Chakra 5, Inc. v. City of Miami Beach

• Decision Date: 22 August 2018
• Docket Number: No. 3D16-2569,3D16-2569
• Citation: 254 So.3d 1056
• Court: Florida District Court of Appeals
• Parties: CHAKRA 5, INC., et al., Appellants, v. The CITY OF MIAMI BEACH, Appellee.

254 So.3d 1056

CHAKRA 5, INC., et al., Appellants,

v.The CITY OF MIAMI BEACH, Appellee.

No. 3D16-2569

District Court of Appeal of Florida, Third District.

Opinion filed August 22, 2018

Kozyak Tropin & Throckmorton, LLP, and Thomas A. Tucker Ronzetti, Harley S. Tropin, and Tal J. Lifshitz, Miami, for appellants.

Raul J. Aguila, City Attorney, and Robert F. Rosenwald, Jr., First Assistant City Attorney; Carlton Fields Jorden Burt, P.A., and Alix Cohen, Miami, for appellee.

Before LAGOA, EMAS, and SCALES, JJ.

LAGOA, J.

Appellants, Chakra 5, Inc. ("Chakra 5"), 1501 Ocean Drive, LLC ("1501"), and Haim Turgman ("Turgman") (collectively, "Appellants"), appeal the trial court's final order dismissing with prejudice their claims against the City of Miami Beach (the "City"). Additionally, the City has moved to dismiss the appeal with respect to Chakra 5 and 1501 because of their administrative dissolution by the Florida Secretary of State. For the reasons set forth below, we deny the City's motion to dismiss the appeal. In addition, we affirm in part and reverse in part the trial court's final order. Specifically, we affirm the trial court's dismissal with prejudice with respect to claims based on injuries alleged to have occurred before May 20, 2009, as they are time barred. Additionally, we affirm the dismissal with prejudice of any claims asserting a violation of substantive due process, regardless of when the underlying events occurred. Finally, we reverse the dismissal with prejudice with respect to claims asserting a violation of procedural due process based on injuries alleged to have occurred after May 20, 2009.

I. FACTUAL AND PROCEDURAL BACKGROUND ¹

In early 2006, Turgman organized 1501 and Chakra 5 to purchase and operate an entertainment complex located in Miami Beach (the "Club"). The purchase was financed in part by a loan from a bank, which took a security interest in the Club. Appellants allege that, shortly after they took ownership of the Club, the City, through its code enforcement department, initiated a "campaign of harassment" against the Appellants, with the aim to extort bribes from them.

As alleged, City code enforcement inspectors unfairly enforced the City's existing building, zoning, fire and tax regulations against the Club. Prior to May 20, 2009, City inspectors allegedly:

(1) delayed, from July 4, 2006, through December 11, 2006, the issuance of a conditional use permit required for the Club to open;

(2) conducted "successive, pre-textual inspections" after the Club opened in December 2006;

(3) shut the Club down for operating past midnight on January 26, 2007, even though the Club's permit authorized it to be open until 5:00 a.m., and required Turgman to pay $3445 to operate until 5:00 a.m.;

(4) visited the Club several times per week during the first half of 2007 and issued two citations during this time period—one for violating the City's noise ordinance when the Club was not open and one for not turning on a rooftop sign;

(5) after a lull in inspection activity after Turgman changed the Club's name and management staff, the City code enforcement staff resumed their prior level of inspections in September 2008 after discovering Turgman's continuing involvement with the Club;

(6) on November 20, 2008, City code enforcement issued a cease and desist order prohibiting the Club's operations for not having code-compliant fire exits, even though the City had approved the construction plans of a neighboring establishment to remove the Club's fire exits; and

(7) after Turgman notified the City in writing of his intent to sue for the closure of the Club, the City monitored every event held at the Club, and in many instances, City inspectors orally ordered Turgman to not let people inside or to shut down the Club.²

The following actions allegedly occurred after May 20, 2009:

(1) in February 2010, a City official informed organizers planning an event at the Club that the Club would be shut down the night of their event, due to a failure to pay past due resort taxes; Appellants subsequently entered into a payment plan with the City to avoid the closure;

(2) Turgman was fined $1800 for event flyer litter violations resulting from a March 2010, Winter Music Conference event over a month after that event occurred; and

(3) on June 3, 2011, the City's Lead Code Compliance Officer, code inspector Jose Alberto, solicited an initial bribe from Turgman, followed by numerous other bribes Turgman paid to various City employees.³

Finally, at a date not specifically alleged in the amended complaint, City officials decided they wanted to permanently put the Club out of business and directed code enforcement to do whatever was necessary to achieve that goal.⁴ Appellants allege that this decision was due to Turgman's unwillingness to contribute to certain City officials' election campaigns or to provide them favors.

