Loesel v. City of Frankenmuth

• Decision Date: 20 August 2012
• Docket Number: No. 10–2354.,10–2354.
• Citation: 692 F.3d 452
• Parties: Ronald LOESEL, Arthur Loesel, Gayle Loesel, Elaine Loesel, Valerian Nowak, and Valerian Nowak and Alice B. Nowak Trust by Valerian Nowak, Plaintiffs–Appellees, v. CITY OF FRANKENMUTH, Defendant–Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

692 F.3d 452

Ronald LOESEL, Arthur Loesel, Gayle Loesel, Elaine Loesel, Valerian Nowak, and Valerian Nowak and Alice B. Nowak Trust by Valerian Nowak, Plaintiffs–Appellees,

v.CITY OF FRANKENMUTH, Defendant–Appellant.

No. 10–2354.

United States Court of Appeals, Sixth Circuit.

Argued: May 29, 2012.

Decided and Filed: Aug. 20, 2012.

ARGUED:Mary Massaron Ross, Plunkett Cooney, Bloomfield Hills, Michigan, for Appellant. Andrew Kochanowski, Sommers Schwartz, P.C., Southfield, Michigan, for Appellees. ON BRIEF:Mary Massaron Ross, Plunkett Cooney, Detroit, Michigan, for Appellant. Andrew Kochanowski, Jesse Young, Sommers Schwartz, P.C., Southfield, Michigan, for Appellees.

Before: MARTIN, GILMAN, and WHITE, Circuit Judges.

OPINION

RONALD LEE GILMAN, Circuit Judge.

This appeal concerns the legality of actions taken by the City of Frankenmuth (the City) to keep a Wal–Mart supercenter from being built on land owned by the Loesel family in Frankenmuth Township (the Township). As the result of a post purchase-agreement ordinance that restricted the size of any new buildings on the property to 65,000 square feet or less, Wal–Mart Real Estate Business Trust (Wal–Mart) terminated its conditional agreement to purchase the Loesels' land for $4 million.

The Loesels sued the City for damages, claiming that the selective zoning ordinance violated their rights under the Equal Protection Clause of the Fourteenth Amendment to the U.S. Constitution. A jury agreed, awarding the Loesels $3.6 million in damages. For the reasons set forth below, we REVERSE the judgment of the district court and REMAND the case for further proceedings consistent with this opinion.

I. BACKGROUND

A. Factual background

Frankenmuth, “Michigan's Little Bavaria,” is one of the top tourist destinations in Michigan. Despite its popularity with tourists, Frankenmuth maintains a small town atmosphere with a population of 4,838 in the City and 2,049 in the Township, according to the 2000 U.S. Census (the last Census taken before the events relevant to this case occurred). The City is famous for its Bavarian-themed stores, restaurants such as the Bavarian Inn and Zehnder's serving family-style chicken dinners, and its gift shops. Bronner's Christmas Wonderland, the world's largest year-round Christmas store, draws over two million visitors annually.

The plaintiffs, Ronald Loesel, Arthur Loesel, Gayle Loesel, Elaine Loesel, Valerian Nowak, and The Valerian Nowak and Alice B. Nowak Trust (collectively, the Loesels), are the co-owners of a 37–acre tract of land that borders Main Street just outside the Frankenmuth city limits. They inherited the property from their mother when she died in 2003. A 2003 property-tax appraisal valued the land at $95,000.

The Loesels' property has been used as farmland for nearly 100 years. Although not within the City's boundaries, the property is within the urban growth area that was established jointly by the City and the Township in 1985 to confine and guide urban growth in order to retain the character of the Frankenmuth community. The City's and the Township's growth is guided by their Joint Growth Management Plan (the Plan) that sets forth the goals for Frankenmuth's expansion. In 1985, the first version of the Plan was drafted and, in June 2005, the second version of the Plan was formally adopted.

The two governments agreed as part of the Plan that they should “[p]romote compact residential and commercial development inside the urban limit line,” which included the Loesels' property. To promote growth, the western portion of the Loesels' property along Main Street, approximately 15 acres in size, was zoned as Commercial Local Planned Unit Development (CL–PUD), with the remaining 22 acres to the east designated as Residential Planned Unit Development (R–PUD). Permitted uses for CL–PUD–zoned properties include developments that “provide principally for sale of goods and services to meet the general needs of the residents of the Frankenmuth community, including but not limited to grocery, department, drug and hardware stores, financial institutions, professional and personal service offices and transportation sale and service businesses.” City of Frankenmuth, Mich., Zoning & Planning Code § 5.241.3(1) (2009).

