Gemtel Corp. v. Community Redevelopment Agency of City of Los Angeles, 92-55368

Decision Date10 May 1994
Docket NumberNo. 92-55368,92-55368
Citation23 F.3d 1542
PartiesGEMTEL CORPORATION; Gemtel WDCH Hotel Associates, Plaintiffs-Appellants, v. COMMUNITY REDEVELOPMENT AGENCY OF the CITY OF LOS ANGELES; County of Los Angeles, Defendants-Appellees.
CourtU.S. Court of Appeals — Ninth Circuit

Orville O. Orr, Jr., Morgan, Lewis & Bockius, Los Angeles, CA, for plaintiffs-appellants.

Pamela S. Schmidt, Kane, Ballmer & Berkman, Los Angeles, CA, for defendant-appellee, Community Redevelopment Agency of the City of Los Angeles.

Lester J. Tolani, Deputy County Counsel, Los Angeles, CA, for defendant-appellee, County of Los Angeles.

Appeal from the United States District Court for the Central District of California.

Before: NOONAN, FERNANDEZ and KLEINFELD, Circuit Judges.

Opinion by Judge KLEINFELD.

KLEINFELD, Circuit Judge:

Gemtel sued the Community Redevelopment Agency and the County of Los Angeles for injunctive, declaratory and damages relief for violating federal rights. The action was dismissed for lack of jurisdiction, as moot in some respects and unripe in others. We affirm, though not entirely on the same grounds.


Lillian Disney, widow of Walt Disney, donated $50 million for a concert hall in the Bunker Hill area of Los Angeles. The Community Redevelopment Agency and Mrs. Disney's foundation decided that a luxury hotel would fit well into the development. They and Gemtel, a developer, negotiated toward building a luxury hotel on the Agency site, to be operated by Ritz-Carlton. The County of Los Angeles, to formalize the arrangement properly under California law, issued a "request for proposals," to which only Gemtel responded.

The deal fell apart when the Agency issued a draft "Policy on Employment Opportunities for Service Employees" which would apply to the development. The policy would require the hotel to pay "prevailing rates of wages and benefits" and provide a "basic level of working conditions." The wages and benefits would have to be "not less than the lowest rate" provided in any collective bargaining agreements covering any such employees, among other standards. Generally the conditions of employment and resolution of any grievances were to be supervised by the Agency.

The request for proposals had not said anything about such a labor policy. When the request for proposals was issued, Gemtel had already signed a "letter of intent" with the Disney foundation to develop the hotel. The County, though, never signed a contract with Gemtel. When, a few months later, the County and the Agency executed a contract with the Disney foundation, the contract required that any hotel developer be bound by the service employees policy which "the Agency is currently formulating." The Agency had not yet concluded its work on the final terms of the policy, and the policy could not go into effect until and unless the Agency obtained approval for it from the Los Angeles City Council. Thus it was impossible to say exactly what the policy would be, but Gemtel would have to subject the Ritz-Carlton to the policy for its employees, whatever it turned out to be, if such a policy was adopted and did not exempt the Ritz-Carlton on this site.

The request for proposals was not an offer of a contract. It expressly so provided:

The County reserves the right, at its sole discretion, to reject any and all offers for any reason or no reason. The County reserves the right to consider factors other than economic factors in its selection. Upon selection of the potential developer, the County will enter into a one hundred and twenty (120) day period of exclusive negotiations to negotiate the terms and conditions of the ground lease or ground leases, as may be appropriate. If an agreement is not reached, the County at its sole option, may then select another proposer with whom to negotiate.

The request did not include any provisions for reimbursing the expenses of bid preparation for any unsuccessful bidder. Gemtel alleged in its complaint that it spent over $2 million planning the hotel project.

Gemtel and the Ritz-Carlton chose not to proceed if they would be bound by the service employee policy. In April of 1991 the County terminated negotiations, subject to reopening them if the parties reached agreement on the labor policy before an imminent Agency meeting. Meanwhile, in June, Mrs. Disney wrote that she would withdraw her $50 million gift if construction did not start by the end of the year or beginning of 1992. The Agency and the Disney foundation then redesigned the project without the hotel.

By February of 1992, when the district court heard the motions, the Agency had decided to proceed with the concert hall development without a hotel. The County Board of Supervisors had approved the design in December. The project had been redesigned to exclude the hotel. No one else was hired to develop the hotel. It was cancelled.


