Fluharty et al v. City of Clarksburg

Filing 73

MEMORANDUM OPINION AND ORDER DENYING DEFENDANTS' MOTION TO DISMISS SECOND AMENDED COMPLAINT: it is ORDERED that Defendants' 67 Motion to Dismiss Second Amended Complaint is hereby DENIED. Signed by District Judge Irene M. Keeley on 5/14/15. (cnd)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
THOMAS H. FLUHARTY, in his
official capacity as Bankruptcy
Trustee, THOMAS J. JACQUEZ,
DIANA R. JACQUEZ,
Plaintiffs,
v.

//

CIVIL ACTION NO. 1:14CV27
(Judge Keeley)

CITY OF CLARKSBURG, JAMES C. HUNT,
MARGARET H. BAILEY, MARTIN G. HOWE,
ADAM BARBERIO, H. KEITH KESLING,
JONATHAN R. DAVIS,
Defendants.
MEMORANDUM OPINION AND ORDER DENYING DEFENDANTS’
MOTION TO DISMISS SECOND AMENDED COMPLAINT [DKT. NO. 67]
Pending before the Court is the motion to dismiss the second
amended complaint (dkt. no. 67) filed by the defendants, the City
of Clarksburg (“Clarksburg”), James C. Hunt (“Hunt”), Margaret H.
Bailey

(“Bailey”),

Martin

G.

Howe

(“Howe”),

Adam

Barberio

(“Barberio”), H. Keith Kesling (“Kesling”), and Jonathan R. Davis
(“Davis”). For the following reasons, the Court DENIES the motion.
I. PROCEDURAL BACKGROUND
On May 31, 2013, Thomas J. Jacquez and Diana R. Jacquez
(collectively, the “Jacquezes”) filed a petition for bankruptcy,
which identified this lawsuit as an asset.

Thomas H. Fluharty

(“Fluharty”), a named plaintiff in this matter, was appointed by
the United States Bankruptcy Court as the Jacquezes’ bankruptcy
trustee and filed this case in February 2014.

FLUHARTY, ET AL. v. CITY OF CLARKSBURG, ET AL.

1:14CV27

MEMORANDUM OPINION AND ORDER DENYING
DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT
In August 2014, the parties sought a stay to permit them to
try

and

settle

their

dispute.

The

Court

granted

the

stay,

settlement discussions ensued, but ultimately were unsuccessful.
Fluharty then filed a second amended complaint, which asserted a 42
U.S.C. § 19831 claim under theories of municipal liability (“Count
One”), official, individual, and supervisory liability (“Count
Two”), and conspiracy liability (“Count Three”).

He also alleged

a count for racketeering liability under the Racketeer Influenced
and Corrupt Organizations Act (“RICO”), 18 U.S.C. §§ 1962(c) and
1964(c) (“Count Four”), and sought a declaratory judgment under 28
U.S.C. § 2201 (“Count Five”).
After the Court lifted the stay in the case, the defendants
moved to dismiss the second amended complaint pursuant to Fed. R.
Civ. P. 12(b)(6). In their motion, they contend (1) that the
Jacquezes failed to exhaust their administrative remedies, and (2)
that Fluharty’s claims are time-barred by both the statute of
limitations and also the doctrine of laches.2
1

Specifically, Fluharty asserts violations
Fourth, Fifth, and Fourteenth Amendment rights.
2

of

the

Jacquezes’

The defendants initially argued that Fluharty lacks standing to
assert any claims on behalf of other property owners, and that any claims
arising from certain criminal statutes are not cognizable.
In his
response memorandum, however, Fluharty explains that “no claims are being
asserted on behalf of others or for causes of action under the federal
criminal statutes cited as predicate acts . . . .” (Dkt. No. 69 at 16).

