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Davis v. Detroit Public Schools Community District

United States District Court, E.D. Michigan, Southern Division

July 24, 2017

ROBERT DAVIS, et al., Plaintiffs,


          MARK A. GOLDSMITH United States District Judge

         Plaintiffs' lawsuit has two distinct facets. First, Plaintiff Robert Davis complains about allegedly unconstitutional treatment that he received during a June 23, 2017 meeting of Defendant Detroit Public Schools Community District Board of Education. At the same time, Plaintiffs continue their efforts, which began in a prior case, to prevent or undo taxpayer-funded financing of the new Little Caesars sports arena in Detroit, Michigan, as that financing scheme is currently structured. Generally speaking, Plaintiffs claim that the funding scheme violates their rights guaranteed by the U.S. Constitution, because City of Detroit millage voters only consented to be taxed for school purposes. By way of relief, Plaintiffs request that the Board of Education put the funding scheme to a vote of the school electors for the City of Detroit.

         Both plaintiffs are Wayne County residents, but only Plaintiff D. Etta Wilcoxon lives in Detroit. Am. Compl. ¶¶ 23-24. The original defendants in this suit are the Detroit Public Schools Community District, Detroit Public Schools, and the Detroit Public Schools Community District Board of Education, as well as its president, Dr. Iris Taylor, in her official capacity (collectively, “DPS Defendants”).[1] When Plaintiffs filed their amended complaint, they added as defendants Olympia Entertainment Events Center LLC (“Olympia Entertainment”), Palace Sports and Entertainment LLC (“Palace Sports”), and the National Basketball Association (“NBA”). Appearing as intervening defendants are the Detroit Downtown Development Authority (“DDA”) and the Detroit Brownfield Redevelopment Authority (“DBRA”) (collectively, “Intervenor Defendants”) - entities created by local governments, pursuant to a state statute, for the purpose of spurring economic growth and revitalization.

         The issues have been fully briefed, and a hearing was held on July 19, 2017. For the reasons set forth below, DPS Defendants' motion to dismiss is granted in part and denied in part; Intervenor Defendants' motion for summary judgment is granted; and Plaintiffs' motion for partial summary judgment is denied as moot.

         I. BACKGROUND

         In the City of Detroit's November 2012 general election, voters approved the renewal of the 18-mills Detroit Public Schools operating millage. See Am. Compl. ¶ 170. Plaintiffs argue that Intervenor Defendants intend to unlawfully use revenue generated from the school operating millage for a purpose other than the one that voters approved. See id. ¶¶ 253-254, 269-270, 274. Specifically, Intervenor Defendants allegedly plan to reimburse Defendants Olympia Entertainment and Palace Sports approximately $56, 500, 000 collected pursuant to the millage to fund certain aspects of the relocation of the Detroit Pistons professional basketball team from Auburn Hills, Michigan, to Detroit, Michigan. See id. ¶¶ 266-267. The DDA intends to reimburse Olympia Entertainment in the amount of $34, 500, 000 for improvements needed to accommodate the Detroit Pistons at the Little Caesar's arena, and the DBRA intends to reimburse Palace Sports in the amount of $22, 000, 000 for constructing the Detroit Pistons' practice facility and corporate headquarters. Id.

         Michigan statutes require that all millage proposals “fully disclose each local unit of government to which the revenue from that millage will be disbursed.” See Am. Compl. ¶ 274 (quoting Mich. Comp. Laws § 211.24f(1)). Under Mich. Comp. Laws § 380.1216, revenues levied for school operating purposes, in particular, may only be used for that purpose without the consent of the local electors. Id. ¶ 254. Plaintiffs argue that both statutes have been violated, because the millage ballot proposals did not identify that the funds would be used by non-school entities for the non-school purpose of supporting the relocation of the Pistons to Detroit.

         Plaintiffs purport to implicate DPS Defendants in the above-described conduct due to DPS Defendants' alleged refusal to place a proposal on the November 2017 general election ballot through which electors can vote on whether to approve the non-school use of funds. Olympia Entertainment and Palace Sports are implicated based on their alleged intent to receive reimbursement from Intervenor Defendants, which reimbursement comes from school millage revenues.


         In considering whether to dismiss a complaint under Federal Rule Civil Procedure 12(b)(1) due to lack of subject-matter jurisdiction, the plaintiff bears the burden of proving the existence of subject-matter jurisdiction. Musson Theatrical, Inc. v. Fed. Express Corp., 89 F.3d 1244, 1248 (6th Cir. 1996). If the motion attacks the assertion of subject matter jurisdiction set out in the complaint, the court accepts the complaint's allegations as true and construes them in the light most favorable to the non-moving party. United States v. A.D. Roe Co., Inc., 186 F.3d 717, 721-722 (6th Cir. 1999). A motion that alleges lack of standing is properly characterized as a motion to dismiss for lack of subject-matter jurisdiction under Rule 12(b)(1). See Stalley v. Methodist Healthcare, 517 F.3d 911, 916 (6th Cir. 2008) (“We review de novo a district court's dismissal of a case for lack of standing - lack of subject matter jurisdiction - under Fed.R.Civ.P. 12(b)(1).”).

