ABCDE OPERATING, LLC., d.b.a. The Penthouse Club, a Michigan Limited Liability Company v. City of Detroit et al
Filing
35
OPINION and ORDER denying pltf's motion for order to show cause 27 Signed by District Judge Nancy G. Edmunds. (CBet)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
ABCDE OPERATING, LLC,
Case No. 17-10138
Plaintiff,
Honorable Nancy G. Edmunds
v.
KEVIN JONES and
CITY OF DETROIT,
Defendants.
/
OPINION AND ORDER DENYING
PLAINTIFF'S MOTION FOR ORDER TO SHOW CAUSE [27]
Plaintiff ABCDE Operating, LLC, doing business as the Penthouse Club, an adult
entertainment establishment, commenced this suit in this Court on January 16, 2017,
asserting due process and other challenges to the procedures used by the Defendant City
of Detroit to suspend or revoke a license to operate an adult cabaret. Shortly after this suit
was filed, the Defendant City and the manager of the City's Business License Center,
Defendant Kevin Jones, invoked these challenged procedures in an effort to suspend or
revoke Plaintiff's license to operate the Penthouse Club, and on May 22, 2017,
administrative hearing officer Richard J. Bowers issued a decision and order providing that
effective June 12, 2017, Plaintiff's license would be suspended for a period of six months.
(See Dkt. 24, 5/22/2017 Decision and Order at 6.)1
1
Under the Detroit City Code provision that governs the process for seeking to suspend
or revoke a license to operate a sexually-oriented business, Plaintiff may seek judicial
review of the hearing officer's decision, (see Complaint, Ex. 1, Detroit City Code § 5-1527(f)), and the record indicates that Plaintiff is currently pursuing this remedy before the
Michigan courts.
At a May 31, 2017 hearing before this Court on Plaintiff's motion for a preliminary
injunction, Plaintiff's counsel argued on the record that the hearing officer's decision was
contrary to law because the relevant provision of the Detroit City Code states that a license
suspension "shall not exceed ninety (90) days." (Detroit City Code § 5-15-27(e).)2 Two
days later, on June 2, 2017, Hearing Officer Bowers issued an amended decision and order
stating that Plaintiff's license was "revoked," rather than suspended, for the same sixmonth period set forth in his initial decision and order. (Plaintiff's Motion for Order to Show
Cause, Ex. 2, 6/1/2017 Amended Decision and Order at 1 (emphasis in original).)3 In
Plaintiff's view, the timing of this amended decision suggests that counsel for Defendants
likely engaged in ex parte communication with the hearing officer, relaying to him the
statement of Plaintiff's counsel that a six-month license suspension was not authorized
under the City Code, and perhaps urging him to issue an amended decision correcting this
infirmity. Accordingly, through the present motion filed on June 7, 2017, Plaintiff requests
that the Court issue an order directing Defendants and their counsel to show cause why
they should not be sanctioned for their allegedly impermissible ex parte communication with
Hearing Officer Bowers.
In response to Plaintiff's motion, Defendants concede that an attorney in the City of
Detroit Law Department, Douglas M. Baker, informed Hearing Officer Bowers in a
telephone call that his initial order of a six-month license suspension was "inconsistent with
the language contained in the City's ordinance" that limited suspensions to no more than
2
This same provision authorizes the revocation of a license for up to a year. (Id.)
3
This amended decision is dated June 1, 2017, but the hearing officer evidently issued
it the next day, June 2. (See Plaintiff's Motion, Ex. 1, 6/2/2017 e-mail.)
2
ninety days. (Defendants' Response, Ex. E, Baker Aff. at ¶ 13.) In particular, Mr. Baker
states in an affidavit:
(i) that following the May 31, 2017 hearing before this Court, counsel for
Defendants in this case, Eric Gaabo, came to Mr. Baker's office and informed
him "that there might be a clerical or typographical error in the hearing officer's
May 24, 2017 Decision and Order," (id. at ¶¶ 11-12);
(ii) that upon reviewing the hearing officer's decision, Mr. Baker and Mr.
