Towers at Sunnyvale LLC v. Dallas Central Appraisal District et al

Filing 32

Memorandum Opinion and Order denying 22 Motion for Summary Judgment, filed by Towers at Sunnyvale LLC, granting 21 Motion for Summary Judgment filed by Appraisal Review Board, Dallas Central Appraisal District; Denying as moot 17 Motion to Strike Expert Witness. (see order for specifics) (Ordered by Judge Ed Kinkeade on 9/23/09) (tln)

IN THE UNITED STATES DISTRICT COURT N O R T H E R N DISTRICT OF TEXAS D A L L A S DIVISION
T O W E R S AT SUNNYVALE, LLC, P la in t if f , v. D A L L A S CENTRAL APPRAISAL D I S T R IC T and APPRAISAL REVIEW BO ARD , D efend ants. § § § § § § § § § § §

C ivil Action No. 3:08-CV-0735-K

M E M O R A N D U M OPINION AND ORDER
B e fo re the Court are (1) Defendants' Motion for Summary Judgment (doc. 21) and ( 2 ) Plaintiff's Motion for Summary Judgment (doc. 22). For the following reasons, on P la in t if f 's due process claims, the Court GRANTS Defendants' motion and DENIES P la in t if f 's motion. The Court declines to exercise supplemental over any remaining state la w claims Plaintiff may have. The Court DENIES as moot Plaintiff's Motion to Strike D e f e n d a n t s ' Expert Witnesses (doc. 17). I. F a c tu a l Background P la in tiff, Towers at Sunnyvale, LLC ("Plaintiff"), acquired the property at 224 S. C o llins Rd. (a/k/a State Highway 352) in June 2006. Plaintiff built a convenience store a n d gasoline facility on this property after receiving a permit. In December 2006, Plaintiff file d an application with the Texas Commission on Environmental Quality ("TCEQ") for a Use Determination of whether the property, or certain portions of it, were used to

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c o n tro l pollution, thereby entitling Plaintiff to a pollution control exemption under the T e x a s Tax Code. The Executive Director of the TCEQ issued a positive Use

D e t e rm i n a tio n letter on December 27, 2006 for certain portions of the facility and its e q u ip m e n t . This positive Use Determination was sent to Plaintiff and a copy to the Chief A p p ra is e r for Defendant Dallas County Appraisal District. F o r the year 2007, Plaintiff's property was valued at $1,065,280.00; Plaintiff was n o t given the pollution exemption by the Chief Appraiser. Plaintiff filed a protest, and on S ep tem b er 18, 2007, a hearing was held. Defendant Appraisal Review Board was aware o f the TCEQ's positive Use Determination. On October 18, 2007, Defendant Appraisal R e vie w Board issued its order denying the exemption. P la in t if f filed suit in state court on November 12, 2007. In its First Amended P e titio n ("Amended Petition") filed in state court, Plaintiff added claims under 42 U.S.C. § 1983 against Defendants, specifically claiming Defendants violated Plaintiff's due p r o c e s s rights. Plaintiff also added a claim under 42 U.S.C. § 1988 for attorneys' fees. D e f e n d a n t s then removed the case to this Court. I I. S u m m a r y Judgment Standard S u m m a r y judgment is appropriate when the pleadings, affidavits and other s u m m a ry judgment evidence show that no genuine issue of material fact exists and the m o v in g party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The moving party bears the burden of identifying th o s e portions of the record it believes demonstrate the absence of a genuine issue of

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m a te ri a l fact. Celotex, 477 U.S. at 322-25. Once a movant makes a properly supported m o tio n , the burden shifts to the nonmovant to show that summary judgment should not b e granted; the nonmovant may not rest upon allegations in the pleadings, but must s u p p o rt the response to the motion with summary judgment evidence showing the e x iste n ce of a genuine fact issue for trial. Id. at 321-25; Anderson v. Liberty Lobby, Inc., 477 U .S . 242, 255-57(1986). All evidence and reasonable inferences must be viewed in the ligh t most favorable to the nonmovant. United States v. Diebold, Inc., 369 U.S. 654, 655 (1 9 6 2 ). III. A n aly s is A. D u e Process Claims

