Barry Aviation v. Land O'Lakes Municipal Airport

• Decision Date: 26 July 2004
• Docket Number: No. 03-2605.,03-2605.
• Citation: 377 F.3d 682
• Parties: BARRY AVIATION INCORPORATED, Plaintiff-Appellant, v. LAND O'LAKES MUNICIPAL AIRPORT COMMISSION, Town of Land O'Lakes Wisconsin, Richard Peterson, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

377 F.3d 682

BARRY AVIATION INCORPORATED, Plaintiff-Appellant, v. LAND O'LAKES MUNICIPAL AIRPORT COMMISSION, Town of Land O'Lakes Wisconsin, Richard Peterson, et al., Defendants-Appellees.

No. 03-2605.

United States Court of Appeals, Seventh Circuit.

Argued January 16, 2004.

Decided July 26, 2004.

COPYRIGHT MATERIAL OMITTED

Appeal from the United States District Court for the Western District of Wisconsin, Barbara B. Crabb, Chief Judge.

George V. Pilat, Robert W. McIntyre (argued), McIntyre, Kahn & Kruse, Cleveland, OH, for Plaintiff-Appellant.

James A. Johnson, D.G. Graff (argued), Johnson & Houlihan, Rhinelander, WI, for Defendants-Appellees.

Before FLAUM, Chief Judge, RIPPLE and ROVNER, Circuit Judges.

RIPPLE, Circuit Judge.

Barry Aviation, Inc. filed a seven-count complaint against the defendants on November 22, 2002. The district court dismissed the counts based on 18 U.S.C. § 1961 and 42 U.S.C. § 1983 for failure to state a claim upon which relief could be granted. It then dismissed the remaining five counts based on state law because it determined that Barry Aviation had failed to allege its state of incorporation and therefore had not alleged jurisdiction based on diversity of citizenship. The district court denied leave to amend the complaint because it concluded that the statute of limitations had expired for each claim. For the reasons set forth in the following opinion, we reverse the judgment of the district court and remand the case for proceedings consistent with this opinion.

I BACKGROUND

A. Facts¹

Barry Aviation, Inc. operated as a "Fixed Base Operator" ("FBO") at the airport at Land O'Lakes, Wisconsin. FBOs "generally operate aircraft sales, rentals, charters, repair for airplanes and avionics, fuel services, and aircraft storage facilities at public airports." R.2 at 3. The defendants include the Town of Land O'Lakes, Wisconsin ("Town"), the Land O'Lakes Municipal Airport Commission ("Airport Commission"), and six individuals who were members of the Town Board or Airport Commission at various times during the relationship with Barry Aviation.

In 1993, Barry Aviation's principal, Timothy Barry, attended a public meeting with Karl Kerscher, the manager of the airport and head of the Land O'Lakes Airport Commission. Barry Aviation alleged that, during this meeting, the defendants presented substantial plans for the future redevelopment of the airport and represented that existing usage of the airport was in excess of 10,000 Federal Aviation Administration ("FAA") defined "operations" per year.² To support their representations regarding the quantity of operations, the defendants provided Barry Aviation with records prepared by the FAA that purportedly were based on the Town's official certified records. One form, FAA Form OMB 2120-0015, confirmed the defendants' representation of 10,000 operations for the twelve-month period ending in September 1991. Barry Aviation also alleged that the Town and Airport Commission provided it with a "Project Statement" created by the defendants for the Wisconsin Department of Transportation ("WDOT") and the FAA as part of the Town's effort to obtain government funds. This document represented that the airport had 11,000 operations for the twelve-month period ending July 1993.

Based upon these materials and assurances, Barry Aviation entered into a multi-year contract as the airport's new FBO. Barry Aviation alleged that it complied with the contract, completing renovations, establishing a maintenance facility, purchasing numerous new planes, and establishing other services required by the agreement. In spite of its efforts, during the period between 1993 and 2001, Barry Aviation experienced "an unexpected and unprecedented low level of business." Id. ¶ 18. Barry Aviation brought its concern about the low level of business to the defendants' attention during this time. The defendants responded to the concerns by asserting that Barry Aviation's meager business levels were a result of its own actions, specifically its method of operation and its personnel, and also the seasonal nature of business due to the airport's location. At various times, the defendants reassured Barry Aviation that operations continued to exceed 10,000 per year during 1991-1997. They provided Barry Aviation with a copy of a request for federal funds they made in 1997 and 1998. In that submission, the Commission and Town stated that their operations were 11,200 for the twelve-month period ending August 1997.