         On a motion to dismiss pursuant to Rule 12(b)(6), on the other hand, “[t]he defendant has the burden of showing that the plaintiff has failed to state a claim for relief.” Directv, Inc. v. Treesh, 487 F.3d 471, 476 (6th Cir. 2007) (citing Carver v. Bunch, 946 F.2d 451, 454-455 (6th Cir. 1991)). Such a motion “should not be granted unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Id. The plausibility standard requires courts to assume that all the alleged facts are true, even when their truth is doubtful, and to make all reasonable inferences in favor of the plaintiff. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-556 (2007); In re NM Holdings Co., LLC, 622 F.3d 613, 618 (6th Cir. 2010). The complaint “does not need detailed factual allegations.” Twombly, 550 U.S. at 555; see also Erickson v. Pardus, 551 U.S. 89, 93 (2007) (“specific facts are not necessary”). It needs only enough facts to suggest that discovery may reveal evidence of actionability, even if the likelihood of finding such evidence is remote. Twombly, 550 U.S. at 556. Evaluating a complaint's plausibility is a “context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009).


          A. Plaintiffs Lack Standing to Challenge the Tax Increment Finance Plan

          Counts VII, VIII, and X through XIV allege, in one way or another, that DPS Defendants, Olympia Entertainment, and Palace Sports are complicit in the wrongful diversion of school millage revenue away from school use. Plaintiffs allege that the diversion and use of this millage revenue for non-school purposes, without notice to and approval by the school electors, violates Mich. Comp. Laws § 380.1216 and Mich. Comp. Laws § 211.24f, as interpreted by Debano-Griffin v. Lake County, 782 N.W.2d 502 (Mich. 2010); City of South Haven v. Van Buren County Board of Commissioners, 734 N.W.2d 533 (Mich. 2007); and In re Request for Advisory Opinion on Constitutionality of 1986 PA 281, 422 N.W.2d 186');">422 N.W.2d 186 (Mich. 1988).

         In addition to the Article III criteria that every case before a federal court must satisfy, state-law standing principles must also be satisfied when a plaintiff brings a state-law claim in a federal court. See Aarti Hosp., LLC v. City of Grove City, Ohio, 350 F. App'x 1, 6 (6th Cir. 2009). Accordingly, this Court will apply Michigan's standing doctrine as set forth in Lansing Schools Education Association v. Lansing Board of Education, 792 N.W.2d 686 (Mich. 2010).

         Previous to Lansing Schools, Michigan standing jurisprudence tracked federal standing jurisprudence. See Lansing Schs., 792 N.W.2d at 693 (standing doctrine in Michigan was “essentially coterminous with the federal doctrine”). Concluding that Michigan's constitution lacked the U.S. Constitution's “case or controversy” language, however, Lansing Schools marked Michigan's return “to a limited, prudential doctrine that is consistent with Michigan's longstanding historical approach to standing.” Id. at 699. Lansing Schools articulated the test for standing as follows:

A litigant has standing whenever there is a legal cause of action. Further, whenever a litigant meets the requirements of MCR 2.605 [declaratory judgments], it is sufficient to establish standing to seek a declaratory judgment. Where a cause of action is not provided at law, then a court should, in its discretion, determine whether a litigant has standing. A litigant may have standing in this context if the litigant has a special injury or right, or substantial interest, that will be detrimentally affected in a manner different from the citizenry at large or if the statutory scheme implies that the Legislature intended to confer standing on the litigant.

Id. (emphasis added).

         Plaintiffs do not attempt to argue that they have standing based on having a cause of action at law; nor do they expressly claim that they have suffered a special injury. Rather, Plaintiffs assert that they have standing because they meet the requirements of Mich. Ct. R. 2.605. See Pls. Mot. for Summ. J. at 10 & n.1, 20-21; Pl. Resp. to Intervenor Defs. Mot. for Summ. J. at 6-8. The court rule provides as follows:

In a case of actual controversy within its jurisdiction, a Michigan court of record may declare the rights and other legal relations of an interested party seeking a declaratory judgment, whether or not other relief is or could be sought or granted.

Mich. Ct. R. 2.605(1).

