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Club Xtreme, Inc. v. City of Wayne

April 21, 2010

CLUB XTREME, INC. AND ROBERT WOJTOWICZ, PLAINTIFFS,
v.
THE CITY OF WAYNE, AL HAIDOUS, JOHN WILLIAMS, AL DAMITIO, PAM DOBROWOLSKI AND JOHN ZECH, DEFENDANTS



The opinion of the court was delivered by: Hon. Victoria A. Roberts

ORDER

I. INTRODUCTION

Plaintiffs Robert Wojtowicz ("Wojtowicz") and Club Xtreme, Inc. ("Club Xtreme" or "the Club") bring this civil rights action against Defendants City of Wayne ("the City"), Mayor Al Haidous, Mayor Pro Tem Pam Dobrowolski, Police Chief John Williams, City Manager John Zech and City Council member Albert Damitio. The matter is now before the Court on Defendants' Motion for Summary Judgment [Dkt #33], filed December 23, 2009. Plaintiffs filed a Response. For the reasons stated, the Motion is GRANTED IN PART and DENIED IN PART.

II. BACKGROUND

As the Court is compelled to do on a Fed. R. Civ. P 56(c) motion for summary judgment, it construes the evidence in the light most favorable to Plaintiffs.

Wojtowicz was the sole shareholder of Club Xtreme, Inc., a Michigan corporation which operated a nightclub called Club Xtreme. Club Xtreme opened on June 4, 2004, after protracted wrangling with the City regarding the site plan and building permits. At one point, Plaintiffs filed suit against the City in state court in order to have their building plans approved; that case was later dismissed.

Club Xtreme was a licensed liquor establishment which served alcoholic beverages. It was the first nightclub of its kind in the City and also the largest of five such downtown liquor establishments. When Club Xtreme first opened, it drew 300 -500 patrons per night. The Club did not have its own parking lot, so its patrons used a nearby municipal lot and several private lots.

Plaintiffs say that since the City could not prevent Club Xtreme from opening, it took steps from its inception to drive the Club out of business. For example, on the Club's opening night, the City's police officers conducted undercover operations inside and outside the Club, issuing numerous tickets for infractions, such as Michigan Liquor Control Commission ("MLCC") violations, littering, and open intoxicants. The police also created a special "Club Xtreme Detail" for increased patrols around the club, and targeted Club Xtreme with the City's Community Oriented Policing Crime Reduction Unit ("COPCRU") and its Metro Street Enforcement Team ("MSET"). Plaintiffs contend that other downtown bars were not subject to such intense police enforcement.

Concerned about possible police harassment of its patrons in July 2004 and June/July 2005, Club Xtreme hired a private investigator to conduct surveillance on the police. Club Xtreme says its investigator's reports illustrate the disparate treatment directed at Club Xtreme patrons. Plaintiffs say Club Xtreme's customer base dwindled because of excessive police enforcement. In an effort to appease the City and hopefully decrease the police enforcement, Club Xtreme voluntarily changed its music format on several occasions, from Top 40 to country. When the music format changed to country, Club Xtreme's customer base dwindled to 40 - 50 customers per night.

To draw new customers, in October 2006 Club Xtreme changed the music format from country to hip hop and rap music, and hired DJ Gary Chandler of local radio station, Hot 102.7 FM. This change led to a peak in business, and the customer base changed from primarily white to primarily black. Club Xtreme says the police harassment reached new proportions with this demographic change; on at least two occasions, in January and February 2007, the police used a German shepherd police dog, and stationed an officer wearing a ski mask and armed with an automatic assault rifle outside the Club.

By 2007, the City apparently had concerns that Club Xtreme led to increased crime in the surrounding area, as a result of over-serving patrons and serving alcohol to minors; by that time, Club Xtreme had amassed 17 MLCC violations, and many patrons had been ticketed or arrested for public disorder and other crimes. Wojtowicz says he had no control over patrons' acts in the parking areas, because police officers told him that he controls the inside of the Club and they control the outside. In any event, the City's concerns were not voiced to Club Xtreme in a formal, written manner until February 2007. Before then, in 2005 and 2006, Club Xtreme's liquor license was renewed by the State of Michigan as a matter of course, with no objection by the City.

The City scheduled a Special Meeting on February 26, 2007 at 6:30 p.m., to consider whether to object to renewal of the Club's liquor license. On February 2, 2007, the City sent notice to Club Xtreme via certified and regular mail. The Notice did not advise Club Xtreme of (1) the reasons for the proposed action, (2) what evidence, witnesses and testimony would be produced, or (3) the standards by which the decision would be made. The Notice also included no provision that Club Xtreme would be able to cross examine the City's witnesses or present evidence or testimony in Club Xtreme's defense.

Wojtowicz and Club Xtreme's attorney attended the February 26, 2007 hearing and objected due to Notice deficiencies. The city council continued with the hearing. Three police officers testified regarding the crime statistics and the City's law enforcement efforts. Several citizens and Wojtowicz testified, and his attorney cross-examined witnesses and argued before the city council. At the conclusion of the hearing, the council voted to object to the renewal of Club Xtreme's liquor license. The council made its decision without any established guidelines.

After the February 26, 2007 special meeting, the MLCC advised the City that the council's actions did not comport with MLCC regulations.

The city council scheduled a second hearing on March 28, 2007 at 7:00 p.m. On March 19, 2007, the City sent a Notice of Special Meeting to Club Xtreme via regular first class mail and certified mail, return receipt requested; this notice purportedly included proposed Guidelines for Class C Liquor Licenses, though it is not indicated on the Affidavit of Service. On March 20, 2007, the city council formally adopted the proposed guidelines. On March 21, 2007, the City sent a second Notice of Special Meeting. This second notice had the same hearing date, but changed the time to 6:00 p.m.; the notice purportedly included the adopted Guidelines for Class C Liquor Licenses, though it is not indicated on the Affidavit of Service. Neither notice outlined the reasons for the proposed action.

