CHKRS, LLC v. City of Dublin

• Decision Date: 04 January 2021
• Docket Number: No. 20-3435,20-3435
• Parties: CHKRS, LLC, Plaintiff-Appellant, v. CITY OF DUBLIN, Ohio; Dana McDaniel, City Manager of Dublin, Ohio, Individually and in his official capacity, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

984 F.3d 483

CHKRS, LLC, Plaintiff-Appellant,

v.CITY OF DUBLIN, Ohio; Dana McDaniel, City Manager of Dublin, Ohio, Individually and in his official capacity, Defendants-Appellees.

No. 20-3435

United States Court of Appeals, Sixth Circuit.

Argued: December 1, 2020

Decided and Filed: January 4, 2021

ARGUED: Warner Mendenhall, THE LAW OFFICES OF WARNER MENDENHALL, Akron, Ohio, for Appellant. Yazan S. Ashrawi, FROST BROWN TODD LLC, Columbus, Ohio, for Appellees. ON BRIEF: Warner Mendenhall, THE LAW OFFICES OF WARNER MENDENHALL, Akron, Ohio, for Appellant. Yazan S. Ashrawi, Jeremy M. Grayem, FROST BROWN TODD LLC, Columbus, Ohio, for Appellees.

Before: DAUGHTREY, NALBANDIAN, and MURPHY, Circuit Judges.

MURPHY, Circuit Judge.

To establish the "standing" required for jurisdiction under Article III of the Constitution, plaintiffs must allege the "invasion of a legally protected interest." Spokeo, Inc. v. Robins , ––– U.S. ––––, 136 S. Ct. 1540, 1548, 194 L.Ed.2d 635 (2016) (citation omitted). To establish a violation of the Takings Clause on the merits, plaintiffs must similarly prove that the government has taken a "cognizable" property interest. Coal. for Gov't Procurement v. Fed. Prison Indus., Inc. , 365 F.3d 435, 481 (6th Cir. 2004). Given these overlapping requirements for jurisdiction and the merits, what happens if a plaintiff fails to prove the required property interest? Does it show the lack of the "legally protected" interest necessary for jurisdiction? Or does it instead show the lack of a "cognizable" interest necessary for the merits of the takings claim?

This case implicates these questions. According to the complaint of CHKRS, LLC, the City of Dublin violated the Takings Clause when it tore out a property's driveway and replaced it with a defective driveway without paying compensation. CHKRS had a lease interest in the property at the time and now owns it outright. The district court nevertheless held that CHKRS failed to establish Article III standing. The court reasoned that issue preclusion barred CHKRS from asserting any protectable interest in the property because state courts had already found that it lacked such an interest. Yet Article III standing was not the correct doctrine.

As long as a plaintiff has asserted a colorable legal claim (and has met standing's other elements), the plaintiff has satisfied Article III and the court may resolve the claim on its merits. And here, CHKRS has established its standing by alleging a colorable interest in the property for its takings claim. The district court misread Ohio issue-preclusion law in reaching the contrary result. We thus reverse the district court's standing-based dismissal of CHKRS's takings claim, but we affirm the court's dismissal of CHKRS's due-process claims on separate forfeiture grounds.

I

This appeal arises from the pleading stage, so we accept as true the well-pleaded facts in CHKRS's complaint. See Bates v. Green Farms Condo. Ass'n , 958 F.3d 470, 478 (6th Cir. 2020). In July 2015, CHKRS entered into a three-year contract with Karen Michelle Friedman to lease Friedman's residential property in Dublin, Ohio. The property sits on the east side of Riverside Drive, a road that runs north-south through Dublin. The lease gave CHKRS an option to buy the property anytime during the three-year period by giving 30 days’ notice. CHKRS paid $8,500 for this purchase option, a nonrefundable amount that CHKRS could use against the purchase price if it chose to buy the home. The lease also included a provision governing who should receive funds from the City of Dublin if the city chose to use its eminent-domain powers to take any part of the property: "Any monies dispersed [sic] by the City of Dublin ... are payable to Karen Michelle Friedman until [CHKRS] has procured on the purchase option."

The parties may have put this eminent-domain term into their contract because Dublin had been constructing a roundabout just north of the leased property at the intersection of Riverside Drive and another road. On September 30, 2015, as part of that project, Dublin gave a letter to the property's residents informing them that workers would be entering in November to construct a bike path. The planned path would travel along the east side of Riverside Drive and run through a portion of the leased property in between the road and the home (which sat a distance off of the road).

