Boulevard & Trumbull Towing, Inc. v. City of Detroit

• Decision Date: 18 November 2021
• Docket Number: 352503,353099
• Court: Court of Appeal of Michigan — District of US
• Parties: BOULEVARD & TRUMBULL TOWING, INC, Plaintiff-Appellant, v. CITY OF DETROIT, CITY OF DETROIT POLICE DEPARTMENT, and DETROIT BOARD OF POLICE COMMISSIONERS, Defendants-Appellees. BOULEVARD & TRUMBULL TOWING, INC, Plaintiff-Appellee, v. CITY OF DETROIT, CITY OF DETROIT POLICE DEPARTMENT, and DETROIT BOARD OF POLICE COMMISSIONERS, Defendants-Appellants.

BOULEVARD & TRUMBULL TOWING, INC, Plaintiff-Appellant,
v.
CITY OF DETROIT, CITY OF DETROIT POLICE DEPARTMENT, and DETROIT BOARD OF POLICE COMMISSIONERS, Defendants-Appellees.

BOULEVARD & TRUMBULL TOWING, INC, Plaintiff-Appellee,
v.
CITY OF DETROIT, CITY OF DETROIT POLICE DEPARTMENT, and DETROIT BOARD OF POLICE COMMISSIONERS, Defendants-Appellants.

Nos. 352503, 353099

Court of Appeals of Michigan

November 18, 2021

UNPUBLISHED

Wayne Circuit Court LC No. 17-010371-CZ

Before: Rick, P.J., and Ronayne Krause and Letica, JJ.

PER CURIAM

These consolidated appeals arise out of defendant the Detroit Board of Police Commissioners's (the Board's) termination of a permit held by plaintiff Boulevard & Trumbull Towing, Inc., to conduct vehicle towing services within defendant the City of Detroit (the City) for defendant the City of Detroit Police Department (the Department), following revelations that plaintiff obtained the permit through bribery. The trial court ultimately granted summary disposition in favor of defendants as to all of plaintiff's various claims, and in Docket No. 352503, plaintiff appeals those dismissals. The trial court then denied defendants' motion for case

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evaluation sanctions, and in Docket No. 353099, defendants appeal that denial. In Docket No. 352503, we reverse the dismissal of plaintiff's federal due process claim on res judicata grounds. In Docket No. 353099, we vacate the trial court's order denying case evaluation sanctions. In all other respects, we affirm.

I. FACTUAL BACKGROUND

The City of Detroit has been in the established practice of utilizing private towing companies (or "towers") to tow abandoned, damaged, forfeited, stolen, illegally parked, impounded, or other vehicles on behalf of the Detroit Police Department. Very generally, towers could apply for permits, which, if granted following certain background checks and at the Board's discretion, would be valid for five years and were renewable. Permitted towers would then be placed into a pool from which they would be contacted to perform tows on a rotating basis. The City has ordinances governing the permitting process, which, in part, grant powers to the Board to establish standards for towers and provide for termination of permits. Plaintiff had been a longstanding police authorized tower. It was granted its last five-year permit in May 2016.

However, in May 2017, Gasper Fiore, who was in May 2016 the president and 60% owner of plaintiff, ^[1] was indicted in the United States District Court for the Eastern District of Michigan on bribery charges involving payments to government officials in exchange for governmental towing contracts.^[2] Shortly thereafter, Celia Washington, a deputy police chief who was charged with overseeing the City's towing rotations, was also indicted on federal bribery charges. The basis for the indictment was that Washington accepted payments from Fiore in April 2016 in order to award his towing companies, including plaintiff, favorable permits and towing rotations within the City.^[3] Almost immediately after Fiore's payments to Washington, the Department, as noted, awarded plaintiff the 2016 towing permit. Fiore and Washington would both ultimately enter guilty pleas to some of their charges pursuant to plea agreements.

On June 15, 2017, after news of the indictments became public, the Board met in a closed session and voted unanimously to rescind plaintiff's towing permit. Although the minutes for the meeting do not specifically disclose the reason for the rescission, the Board seemingly acted pursuant to Detroit Ordinance § 55-15-1(4), which provided, in relevant part:

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The City may immediately terminate any towing permit with a tow company for fraud or criminal conduct by the tow company or its employees, provided however, that as soon as practicable the permit holder shall be afforded an opportunity for a hearing before the Board of Commissioners or the Board's designee following which hearing the Board shall either affirm or rescind the termination

The Board did not provide plaintiff with prior notice of the meeting. The Board also did not offer plaintiff a prompt hearing following the termination, although plaintiff apparently did not seek one other than by filing this lawsuit. After the Board terminated plaintiff's permit, multiple other governmental entities also terminated their arrangements with plaintiff.^[4]

