La. Cmty. Dev. Capital Inv. Fund, Inc. v. Grambling Legends Square Taxing Dist.

• Decision Date: 16 April 2015
• Docket Number: CIVIL ACTION NO. 14-2212
• Parties: THE LOUISIANA COMMUNITY DEVELOPMENT CAPITAL INVESTMENT FUND, INC. AND FAITH INVESTMENTS, LLC v. THE GRAMBLING LEGENDS SQUARE TAXING DISTRICT
• Court: U.S. District Court — Western District of Louisiana

THE LOUISIANA COMMUNITY DEVELOPMENT CAPITALINVESTMENT FUND, INC. AND FAITH INVESTMENTS, LLC v. THE GRAMBLING LEGENDS SQUARE TAXING DISTRICT

CIVIL ACTION NO. 14-2212

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF LOUISIANA MONROE DIVISION

April 16, 2015

JUDGE ROBERT G. JAMES

MAG. JUDGE KAREN L. HAYES

REPORT AND RECOMMENDATION

Before the undersigned magistrate judge, on reference from the District Court pursuant to 28 U.S.C. § 636(b)(1)(B), is a motion to dismiss for failure to state a claim upon which relief can be granted, Fed.R.Civ.P. 12(b)(6) [doc. # 21] filed by defendant The Grambling Legends Square Taxing District. The motion is opposed. For reasons assigned below, it is recommended that the motion be GRANTED.

I. Procedural Background

On June 30, 2014, plaintiffs, the Louisiana Community Development Capital Fund, Inc. ("CapFund") and Faith Investments, LLC ("Faith Investments") filed the instant civil rights action under 42 U.S.C. § 1983 against The Grambling Legends Square Taxing District (the "District"). In their original complaint, plaintiffs alleged that the District violated their right to equal protection under the Fourteenth Amendment to the U.S. Constitution by refusing to entertain their proposal to develop a hotel project to be funded by tax incremental financing, despite approving funding for a purportedly similar hotel project. See Compl. Plaintiffspetitioned the court to find that the District's action/inaction violated the Fourteenth Amendment and, consequently, order the District to approve plaintiffs' proposed special taxing district financial resolution for approximately $2,640,000 in incremental bond financing. See Compl., Exh. 6. In the alternative, plaintiffs asked for an award of compensatory and punitive damages. (Compl., Req. for Relief). They also sought costs, expenses, and reasonable attorney's fees.

On July 23, 2014, the District filed a motion to dismiss under Rule 12 - principally for failure to state a claim upon which relief can be granted. In support of its motion, the District argued, inter alia, that plaintiffs failed to allege requisite facts to support the elements of either a due process or equal protection claim.¹ On December 8, 2014, the undersigned issued a report recommending that the court grant the District's motion to dismiss on the grounds that it failed to state a claim upon which relief can be granted. See Dec. 8, 2014, R&R [doc. # 15]. However, because it was conceivable that plaintiffs could cure their deficient pleadings via amendment, the recommendation of dismissal was subject to plaintiffs' opportunity to seek leave of court to amend their complaint to cure the deficient allegations. Id.

Neither side filed objections to the report and recommendation.² Instead, on January 2, 2015, plaintiffs obtained leave of court to file an amended complaint. [doc. #s 18-20]. The new pleading changed various paragraphs of the original complaint by 1) adding a Fourteenth Amendment due process claim for the "taking" of plaintiffs' land by placing it in the Districtwithout notice or plaintiffs' consent; 2) deleting plaintiffs' "class of one" equal protection claim; 3) formally including conclusory allegations that the District discriminated against plaintiffs because of their status as African-American businesses; and 4) clarifying that plaintiffs' request for funding from the District pertained to property located within the District. (Amend. Compl. [doc. # 20].

On January 22, 2015, the District filed the instant motion to dismiss for failure to state a claim upon which relief can be granted in which it re-urged its successful arguments from its prior motion and added new grounds to address plaintiff's amended pleading. Plaintiffs filed their opposition on February 13, 2015. [doc. # 25]. The District did not seek leave to file a reply, and the time to do so has lapsed. See Notice of Motion Setting [doc. # 22]. Thus, the matter is ripe.

II. Plaintiffs' Allegations (as Amended) and the Documents Referenced in the Complaint³

Plaintiff, the CapFund, is an "African-American Louisiana 501(c)(3) tax exempt non-profit organization . . ." (Compl., ¶ 3). Plaintiff, Faith Investments, is a "majority African American owned Louisiana Limited Liability Company . . ." comprised of two members: the CapFund (51%) and attorney/developer, Jules B. LeBlanc III (49%). Id., ¶¶ 5-6.

Defendant, the District, is a "special taxing district and political subdivision of the state . .. created in the city of Grambling, parish of Lincoln." Id., ¶ 6; La. R.S. § 33.9038.66.

