Bishop v. City of Galveston
| Decision Date | 12 March 2013 |
| Docket Number | CIVIL ACTION H-11-4152 |
| Parties | LARRY BISHOP, CYNTHIA BISHOP, GEORGE CLARK, DEBORAH CLARK, KRIS B. HALL, HOLLY J. JONES, GARY MCGREGOR, TERI MCGREGOR, SOLEDA PINEDA, JOHN STANFORD, JR., and CAROL M. SEVERANCE, Plaintiffs, v. CITY OF GALVESTON, TEXAS, STEVEN C. MCCRAW, in his official capacity as the Director of the Texas Department of Public Safety, JEFF COLLEY, in his official capacity as the Chief of the Emergency Management Department of the Texas Department of Public Safety, GREG PEKAR, in his official capacity as the State Hazard Mitigation Officer of the Emergency Management Division of the Texas Department of Public Safety, and HILDA SOPER, in her official capacity as an employee of the Emergency Management Division of the Texas Department of Public Safety, Defendants. |
| Court | U.S. District Court — Southern District of Texas |
The above referenced cause, grounded in the Fourteenth Amendment and 42 U.S.C. § 1983, alleges deprivation without due process of funds authorized and approved pursuant to the StaffordAct1 and Federal Hazard Mitigation Grant Program ("HMGP") for acquisition of Plaintiffs' homes in The Sands of Kahala Beach subdivision on the west end of Galveston Island, which were damaged by Hurricane Ike. Pending before the Court is a motion to dismiss (instrument #19) pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6), filed by Defendants Steven C. McCraw, in hisofficial capacity as Director of the Texas Department of Public Safety ("DPS"), W. M. Nim Kidd, in his official capacity as Chief of the Division of Emergency Management, Division of DPS,2 Greg Pekar, in his official capacity as the State Hazard Mitigation Officer of the Emergency Management Division of the DPS, and Hilda Soper, in her official capacity as an employee of the Division of Emergency Management at DPS (collectively, "DPS Officials").
Plaintiffs own homes in The Sands of Kahala, a subdivision on the west end of Galveston Island in the City and County of Galveston, Texas. Their real property was damaged by Hurricane Ike on September 13, 2008. President Bush declared Galveston County, inter alia, to be a disaster area and thus automatically qualified it under the Stafford Act for individual assistance, including under the HMGP, which is authorized under Section 404 of the Stafford Act, 42 U.S.C. § 5170c, to provide grants to state and local governments to reduce the risk of future damage, hardship, and loss from all hazards. The HMGP permits applicants/grantees to acquire flood-damaged property.
On January 22, 2009 the Galveston City Council approved and authorized the Galveston City Manager to proceed with an application for HMGP funds to purchase certain beach front homes, with "the local grant share to be paid by others besides the city." Plaintiffs applied and, after inspections, their real properties were determined by the City to qualify for acquisition under the HMGP, as confirmed by letters from the City ("Substantial Damage Determinations" or "SDD Letters"). The City subsequently applied to the Texas DPS, Texas Division of Emergency Management, for the funds under the HMGP. Of the funds obtained by the City, 75% came from FEMA through the HMGP and $65,000 per home from the Texas General Land Office; none of the funds came from the City of Galveston ("the City").3 On July 23, 2009 the United States Department of Homeland Security, FEMA Region 6, notified Defendant Colley, then Chief of the State of Texas Governor's Division of Emergency Management, that the City of Galveston had been awarded a grant in the amount of $15,333,770 for acquisition and demolition of certain property through the HMGP under FEMA Project No. 1791-DR-TX. Colley informed Lyda Ann Thomas, then Mayor of the City, of the grant on July 31, 2009. Plaintiffs contend that as of July 31, 2009, they had a vested property interest in the receipt of thesefunds.
Under the terms of the grants, the City was to acquire a total of 62 homes. As of August 31, 2011, the City had acquired all but the six homes owned by Plaintiffs. The notification letters from FEMA stated, "The Projects must be completed within twenty-four (24) months from the Project approval date." Plaintiffs executed Grant Agreements with the City of Galveston to purchase their properties.
