TF-Harbor, LLC v. City of Rockwall

• Decision Date: 09 May 2014
• Docket Number: Civil Action No. 3:13–CV–4318–D.
• Citation: 18 F.Supp.3d 810
• Parties: TF–HARBOR, LLC, Plaintiff, v. CITY OF ROCKWALL, TEXAS, et al., Defendants.
• Court: U.S. District Court — Northern District of Texas

18 F.Supp.3d 810

TF–HARBOR, LLC, Plaintiff

v.CITY OF ROCKWALL, TEXAS, et al., Defendants.

Civil Action No. 3:13–CV–4318–D.

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

Signed May 9, 2014.

Frederick William Addison, III, Christopher Kelley Rusek, Mary Louise Patton Bell, Nolan Knight, Munsch Hardt Kopf & Harr PC, Dallas, TX, for Plaintiff.

Lyndon F. Bittle, Neal J. Suit, Carrington Coleman Sloman & Blumenthal LLP, John A. Koepke, Scott M. McElhaney, Jackson Walker, Dallas, TX, for Defendants.

MEMORANDUM OPINION AND ORDER

SIDNEY A. FITZWATER, Chief Judge.

In this suit alleging federal-law and state-law claims based on the enactment of a municipal ordinance regulating the development of commercial real property, and on related conduct, the court must decide whether the plaintiff has standing to bring its federal-law claims. Concluding that it does not, the court dismisses the federal-law claims for lack of subject matter jurisdiction, holds in the alternative that the plaintiff has failed to state federal-law claims on which relief can be granted, declines to reach the pendent state-law claims, and denies the plaintiff's motion for a preliminary injunction without prejudice to its seeking such relief in state court.

I

A

Plaintiff TF–Harbor, LLC (“TF–Harbor”) owns a commercial shopping center in Rockwall, Texas (the “Shopping Center”).¹ The Shopping Center is located on an area that is currently designated as “Lot 5” under city zoning laws. The adjacent property, which TF–Harbor does not own, is designated as “Lot 7.” TF–Harbor did not acquire Lot 5 until 2010, but the pertinent factual background of this case begins in 2003.

In October 2003 CNMK Texas Properties, Ltd. (“CNMK”) entered into a lease agreement—the “Cinemark Lease”—with Mariah Bay Development, Inc. (“MBD”), an entity owned by Robert Whittle (“Whittle”). The Cinemark Lease was amended several times between June 2004 and December 2006, and it included several provisions that gave CNMK signage, parking, and pedestrian-access rights over the property. CNMK operates a movie theater on the leased property under the trade name Cinemark (“the Cinemark theater”). The property on which the Cinemark theater is located is referred to as the “Cinemark property.”

In July 2004 CNMK filed in the Rockwall County Property Records a document memorializing CNMK's rights under the Cinemark Lease. This document, which TF–Harbor calls the “Memorandum of Lease,” contained several provisions designed to ensure that development on, or adjacent to, the Cinemark property would not infringe CNMK's rights under the Cinemark Lease. In particular, the Memorandum of Lease expressly incorporates the Cinemark Lease in its entirety and explains that the Memorandum of Lease is intended to give constructive notice of CNMK's leasehold interests. The Memorandum of Lease was filed within the historical chain of title for all properties relevant to this litigation, including Lot 7.

In 2010 MBD, along with various corporate entities owned by Whittle (collectively, the “Whittle entities”), filed for bankruptcy. All of the property in Lots 5 and 7 was initially owned by one or more of the Whittle entities. MBD was not able to confirm a plan of reorganization that would have enabled it to retain ownership of the Cinemark property. Credit Union Liquidity Services, LLC (“CULS”) held a deed of trust on the Cinemark property and requested that the bankruptcy court lift the automatic stay to allow CULS to foreclose on the property. The court granted the request, and in October 2010 a non-judicial foreclosure sale was conducted. TF–Harbor, an affiliate of CULS, acquired the property immediately after the foreclosure sale. The property that TF–Harbor acquired included the Cinemark property and portions of the parking area over which CNMK had certain usage rights. In connection with these transactions, TF–Harbor also inherited all leases at the Shopping Center, including the Cinemark Lease. The Cinemark Lease imposes on TF-Harbor a duty to prevent interference with CNMK's leasehold rights.

