Wal-Mart Stores Inc. v. City of Cheyenne ( 1997 )

F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS AUG 7 1997
TENTH CIRCUIT PATRICK FISHER
Clerk
WAL-MART STORES, INC., dba
Sam’s Club #6430,
Plaintiff-Appellant,
No. 96-8080
v.
(D.C. No. 95-CV-276-D)
(D. Wyo.)
CITY OF CHEYENNE; CITY
COUNCIL FOR THE CITY OF
CHEYENNE,
Defendants-Appellees.
ORDER AND JUDGMENT *
Before SEYMOUR, Chief Judge, PORFILIO and TACHA, Circuit Judges.
Wal-Mart Stores, Inc., d/b/a Sam’s Club, sued the City of Cheyenne and its
City Council in state court, asserting constitutional and state law claims arising
out of Cheyenne’s decision to deny WalMart a retail liquor license. Cheyenne
removed the action to federal court and moved for judgment on the pleadings,
*
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
which the district court granted. We affirm the district court’s ruling with respect
to the constitutional claims, and we remand the state law claims with instructions
to dismiss them without prejudice. 1
The facts are essentially undisputed. Wal-Mart began its attempts to obtain
a retail liquor license in Cheyenne in 1994. It first applied for a recently-expired
license that had been held by a restaurant. When that application was denied, it
applied for a new license that had become available due to a population change.
This license was ultimately given to another applicant. During the proceedings
pertaining to this application, two unidentified Council members asked Wal-Mart
whether it had attempted to purchase a retail liquor license from another holder in
Cheyenne. Wal-Mart thereupon arranged to purchase a retail liquor license from
1
A motion for judgment on the pleadings under
Fed.R.Civ.P. 12(c) is treated as a motion to dismiss
under Fed.R.Civ.P. 12(b)(6). We review the sufficiency
of a complaint de novo, and will uphold dismissal “only
when it appears that the plaintiff can prove no set of
facts in support of the claims that would entitle the
plaintiff to relief.” We must accept all well-pleaded
allegations in the complaint as true and “construe them
in the light most favorable to the plaintiff.”
Mock v. T.G. & Y. Stores Co., 971 F.2d 522, 528-29 (10th Cir. 1992) (citations
omitted). Although the record reflects that some material outside the pleadings
may have been submitted to and not excluded by the district court, both parties
assert on appeal that the district court’s disposition of the suit was made under
Rule 12(c), and we therefore treat it as such. Accordingly we do not consider
material outside the pleadings.
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another establishment and submitted an application to transfer the ownership and
location of this license. The Council denied Wal-Mart’s application without
giving any reasons. Wal-Mart then filed this suit alleging that it was entitled to
relief under state law in several regards, and that Cheyenne had deprived it of
substantive due process under 42 U.S.C. § 1983.
Wal-Mart contends the Council’s decision to deny it a liquor license was
arbitrary and capricious and thereby violated Wal-Mart’s substantive due process
rights. Wal-Mart asserts it was entitled to substantive due process protection
when applying to transfer the purchased liquor license because it had a property
interest in the approval of that application. 2 Wal-Mart first argues that such a
property interest is created by the liquor statutes and ordinances governing
applications to obtain new licenses, renew licenses, and transfer licenses. As the
district court pointed out, however, these provisions do not state that fulfillment
of specified conditions assures approval of an application. See Aplt. App. at 135-
36 (discussing W YO . S TAT . A NN . § 12-4-104(b) (Michie 1986) (a license shall not
be issued, renewed, or transferred if one of five factors is present) and
C HEYENNE , W YO ., C ODE art. II, § 4-21 (City has discretionary authority to issue
2
Although the pleadings allege only that Wal-Mart was denied substantive
due process, Wal-Mart has upon occasion in these proceedings asserted a denial
of procedural due process as well. Given our conclusion infra that Wal-Mart has
failed to establish a property interest, Wal-Mart’s procedural due process claim
fails as well. See Board of Regents v. Roth, 408 U.S. 564, 569-70 (1972).
