Cars Nw., Inc. v. City of Gladstone, Case No. 3:17-cv-01950-AC

CARS NORTHWEST, INC., a corporation doing business as Cars-R-Us, and MICHAEL MAES, Plaintiffs, v. CITY OF GLADSTONE, a municipal entity, ERIC SWANSON, an individual,LINDA NEACE, an individual, PATRICK McMAHON, an individual, NEIL REISNER,an individual, STEVE JOHNSON, an individual, THOMAS MERSEREAU,an individual, KEVIN JOHNSON, an individual, JACQUE BETZ, an individual,and TAMMY STEMPEL, an individual, Defendants.

Case No. 3:17-cv-01950-AC

UNITED STATES DISTRICT COURT DISTRICT OF OREGON PORTLAND DIVISION

January 23, 2020

OPINION AND ORDER

ACOSTA, Magistrate Judge:

Plaintiffs Cars Northwest, Inc. ("Cars" or "Cars-R-Us"), and Michael Maes ("Maes") (collectively "Plaintiffs") bring this action pursuant to 42 U.S.C. § 1983 against Defendants the City of Gladstone ("the City"), Eric Swanson, Linda Neach, Patrick McMahon, Neil Reisner, Steve Johnson, Thomas Mersereau, Kevin Johnson, Jacque Betz, and Tammy Stempel's (the "Individual Defendants") (collectively "Defendants"). Plaintiffs allege Defendants violated their Fourteenth Amendment due process rights by depriving them of relocation benefits under Oregon Revised Statute ("O.R.S.") § 35.510 and the Uniform Relocation Assistance and Real Property Acquisitions Policy Act ("URA"), 42 U.S.C. §§ 4601 et seq., when Defendants purchased property they were leasing in order to develop a new City Hall and Police Station. Presently before the court is Defendants' motion for summary judgment (ECF No. 24). For the following reasons, the court grants Defendants' motion.

Factual Background

Maes is the sole owner of Cars-R-Us, a wholesale and retail business selling used cars, boats, motorcycles, and other vehicles. (Decl. Michael Maes Supp. Pl.'s Resp. Mot. Summ. J. ("Maes Decl.") ¶¶ 2-5, ECF No. 33-1.) For over twenty years, Cars operated on a gravel parking lot at 18565 Portland Avenue, Gladstone, Oregon ("the Portland Avenue Property" or "the Property"). (Id. ¶ 4.) The Portland Avenue Property was owned by the Kmetic family, specifically Kenneth Kmetic and Steven and Kevin Kmetic as trustees of the Walter J. Kmetic Trust. (Decl. Bradley F. Piscadlo ("Piscadlo Decl.") Ex. 7, attaching Dep. Steven Kmetic ("Steven Kmetic Dep.") at 7:2-23, ECF No. 24-1 at 60.) Maes leased space on the Property from Kmetic RV Storage on a month-to-month basis for $463 per month. (Piscadlo Decl. Ex. 4, attaching Dep. Michael Maes ("Maes Dep.") at 38:20-24, 39:3-11, ECF No. 24-1 at 27-28; Maes Decl. ¶ 4, ECF No. 33-1 at 2.) Lynne Kmetic, spouse of Kenneth Kmetic, also rented space at the Portland Avenue Property for a hair salon. (Maes Decl. ¶ 8, ECF No. 33-1 at 3.) Multiple other businesses leased propertyfrom the Kmetics at the Portland Avenue Property on a month-to-month basis. (Piscadlo Decl. Ex. 6, attaching Dep. of Lynne Kmetic ("Lynne Kmetic Dep.") at 6:5-15, ECF No. 24-1 at 48.)

In March 2016, the City approached the Kmetic family about possibly purchasing the Property. The City used real estate agent Tony Reser and the Kidder Matthews real estate firm to assist the City in negotiating the purchase. (Decl. Tony Reser ("Reser Decl.") ¶ 1, ECF No. 24-2.) The City had identified the Property for expansion of the City's Public Works Building and as a staging area while the new City Hall was being built. (Decl. Cameron Ramelli Supp. Pl.'s Resp. Mot. Summ. J. ("Ramelli Decl.") Ex. 5, ECF No. 33-2.) In a draft letter, Reser suggested that the City approach the Kmetic family to suggest a "friendly condemnation" in order to allow the Kmetic family to defer potential taxes on the sale. (Ramelli Decl. Ex. 5, ECF No. 33-2.) The City's attorney, David Doughman, and Reser arranged a meeting with the Kmetic family to discuss sale of the Property. The Kmetics were receptive to selling the Property, and in April 2016, negotiated a sale price of $910,000. (Piscadlo Decl. Ex. 9 at 4, ECF No. 24-1 at 78.) Pursuant to the agreement, the Kmetics were to deliver the Property free and clear of all tenants. (Id.) Additionally, an addendum to the Purchase and Sale agreement provided that the "[s]ubject purchase by the City of Gladstone is contemplated as an acquisition in lieu of condemnation (involuntary conversion)" pursuant to a Section 1033 Exchange. (Id. at 24, ECF No. 24-1 at 98.)