On March 28, 2007 at 6:00 p.m., the city council held the second special meeting concerning the liquor license renewal. No representative for Club Xtreme was present. The City presented no new testimony, and incorporated by reference the testimony from the February 26, 2007 special meeting. The city council voted to object to the renewal of Club Xtreme's liquor license. At the urging of the city attorney, Richard Clark, the council outlined its reasons for the objection:

Be it resolved that the City of Wayne objects to the Michigan Liquor Control Commission's Renewal of the License for the consumption of intoxicating liquors on the premises currently held by the owners/operators of Club Xtreme for the following reasons:

1. Licensee's failure to comply with all applicable city and state laws concerning the health, safety and moral conduct or public welfare incidents attaché Wayne Police Department report and letter from John Williams, Sergeant Dan Jurus and Sergeant Patrick Lindberg.

2. The Licensee's repeated violation of state liquor laws as noted in the report of Chief John Williams in Exhibit A.

3. The Licensee's maintenance of a nuisance upon or in connection with the licensed premises, specifically a pattern of patron conduct in the neighborhood of the licensed premises which is in violation of the law and/or disturbs the peace, order and tranquility of the neighborhood, as detailed in the attached reports as noted in the reports of Sergeant Patrick Lindberg (Exhibit B) and Sergeant Dan Jurus (Exhibit C).

See Def. Exh. 17. The meeting concluded at 6:12 p.m.

The parties dispute whether Wojtowicz and Club Xtreme received proper notice of the second hearing. The March 19 and 21, 2007 notices went unclaimed at the post office. Clark says by affidavit that he contacted Club Xtreme's then-attorney, Allan Rubin, regarding potential witnesses. Clark says Rubin acknowledged receipt of the notice and said he would not attend unless he was paid for his services. See Pl. Exh. 15.

Rubin says by affidavit that he does not recall either that conversation or receiving any notice from Clark's office, and review of his files shows no such conversation. See Pl. Exh. 12. Rubin's co-counsel, Lawrence Shulman, says by affidavit that he first learned of the hearing on March 28, 2007, when Clark called him to ask if he planned to call any witnesses; before then, he received no written or verbal notice of the second hearing. See Pl. Exh. 13. Shulman also says he told Clark that he and his client were unaware of the hearing. Id. Shulman says Clark told him the hearing was set for 7:00 p.m., but when Shulman arrived between 6:30 and 6:45 p.m., the parking lot was empty and the doors were locked. Id.

Club Xtreme closed in April 2007, after the MLCC did not renew its liquor license based on the City's recommendation.

On December 13, 2007, Plaintiffs filed suit. The Complaint alleges: Count I -Violation of First Amendment Rights, Count II - Violation of 14th Amendment Procedural Due Process Rights, Count III - Violation of Substantive Due Process Rights, Count IV -Denial of 5th Amendment Equal Protection Rights, and Count V - Violations of Plaintiffs' Constitutional Rights by Defendants Haidous, William, Damitio, Dobrowolski, and Zech.

Wojtowicz and Club Xtreme say they were subject to escalating police harassment, which culminated with Defendants' arbitrary recommendation denying renewal of Club Xtreme's liquor license with the State of Michigan. Wojtowicz and Club Xtreme allege the recommendation was due to the music format played by the Club (rap and hip hop) and the race and ethnicity of Club Xtreme's clientele (primarily black).

Defendants move for summary judgment on all claims.

III. STANDARD OF REVIEW

Under Fed. R. Civ. P 56(c), summary judgment may be granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Copeland v. Machulis, 57 F.3d 476, 478 (6th Cir. 1995). A fact is "material" and precludes a grant of summary judgment if "proof of that fact would have [the] effect of establishing or refuting one of the essential elements of the cause of action or defense asserted by the parties, and would necessarily affect application of appropriate principle[s] of law to the rights and obligations of the parties."Kendall v. Hoover Co., 751 F.2d 171, 174 (6th Cir. 1984).

The court must view the evidence in the light most favorable to the nonmoving party and it must also draw all reasonable inferences in the nonmoving party's favor. Cox v. Kentucky Dept. of Transp., 53 F.3d 146, 150 (6th Cir. 1995). Nevertheless, nonmoving party must do more than simply show there is some metaphysical doubt as to the material facts. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 89 L.Ed. 2d 538, 106 S.Ct. 1348 (1986). The mere existence of a scintilla of evidence in support of the nonmoving party's position is not sufficient to create a genuine issue of material fact. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 91 L.Ed. 2d 202, 106 S.Ct. 2505 (1986). The proper inquiry is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Id. at 251-52.

IV. ANALYSIS

A. Standing

1. Wojtowicz's Individual Standing

Federal courts consistently hold that "an action to redress injuries to a corporation... cannot be maintained by a stockholder in his own name.... The general rule is applicable in cases where the individual is the sole stockholder." Canderm Pharmacal, Ltd. v. Elder Pharmaceuticals, Inc., 862 F.2d 597, 602-03 (6th Cir. 1988) (quoting Schaffer v. Universal Rundle Corp., 397 F.2d 893, 896 (5th Cir. 1968)). "This limitation on standing applies even to civil rights claims brought in the place of corporations." Quarles v. City of East Cleveland et al, 1999 U.S. App. LEXIS 34061, *7-8 (6th Cir. 1999).

However, there is a well-recognized exception to this rule precluding shareholders from bringing individual actions: "'Where the shareholder suffers an injury separate and distinct from that suffered by other shareholders,' or the corporation as an entity, the ...


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