At the time the Loesels inherited the property, the land was being leased to a tenant farmer. In 2004, however, the Loesels were approached by a real-estate broker who told them he had a client interested in purchasing their property. The Loesels met with the broker and discovered that he represented Wal–Mart. Because the western portion of the Loesels' property abuts Main Street and is commercially zoned, Wal–Mart was interested in buying the property to build a store.

In early 2005, City officials became aware that Wal–Mart was interested in purchasing and developing the Loesels' property. The district court summarized the reaction of the City Manager as follows:

On March 29, 2005, upon learning that Plaintiffs were talking to Wal–Mart, ... City Manager Charles Graham emailed a planner acquaintance at the Michigan Department of Transportation (“MDOT”) stating that “[City Clerk] Phil Kerns has now confirmed there will be a meeting here on April 7th pertaining to the Loesel property on North Main.” The next day, Graham emailed the planner at MDOT and said, “We have heard rumors that the proposed project is a Walmart which I am totally opposed to, and I think most people in Frankenmuth will be opposed to.” However, Graham acknowledged that [the Loesels'] property was properly commercially zoned and that as a consequence, absent action by [the City], [the Loesels] had a right to sell the property to Wal–Mart for a store to be built in the northern end of town.

(Brackets around “[City Clerk]” in original; all other brackets added.)

On May 26, 2005, the Loesels entered into a conditional agreement to sell 23.55 acres of their land to Wal–Mart for $2,943,750, which works out to precisely $125,000 per acre. Wal–Mart had 180 days under the agreement to determine the feasibility of its planned development of the property. “At any time prior to the end of the Feasibility Period, Wal–Mart [was permitted to], for any reason in its sole and absolute discretion, cancel [the] Agreement and receive a refund of the [$50,000] Deposit.”

City Manager Graham, however, did not give up his fight against Wal–Mart, as the following excerpt from the district court's opinion explains:

At a point after [the Loesels] had signed the agreement with Wal–Mart, Graham began to solicit information concerning other communities' efforts to exclude Wal–Mart from their towns. On June 22, 2005, in response to an email he sent requesting assistance on how to oppose the Wal–Mart, Graham was told that [the City] could[ ] “[a]dd a provision to the zoning ordinance that limits the size of any commercial building. That will stop them from enlarging and may stop them from beginning if they know they cannot enlarge.” In the same email, Graham was advised: “Be sure to do a good internet search first because WalMart has challenged some of those provisions and won when they were poorly drafted, but lost when they weren't, if I recall correctly.” Graham was further advised: “It is definitely better for citizens to fight it instead of the city and township.”

On July 14, 2005, Graham attended a meeting of the Frankenmuth Economic Development Corporation (“EDC”). At the meeting Graham acknowledged that he had reviewed the proposed site plan submitted by Wal–Mart's engineers, and admitted that, as shown, it appeared that the zoning allowed the proposed project. The EDC estimated that the Wal–Mart store would generate between $40,000 and $50,000 in annual [property] tax revenue for [the City], which would have added an additional two-percent to [the City's] annual property tax revenue, with total tax revenue for [all local taxing entities] amounting to between $200,000 and $250,000.

.... On July 15, 2005, Sheila Stamiris, Executive Director of the DDA [ (Frankenmuth Downtown Development Authority) ], sent a memorandum to the Frankenmuth Mayor and City Council. She advised [the] Mayor and the City Council that [the Loesels] had been offered a large sum of money by Wal–Mart for their land. She said:

Tuesday we awkwardly discussed the proposed Walmart project. As I already suggested, we have not brought the discussion to the public agenda. If there is anything good to say about the project, we can say that we have been given a heads up by the owner and perhaps we have been given a gift of time to adequately plan for this controversial project. I feel strongly that the City should remain neutral while fact finding is completed.

Stamiris expressly advised [City officials] that the proposed store was a 104,000 square-foot super-center including sundry and drygoods, a grocery, a pharmacy, and a tire center. Stamiris identified the precise location of the proposed store. Shortly after writing the memorandum, Stamiris advised Graham and other [City] officials that other Michigan towns had not experienced problems with Wal–Mart stores. She forwarded an email from the Downtown Development Authority of DeWitt, Michigan, a town roughly the same size as [the City], that said in response to her inquiry:

We have three Wal–Marts within a twenty mile radius. To this point we have not noticed that specifically, Wal–Mart has negatively impacted our downtown. We recently lost a dollar store, but [I] am not sure it could be contributed [sic] to the opening of a Wal–Mart. It seems that folks in this area are of the opinion that shoppers will go where they can get the best deal and Wal–Mart has good deals. We feel that the Big Box stores offering one stop shopping appeal to younger shoppers with convenience as their goal.

Stamiris also forwarded to [City officials] an Economic Impact Report that estimated the new Wal–Mart store would generate between three- and five-hundred jobs and...