         Lansing Schools was not entirely clear whether it created a regime under which special injury or interest was required to establish standing to seek a declaratory judgment.[2] Later cases, however, clarify that Mich. Ct. R. 2.605 does incorporate the prerequisite of a special injury different from that suffered by the general public. See, e.g., UAW v. Cent. Mich. Univ. Trs., 815 N.W.2d 132, 138-139 (Mich. Ct. App. 2012) (finding standing under Mich. Ct. R. 2.605 in part because plaintiffs alleged an interest “different from any rights or interests of the public at large”); Duck Lake Riparian Owners Ass'n v. Fruitland Twp., No. 312295, 2014 WL 891079, at *5-6 (Mich. Ct. App. Mar. 6, 2014) (noting in general that, as to plaintiffs asserting standing under Lansing Schools' “cause of action” theory and Mich. Ct. R. 2.605, “plaintiffs' standing would still depend on having some kind of harm distinct from that of the general public”); Greenstein v. Farmington Pub. Sch., No. 306268, 2012 WL 4222066, at *2 (Mich. Ct. App. Sept. 20, 2012) (rejecting standing under Mich. Ct. Rule 2.605 because plaintiff failed to allege “any interest that is detrimentally affected in a manner different from the citizenry at large”). Rule 2.605 “does not limit or expand the subject-matter jurisdiction of the courts, but instead incorporates the doctrine[ ] of standing . . . .” Cent. Mich. Univ. Trs., 815 N.W.2d at 138 (emphasis added)).

         Plaintiffs lack standing because they allege no injury apart from that suffered by all school electors in Detroit. See also Am. Compl. ¶ 136 (“[T]his fundamental right has been denied Plaintiff Wilcoxon and other registered and qualified electors of the City of Detroit . . . .”). The only possible allegation that might be construed as a claim of specialized injury is their allegation that they are “the only electors who submitted a written demand on DPS Defendants to place the TIF issue on the November 2017 ballot.” Pls. Resp. to Intervenor Defs. Mot. for Summ. J. at 8 (emphasis in original). But having made a demand does not show any special injury. Any alleged injury traceable to DPS Defendants would flow from the failure to place a proposal on the ballot - an injury, if it were one, that all Detroit voters would suffer, regardless of who made a demand on DPS Defendants or whether any demand was made at all.

         The same deficiency applies to the claims in Counts XII and XIII, directed at Olympia Entertainment, Palace Sports, and the NBA. See, e.g., Am. Compl. ¶¶ 16-17. In those counts, Plaintiffs ask for a declaration that these entities cannot be reimbursed with revenue collected pursuant to a school millage, because to do so would violate state law. Id. Even assuming that Plaintiffs are correct about the alleged wrongdoing, it affects them no differently than any other elector in the City of Detroit.

         Therefore, Plaintiffs' claims against DPS Defendants and Intervenor Defendants in Counts VII, VIII, and X through XIV, and all claims against Olympia Entertainment, Palace Sports, and the NBA are dismissed with prejudice.

         C. Michigan's Bigger Doctrine

         Even if this Court is in error regarding Plaintiffs' lack of standing to bring the majority of their state-law claims, all of Plaintiffs' state-law claims - including the mandamus claim in Count IX - are subject to dismissal on account of their dilatory conduct vis-à-vis the widely publicized progress of the Little Caesars arena.

         In the specific context of public works financing, Michigan law recognizes what Intervenor Defendants aptly term a “corollary” to laches, see Intervenor Defs. Mot. for Summ. J. at 20.[3] That doctrine arose in Bigger v. City of Pontiac, 210 N.W.2d 1 (Mich. 1973), which case did not mention the equitable doctrine of laches. In fact, the doctrine is distinct from laches, because “Bigger applies even if plaintiff's claim is legal rather than equitable.” Bylinski v. City of Allen Park, 8 F.Supp.2d 965, 973 (E.D. Mich. 1998) (citing Walled Lake Consol. Sch. Dist. v. Charter Twp. of Commerce, 437 N.W.2d 16, 17 (Mich. Ct. App. 1989)), aff'd, 169 F.3d 1001 (6th Cir. 1999).

         In Bigger, the defendant publicized, on April 23, 1973, its plans for a bond sale to publicly finance improvements to a professional football stadium. “[T]he plaintiffs allowed the balance of the month of April, all of the months of May and June and half of the month of July to pass without commencing any legal proceedings.” Id. at 3. After a procedural misstep in mid-July 1973, the plaintiffs properly commenced the action on August 1, 1973, after the bonds had been sold and one month before the bonds were to be delivered. Id. The Michigan Supreme Court dismissed the case based upon that delay and its potential effect on the defendants, stating:

In cases where because of the nature of the subject matter, absolute time limits must be observed, the law requires speedy resort to the courts by those who wish to prevent or modify contemplated transactions or procedures. Those who would avail themselves of our processes must do so in a manner which facilitates an orderly process of adjudication within the given time frame. . . . In this case had the plaintiffs in April, rather than inexplicably waiting until August, instituted this action, there would have been adequate time for preparation, presentation and reflection.


