WCI, Inc. v. Ohio Dep't of Pub. Safety

WCI, INC., Plaintiff, v. OHIO DEPARTMENT OF PUBLIC SAFETY, et al., Defendants.

Case No. 3:17-cv-000282

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF OHIO WESTERN DIVISION AT DAYTON

April 27, 2020

District Judge Thomas M. Rose

Magistrate Judge Sharon L. Ovington

REPORT AND RECOMMENDATIONS¹

I. Introduction

Ohio Administrative Code § 4301:1-1-52(B)(2)-(4), known as Rule 52, "prohibits holders of Ohio liquor licenses from engaging in or allowing employees or agents of the holder to engage in certain activities, including '[a]ppear[ing] in a state of nudity ....'" WCI, Inc. v. Ohio Department of Public Safety, 774 F. App'x 959, 962 (6th Cir. 2019).

Plaintiff WCI, Inc. does business as a "Gentlemen's Club" (more colloquially, a strip club, see id. at 960) in Ohio. WCI holds an Ohio liquor license. In August 2015, Defendant Ohio Liquor Control Commission (the Commission) concluded that WCI violated Rule 52's nudity prohibition and issued an order revoking its liquor license.² The Commission gave WCI the alternative option to pay a $25,000 fine to avoid losingits liquor license.

WCI asked the Commission to reconsider its order, but the Commission declined. WCI then sought relief at each level of the Ohio court system—the Franklin County Court of Common Pleas, the Ohio Court of Appeals, and the Ohio Supreme Court. After WCI did not succeed in the Ohio courts, it filed the instant case raising a variety of federal constitutional claims.

This case is presently before the Court following a remand from the U.S. Court of Appeals for the Sixth Circuit. WCI's remaining claims arise under the Fourteenth Amendment's Due Process Clause and the Eighth Amendment's Excessive Fines Clause.

Defendants argue that dismissal for lack of jurisdiction is warranted under Fed. R. Civ. P. 12(b)(1) because the Eleventh Amendment blocks WCI's remaining claims. Defendants also seek judgment on the pleadings under Fed. R. Civ. P. 12(c) for numerous reasons—including, the Rooker-Feldman doctrine, absence of a live case or controversy, failure to state a claim upon which relief could be granted, and res judicata and collateral estoppel.

WCI contends that Rule 12(c) is the improper procedural tool to invoke at this point in the case—particularly after remand from the Sixth Circuit—and that discovery rather than dismissal is warranted. WCI also argues that its Complaint advances plausible claims and that Defendants' other dismissal arguments lack merit.

II. Plaintiff's Complaint and Remaining Claims

WCI alleges that the Commission has a custom and practice in its enforcement of Rule 52:

55. It is the custom and practice of the Liquor Control Commission to consistently impose extraordinarily high financial sanctions, in lieu of the threat of revocation, on virtually all matters brought before the Commission that involve alleged violations of Rule 52, involving "Gentlemen's Clubs."

56. The conduct of the Liquor Control Commission, in imposing the sanctions on WCI described above ($25,000 or revocation), is an example of the Commission's custom and practice of consistently imposing extraordinarily high financial sanctions, in lieu of the threat of revocation, on virtually all matters before the Commission that involve alleged violations of Rule 52, involving "Gentlemen's Clubs."

(Doc. #1, PageID #14).

WCI's remaining due-process claims arise in Counts III, IV, V, and VII of its Complaint. Each Count begins, "The continued exercise of unbridled discretion in the imposition of penalties on 'Gentlemen's clubs,' including [WCI], brought before the Commission for alleged violations of Rule 52 violates the rights guaranteed by the United States Constitution ...." (Doc. #1, PageID #s 17-18). These Counts then allege, respectively, that the Commission's enforcement of Rule 52 is arbitrary and capricious as applied to WCI (Count III), constitutes an unconstitutional taking (Count IV), lacks adequate procedural safeguards (Count V), and "grants unbridled discretion to administrative officials in the enforcement of provisions of the legislation applicable to liquor permit holders [Count VII]." Id.

WCI's other remaining claim (Count VIII) rests on the theory that Rule 52's grant of "unbridled discretion" to the Commission results in penalties that are "grossly disproportionate and allows the imposition of an excessive fine, in violation of the Eighth Amendment." (Doc. #1, PageID #s 18-19).

WCI's Complaint requests relief (in part) in the form of a declaration that theCommission's continued exercise of unbridled discretion in imposing penalties for alleged violations of Rule 52 violates the Constitution; attorney fees and costs; and any and all actual, consequential, and special damages. Id. at 19.

