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E & R Enterprise LLC v. City of Rehoboth Beach

United States District Court, D. Delaware

July 31, 2015

E & R ENTERPRISE LLC, Plaintiff,
v.
THE CITY OF REHOBOTH BEACH, a municipal corporation of the State of Delaware; STAN MILLS, as a Member of the City of Rehoboth Beach Board of Commissioners; KATHY MCGUINESS, as a Member of the City of Rehoboth Beach Board of Commissioners; PATRICK GOSSETT, as a Member of the City of Rehoboth Beach Board of Commissioners; LORRAINE ZELLERS, as a Member of the City of Rehoboth Beach Board of Commissioners; TONI SHARP, as a Member of the City of Rehoboth Beach Board of Commissioners; BILL SARGENT, as a Member of the City of Rehoboth Beach Board of Commissioners; SAMUEL R. COOPER, as Mayor of the City of Rehoboth Beach and as a Member of the City of Rehoboth Beach Board of Commissioners; SHARON LYNN, as City Manager of the City of Rehoboth Beach; and TERRI SULLIVAN, as Chief Building Inspector of the City of Rehoboth Beach, Defendants.

Todd A. Coomes and Travis S. Hunter of RICHARDS, LAYTON & FINGER, P.A., Wilmington, Delaware. Attorneys for Plaintiff.

Megan T. Mantzavinos and Emily K. Silverstein of MARKS, O'NEIL, O'BRIEN, DOHERTY & KELLY, P.C., Wilmington, Delaware. Attorneys for Defendants.

MEMORANDUM OPINION

LEONARD P. STARK, District Judge.

Plaintiff, E & R Enterprise LLC, ("E & R"), filed this action on November 18, 2014 in the Delaware Court of Chancery against Defendant City of Rehoboth Beach ("City"). The City removed the case to this Court on December 2, 2014.

Plaintiff filed an Amended Complaint on December 12, 2014 against City of Rehoboth Beach, Stan Mills ("Mills"), Kathy McGuiness ("McGuiness"), Patrick Gossett ("Gossett"), Lorraine Zellers ("Zellers"), Toni Sharp ("Sharp"), Bill Sargent ("Sargent"), Samuel R. Cooper ("Cooper"), Sharon Lynn ("Lynn"), and Terri Sullivan ("Sullivan") (collectively, "Defendants"). (D.I. 5) In its Amended Complaint, Plaintiff seeks damages, declaratory judgment, and injunctive relief for alleged violations of its rights under the Fourteenth Amendment of the U.S. Constitution and under Article I, Sections 7 and 9 of the Delaware Constitution. All of Plaintiffs claims arise from Defendants' rejection of Plaintiff's Building Permit Application ("BP A") based on what Plaintiff contends was improper application of a subsequently-adopted resolution relating to the construction of swimming pools.

Pending before the Court is Defendants' Motion To Dismiss Plaintiffs Amended Complaint pursuant to Rule 12(b)(1) for lack of subject-matter jurisdiction and Rule 12(b)(6) for failure to state a claim upon which relief can be granted. (D.I. 11) The Court held oral argument on July 21, 2015. ( See Transcript ("Tr.")) For the reasons discussed below, the Court will grant the motion in part and deny it in part.

I. BACKGROUND

Plaintiff purchased 200 Laurel Street, in Rehoboth Beach, Delaware, in August of 2014, intending to build a residential home with a centrally located pool. (D.I. 5 ¶¶ 15-16) On September 12, 2014, Plaintiff attended a Joint Meeting of the Board of Commissioners and the Planning Commission of the City, during which City officials directed attendees to submit before September 19, 2014 - any application to build a pool, so that those applications could be reviewed under "currently applicable standards." (D.I. 5 ¶ 18) At that time, the City had a practice of requesting clarification and/or additional information when a building permit application was insufficient. ( Id. ¶ 21) Plaintiff submitted its application on September 15. ( Id. ¶ 19)

On September 19, Defendants passed Adopted Resolution No. 0914-02 ("Adopted Resolution"), which proposed a public hearing concerning "a moratorium on permits or other approvals for the construction of unenclosed swimming pools within the residentially zoned districts of the City." (D.I. 12 Ex. 2) The Adopted Resolution included an ordinance imposing the moratorium on pool construction ("Ordinance") and was made subject to the pending ordinance doctrine. ( Id. ) Section 4 of the Ordinance states:

This moratorium shall not apply to: (1) applications for permits or other approvals for construction of unenclosed swimming pools finally approved by the City prior to the September 19, 2014 introduction of this Ordinance; and (2) complete applications filed and pending with the City as of the September 19, 2014 introduction of this ordinance that include all information necessary for processing by the City, including information necessary to determine compliance with all applicable Federal, State, and City laws and regulations; and (3) applications for permits or other approvals for the maintenance and repair of existing Swimming Pools.

