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Johnson v. Morales

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

December 20, 2017

RITA R JOHNSON, Plaintiffs,
TIMOTHY MORALES, et al, Defendants.


          THOMAS L. LUDINGTON United States District Judge

         On July 25, 2017, Plaintiff Rita R. Johnson filed a complaint alleging that Defendants Timothy Morales, Dennis Jordan, and the City of Saginaw violated her due process rights when they suspended her business license. Compl., ECF No. 1. On August 23, 2017, Johnson filed an amended complaint which provides additional factual allegations and contains an additional count alleging that Defendants violated her Fourth Amendment due process rights. ECF No. 5. On September 9, 2017, Johnson filed a motion for a temporary restraining order and, alternatively, a motion for a preliminary injunction. ECF No. 7. That motion was focused solely on Count Four of the Amended Complaint, which alleged that Johnson's due process rights would be violated if Defendant Morales, who issued the initial order suspending Johnson's business license, sat on a panel reviewing that decision.

         The Court denied that motion. ECF No. 8. On September 21, 2017, Johnson filed a motion for reconsideration. ECF No. 10. On the same day, Defendants filed a motion to dismiss the suit. ECF No. 11. Four days later, Johnson filed a motion for leave to submit supplemental authority in support of her motion for reconsideration. ECF No. 12. And, on October 17, 2017, Johnson filed a motion for leave to file a second amended complaint. ECF No. 15.

         For the reasons that follow, Johnson's motion for leave to submit supplemental authority will be granted, but her motion for reconsideration will be denied. Defendants' motion to dismiss will be granted and, because amendment would be futile, Johnson's motion for leave to file a second amended complaint will be denied.



         The well-pleaded factual allegations in Johnson's complaint, as articulated in the September 15, 2017, opinion and order, will be summarized here. Johnson owns and operates Rita's Southern Soul Café in Saginaw, Michigan. Am. Compl. at 1. Defendant Timothy Morales is the Saginaw City Manager. Defendant Dennis Jordan is the City of Saginaw's Human Resource Director.

         On May 6, 2017, Johnson rented the cafe to a private party. Id. at 2. In the early morning hours of May 6, 2017, unknown individuals “emerged from a vehicle . . . and began shooting at Plaintiff's building.” Id. To her knowledge, Johnson's guests did not commit any crime during the assault and Johnson herself has no connection to any of the shooters.

         The Saginaw Police Department responded to the shooting. Police Chief Robert Ruth later opined that the incident was likely gang-related. Id. at 3. Johnson faults the City of Saginaw for not ordering “the criminal shooters to halt their illegal activities.” Id. at 4. Instead, in reaction to the shooting, the City of Saginaw took action against Johnson:

Rather than focus efforts on apprehending and stopping the unknown gang-members who actually acted illegally and unlawfully, Defendant CITY OF SAGINAW, likely in an attempt to shift blame from its poorly-staffed and ineffective police department, took adverse action against Plaintiff by suspending her business license for actions for which she is not responsible and for alleged crimes she did not otherwise commit or authorize

Id. (emphasis in original).

         The City of Saginaw also turned off Johnson's water supply “without notice or authority in a backhanded way to shut down Plaintiff's commercial operations.” Id.

         The administrative appeal process for challenges to the suspension of business licenses is governed by the City of Saginaw Code of Ordinances, 110.06(E). Pursuant to 110.06(F), if “the City Manager or their designee” determines that an immediate suspension of a business license is necessary to protect “the public health, morals, safety, or welfare, ” they may unilaterally order an immediate suspension. But the City Manager or their designee must hold a hearing within five days to allow the license holder to challenge the suspension. Id. On May 8, 2017, Timothy Morales “issued a governmental order entitled Notice of Immediate Suspension of Business Activity whereby he, as an agent of Defendant CITY OF SAGINAW, ordered the halt of all (and not just illegal) activities, including all commercial activities of any type.” Am. Compl. at 4. (emphasis in original). Johnson alleges that the shutdown order was intended to destroy Johnson's commercial interests.

