Ma Leg Partners 1 v. City of Dall.

• Decision Date: 04 March 2020
• Docket Number: Civil Action No. 3:19-CV-00219-X
• Citation: 442 F.Supp.3d 958
• Parties: MA LEG PARTNERS 1, Plaintiff, v. CITY OF DALLAS, Defendant.
• Court: U.S. District Court — Northern District of Texas

442 F.Supp.3d 958

MA LEG PARTNERS 1, Plaintiff,

v.CITY OF DALLAS, Defendant.

Civil Action No. 3:19-CV-00219-X

United States District Court, N.D. Texas, Dallas Division.

Signed March 4, 2020

Richard B. Schiro, Greg E. Butts, Law Office of Richard B. Schiro, Dallas, TX, for Plaintiff.

Cal Alfred Estee, Justin Henry Roy, Dallas City Attorney's Office, Dallas, TX, for Defendant.

MEMORANDUM OPINION AND ORDER

BRANTLEY STARR, UNITED STATES DISTRICT JUDGE

The City of Dallas regulates rental properties by requiring applications and providing for inspections. When MA LEG Partners 1 (MA LEG) received a notice of violation for failing to provide an application for a rental property, it sued challenging the constitutionality of the ordinance under the First, Fourth, Fifth, Seventh, Eighth, and Fourteenth Amendments and bringing a section 1983 claim, and seeking declaratory and injunctive relief. The City filed a motion to dismiss for lack of jurisdiction (Doc. No. 10) and a motion to dismiss for failure to state a claim (Doc. No. 8). The motions are fully briefed. For the reasons explained below, MA LEG lacks standing and the Court lacks jurisdiction. The Court hereby GRANTS the City's motion to dismiss for lack of jurisdiction and DISMISSES WITHOUT PREJUDICE MA LEG's claims. The Court DISMISSES AS MOOT the City's motion to dismiss for failure to state a claim.

I. Factual Background

The City adopted an ordinance in 2016 that regulates rental properties. Among other things, the ordinance requires rental property owners to complete an application, attach an affidavit, and pay a registration fee. MA LEG alleges it received a notice of violation in 2018 for failure to register. MA LEG responded by filing suit to challenge the constitutionality of the ordinance.

II. Motion to Dismiss Standard

The City filed motions to dismiss both for lack of jurisdiction under Rule 12(b)(1) and failure to state a claim under Rule 12(b)(6). The City contends the Court lacks jurisdiction because MA LEG lacks standing. Standing under Article III of the Constitution is jurisdictional, such that the Court must address it before considering the merits of a plaintiff's claims.¹ Unlike a 12(b)(6) motion, the Court is free to weigh the evidence and satisfy itself as to the existence of its power to hear the case on a Rule 12(b)(1) motion.² A court must dismiss the case if it "lacks the statutory or constitutional power to adjudicate the case."³ And the burden is on the party who seeks federal jurisdiction to clearly "allege facts demonstrating that [it] is a proper party to invoke the judicial resolution of the dispute."⁴

Standing requires that a plaintiff establish, for each claim, "(1) that the plaintiff have suffered an ‘injury in fact—an invasion of a legally protected interest which is (a) concrete and particularized, and (b) actual or imminent’; (2) that there is ‘a causal connection between the injury and the conduct complained of’; and (3) that the injury is likely to be redressed by a favorable decision."⁵

Under Federal Rule of Civil Procedure 12(b)(6), the Court evaluates the pleadings by "accepting as true the factual allegations in the complaint and drawing all inferences in the plaintiff's favor."⁶ To survive a motion to dismiss, MA LEG must allege enough facts "to state a claim to relief that is plausible on its face."⁷ "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged."⁸ "The plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully."⁹ "[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged—but it has not ‘show[n]’—‘that the pleader is entitled to relief.’ "¹⁰

III.

MA LEG brings nine enumerated claims and requests for declaratory and injunctive relief. The City argues that MA LEG has suffered no injury and failed to state a claim. The Court addresses standing first and then addresses each claim in turn.

