Hall v. City of Clarksburg et al
Filing
189
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS' MOTIONS FOR SUMMARY JUDGMENT, DENYING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT, AND DISMISSING CASE WITH PREJUDICE: It is ORDERED that the Court GRANTS Defendants' 121 , 123 , 125 , 127 , 129 , 131 , 133 and 135 Motions for Summary Judgment, DENIES Plaintiff's 137 Motion for Summary Judgment and DISMISSES CASE WITH PREJUDICE. The Clerk is DIRECTED to enter a separate judgment order. Signed by District Judge Irene M. Keeley on 9/30/16. (cnd)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
GREGORY G. HALL,
Plaintiff,
v.
//
CIVIL ACTION NO. 1:14CV90
(Judge Keeley)
CITY OF CLARKSBURG, a
municipal corporation and
political subdivision,
MARTIN G. HOWE, JAMES C. HUNT,
RALPH PEDERSEN, MARGARET BAILEY,
ADAM BARBERIO, H. KEITH KESLING,
and JONATHAN R. DAVIS,
Defendants.
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS’ MOTIONS
FOR SUMMARY JUDGMENT [DKT. NOS. 121, 123, 125, 127, 129,
131, 133, AND 135], DENYING PLAINTIFF’S MOTION FOR SUMMARY
JUDGMENT [DKT. NO. 137], AND DISMISSING CASE WITH PREJUDICE
On September 6, 2015, the Court heard oral argument on the
parties’ competing motions for summary judgment. In accord with the
reasons
stated
on
the
record,
the
Court
GRANTS
all
of
the
defendants’ motions for summary judgment (dkt. nos. 121. 123. 125.
127, 129, 131, 133, and 135), and DENIES the plaintiff’s motion for
summary judgment (dkt. no. 137).
I. BACKGROUND
A.
Factual Background
Gregory G. Hall (“Hall”) was involved in real estate investing
within West Virginia and, at one time, owned numerous properties in
Harrison County. His complaint asserted that he rented these
properties to “low income, elderly and disabled tenants.” (Dkt. No.
HALL V. CITY OF CLARKSBURG, ET AL.
1:14CV90
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS’ MOTIONS
FOR SUMMARY JUDGMENT [DKT. NOS. 121, 123, 125, 127, 129,
131, 133, AND 135], DENYING PLAINTIFF’S MOTION FOR SUMMARY
JUDGMENT [DKT. NO. 137], AND DISMISSING CASE WITH PREJUDICE
35 at 4). The dispute in this case arises from the efforts of the
City
of
Clarksburg
(“City”)
and
its
management
employees
to
allegedly circumvent the law in order to demolish residential
properties such as those owned by Hall. Hall further alleged that
the City’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”), which
was designed to “provide municipalities with financial resources to
demolish older, residential rental properties, many of which were
being subsidized under various HUD programs.” (Dkt. No. 35 at 10)
(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.” (Dkt. No. 35 at 10).
James C. Hunt (“Hunt”), who was an elected member of the City
Council until 2012, was also a DLP area manager responsible for
projects in the City. As such, he informed other City officials
about the DLP and “the availability of public funds to demolish
residential rental properties.” (Dkt. No. 35 at 12).
2
HALL V. CITY OF CLARKSBURG, ET AL.
1:14CV90
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS’ MOTIONS
FOR SUMMARY JUDGMENT [DKT. NOS. 121, 123, 125, 127, 129,
131, 133, AND 135], DENYING PLAINTIFF’S MOTION FOR SUMMARY
JUDGMENT [DKT. NO. 137], AND DISMISSING CASE WITH PREJUDICE
In September 2000, Hunt worked with City Manager Martin G.
Howe (“Howe”) 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
the
City
$150,000
for
the
project.
