Scahill v. Dist. of Columbia

271 F.Supp.3d 216

Martin SCAHILL, et al., Plaintiffs,

v.DISTRICT OF COLUMBIA, et al., Defendants.

Civil Action No. 16–2076 (JDB)

United States District Court, District of Columbia.

Signed September 25, 2017

Brendan James Klaproth, Klaproth Law, PLLC, Washington, DC, for Plaintiffs.

Conrad Z. Risher, Michael A. Tilghman, Office of the Attorney General, Washington, DC, for Defendants.

MEMORANDUM OPINION

JOHN D. BATES, United States District Judge

Plaintiffs Martin Scahill and HRH Services, LLC filed this suit under 42 U.S.C. § 1983, challenging conditions placed on a liquor license issued to HRH for its restaurant, the Alibi, by the District of Columbia Alcoholic Beverage Control Board ("Board"). The conditions essentially prevent Scahill from entering the premises or playing any role in the business, which plaintiffs claim violates a number of their constitutional rights. Currently before the Court is [10] defendants' motion to dismiss for lack of standing and for failure to state a claim. For the following reasons, the motion will be granted, and plaintiffs' claims will be dismissed.

I. BACKGROUND

The following facts are taken from plaintiffs' complaint. In January 2015, HRH Services, owned by Rachel and Richard Traverso, applied to the ABC Board for a "New Retailer's Class CR License" for the Alibi restaurant. Am. Compl. [ECF No. 9] ¶¶ 11–12. The Board approved the liquor license on May 18, 2016, subject to certain conditions that restricted Scahill's involvement in HRH's business. Id. ¶ 13; see also Board Order No. 2016–280 ("Board Order") [ECF No. 10–1] at 23, 36.¹ Scahill is not an owner of HRH or the Alibi, but is the guarantor on the Alibi's lease. Am. Compl. ¶¶ 12, 41. In addition, Scahill is the former owner of My Brother's Place, the restaurant that previously occupied the space in which the Alibi is located, and was the applicant listed on a prior liquor license application filed by Melles Hospitality Group. Id. ¶ 13.

Under the terms of the liquor license, awarded to HRH by the Board, HRH must execute and maintain a barring notice against Scahill prohibiting him from entering or accessing the Alibi for five years, and must notify D.C. police within 24 hours if any violation of the barring notice occurs. Id. ¶ 13; Board Order at 24, 36. HRH is also prohibited from transferring ownership of the Alibi to Scahill, and from permitting Scahill to obtain an interest in the business, in the Alibi, or in the license. Am. Compl. ¶ 13; Board Order at 24, 36. Finally, HRH is prohibited from employing Scahill in any capacity, either in its business or at the Alibi; from giving Scahill access to or control over the business's financial accounts; and from allowing Scahill to "volunteer" for the organization. Am. Compl. ¶ 13; Board Order at 36–37. Any violation of these conditions could result in revocation of the liquor license. Am. Compl. ¶ 13; Board Order at 37.

On May 31, 2016, HRH moved the Board for reconsideration of these conditions, which the Board denied on June 29, 2016. Am. Compl. ¶¶14–15. Scahill filed a petition for review of the Board's order with the D.C. Court of Appeals on July 27, 2016. Id. ¶ 16.² On October 6, 2016 the Board issued a Notice of Status and Show Cause Hearing to HRH, alleging that Scahill had been seen at the Alibi on June 10, 2016, in violation of the conditions placed on the liquor license. Id. ¶ 17. The Notice charged HRH with failing to follow the Board's order, and threatened to revoke HRH's license. Id. Plaintiffs allege that the Board's action was in retaliation for their appeals. Id. HRH and Scahill then filed this lawsuit on October 18, 2016. Id. ¶ 18. Allegedly in retaliation for filing this suit, the Board issued a second Notice of Status and Show Cause hearing to HRH on November 7, 2016, asserting that Scahill had been seen at the Alibi on July 8, 2016. Id. ¶ 19.

Plaintiffs bring claims against the Board, the District of Columbia, and ten unnamed "John Doe" defendants under 42 U.S.C. § 1983, seeking declaratory and injunctive relief as well as damages. Plaintiffs allege that the conditions placed on the liquor license violate their First Amendment rights to freedom of speech and freedom of association, and that the Board issued the show cause orders to HRH in retaliation for plaintiffs' exercise of their First Amendment rights. In addition, plaintiffs claim that the order violates their Fifth Amendment rights to liberty, due process, and freedom of movement, and that the Board's order violates the unconstitutional conditions doctrine. Id. ¶¶ 20–52. Defendants—the District of Columbia and the Board—filed a motion to dismiss under Federal Rule of Civil Procedure 12(b)(1) and 12(b)(6), arguing that plaintiffs lack standing and have failed to state a claim.³