Gaabo confirmed "that the hearing officer had mistakenly used the words
"suspend[]" and "suspended" instead of "revoke" and "revoked," (id. at ¶ 12);
(iii) that during a "very brief" telephone call with Hearing Officer Bowers on
June 1 or 2, Mr. Baker "stated that [he] was confused by the May 24, 2017
Decision and Order, because the remedy provided — a 6-month 'suspension,'
rather than a 'revocation' — was inconsistent with the language contained in the
City's ordinance," (id. at ¶ 13);4 and
(iv) that Hearing Officer Bowers "immediately acknowledged the conflict
between the language of his Decision and Order and" the relevant City Code
provision, § 5-15-27(e), and he "stated that he would clarify his intention by
issuing a corrected Decision and Order," (id.).
Nonetheless, while Defendants agree that this ex parte telephone conversation between
Mr. Baker and Hearing Officer Bowers led to the issuance of an amended decision and
order that changed the six-month "suspension" of Plaintiff's license into a six-month
"revocation," they point to case law indicating that a party may appropriately engage in ex
parte communication with a judge in order to bring a clerical or typographical error to the
court's attention. See, e.g., Thomas v. District of Columbia, 407 F. Supp.2d 102, 112
(D.D.C. 2005) (opining that "to the extent that a clerical error in a decision is detected by
a party, the party has an affirmative obligation to inform the decision-maker such that the
resulting [o]pinion reflects what was intended and actually decided").
4
Mr. Baker denies that he "discuss[ed] the merits" of the hearing officer's decision during
this phone call. (Id.)
3
Although the Court shares Plaintiff's skepticism that the ex parte communication
between Mr. Baker and Hearing Officer Bowers concerned only a clerical mistake or
typographical error, rather than a substantive matter, it is unnecessary to resolve this
question. Rather, the proper disposition of Plaintiff's motion turns on a threshold issue that
neither party has addressed to the Court's satisfaction — namely, whether this Court has
the authority to investigate and take action against a non-party's purported ethical violation
that has no apparent bearing upon this case. Under the undisputed record, the ex parte
contact at issue here was initiated by Douglas Baker, a City of Detroit attorney who has not
appeared on behalf of any party to this suit.
Mr. Baker directed this ex parte
communication to Hearing Officer Bowers, who likewise is not a party to this suit.5 Although
this ex parte communication conveyed information stated on the record at a May 31, 2017
hearing before this Court, Plaintiff does not suggest that counsel for Defendants in this
case, Eric Gaabo, acted improperly or unethically by sharing this information with a
colleague in the City of Detroit Law Department.6
5
Moreover, the substance of the hearing officer's decision is not relevant to the proper
disposition of the claims pending before this Court; rather, this case implicates only the
process established under the Detroit City Code for determining whether to suspend or
revoke a license to operate a sexually-oriented business. Any review of the substance of
Hearing Officer Bowers' decision is a matter for the Michigan courts, and this review
evidently is proceeding in that forum.
6
To illustrate this point, consider another possible scenario. If Mr. Baker had taken the
information learned from Mr. Gaabo and included it in a letter or e-mail to Hearing Officer
Bowers with a copy to Plaintiff's counsel, Plaintiff presumably could not have complained
that the amended decision subsequently issued by the hearing officer was the product of
any unethical or otherwise improper conduct by Mr. Baker or Mr. Gaabo. Rather, it was Mr.
Baker's disclosure of this information in an ex parte communication with Hearing Officer
Bowers that has triggered Plaintiff's complaint in the present motion.
4
Under these circumstances, the Court finds no basis for conducting an inquiry into the
alleged ethical violations of an individual, Mr. Baker, who has not participated in this suit
in any fashion, whether as a litigant or as counsel. While Plaintiff appeals to Chambers v.