A. Standing

The City argues that because MA LEG has only received a notice of violation, it lacks a concrete and particularized injury sufficient to sue. The Court disagrees. As the Supreme Court explained in Babbitt v. United Farm Works Nat'l Union,

A plaintiff who challenges a statute must demonstrate a realistic danger of sustaining a direct injury as a result of the statute's operation or enforcement. But one does not have to await the consummation of threatened injury to obtain preventive relief. If the injury is certainly impending that is enough.¹¹

If the City were right, pre-enforcement challenges to the constitutionality of statutes and ordinances could never occur. But they often do. In fact, the City has brought such actions against Texas to attempt to enjoin state law before it took effect.¹² And those actions seek injunctive relief to prevent future constitutional violations, not just damages for past violations. MA LEG has done likewise here. And the City has not indicated in briefing or the hearing that it will not enforce the ordinance against MA LEG (and the notice of violation indicates the opposite). The Court disagrees with the City's global assertion of lack of standing and jurisdiction in this posture where the first step of enforcement as to the plaintiff has begun. But the Court must assess standing count by count, so that is not the end of the matter.

B. Count One: Reasonable Expectation of Privacy

MA LEG complains that Chapter 27's application process requires the disclosure of the following information it believes to be constitutionally protected from disclosure:

(i) Contact information for the holder of any deed of trust or mortgage lien on the property, sec. 27-32(a)(1)(D);

(ii) Contact information for the property owner's casualty insurance carrier, sec. 27-32(a)(1)(E); (iii) "the name and mailing address for each principal officer, director, general partner, trustee, manager, member, or other person charged with the operation, control, or management of the entity," sec. 27-32(a)(3);

(iv) "the location of business records pertaining to the rental property," sec. 27-32(a)(4);

(v) "a copy of the owner's current driver's license or other government-issued personal identification card containing a photograph of the owner, if the owner is a natural person," sec. 27-32(a)(5); and

(vi) "a list of businesses ... operating out of the property and offering goods or services to persons residing at or visiting the property," sec. 27-32(a)(6). (Doc. No. 1 at 27).

MA LEG's first count contends its expectation of privacy in this information is protected by the Fourth and Fourteenth Amendments. The City argues, among other things, that MA LEG lacks standing because it has no reasonable expectation of privacy in the information the application calls for.

The Court agrees with the City that MA LEG lacks a reasonable expectation of privacy in the requested records.¹³ Items (i) (relating to deed holders and mortgage holders), (ii) (relating to insurance carriers), and (vi) (relating to businesses at the property) concern records of other individuals. One generally does not have standing to assert Fourth Amendment rights of others but only has standing to assert their personal stake if the rights of others affect them.¹⁴ MA LEG contends that its personal stake is that information such as deed holders, insurance carriers, and businesses are the types of sensitive business information MA LEG takes steps to keep private. The Court holds that, while MA LEG may have a personal stake in these types of information, other government regulatory frameworks require its disclosure, thus destroying any reasonable expectation of privacy. And caselaw regarding business entities indicates there is no reasonable expectation of privacy in information regarding a business operating at a rental property.

Regarding contact information of deed holders and mortgage holders, section 214.001 of the Texas Local Government Code requires the City in various circumstances to inform lienholders and mortgagees of violations of ordinances concerning substandard buildings. And MA LEG conceded at oral argument that the City would have an interest in notifying mortgage holders and deed holders of City violations because of the potential for the City to abate a nuisance at the property and destroy the holder's financial stake before they had notice to fix the problems. Information regarding the holder of the deed or mortgage is necessary for the City to perform that function and already required by state law. Regarding insurance, the Fifth Circuit has held that a motorist has no privacy right to proof of insurance.¹⁵ In addition, Texas rules of procedure already require the disclosure of such insurance information if there is pending litigation.¹⁶ It should also be noted that the ordinance only requests the contact information of MA LEG's casualty insurance carrier and not any detailed information like policy limits or the scope of overage.

Regarding businesses operating at the rental property, business information can often be in the public domain, such that there is no reasonable expectation of privacy.¹⁷ For example, courts have concluded there is no reasonable expectation of privacy in a public store.¹⁸ To the extent MA LEG contends the disclosure of the name of the business itself is so secretive that it has not been disclosed and the public is not entitled to know the name, MA LEG has not made a sufficient showing to meet its burden of proof¹⁹ as to its reasonable expectation of privacy that confers jurisdiction on the Court. Therefore, MA LEG cannot assert a reasonable expectation of privacy in the information of a deed holder, mortgage holder, insurer, or business operating from the rental property.

Item (iii) involves the officers and directors of the entity...