Ragaway v. City of Portland
| Decision Date | 17 November 2021 |
| Docket Number | A172095 |
| Citation | 315 Or.App. 647,504 P.3d 79 |
| Parties | Philip RAGAWAY, an individual; J A Atwood Corporation, an Oregon corporation; Spot Properties, LLC, an Oregon limited liability company; JSP Investments, LLC, an Oregon limited liability company; Concept Entertainment - Two, LLC, an Oregon limited liability company, dba Duke's Country Bar and Grill; Concept Entertainment - Four, LLC, an Oregon limited liability company, dba Dixie Tavern; Daniel Lenzen, an individual; Divine Comedy, LLC, an Oregon limited liability company, dba Dante's ; Glitz, LLC, an Oregon limited liability company, dba Star Theater; and Does 1-100, Plaintiffs-Appellants, v. CITY OF PORTLAND, an Oregon municipal corporation, Defendant-Respondent. |
| Court | Oregon Court of Appeals |
Daniel T. Goldstein argued the cause for appellants. Also on the briefs was Aldrich Goldstein, P.C.
Denis Vannier argued the cause and filed the briefs for respondent.
Before Lagesen, Presiding Judge, and James, Judge, and Kamins, Judge.
In 2013, the Portland City Council passed an ordinance that amended the city's fire code to mandate that all existing nightclubs in the city with an occupant load of more than 100 persons have automatic fire sprinkler systems. Plaintiffs are building owners and operators in Portland who installed sprinkler systems as a result of the ordinance. In 2017, they filed this action alleging various claims arising out of the city's enactment and enforcement of the sprinkler ordinance, including claims for declaratory relief, quasi-contract, impairment of contract, negligence, and intentional interference with contractual relations. The crux of their complaint is that Oregon's state building code governs when and where sprinklers must be installed, thereby preempting any city ordinance that attempts to impose additional sprinkler requirements. See ORS 455.040 (). According to plaintiffs, the city knew that such an ordinance was preempted under ORS 455.040 but enacted and enforced one anyway, thereby resulting in economic damage to them.
The city responded with both procedural and merits-based defenses. The city argued that the ordinance was not preempted but that, in any event, plaintiffs were required to raise their challenges sooner and in a different forum—specifically, before the city's Fire Code Board of Appeals (FCBA)—and that, even if the ordinance was preempted, the claims failed for other reasons. Plaintiffs, for their part, moved for partial summary judgment on the merits of the preemption question.
The trial court ultimately agreed with the city that each of plaintiffs’ claims failed. It granted the city's motion to dismiss the claim for declaratory relief based on the doctrine of common-law exhaustion, reasoning that plaintiffs were required to raise the issue before the FCBA, and it later denied plaintiffs’ motion to amend their complaint to plead around that doctrine. And, although the court agreed with plaintiffs on the merits of the preemption issue and granted their motion for partial summary judgment, it nonetheless concluded that the city was entitled to summary judgment on plaintiffs’ four remaining claims (quasi-contract, impairment of contract, and the two tort claims) based on substantive arguments independent of the merits of the preemption question. Plaintiffs now appeal, arguing that each of the adverse rulings on their claims was erroneous; the city cross-assigns error to the court's ruling on the preemption issue. We affirm the trial court's judgment in favor of the city as to each of plaintiffs’ claims, obviating the need to address the city's contingent cross-assignment of error.
This is the second time that we have addressed issues arising from the city's enactment of the sprinkler ordinance. In City of Portland v. Building Codes Div. , 313 Or. App. 93, 496 P.3d 1108 (2021), we described the enactment history of the ordinance, as well as the overlay of the statutory and regulatory schemes involving the state building code and state fire marshal statutes. For purposes of our resolution of the issues on appeal, it is not necessary to repeat that context in full. Rather, we begin with a brief overview of the parties’ dispute and discuss the pertinent facts in greater detail within particular assignments of error.
