In Their Opinion : Seventh Circuit Court of Appeals Commentary : Lawyer & Attorney Michael E. Rigney : Kelley Drye & Warren Law Firm

LOUIS AND KAREN METRO FAMILY, LLC v. LAWRENCEBURG CONSERVANCY DISTRICT (July 29, 2010)

Louis and Karen Metro Family, LLC is a limited liability company owned by Louis and Karen Metro. The company owns a number of parcels of property in Ohio and Indiana. One such parcel sat on a bank of Tanners Creek and was home to a pizza parlor. Because Tanners Creek had a long history of flooding, the City of Lawrenceburg and the Lawrenceburg Conservancy District agreed to jointly build a floodwall along the creek. The District notified Metro Family of its intent to acquire the Tanner Creek property through eminent domain. It offered $417,000 -- the appraised fair market value. Metro Family refused the offer but eventually agreed on the sale of the property for $417,000 plus an irrevocable option to purchase 1.4 acres back for $269,490. The option was exercisable for 18 months after completion of the floodwall. Unfortunately, the floodwall was never built. The City withdrew from the project and the District could not complete it on its own. The District conveyed the Metro Family parcel to the City. The property was converted to highway use. Metro Family brought suit against the City and the District for breach of contract. Magistrate Judge Hussman (S.D. Ind.) concluded that there was a breach but that Metro Family was entitled to no monetary recovery. Instead, he ordered reformation of the contract and gave Metro Family 18 additional months within which to exercise the option. The City and the District appeal. Metro Family cross-appeals.

In their opinion, Judges Cudahy, Wood, and Evans vacated and remanded. The only issue on appeal was the remedy for the breach. In Indiana, reformation of the contract is available when there is a mutual mistake. The Court noted that the problem was not really a mutual mistake but a failure to allocate risk in the event the underlying project was canceled. Nevertheless, the Court believed that an Indiana court would use the mutual mistake concept -- that the parties shared a common assumption regarding a fact that was the essence of the agreement -- to find for Metro Family. Therefore, the Metro Family is entitled to the value of the option. The Court opined that the magistrate judge's reformation approach would have been appropriate if the option parcel was still undeveloped. Since exercising the option is no longer a viable alternative, however, the Court concluded that the next best approach was to compare the option price ($269,490) with the appraised value of the option parcel prior to the construction of the highway. Metro Family is entitled to the excess (if any) of the appraised value over the option price.

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FLYING J INC. v. CITY OF NEW HAVEN (December 5, 2008)

Flying J develops and operates travel plazas for truck drivers and other travelers. It purchased 50+ acres in New Haven, Indiana (the “City”) to develop a new travel plaza. The City opposed the development and took the position that it was not allowed under the then-current zoning. Flying J ultimately prevailed in the Indiana state courts on its challenge to the City’s position. Undaunted, the City amended its zoning ordinance to limit developments of this type to two acres. The Flying J development was the only parcel affected by this limitation. The City held several public meetings on the amendment but never gave Flying J specific notice of them. In August of 2007, the City advised Flying J that its development must comply with the two acre rule. Flying J filed suit in September, alleging violations of its rights under the U.S. and Indiana Constitutions. The district court dismissed for failure to state a claim. Flying J appeals.

In their opinion, Judges Bauer, Flaum and Williams affirmed. The Court first addressed the City’s position that the Court lacked jurisdiction under the principles of Williamson County. The Supreme Court in Williamson County held that takings claims in land use cases are not ripe until the local authority has reached a final decision, including a decision on a variance application and compensation. Courts have applied the doctrine to takings claims even when they are labeled as due process or equal protection claims. The Court noted that it has created an exception for claims alleging the malicious conduct of a government agent unrelated to a legitimate state objective. Flying J’s allegations of the City’s protracted litigation, its covert amendment to the ordinance, the ordinance’s application only to Flying J, and the potential conflicts of interest of several commission members fit its claim within that exception.

The Court next addressed whether Flying J stated a claim. Relying on its precedent in Wroblewski and Lauth, the Court identified the pleading standard for a class-of-one equal protection claim. In those cases, the plaintiff must negate any set of facts that provides a rational basis for the classification challenged. Animus of the defendant comes into play only after the plaintiff has pled facts that show the irrationality of the government’s conduct. Flying J does allege facts that would show that the City took its actions in response solely to Flying J’s development but it does not allege facts to establish that the zoning amendment was irrational. Flying J’s allegations therefore do not overcome the presumption of rationality the government enjoys in cases of this nature.

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JOHNSON v. ORR (December 04, 2008)

David Johnson obtained a certificate of purchase for a tax-delinquent piece of land in Cook County (the “County”). The certificate allowed him to acquire the property by following certain notice requirements and by then petitioning the court. He complied with the notice requirements. Before he petitioned the court, the County realized that its determination of delinquency was in error. The County and Johnson agreed to an order, entered by the court, declaring the tax sale in error and directing the cancellation of the certificate and return of the purchase price. Notwithstanding the order, Johnson petitioned the state court for a deed. Johnson later filed suit in federal court. He alleged that the County’s failure to issue the deed violated his constitutional rights and the Interstate Land Sales Full Disclosure Act, as well as various other state statutory and common laws. The court granted defendant’s motion to dismiss, ruling that the complaint sought review of a state court decision in violation of the Rooker-Feldman doctrine and that jurisdiction was barred by the Tax Injunction Act (“TIA”). Johnson appeals.

In their opinion, Judges Ripple, Evans and Tinder affirmed. The Court first addressed the Rooker-Feldman doctrine. That doctrine deprives federal courts (except the Supreme Court) of jurisdiction to hear a party complain about the effects of a state court judgment. Although Johnson attempted to style his request for relief as something other than an attack on the state court judgment, the Court looked beyond the complaint to identify the actual injury. Johnson’s injury, the state court’s failure to grant him a tax deed, comes directly from the order entered by the court canceling the certificate. The gravamen of his complaint is that the court’s order was erroneous. The district court therefore lacked subject matter jurisdiction of Johnson’s constitutional claims. Johnson also alleged a violation of the Interstate Land Sales Full Disclosure Act (the “Act”), a federal statute. Although a claim pursuant to a federal statute would normally provide subject matter jurisdiction, the Court stated that such a claim should be dismissed if it is “wholly insubstantial and frivolous.” The Court concluded that Johnson’s claim was just that. The Act applies only to sales of real estate. Here, the County did not sell the property and Johnson did not buy the property. Even if there was a sale, the Court observed that the Act would not apply because it contains an exemption for a sale by a government body. Although it did not have to, the Court did briefly address the TIA issue. It disagreed with the district court’s conclusion that the TIA applied. The TIA only applies where the relief requested would reduce the State’s tax benefit or impede the collection of taxes. The Court found neither present in the case.
 

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