         In the notice of suspension, City Manager Morales identified five reasons for the immediate suspension. See Not. Susp., ECF No. 5, Ex. A. First, Morales cited the “serious and violent criminal activity generated by the operation of this establishment.” Id. at 1. Second, he specified that the criminal activity had “resulted in significant injury to persons and damage to property.” Id. Third, the “serious and violent criminal activity” had “occurred as recently as Saturday, May 6, 2017.” Id. Fourth, Morales concluded that the criminal activity constituted “a hazardous condition contrary to the health, morals, safety, and welfare of the public.” Id. And finally, Morales faulted the café for failing to “maintain adequate security to prevent or discourage unlawful behavior.” Id.

         Pursuant to the governing city ordinance, a hearing on the suspension was scheduled for May 11, 2017. Dennis Jordan, the Human Resources Director for the City of Saginaw, was designated as the hearing officer. According to Johnson, Timothy Morales is the immediate supervisor of Defendant Jordan. The hearing was held as scheduled, but Johnson alleges that Jordan “allowed hearsay testimony, dubious evidence, and irrelevant testimony.” Id. at 4. Johnson highlights two examples of alleged misconduct during the hearing. First, Johnson asserts that the City of Saginaw was represented at the hearing by a law firm which had previously represented Jordan. Id. Despite this connection, Jordan did not recuse himself from the hearing. Second, Jordan permitted Police Chief Ruth to testify about the events of May 6, 2017, even though he had not been present at the scene or directly involved in the ensuing investigation.

         Two months after the hearing, Jordan denied the appeal. Id. at 6. While Jordan was considering the appeal, Johnson's counsel asked “how the City could have a Human Resources Director serve as a neutral, detached decision maker and how it could allow hearsay and conjecture as evidence in such a hearing.” Id. at 5. In response, counsel for the City suggested that, because it was only an administrative hearing, that level of due process was not required. Id. Johnson's counsel then submitted a number of Freedom of Information Act Requests seeking information regarding the City's processes and procedures. Id.

         On July 11, 2017, “City Attorney Amy Lusk introduced a proposal to the City of Saginaw City Council to amend the City Ordinance permitting the appointment of employees of the City of Saginaw as the hearing officer to conduct hearings like the one undertaken against Plaintiff.” Id. The update to the City Ordinance has been approved.

         In the first amended complaint, Johnson frames four Counts which all allege that her Fourth Amendment due process rights were violated. In Count I, Johnson contends that Dennis Jordan was not a neutral and detached arbiter because he was reviewing his supervisor's actions. In Count II, Johnson argues that her “constitutionally protected right of property” was violated when the City of Saginaw suspended her business license without providing a pre-suspension hearing. In Count III, Johnson argues that the City Ordinance, which requires a public hearing after license suspension, is unconstitutional because it places the burden of demonstrating why the license should not be suspended on Johnson. In Count IV, Johnson argues that her due process rights will be violated if Timothy Morales is permitted to sit on the three-person panel which will review Jordan's decision.


         The proposed second amended complaint which Johnson submitted on October 17, 2017, largely mirrors the allegations contained in the first amended complaint. Prop. Sec. Am. Compl., ECF No. 15, Ex. 1. The differences will be briefly highlighted.

         In the proposed second amended complaint, Johnson emphasizes that the actions of the shooters on May 6, 2017, had nothing to do with Johnson's business and that Johnson was in full compliance with all local laws on that day. Id. at 3. She also alleges that, to date, the City of Saginaw Police Department has not arrested anyone associated with the shooting that took place in May. Id. As regards the May 11, 2017, hearing before Defendant Jordan, Johnson adds the additional allegation that “[i]n the days that followed . . . Defendant DENNIS JORDAN had ex parte communications with Police Chief Ruth asking about details of his prior testimony via secret, non-public email communications.” Id. at 5.