2

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MEMORANDUM OPINION AND ORDER DENYING
DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT
II. FACTUAL BACKGROUND
The Court construes the facts relevant to the defendants’
motion in the light most favorable to the non-movant, Fluharty.
See Kendall v. Balcerzak, 650 F.3d 515, 522 (4th Cir. 2011).
Jacquezes

owned

numerous

properties

in

Harrison

County,

The
West

Virginia, which they rented to “low income, elderly, and disabled
tenants.”

(Dkt. No. 65 at 4).

The dispute in this case arises

from the alleged efforts of city officials in Clarksburg and
management employees to circumvent the law in order to demolish
residential properties such as those owned by the Jacquezes.
Fluharty alleges that Clarksburg’s management employees stood to
profit –- financially and politically -- from their purportedly
unlawful conduct.
In 2000, the West Virginia Housing Development Fund (“WVHDF”)
allocated funding for its Demolition Loan Program (“DLP”), a
program

designed

to

“provide

municipalities

with

financial

resources to demolish older, residential rental properties, many of
which were being subsidized under various HUD programs.” Id. at 13
(internal quotation marks omitted).

The DLP explicitly recognized

that “[h]omes which remain owner-occupied and in good condition
suffer from lower appraisal values due to the condition of their
neighbors.”

Id.
3

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MEMORANDUM OPINION AND ORDER DENYING
DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT
Hunt, who was an elected member of the City of Clarksburg
Council (the “City Council”) until 2012, was also a DLP area
manager responsible for projects in the City of Clarksburg.

As

such, he informed other public officials in the City of Clarksburg
about the DLP and “the availability of public funds to demolish
residential rental properties.”
In

September

2000,

Hunt

Id. at 15.
worked

with

Howe,

Clarksburg’s

manager, to apply to the WVHDF for a $250,000 loan for the
demolition of fifty homes under the DLP.

In December 2000, the

WVHDF awarded Clarksburg $150,000 for the project.

Since then,

with the assistance of Hunt, Clarksburg has applied for five
additional

DLP

loans,

and

has

received

loan

awards

totaling

$1,450,000.
Fluharty alleges that “Hunt benefitted personally as a result
of his public employment as WVHDF’s Area Manager for Clarksburg and
his direct involvement as Defendant Clarksburg’s elected public
official and member of its council.”

Id. at 25-26.

He further

alleges that “Hunt personally benefitted from his public employment
and elected position by promoting himself as an expert consultant
for hire to other public entities considering the use of public
funds for urban renewal projects and demolition of dilapidated
residential properties.”

Id. at 26.
4

Finally, he alleges that

FLUHARTY, ET AL. v. CITY OF CLARKSBURG, ET AL.

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MEMORANDUM OPINION AND ORDER DENYING
DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT
“Hunt benefited [sic] others by directing and encouraging official
actions

be

taken

by

Defendant

Clarksburg

in

its

continued

participation in WVHDF’s Demolition Loan Program and the demolition
of hundreds of residential properties.”
In

June

2001,

Clarksburg

was

Id.

“unable

to

meet

the

loan

requirements imposed upon it by the WVHDF,”3 and requested the
assistance of the Clarksburg Urban Renewal Authority (“CURA”).4
Id. at 16.

CURA is a public body that was created by the City

Council in 1961 pursuant to West Virginia’s Urban Renewal Authority
Law, W. Va. Code § 16-18-1, et seq.
Urban

Renewal

Plan

for

Demolition

CURA, in turn, created the
of

Dilapidated

Residential

Structures for the City of Clarksburg (the “Urban Renewal Plan”).
Fluharty contends that the Urban Renewal Plan is illegal
because it fails to identify “the area of the urban renewal
project,” in accordance with state statute.5
(internal quotation marks omitted).

(Dkt. No. 65 at 17)

He asserts that it “merely

identified the project area as including ‘scattered sites located
3

Fluharty’s second amended
requirements were too stringent.

complaint

does

not

specify

which

4

Although Fluharty’s second amended complaint says little regarding
the specifics of the arrangement between the City of Clarksburg and CURA,
it does allege that the City of Clarksburg assigned the obligation on the
loan to CURA.
5

The statute cited by Fluharty is W. Va. Code § 16-18-1, et seq.