With
the
assistance of Hunt, the City applied for five additional DLP loans
and received loan awards totaling $1,450,000. Hall has alleged that
Hunt benefitted personally from his involvement with the WVHDF, his
position as an elected official, and from his membership on the
City Council. (Dkt. No. 35 at 19). He has further alleged that Hunt
personally benefitted by promoting himself as an expert consultant
to
other
public
entities
contemplating
similar
urban
renewal
projects. (Dkt. No. 35 at 19).
In
June
2001,
the
City
was
“unable
to
meet
the
loan
requirements imposed upon it by the WVHDF,”1 and requested the
assistance of the Clarksburg Urban Renewal Authority (“CURA”).2
CURA is a public body that the City Council created in 1961,
pursuant to West Virginia’s Urban Renewal Authority Law, W. Va.
1
Hall’s amended complaint does not specify which requirements
were too stringent.
2
Although Hall’s amended complaint says little regarding the
specifics of the arrangement between the City and CURA, it does
allege that the City assigned the obligation on the loan to CURA.
3
HALL V. CITY OF CLARKSBURG, ET AL.
1:14CV90
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS’ MOTIONS
FOR SUMMARY JUDGMENT [DKT. NOS. 121, 123, 125, 127, 129,
131, 133, AND 135], DENYING PLAINTIFF’S MOTION FOR SUMMARY
JUDGMENT [DKT. NO. 137], AND DISMISSING CASE WITH PREJUDICE
Code § 16-18-1, et seq.
CURA, in turn, created the Urban Renewal
Plan for Demolition of Dilapidated Residential Structures for the
City of Clarksburg (the “Urban Renewal Plan”).
Hall has alleged that the Urban Renewal Plan was illegal
because it failed to identify “the area of the urban renewal
project” in accordance with state statute.3 (Dkt. No. 35 at 13)
(internal quotation marks omitted). Rather, he contends that it
“merely identified the project area as including ‘scattered sites
located 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.’” (Dkt. No. 35 at 13). Furthermore, Adam Barberio
(“Barberio”), the City’s code enforcement officer, as well as Hunt
and Howe, allegedly “knew, or should have known, that CURA’s ad hoc
urban renewal plan was unlawful.” (Dkt. No. 35 at 13).
Hall also has alleged that the City 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
3
The statute cited by Hall is W. Va. Code § 16-18-1, et seq.
4
HALL V. CITY OF CLARKSBURG, ET AL.
1:14CV90
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS’ MOTIONS
FOR SUMMARY JUDGMENT [DKT. NOS. 121, 123, 125, 127, 129,
131, 133, AND 135], DENYING PLAINTIFF’S MOTION FOR SUMMARY
JUDGMENT [DKT. NO. 137], AND DISMISSING CASE WITH PREJUDICE
BCAB from five to three members; (3) granting building inspectors
unreasonable right of entry and inspection to dwellings; (4)
blocking the opportunity for property owners to repair their
properties while under a demolition order; and (5) removing the
City’s notice requirement of its right to file a lien against any
property subject to code enforcement action.
According to Hall’s amended complaint, the City’s building
code officials and building inspectors were not trained, qualified,
or certified in accordance with W. Va. Code § 87-7-1, et seq.
Moreover,
the
(“Bailey”),
City,
H.
Hunt,
Howe,
Keith
Kesling
Barberio,
(“Kesling”),
Margaret
Jonathon
Bailey
R.
Davis
(“Davis”), and Ralph Pedersen (“Pedersen”)4 allegedly all knew or
should have known of this fact. Furthermore, between July 2006 and
August
2013,
Barberio
and
his
two
subordinate
building
code
officials, Kesling and Davis, allegedly ordered or scheduled the
demolition of properties Hall owned at ten separate addresses.
According
to
Hall,
these
actions
violated
the
West
Virginia
Building Code, and the defendants allegedly relied on false and
4
Pedersen was a WVHDF employee and one of three appointed
members of the BCAB.
5
HALL V. CITY OF CLARKSBURG, ET AL.
