Midnight Sessions, Ltd. v. City of Philadelphia, s. 91-1055

Citation945 F.2d 667
Decision Date28 October 1991
Docket Number91-1109 and 91-1140,Nos. 91-1055,s. 91-1055
PartiesMIDNIGHT SESSIONS, LTD., t/a After Midnight, Baker Ocean, Inc., t/a Down South, Good Times Cafe, Inc., Donald R. Welch, Sally Hunter, Jack Manoff, Richard Singer, and Curt E. Heidinger, Appellees-Cross-Appellants, v. CITY OF PHILADELPHIA, City of Philadelphia Police Department, City of Philadelphia Department of Licenses & Inspections, City of Philadelphia Board of License & Inspection Review, Alan Kessler, Esq., James F. Jordan, Jr., James P. Lynn, Anthony P. Rabutino, Carl Schmollinger, Larry A. Thomas, James J. Tayoun, John Plonski, Henry Herling, Robert J. D'Agostino, Clarence Mosley, Cureley Cole, Esq., Joan S. Baizer, Charles L. Duncan, Jr., West Poplar Action Committee, South Street Business Association, City of Philadelphia, Appellant, James J. Tayoun, Cross-Appellee.
CourtUnited States Courts of Appeals. United States Court of Appeals (3rd Circuit)

Richard G. Freeman (argued), Deputy City Sol., Philadelphia, Pa., Mark Rahdert, Philadelphia, Pa., for appellant-cross-appellee.

Michael G. Trachtman (argued), Jonathan K. Hollin, Ethan N. Halberstadt, Powell, Trachtman, Logan & Carrle, King of Prussia, Pa., for appellees-cross-appellants.

Before SLOVITER, Chief Judge, GREENBERG, Circuit Judge, and McCLURE, District Judge. *

OPINION OF THE COURT

GREENBERG, Circuit Judge.

In this civil rights action, the City of Philadelphia appeals from an order entered February 11, 1991, denying it a judgment notwithstanding a verdict in favor of the plaintiffs Midnight Sessions (After Midnight), Baker Ocean, Inc. (Down South), and several of their individual investors, who alleged that the City violated their constitutional rights by denying their applications for dance hall licenses. In particular the plaintiffs pleaded causes of action under 42 U.S.C. § 1983 claiming that they had been denied substantive and procedural due process of the law and that their property had been unconstitutionally taken. The plaintiffs also alleged that the City denied them equal protection of the laws, asserting in this regard, among other things, that it engaged in intentional race discrimination because it would not license the dance halls as they were in white neighborhoods, but catered to a young black clientele. In addition, Down South asserted that the City unconstitutionally harassed it by repeatedly citing it for City fire code violations. The plaintiffs also advanced a count for racial discrimination predicated on their clientele under 42 U.S.C. §§ 1981, 1982, 1985 and 1986 and a RICO count.

The verdict was returned on interrogatories and was based on three findings that the City violated the plaintiffs' rights to procedural and substantive due process of law and took their property without just compensation. The City, however, was found not liable for racial discrimination and the RICO count and equal protection counts were dismissed before trial. The jury awarded $2,553,000 to After Midnight and $522,000 to Down South in lump sums without a breakdown on particular bases for liability. The district court by an order entered on January 14, 1991, from which the City also appeals, granted attorneys' fees and costs of $644,460.40 to the plaintiffs. Though, as we later explain, the plaintiffs cross-appealed from a pretrial order granting judgment to an individual defendant, James J. Tayoun, we will refer to the plaintiffs as the appellees as the City is the principal appellant.

On a motion for summary judgment decided before the trial, the district court held that the appellees' loss of investment in the dance halls could be a taking without just compensation but deferred for decision at trial the question whether there had been a taking. Furthermore, the court in a pretrial ruling characterized the due process issue as whether the City's licensing procedure in this instance was arbitrary and capricious, determining that the jury would decide that. We conclude that the district court should have granted the City's motion for summary judgment and motion for judgment notwithstanding the verdict on the takings and procedural due process claims as well as on the substantive due process claim of Down South. Furthermore, we conclude that the district court erred in its disposition of the substantive due process claim of After Midnight as it instructed the jury to decide a legal issue which should have been determined by the court. Accordingly, we will reverse and direct entry of judgment for the City on all issues except for the substantive due process claim of After Midnight which we will remand for a new trial. 1