NASCO, Inc., 501 U.S. 32, 45-46, 111 S. Ct. 2123, 2133-34 (1991), as recognizing a
federal court's inherent power to impose sanctions against a party or attorney who has
engaged in bad-faith conduct, the courts have cautioned against the overly broad use of
this authority to police the activities of non-parties. In Helmac Products Corp. v. Roth
(Plastics) Corp., 150 F.R.D. 563, 566-67 (E.D. Mich. 1993), for example, the court deemed
it appropriate to sanction the individual owner and chief executive officer of the corporate
defendant for directing the destruction of documents responsive to the plaintiff's discovery
requests, reasoning that this individual was "closely tied to the litigation" and that his
actions "directly interfered with the conduct of trial." In so ruling, the court adopted a twopart standard for determining whether a non-party who is not subject to a court order may
be sanctioned under the court's inherent authority: the non-party "must (1) have a
substantial interest in the outcome of the litigation and (2) substantially participate in the
proceedings in which he interfered." Helmac Products, 150 F.R.D. at 568. The court
explained that "[t]his test will effectively limit the scope of the Court's inherent power to
sanction to those individuals who were either (1) parties, (2) subject to a court order, or (3)
real parties in interest." 150 F.R.D. at 568; see also In re VIII South Michigan Associates,
175 B.R. 976, 983-87 (Bankr. N.D. Ill. 1994) (discussing Helmac Products and other cases
in determining that "[t]he holding in Chambers . . . should not be extended to non-party
expert witnesses who have not appeared in court, testified in any proceeding, nor violated
a court order").
5
Applying these principles here, the Court concludes that the inherent authority
recognized by the Supreme Court in Chambers does not reach the conduct of Mr. Baker
in connection with the administrative proceeding initiated by the Defendant City to suspend
or revoke Plaintiff's license to operate a sexually-oriented business. First, Mr. Baker is not
a party to this suit, has not appeared on behalf of any party, and is not subject to any order
issued in these proceedings. Next, although Mr. Baker works in the City of Detroit Law
Department and is a colleague of the attorney, Mr. Gaabo, who is representing Defendants
in this suit, it cannot be said that he has any interest, substantial or otherwise, in the
outcome of this litigation, such that he could be deemed either a "real party in interest" to
this suit or a representative of such a party. Likewise, Mr. Baker has not participated in any
proceedings in the case before this Court, whether in an individual or representative
capacity. Accordingly, none of the factors discussed in Helmac Products are satisfied here,
nor has Plaintiff otherwise identified any considerations that would warrant this Court's
inquiry into the activities of a non-party that took place wholly outside these proceedings
and have no apparent bearing on the claims and issues raised in this case.
It bears emphasis, in closing, that other avenues are available to Plaintiff for seeking
relief from Mr. Baker's alleged ethical violation. Most notably, Plaintiff evidently has
invoked § 5-15-27(f) of the Detroit City Code to seek judicial review of Hearing Officer
Bowers' decision, and the state court that hears this appeal seemingly would be well
positioned to examine the conduct of counsel in the administrative proceeding under
review. Indeed, Plaintiff recently filed a transcript from a state court proceeding that
confirms this belief. (See Dkt. 34, 7/7/2017 State Court Hearing Tr.) This transcript reveals
that Plaintiff squarely raised its complaint of improper ex parte communication between Mr.
6
Baker and Hearing Officer Bowers, and that the state court (i) agreed that this
communication was improper, as it concerned a substantive matter rather than a clerical
error, but (ii) determined that no relief was warranted because the Hearing Officer's
amended decision reflected what he had intended all along, regardless of Mr. Baker's ex
parte communication — namely, a 180-day revocation of Plaintiff's sexually oriented
business license. (See id. at 4-8, 13.) This state court inquiry lends further support to the
Court's conclusion that this is not the proper forum for investigating Mr. Baker's alleged
ethical violation.
For these reasons,
The Court hereby DENIES Plaintiff's June 7, 2017 motion for an order to show cause
why Defendants should not be sanctioned for ex parte communications (Dkt. 27).
SO ORDERED.
s/Nancy G. Edmunds
Nancy G. Edmunds
United States District Judge
Dated: August 17, 2017
I hereby certify that a copy of the foregoing document was served upon counsel of
record on August 17, 2017, by electronic and/or ordinary mail.
s/Carol J. Bethel
Case Manager
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