MS Rentals, LLC v. City of Detroit

• Decision Date: 27 February 2019
• Docket Number: Case Number 18-10165
• Citation: 362 F.Supp.3d 404
• Parties: MS RENTALS, LLC, and Garner Properties & Management, LLC, Plaintiffs, v. CITY OF DETROIT, Defendant.
• Court: U.S. District Court — Eastern District of Michigan

362 F.Supp.3d 404

MS RENTALS, LLC, and Garner Properties & Management, LLC, Plaintiffs,

v.CITY OF DETROIT, Defendant.

Case Number 18-10165

United States District Court, E.D. Michigan, Southern Division.

Signed February 27, 2019

Mark K. Wasvary, Becker and Wasvary, Troy, MI, Aaron D. Cox, Law Offices of Aaron D. Cox PLLC, Taylor, MI, for Plaintiffs.

Michael M. Muller, Detroit City Law Department, Detroit, MI, for Defendant.

DAVID M. LAWSON, United States District Judge

OPINION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION FOR SUMMARY JUDGMENT, GRANTING PLAINTIFFS PARTIAL SUMMARY JUDGMENT UNDER Fed. R. Civ. P. 56(f)(1), DISMISSING CERTAIN COUNTS OF THE COMPLAINT WITH PREJUDICE, AND DISMISSING MOTION FOR CLASS CERTIFICATION AS MOOT

The City of Detroit, like many municipalities, has a Property Maintenance Code (PMC) that includes provisions regulating landlords and the rentals of residential housing units. Detroit's ordinance requires property owners to register their property, comply with habitability standards, and submit to inspections. The City charges fees for occupancy certificates and inspections, and imposes fines when inspections are refused. The plaintiffs brought the putative class action alleging that Detroit's PMC is unconstitutional because the version of the PMC in effect when the case was filed authorizes rental property inspections without a warrant or an opportunity for precompliance review. Asserting various legal theories, the plaintiffs ask the Court to void the PMC and order the City to return all fees and fines collected under it.

The City has moved for summary judgment. It has amended its ordinance to include a process allowing landlords to refuse a demand for inspection and mount an administrative challenge before fines or fees are assessed. Believing that the amendment cures any constitutional violation, the City asserts that the case is now moot. Remarkably, though, the City asserts that if the Court finds the old ordinance valid, it will revert to that version. The City also argues that the plaintiffs' other theories do not support their claim for any relief, including damages.

The Court heard oral argument from the parties on December 19, 2018. The case is not moot because the City's voluntary cessation of unconstitutional conduct does not eliminate the controversy, especially in light of its avowed intention to revert to that conduct. The involuntary inspection provision absent precompliance review violates the Fourth Amendment, and therefore the old ordinance is invalid on its face. But the plaintiffs have not offered evidence that establishes a right to relief on any of their other legal theories, nor have they created a fact question on causation or damages because there is no record evidence that the City conducted any inspections over the objection of plaintiff landlords, or that the plaintiffs ever refused an inspection. Therefore, the Court will grant in part the City's motion for summary judgment and dismiss the claims for damages. Because the old ordinance is facially unconstitutional, the Court will deny the motion for summary judgment on that ground, grant judgment for the plaintiffs, and declare the inspection provision invalid.

I. Facts and Proceedings

The plaintiffs own and manage single-family, rental properties in Detroit, Michigan that are subject to the City's PMC. These ordinances are derived from the International Property Maintenance Code, a widely used set of standards, and establish "the minimum legal requirements for the maintenance, inspection and reinspection of all buildings, premises, and structures within the city." Detroit PMC, ECF No. 14-5, PageID.155, 166. The PMC applies to all existing residential and nonresidential buildings, premises, and structures with an expressed intent to "ensure the public health, safety, and welfare insofar as they are affected by the continued occupancy and maintenance" of properties in Detroit. Id. , PageID.166. The PMC imposes several requirements on owners or agents of rental properties in Detroit.

The parties estimate that there are at least 90,000 rental properties in the City. All dwellings must be registered with the City and owners must obtain a certificate of registration. PMC § 9-1-81, ECF No. 14-5, PageID.186. Once registered, rental properties are subject to inspection "as closely as possible to once a year." Id. § 9-1-82, ECF No. 14-5, PageID.187. Properties that pass inspection are issued a certificate of compliance. Ibid. It is unlawful for rental properties to be occupied without a certificate of compliance. Ibid. Terrance Martin, a supervisor of building inspectors at Detroit's Buildings, Safety Engineering & Environmental Department, testified that the City recently modified the frequency of inspection, which is now every two years once a certificate of compliance is obtained.

