Norfolk Federation v. City of Norfolk ( 1996 )


Menu:
  • UNPUBLISHED
    UNITED STATES COURT OF APPEALS
    FOR THE FOURTH CIRCUIT
    THE NORFOLK FEDERATION OF
    BUSINESS DISTRICTS,
    Plaintiff-Appellant,
    v.
    CITY OF NORFOLK, a municipal
    corporation; NORFOLK
    REDEVELOPMENT AND HOUSING
    AUTHORITY,
    Defendants-Appellees,
    No. 96-1746
    U.S. DEPARTMENT OF HOUSING &
    URBAN DEVELOPMENT, in its official
    capacity as agency of the
    Government of the United States;
    HENRY G. CISNEROS, in his official
    capacity as the Secretary of the
    Department of Housing and Urban
    Development,
    Defendants.
    Appeal from the United States District Court
    for the Eastern District of Virginia, at Norfolk.
    Henry C. Morgan, Jr., District Judge.
    (CA-96-308-2)
    Argued: September 25, 1996
    Decided: November 20, 1996
    Before MURNAGHAN and HAMILTON, Circuit Judges, and
    MERHIGE, Senior United States District Judge
    for the Eastern District of Virginia, sitting by designation.
    _________________________________________________________________
    Affirmed by unpublished per curiam opinion.
    _________________________________________________________________
    COUNSEL
    ARGUED: Andrew Michael Sacks, SACKS & SACKS, Norfolk,
    Virginia, for Appellant. William Gray Broaddus, MCGUIRE,
    WOODS, BATTLE & BOOTHE, L.L.P., Richmond, Virginia; Fran-
    cis Nelson Crenshaw, CRENSHAW, WARE & MARTIN, P.L.C.,
    Norfolk, Virginia, for Appellees. ON BRIEF: Stanley E. Sacks,
    SACKS & SACKS, Norfolk, Virginia, for Appellant. Philip R. Tra-
    pani, City Attorney, Bernard A. Pishko, Senior Deputy City Attorney,
    CITY OF NORFOLK, Norfolk, Virginia; E. Duncan Getchell, Jr.,
    Bradford A. King, MCGUIRE, WOODS, BATTLE & BOOTHE,
    L.L.P., Richmond, Virginia, for Appellee City of Norfolk; James L.
    Chapman, IV, David H. Sump, CRENSHAW, WARE & MARTIN,
    P.L.C., Norfolk, Virginia, for Appellee Housing Authority.
    _________________________________________________________________
    Unpublished opinions are not binding precedent in this circuit. See
    Local Rule 36(c).
    _________________________________________________________________
    OPINION
    PER CURIAM:
    The district court dismissed plaintiff's Counts I, II, III, V, VI, VII,
    VIII, and IX with prejudice and dismissed Count IV without preju-
    dice. The court only considered the motion to dismiss as it related to
    the defendants served with process; the City of Norfolk and the Nor-
    folk Redevelopment and Housing Authority (NRHA). NFBD agreed
    to dismiss HUD and Secretary Cisneros after the district court's judg-
    ment.
    We review de novo the dismissal of the federal claims properly
    before the Court pursuant to Rule 12(b)(6), Brooks v. City of Winston
    2
    Salem, 
    85 F.3d 178
    , 181 (4th Cir. 1996), and conclude that the trial
    judge was correct in his rulings and affirm.
    Appellant's contention that the lower court erred in not converting
    the Appellees' 12(b)(6) motion to a motion for summary judgment
    under Rule 56 Fed.R.Civ.P is not well taken.
    The record reflects that the complaint was accompanied by a num-
    ber of documents which made reference to Norfolk redevelopment
    plan, an admittedly public document. The lower court's consideration
    of that document was appropriate and did not warrant converting the
    Rule 12(b)(6) motion to one for summary judgment. Anheuser-Busch,
    Inc. v. Schmoke, 
    63 F.3d 1305
    , 1312 (4th Cir. 1995), cert. granted
    and judgment vacated on other grounds, 
    116 S.Ct. 1821
     (1996). In
    short, a court may consider matters of public record, items appearing
    in the record of the case, as well as exhibits attached to the complaint.
    See generally Charles A. Wright and Arthur R. Miller, Federal Prac-
    tice and Procedure § 1357 (1990), cited with approval in Anheuser,
    
    63 F.3d at 1312
    .
    Plaintiff is the Norfolk Federation of Business Districts (NFBD),
    an organization that purports to represent and act for eight member
    businesses or merchant associations, affiliated businesses and individ-
    uals in a number of geographical areas within Norfolk, including such
    businesses and individuals with business interest in an area designated
    as Norfolk MacArthur Center Project ("the Center") which is the area
    giving rise to this controversy. It claims to be acting "as and for itself
    as well as on behalf of the legal interests and rights of its constituent
    member merchant or business associations and their affiliated mem-
    ber businesses and individuals."