5

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MEMORANDUM OPINION AND ORDER DENYING
DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT
within the incorporated area of Clarksburg, at which dilapidated
residential structures exist, which sites have been declared by
Clarksburg to be blighted areas in need of redevelopment.’”

Id.

He further alleges that Barberio, Clarksburg’s code enforcement
officer, as well as Hunt and Howe, “knew, or should have known,
that CURA’s ad hoc urban renewal plan was unlawful.”

Id.

Fluharty also contends that Clarksburg and the City Council
unlawfully amended the City Ordinances by: (1) authorizing Howe,
rather than the City Council, to appoint members to the Building
Code Appeals Board (“BCAB”); (2) reducing the membership of the
BCAB from five to three members; (3) granting building inspectors
unreasonable right to enter and inspect dwellings; (4) blocking the
opportunity for property owners to repair their properties while
under a demolition order; and (5) removing the Clarksburg’s notice
requirement of its right to file a lien against any property
subject to code enforcement action. Further, Clarksburg’s building
code officials and building inspectors were not trained, qualified,
or certified in accordance with W. Va. Code § 87-7-1, et seq.,

a

fact Fluharty contends the defendants knew or should have known.
Finally, Fluharty contends that, between April 2010 and March
2013, Barberio and his two subordinate building code officials,
Kesling and Davis, ordered the demolition of, or scheduled for
6

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MEMORANDUM OPINION AND ORDER DENYING
DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT
demolition, eight separate properties owned by the Jacquezes.6
Allegedly, these actions violated the West Virginia Building Code,
and the

defendants

relied

on

false

and

misleading

claims

of

building code violations to accomplish the demolition.
Fluharty also alleges that Bailey, Clarksburg’s then mayor,
sanctioned this conduct when she signed a resolution “authorizing
and empowering Defendant Clarksburg’s officials and employees to
continue participating in WVHDF’s Demolition Loan Program and to
receive its loan award in the amount of $400,000.”
24).

(Dkt. No. 65 at

Moreover, Bailey “personally benefitt[ed]” from certain

demolitions. (Dkt. No. 65 at 25).
In December 2013 and January 2014, the Jacquezes and several
other

affected

property

owners

filed

complaints

defendants with the West Virginia Fire Commission.

against

the

In June 2014,

the Fire Commission issued its own “Consolidated Complaint and
Notice of Hearing” against several defendants, including the City
of

Clarksburg,

Barberio,

Kesling,

and

Davis,7

based

on

its

determination that these defendants “knowingly utilized an unlawful

6

Fluharty appealed one demolition order to the three-member BCAB,
which voted 2-1 to uphold the order.
7

Fluharty has adopted the Fire Commission’s allegations of fact and
conclusions of law in his second amended complaint. (Dkt. No. 65 at 27).

7

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MEMORANDUM OPINION AND ORDER DENYING
DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT
building code, through the actions of unlawful [building code
officials], to selectively target specific properties and property
owners, to divest them of real and personal property without
adequate due process of law.”

(Dkt. No. 65-1 at 5).

Additionally,

the defendants “utilized the Clarksburg building code program to
directly and/or indirectly enrich themselves and others through the
use of public funds and the unlawful building code program.”

Id.

II. STANDARD OF REVIEW
In reviewing the sufficiency of a complaint, a district court
“‘must accept as true all of the factual allegations contained in
the complaint.’”

Anderson v. Sara Lee Corp., 508 F.3d 181, 188

(4th Cir. 2007) (quoting Erickson v. Pardus, 551 U.S. 89, 94
(2007)). However, while a complaint does not need detailed factual
allegations, a plaintiff’s obligation to provide the grounds of his
entitlement

to

relief

requires

more

than

mere

labels

and

conclusions, and a formulaic recitation of the elements of a cause
of action will not do.
555 (2007).

Bell Atl. Corp. v. Twombly, 550 U.S. 544,

Indeed, courts “are not bound to accept as true a

legal conclusion couched as a factual allegation.”

