Beck v. City of Whitefish

653 F.Supp.3d 813

Jeff BECK, individually; Amy Weinberg, individually; Zac Weinberg, individually;

Alta Views, LLC; Riverview Company, LLC;and on behalf of a class of similarly situated persons and entities, Plaintiffs, v. CITY OF WHITEFISH, a Montana municipality, and Does 1-50, Defendants.

City of Whitefish, a Montana municipality, Third-Party Plaintiff, v. Financial Consulting Solutions Group, Inc., Third-Party Defendant.

CV 22-44-M-KLD

United States District Court, D. Montana, Missoula Division

Signed January 27, 2023

Ben Alvin Snipes, Mark Kovacich, Caelan G. Brady, Kovacich Snipes Johnson, PC, Great Falls, MT, Cory R. Laird, Lindsay Ann Mullineaux, Riley Matthew Wavra, Laird Cowley, PLLC, Missoula, MT, for Plaintiffs Jeff Beck, Amy Weinberg, Zac Weinberg, Alta Views, LLC, Riverview Company, LLC.

Marcel A. Quinn, Thomas Hollo, Todd A. Hammer, Hammer, Quinn & Shaw, PLLC, Kalispell, MT, for Defendant/Third-Party Plaintiff City of Whitefish.

Gabrielle N. Gee, Jori Lydia Quinlan, Hall Booth Smith, P.C., Missoula, MT, Baxter Drennon, Hall Booth Smith, Little Rock, AR, for Third-Party Defendant.

ORDER

Kathleen L. DeSoto, United States Magistrate Judge

This matter comes before the Court on Defendant City of Whitefish's ("the City") Motion for Judgment on the Pleadings (Doc. 26) under Federal Rule of Civil Procedure 12(c). The above named Plaintiffs are individuals and limited liability companies that applied for building permits in the City and were charged impact fees for water and wastewater services. Based on the pleadings, the City seeks judgment on Plaintiffs' First Cause of Action, which alleges that, under 42 U.S.C. § 1983, the City's impact fees amount to a Fifth Amendment Taking. For the reasons set forth below, the City's motion is denied.

I. Background¹

"Impact fees" are charges imposed upon new development, remodels, and renovations by a governmental entity as part of the development approval process "to fund the additional service capacity required by the development." Mont. Code. Ann. § 7-6-1601(3), (5)(a). Montana law authorizes local governments to charge impact fees, and provides criteria for, and limitations on, how impact fees may be established, calculated, and imposed. See Mont. Code Ann. § 7-6-1602. In Montana, the amount of the impact fee must be reasonably related and proportionate to the new development's share of the cost of the infrastructure improvements. Mont. Code Ann. § 7-6-1602(7)(a), (b).

The City has been charging impact fees since 2007. (Doc. 1, ¶ 8). On November 19, 2018, the Whitefish City Council ("City Council") adopted Resolution No. 18-44, which increased impact fee rates for water and wastewater services charged as a precondition to receiving a building permit within the City limits, effective January 1, 2019. (Doc. 1, ¶¶ 9, 12). On July 15, 2019, the City Council adopted Resolution No. 19-15, which again increased impact fee rates, effective September 1, 2019. (Doc. 1, ¶ 10).

On February 24, 2022, Plaintiffs sued the City, claiming the impact fees mandated by the Resolutions are unlawful takings in violation of the Fifth Amendment to the United States Constitution (Count I), as well as asserting claims against the City for negligence per se (Count II), negligence (Count III), and negligent misrepresentation (Count IV) under state law. (Doc. 1).

First, Plaintiffs assert that by misapplying maximum fee recommendations made in two third-party reports, one by an engineering consulting company retained in 2007 and the other an updated report by a separate utility rate and fee consulting company in 2018, the Resolutions ostensibly permitted the City to charge greater than the maximum allowable fee rates calculated by the consulting companies. (Doc. 1, ¶¶ 15-19). Therefore, Plaintiffs allege the City has been charging inflated impact fee rates, inconsistent with the actual impacts of new development on water and wastewater services in the City. (Doc. 1, ¶¶ 20, 22).

Additionally, Plaintiffs allege that because the 2018 impact fee rates in Resolution No. 19-15 reflected anticipated costs related to two future water and wastewater-related projects that have since been "redefined" or "scrapped" entirely, the City cannot lawfully include these project costs in calculating appropriate impact fee rates. (Doc. ¶¶ 27-32).

Lastly, Plaintiffs allege that Resolution No. 19-15 illogically established impact fee rates reflecting the projected cost of a $10 million water treatment plant upgrade without accounting for the additional new homes that would result from the capacity upgrades, effectively spreading out the burden among more future users. (Doc. 1, ¶¶ 33-34).

Plaintiffs seek declaratory relief under the Federal Declaratory Judgment Act, 28 U.S.C. §§ 2201, et seq. (Count V), including declarations that the City's impact fee resolutions are unlawful and should be set aside, and that Plaintiffs are entitled to refunds of any money paid in impact fees in excess of those permitted under the United States Constitution and Montana law. (Doc. 1, ¶ 81-83).

