Legacy Hous. Corp. v. City of Horseshoe Bay

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LEGACY HOUSING CORPORATION, Plaintiff v. CITY OF HORSESHOE BAY, TEXAS, HORSESHOE BAY PROPERTY OWNERS ASSOCIATION, JAFFE INTERESTS, LP, F/K/A HORSESHOE BAY RESORT LTD. F/K/A HORSESHOE BAY RESORT INC.; AND HORSESHOE BAY RESORT DEVELOPMENT, LLC, Defendants

No. 1:21-CV-01156-RP

United States District Court, W.D. Texas, Austin Division

July 24, 2023

HONORABLE ROBERT PITMAN UNITED STATES DISTRICT JUDGE

REPORT AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE

DUSTIN M. HOWELL UNITED STATES MAGISTRATE JUDGE

Before the Court is the City of Horseshoe Bay's Partial Motion to Dismiss, Dkt. 48; and all related briefing. After reviewing these filings and the relevant case law, the undersigned recommends that the District Court grant the City's motion.

I. BACKGROUND

This suit arises from a dispute among Legacy, a producer of manufactured housing, Horseshoe Bay Property Owners Association (the “POA”), Jaffe Interests Horseshoe Bay Resort Development (“Horseshoe Bay Development”), and the City of Horseshoe Bay concerning Legacy's development of 297 lots (the “development lots”) in the city of Horseshoe Bay, purchased in 2019. Dkt. 43, at 1. Legacy's complaint states that the development lots are now encumbered by zoning Ordinance 2021-12 which imposed new registration requirements for contractors, limited the number of permits for speculative builds, and changed the requirements for driveways for manufactured homes. Id. at 5-8. Legacy argues that these new regulations interfere with its investment-backed expectations for the development lots and constitute a regulatory taking. Id. at 8. Legacy also claims that it was misled by the City about its chances of securing various zoning variances. Id. at 10. Further, Legacy states that the City has impermissibly delegated its interest in exercising its permitting and development powers by instructing Legacy to “first seek approval from Jaffe Interests” before going to the City for construction permits. Id. at 12.

Legacy's suit also concerns a 94.77-acre plot of land (the “ETJ property”) located outside of the City (but within its extraterritorial jurisdiction) that “borders a strip of land [the ‘Greenbelt'] located in the City that is owned by the POA.” Id. at 11. The Greenbelt is bordered by Legacy's ETJ property to the south and Legacy's development lots to the north. Dkt. 11, at 15. Legacy claims that the POA accepted money from the City in exchange for denying Legacy access to the Greenbelt and agreeing to bring charges against anyone who crosses the Greenbelt. Dkt 43, at 11. Legacy also contends that the City “has notified Legacy of its plans to deny any permit applications to construct a driveaway on Legacy's residential lots separated by the POA's [Greenbelt].” Id. at 11-12. Legacy states that the POA diverts a percentage of its capital funds to private entities including Jaffe Interests and that the City, POA, and Jaffe Interests are conspiring with respect to the POA's capital budget and the City's contributions. Id. at 12.

Legacy brings several causes of action against the City, the POA, and Jaffe Interests and its various resort entities operating in Horseshoe Bay. Id. at 14-24. As to the City, Legacy brings a claim for an unconstitutional regulatory taking as well as claims under 42 U.S.C. § 1983 for deprivation of substantive due process, procedural due process, and the right to equal protection, along with a claim for conspiracy related to the City's alleged interference with Legacy's property interests and investment backed expectations. Dkt. 43, at 18-19. Legacy also brings a claim for civil conspiracy claim against the City arising from the same conduct. Id. at 20.

The City moves to dismiss all but Legacy's regulatory takings claim. Dkt. 48, at 11. The City moves to dismiss Legacy's civil conspiracy claim pursuant to Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction, arguing the civil conspiracy claim is barred by the City's governmental immunity. Dkt. 48, at 13. The City also moves to dismiss Legacy's § 1983 claims pursuant to Federal Rule of Civil Procedure 12(b)(6), arguing that Legacy does not state a viable claim for a deprivation of a constitutional right because it had no vested right to build a road across the POA property as it wanted and has not pleaded any facts that show the City denied permits to which it was entitled. Id. at 10-11.

