CHKRS, LLC v. City of Dublin

CHKRS, LLC, Plaintiff, v. THE CITY OF DUBLIN, OHIO, et al., Defendants.

Civil Action 2:18-cv-1366

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF OHIO EASTERN DIVISION

March 23, 2020

Magistrate Judge Kimberly A. Jolson

OPINION AND ORDER

This matter is before the Court on Defendants' Motion for Judgment on the Pleadings (Doc. 42), Defendants' Motion to Strike Supplemental Memorandum (Doc. 48), and Defendants' Motion to Disqualify Karen Edwards-Smith as Plaintiff's Counsel (Doc. 32). For the following reasons, Defendants' Motion for Judgment on the Pleadings (Doc. 42) is GRANTED, Defendants' Motion to Strike Supplemental Memorandum (Doc. 48) is GRANTED, and Defendants' Motion to Disqualify Karen Edwards-Smith as Plaintiff's Counsel (Doc. 32) is DENIED as moot.

I. BACKGROUND

The Court has previously summarized the background of this case. (See Doc. 27 at 1-3). Relevant here, in July 2015, Plaintiff entered into a three-year lease (the "Lease") with an option to purchase the property at 6310 Riverside Drive (the "Property") from its then owner, Ms. Karen Friedman. (Doc. 38, ¶ 15). Several months later in September 2015, Defendant the City of Dublin, Ohio ("Dublin") "sued to appropriate a permanent bike path easement and a temporary construction easement" on the Property. (Id., ¶ 17).

The parties, along with Ms. Friedman, litigated the appropriation in the Franklin County Court of Common Pleas, the Ohio Tenth District Court of Appeals, and the Ohio Supreme Court (the "State Court Action"). (Id., ¶¶ 17-22, 34, 37-39). In the state trial court, the City of Dublin moved to appropriate "a permanent easement and a temporary easement ... for the public purpose of constructing roadway improvements at the intersection of State Route 161 and Riverside Drive, and a shared-use path adjacent to Riverside Drive." City of Dublin v Friedman, et al., Case No. 15 CV 008664, Am. Compl. for Appropriation, ¶ 8 (Ohio Com. Pl. Oct. 21, 2015). Consistent with the requirements of the Ohio Revised Code, the City of Dublin hired an independent appraiser to determine the value of the property interest in the desired easement and deposited that amount into an escrow account. Id., ¶¶ 10-11.

Ms. Friedman subsequently moved to withdraw the City of Dublin's escrow deposit. See id., Mot. to Withdraw Deposit (Ohio Com. Pl. Nov. 30, 2015). CHKRS responded and requested that the Court "hear evidence as to CHKRS [sic] interest and make distribution of the deposit of the City of Dublin accordingly." Id., Br. in Resp. to Mot. for Disbursement at 3 (Ohio Com. Pl. Dec. 9, 2015).

The trial court directed the parties to brief the issue of "a so-called eminent domain clause in the lease." Id., Journal Entry at 1 (Ohio Com. Pl. Mar. 9, 2016). That provisions states: "Any monies dispersed by the City of Dublin or ODOT are payable to Karen Michelle Friedman until the Lessee has procured on the purchase option." (Doc. 38-1, ¶ 31). The Court summarized Ms. Friedman's argument regarding this clause:

[T]he option in the lease to tenant CHKRS, LLC has not been exercised, and ¶ 31 of the lease is an "eminent domain clause" that sets out what occurs in the event of a land condemnation proceeding. Beyond that, if the court rules that ¶ 31 (or other legal rules) govern and effectively vest the condemnation award in the owner Ms. Friedman, then she and the plaintiff have already agreed upon a final settlement of this case.

City of Dublin v Friedman, et al., Case No. 15 CV 008664, Journal Entry at 1-2 (Ohio Com. Pl. Mar. 9, 2016) (footnote omitted).

The parties briefed the issue as directed by the trial court. Relying on that provision, Ms. Friedman argued that CHKRS had no compensable interest in the Property. See id., Hr'g Br. at 2 (Ohio Com. Pls. Mar. 11, 2016) ("Because it is undisputed that CHKRS did not procure on its option to purchase the Property by the date of take in this matter ..., the plain language of the Lease provides that all of the monies associated with Dublin's appropriation must be distributed to Friedman."). CHKRS disputed Ms. Friedman's position, arguing that it was contrary to the plain language of the contract and that it would "den[y] CHKRS the benefit of its bargain." Id., Hr'g Br. and Br. in Opp. at 3 (Ohio. Com. Pl. Mar. 18, 2016). Moreover, CKHRS emphasized, it had procured on the purchase option and, therefore, it was entitled to compensation. Id. at 3-4.