         Most of the new allegations in the proposed second amended complaint involve Johnson's administrative appeal of Defendant Jordan's decision to uphold the license suspension. After Johnson's motion for an order enjoining the City of Saginaw from permitting Defendant Morales to participate in the appeal of Defendant Jordan's decision was denied, Johnson requested the appeal hearing. The City of Saginaw scheduled the hearing for October 16, 2017. Id. at 6. The following people served on the panel: “Janet Santos, City Clerk; Kim Mason, Director of Water & Waste Water who served at the selection and direction of Defendant TIMOTHY MORALES; and Darrin Jerome, Deputy/Mechanical Inspector, who served at the selection and direction of City Inspector John Stemple.” Id. Johnson alleges that none of the panel members have any “training, experience, or understanding with the rules of evidence, rules in legal interpretation and its application of evidence, and/or how the disputed ordinance is supposed to be applied.” Id.

         Johnson argues that the appeal panel failed to understand her arguments and, further, “failed to reasonably review into the facts, law, or principles raised by the attorneys in writing or by oral arguments to a sufficient enough level to even legally understand the technical arguments.” Id. at 7. For that reason, Johnson believes the appeal board “is a sham.” Id. In fact, Johnson believes that the panel was selected “precisely because they lack sufficient and/or the requisite minimum understanding of the legal obligations imposed by local and the federal constitution.” Id.

         After the attorneys argued before the panel, “a motion was made by Mason to affirm the decision.” Id. The panel did not engage in “any substantive discussion or debate” prior to the motion being made. Id. Prior to voting on the motion, members of the panel “inquired whether any settlement offers had been made between Defendant CITY OF SAGINAW and Plaintiff as part of this federal lawsuit.” Id. After being informed that no settlement had been reached, the appeal panel “voted to blankly affirm the decision of Defendant Timothy Morales.” Id. The panel provided no written or oral explanation for their decision. Id.

         The proposed second amended complaint contains nine claims. Count One alleges that the City of Saginaw Code of Ordinances § 110.06(E), which provides guidelines and procedures for the review panel, is unconstitutional. Count Two alleges that § 110.06(F), which permits the City Manager to immediately suspend a business license if doing so is “in the interest of the public health, morals, safety, or welfare, ” is void for vagueness. In Count Three, Johnson alleges that the City of Saginaw has selectively enforced § 110.06(F). Counts Four, Five, and Six frame claims for “Undue Process Violation, ” essentially arguing that due process was violated because Dennis Jordan is Defendant Morales's direct subordinate, because Defendant Jordan held “secret, ex parte communications with Chief Ruth outside the presence or knowledge of Plaintiff, ” and because Defendant Jordan's personal attorney appeared at the hearing on behalf of the City of Saginaw. Id. at 10-12. In Count Seven, Johnson alleges that her constitutionally protected right to property was violated when her business license was suspended without a hearing and in the absence of exigent circumstances. Count Eight asserts that the City of Saginaw Code of Ordinances § 110.06(D) unconstitutionally places the burden of showing that the suspension should be revoked on Johnson. And Count Nine contends that the City of Saginaw violated Johnson's substantive due process rights when it suspended her business license based on the actions of third parties.



         Pursuant to Eastern District of Michigan Local Rule 7.1(h), a party can file a motion for reconsideration of a previous order, but must do so within fourteen days. A motion for reconsideration will be granted if the moving party shows: “(1) a palpable defect, (2) the defect misled the court and the parties, and (3) that correcting the defect will result in a different disposition of the case.” Michigan Dept. of Treasury v. Michalec, 181 F.Supp.2d 731, 733-34 (E.D. Mich. 2002) (quoting E.D. Mich. LR 7.1(g)(3)). A “palpable defect” is “obvious, clear, unmistakable, manifest, or plain.” Id. at 734 (citing Marketing Displays, Inc. v. Traffix Devices, Inc., 971 F.Supp.2d 262, 278 (E.D. Mich. 1997). “[T]he Court will not grant motions for rehearing or reconsideration that merely present the same issues ruled upon by the Court, either expressly or by reasonable implication.” E.D. Mich. L.R. 7.1(h)(3). See also Bowens v. Terris, No. 2:15-CV-10203, 2015 WL 3441531, at *1 (E.D. Mich. May 28, 2015).