Months after this lawsuit was initiated, the City's Office of Inspector General (OIG) conducted an investigation into Fiore's criminal behavior. In May 2018, the OIG recommended that the City decline future applications from plaintiff for towing permits. In June 2018, the OIG held a hearing regarding its investigation and recommendation, at which plaintiff appeared and argued in its defense. The OIG ultimately rejected plaintiff's claims that Fiore's payment to Washington had been merely a small loan and that plaintiff did not violate any rule. Ultimately, after noting that plaintiff had not cooperated in providing requested information during the hearing and that plaintiff had not taken steps to guard against criminal conduct in connection with plaintiff's application for the permit, the OIG found that plaintiff had failed to show that it was a responsible contractor that conducts business with honesty and integrity and it upheld its initial recommendation. On November 2, 2018, the OIG issued its final recommendation and also issued a notice of proposed debarment and initiation of debarment proceedings. Plaintiff expends considerable effort arguing that the OIG investigation was flawed, but plaintiff has not actually pursued any action, as far as we know, seeking to overturn the outcome of that investigation.

II. PROCEDURAL BACKGROUND

Plaintiff filed this lawsuit in July 2017. Plaintiff initially alleged violations of procedural and substantive due process under both the Michigan and the United States Constitutions and a violation of the Open Meetings Act (OMA), MCL 15.261 et seq. Plaintiff sought reinstatement of its 2016 towing permit, compliance by defendants with the procedural due process requirements of Detroit's ordinances through mandamus and injunctive relief, and damages. Plaintiff later filed an amended complaint adding claims of breach of contract, "breach of 2016 permit," unjust enrichment, and violation of the Federal Wiretap Act, 18 USC § 2515 et seq.^[5] Plaintiff's breach

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of contract and unjust enrichment claims were pleaded in the alternative and mostly premised on defendants allegedly failing to compensate plaintiff for some towing and storage services and retaining some overpaid administrative fees.

Defendants sought removal of the matter to the federal district court, but the federal district court denied supplemental jurisdiction over the state-law claims. See Boulevard & Trumbull Towing, Inc v Detroit, unpublished opinion of the United States District Court for the Eastern District of Michigan, issued January 9, 2018 (Case No. 17-12446), pp 4-5. The federal district court remanded the state claims back to the circuit court and retained jurisdiction over the federal due-process claim. Id. The federal district court then held that because plaintiff's theory was not that defendants' rules were procedurally inadequate per se, but rather that defendants were disregarding those rules, plaintiff was required to show that it lacked a remedy under Michigan law. Id. at pp 7-12. The federal district court concluded that plaintiff had failed to show why its pending action in the Wayne County Circuit Court did not offer an adequate state-law remedy. Therefore, it dismissed plaintiff's federal due process claim without prejudice because that claim would not be ripe for federal court action until the state action was complete. Id. at pp 12-13.

Defendants first moved for summary disposition in December 2018. Regarding procedural due process, defendants argued that even if plaintiff had a right to a hearing regarding the termination of its permit, it was not entitled to a pre-termination hearing, because the City's towing rules explicitly provided that the City could summarily terminate permits at any time on the basis of fraud or criminal conduct. Plaintiff chose to commence suit instead of seek a post-termination hearing, and in any event, any such hearing would have been difficult to conduct while Fiore's criminal charges were pending. Furthermore, the OIG investigation provided plaintiff with a hearing at which it was allowed to call witnesses and present evidence. Defendants further argued that even if plaintiff had been immediately afforded a full hearing, the outcome would have been the same, so plaintiff cannot recover any damages. Defendants argued that plaintiff's substantive due process claim was simply not applicable to a government contract, and the OMA claim failed because the Board's closed session was to meet with counsel and discuss privileged information before making a decision in a public session. Defendants conceded that plaintiff had a valid claim to a few thousand dollars arising out of the City's 2013 bankruptcy but argued that plaintiff had otherwise not factually supported its breach of contract or unjust enrichment claims. Defendants

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contended that mandamus was improper because plaintiff had no clear legal right to, and defendant had no clear legal duty to perform, any ministerial act.

The trial court agreed that plaintiff was not entitled to a pre-termination hearing, but it held that plaintiff had been entitled to a post-termination hearing. The trial court rejected defendants' argument that the hearing as part of the OIG investigation was sufficient: it was untimely because it was not held until almost seven months after Fiore's guilty plea, and it was not meaningful because it pertained to the propriety of issuing future permits to plaintiff rather than to...