DM Arbor Court, Ltd. v. City of Houston
Docket Number | CIVIL ACTION NO. 4:18-CV-01884 |
Decision Date | 17 August 2022 |
Citation | 622 F.Supp.3d 426 |
Parties | DM ARBOR COURT, LTD., Plaintiff, v. The CITY OF HOUSTON, TEXAS, Defendant. |
Court | U.S. District Court — Southern District of Texas |
Kenneth B. Chaiken, Robert L. Chaiken, Chaiken Chaiken PC, Plano, TX, for Plaintiff.
Pierre Charles Grosdidier, City of Houston Legal Department, Houston, TX, for Defendant.
On August 15, 2022, the Court held a hearing on six motions: Defendant's Motion for Partial Summary Judgment on Plaintiff's Equal Protection Claim (ECF No. 193); Defendant's Motion to Strike Plaintiff's Response (ECF No. 224); Defendant's Motion to Strike Mr. Marchitelli's Errata Sheet (ECF No. 241); Defendant's Motion to Exclude Mr. Marchitelli (ECF No. 200); Defendant's Motion for Partial Summary Judgment on Plaintiff's Takings Claim (ECF No. 199); and Plaintiff's Cross-Motion for Partial Summary Judgment on Plaintiff's Takings Claim (ECF No. 202). At the hearing, the Court ruled from the bench. The Court provides this Memorandum and Order to further document its rulings and reasoning.
Arbor Court was built in the late 1970s as a 15-building multi-family apartment community. ECF No. 203 at APPX0448. Plaintiff DM Arbor Court, Ltd. ("DMAC") bought Arbor Court for $13.5 million and invested another $500,000 into it. Id. at APPX0448-0449. DMAC operated Arbor Court under a Housing Assistance Payment Contract ("HAP Contract") from the U.S. Department of Housing and Urban Development ("HUD"). Id. at APPX0450. The HAP contract subsidized the apartments and, in return, required DMAC to use the units as affordable housing for low-income residents. Id.
Arbor Court flooded during the Tax Day Flood of April 2016. Id. at APPX0449. In response, DMAC sought and obtained repair permits from Defendant The City of Houston ("the City") under Chapter 19 of the Houston Code of Ordinances. Id. Subsequently, the City received a "drainage evaluation report" from Lockwood, Andrews, and Newnam, Inc. (the "LAN Report"). The LAN Report suggested that the City treat the area where Arbor Court is located as repetitively flooding. Id. at APPX0047; ECF No. 137 at 3-4. Thereafter, the City considered acquiring Arbor Court and repurposing the area for recreation and flood detention. ECF No. 203 at APPX0009-0010. City officials stated: "getting Arbor Court relocated should be one [of] our highest priorities." ECF No. 203 at APPX0008.
Arbor Court flooded again during Hurricane Harvey. Id. The buildings were damaged and first-floor tenants had to evacuate. Id. Once more, DMAC sought repair permits under the Ordinance. ECF No. 137 at 1. Judge Miller's opinion on the City's Motion to Dismiss provides helpful background on the Ordinance:
The requirements for obtaining a repair permit under the Ordinance turn in part on whether the permit calls for a "substantial improvement." A permit for a "substantial improvement" must comply with the Ordinance's additional requirements for new construction. See e.g., ECF No. 108-1, Ch. 19, art. III, § 19-33 (). A "substantial improvement" includes "any reconstruction, rehabilitation,... or other improvement of a structure, the cost of which equals or exceeds 50 percent of the market value of the structure before the start of construction of the improvement." Id., art. I, § 19-2 (defining substantial improvement). A "substantial improvement" further "include[s] structures that have incurred repetitive loss or substantial damage, regardless of the repair work performed." Id. A structure is "substantially damaged" when "the cost of restoration of the structure to its before damaged condition would equal or exceed 50 percent of the market value of the structure." Id. The upshot of this series of interlocking rules is that, if a structure is damaged by 50% or more during a flood, repairs must comply with the Ordinance's heightened requirements for new construction.
After Harvey, DMAC applied for "minor repair" permits for Arbor Court. ECF No. 193-1. DMAC proposed total repairs of $1,217,500, which would have covered damage to insulation and electrical outlets. Id. at COH/Arbor Court 000092-137. The City then conducted an independent "Substantial Damage Determination" ("SDD"). Using FEMA's Substantial Damage Estimator tool ("SDE"), the City's Floodplain Management Office ("FMO") calculated Arbor Court's value at around $8 million, and the damage from Harvey at around $5.8 million (approximately 73% of Arbor Court's total value). ECF No. 193-3. Because the structures were more than 50% damaged, the City concluded that Arbor Court was "substantially damaged" and demanded that DMAC comply with the Ordinance's "substantial improvement" provisions (including the elevation requirement). Id. Since DMAC's applications only sought approval for "minor repairs," the City denied those applications. ECF No. 203 at APPX0450-0451.
In the interim, an insurance adjuster (Wayne Milam) calculated the damage to Arbor Court for DMAC. Mr. Milam determined that all but two of the buildings were more than 50% damaged, and that Arbor Court was 59.7% damaged in total ($12 million in value vs. $7.2 million in damage). ECF No. 193-5. When DMAC's contractor (William "Keith" Cramer) learned of Mr. Milam's report, he told Mr. Milam that the figures "don't really give me what I need." ECF No. 193-8 at AC102789. Mr. Milam responded: "I'm sorry but I have rules to follow and I did what I could ... I'm sorry Keith I tried to help and I will help if you need me but you know I don't have the final say[.]" Id. at AC102788. Mr. Cramer replied: Id. at AC102787.
Undeterred, DMAC appealed the City's denial to the General Appeals Board ("GAB"). ECF No. 137 at 4. Before the GAB, DMAC relied on its own market value calculation ($16.6 million) and an estimate for repairs that was less than half of what Mr. Milam had relayed to Mr. Cramer ($3.4 million). ECF No. 203 at APPX045; ECF No. 193 at ¶ 17. In March 2018, the FMO used DMAC's heightened market values to redo the SDDs.2 ECF No. 193-10. Using DMAC's market values, the City concluded that Buildings 7-9 and 12-15 were not substantially damaged. Id. As a result, the City removed the hold on the permits for those structures. ECF No. 193-10. The City maintained the hold on the permits for Buildings 1-6 and 10-11, however, because it determined that those structures were still "substantially damaged." Id. DMAC then sent additional information to the FMO.3 DMAC's subsequent submissions went so far as to claim that Arbor Court was only 2% damaged. ECF No. 193-2 at ¶ 7. FMO Engineer Choyce Morrow states in an affidavit that she then tried to repeat the SDDs with DMAC's new data, but "could not complete them because [she] did not have all the required information." Id.
The permitting process took another turn in May 2018, when Ms. Morrow sent DMAC the...
To continue reading
Request your trial