         In her emergency motion for reconsideration, Johnson again requests a Court order enjoining the City of Saginaw from placing Timothy Morales on the appeal panel. ECF No. 10. In her motion for leave to file a second amended complaint, Johnson asserts that the motion for reconsideration is now moot because the appeal hearing has occurred. Nevertheless, the merits of Johnson's motion for reconsideration will be briefly addressed to recount why the Court declined to provide emergency relief.

         As an initial matter, Johnson has also filed a motion or leave to submit supplemental authority in further support of her motion for reconsideration. ECF No. 12. That motion will be granted. But because neither that authority nor the arguments advanced in the motion for reconsideration change the Court's conclusion, the motion for reconsideration will be denied.

         In the Court's September 15, 2017, opinion and order denying Johnson's motion for preliminary injunctive relief, the Court based its conclusion on one rationale, provided an alternative explanation for why the motion would be denied, and identified a further potential shortcoming of Johnson's motion. First, the Court concluded that “Johnson is extremely unlikely to prevail on the merits of her claim.” Sept. 15, 2017, Op. & Order at 9. In so holding, the Court relied in large part upon Withrow v. Larkin, where the Supreme Court concluded that it was not violative of due process for an administrative board to suspend a doctor's license even though the same board had also conducted the investigation of the charges. 421 U.S. 35, 46 (1975). The parallels to the present case are unmistakable. Emphasizing the limited nature of the review of a motion seeking preliminary injunctive relief, the Court concluded that Johnson had not established a strong likelihood of success on the merits.

         While the Court also discussed the question of whether Johnson had demonstrated that irreparable injury would occur without relief the denial of the motion for preliminary injunctive relief was predicated primarily on Johnson's inability to establish a strong likelihood of success on the merits. And now, in her motion for reconsideration and motion for leave to submit supplemental authority, Johnson does not challenge the Court's analysis regarding whether she demonstrated a strong likelihood of success on the merits. Rather, she challenges the suggestion that she had not demonstrated that irreparable injury would occur absent preliminary injunctive relief and that she was not appealing from a final decision.[1]

         Thus, Johnson is not taking issue with any part of the primary rationale for denying her motion for preliminary injunctive relief. “When a party seeks a preliminary injunction on the basis of a potential constitutional violation, ‘the likelihood of success on the merits often will be the determinative factor.'” Obama for Am. v. Husted, 697 F.3d 423, 436 (6th Cir. 2012) (quoting Jones v. Caruso, 569 F.3d 258, 265 (6th Cir. 2009)). And when the moving party cannot meet its burden of demonstrating a likelihood of success on the merits, preliminary injunctive relief is not warranted. See also Overstreet v. Lexington-Fayette Urban Cty. Gov't, 305 F.3d 566, 578 (6th Cir. 2002) (explaining that where the movant is unlikely to prevail on the merits of their constitutional claim, a presumption of irreparable injury is not warranted). Thus, even if Johnson prevailed on the arguments raised in her motion to dismiss, the Court's ultimate conclusion would be unchanged.[2] Johnson's motion for reconsideration will be denied.


         Defendants are moving for dismissal pursuant to Federal Rule of Civil Procedure 12(b)(6). A pleading fails to state a claim under Rule 12(b)(6) if it does not contain allegations that support recovery under any recognizable legal theory. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). In considering a Rule 12(b)(6) motion, the Court construes the pleading in the non-movant's favor and accepts the allegations of facts therein as true. See Lambert v. Hartman, 517 F.3d 433, 439 (6th Cir. 2008). The pleader need not provide “detailed factual allegations” to survive dismissal, but the “obligation to provide the ‘grounds' of his ‘entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). In essence, the pleading “must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face” and “the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions.” Iqbal, 556 U.S. at 678-79 (quotations and citation omitted).