Over the next nine months, the parties litigated this taking in state trial court. Dublin initiated a "quick-take" action against Friedman, the property owner, to obtain a permanent bike-path easement across the property and a temporary easement for the construction. Dublin soon learned of CHKRS's lease and added it to the suit. The city's appraiser valued the easement at $25,080, and the city deposited the funds with the court. Friedman moved to have this amount paid to her. A member of CHKRS, however, emailed Friedman and indicated that CHKRS intended to buy the property. After this email, CHKRS and Friedman disputed who had the right to receive the city's funds under the lease. The lease indicated that city funds should go to Friedman until CHKRS "procured" on its "purchase option." The state court read this language (particularly, the use of the verb "procured") to require CHKRS to have actually closed on the sale. Because CHKRS's email merely informed Friedman of an intent to purchase, the court held that the email, even if it qualified as adequate notice under the lease, did not suffice to "procure" on the purchase option. The court thus found Friedman entitled to Dublin's funds. In June 2016, Friedman and Dublin settled the city's action for $47,500. See City of Dublin v. Friedman , 101 N.E.3d 1137, 1143 (Ohio Ct. App. 2017).

CHKRS appealed. A state appellate court affirmed the trial court's interpretation of the lease provision. See id. at 1150–51. The Ohio Supreme Court denied CHKRS's request for discretionary review. See Dublin v. Friedman , 152 Ohio St.3d 1479, 98 N.E.3d 294 (2018).

While this state appropriation suit progressed, Dublin undertook the planned construction. According to CHKRS's complaint, Dublin began removing the existing driveway in November 2015, and "it has not been possible to safely enter or exit the property" since that time. In July 2016, after the state trial court entered its final judgment, CHKRS's complaint alleges that the city reentered the property and tore out an initial replacement driveway that it had installed. In November of the same year, the city constructed a new driveway that veered south as it connected with Riverside Drive:

Compl., R.38, PageID#563. Dublin allegedly gave CHKRS no notice before this second round of construction, and the city also did not file another appropriation suit to pay for it.

CHKRS asserts that the new driveway layout suffers from design flaws and violates state and municipal building and traffic codes. Residents attempting to turn onto Riverside Drive out of the residence purportedly cannot see oncoming traffic approaching from the south. This northbound traffic also allegedly cannot see a car stopped on the driveway attempting to turn onto the road. And the design has purportedly made it impossible for a car travelling southbound on Riverside Drive to turn left into the property.

After the state litigation, CHKRS completed its purchase of this property. Friedman signed over her deed on July 31, 2018. CHKRS then filed federal litigation against Dublin and its city manager, Dana McDaniel (collectively, "Dublin"). CHKRS's amended complaint asserted a takings claim and two due-process claims. It sought payment for Dublin's second round of construction in 2016 when the city replaced the initial replacement driveway with an allegedly defective one. CHKRS disavowed any attempt to again seek payment for the taking at issue in the state suit: the city's appropriation of the bike-path easements.

The district court granted judgment on the pleadings to Dublin. CHKRS, LLC v. City of Dublin , 2020 WL 1331926, at *8 (S.D. Ohio March 23, 2020). Starting with the takings claim, the court held that CHKRS lacked Article III standing.

Id. at *4–7. It reasoned that the state courts had already held that CHKRS lacked a protectable interest in the property and that the doctrine of issue preclusion barred CHKRS from relitigating this issue. Id. at *6–7. According to the court, the absence of a protectable interest deprived CHKRS of standing to assert its takings claim. Id. at *7. Turning to the due-process claims, the court found that CHKRS had abandoned them by making no arguments in response to Dublin's motion for judgment on the pleadings. Id. at *7–8.

CHKRS appeals. We review the district court's decision de novo. Bates , 958 F.3d at 479.

II. Takings Claim

The district court made two mistakes in concluding that CHKRS lacked Article III standing to assert its takings claim. It mistook the substantive requirements of the Fifth Amendment's Takings Clause for the jurisdictional requirements of Article III. And it mistook the state courts’ holding on one issue (that CHKRS, as lessee, could not seek already-disbursed funds) as resolving the different issue in this case (whether CHKRS, as owner, may seek yet-to-be-disbursed funds).

A

Article III of the Constitution vests the federal courts with only the judicial "Power" to resolve "Cases" or "Controversies." U.S. Const., art. III, § 2. For a dispute to qualify as an Article III "case" that a federal court may resolve, the plaintiff who brings the dispute to the court must have "standing." Buchholz v. Meyer Njus Tanick, PA , 946 F.3d 855, 860 (6th Cir. 2020). To establish standing, the plaintiff must allege three well-known ingredients: that the plaintiff has suffered an injury; that the injury traces to the defendant's actions; and that a ruling for the plaintiff would likely redress this injury. See Spokeo, Inc. v. Robins , ––– U.S. ––––, 136 S. Ct. 1540, 1547, 194 L.Ed.2d 635 (2016).

An ...