Allegedly as a result of the City's actions, Appellants suffered significant financial losses, and in 2010, defaulted on the loan secured by the Club. The lender subsequently took possession of the Club and sold it at a May 26, 2012, auction.

On May 20, 2013, Appellants filed the instant action against the City and the seven City employees involved in the alleged extortion scheme. On October 23, 2015, Appellants filed their amended complaint, which included two counts against the City under 42 U.S.C. § 1983 (2012) asserting deprivation of their rights to substantive and procedural due process.

In response to the amended complaint, the City filed a motion to dismiss, asserting that: (1) Appellants failed to state a cause of action; (2) the statute of limitations barred Appellants' injuries prior to May 20, 2009; and (3) Chakra 5 and 1501 could not proceed with their claims because they had been administratively dissolved. After holding a hearing on the matter, the trial court entered a final order dismissing the counts against the City with prejudice and dismissing the City from the case.⁵ This appeal ensued.

II. STANDARD OF REVIEW

We review de novo an order granting a motion to dismiss with prejudice. Falkinburg v. Village of El Portal, 183 So.3d 1189, 1191 (Fla. 3d DCA 2016). We are bound by the same restrictions the trial court faced when it ruled on the motion to dismiss, and we therefore treat as true all of the well-pled allegations of the complaint, including its incorporated attachments, and "look no further than the complaint and its attachments." Id.

III. ANALYSIS

We first consider the City's argument that because Chakra 5 and 1501 were administratively dissolved by the Florida Secretary of State, this appeal with respect to those entities should be dismissed or, alternatively, the trial court's order should be affirmed under the "tipsy coachman" doctrine. Second, we address whether Appellants' claims are barred by the statute of limitations and whether they fail to state a claim.⁶

A. Administrative Dissolution of the Entity Appellants

Chakra 5 and 1501 are a Florida corporation and a Florida limited liability company, respectively. Although not relied upon by the trial court in dismissing the City from the instant case, the City has argued, both here and below, that Chakra 5 and 1501 cannot maintain suit either in the trial court or on appeal because they have been administratively dissolved by the Florida Secretary of State. Accordingly, the City argues that their appeal should be dismissed or, alternatively, that the trial court's dismissal as to these two entities should be affirmed under the "tipsy coachman" doctrine, i.e., that the trial court was right for the wrong reason. E.g., Porter v. Porter, 913 So.2d 691, 694 (Fla. 3d DCA 2005).

Appellants' appendix to their reply includes two certificates of status, which we take judicial notice of,⁷ from the Florida Secretary of State showing that both Chakra 5 and 1501 have been reinstated and are now active. As this Court has previously stated:

The sanctions authorized for failing to file an annual report—involuntary dissolution and the inability to carry on any business, including bringing or defending a lawsuit, other than that necessary to wind up its affairs under sections 607.1420 and 607.1421—are intended to benefit the State, not third parties outside the corporation/State relationship. Hence, the [defendants], "who are strangers to the dealings between plaintiff and the State, should not be allowed to take advantage of the plaintiff's default ... to escape their own obligations to the plaintiff."

Allied Roofing Indus., Inc. v. Venegas, 862 So.2d 6, 9 (Fla. 3d DCA 2003) (quoting Cosmopolitan Distribs., Inc. v. Lehnert, 470 So.2d 738, 739-40 (Fla. 3d DCA 1985) ); see also Bldg. B1, LLC v. Component Repair Servs., Inc., 224 So.3d 785, 788 (Fla. 3d DCA 2017). Venegas is clear that when the issue of an entity's status with the Florida Secretary of State is raised, the appropriate course by a trial court is to abate the action for a brief period of time to permit compliance with the statute; only after a failure to comply within a reasonable time may sanctions such as dismissal be considered. Venegas, 862 So.2d at 9.

Accordingly, as Chakra 5 and 1501 are now reinstated, the litigious disability has been cured. E. Invs., LLC v. Cyberfile, Inc., 947 So.2d 630, 631-32 (Fla. 3d DCA 2007) ("The language of the statute suggests that any failure to comply simply prevents a plaintiff from prosecuting the action, a disability that can be remedied at any point."); Indus. Nat'l Mortg. Co. v. Blake, 406 So.2d 103, 104 (Fla. 3d DCA 1981) ("Industrial National could have overcome its litigious disability by the simple expedient of filing the overdue reports and paying the back taxes."); accord § 607.1422(3), Fla. Stat. (2013) ("When the reinstatement is effective, it relates back to and takes effect as of the effective date of the administrative dissolution and the corporation resumes carrying on its business as if the administrative dissolution had never occurred."); §...