         Plaintiff has requested leave to file a second amended complaint. Federal Rule of Civil Procedure 15(a)(2) provides that a party may amend its pleading with the court's leave and that “the court should freely give leave when justice so requires.” Denial of a motion to amend is appropriate, however, “‘where there is ‘undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of the amendment, etc.'” Morse v. McWhorter, 290 F.3d 795, 800 (6th Cir. 2002) (quoting Foman v. Davis, 371 U.S. 178, 182 (1962)).

         An amendment would be futile if the amended complaint does not state a claim upon which relief can be based. A pleading fails to state a claim under Rule 12(b)(6) if it does not contain allegations that support recovery under any recognizable legal theory. Ashcroft v. Iqbal, 556 U.S. 662, 678, (2009). The standard of review for Defendants' motion to dismiss and Plaintiff's motion for leave to file a second amended complaint is thus identical.


         There is substantial overlap between the motion to dismiss and the proposed second amended complaint. Accordingly, Defendant's motion to dismiss the amended complaint will be considered first. And then Plaintiff's motion for leave to file a second amended complaint will be addressed.


         In the motion to dismiss, Defendants argue that all four claims in Johnson's amended complaint should be dismissed for failure to state a claim. Defendants also argue that the suit should be dismissed because, at the time the amended complaint was filed, the administrative decision she was challenging was not yet final.[3] Defendants' challenges to the claims in the amended complaint will be analyzed in turn.

         First, Defendants argue that Plaintiff's claims alleging that Defendants Jordan and Morales are not neutral and detached arbiters and thus that review of the suspension by them violates her due process rights fail as a matter of law. In the first count of the amended complaint, Johnson alleges that Dennis Jordan is not “a neutral and detached arbiter, ” as due process requires, because of his connection with his supervisor, Timothy Morales. Defendants argue that dismissal of the first count is appropriate because the amended complaint does not “allege that Defendant Jordan has a pecuniary interest in the outcome, nor . . . that Plaintiff Johnson has in any way targeted him for personal abuse or criticism.” Mot. Dismiss at 4, ECF No. 11.

         In response, Johnson admits that there is no evidence that Jordan has a pecuniary interest in the operation of Johnson's business or that Johnson has personally targeted him in any way. Rather, Johnson argues that the “actual question in this case is whether a person self-selected by his direct supervisor (the latter who has the power to fire or give poor evaluations of that decision maker as part of its regular City job) would have ‘a possible temptation' to forget the burden required of his to reverse or invalidate his supervisor's legal decision to suspend a business?” Pl. Resp. Br. at 11, ECF No. 14 (emphasis in original).


         The “minimum requirements of due process” include the right to a hearing before “a ‘neutral and detached' hearing body . . ., members of which need not be judicial officers or lawyers.” Morrissey v. Brewer, 408 U.S. 471, 489 (1972). And that minimum requirement of due process is applicable both to courts and administrative agencies which are involved in adjudication. Withrow v. Larkin, 421 U.S. 35, 46 (1975). Johnson argues that she did not receive a “neutral and detached” arbiter here.

         Over the years, courts have identified a number of situations where “experience teaches that the probability of actual bias on the part of the judge or decisionmaker is too high to be constitutionally tolerable.” Withrow, 421 U.S. at 47. Among those situations are cases “in which the adjudicator has a pecuniary interest in the outcome and in which he has been the target of personal abuse or criticism from the party before him.” Id. Johnson acknowledges that neither of those scenarios are implicated on the facts alleged.