1:14CV90
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS’ MOTIONS
FOR SUMMARY JUDGMENT [DKT. NOS. 121, 123, 125, 127, 129,
131, 133, AND 135], DENYING PLAINTIFF’S MOTION FOR SUMMARY
JUDGMENT [DKT. NO. 137], AND DISMISSING CASE WITH PREJUDICE
misleading claims of building code violations to accomplish the
demolition.
Finally, Hall contends that all of this allegedly unlawful
conduct was sanctioned by Bailey, the City’s mayor at the time,
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.” (Dkt. No. 35 at 18). According to Hall,
the demolition of his property at 531 Milford Street “personally
benefitt[ed] Defendant Bailey.” (Dkt. No. 35 at 19).
B.
Procedural Background
In December 2013 and January 2014, Hall and several other
affected property owners filed complaints against the defendants
with the West Virginia Fire Commission (“Fire Commission”). In June
2014, the Fire Commission issued its own “Consolidated Complaint
and Notice of Hearing” against several defendants, including the
City,
Barberio,
Kesling,
and
Davis.
It
alleged
that
these
defendants “knowingly utilized an unlawful building code, through
the actions of unlawful [building code officials], to selectively
target specific properties and property owners, to divest them of
6
HALL V. CITY OF CLARKSBURG, ET AL.
1:14CV90
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS’ MOTIONS
FOR SUMMARY JUDGMENT [DKT. NOS. 121, 123, 125, 127, 129,
131, 133, AND 135], DENYING PLAINTIFF’S MOTION FOR SUMMARY
JUDGMENT [DKT. NO. 137], AND DISMISSING CASE WITH PREJUDICE
real and personal property without adequate due process of law.”5
(Dkt. No. 35-1 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.” (Dkt. No. 35-1 at 5). During
oral argument on the parties’ pending motions for summary judgment,
they informed the Court that, during the pendency of this case, the
Fire Commission’s complaint was settled without any admission of
guilt or liability on the City’s part.
As a result of that
settlement, moreover, Barberio, Kesling, and Davis turned in all of
their building code certifications.
Hall originally filed his complaint on May 30, 2014. The
parties then sought a stay, which the Court granted. Subsequently,
they requested that the Court lift the stay and allow the case to
proceed. After lifting the stay, the Court granted Hall’s request
for
leave
to
amend
his
complaint
5
in
order
to
address
the
Hall has adopted the Fire Commission’s allegations of fact
and conclusions of law in his amended complaint. (Dkt. No. 35 at
20).
7
HALL V. CITY OF CLARKSBURG, ET AL.
1:14CV90
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS’ MOTIONS
FOR SUMMARY JUDGMENT [DKT. NOS. 121, 123, 125, 127, 129,
131, 133, AND 135], DENYING PLAINTIFF’S MOTION FOR SUMMARY
JUDGMENT [DKT. NO. 137], AND DISMISSING CASE WITH PREJUDICE
deficiencies outlined in the defendants’ motion to dismiss.6 Hall
filed his amended complaint on February 20, 2015.
The amended complaint asserts five causes of action. Three
involve claims arising under 42 U.S.C. § 1983, but alleging
different theories of liability. These include municipal liability
(“Count One”), official, individual, and supervisory liability
(“Count Two”), and conspiracy liability (“Count Three”). Count Four
alleges
liability
under
the
Racketeer
Influenced
and
Corrupt
Organizations Act (“RICO”), 18 U.S.C. §§ 1962(c) and 1964(c).
Finally, Count Five seeks a declaratory judgment that “all amounts
assessed against [Hall] for demolition costs, assessments and fines
by Defendant Clarksburg are improper, unlawful, and not due and
owing.” (Dkt. No. 35 at 31). On March 12, 2015, the defendants
moved to dismiss Hall’s amended complaint pursuant to Fed. R. Civ.
P. 12(b)(6), which the Court denied.
Thereafter, on May 16, 2016, Hall filed his motion for summary
judgment, seeking partial summary judgment on Count One of his
complaint for municipal liability under § 1983, pursuant to Monell,
as well as on Count Two for official, individual, and supervisory
6
The Court denied as moot the defendants’ original motion to
dismiss.