Papasan v.

Allain, 478 U.S. 265, 286 (1986). In considering whether the facts
alleged are sufficient, “a complaint must contain ‘enough facts to

8

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MEMORANDUM OPINION AND ORDER DENYING
DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT
state a claim to relief that is plausible on its face.’”

Anderson,

508 F.3d at 188 (quoting Twombly, 550 U.S. at 547).
“A motion to dismiss under Rule 12(b)(6) tests the sufficiency
of

a

complaint;

importantly,

it

does

not

resolve

contests

surrounding the facts, the merits of a claim, or the applicability
of defenses.”

Republican Party of N.C. v. Martin, 980 F.2d 943,

952 (4th Cir. 1992).

“But in the relatively rare circumstances

where facts sufficient to rule on an affirmative defense are
alleged in the complaint, the defense may be reached by a motion to
dismiss filed under Rule 12(b)(6),” so long as “all facts necessary
to the affirmative defense ‘clearly appear[] on the face of the
complaint.’” Goodman v. Praxair, Inc., 494 F.3d 458, 464 (4th Cir.
2007) (quoting Richmond, Fredericksburg & Potomac R.R. v. Forst, 4
F.3d 244, 250 (4th Cir. 1993)).
III. DISCUSSION
A.

Statute of Limitations/Laches
In their motion to dismiss, the defendants argue that the

majority

of

Fluharty’s

properties,

are

limitations

prescribed

claims,

time-barred
by

W.

as

under
Va.

9

they
the

Code §

relate
two-year

to

certain

statute

55-2-12(a),

and

of
the

FLUHARTY, ET AL. v. CITY OF CLARKSBURG, ET AL.

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MEMORANDUM OPINION AND ORDER DENYING
DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT
doctrine of laches,8 which are both affirmative defenses identified
in Fed. R. Civ. P. 8(c).

As noted above, “a motion to dismiss

filed under Federal Rule of Procedure 12(b)(6) . . . generally
cannot reach the merits of an affirmative defense, such as the
defense that the plaintiff’s claim is time-barred.”

Goodman, 494

F.3d at 464.
This

case does

not

present

one

of

the

“relatively

circumstances” described in Goodman, 494 F.3d at 464.
to

the

defendants’

contends that

the

statute
discovery

of

limitations

rule,

as

In response

argument,

well

as

rare

the

Fluharty

continuing

violation and fraudulent concealment doctrines, preclude dismissal.
(Dkt.

No.

69

at

11).

Regarding

laches,

he

argues

that

the

defendants are unable to establish either undue delay or prejudice.
In the Court’s view, these issues will require further evidentiary
development before it may properly rule on them.

8

Notably, laches is typically a state law doctrine that applies to
claims in equity. See Dunn v. Rockwell, 689 S.E.2d 255, 267 n.11 (W. Va.
2009). Notwithstanding, the defendants contend that “the doctrine of
laches precludes Plaintiffs from asserting any claims associated with the
demolition of the property at 1513 and 1515 Hamill Avenue or 661 Mulberry
Avenue.” (Dkt. No. 68 at 14). Because Fluharty seeks damages under §
1983 and RICO, it is not clear that West Virginia’s laches defense could
bar his claims in the manner argued by the defendants.

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MEMORANDUM OPINION AND ORDER DENYING
DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT
B.

Failure to Follow Proper Appellate Procedure
Relying

on

Article

1720.05

of

the

City

of

Clarksburg’s

municipal code, the defendants also contend that the Jacquezes were
required to appeal any building code enforcement decision to the
BCAB

before

filing

suit.

Had

they

received

an

unfavorable

administrative ruling, the defendants contend the Jacquezes then
were required to file a petition for a writ of certiorari with the
Circuit Court of Harrison County for review of the BCAB’s decision.
See W. Va. Code § 53-3-2.