    On May 31, 1994 the City and NRHA entered into a cooperation
    agreement which was adopted by the City of Norfolk Council by ordi-
    nance. NFBD alleges that this agreement provides that the City will
    guarantee all financial obligations of NRHA pertaining to the Mac-
    Arthur Center Project, provide NRHA with all funds required for the
    Center, and meet all NRHA obligations and payments regarding the
    Center. In the agreement the City authorized the issuance of up to
    $50,000,000.00 in parking revenue bonds for garage construction and
    up to $13,537,050.00 in general obligation bonds for Center infra-
    3
    structure improvement. NRHA sought $32,815.00 from a private
    bank loan.
    The Center is to house a number of stores including a Nordstrom
    department store which the City and NRHA describe as the main
    focus of the Center. The defendants plan to fund construction of the
    store almost entirely by public monies. Plaintiff argues that the defen-
    dants selectively favor Nordstrom, a private competitor of many of
    plaintiff NFBD's constituents, with a locally unprecedented infusion
    of public monies for the private benefit of Nordstrom, by agreeing to
    build the Nordstrom store to Nordstrom's customized specifications
    with such public money.
    Thus NFBD concludes that the defendants are publicly subsidizing
    private businesses with largely public taxpayer funds. It argues that
    the defendants' actions constitute an arbitrary and capricious selective
    favoring of these competitors to plaintiff with an improper use of pub-
    lic funds, thus violating both its Equal Protection and Substantive Due
    Process rights.
    Plaintiff contends that defendants' actions violate its constitutional
    economic rights under the Fourteenth Amendment to the United
    States Constitution. As the district court correctly pointed out, how-
    ever, only laws affecting fundamental rights are within the purview
    of the Fourteenth Amendment's strict scrutiny analysis. National
    Paint & Coatings Ass'n. v. City of Chicago, 
    45 F.3d 1124
     (7th Cir
    1995), cert. denied, 
    115 S.Ct. 2579
     (1995). Since "[c]orporations do
    not have fundamental rights; they do not have liberty interests, pe-
    riod." Id. at 1129. After concluding that the plaintiff's fundamental
    rights had not been violated, the district court correctly analyzed its
    claims under the rational basis test. Under the rational basis test the
    question is not whether the legislation or the official action is "in
    every respect logically consistent with its aims to be constitutional,"
    rather it "is enough that there is an evil at hand for correction, and that
    it might be thought that the particular legislative measure was a ratio-
    nal way to correct it." Williamson v. Lee Optical of Oklahoma, Inc.,
    
    348 U.S. 483
    , 487-88 (1955).
    In Count I the plaintiff alleges that the defendants violated its rights
    under the Fourteenth Amendment's Due Process and Equal Protection
    4
    Clauses arising from defendants' "unfair and discriminatorily selec-
    tive favoring of private business competitors of Plaintiff's constitu-
    ents through heavy public subsidies to entice those competitors to
    participate in Norfolk's MacArthur Center Project."
    In Counts II and III, plaintiff alleges that the defendants violated
    its due process rights in its state-created property rights. Plaintiff
    alleges that the defendants unlawfully utilized and planned to con-
    tinue to utilize publicly raised tax money to benefit private parties and
    unlawfully took and planned to continue to take private property in
    the form of money raised in the exercise of its taxing authority for pri-
    vate purposes.
    In Count IV, plaintiff claims that under § 108 of the Loan Guaran-
    tee Application made by the defendants to HUD the defendants fail
    to meet statutory and regulatory criteria to justify such a guarantee.
    It further claims that the federal government through HUD wrong-
    fully approved the application to the prejudice of plaintiff's constitu-
    tional rights.
    Count V charges the defendants with violating the federal statutory
    rights of plaintiff which arise out of their improper use of the § 108
    Loan Guarantee statutes and regulations.
    The remaining Counts VI-IX fall under the Court's supplemental
    and pendant jurisdiction. Plaintiff asserts in these Counts that the laws
    of the Commonwealth of Virginia and its Constitution prohibit defen-
    dants' actions in connection with the proposed financing of the Cen-
    ter.
    The district court properly applied rational basis scrutiny to the
    constitutional complaints contained in Counts I, II and III, and found
    that defendants' actions pass rational scrutiny and plaintiff does not
    have a due process or an equal protection violation claim. We agree
    with the trial court's holding that any allegations of economic harm
    under the Fourteenth Amendment must be reviewed under the rational
    basis test. The movant must negate "every conceivable basis which
    might support" the economic plan, rule or tax in question. Madden v.
    Kentucky, 
    309 U.S. 83
    , 88 (1940). Reviewing the defendants' redevel-
    opment plan, the district court determined that the defendants had a
    5
    rational basis for their actions, mainly to reduce urban blight, and that
    any economic harm incurred by the plaintiff was justified.
    The district court dismissed Count IV without prejudice, because
    the plaintiff had failed to perfect service of process on the appropriate
    defendants.
    The district court dismissed Count V for failure to state a claim.