The City timely filed this Motion for Judgment on the Pleadings, asserting that Plaintiffs' allegations do not constitute a taking as a matter of law, and absent a valid takings claim, the Court lacks subject matter jurisdiction over Plaintiffs' other claims. (Doc. 26).

II. Legal Standard

A failure to state a claim defense may be raised by a motion for judgment on the pleadings after the pleadings are closed but early enough not to delay trial. Fed. R. Civ. P. 12(c), (h)(2)(B). A motion under Rule 12(c) operates in the same way as a motion to dismiss under Rule 12(b)(6) by challenging the sufficiency of the pleadings. Chavez v. United States, 683 F.3d 1102, 1108 (9th Cir. 2012). The allegations in the complaint "must be enough to raise a right to relief above the speculative level." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Conclusory allegations and unwarranted inferences are insufficient to defeat a motion to dismiss. Johnson v. Lucent Techs. Inc., 653 F.3d 1000, 1010 (9th Cir. 2011); Twombly, 550 U.S. at 555, 127 S.Ct. 1955 ("[A] plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.").

In considering a motion for judgment on the pleadings, the court must accept as true "all allegations of fact by the party opposing the motion" and construe them "in the light most favorable to that party." General Conf. Corp. of Seventh-Day Adventists v. Seventh-Day Adventist Congregational Church, 887 F.2d 228, 230 (9th Cir. 1989). "A judgment on the pleadings is a decision on the merits," 3550 Stevens Creek Assocs. v. Barclays Bank of Cal., 915 F.2d 1355, 1357 (9th Cir. 1990), and is only appropriate when "there is no issue of material fact in dispute, and the moving party is entitled to judgment as a matter of law." Fleming v. Pickard, 581 F.3d 922, 925 (9th Cir. 2009).

III. Discussion

A. Pleading Requirements

As "[f]ederal pleading rules call for 'a short and plain statement of the claim showing that the pleader is entitled to relief,' " an "imperfect statement of the legal theory supporting the claim asserted" is not fatal to a pleading if the defendant is otherwise sufficiently informed of the factual basis for the complaint. Johnson v. City of Shelby, Miss., 574 U.S. 10, 11, 135 S.Ct. 346, 190 L.Ed.2d 309 (2014) (per curiam) (quoting Fed. R. Civ. P. 8(a)(2)); Alvarez v. Hill, 518 F.3d 1152, 1157 (9th Cir. 2008) ("Notice pleading requires the plaintiff to set forth in his complaint claims for relief, not causes of action, statutes or legal theories." (Emphasis in original)).

"Whether a suit arises under the laws of the United States must be determined from the plaintiff's complaint, but the lack of proper reference to federal law is not controlling." L.B. v. United States, No. CV 18-74-BLG-SPW-TJC, 2020 WL 2736202, at *3 (D. Mont. May 6, 2020), report and recommendation adopted sub nom. L.B. v. United States, Bureau of Indian Affs., No. CV 18-74-BLG-SPW, 2020 WL 2732074 (D. Mont. May 26, 2020) (citing N. Am. Phillips v. Emery Air Freight Corp., 579 F.2d 229, 233 (2d Cir. 1978)); Western Org. of Res. Councils v. Bernhardt, 412 F. Supp. 3d 1227, 1235 (D. Mont. 2019) ("[A] complaint is only required to contain a factual basis for its claim, Fed. R. Civ. P. 8(a)(2), not outline a complete legal theory.").

Plaintiffs allege that because the cost of the water and wastewater impact fees the City charges for new development, remodels, and renovations greatly exceeds the actual impacts that new development has on the City's water and wastewater services and facilities, the over-charge amounts to an illegal taking of their property. Pursuant to 42 U.S.C. § 1983, Plaintiffs' First Cause of Action alleges a deprivation of constitutional rights under the Fifth Amendment of the United States Constitution. (Doc. 1, ¶ 54). Plaintiffs' Complaint characterizes their claim as an unconstitutional "monetary exaction," specifically citing the "Takings Clause" and the following legal standard for unconstitutional exactions as articulated by the Supreme Court in Dolan v. City of Tigard, 512 U.S. 374, 386, 391, 114 S.Ct. 2309, 129 L.Ed.2d 304 (1994):

A local government exaction that places conditions on the development of private property passes constitutional muster only if: (1) the exaction shares an "essential nexus" with the reasons that would allow rejection of the permit altogether; and (2) the public benefit derived from the exaction is roughly proportional to the burden imposed on the public.

(Doc. 1, ¶¶ 51-53).

In its Brief in Support of its Motion for Judgment on the Pleadings, the City argues that Plaintiffs failed to state a valid takings claim because in McClung v. City of Sumner, 548 F.3d 1219 (9th Cir. 2008), the Ninth Circuit held the "essential nexus" and "rough...