Because Fluharty, as the bankruptcy

trustee, sued directly in federal court, the defendants argue that
“all such

causes

of action

fail

as

a

matter

of

law

as

the

[Jacquezes] never utilized the proper avenues to challenge said
actions.”

(Dkt. No. 68 at 5).

Well-settled case law directly contradicts the defendants’
argument.

In Patsy v. Bd. of Regents of State of Fla., 457 U.S.

496, 516 (1982), the Supreme Court of the United States reaffirmed
its prior holding that “exhaustion of state administrative remedies
should not be required as a prerequisite to bringing an action
pursuant to § 1983.”

See also Steffel v. Thompson, 415 U.S. 452,

472-73 (1974); McNeese v. Bd. of Ed. for Cmty. Unit Sch. Dist. 187,
Cahokia, Ill., 373 U.S. 668, 671 (1963); Monroe v. Pape, 365 U.S.
167, 183 (1961)).

Nor do land use cases such as this one present
11

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MEMORANDUM OPINION AND ORDER DENYING
DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT
an exception to this rule.

See Front Royal & Warren Cnty. Indus.

Park Corp v. Town of Front Royal, Va., 135 F.3d 275, 283 n.3 (4th
Cir. 1998); Timmons v. Andrews, 538 F.2d 584, 586 (4th Cir. 1976).
The defendants’ reliance on Bess v. Kanawha Cnty. Bd. of
Educ., No. 2:08CV1020, 2009 WL 3062974 (S.D.W. Va. Sept. 17, 2009),
to argue otherwise is misplaced.

There, Judge Goodwin recognized

that a § 1983 claim that could have been brought under the
Individuals with Disabilities Education Act (“IDEA”) was subject to
exhaustion. See Bess, 2009 WL 3062974 at *4.

This was because,

“under the IDEA, parents asserting a violation of the IDEA must
first request a due process hearing.”

MM ex rel. DM v. Sch. Dist.

of Greenville Cnty., 303 F.3d 523, 535-36 (4th Cir. 2002) (citing
20 U.S.C. § 1415(f)).

Bess merely applies a rule that requires

exhaustion of all available federal administrative remedies as a
prerequisite to a § 1983 action.

See Alexandria Resident Council,

Inc. v. Alexandria Redev. & Hous. Auth., 11 Fed. App’x 283, 286-87
(4th Cir. 2001) (per curiam) (recognizing that exhaustion is not
required with respect to state administrative remedies, but is
required

in

available).
any

federal

cases

where

federal

administrative

remedies

are

Here, because the defendants have not proposed that
administrative

remedies

were

Jacquezes, the holding in Bess is inapposite.
12

available

to

the

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MEMORANDUM OPINION AND ORDER DENYING
DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT
Finally, any argument that Fluharty’s RICO claim is barred by
the Jacquezes’ purported failure to exhaust state remedies is
without merit. Courts have consistently rejected this contention
out of hand.

See Glickstein v. Sun Bank/Miami, N.A., 922 F.2d 666,

674 (11th Cir. 1991) (“The proposition that state ‘exhaustion’
rules could bar the federal RICO claims is not one that requires
much discussion.”); Dickson v. Chicago Allied Warehouses, Inc., No
90C6161,

1991

WL

60571,

at

*2

(N.D.

Ill.

Apr.

15,

1991)

(“Plaintiffs correctly observe that there is no requirement that
state remedies be exhausted before a RICO claim may be brought.”);
and Gunther v. Dinger, 547 F. Supp. 25, 27 (S.D.N.Y. 1982) (“The
argument is frivolous on its face.”).
IV. CONCLUSION
After carefully considering the issues argued by the parties,
for the reasons discussed, the Court DENIES the defendants’ motion
to dismiss the second amended complaint.
It is so ORDERED.
The

Court

directs

the

Clerk

to transmit

copies

of

this

Memorandum Opinion and Order to counsel of record.
DATED: May 14, 2015.
/s/ Irene M. Keeley
IRENE M. KEELEY
UNITED STATES DISTRICT JUDGE
13