    Plaintiff alleged that defendants' violation of§ 108 of the Housing
    Community Development Act of 1974, 
    42 U.S.C. § 5301
     et seq.,
    comprises a violation of its civil rights under 
    42 U.S.C. § 1983
    . The
    court dismissed the action because it properly held that § 108 of
    HCDA did not create any enforceable rights in the general public or
    individual citizens. Furthermore, the court found that any improperly
    granted loans would impose liability on the federal government, not
    the municipal defendants.
    The court then considered the state law claims contained in Counts
    VI, VII, and VIII. The court found that the Virginia Code created
    Redevelopment and Housing Authorities which were expressly
    charged with improving urban and blighted areas. Va. Code § 36-4.
    Moreover, the court found that the code permits the actions taken by
    the defendants in furtherance of their redevelopment plan. City of
    Charlottesville v. DeHaan, 
    323 S.E.2d 131
     (Va. 1984). Thus, the
    court held that the Virginia Code permits the very actions that the
    plaintiff alleged were impermissible and dismissed the Counts.
    In Count VI, the plaintiff claimed that the defendants violated the
    "credit clause" of the Virginia Constitution, Art. X, § 10, which
    assures that the credit of the government of Virginia will not be
    granted in favor of any person or corporation. Plaintiff claimed that
    defendants violated the clause by pledging their credit to the benefit
    of private businesses. The district court found that since NRHA has
    authority to act under title 36 of the Virginia Code, it followed that
    the plaintiff's only substantive claims lay under the Virginia Constitu-
    tion. The court properly determined that the extension of credit for the
    purpose of redevelopment or another public purpose did not implicate
    the credit clause. The court looked to the Virginia Supreme Court's
    decision in City of Charlottesville which had similar facts. 323 S.E.2d
    at 131. The Supreme Court stated that "[m]erely because the [s]tate
    6
    incurs an indebtedness or expends its funds for its benefit and others
    may incidentally profit thereby does not bring the transaction within
    the letter or the spirit of the `credit clause' prohibition." Id. at 134. In
    the present case, the district court found that the defendants clearly
    had a public purpose with their redevelopment plan and thus they
    were removed "from the ambit of the credit clause, as stated by the
    General Assembly in title 36." 96cv308 page 31.
    In Count VII plaintiff contends that the internal improvements
    clause of the Virginia Constitution prohibits the defendants' actions.
    That clause essentially prohibits the Commonwealth from becoming
    interested in any work of internal improvement, save public roads or
    parks. Va. Const. Art. X, § 10. The district court correctly rejected
    this claim for a variety of reasons. First, it found that the internal
    improvements clause specifically applies to the Commonwealth itself,
    not to other units of government; thus neither the City nor the NRHA
    is implicated under the clause. The court also held that the existence
    of a "governmental functions" exception to the internal improvement
    clause eliminated any residual doubt as to whether the defendants had
    violated the clause. See Fairfax Co. Industrial Development Authority
    v. Coyner, 
    150 S.E.2d 87
     (Va. 1966). The exception encompasses
    those improvements that are necessary to the performance of govern-
    ment functions. Since the Center is an essential component to the
    Redevelopment Plan and the defendants are expressly authorized to
    pursue this plan, their actions fall under the governmental functions
    exception.
    In Count VIII, plaintiff alleges that certain of the defendants'
    actions violate the "laws of the Commonwealth of Virginia" by using
    individuals' tax money for private purposes. The district court cor-
    rectly dismissed this Count as well because plaintiff failed to specify
    any law violated or any actions that constituted a violation. Even if
    the Court interpreted this as a takings argument, it fails. In redevelop-
    ment cases where a loss of customers occurs to businesses, a taking
    in the constitutional sense has not occurred even if land value is
    decreased. See e.g., Woodland Market Realty Co. v. City of
    Cleveland, 
    426 F.2d 955
    , 958 (6th Cir. 1970).
    Lastly, in Count IX plaintiff claims that the NRHA's actions vio-
    late the Dillon Rule. Virginia's Dillon Rule "provides that municipal
    7
    corporations possess and can exercise only those powers expressly
    granted by the General Assembly, those necessarily or fairly implied
    therefrom, and those that are essential and indispensable." City of
    Richmond v. Confrere Club of Richmond, Virginia, Inc., 
    387 S.E.2d 471
    , 473 (Va. 1990). Plaintiff challenges the defendants' authority to
    undertake a landlord function in connection with a commercial retail
    establishment. The district court found that the Virginia Code clearly
    grants the NRHA explicit power to act as a landlord in connection
    with a commercial retail establishment such as the Center. The district
    court held that § 36-49 of the Virginia Code grants Housing and
    Redevelopment Authorities the specific powers to"make land . . .
    acquired available to private enterprises or public agencies (including
    sale, leasing, or retention by the authority itself) in accordance with
    the redevelopment plan." Va. Code § 36-49. It then properly dis-
    missed Count IX.
    Concluding that the trial court thoroughly and correctly analyzed
    each of the asserted claims, we affirm.
    AFFIRMED
    8