8
HALL V. CITY OF CLARKSBURG, ET AL.
1:14CV90
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS’ MOTIONS
FOR SUMMARY JUDGMENT [DKT. NOS. 121, 123, 125, 127, 129,
131, 133, AND 135], DENYING PLAINTIFF’S MOTION FOR SUMMARY
JUDGMENT [DKT. NO. 137], AND DISMISSING CASE WITH PREJUDICE
liability under § 1983 (dkt. no. 137). He sought summary judgment
only as to the City, Howe, Barberio, Davis, and Kesling. On the
same date, each of the defendants moved separately for summary
judgment on all of Hall’s claims (dkt. nos. 121, 123, 125, 127,
129, 131, 133, and 135). All of the defendants’ motions share some
common bases that the Court finds to be dispositive, including a
statute of limitations defense and a defense that Hall lacked
standing.
II. LEGAL STANDARD
Summary
documents,
judgment
is
appropriate
electronically
declarations,
stipulations
where
the
stored
information,
.
,
.
.
admissions,
“depositions,
affidavits
or
interrogatory
answers, or other materials” establish that “there is no genuine
dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” Fed R. Civ. P. 56(a), (c)(1)(A).
When ruling on a motion for summary judgment, the Court reviews all
the evidence “in the light most favorable” to the nonmoving party.
Providence Square Assocs., L.L.C. v. G.D.F., Inc., 211 F.3d 846,
850 (4th Cir. 2000). The Court must avoid weighing the evidence or
determining
its
truth
and
limit
9
its
inquiry
solely
to
a
HALL V. CITY OF CLARKSBURG, ET AL.
1:14CV90
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS’ MOTIONS
FOR SUMMARY JUDGMENT [DKT. NOS. 121, 123, 125, 127, 129,
131, 133, AND 135], DENYING PLAINTIFF’S MOTION FOR SUMMARY
JUDGMENT [DKT. NO. 137], AND DISMISSING CASE WITH PREJUDICE
determination of whether genuine issues of triable fact exist.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S. Ct.
2505, 2510 (1986).
The moving party bears the initial burden of informing the
Court
of
the
basis
for
the
motion
and
nonexistence of genuine issues of fact.
of
establishing
the
Celotex Corp. v. Catrett,
477 U.S. 317, 323, 106 S. Ct. 2548, 2556 (1986). Once the moving
party has made the necessary showing, the non-moving party “must
set forth specific facts showing that there is a genuine issue for
trial.”
Anderson, 477 U.S. at 256, 106 S. Ct. at 2510 (internal
quotation marks and citation omitted). The “mere existence of a
scintilla of evidence” favoring the non-moving party will not
prevent the entry of summary judgment; the evidence must be such
that a rational trier of fact could reasonably find for the
nonmoving party.
Id. at 248–52.
III. DISCUSSION
On September 6, 2016, the Court heard oral argument on the
parties’ competing motions for summary judgment, following which it
indicated from the bench that it would DENY Hall’s motion and GRANT
all of the defendants’ motions.
10
HALL V. CITY OF CLARKSBURG, ET AL.
1:14CV90
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS’ MOTIONS
FOR SUMMARY JUDGMENT [DKT. NOS. 121, 123, 125, 127, 129,
131, 133, AND 135], DENYING PLAINTIFF’S MOTION FOR SUMMARY
JUDGMENT [DKT. NO. 137], AND DISMISSING CASE WITH PREJUDICE
A.
Statute of Limitations
The applicable statute of limitations had run prior to the
filing of Hall’s complaint. Section 1983 provides a federal cause
of action but looks to state law to establish the applicable
statute of limitations. See Wallace v. Kato, 549 U.S. 384, 387
(2007). The parties agree that, under West Virginia Code § 55-2-12,
the applicable period for the Hall’s claims is two years.