I n its Amended Petition, Plaintiff makes due process claims under 42 U.S.C. § 1 9 8 3 . Section 1983 itself is not an origin of substantive rights, but instead acts as a v e h icle for enforcing federal rights secured elsewhere. Albright v. Oliver, 510 U.S. 266, 271 ( 1 9 9 4 ) ( q u o t in g Baker v. McCollan, 443 U.S. 137, 144 n. 3 (1979)). Plaintiff's Amended P e tit io n makes no reference to any constitutionally protected right, but instead merely re fe re n ce s section 1983 in relation to its due process violation claims. Plaintiff finally claim s a protected property interest under the Fourteenth Amendment in its summary ju d gm e n t briefing. Two claims which may be asserted under the due process clause of the F o u rtee n th Amendment through section 1983 are: (1) procedural due process claims w h ic h prohibit the deprivation of a protected right without due process or fair procedure; a n d (2) substantive due process claims which prohibit "certain arbitrary, wrongful

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g o v e rn m ent actions" irrespective of any procedures in place to guarantee fairness. Zinermon v. Burch, 494 U.S. 113, 124-25 (1990). P la in t if f clearly makes a substantive due process claim, asserting the Defendants a c te d "arbitrarily and capriciously" in denying the pollution control exemption. While the s u b s ta n tiv e due process claim is apparent to the Court, Plaintiff does not make clear w h e t h e r it asserts a claim for procedural due process violations against Defendants. P la in t if f merely makes one reference to a state court of appeals opinion which addresses "th e protection of procedural due process." But Plaintiff makes no actual allegations that its procedural due process rights were violated. The Court will liberally construe Plaintiff's A m e n d e d Petition to include both procedural and substantive due process claims. 1. P ro c e d u ra l Due Process

T h e Due Process Clause provides the guarantee of fair procedure related to a co n st itu tio n a lly protected interest. Id., 494 U.S. at 125. It is not the deprivation of a c o n s titu tio n a lly protected interest that is itself unconstitutional; rather, it is the d e p r iv a t io n of the interest without due process of law that is unconstitutional. Id. The c o lle c tio n of a tax equates to the deprivation of property; therefore, procedural safeguards m u s t be provided by the government to protect the property owner's due process rights. M cK esson Corp. v. Div. of Alcoholic Beverages & Tobacco, Dep't of Bus. Regulation of Florida, 496 U .S . 18, 36-37 (1990). Procedural due process requires notice and opportunity to be h e a rd . See Cohen v. City of Houston, 185 S.W.2d 450, 452 (Tex. Civ. App.­Galveston 1 9 4 5 ) . While due process dictates a taxpayer's right to be heard before a final assessment,

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it does not set forth the mechanics of such a review. ABT Galveston Ltd. Partnership v. G a lves ton Central Appraisal Dist., 137 S.W.3d 146, 155 (Tex. App.­Houston [1st Dist.] 20 04 ). T e x a s courts have held that, in tax cases, due process is satisfied if the taxpayer has a n opportunity to be heard before an assessment board at some stage of the proceedings. Id . The Tax Code provides for a specific review process for taxpayer protests. See TEX. TAX C ODE §§ 41.01, et seq. (Vernon 2008). The taxpayer may protest before the appraisal re v iew board such action as the denial of an exemption. TEX. TAX CODE § 41.41(4). At th e hearing before the appraisal review board, the taxpayer may present evidence and a rg u m e n t; then the appraisal review board determines the protest and issues its decision in a written order. TEX. TAX CODE §§ 41.45, 41.47. A taxpayer may then appeal the ap p raisal review board's decision to the district court for de novo review. TEX. TAX CODE § § 42.01, 42.23. The Texas Tax Code provides for due process because taxpayers have