In early August 2016, shortly before closing, the City became aware that some of tenants on the Property believed they were entitled to relocation benefits and that the Kmetic family was willing to sell only because condemnation had been threatened. (Maes Decl. ¶ 11, ECF No. 33-1.) The City agreed to provide the tenants cash settlements in the amount of two months' rent and to provide additional lease time on the Property in exchange for signed agreements releasing the Cityfrom any potential claims for relocation benefits. (Piscadlo Decl. Ex. 15, ECF No. 24-1 at 108; Maes Decl. ¶ 12, ECF No. 33-1.)

On September 20, 2016, the Clackamas Review, a local newspaper, published an article about the City's purchase of the Property. (Maes Decl. Ex. 1 at 1, ECF No. 33-1 at 7.) The article highlighted concerns expressed by some of the tenants and suggested that the Kmetic family had been forced to sell. (Id.) The article indicated that the City believed the site would be ideal for a new Police Station. (Id.) Tenant Bruce Hildreth, president of the Sherie Hildreth Ovarian Cancer Foundation ("SHOC"), operated the Teal Ribbon Boutique on the Property. Hildreth indicated in the article that he had received an eviction notice and had no plans of relocating. (Id.) The article also quoted Lynne Kmetic as indicating that the family did not want to sell the property, but "we didn't have a choice. [That is what happens] when you deal with government entities." (Id. at 2, ECF No. 33-1 at 8; Lynne Kmetic Dep. 6:5-15, ECF No. 24-1 at 48.)

The following day, the City sent an email to the reporter asking the Clackamas Review to run a response to the article that provided the following:

The [C]ity has expressed in a public meeting it has no plans to force a sale of the Kmetic property or use its eminent domain authority to acquire the property. The [C]ity has always understood the property owner would terminate the month-to-month tenancies in advance of a sale of the property to any buyer, the [C]ity or otherwise. For these reasons, the [C]ity does not believe it is obligated to provide relocation assistance to the tenants. However, the fact is the [C]ity has offered money to the tenants in the form of two month's rent. Two of the tenants do not pay any monthly rent to the property owner, yet the [C]ity is offering those tenants money as well. We are awaiting confirmation from the property owner that the tenants have accepted the [C]ity's offer.

(Piscadlo Decl. Ex. 11, ECF No. 24-1 at 103 (emphasis in original).) The Clackamas Review did not run the City's response.

On October 5, 2016, Reser received a text message from Lynne Kmetic indicating that some of the tenants were unwilling to sign the releases "because their attorneys have told them the release is not legal and that they should get 60 days to move." (Piscadlo Decl. Ex. 12, ECF No. 24-1 at 104.) On October 7, 2016, Reser requested a meeting with Steve Kmetic prior to a Gladstone City Council meeting scheduled for October 11, 2016, to discuss the issue with the tenants. (Id. Ex. 13, ECF No. 24-1 at 105-06.) Additionally on October 7, 2016, the City's attorney Doughman, sent an email to Steve Kmetic providing that the City needed to better understand the issue with the tenants. (Id.) Doughman noted that he understood some tenants were unwilling to sign the releases, and that the City may be "amenable to allowing some or all of them more time to vacate the property." (Id.) However, Doughman provided that:

in light of the newspaper article from a couple of weeks ago, and, candidly, the comment from Ms. Kmetic alluding to the [C]ity's purchase of the property as "forced", I cannot recommend the [C]ity close on the property unless it is clear that it will not face a legal action from the tenants after we close on the property.

(Id.)

On October 10, 2016, Reser met with Steve Kmetic, and reported to Doughman that the tenants were under the "mistaken impression" that the property was being condemned, and that Kmetic indicated that "now that they know it is an outright sale he doesn't think they will object." (Id. at Ex. 14, ECF No. 24-1 at 107.) Mr. Reser also indicated that Kmetic requested that new releases be drafted on "Gladstone letterhead" and explain that it is not a condemnation, but an arm's length sale. (Id.) The City revised the releases to include the following language: "The City is not using its eminent domain authority to acquire the Portland Avenue Property or otherwise forcing the sale of the Property." (Piscadlo Decl. Ex. 15 at 1, ECF No. 24-1 at 108.) On October 18, 2016, Maes, on behalf of Cars, signed the revised release which stated "[a]s the City and Trusthave explained to Cars, the City and the Trust are engaged in an arms-length, negotiated purchase and sale of the Property." (Id.) Specifically, Plaintiff agreed to the sum of $926 and the right to stay on the Property through January 1, 2017 in exchange for releasing the City "from any obligation it may have under state or federal law, including ORS 35.500 - 35.530, to provide relocation assistance to Cars if it purchases the property." (Id.)

At a November 9, 2016 City Council Meeting, the City passed Resolution 1093 which approved the purchase of the Property. (Id. at Ex. 16 at 3-4, ECF No. 24-1 at 111-12; Id. at Ex. 17, ECF No. 24-1 at 116.) At the November 9 Meeting, Councilor Steve Johnson noted that there had been a lot of misinformation about the Portland Avenue Property purchase, and asked Doughman to clarify some issues. (Id. at 3.) Doughman confirmed that the City was not using its eminent domain authority to purchase the Property. (Id.) Also at the November 9 Meeting, several tenants attempted to rescind their agreements to...