         Here, voters approved the Detroit school millage in a 2012 election. See Am. Compl. ¶ 110. In a tax increment financing (“TIF”) plan adopted by the DDA in June 2013 and approved by the Detroit City Council in December 2013, the DDA announced its intent to immediately begin capturing revenue attributable to taxes collected for school purposes. See 2013 TIF Plan, Ex. 2 to Intervenor Defs. Mot. for Summ. J., at 43, 207 (noting intent to use “tax increment revenues described in [Mich. Comp. Laws] § 125.1651(cc)(vi), ” which statute authorizes capture of, inter alia, ad valorum property taxes levied by local and intermediate school districts) (Dkt. 27-3); see also Am. Compl. ¶ 152 (“On June 26, 2013, the DDA Board of Directors passed a resolution designating the new Little Caesars Arena as its ‘catalyst development project' [i.e., a project to be funded through a TIF plan].”).[4] The purpose of this tax capture included the “primary component” of “a multi-purpose sports and entertainment center”; the TIF Plan named the Detroit Red Wings professional hockey team as a fixture of the arena, and it expressly contemplated “other sports and entertainment events.” TIF Plan at 205.

         The tax capture at issue in this case is a modification to that preexisting plan, which modification was made public late last year and will be effectuated by refinancing the outstanding series of bonds with a new series of bonds backed by the same income stream - not by capturing millage proceeds from new sources. See MOU, Ex. 1 to Intervenor Defs. Mot. for Summ. J., at 3 (Dkt. 27-2) (“DDA has determined that there is a public purpose to modify the existing public-private partnership for the Arena to incorporate the construction of [basketball facilities] . . . .”), 6 (stating intent to refinance outstanding bonds and leverage existing tax increment revenues to raise additional monies); see also Bill Shea & Kirk Pinho, Biggest Tabs for Public Arena Debt? Gilbert, GM, Crain's Detroit Business (Dec. 11, 2016), Ex. 6 to Defs. Mot. for Summ. J., at 121 (cm/ecf page) (Dkt. 27-7) (“extending the original maturity date three years to 2048, to generate $34.5 million . . . .”); Am. Compl. ¶¶ 131, 135 (acknowledging 2016 plan's connections to the 2013 plan).

         Plaintiffs insist that the tax increment capture of these millage revenues was sprung on the public just two months ago: Wilcoxon avers that she first learned of the tax increment finance plan at the Detroit City Council's May 25, 2017 public hearing. See Wilcoxon Aff., Ex. 1 to Pls. Resp. to Intervenor Defs. Mot. for Summ. J., ¶ 10 (Dkt. 34-2).

         However, when Wilcoxon subjectively became aware of any particular event is irrelevant under Bigger. What is relevant is what information was reasonably available to the public at large. See Bigger, 210 N.W.2d at 2-3 (critical date was when agreement was “announced to the public”). Here, Defendants submitted unrebutted evidence proving that Plaintiffs were in a position to judicially oppose the instant project and its tax increment finance plan - not a little under three months ago (as was deemed too slow in Bigger), but up to four years ago. As noted above, the capture of the taxes at issue here is a modification to a tax increment financing plan that has been in place, and well-publicized, for years.

         It is a feature of large development projects, like the Little Caesar's arena, that they evolve over time. Rarely, if ever, does a multi-year, billion-dollar construction project debut in a form identical to the one seen in the original blueprints or the conceptual model. This flexibility is necessary; the size and duration of projects like these present a particularly acute need to adapt to factors that might not face a smaller project, such as changes to the community, the local or national economic landscape, political sensitivities, and the like. When, as here, the general financing scheme has been public knowledge since the beginning, permitting a plaintiff to upset a particular stage of the evolution of the project is to permit a plaintiff to upset the project itself. The core of Plaintiffs' legal arguments concerning Mich. Comp. Laws § 380.1216 were available to them, as against these Defendants, for an inexcusably long period of time. This Court sees no meaningful distinction between challenges to the original plan and amendments to that plan that were added to the project as it materialized.

         Even if this Court were inclined to recognize a distinction between the project at large and the recent amendments, the December 2016 MOU - which was entered into by the DDA, the City of Detroit, and Palace Sports - noted its intent to use “state and local school taxes” for the instant “catalyst development project.” See MOU at 1. That the plan would capture school millage funds, in particular, was well-reported by the news media. See, e.g., Bill Shea, Council Puts Check on Arena Financing, Wants Details First, Crain's Detroit Business (Dec. 8, 2013), Ex. 3 to Intervenor Defs. Mot. to Dismiss, at 84 (cm/ecf page) (“The bonds will be repaid by . . . school taxes within the DDA district . . . .”); JC Reindl, $24.4 Million Garage Helps Ilitch ...

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