Gemtel's theory of suit was that the County and the Agency, by imposing wage, hour and benefit requirements for the prospective hotel workers, violated ERISA and the National Labor Relations Act. Gemtel claimed entitlement to injunctive, declaratory and damages relief under 42 U.S.C. Sec. 1983, for violation of federal statutory rights based on federal preemption of the labor relations and benefits laws the County sought to impose. The district court ruled that the claims were moot, because the hotel was cancelled. The court also found that the terms of the service employee policy were not ripe for adjudication because no final policy had yet been adopted. It therefore dismissed the complaint for lack of jurisdiction under Federal Rule of Civil Procedure 12(b)(1). 1

1. Mootness.

The basis for the district court's determination of mootness was that once the County and the Agency decided to drop the hotel from the plan, the violations of federal labor and ERISA law involving hotel employees would no longer take place. The district court treated this as a voluntary cessation with no reasonable likelihood of recurrence and eradication of the effects of the violation under County of Los Angeles v. Davis, 440 U.S. 625, 631, 99 S.Ct. 1379, 1383, 59 L.Ed.2d 642 (1979). We review de novo. Coverdell v. Department of Social & Health Services, 834 F.2d 758, 766 (9th Cir.1987).

There was a serious question of whether the County and the Agency could impose the service employee policy on developers with whom they did business. See Golden State Transit Corp. v. City of Los Angeles, 493 U.S. 103, 110 S.Ct. 444, 107 L.Ed.2d 420 (1989); Associated Builders & Contractors, Inc. v. City of Seward, 966 F.2d 492 (9th Cir.1992), cert. denied, --- U.S. ----, 113 S.Ct. 1577, 123 L.Ed.2d 146 (1993). The district court did not reach this substantive issue of law. Neither do we. We assume without deciding, for purposes of the mootness discussion below, that the County and the Agency could not legally require the developer to pay "the prevailing wage" and benefits and otherwise manage the hotel's labor relations as it proposed to do in the draft policy.

We conclude that the claims for injunctive and declaratory relief were indeed moot. Once the County and the Agency had irrevocably decided to drop the hotel, such relief could not prevent harm to Gemtel. There could no longer be any harm to Gemtel from the service employee policy, because there would be no hotel. Because the County and the Agency had dropped the hotel, not just substituted another developer, no injunction could prevent harm. Even assuming, for purposes of discussion, that the labor policy was an illegal interference in federally preempted areas, nevertheless the County had reserved the right "for any reason or no reason" to decide not to proceed at all, and that is what it did.

This was not a case where the County was "free to return to [its] old ways." Cf. United States v. W.T. Grant Co., 345 U.S. 629, 632, 73 S.Ct. 894, 897, 97 L.Ed. 1303 (1953). No other hotel was going to be built in the Bunker Hill project. Gemtel argues that the district court should have treated the likelihood of future harm as a question of fact, but that is incorrect. Gemtel had the burden of demonstrating jurisdiction, in the face of the apparent mootness of the claim, and put forward no evidence of any reasonable likelihood that the hotel would be built. Both Davis conditions were satisfied, because there was no reasonable likelihood that Gemtel and the Ritz-Carlton would be subjected to the Agency labor policy, and any effect of imposing the policy on them was completely and totally eradicated by elimination of the hotel project. The district court properly found Gemtel's declaratory and injunctive relief claims to be moot.

Damages relief, though, is not moot. If an unlawful Agency labor policy killed a project which otherwise would have gone forward, then damages relief could redress the financial injury which Gemtel suffered. Gemtel evidently was to be the sole respondent on this request for a proposal to build a luxury hotel on County land next to the concert hall, and alleges that it spent $2 million responding. Even though the hotel is dead, so Gemtel will never have to comply with the labor policy, refusal to proceed with the proposal because of Gemtel's refusal to comply with an unlawful policy leaves a live controversy over Gemtel's entitlement to damages. See City of Richmond v. J.A. Croson Co., 488 U.S. 469, 478 n. 1, 109 S.Ct. 706, 713 n. 1, 102 L.Ed.2d 854 (1989); Glenwood Bridge, Inc. v. City of Minneapolis, 940 F.2d 367, 371 (8th Cir.1991).

2. Ripeness.

Nor is the claim for damages unripe. We review ripeness de novo. Municipality of Anchorage v. United States, 980 F.2d 1320, 1323 (9th...

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