Stauch v. City of Columbia Heights

• Decision Date: 14 February 2000
• Docket Number: No. 99-2064,99-2064
• Citation: 212 F.3d 425
• Parties: (8th Cir. 2000) LELAND STAUCH; AUDREY STAUCH; MATTHEW STAUCH, PLAINTIFFS/APPELLEES, v. CITY OF COLUMBIA HEIGHTS; DEFENDANTS/APPELLANTS, PATRICK HENTGES; CHARLES KEWATT; LOWELL DEMARS; EVELYN NYGAARD; GARY GORMAN; MATTHEW FIELD, DEFENDANTS. Submitted:
• Court: U.S. Court of Appeals — Eighth Circuit

Page 425

212 F.3d 425 (8th Cir. 2000)

LELAND STAUCH; AUDREY STAUCH; MATTHEW STAUCH, PLAINTIFFS/APPELLEES, v. CITY OF COLUMBIA HEIGHTS; DEFENDANTS/APPELLANTS, PATRICK HENTGES; CHARLES KEWATT; LOWELL DEMARS; EVELYN NYGAARD; GARY GORMAN; MATTHEW FIELD, DEFENDANTS.

No. 99-2064

UNITED STATES COURT OF APPEALS FOR THE EIGHTH CIRCUIT

Submitted: February 14, 2000

Filed: May 8, 2000

Appeal from the United States District Court for the District of Minnesota. [Copyrighted Material Omitted]

[Copyrighted Material Omitted] Before Beam and John R. Gibson, Circuit Judges, and Pratt, ¹ District Judge.

Beam, Circuit Judge.

The City of Columbia Heights, Minnesota (the City) appeals the district court's ² denial of its motion for judgment as a matter of law or in the alternative for a new trial following an adverse jury verdict. We affirm.

I. BACKGROUND

Leland and Audrey Stauch and their son, Matthew Stauch (the Stauches) owned and operated thirty-eight rental units in Columbia Heights. In 1992, twelve of these units failed to pass an inspection performed by the City. The City allowed the Stauches additional time to bring the units into compliance. Meanwhile, in November 1992, the Stauches received renewal forms for the rental licenses on their units for the 1993 year. The Stauches completed and returned these forms, along with the required fees. In May 1993, the City again inspected the Stauches' property and determined that none of the units passed inspection. Those units that had also failed the 1992 inspection were posted with notices stating that they were unlicensed. The tenants living in those units were told to vacate. In July 1993, similar action was taken with the remaining units. The City's official position was that a property must pass inspection before a rental license could be renewed. ³

The City then charged Leland and Audrey Stauch with the misdemeanor of operating rental units without a license in violation of the City of Columbia Heights Code of Ordinances (the Code). They were convicted. The Minnesota Court of Appeals later overturned the convictions finding that the Stauches had complied with the Code. See State v. Stauch, No. C8-94-189, 1994 WL 454747 (Minn. Ct. App. Aug. 23, 1994). The court rejected the City's argument that a property must pass inspection before a rental license could be renewed. It found that the language in Chapter 5A of the Code dealing with licensing procedures for rental properties clearly required that, although a property must pass inspection before it could be initially licensed, license renewal was automatic upon a showing of three conditions: (1) return of the renewal form; (2) payment of the registration fee; (3) and inspection of the unit within the previous two years. Id. at *1. The court specifically noted that the Code did not state that a failed inspection invalidates license renewal. ⁴ Id. at *2.

The Stauches then filed this section 1983 suit alleging that the City and individual city officials (defendants) had violated their due process rights by failing to provide notice and opportunity for a hearing before posting their properties as unlicensed and requiring their tenants to vacate. The Stauches also asserted an equal protection claim against defendants claiming that the discriminatory treatment was due in part to the fact that they rented to a high percentage of minorities. The district court granted summary judgment on the due process claims against the individual city officials on the basis of qualified immunity. The action was then tried to a jury. The jury found in favor of the defendants on the equal protection claim but found in favor of the Stauches on the due process claim, and awarded $120,000 in damages. The district court denied the City's post-trial motions for judgment as a matter of law or in the alternative for a new trial. The City appeals.

II. DISCUSSION

We review the district court's denial of a motion for judgment as a matter of law de novo using the same standards as the district court. See Smith v. World Ins. Co., 38 F.3d 1456, 1460 (8th Cir. 1994). The denial of a motion for judgment as a matter of law may be reversed only when the evidence viewed in the light most favorable to the nonmoving party points one way and is susceptible of no reasonable inferences supporting the position of the nonmoving party. See Angarita v. St. Louis County, 981 F.2d 1537, 1544 (8th Cir. 1992). A review of the denial of a motion for new trial is even more limited in that it is within the sound discretion of the trial court and will be reversed only upon a showing that the trial court abused its discretion. See id.