“The applicable statute of limitations begins to run once a
claim accrues, and federal law controls that determination.” A
Society Without A Name v. Virginia, 655 F.3d 342, 348 (4th Cir.
2011) (citing Cox v. Stanton, 529 F.2d 47, 50 (4th Cir. 1975)). “A
civil rights claim accrues when the plaintiff knows or has reason
to know of the injury which is the basis of the action.” Id.
(internal quotation omitted).
Hall argues, however, that the continuing violation doctrine,
which provides that the statute of limitations may be tolled by a
continuing unlawful or tortious practice, saves his claims. See id.
Generally, to “establish a continuing violation[,] the plaintiff
must establish that the unconstitutional or illegal act was a fixed
and continuing practice.” Id. (quoting Nat'l Adver. Co. v. City of
11
HALL V. CITY OF CLARKSBURG, ET AL.
1:14CV90
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS’ MOTIONS
FOR SUMMARY JUDGMENT [DKT. NOS. 121, 123, 125, 127, 129,
131, 133, AND 135], DENYING PLAINTIFF’S MOTION FOR SUMMARY
JUDGMENT [DKT. NO. 137], AND DISMISSING CASE WITH PREJUDICE
Raleigh, 947 F.2d 1158, 1166 (4th Cir. 1991)). Accordingly, if “the
illegal act did not occur just once, but rather ‘in a series of
separate acts[,] and if the same alleged violation was committed at
the time of each act, then the limitations period begins anew with
each violation.’” Id. (quoting City of Raleigh, 947 F.2d at 1167).
The Fourth Circuit Court of Appeals has established a clear
distinction between “continual unlawful acts” and “continuing ill
effects
of
an
original
violation
because
the
latter
do
not
constitute a continuing violation.” Id. In A Society Without a
Name, the plaintiff alleged that Virginia had unlawfully relocated
a homeless center at a far distance for discriminatory purposes.
Because the Society knew or should have known of the allegedly
discriminatory action by February 5, 2007, they were required to
file suit no later than February 5, 2009. Id. at 348. Nonetheless,
the Society argued that a continuing violation existed because,
during the statutory period, the state had persuaded organizations
to move feeding services to the distant shelter and had required
homeless people to register at that new location.
The court concluded that these actions, all of which had
occurred in the statutory period, “[do] not amount to a continuing
12
HALL V. CITY OF CLARKSBURG, ET AL.
1:14CV90
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS’ MOTIONS
FOR SUMMARY JUDGMENT [DKT. NOS. 121, 123, 125, 127, 129,
131, 133, AND 135], DENYING PLAINTIFF’S MOTION FOR SUMMARY
JUDGMENT [DKT. NO. 137], AND DISMISSING CASE WITH PREJUDICE
violation, but rather amount[] to the continuing effect of the
original decision to locate the [shelter where it had].” Id.
(citing Jersey Heights Neighborhood Ass'n v. Glendening, 174 F.3d
180, 189 (4th Cir. 1999) (“At bottom, appellants’ continuing
violation argument rests on the alleged ongoing effects of the
original decision to locate the highway in proximity to Jersey
Heights.”)). Therefore, the court concluded that, because the
plaintiffs had filed suit on February 17, 2009, twelve days beyond
the statutory period, their claims were time barred. Id.
Likewise, in the case at bar, characterization of the City’s
alleged violations as a continuing violation is entirely premised
on ongoing effects of the City’s original decision to amend the
ordinances and building code. Hall was aware as early as 2003 as to
some of the amendments and as early as 2009 as to the others.
Further, he has alleged that the City began to enforce those
ordinances against the subject properties as early as 2006. (Dkt.
No. 35 at 17). Indeed, the amended complaint lists all of the
subject properties and the dates on which action was taken against
them. Id. at 17-18. With the exception of a Notice of Violation
(“NOV”) issued on August 19, 2013, for the 1300 N. 13th St.
13
HALL V. CITY OF CLARKSBURG, ET AL.