a right to a trial de novo of the appraisal review board's decision in the district court. See K eg g ereis v. Dallas Cent. Appraisal Dist., 749 S.W.2d 516, 518 (Tex. App.­Dallas 1988); see a l so Lamar County Appraisal Dist. v. Campbell Soup Co., 93 S.W.3d 642, 648 (Tex. A p p .­ T e x a rk a n a 2002); see also Watson v. Robertson County Appraisal Review Bd., 795 S .W .2 d 307, 310-11 (Tex. App.­Waco 1990). T h e requirements for procedural due process present a very low threshold for D e f e n d a n t s to satisfy. The record before the Court establishes that Plaintiff did indeed a p p e a l the denial of its pollution control exemption to Defendant Appraisal Review Board,

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a n d that Plaintiff participated in this hearing. There is nothing in the record evidencing t h a t Plaintiff was not given the right to present evidence and argument at this hearing. F u rth e rm o re , Plaintiff had the opportunity, pursuant to the Tax Code, to appeal D efe n d an t Appraisal Review Board's written order to the district court for de novo review. T ex a s case law establishes that these procedural safeguards sufficiently protect the ta x p a y e r's procedural due process rights. See Keggereis, 749 S.W.2d at 518; Lamar County, 9 3 S.W.3d at 648; Watson, 795 S.W.2d at 310-11. T h e Court concludes procedural due process requirements have been satisfied. See L a m a r County, 93 S.W.3d at 648. 2. S u b s t a n t iv e Due Process

T h e Due Process Clause also protects against "certain arbitrary, wrongful g o v e rn m e n t actions `regardless of the fairness of the procedures used to implement them.'" Z in er m o n , 494 U.S. at 125 (quoting Daniels v. Williams, 474 U.S. 327, 331 (1986)); see S im i Inv. Co., Inc. v. Harris County, Tex., 236 F.3d 240, 249 (5th Cir. 2000)(substantive due p ro ce ss implicated where "government arbitrarily abuses its power to deprive individuals o f constitutionally protected rights."). Unlike procedural due process which requires c e rt a in procedures be in place when the government deprives a person of a protected lib e r ty , substantive due process is implicated by the act itself of depriving someone of a p ro t ec te d right without any reasonable justification in terms of a legitimate governmental o b je ct iv e . County of Sacramento v. Lewis, 523 U.S. 833, 846 (1998). When the specific act o f a governmental employee is at issue, only the most egregious official conduct equates

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t o an arbitrary action in the due process context. Id. (criteria for determining what is " f a ta lly arbitrary" depends upon whether legislation or the act of a governmental employee is at issue). Such a standard operates to prevent governmental officials from abusing their p o w e r or using it in an oppressive manner. Id. These governmental actions must "shock th e conscience" to violate substantive due process. Id. at 846-47(citing Rochin v. California, 3 4 2 U.S. 165, 172-73 (1952)); Collins v. Harker Heights, 503 U.S. 115, 128 (1992)(the g o v e rn m e n ta l employee's action must be able to be characterized as "arbitrary, or c o n s c ie n c e shocking, in a constitutional sense"). P la in t if f maintains that Defendants violated Plaintiff's substantive due process rig h t s in denying the pollution control exemption in spite of the TCEQ's positive Use D e te rm in a tio n . To establish a substantive due process violation, Plaintiff must prove: (1) it had a constitutionally protected interest in the property; and (2) the government d e p r iv e d Plaintiff of that interest capriciously and arbitrarily. See Simi Inv., 236 F.3d at 2 4 9 . The Court concludes that Plaintiff has initially failed to establish that it has a c o n s t it u t io n a lly protected property interest for purposes of substantive due process. In its m o t io n , Plaintiff makes the argument that money is a well-established protected property in t e r es t and the TCEQ's positive Use Determination "creates a right to money." In s u p p o r t of its proposition, Plaintiff provides a block quote from a Fifth Circuit case, M a h on e v. Addicks Util. Dist. of Harris County, 836 F.2d 921 (5th Cir. 1988), which defines a property interest as having a legitimate claim of entitlement to a benefit. Plaintiff, h o w e v e r, fails to expound on the Fifth Circuit case and quotation to permit the Court to