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licenses to those it deems proper recipients)). Absent a provision under which an
applicant has a legitimate claim of entitlement to a license when specified
conditions are met, an entity’s failure to follow its own procedures does not give
rise to a due process violation. Jacobs, Visconti & Jacobs v. City of Lawrence,
927 F.2d 1111, 1116 (10th Cir. 1991). A promise to follow certain procedural
steps in considering an application does not of itself create a property interest in
that application, Bunger v. University of Okla. Bd. of Regents, 95 F.3d 987, 991
(10th Cir. 1996), nor does a requirement that application decisions be reasonable,
Jacobs, 927 F.2d at 1116. 3
Wal-Mart also contends it has a constitutionally protected property interest
because of its ownership of the existing license. This assertion puts the cart
before the horse. While Wal-Mart may have an item of value that is transferrable
under state law, that item is not the right to sell liquor, but only the right to apply
3
In view of the authority from this circuit set out above, Wal-Mart’s
reliance on Hornsby v. Allen, 326 F.2d 605 (5th Cir. 1964), is misplaced. The
court in Hornsby held that the denial of a liquor license deprived the plaintiff of
her due process rights even though under state law a liquor license was a privilege
and not a right. Id. at 609-10. The Fifth Circuit has indicated that Hornsby is of
doubtful continuing vitality, see Atlanta Bowling Ctr., Inc. v. Allen, 389 F.2d 713(5th Cir. 1968), and has refused to extend it to zoning cases, see South Gwinnett
Venture v. Pruitt, 491 F.2d 5, 7 n.1 (5th Cir. 1974). No recent circuit case has
relied on Hornsby as Wal-Mart asks this court to do, and the viability of its
holding is doubtful in light of the legion of more recent cases stating that failure
to follow procedures does not violate due process if no property interest is
involved.
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for the right to sell liquor. The bootstrap argument posed by Wal-Mart would in
effect eliminate the application process entirely with respect to transfer
applications, a result directly at odds with state law.
Finally, Wal-Mart asserts it has a property interest based on the queries by
two Council members concerning Wal-Mart’s efforts to purchase an existing
license. Wal-Mart contends these comments created an implied agreement
between it and the Council that if Wal-Mart did purchase an existing license, the
Council would approve Wal-Mart’s application to transfer the license. The
district court held that state law does not provide for the creation of a contract
giving rise to a property interest in these circumstances, and we agree. “The
members of a board cannot act as individuals to bind an agency because the board
must act as a body to validly act for and obligate the agency by an express
contract.” Robert W. Anderson Housewrecking & Excavating, Inc. v. Board of
Trustees, 681 P.2d 1326, 1329-30 (Wyo. 1984). Even if the representations by
the two Council members could be viewed as an implicit agreement that they
personally would vote to approve the transfer application, those members could
not bind the Council.
We accordingly conclude that Wal-Mart’s pleadings, viewed most favorably
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to it, fail to establish that it had a constitutionally protected property interest. 4
We therefore affirm the district court’s judgment for Cheyenne on the claims
asserted under section 1983.
We turn now to Wal-Mart’s claims that it is entitled to relief under various
state law theories. The district court addressed these claims on the merits and
dismissed them under Rule 12(c). We have held that when, as here, the federal
claims are resolved prior to trial, the district court should usually decline to
exercise jurisdiction over pendent state law claims and allow a plaintiff to pursue
them in state court. See Ball v. Renner, 54 F.3d 664, 669 (10th Cir. 1995). We
believe this general practice is particularly appropriate here. Liquor licensing is
highly regulated by the state and is a matter of particular state concern. We
therefore reverse the dismissal with prejudice of the state law claims and remand
with instructions to remand them to state court. Carnegie-Mellon Univ. v. Cohill,
4
“Authority in this circuit is unclear on what interest is required to trigger
substantive due process guarantees.” Jacobs, Visconti & Jacobs v. City of
Lawrence, 927 F.2d 1111, 1119 (10th Cir. 1991) (comparing cases). What is
clear, however, is that Wal-Mart’s asserted interest in a liquor license “bears
‘little resemblance to the fundamental interests that previously have been viewed
as implicitly protected by the Constitution.’” Lehman v. City of Louisville, 967
F.2d 1474, 1476 n.2 (10th Cir. 1992) (quoting Regents of Univ. of Mich. v.
Ewing, 474 U.S. 214, 229 (1985)).
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484 U.S. 343, 357 (1988). 5
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED
WITH INSTRUCTIONS.
ENTERED FOR THE COURT
Stephanie K. Seymour
Chief Judge
5
In light of our disposition, we deny Wal-Mart’s Motion to Certify
Questions of State Law.
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