1:14CV90
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS’ MOTIONS
FOR SUMMARY JUDGMENT [DKT. NOS. 121, 123, 125, 127, 129,
131, 133, AND 135], DENYING PLAINTIFF’S MOTION FOR SUMMARY
JUDGMENT [DKT. NO. 137], AND DISMISSING CASE WITH PREJUDICE
property, all of the actions occurred before May 30, 2012, which is
two years prior to the filing of Hall’s original complaint.
Although all of these actions, including the final NOV on
August 19, 2013, clearly constitute ongoing effects of the original
decision to amend the City ordinances, Hall has contended that,
because some of the properties remain on the demolition list, the
continuing violation doctrine saves his claims. This argument also
fails; their placement on the list is also derivative of the
original decision to amend the ordinances.
It is undisputed that Hall had constructive knowledge of the
allegedly unlawful amendments to the ordinances in 2003 and in
2009. See Old Home Properties, LLC v. City of Clarksburg, 2015 WL
7628719, at *10 (W.Va. 2015). Further, he had direct knowledge of
the allegedly unlawful actions impacting the subject properties as
early as 2006. Despite his constructive knowledge and direct
personal knowledge, Hall failed to sue the defendants until May 30,
2014, well beyond the date on which his claims first accrued.
Furthermore, because the subsequent actions by the code enforcement
officers, as well those of the City, all stem from the original
decision to amend the ordinances, the continuing violation doctrine
14
HALL V. CITY OF CLARKSBURG, ET AL.
1:14CV90
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS’ MOTIONS
FOR SUMMARY JUDGMENT [DKT. NOS. 121, 123, 125, 127, 129,
131, 133, AND 135], DENYING PLAINTIFF’S MOTION FOR SUMMARY
JUDGMENT [DKT. NO. 137], AND DISMISSING CASE WITH PREJUDICE
does not toll the statute of limitations or otherwise save his
claims. Accordingly, the Court GRANTS the defendants’ motions for
summary judgment on all claims based on the statute of limitations
defense.
B.
Standing
Alternatively, the defendants contend that Hall lacks standing
to assert his claims because all of the subject properties were
owned by limited liability companies (“LLC”) or corporations, of
which he was a member or shareholder. Accordingly, they reason that
any damages suffered by those corporate entities were not damages
to Hall personally.
The Supreme Court of the United States has established a three
part test for determining whether a party has standing:
First, the plaintiff must have suffered an injury in
fact—an invasion of a legally protected interest which is
(a) concrete and particularized, and (b) actual or
imminent, not conjectural or hypothetical. Second, there
must be a causal connection between the injury and the
conduct complained of—the injury has to be fairly
traceable to the challenged action of the defendant, and
not the result of the independent action of some third
party not before the court. Third, it must be likely, as
opposed to merely speculative, that the injury will be
redressed by a favorable decision.
Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992).
15
HALL V. CITY OF CLARKSBURG, ET AL.
1:14CV90
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS’ MOTIONS
FOR SUMMARY JUDGMENT [DKT. NOS. 121, 123, 125, 127, 129,
131, 133, AND 135], DENYING PLAINTIFF’S MOTION FOR SUMMARY
JUDGMENT [DKT. NO. 137], AND DISMISSING CASE WITH PREJUDICE
Here, Hall has not suffered the injury; rather, the injury in
fact was suffered by the LLCs or corporations that actually owned
the properties. “According to W. Va. Code § 31B-5-501(a) (1996),
‘[a] member [of a limited liability company] is not a co-owner of,
and
has
no
transferable
interest
in,
property
of
a
limited
liability company[.]’” Mott v. Kirby, 696 S.E.2d 304, 307 (W.Va.