II. DISCUSSION

To survive a motion to dismiss, 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, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). A plaintiff's "[f]actual allegations must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555, 127 S.Ct. 1955. " ‘Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements,’ are therefore insufficient to withstand a motion to dismiss." BEG Invs., LLC v. Alberti, 144 F.Supp.3d 16, 21 (D.D.C. 2015) (quoting Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 ). "A court need not accept a plaintiff's legal conclusions as true nor must a court presume the veracity of any legal conclusions that are couched as factual allegations." Id. (citing Twombly, 550 U.S. at 555, 127 S.Ct. 1955 ). Nor must a court accept as true a plaintiff's factual allegations "insofar as they contradict exhibits to the complaint or matters subject to judicial notice." Kaempe v. Myers, 367 F.3d 958, 963 (D.C. Cir. 2004).

Defendants argue that plaintiffs lack standing to challenge the conditions imposed on the liquor license because HRH voluntarily stipulated to these conditions, as reflected in the Board's order and findings of fact. Defendants also claim that the Board is non sui juris (meaning it cannot be sued independently), and that plaintiffs have failed to allege an unconstitutional custom or policy that would enable them to bring suit against the District. See Mot. to Dismiss at 2–3. On the merits, defendants argue that plaintiffs have failed to allege enough facts to support any of their claims. Id. at 2. The Court will consider each argument in turn.

A. JUDICIAL NOTICE

At the outset, the Court must briefly discuss which documents it may consider in evaluating the motion to dismiss. Defendants' arguments regarding standing depend heavily on findings in the Board's order imposing the license conditions, which defendants have attached to their motion to dismiss. See Board Order. Defendants have also provided the Board's order denying the motion for reconsideration, a D.C. Court of Appeals order denying HRH's petition for review of the Board's order, and Scahill's petition for review of the Board's order. See Exs. B–D, Mot. to Dismiss [ECF Nos. 10–2 to 10–4]. Plaintiffs argue that defendants "improperly" attached these documents to their motion to dismiss, and that the Court may not consider in particular the Board's principal order, as it is outside the pleadings and not "integral" to the complaint. The Court disagrees, for several reasons.

The argument that the Board's principal order imposing the license conditions is not "integral" to plaintiffs' complaint is entirely unsupportable—the complaint quotes this order at length, and it is the basis for most of plaintiffs' claims. See, e.g., Am. Compl. ¶¶ 13, 22–25, 31–32, 34–36, 40–45, 48–52. As the Board's order is appended to the motion to dismiss, referred to in the complaint, integral to plaintiffs' claims, and undisputed as to its authenticity, the order may be considered here. See Kaempe, 367 F.3d at 965.

In addition, the Board's order, the order denying the motion for reconsideration, and the documents from the D.C. Court of Appeals are public records relevant to plaintiffs' complaint and subject to judicial notice on a motion to dismiss. See EEOC v. St. Francis Xavier Parochial Sch., 117 F.3d 621, 624 (D.C. Cir. 1997) ; Grant v. Dep't of Treasury, 194 F.Supp.3d 25, 28 n. 2 (D.D.C. 2016) (noting that "the Administrative Judge's Initial Decision, Treasury's Final Agency Decision, and [the Merit System Protection Board]'s Final Order are official, public documents subject to judicial notice"); BEG Invs., 144 F.Supp.3d at 19 n.3 (taking judicial notice of ABC Board orders which were official public documents, pertinent to plaintiff's claims, and attached to defendant's motion to dismiss); Hinton v. Corr. Corp. of Am., 624 F.Supp.2d 45, 46 (D.D.C. 2009) (noting that on a motion to dismiss, courts may consider "documents upon which the plaintiff's complaint necessarily relies even if the document is produced not by the plaintiff in the complaint but by the defendant in a motion to dismiss" (internal quotations omitted)).

Finally, the Court may consider matters outside the pleadings in resolving challenges to its subject matter jurisdiction under Rule 12(b)(1). See Advance Am. v. FDIC, 257 F.Supp.3d 56, 60–61, 2017 WL 2869918, at *2 (D.D.C. 2017). A lack of standing constitutes "a defect in [the Court's] subject matter jurisdiction," Haase v. Sessions, 835 F.2d 902, 906 (D.C. Cir. 1987), and in considering jurisdiction, the court "may rest its decision on its own resolution of disputed facts." Advance Am., 2017 WL 2869918, at *2 (citing Herbert v. Nat'l Acad. of Sci., 974 F.2d 192, 197 (D.C. Cir. 1992) ). Because defendants challenge plaintiffs' standing here, the Court may look to matters outside the pleadings, including the Board's orders, to determine whether plaintiffs have standing...