I. FACTS AND PROCEDURE
A. AFTER MIDNIGHT

The case is complicated both legally and factually and we therefore describe it at length. In June 1987, Jack Manoff and other investors decided to open a new club, "After Midnight," at property they were leasing at 1004-26 Spring Garden Street, Philadelphia, which was to include an arcade, restaurant, roller skating rink, movie theater, and a dance floor to accommodate as many as 2,780 persons. The investors contemplated that After Midnight would feature live entertainment. They intended to operate the skating rink from 10 a.m. to 10 p.m. and an all-night disco from 10 p.m. to 10 a.m. After Midnight obtained zoning and building permits to convert the Spring Garden Street property into the club. In February 1988, After Midnight applied for a dance hall license, which the City's Department of Licenses and Inspection ("L & I"), following its established though unwritten procedure, refused to accept, returning it with a notation that a certificate of occupancy was required before the application. Ultimately After Midnight completed the construction and passed all inspections so that it received its certificate of occupancy on April 27, 1988. It then reapplied for a dance hall license.

In January 1988, the commanding officer of the applicable police district, Captain Barcliff, reported to the central police division that community opposition to the new dance club was growing. Area residents and businesses were understandably concerned about the large numbers of juveniles expected to attend the dances (3,000-5,000) and contemplated problems from congestion, vandalism, drinking and drugs, noise, muggings, and general disorder. According to Barcliff, After Midnight planned to operate the club throughout the night on Fridays, Saturdays, and Sundays. He concluded that "[i]t is my opinion that the large crowd that is expected would pose a real problem for the neighborhood and the police." In March 1988, Barcliff again reported to the central police division that the opponents in the neighborhood cited "potential increases in vehicle traffic, noise, disturbances on the street, drugs, etc."

Events unfolded as Barcliff anticipated. Following the opening of After Midnight without its dance hall license on May 13, 1988, its operations caused neighbors to complain that it disrupted the neighborhood with noise, trash, drugs, and alcohol; that large numbers of people were roaming the neighborhood or loitering; that patrons were harassing and frightening neighbors; and that patrons were urinating in the street. L & I cited After Midnight for operating without the dance hall license on May 13, but did not cite it for May 14 and 15 despite its continued operation. On May 20, L & I denied After Midnight's application for a dance hall license, the notice of denial indicating that it had been denied due to "Police Disapproval--Objection of neighbors." The notice also stated that an appeal from the disapproval could be filed with the Board of License Inspection and Review within 30 days. After Midnight did appeal but the Review Board affirmed the denial at a hearing on May 31, 1988. The Review Board indicated that the "neighborhood testimony was unanimous, unwavering, and we are pursuaded by the problems that seem to have arisen since the dance hall began in operation in May." After Midnight then appealed to the Court of Common Pleas but it later withdrew the appeal.

In September 1988, After Midnight requested that the Review Board reconsider its denial, but this request was denied on October 25, 1988, the board noting that After Midnight had appealed from the original denial to the Court of Common Pleas and had not obtained relief. The Review Board therefore regarded the matter as concluded. After Midnight reapplied for a dance hall license on October 31, 1988, but L & I indicated that it could not accept the application for three months. 2 After Midnight then sought and obtained a writ of mandamus from the Court of Common Pleas requiring L & I to accept its application. But L & I denied that application on November 29, 1988, noting police disapproval, and stating that its decision was:

[b]ased on the opposition of various community groups, business persons and nearby residents (within a two block radius) along with the fact that the anticipated large crowds would pose a problem for the neighborhood and to the police department's ability to deliver protective services to the entire community.

App. at 1987.

After Midnight again appealed to the Review Board which, after a hearing on December 12, 1988, ordered L & I to grant the dance hall license. After Midnight thereafter operated as a dance hall for six months before going out of business.

As we have indicated, in its complaint against the City, After Midnight contended that the City's actions constituted both a taking of its property without just compensation and a violation of its procedural and substantive due process rights, and that the City intentionally discriminated against it on the basis of race because its anticipated clientele was primarily young blacks. It also contended that Councilman James J. Tayoun, who actively opposed its application and was a defendant, had inappropriately and illegally meddled in the process. It alleged...

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