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d ra w the conclusion that the positive Use Determination vests Plaintiff with a property in t e r es t . Plaintiff does not provide the Court with any support, other than this one block q u o t a t io n , for its claim that the tax exemption allegedly created by the positive Use D e t e rm i n a t io n creates a right to money that thereby implicates a property interest p ro te c te d by due process. The Tax Code itself requires a taxpayer seeking an exemption, in clu d in g a pollution control exemption permitted under section 11.31, to apply for the e x em p tio n . TEX. TAX CODE § 11.43(a) (statutory language specifically excludes nine a u t h o riz e d exemptions from the application process, but section 11.31 is not one of them). T h e statutory language then lends credence to the argument that the positive Use D e te rm in a tio n itself does not create a right to money because the taxpayer may not rely s o le ly upon this document for the tax exemption, but instead must apply for the e x e m p t io n with the appropriate appraisal district. T h e United States Supreme Court has recognized that substantive due process has b e e n implicated in cases involving marriage, family, procreation, and the right to bodily in te g rity . Albright, 510 U.S. at 272 (citing Planned Parenthood of Southeastern Pa. v. Casey, 5 0 5 U.S. 833, 847-849 (1992) for list of cases where substantive due process rights have b e e n recognized). Plaintiff is asking this Court to make a leap as it relates to established p rop erty interests within the ambit of substantive due process without providing the Court w ith any sufficient basis for doing so. The Supreme Court has noted on more than one o cc a s io n its reluctance to expand substantive due process "because the guideposts for re s p o n s i b le decisionmaking in this unchartered area are scarce and open-ended." Collins,

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5 0 3 U.S. at 125; see also Albright, 510 U.S. at 271-72. The Supreme Court in Collins went o n to say that "the utmost care" must be used when "asked to break new ground in this f ie ld ." Id. Plaintiff has not provided sufficient support for the Court to agree with P la in t if f 's assertion. The Court cannot conclude that the TCEQ's positive Use

D e te rm in a tio n alone vests Plaintiff with a protected property interest in the area of s u b s t a n t iv e due process. E v e n if the Court were to find that Plaintiff had a protected property interest here, P la in tiff would fail on the second element of establishing Defendants acted arbitrarily and ca p ricio u sly. The record does not demonstrate that Defendants acted in an arbitrary m a n n e r such that it shocks the conscience of this Court in a constitutional sense. See C o ll i n s , 503 U.S. at 128; Zinermon, 494 U.S. at 125; see also Simi Inv., 236 F.3d at 249. P la in t if f makes a reference in its Amended Petition that the Chief Appraiser failed to a p p e a l the TCEQ's positive Use Determination within twenty days as provided for in s e ct io n 11.31(e). TEX. TAX CODE § 11.31(e). (Plaintiff does not, however, make this a r gu m e n t in its motion for summary judgment.) The record does establish that the Chief A p p ra ise r did not, in fact, appeal the TCEQ's positive Use Determination letter within tw e n ty days after receipt of the same. The Court does not comment on whether this a c tio n violates the Tax Code's provisions related to TCEQ's use determinations and any ap p ea l related thereto. But the Court notes that Defendant Appraisal Review Board ig n o rin g the evidence of the TCEQ's positive Use Determination which was before them a t the hearing is so strong, that their denial of the exemption almost rises to the level of

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b ein g arbitrary and capricious. But the Court must conclude that the record does not e s ta b lis h that Defendants acted arbitrarily in such a way to "shock the conscience" of the C o u rt in a constitutional sense. See Collins, 503 U.S. at 128; Rochin, 342 U.S. at 172-73. 3. A t to r n e y s ' Fees