2010). Indeed, “[a] limited liability company is a legal entity
distinct from its members.” W. Va. Code § 31B-2-201. Similarly,
“[i]t is considered a fundamental rule that a shareholder - even
the sole shareholder - does not have standing to assert claims
alleging wrongs to the corporation.” Ashbaugh v. Corporation of
Bolivar, 2012 WL 3935950, at *1 (4th Cir. 2012) (per curiam)
(quoting Smith Setzer & Sons, Inc. v. S.C. Procurement Review
Panel, 20 F.3d 1311, 1317 (4th Cir. 1994)). Accordingly, Hall had
no standing to assert his individual claims for damages that were
suffered by the LLCs or corporations.
Hall argues that he did in fact personally purchase the
subject properties and, regardless of the name of the purchaser,
that
he
“was
the
owner
of
such
properties
and
operated
his
businesses as such.” (Dkt. No. 141 at 13). Hall points out that the
16
HALL V. CITY OF CLARKSBURG, ET AL.
1:14CV90
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS’ MOTIONS
FOR SUMMARY JUDGMENT [DKT. NOS. 121, 123, 125, 127, 129,
131, 133, AND 135], DENYING PLAINTIFF’S MOTION FOR SUMMARY
JUDGMENT [DKT. NO. 137], AND DISMISSING CASE WITH PREJUDICE
notices he received from the City were addressed to him personally,
indicating that the City never distinguished between him and his
companies.
“‘It
is
equally
well-settled
that
the
parties’
characterization of themselves or their claims is not determinative
for
federal
jurisdiction
purposes.’”
General
Technology
Applications, Inc. v. Exro Ltda, 388 F.3d 114, 118 (4th Cir. 2004)
(quoting Roche v. Lincoln Prop. Co., 373 F.3d 610, 615-16 (4th Cir.
2004)). Nor would the way in which the City addressed a letter
alter the legal nature of the properties’ ownership. Finally,
Hall’s own deposition testimony fails to support his contentions
that he personally owned the subject properties.
The Court
therefore concludes that Hall is unable to assert a claim for
damages allegedly suffered by the LLCs or corporations.
Hall next argues that he should be allowed to assert the
claims under a reverse veil piercing theory. He cites as support
for this theory a lone Minnesota State Supreme Court case, Cargill,
Inc. v. Hedge, 375 N.W.2d 477 (Minn. 1985), which laid out three
factors to determining whether it is appropriate to pierce the
corporate veil:
17
HALL V. CITY OF CLARKSBURG, ET AL.
1:14CV90
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS’ MOTIONS
FOR SUMMARY JUDGMENT [DKT. NOS. 121, 123, 125, 127, 129,
131, 133, AND 135], DENYING PLAINTIFF’S MOTION FOR SUMMARY
JUDGMENT [DKT. NO. 137], AND DISMISSING CASE WITH PREJUDICE
1.
2.
3.
“The degree of identity between the individual and his or
her corporation [and] the extent to which the corporation
is an alter ego”;
Whether piercing the corporate veil would injure third
parties, such as creditors; and
Whether there is a “strong public policy” present that
would justify piercing the corporate veil.
Id. at 479. Applying these factors, the court in Cargill “reverse
pierced” the veil of a corporation that was essentially a family
farm.
It did so solely to allow the lone shareholder, Hedges, to
apply for a personal homestead exemption to a tax sale, despite the
fact that the subject property was owned by the corporation. The
court found that Hedges and the corporation were alter egos and
that, although some creditors could potentially be harmed, such
harm was outweighed by the strong public policy of promoting the
homestead exemption law.7
Hall’s
argument
for
following
Cargill
fails
under
the
circumstances of this case. First, the Cargill court’s holding is
not binding on this Court. Next, Cargill explicitly noted that “a
reverse pierce should be permitted in only the most carefully
limited circumstances.” Id. at 480. Further, its reasoning relied
heavily on the strong public policy of Minnesota supporting the
7
The Cargill court also placed weight on the fact that Hedges
actually lived in the home in question. 375 N.W.2d at 477.
18
HALL V. CITY OF CLARKSBURG, ET AL.