The purpose of the District is to foster "cooperative economic development among the city, the district, the state, owners of property within the district, and other entities as permitted by law in order to provide for the following:

(1) The construction, infrastructure, renovation, and development of certain properties within the city of Grambling, including a hotel and Legends Square and to provide for economic development for the city of Grambling and the district.

(2) The utilization of sales tax increment financing⁴ of the costs and expenses associated with infrastructure improvements constructed in accordance with the Legends Square Development Plan for the commercial development of all or any portion of the property located within the boundaries of the district as provided for in Subsection H of this Section."

La. R. S. § 33:9038.66(C) (emphasis added); see also Compl., ¶ 11.

The District is composed of six parcels or tracts of land located in the City of Grambling. (Compl., ¶ 8; La. R. S. § 33:9038.66(B)). The CapFund owns Parcel No. 6 (described as 0.223 acres, including a portion of the I-20 interchange), which is located within the District. (Compl., ¶¶ 9, 16; La. R. S. § 33:9038.66(B)). On January 4, 2014, the CapFund executed an option to sell the foregoing parcel of land to Faith Investments for purposes of constructing and operating a Mainstay Suites Hotel Annex and other infrastructure. Id.⁵

The City of Grambling also owned a tract of land within the District on which it or its affiliates planned to construct and operate a Marriott Hotel and Legends Square Retail Center.(Compl., ¶ 10).

By letter dated February 20, 2014, Faith Investments' minority shareholder, Jules LeBlanc, III, wrote to the Board of Commissioners for the District (the "Board") to advise the body that Faith Investments had received a franchise to own and operate a MainStay Suites Hotel. (Compl., ¶18; Exh. 3). LeBlanc added that "if this property is covered by the Taxing District . . ." then he would like the Board to enact an ordinance permitting the hotel occupancy tax generated by the hotel to be used to finance the construction of the development. Id. (emphasis added). He also asked the Board to issue bonds up to the full amount of the hotel occupancy tax increments. Id. LeBlanc noted in his letter that Mayor Jones had advised him that their request would be on the agenda for the Board's March 5, 2014, meeting. (Compl., Exh. 3). Toward that end, LeBlanc requested all necessary documentation to present the request for funding to the Board. Id. He concluded by stating that "if the Taxing District does not cover the Grambling Plaza property please advise prior to the meeting." Id. (emphasis added).

In a May 22, 2014, e-mail to the Grambling Mayor, Jules LeBlanc asked that Faith Investments be placed on the agenda for the Board's June 5, 2014, meeting. (Compl., ¶ 20; Exh. 4). Despite having failed to receive requested policies and rule-making procedures from the Board, LeBlanc nonetheless managed to attach a proposed financing resolution and description of the CapFund's property to be considered at the June 5, 2014, meeting. (Compl., ¶¶ 19, 22; Exh. 5). The proposed resolution sought

financial support in the form of sales tax increment financing and hotel occupancy tax, for the construction and development of the hotel project to be known as Grambling MainStay Suites Hotel Visitors Center Complex (the "Project"), a portion of which Project is intended to be constructed on the current site that is part of the Grambling Square Taxing District . . .

(Compl., Exh. 5) (emphasis added).⁶

The financing proposal totaled $3,300,000, including $2,640,000 in Incremental Bond Financing. (Compl., 24; Exh. 6).

On May 23, 2014, plaintiffs' attorney, Ernest Johnson, e-mailed Mayor Jones, President Copeland, and the District's attorney, Pamela Breedlove. (Compl., ¶ 25, Exh. 7). Johnson explained that LeBlanc's request to appear before the Board was solely to discuss support for a development to be located within the District at Grambling Plaza. Id. He noted that LeBlanc wanted an opportunity to appear before the Grambling City Council to obtain support for the projects. Id.

That same date, Breedlove responded to Johnson that

[a]s explained in the attached letter and discussed at the April meeting, the Legends Square TIF District cannot levy or collect occupancy taxes or utilize sales tax increment financing on property not located within its boundaries. Therefore, the Legends Square TIF District cannot legally adopt the resolution you have requested of it. The City cannot legally levy hotel occupancy taxes.

(Compl., ¶¶ 26-27; Exh. 8).

Breedlove concluded that because the District and the City of Grambling could not legally provide the assistance requested by plaintiffs, there was nothing to be placed on the agendas for the Board or City Council meetings. Id. She attached a copy of the letter that she had sent toLeBlanc regarding LeBlanc's request to be placed on the agendas. Id. The letter stated, in pertinent part, that,

[w]ith regards [sic] to your request for a resolution of the TIF District regarding "the utilization of the Sales Tax Increment Financing Hotel Occupancy Tax," that request is also beyond the authority of the TIF District Board. As you will recall, it was determined at the TIF District meeting in April that all but a small corner of the property at

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