CHKRS' first attempt at establishing a compensable interest in the Lease was unsuccessful. In its June 3, 2016 Opinion and Journal Entry, the Court rejected CHKRS argument and concluded that, because CHKRS had not procured on the purchase option, it was not entitled to compensation for the appropriation of the bike path easement pursuant to ¶ 31 of the Lease. Id., Op. and Journal Entry at 7-9 (Ohio Com. Pl. June 3, 2016). It found that Ms. Friedman was "entitled to withdraw Dublin's $25,080 deposit" and granted her motion to withdraw deposit as a result. Id. at 9. Shortly thereafter, the trial court entered its Final Judgment Entry, granting Ms. Friedman's motion to withdraw deposit. City of Dublin v Friedman, et al., No. 15CV0908664, 2016 WL 11513379 (Ohio Com. Pl. June 16, 2016).

CHKRS' second bite at the apple fared no better. In its appeal to the Tenth District Court of Appeals, CHKRS explicitly challenged (1) the trial court's interpretation of ¶ 31 of the Lease and (2) its finding that CHKRS failed to procure on the Lease's purchase option. See City of Dublin v Friedman, et al., 16-AP-000516, Appellant's Br. at viii (Ohio Ct. App. Sept. 18, 2016) ("Assignment of Error No. 1 Whether the trial court properly found that CHKRS did not exerciseits option to purchase the property, when there was no issue as to that fact before the Court .... Assignment of Error No. 2 Whether paragraph 31 of the lease is clear and unambiguous such that its interpretation is a matter of law. Whether the lease agreement CHKRS has procured on the purchase option and is entitled to a credit against the purchase price for the funds disbursed to Friedman. Whether CHKRS, LLC has the right to defend its property interests in the eminent domain proceedings."). CHKRS argued at length that, as the lessee, it had a compensable interest in the Property and that ¶ 31 of the Lease did not alter its entitlement to compensation or its ability to challenge the City of Dublin's appropriation. Id. at 14-23.

The Ohio Tenth District Court of Appeals disagreed. See City of Dublin v. Friedman, 101 N.E.3d 1137 (Ohio Ct. App. 2017). It summarized Ohio law regarding lessees' entitlement to compensation:

Generally, a tenant does have a property right in the leasehold and, in the absence of an agreement to the contrary, is entitled to compensation if it is appropriated by eminent domain. However, there is nothing to prevent the parties from changing their respective rights by agreement. Thus, it is the agreement of the parties that controls whether the lessee has a compensable property interest in the appropriated property.

Id. at 1151 (internal citations and quotations omitted). In light of ¶ 31 of the Lease, the court of appeals concluded that "Friedman and CHKRS provided that CHKRS, as a lessee, would not have a compensable interest if the property was appropriated by Dublin or Ohio Department of Transportation." Id. CHKRS appealed that decision to the Ohio Supreme Court, which declined jurisdiction. See City of Dublin v. Karen Michelle R. Friedman, et al., Case No. 2018-0164, Entry (Ohio May 23, 2018) (declining jurisdiction); id., CHKRS' Mem. in Support of Jurisdiction at 10-12 (Ohio Jan. 31, 2018) (challenging the lower court's interpretation of ¶ 31 of the Lease); id., Notice of Appeal (Ohio Jan. 31, 2018). In short, multiple state courts considered CHKRS' argument that it had a compensable interest in the Property and rejected it.

While the State Court Action was pending, in November 2015, Defendant Dublin began construction on the Property and "over several months, cleared and regraded the property; constructed a wall separating the property from the bike path and the street that obstructed visibility of pedestrians and bicycles on the bike path, and vehicles on Riverside Drive; and removed the existing driveway access to Riverside Drive." (Doc. 38, ¶ 11). On two subsequent occasions, in July and November 2016, Defendant Dublin reentered the Property and, without Plaintiff's permission, performed additional construction work on the portion of the driveway adjacent to Riverside Drive (the "Driveway"). (Id., ¶ 43-44). As a result of Defendant Dublin's actions, Plaintiff alleges, the Driveway "is unsafe" and not usable. (See id., ¶¶ 48, 50, 56).

On July 31, 2018, Ms. Friedman transferred ownership of the Property to Plaintiff. (Doc. 38-2 at 2). Several months later, Plaintiff filed this action. (See Doc. 2). In the First Amended Complaint, Plaintiff brings a procedural due process claim, a substantive due process claim, and a takings claim based on Defendants' alleged seizure and removal of the Driveway in July and November 2016. (Id., ¶¶ 68-76).¹ Defendants filed their Motion for Judgment on the Pleadings (Doc. 42) and Motion to Strike Supplemental Memorandum (Doc. 48), which are fully briefed and now ripe for resolution.

II. MOTION FOR JUDGMENT ON THE PLEADINGS

The Court first addresses Defendants' Motion for Judgment on the Pleadings (Doc. 42).

A. Standard of Review

The Federal Rules of Civil Procedure provide that, "after the pleadings are closed—but early enough not to delay trial—a party may move for judgment on the pleadings." Fed. R. Civ.P. 12(c). "Judgment may be granted under Rule 12(c) where the moving parties clearly establish that no material issue of fact remains to be resolved and that they are entitled to judgment as a matter of law." Williamson v. Recovery Ltd. P'ship, No. 2:06-CV-292, 2010 WL 3769136, at *2 (S.D. Ohio Sept. 24, 2010) (citations omitted).

In examining a motion for judgment on the pleadings...