Although registration is free, inspections are accompanied by fees. Id. § 9-1-34, ECF No. 14-5, PageID.177. Owners of single-family rental properties are expected to pay $ 150 for any mandatory, initial inspection and $ 134 for a second reinspection. If a rental property does not pass an initial inspection, the first reinspection thereafter is free.

At times relevant to this lawsuit, the PMC authorized designated City officials, "subject to any constitutional restrictions on unreasonable searches and seizures,...to enter any building, premises, or structure within the city...at reasonable times to inspect" and to "pursue recourse" where entry is refused or not obtained. Id. § 9-1-35(b), ECF No. 14-5, PageID.178. According to Terrence Martin, there was no process in place (until recently) for obtaining a warrant if an owner or tenant refused entry. Martin testified that in the last four or five years, he could not recall a single instance when an inspector obtained a warrant to enter a residential rental.

Inspections to obtain compliance were conducted based on at least one of several triggering events, including the receipt of a complaint or other notice of a possible violation of the PMC, a request for inspection by the owner of a building, or the passage of approximately one year since the last inspection. If a rental property was found to be out of compliance, owners were issued "correction orders," which described the violations discovered during an inspection and directed owners to make the necessary repairs within a prescribed time. Owners were responsible for requesting reinspection once the violations had been corrected; the City scheduled the reinspections 31 or 35 days following initial inspection.

Rental owners who did not correct their code violations per a correction order were denied certificates of compliance, and, as a result, could not lawfully lease their properties. Occasionally, an inspector would issue a blight violation under the PMC when a unit remained occupied despite a certificate of compliance being withheld where a violation presented an immediate risk of harm or persisted even after a correction order was issued. PMC § 9-1-19, ECF No. 14-5, PageID.169; id. § 8-5-2-14, ECF No. 14-6, PageID.223. The first blight offense resulted in a fine of $ 250, increasing to $ 350 and $ 500 for the second and third offenses. Id. § 9-1-20, ECF No. 14-5, PageID.172. A blight violation ticket or citation could be issued for each day a rental property lacks a certificate of compliance. Martin testified that those tickets serve to "edge" owners into compliance when maintenance violations remain outstanding.

Issuance of a blight citation triggers an administrative proceeding that gives alleged violators an opportunity to challenge the citation. Under the PMC, a blight violation notice must contain a prescribed list of information, including a description of the violations alleged, the date and time of the administrative hearing, and the alleged violator's rights either to admit or deny responsibility. PMC § 8-5-2-12, ECF No. 14-6, PageID.222. Where an alleged violator admits responsibility "with explanation" or denies responsibility altogether, he is required to appear at an administrative hearing to give testimony or offer evidence that is "relevant to the existence of a blight violation." Id. §§ 8-5-2-16, PageID.224; 8-5-3-22, PageID.228. However, if a violator fails to pay a blight citation after a hearings officer's determination or otherwise defaults, the City is authorized to obtain a lien against the property. Id. § 8-5-2-19, PageID.225. In order to obtain a certificate of compliance, an owner must receive "clearance" from the department of administrative hearings that there are no outstanding blight judgments against the owner for any of its properties.

The plaintiffs alleged in their complaint that on several occasions, inspections were performed at their rental properties of which they were unaware and did not consent. They have not backed that up with any evidence, however.

The record does show that plaintiff MS Rentals, a limited liability company located in Gibraltar, Michigan, owns the property located at 9224 Fielding, Detroit, Michigan ("Fielding"). On April 4, 2014, the defendant's buildings, safety, engineering, and environmental department received a complaint from a tenant at that property. Inspector Ramez Ibrahim testified that he responded to the complaint on April 9, but because the tenant was not home the inspection was postponed. Ibrahim testified that he has never entered a building without permission. On April 21, 2014, the City did perform an inspection of Fielding for which MS Rentals was charged a fee of $ 150. The City thereafter issued a correction order to MS Rentals, listing 11 violations of the PMC that included an emergency directive to provide and maintain a smoke detector. The order directed MS Rentals to correct the violations by May 21, 2014. The City asserts that MS Rentals never requested reinspection or made the necessary corrections. On June 12, 2014, the defendant issued two...