dismiss is entered and continued as to the plaintiffs' remaining claims. The parties
should be prepared to discuss at the upcoming status hearing whether the Court should
continue to exercise supplemental jurisdiction over the plaintiffs' state-law claims.
Date: November 15, 2020
MATTHEW F. KENNELLY
United States District Judge
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?