On January 11, 2010, a Bishop-Clark Flood Damaged Property Contract for Sale with the City for $868,541.73 was signed. On September 15, 2009 the Halls' contract for sale for $789,110.96 was executed. On or about the same day the McGregors' contract was entered into for $886,762.38, and Severance's was entered into for $812,508.69. The City also agreed to acquire Pineda's property and Stanford's property for 75% of their pre-Hurricane Ike appraised values plus $65,000, less any insurance reimbursements. At the time that each contract was executed, Plaintiffs maintain that they met all requirements or qualifications under the Stafford Act and were entitled to receive the funds.
Nevertheless in August 2009, owners of other homes in the subdivision along with the City of Galveston and the DPS Officers began campaigning to prevent Plaintiffs from participating in the HMGP, making allegations that the properties did not qualify and threatening litigation against the City. Despite its priorapproval of the acquisition of Plaintiffs' properties, the City arbitrarily demanded that Plaintiffs obtain a release from The Sands of Kahala Beach Home Owners Association, Inc. ("HOA") affirming that the City of Galveston would not be required to pay any maintenance fees provided for in the deed restrictions applicable to the Subdivision. Plaintiffs claim that this action was intended to delay and prevent Plaintiffs from receiving the HMGP funds because, as a governmental subdivision, a municipality, the City would have immunity from such claims so there was no need for such a release. No other grantee and/or sub-grantee has been required to obtain any type of release and/or have any other conditions been imposed upon a participant in the HMGP beyond those required by the Stafford Act. Plaintiffs assert that Galveston never intended to proceed, nor has it proceeded, with acquisition of Plaintiffs' real properties.
On June 29, 2011, Defendant Pekar notified the City that he had received an inquiry from a Special Agent with Homeland Security, Office of the Inspector General, concerning "potential fraud" involving five of the not-yet-purchased properties and directing the City to "cease all activities concerning the purchase." On June 30, 2011, with only 23 days remaining from the original project completion date, the City requested that the FEMA grants be extended through August 31, 2011. The complaint states that at some point before June 30, 2011 owners of homes in theSubdivision made allegations to various law enforcement agencies, including the Department of Homeland Security and the FEMA Fraud Hotline, that Plaintiffs had used inflated or fraudulently obtained estimates of their real properties and did not otherwise qualify for the HMGP funds.
On August 8, 2011 counsel for the City notified Plaintiffs that they were to have closed on the sales of their real properties before August 1, 2011. Moreover the City arbitrarily imposed a 30-day period for it to meet its obligations under the HMGP, which was not required by or related to the HMGP and/or the FEMA grants. Plaintiffs maintain that they met all qualifications for entitlement to the funds during the relevant time. The City has refused to acquire Plaintiffs' real properties and to close.
On October 25, 2011 Texas DPS, through Defendant Kidd, issued a report on the purported investigation to Special Agent Perry of Homeland Security about the SDD conducted by the City. The report, with no finding of fraud by any Plaintiff, stated that DPS "will require new substantial damage determination reviews by qualified staff before those addresses will be allowed to participate." Up until then, Plaintiff had never received any notification from the City or DPS that the City's SDDs were irregular or questionable. Plaintiffs were not given an opportunity to submit new SDDs and/or otherwise prove their entitlement to the HMGP funds, nor to participate in the alleged investigation, nor notified and affordedan opportunity to be heard at any of these proceedings. Instead their right to participate in the HMGP has been thwarted for at least three years by a concerted effort involving the City, owners of other homes in the Subdivision, and DPS officials.
"When a motion to dismiss for lack of jurisdiction 'is filed in conjunction with other Rule 12 motions, the court should consider the Rule 12(b)(1) jurisdictional attack before addressing any attack on the merits." Crenshaw-Logal v. City of Abilene, Texas, No. 11-10264, 2011...
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