         JJohnson relies upon a different line of cases in asserting that Jordan was not a “neutral and detached decisionmaker.” Specifically, Johnson leans heavily upon the Supreme Court's decision in Caperton v. A.T. Massey Coal Co., 556 U.S. 868 (2009). In Capterton, the Supreme Court discussed two instances where courts have concluded that recusal is necessary. First, recusal is necessary where the judge has a financial interest in the case's outcome. Id. at 877. Second, recusal is required “where a judge had no pecuniary interest in the case but was challenged because of a conflict arising from his participation in an earlier proceeding.” Id. at 880. The original, landmark case in this second line of authority is In re Murchison, 349 U.S. 133, 138 (1955). In Murchison, the question was whether a criminal contempt proceeding “where the same judge presiding at the contempt hearing had also served as the ‘one-man grand jury' out of which the contempt charges arose” complied with due process. Id. at 134. The Supreme Court held that it did not.

         In describing Murchison, the Caperton Court emphasized several aspects of the opinion. First, the Murchison opinion recited the general rule that “no man can be a judge in his own case and no man is permitted to try cases where he has an interest in the outcome.” Capterton, 556 U.S. at 880 (quoting Murchison, 349 U.S. at 136). But the Murchison Court also recognized that the interests which require recusal “cannot be defined with precision” and so “[c]ircumstances and relationships must be considered.” Murchison, 349 U.S. at 136. According to the Capterton Court, two facts in Murchison were “of critical import”: “The judge's prior relationship with the defendant, as well as the information acquired from the prior proceeding.” Capterton, 556 U.S. at 881.

         In Mayberry v. Pennsylvania, 400 U.S. 455, 466 (1971), another case cited in Caperton, the Supreme Court held that the due process clause was violated when a judge who have been subject to “highly personal aspersions” presided over the criminal contempt proceeding arising out of those insults. The Mayberry Court found that the due process clause would be complied with “only if the judgment of contempt is vacated so that on remand another judge, not bearing the sting of these slanderous remarks and having the impersonal authority of the law, sits in judgment on the conduct of petitioner as shown by the record.” Id.

         In its discussion of this area of law, the Caperton Court emphasized, however, that “‘not every attack on a judge . . . disqualifies him from sitting.'” 566 U.S. at 881 (quoting Mayberry, 400 U.S. at 465). Rather, “[t]he inquiry is an objective one. The Court asks not whether the judge is actually, subjectively biased, but whether the average judge in his position is ‘likely' to be neutral, or whether there is an unconstitutional ‘potential for bias.'” Id. In Caperton, the Supreme Court held that “there is a serious risk of actual bias-based on objective and reasonable perceptions-when a person with a personal stake in a particular case had a significant and disproportionate influence in placing the judge on the case by raising funds or directing the judge's election campaign when the case was pending or imminent.” Id. at 884. In so holding, the Supreme Court took care to remind that “the Constitution requires recusal” only in “extreme” and “extraordinary” situations. Id. at 887. “[M]ost disputes over disqualification will be resolved without resort to the Constitution.” Id. at 890.

         Because Johnson's allegations do not involve a scenario where fundraising in an electoral campaign might have influenced Jordan's (or Morales's) decision, Caperton is not directly applicable. Although the opinion provides a broad overview of the applicable principles to consider, it provides limited guidance regarding whether Johnson's present allegations identify an unconstitutional risk of bias.

         Rather, the Supreme Court's decision in Withrow appears to provide more tailored guidance. The district court in Withrow granted a preliminary injunction which prevented the state medical examining board from adjudicating the suspension of a doctor's license because the board had investigated the charges in question and thus would be reviewing its own investigative decision. 421 U.S. at 46. The Withrow Court addressed “[t]he contention that the combination of investigative and adjudicative functions necessarily creates an unconstitutional risk of bias in administrative adjudication.” Id. at 47. The Supreme Court reasoned that such an argument has a “difficult burden of persuasion to carry”:

It must overcome a presumption of honesty and integrity in those serving as adjudicators; and it must convince that, under a realistic appraisal of psychological tendencies and human weakness, conferring investigative and adjudicative powers on the same individuals poses such a risk of actual bias or prejudgment that the practice ...

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