1:14CV90
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS’ MOTIONS
FOR SUMMARY JUDGMENT [DKT. NOS. 121, 123, 125, 127, 129,
131, 133, AND 135], DENYING PLAINTIFF’S MOTION FOR SUMMARY
JUDGMENT [DKT. NO. 137], AND DISMISSING CASE WITH PREJUDICE
homestead exemption in order to justify piercing. Here, there is no
similar public policy at work that would justify reverse piercing,
nor do there appear to be any creditors who may be harmed. Indeed,
the Supreme Court of Appeals of West Virginia has affirmed the
Circuit Court of Harrison County’s decision holding that Hall’s
challenges to the amended ordinances on procedural grounds were
barred
as
against
public
policy,
thereby
justifying
summary
judgment in a separate related case. See Old Home Properties, 2015
WL 7628719, at *11.
Finally, the United States Supreme Court long ago addressed
the propriety of piercing the corporate veil:
While corporate entities may be disregarded where they
are made the implement for avoiding a clear legislative
purpose, they will not be disregarded where those in
control have deliberately adopted the corporate form in
order to secure its advantages and where no violence to
the legislative purpose is done by treating the corporate
entity as a separate legal person. One who has created a
corporate arrangement, chosen as a means of carrying out
his business purposes, does not have the choice of
disregarding the corporate entity in order to avoid the
obligations which the statute lays upon it for the
protection of the public.
Schenley Distillers Corp. v. U.S., 326 U.S. 432, 437 (1946).8
8
It should be noted that reverse corporate veil piercing is
generally intended to provide an avenue for creditors to reach the
assets of a debtor that have been improperly shielded by an LLC or
19
HALL V. CITY OF CLARKSBURG, ET AL.
1:14CV90
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS’ MOTIONS
FOR SUMMARY JUDGMENT [DKT. NOS. 121, 123, 125, 127, 129,
131, 133, AND 135], DENYING PLAINTIFF’S MOTION FOR SUMMARY
JUDGMENT [DKT. NO. 137], AND DISMISSING CASE WITH PREJUDICE
Hall,
who
has
long
benefitted
from
the
protections
and
benefits of the LLC and corporate structures used to purchase,
hold, and operate these properties, now seeks to disregard those
entities
for
his
own
personal
benefit.
This
he
cannot
do.
Furthermore, there is no strong public policy favoring reverse
piercing in this case. Accordingly, Hall can not avail himself of
a reverse corporate veil piercing theory.
V. CONCLUSION
As discussed, the statute of limitations has run on Hall’s
claims.
Alternatively, he lacks standing to bring those claims.
Either of these grounds is adequate to support summary judgment in
favor of the defendants. Therefore, the Court GRANTS all of the
defendants’ motions for summary judgment on all claims, DENIES
corporation:
In a reverse piercing action, however, the plaintiff
seeks to reach the assets of a corporation to satisfy
claims against a corporate insider. This action,
sometimes referred to as “outsider reverse piercing,”
achieves goals similar to those served by traditional
piercing actions—namely, to prevent abuses of corporate
or partnership structures.
C.F. Trust, Inc. v. First Flight Ltd. Partnership, 111 F.Supp.2d
734, 740 (E.D.Va. 2000). Allowing a member or shareholder to use
reverse veil piercing for their own personal gain would not comport
with its purpose.
20
HALL V. CITY OF CLARKSBURG, ET AL.
1:14CV90
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS’ MOTIONS
FOR SUMMARY JUDGMENT [DKT. NOS. 121, 123, 125, 127, 129,
131, 133, AND 135], DENYING PLAINTIFF’S MOTION FOR SUMMARY
JUDGMENT [DKT. NO. 137], AND DISMISSING CASE WITH PREJUDICE
Hall’s motion for summary judgment, and DISMISSES this case WITH
PREJUDICE.
It is so ORDERED.
The Court DIRECTS the Clerk to transmit copies of this Order
to counsel of record and to enter a separate Judgment Order.
DATED: September 30, 2016.
/s/ Irene M. Keeley
IRENE M. KEELEY
UNITED STATES DISTRICT JUDGE
21
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