Because Barry Aviation's business levels were not consistent with the operations levels stated in these documents, it requested the underlying documents upon which the FAA and WDOT documents were based. It received, instead, the same materials it initially had received representing the operations level for 1991-92. However, in 2000, while cleaning a portion of the airport terminal basement controlled by the defendants, Barry Aviation fortuitously discovered an unmarked file cabinet with Commission and Town records. The "files contained the actual original operations log/records prepared by and kept by Defendants" from 1985 through 2000. Id. ¶ 25. Although seemingly important records, they were not stored in any public office. Upon examination, these files did not confirm the operation levels stated in the FAA, WDOT and other documents supplied earlier for Barry Aviation. Indeed, the files revealed that the stated operations levels were "over 2000% the actual amount of operations performed at the Airport in the relevant years." Id. After gaining permission to copy certain records, Barry Aviation returned the files to the defendants. In May of 2002, the file cabinet and uncopied materials disappeared and are unaccounted for at the present time.

B. District Court Proceedings

The district court granted the defendants' motion to dismiss on May 16, 2003. It first addressed the Racketeer Influenced and Corrupt Organizations Act ("RICO") and § 1983 claims, which ultimately were based on fraud allegations. The court concluded that the underlying allegations of fraud were not pleaded with the requisite particularity. In spite of this impediment, the district court also addressed and rejected both the due process and equal protection claims brought pursuant to § 1983. The court first determined that Barry Aviation waived its § 1983 claim based on a violation of equal protection because the "defendants raised a question in their brief about the existence of an equal protection claim," but Barry Aviation "said nothing in its responsive brief to explain how such a claim factor[ed] into its allegations." R.26 at 12. In addressing the due process claim, the court noted that Barry Aviation only advanced a denial of substantive due process, not procedural due process. The court found that Barry Aviation could not demonstrate that being free from the alleged fraud was a fundamental right deeply rooted in our history and traditions or implicit in the concept of ordered liberty; Barry Aviation also could not demonstrate "`why having a state-law remedy for whatever injury the defendants caused [the plaintiff] is inadequate under the federal constitution.'" Id. at 14 (quoting Khan v. Gallitano, 180 F.3d 829, 835 (7th Cir.1999)). Once the court dismissed the § 1983 claims, it also dismissed the RICO claim. The court noted that Barry Aviation could not "point to a single federal statute enumerated in RICO that provides the link to a predicate act of racketeering activity in this case." Id. at 16.

After dismissing both federal claims, the court determined that the plaintiff had failed to establish diversity jurisdiction. See 28 U.S.C. § 1332. In this respect, Barry Aviation's undoing was that it had pleaded only its principal place of business without also stating its state of incorporation. Its failure to plead this information, in spite of the fact the defendants pointed out this deficiency, caused the court to dismiss the state law claims for lack of jurisdiction.

Finally, the court refused to provide Barry Aviation leave to amend its complaint. The court determined from the complaint that the statute of limitations had run as to both federal claims and that any amendment would be futile. The court held that RICO claims have a four-year statute of limitations and that § 1983 utilized a six-year limit. The court then noted that the complaint alleged that the defendants fraudulently had induced Barry Aviation to enter a contract in 1993. At the same time, continued the court, Barry Aviation admitted in its complaint that it had "suffered `an unexpected and unprecedented low level of business' during the years '1993 through 2001' and that it [had] brought these `material deviations from the operations' to the attention of `defendants' at `various times' during" 1993-2001. Id. at 17-18 (quoting R.2 ¶ 18). Reading these allegations in their totality, the court determined that the "plaintiff knew and reported these `material deviations from the operations' to defendant[s] as early as 1993." Id. at 18. Therefore, the court concluded, Barry Aviation's claims expired in 1997 and 1999. Because Barry Aviation did not file its claims until November 22, 2002, it was outside the limitations period.

II DISCUSSION

Barry Aviation submits that its claims were filed in a timely manner. In its view, the defendants' concealment of necessary documents prevented the discovery of injuries until 2000, when it found the file cabinet and airport records. Barry Aviation claims that the district court therefore should not have relied on the limitations period as the ground for refusing leave to amend its complaint. The district court's denial of leave to amend a complaint is reviewed for an abuse of discretion. See Am. United Logistics, Inc. v. Catellus Dev. Corp., 319 F.3d 921, 925-26 (7th Cir.2003).

A. Standard for Granting Leave To Amend

Leave to amend a complaint should "be freely given when justice so...