During the 2010 bankruptcy proceedings, several Whittle entities attempted to transfer the ownership rights over Lot 7. CULS, which was still an interested creditor at the time, had concerns that the transfers were fraudulent or preferential. Several Whittle entities sought permission from the bankruptcy court to settle their disputes regarding the transfers. The bankruptcy court conducted a mediation involving a group of interested parties, including Whittle, MBD, CULS, and TF–Harbor. After the mediation, the parties entered into a “Mediated Settlement Agreement.” This agreement included several provisions designed to accommodate TF–Harbor's obligation to protect the rights of its tenants (including CNMK) to signage, parking, and pedestrian access extending to the adjacent property (now known as Lot 7). In particular, the parties agreed to the following: (1) they would re-plat the areas on the property where the majority of the Shopping Center's parking lot is located; (2) the relevant Whittle entities would transfer ownership rights over certain parking and other areas over to TF–Harbor free and clear of all liens, claims, and encumbrances; and (3) the parties would agree to cross-easements to preserve CNMK's signage, usage, and pedestrian-access rights, which extended beyond the boundaries of the property TF–Harbor already owned or would receive by way of the agreed-upon transfer.

As contemplated by the Mediated Settlement Agreement, the parties worked to re-plat the relevant properties, thereby designating Lots 5 and 7, and in December 2011 they filed the re-plat in the Rockwall County Property Records. The Whittle entities did not, however, honor the other provisions of the Mediated Settlement Agreement. They did not transfer the specified portions of parking on Lot 5 to TF–Harbor; they failed to execute a cross-easement that would have ensured TF–Harbor's signage, usage, and pedestrian-access rights on Lot 7; and, in June 2012, they sold all of the newly designated Lot 7 to defendant Rockwall Rental Properties, L.P. (“Rockwall Rental”) without first securing a cross-easement commitment from Rockwall Rental.

After TF–Harbor and CULS learned of these matters, they demanded that the Whittle entities resolve the complications caused by the transfer of the property to Rockwall Rental. The parties could not resolve their dispute, TF–Harbor successfully petitioned the bankruptcy court to reinstate proceedings, and the bankruptcy court granted TF–Harbor's motion to compel compliance with the Mediated Settlement Agreement. By special warranty deed dated April 1, 2013, the Whittle entities transferred to TF–Harbor the balance of the parking area on Lot 5 that TF–Harbor did not already own. On the same day, all of the interested parties, including Rockwall Rental, executed a contractual agreement to resolve signage, usage, and pedestrian-access rights at the abutting properties.

This new agreement—the Non–Exclusive Reciprocal Easement Agreement (the “REA”)—subordinates Rockwall Rental's ownership rights in Lot 7 to CNMK's ongoing leasehold rights. In particular, the REA establishes overlapping usage and access rights among TF–Harbor, Rockwall Rental, and a third entity known as Bella Harbor Hotel Venture regarding issues such as parking, utility, and pylon sign easements. The REA took effect on April 1, 2013, and it was filed in the Rockwall County Property Records in June 2013.

Around the same time, Rockwall Rental began lobbying defendant City of Rockwall (“the City”) to pass a municipal ordinance that would apply to Lot 7. On June 17, 2013 the City enacted Ordinance 13–16 (“the Ordinance”). One of the Ordinance's provisions acknowledges that it was passed specifically as an accommodation to Rockwall Rental. The Ordinance approves a development plan submitted by Rockwall Rental for commercial development on the property. According to TF–Harbor's complaint, the approved plan “resurrects” development options that are foreclosed by the REA, the Cinemark Lease, and the Memorandum of Lease. In particular, the plan contemplates development that would (1) obstruct the Cinemark sign facing the highway, (2) impermissibly cover portions of the existing parking area, (3) impermissibly re-configure parking available to Cinemark customers, (4) impermissibly exclude CNMK's customers from new parking proposed under the plan, (5) eliminate a pedestrian access way to the theater, (6) fail to provide sufficient parking to satisfy contractual and municipal requirements, and (7) alter the primary roadway bordering the theater, which would disrupt the free flow of traffic.

B

TF–Harbor brings this action against the City and Rockwall Rental for declaratory and injunctive relief and money damages. It alleges the following claims under federal law² : Count I alleges that the Ordinance is unconstitutional under the Contracts Clause of the United States Constitution because it impairs TF–Harbor's contractual obligations to CNMK, and Count II alleges that the Ordinance is unconstitutionally vague under the Due Process Clause of the Fourteenth Amendment because it is a regulatory statute that fails to give a person of ordinary intelligence a reasonable opportunity to know what is prohibited and fails to provide standards by which the Ordinance will be applied. It alleges the following claims under state law: Count III alleges that the Ordinance is void and unenforceable under Texas law because the “penalty” and “offense” provisions of the Ordinance fail to comport with various state penal laws; Count IV alleges that Rockwall Rental is liable for attempting to violate covenants set forth in the Cinemark Lease and made “restrictive covenants” by operation of the Memorandum of Lease and the REA; and Count V alleges that Rockwall Rental is liable for breach of contract because it is in violation of the REA.

The City moves to dismiss under Fed.R.Civ.P. 12(...