II. LEGAL STANDARD

A. 12(b)(1)

Federal Rule of Civil Procedure 12(b)(1) allows a party to assert lack of subjectmatter jurisdiction as a defense to suit. Fed.R.Civ.P. 12(b)(1). Federal district courts are courts of limited jurisdiction and may only exercise such jurisdiction as is expressly conferred by the Constitution and federal statutes. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). A federal court properly dismisses a case for lack of subject-matter jurisdiction when it lacks the statutory or constitutional power to adjudicate the case. Home Builders Ass'n of Miss., Inc. v. City of Madison, 143 F.3d 1006, 1010 (5th Cir. 1998). “The burden of proof for a Rule 12(b)(1) motion to dismiss is on the party asserting jurisdiction.” Ramming v. United States, 281 F.3d 158, 161 (5th Cir. 2001), cert. denied, 536 U.S. 960 (2002).

“Accordingly, the plaintiff constantly bears the burden of proof that jurisdiction does in fact exist.” Id. In ruling on a Rule 12(b)(1) motion, the court may consider any one of the following: (1) the complaint alone; (2) the complaint plus undisputed facts evidenced in the record; or (3) the complaint, undisputed facts, and the court's resolution of disputed facts. Lane v. Halliburton, 529 F.3d 548, 557 (5th Cir. 2008).

B. 12(b)(6)

Pursuant to Rule 12(b)(6), a court may dismiss a complaint for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). In deciding a 12(b)(6) motion, a “court accepts ‘all well-pleaded facts as true, viewing them in the light most favorable to the plaintiff.'” In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007) (quoting Martin K. Eby Constr. Co. v. Dall. Area Rapid Transit, 369 F.3d 464, 467 (5th Cir. 2004)). “To survive a Rule 12(b)(6) motion to dismiss, a complaint ‘does not need detailed factual allegations,' but must provide the plaintiff's grounds for entitlement to relief-including factual allegations that when assumed to be true ‘raise a right to relief above the speculative level.'” Cuvillier v. Taylor, 503 F.3d 397, 401 (5th Cir. 2007) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). That is, “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570).

A claim has facial plausibility “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. “The tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. A court ruling on a 12(b)(6) motion may rely on the complaint, its proper attachments, “documents incorporated into the complaint by reference, and matters of which a court may take judicial notice.” Dorsey v. Portfolio Equities, Inc., 540 F.3d 333, 338 (5th Cir. 2008) (citations and internal quotation marks omitted). A court may also consider documents that a defendant attaches to a motion to dismiss “if they are referred to in the plaintiff's complaint and are central to her claim.” Causey v. Sewell Cadillac-Chevrolet, Inc., 394 F.3d 285, 288 (5th Cir. 2004). But because the court reviews only the well-pleaded facts in the complaint, it may not consider new factual allegations made outside the complaint. Dorsey, 540 F.3d at 338. “[A] motion to dismiss under 12(b)(6) ‘is viewed with disfavor and is rarely granted.'” Turner v. Pleasant, 663 F.3d 770, 775 (5th Cir. 2011) (quoting Harrington v. State Farm Fire & Cas. Co., 563 F.3d 141, 147 (5th Cir. 2009)).

III. DISCUSSION

A. Civil Conspiracy Claim

Legacy claims that the City has conspired with “Jaffe Interests, Horseshoe Bay Development, and the POA” by instructing Legacy to “seek approval from Jaffe Interests ... before the City will consider issuing a construction permit to Legacy.” Dkt. 43, at 19. Legacy states that the City has also conspired “with the POA to deny access to the POA [Greenbelt] . all to stifle development of manufactured housing.” Id. The City moves to dismiss Legacy's civil conspiracy claim, arguing that the claim is barred by governmental immunity under Texas law. Dkts. 48, at 13.

Under Texas law, “[s]overeign immunity generally defeats a court's subject matter jurisdiction over a suit against a state unless the state expressly consents to suit.” Harris Cnty. v. Sykes, 136 S.W.3d 635, 638 (Tex. 2004). “Governmental immunity operates like sovereign immunity to afford similar protection to subdivisions of the State, including counties, cities, and school districts.” Id.

The Texas Tort Claims Act (“TTCA”) provides a limited waiver of sovereign and governmental immunity for certain tort claims, “allowing suits to be brought against governmental units only in certain, narrowly defined circumstances.” Tex. Dep't of Criminal Justice v. Miller, 51 S.W.3d 583, 587 (Tex. 2001). As such, the TTCA's waiver of immunity constitutes the “only . . . avenue for common-law recovery against the government” on a tort theory. Mission Consol. Indep. Sch. Dist. v. Garcia, 253 S.W.3d 653, 659 (Tex. 2008). The TTCA, does not waive immunity for...