The state building code establishes requirements for fire protection systems, including automatic sprinkler systems, in certain new buildings and structures, but the building code generally does not require retrofitting of existing buildings that were up to code at the time they were built. In 2013, the City of Portland was concerned about the potential for catastrophic nightclub fires in existing buildings that were not required to be equipped with automatic sprinkler systems. However, city officials were cognizant of the fact that Oregon law prohibits municipalities from imposing building code requirements without authorization from the Oregon Building Codes Division (BCD). See ORS 455.040(1). So, rather than seek authorization for a code change regarding sprinkler systems, they proposed an ordinance that imposed fire sprinkler requirements as part of the city's fire code, not its building code.
The sprinkler ordinance, which the city adopted in September 2013, required automatic sprinkler systems to be installed in all existing nightclubs with an occupant load greater than 100, and it gave nightclubs with an occupant load of 200 or more until December 31, 2014, to comply. Nightclubs with an occupant load of 101 to 199 were required to comply no later than June 30, 2015. The ordinance further provided:
"Any person, owner or occupant subject to the requirements of [the amendment to the fire code] may submit an appeal for a modification pursuant to Portland Fire Code 104.8 and in the manner provided by Portland City Code 31.10.080 []."
Plaintiffs complied with the ordinance by installing sprinklers, incurring costs for permits and installation. None of them filed an appeal with the FCBA.
Meanwhile, in 2014, the BCD began investigating the city's enactment of the ordinance—specifically, whether the city's ordinance was unlawful because it was preempted by the state building code. Eventually, in April 2016, the BCD issued an investigative report concluding that the ordinance was unlawful; it followed that with a notice of proposed order for corrective action and fines in July 2017. (That order was the subject of our recent decision in City of Portland , 313 Or. App. 93, 496 P.3d 1108, in which we held that the BCD did not have the broad enforcement powers that it claimed with regard to the enactment of local ordinances.)
In September 2017, plaintiffs filed this action. Their operative complaint included five claims for relief: (1) declaratory relief; (2) quasi-contract; (3) "constitutional violations" (which ultimately narrowed to an impairment-of-contract count); (4) negligence; and (5) intentional interference with economic relations. In allegations common to all of those claims, plaintiffs alleged that the city unlawfully enacted the ordinance with awareness that the state building code governed installation of sprinklers in buildings, that the city lacked authority to enact any sprinkler ordinance that deviated from the building code without express approval from the BCD, and that it could not require retrofits on existing buildings when they are not under construction, reconstruction, alteration, or repair. According to plaintiffs, it was not until June 2016, when they became aware of the investigative report from the BCD, that they first discovered that the city's "action of adopting and enforcing the Retroactive Sprinkler Ordinance and the related policies, rules, and procedures were contrary to Oregon Law." And, they alleged, it was at that point that they provided notice of their claims to the city under the Oregon Tort Claims Act (OTCA).
After plaintiffs filed their operative complaint, the city moved to dismiss the claims on the basis of common-law exhaustion, arguing that plaintiffs were required to pursue an appeal before the FCBA; the city also moved to dismiss on a number of grounds that touched on the merits of the various claims, including the fundamental question whether the sprinkler ordinance was preempted by state law. The trial court granted the city's motion to dismiss on exhaustion grounds only with regard to the claim for declaratory relief. It otherwise concluded that common-law exhaustion did not bar the remaining claims; that the city's arguments on the merits of the preemption issue were wrong; and that the rest of the issues presented in the city's motion to dismiss were better resolved at the summary judgment stage after development of the record.
In the wake of that ruling, plaintiffs sought to turn the court's denial of the city's motion into an affirmative ruling in their favor. They filed a motion for partial summary judgment, explaining that
The city, on the other hand, filed a motion for summary judgment on the claims that had survived the motion to dismiss. At a hearing on those motions in April 2019, the trial court provided alternative rulings on many of the issues that were before it, in the event that issues were taken up on appeal. During the hearing, the court indicated that it was granting plaintiffs’ partial summary...
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