In a section 1983 suit against a municipality, we must determine two separate issues: "(1) whether plaintiff's harm was caused by a constitutional violation, and (2) if so, whether the city is responsible for that violation." Collins v. City of Harker Heights, 503 U.S. 115, 120 (1992). We examine each issue in turn.

A. The Constitutional Violation

The Stauches assert that the City violated their procedural due process rights as guaranteed by the Fourteenth Amendment because it failed to follow Code requirements requiring notice and an opportunity to be heard before determining that the units were unlicensed and posting them as such. The possession of a protected life, liberty, or property interest is a condition precedent to invoking the government's obligation to provide due process of law. See Movers Warehouse Inc. v. City of Little Canada, 71 F.3d 716, 718 (8th Cir. 1995). Thus, we must first determine whether the Stauches possessed a protectible property interest in the renewal of their rental licenses sufficient to trigger federal due process guarantees.

Property interests are not created by the Constitution but rather stem from an independent source such as state law. See id. The property interest claimed by the Stauches derives from the licensing scheme set forth in the Code. See id. at 718 n.3 (municipal ordinance can be a form of state law creating a protected property interest). To establish a property interest in the renewal of a license, the Stauches must show more than a unilateral expectation of it. See id. at 718. They must possess a legitimate claim of entitlement to it. See id. One manner in which state law can create a property interest is by establishing procedural requirements that impose substantive limitations on the exercise of official discretion. See id. at 719.

The City argues that the Stauches possessed no such property interest because they were not entitled to license renewal under the Code if their units did not pass inspection. The district court, based on the Minnesota Court of Appeals' interpretation of the license renewal requirements, rejected this reading of the Code. It instructed the jury that the Stauches had a protected property interest if: (1) they completed an application form; (2) paid the registration fee; and (3) the property had been inspected within the previous two years. ⁵

We have examined the relevant provisions of the Code, and find no error in the district court's interpretation of the Code's requirements for rental license renewal. ⁶ Furthermore, we find that the licensing scheme which limits the City's discretion to deny renewal, creates a protected property interest. An applicant seeking renewal of a rental license in Columbia Heights need only meet three objective criteria to qualify. See supra note 4. There is no indication in the Code that upon satisfaction with these criteria, the City may still use its discretion to deny renewal. See, e.g., Movers Warehouse, 71 F.3d at 719 (finding no property interest when ordinance regulating renewal of bingo hall license granted city unfettered discretion to withhold approval of application for license renewal); Littlefield v. City of Afton, 785 F.2d 596, 601 (8th Cir. 1986) (discussing when an applicant's interests in a license which is denied rises to a constitutionally protected interest), overruled on other grounds, Chesterfield Dev. Corp. v. City of Chesterfield, 963 F.2d 1102, 1104 n.2 (8th Cir. 1992).

Thus, we find that the Stauches had a protected property interest in the renewal of their rental licenses. Next, we consider whether they were afforded due process in connection with the City's deprivation of that interest. See Zinermon v. Burch, 494 U.S. 113, 125 (1990) ("the deprivation by state action of a constitutionally protected interest . . . is not in itself unconstitutional; what is unconstitutional is the deprivation of such an interest without due process of law") (emphasis in original).

An essential principle of due process is that a deprivation of life, liberty, or property be preceded by notice and opportunity for hearing that is appropriate to the nature of the case. See Cleveland Bd. of Educ. v. Loudermill, 470 U.S. 532, 542 (1985). See also Logan v. Zimmerman Brush Co., 455 U.S. 422, 434 (1982) ("To put it as plainly as possible, the State may not finally destroy a property interest without first giving the putative owner an opportunity to present his claim of entitlement."). The right to notice and an opportunity to be heard "'must be granted at a meaningful time and in a meaningful manner.'" Fuentes v. Shevin, 407 U.S. 67, 80 (1972) (quoting Armstrong v Manzo, 380 U.S. 545, 552 (1965)).

The Stauches assert that they were denied notice and opportunity for a hearing by the City even though the Code required it. First, they point to the fact that the Code provides for notice and a public hearing on any proposed license revocation or suspension. We find the City's actions cannot be characterized as a "revocation" or "suspension" of the licenses because those terms imply "the withdrawal of an existing entitlement." Mover's Warehouse, 71 F.3d at 719. Here, the City's actions can better be characterized as a refusal to reissue or extend the life of an existing license rather than a withdrawal. ⁷ Although the Stauches...