( Id. )

On October 14, the City informed Plaintiff verbally of the rejection of E & R's BP A and told Plaintiffs contractor, Allen Walker, that the City could not accept changes or additional information. (D.I. 5 ¶ 30) The next day, Defendants Lynn and Sullivan told Walker that the application had been rejected due to the City's "interpretation and application of Section 4 of the Adopted Resolution." ( Id. ¶ 31)

After the City rejected Plaintiffs BP A, Defendant Cooper and other City agents told Plaintiff that the appropriate procedure to resolve the issue would include a discussion with Lynn and the City Solicitor. ( Id. ¶ 32) Moreover, Cooper and City agents asked that E & R take no further action until the rejection of the BP A could be reviewed further. ( Id. )

Plaintiff met with Lynn, the City Solicitor, and the City's Assistant Building Inspector on October 23 ( id. ¶ 36), and next attended an executive session with the Mayor, Commissioners, and Lynn on October 31 ( id. ¶ 37). However, it was not until an executive session on November 17, 2014 that the City stated it would take no further action on the Adopted Resolution or Plaintiff's BP A. ( Id. ¶ 41)

The Amended Complaint alleges the following claims: declaratory judgment pursuant to 28 U.S.C § 2201, etseq., and Rule 57 of the Federal Rules of Civil Procedure (Count I); injunctive relief (Count II); equitable estoppel (Count III); vested rights (Count IV); a violation of Procedural Due Process under Delaware Constitution Article I, Sections 7 and 9 (Count V) and under 42 U.S.C. § 1983 (Count VI); a violation of Substantive Due Process under 42 U.S.C. § 1983 (Count VII); a violation of Equal Protection under 42 U.S.C. § 1983 (Count VIII); and a claim for attorneys' fees under 42 U.S.C. § 1988 (Count IX).

Defendants moved to dismiss Plaintiffs Amended Complaint on six grounds. First, Defendants contend that the state of Delaware and the City of Rehoboth Beach have adequate administrative remedies that would have provided E & R with procedural due process had E & R pursued them. (D.I. 12 at 8) Defendants maintain that Plaintiffs failure to exhaust its administrative remedy bars Plaintiff from pursuing its state-law claims, procedural due process claim, and any claims for equitable relief (Counts I through VI). Second, Defendants argue that Plaintiff had an adequate remedy at law, which it failed to pursue, and, thus, is barred from asserting claims for equitable relief (Counts I through V). Third, Defendants maintain that Plaintiffs substantive due process claim (Count VII), based on the City's alleged "arbitrary and capricious" conduct, does not "shock-the-conscience" and, accordingly, is not actionable. Fourth, Defendants argue that Plaintiffs equal protection claim (Count VIII) must fail since E & R does not allege that it was similarly situated to any other individual or entity, or that there was no rational basis for any alleged differential treatment. Fifth, Defendants assert that Plaintiff has failed to challenge a zoning decision at the local level, and therefore, its section 1983 claims (Counts VI through VIII) are not ripe. Sixth, and finally, Defendants argue that because Plaintiff cannot prevail on its section 1983 claims, its claim for attorneys' fees (Count IX) should be dismissed.

II. LEGAL STANDARDS

Defendants' motion to dismiss alleges lack of subject matter jurisdiction pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure as well as failure to state a claim upon which relief may be granted pursuant to Rule 12(b)(6). When a court is faced with 12(b)(1) and 12(b)(6) motions to dismiss, as a general rule the correct procedure is to consider dismissal on the jurisdictional ground first, "for the obvious reason that if the court lacks jurisdiction to hear the case then a fortiori it lacks jurisdiction to rule on the merits." Mortenson v. First Fed. Sav. & Loan Assn, 549 F.2d 884, 895 n. 22 (3d Cir. 1977).

A. Fed.R.Civ.P. 12(b)(1)

"Federal Rule of Civil Procedure 12(b)(1) authorizes dismissal of a complaint for lack of jurisdiction over the subject matter, or if the plaintiff lacks standing to bring his claim." Samsung Electronics Co., Ltd. v. ON Semiconductor Corp., 541 F.Supp.2d 645, 648 (D. Del. 2008). Motions brought under Rule 12(b)(1) may present either facial or factual challenges to the Court's subject matter jurisdiction. See CNA v. United States, 535 F.3d 132, 139 (3d Cir. 2008) (quoting U.S. ex rel. Atkinson v. PA. Shipbuilding Co., 473 F.3d 506, 514 (3d Cir. 2007)). In reviewing a facial challenge under Rule 12(b)(1), the Court must accept all factual allegations in the complaint as true and may only consider the complaint and documents referenced in or attached to the complaint. See Gould Elecs., Inc. v. United States, 220 F.3d 169, 176 (3d Cir. 2000). In reviewing a factual challenge, "the trial court is free to weigh the evidence and satisfy itself as to the existence of its power to hear the case." Mortensen, 549 F.2d at 891. In a factual attack, "no presumptive truthfulness attaches to plaintiffs allegations, and the existence of disputed material facts will not preclude the trial court from evaluating for itself the merits of jurisdictional claims. Moreover, the plaintiff will have the burden of proof that jurisdiction does in fact exist." ( Id. )

When the issue of a court's jurisdiction and the merits of the case are intertwined, "a court may determine subject matter jurisdiction without reaching the merits, so long as the court demand[s] less in the way of jurisdictional proof than would be appropriate at the trial stage.'" Gould Elecs., 220 F.3d at 178 ( quoting Mortensen, 549 F.2d at 891) (permitting evaluation of ...


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