P la in t if f seeks attorneys' fees pursuant to 42 U.S.C. § 1988. Section 1988 provides fo r attorneys' fees in any action under section 1983. The Court concluded Plaintiff's s e c tio n 1983 claims fail. Accordingly, the Court does not award attorneys' fees under s e c tio n 1988. 4. C o n clu s io n

S u m m a r y judgment is appropriate on Plaintiff's due process claims against D e fe n d a n ts as well as Plaintiff's claim for attorneys' fees under section 1988. B. S ta te Law Claims

W h en federal claims are dismissed before trial and only state law claims remain, the fa c to rs considered under the supplemental jurisdiction doctrine weigh heavily in favor of d e c lin i n g jurisdiction; therefore, the federal court should usually decline to exercise ju risd ict io n over the remaining claims and send them to state court. Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 350 (1988); see Parker & Parsley Petroleum Co. v. Dresser Ind., 972 F .2 d 580, 585 (5th Cir. 1992)("general rule is to dismiss state claims when the federal c la im s to which they are pendent are dismissed."). The Court has already concluded that s u m m a r y judgment is appropriate on Plaintiff's federal claims for section 1983 due process v io la tio n s and attorneys' fees under section 1988. However, as the Court previously

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n o t e d , while the conclusion is that no due process violations occurred, the Defendants' co n d u ct almost rises to the level of a substantive due process violation. The record ind icates that Defendants, beginning with the Chief Appraiser, ignored the evidence before th em of the positive Use Determination. While Defendants make an argument that the a d d re s s e s on the positive Use Determination compared with the application Plaintiff filed w ith Defendant Dallas Central Appraisal District conflict, the Court views this as d is in g en u o u s . Plaintiff's summary judgment evidence indicates that Defendant Dallas C e n tra l Appraisal District was aware, based on its own records, that this one piece of p r o p e r t y was listed with more than one physical address. P la in t iff's Amended Petition is not clear as to the claims, federal or state, that P laintiff asserts against Defendants. In its briefing, however, Plaintiff moves for summary ju d g m e n t on the grounds of due process violations and that the TCEQ's positive Use D e t e rm in a t io n is a valid final order under the Texas Tax Code and is not subject to c o lla te ra l attack. Defendants ignored the appellate procedure under section

1 1 .3 1 ( e ) p ro v id ed to the taxpayer or the chief appraiser to appeal an unsatisfactory TCEQ u s e determination. The Chief Appraiser then denied Plaintiff the exemption in spite of s e c tio n 11.31(i) which directs the chief appraiser to accept a final determination of the T C E Q as conclusive evidence that the property is pollution control property. On

P la in t if f 's appeal of the Chief Appraiser's denial, Defendant Appraisal Review Board then ru led in agreement with the Chief Appraiser, again denying Plaintiff the exemption. It is o b v io u s to this federal court that these actions by the Defendants need to be dealt with

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b y the state court. Therefore, to the extent that Plaintiff makes a claim related to the T C E Q 's Use Determination and the finality thereof, this would be subject to Texas state la w . A c c o r d i n g ly , if there remain any state law issues related to the finality of the Use D e te rm in a tio n , the Court declines to exercise supplemental jurisdiction, instead deferring to the laws and judicial processes of the State of Texas. 28 U.S.C. § 1367(c)(3). This C o u rt is certain that the state trial court will deal with the issues in a fashion that reco gn izes that this may not be a substantive due process violation, but requires severe s c ru t in y by the trial court. S O ORDERED. S ig n ed September 23 rd, 2009.

_ _ _ __ _ _ __ _ _ __ _ _ __ _ _ __ _ _ __ _ _ __ _ _ __ _ _ __ _ E D KINKEADE U N I T E D STATES DISTRICT JUDGE

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