III. Rules 12(b)(1) and 12(c)

Rule 12(b)(1) of the Federal Rules of Civil Procedure permits dismissal of a Complaint for lack of subject matter jurisdiction. When the Eleventh Amendment applies, the Court lacks subject matter jurisdiction over the claims it bars. Doe v. DeWine, 910 F.3d 842, 848 (6th Cir. 2018) ("the Eleventh Amendment is a true jurisdictional bar, Defendants' entitlement to sovereign immunity must be decided before the merits.").

"The standard of review for a Rule 12(c) motion is the same as for a motion under Rule 12(b)(6) for failure to state a claim upon which relief can be granted." Fritz v. Charter Twp. of Comstock, 592 F.3d 718, 722 (6th Cir. 2010) (citations omitted). "'[A]ll well-pleaded material allegations of the pleadings of the opposing party must be taken as true, and the motion may be granted only if the moving party is nevertheless clearly entitled to judgment' as a matter of law." Id. (quoting, in part, JPMorgan Chase Bank, N.A. v. Winget, 510 F.3d 577, 581-82 (6th Cir. 2007)).

"The factual allegations in the complaint need to be sufficient to give notice to the defendant as to what claims are alleged, and the plaintiff must plead 'sufficient factual matter' to render the legal claim plausible, i.e., more than merely possible. However, 'a legal conclusion couched as a factual allegation' need not be accepted as true on a motion to dismiss, nor are recitations of the elements of a cause of action sufficient." Id.(quoting, in part, Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949-50 (2009); citing Hensley Mfg. v. ProPride, Inc., 579 F.3d 603, 609 (6th Cir. 2009)).

Defendants previously filed a Rule 12(b)(6) Motion, which the Court granted, leading to appeal and remand. (Doc. #9). WCI seeks to stop Defendants from invoking Rule 12(c) for what they see as a second time. It argues that the law of the case doctrine prevents Defendants from rehashing the same arguments they raised in their earlier-filed Rule 12(b)(6) Motion. This contention lacks merit because the law of the case doctrine applies to the issue the Court of Appeals actually decided, not to arguments left unresolved. Howe v. City of Akron, 801 F.3d 718, 739 (6th Cir. 2015) ("For a prior decision to control [under the doctrine of law of the case], the prior tribunal must have actually decided the issue."). The Sixth Circuit did not actually resolve Defendants' arguments for dismissal of WCI's remaining constitutional claims pursuant to the Eleventh Amendment, the Rooker-Feldman doctrine, the absence of a live case or controversy, failure to state a claim upon which relief could be granted, and claim preclusion or issue preclusion. The Sixth Circuit also left open WCI's assertion in its Complaint that it had preserved its right to federal judicial review of its constitutional claims pursuant to England v. Louisiana State Bd. of Medical Examiners, 375 U.S. 411 (1964). See WCI, 774 F. App'x at 961.

WCI argues that Rule 12(c) consideration is not proper and, instead, discovery is presently warranted:

The Sixth Circuit Appeals correctly stated that issues related to due process protections concerning the imposition of penalties and whether those penalties are excessive need to be briefed in greaterdetail. By obvious implication, this means after discovery in the litigation. The appellate court's remand is not conducive to dismissal or judgment on the pleadings under Rule 12. If these questions were determinable by such motions, the Sixth Circuit would not have remanded these issues for additional consideration.

(Doc. #23, PageID #177). This reads too much into the Court of Appeals' decision.

Nothing in the Sixth Circuit's decision speaks directly to the need for discovery before, or precludes, consideration of issues remaining under Rule 12. The remand decision does not impliedly suggest the need for discovery following remand. Instead, the Sixth Circuit declined to reach certain due-process issues and the merits of WCI's Eighth-Amendment claim because these matters were not adequately briefed, and this Court had not yet addressed them. WCI, 774 F. App'x at 966-67. Doing so, it invoked the "'general rule that a federal appellate court does not consider an issue not passed upon below.'" Id. (citations omitted).

Viewed broadly, Defendants' Rule 12(c) Motion contends, for various reasons, that Plaintiff's remaining constitutional claims fail as a matter of law. With a single exception, no discovery is needed to resolve these issues, and nothing in the Court of Appeals' decision prevents this Court from resolving the parties' Rule 12(b)(1) and (c) before discovery occurs.

IV. Eleventh Amendment

Defendants maintain that the Eleventh Amendment extends immunity to them from Plaintiff's attempt to recover monetary damages against them in their official capacities. This is partially correct.

"The judicial power of the United States shall not be construed to extend to anysuit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State...." U.S. Const. amend. XI. When the Eleventh Amendment applies in federal lawsuits, it bars monetary claims against a State or state officials acting in their official capacities. See S & M Brands, Inc. v. Cooper, 527...