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Investment Realty Services, LLC v. City of Garden City

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

August 26, 2019

Investment Realty Services, LLC, et al., Plaintiffs,
City of Garden City, Defendant.


          Sean F. Cox United States District Court Judge

         Acting through counsel, two named Plaintiffs filed this putative class action challenging the constitutionality of Defendant Garden City's Weed and Nuisance Ordinance and its Rental Ordinance. The matter is currently before the Court on the City's Motion to Dismiss, brought under Fed.R.Civ.P. 12(b)(1) and (c). The motion has been fully briefed by the parties and the Court concludes that oral argument would not aid the decisional process. Thus, the Court orders that the motion shall be decided without a hearing. As explained below, the Court shall GRANT the motion because the two named Plaintiffs have failed to meet their burden of establishing that they have standing to bring the substantive claims they assert in this action. In addition, the remaining counts, that do not assert separate substantive claims, shall also be dismissed.


         Acting through counsel, Plaintiffs Investment Realty Services, LLC (“IRS”) and Safevest Oakland Acquisitions, LLC (“Safevest”) filed this putative class action against Defendant the City of Garden City (“the City”) on January 21, 2019, based on federal question jurisdiction. The original complaint included multiple state-law claims, along with the federal claims, and asked this Court to exercise supplemental jurisdiction over them. This Court declined to do so and dismissed the state-law claims without prejudice.

         The Scheduling Order in this case provides that: 1) amendment to pleadings had to be made by April 25, 2019; 2) motions to dismiss had to be filed by June 7, 2019; 3) class certification discovery is to be completed by July 26, 2019; and 4) a class certification motion is to be filed by August 26, 2019.

         Plaintiffs' Amended Complaint, filed on April 8, 2019, is now the operative complaint in this case. It asserts the following seven counts: 1) “Violation of Due Process” (Count One), asserted on behalf of IRS; 2) “Violation of the Eighth Amendment” (Count Two), asserted on behalf of IRS; 3) “Violation of Due Process (failure to provide notice)” (Count Three), asserted on behalf of IRS; 4) “Violation of Due Process / Unconstitutional Conditions Doctrine (Forcing Plaintiff to Forfeit their Constitutional Rights in order to Rent Property)” (Count Four), asserted on behalf of Safevest; 5) “Violation of Fourth Amendment (Warrantless Searches)” (Count Five), asserted on behalf of Safevest; 6) “Declaratory Judgment Invalidating Liens & Injunctive Relief” (Count Six), asserted on behalf of IRS; and 7) “Violation of 42 USC 1983” (Count Seven), asserted on behalf of both IRS and Safevest. The Amended Complaint asks this Court to certify the following class:

126. Class Definition. Plaintiffs seek to certify the following class
A) All persons and entities who have been charged/levied any amounts by the City under their Weeds Ordinances or Nuisance Ordinances from January 21, 2013 through final judgment in this matter, or such longer period as may be allowed by law; AND
B) All persons and entities that paid any registration or inspection fees to the City of Garden City at any time from January 21, 2013 through the date of final judgment under the City Rental Ordinances.

(Am. Compl. at ¶ 126).

         On June 7, 2019, the City filed a “Motion To Dismiss Pursuant To Fed.R.Civ.P. 12(b)(1) And/Or For Judgment On The Pleadings Pursuant To Fed.R.Civ.P. 12(c)” (ECF No.13).


         The City brings the instant Motion to Dismiss under both Fed.R.Civ.P. 12(b)(1) and 12(c). The City's standing challenges are brought under Fed.R.Civ.P. 12(b)(1) and its remaining challenges are asserted as a motion for judgment on the pleadings under Fed.R.Civ.P. 12(c).

         I. The City's Standing Challenges

         That portion of the City's Motion to Dismiss that challenges the standing of the named Plaintiffs to bring the claims asserted in this action is made under Fed.R.Civ.P. 12(b)(1).

         A motion to dismiss brought under Fed.R.Civ.P. 12(b)(1) is a challenge to subject matter jurisdiction. “Motions to dismiss for lack of subject matter jurisdiction fall into two general categories: facial attacks and factual attacks.” United States v. Ritchie, 15 F.3d 592, 598 (6th Cir. 1994). “A facial attack is a challenge to the sufficiency of the pleading itself.” Id. (emphasis in original). “A factual attack, on the other hand, is not a challenge to the sufficiency of the pleading's allegations, but a challenge to the factual existence of subject matter jurisdiction.” Id. (emphasis in original).

         Here, the City's motion clearly states that the City is making a factual attack to subject matter jurisdiction. (See Def.'s Br. at 6). (“This motion presents a factual attack.”).

         “On such a motion, no presumptive truthfulness applies to the factual allegations” and this Court “is free to weigh the evidence and satisfy itself as to the existence of its power to hear the case.” Ritchie, 15 F.3d at 598. “[W]hen a defendant produces evidence challenging the existence of standing, a plaintiff must generally prove standing with evidence, even at the motion-to-dismiss stage.” Harris v. Lexington-Fayette Urban Cnty. Govt., 685 Fed.Appx. 470, 472 (6th Cir. 2017). And it is well established that the plaintiff, as the party invoking federal jurisdiction, bears the burden of establishing standing. Spokeo, Inc. v. Robins, 136 S.Ct. 1540, 1547 (2016).

         Accordingly, “[t]o defeat a factual attack, a plaintiff ‘must prove the existence of subject-matter-jurisdiction by a preponderance of the evidence” and is “obliged to submit facts through some evidentiary method to sustain his burden of proof.'” Superior MRI Svs., Inc. v. Alliance Healthcare Svs., Inc., 778 F.3d 502, 504 (6th Cir. 2015) (citations omitted).

         A. Claims Asserted By Safevest

         Safevest is the sole named Plaintiff that asserts the claims that pertain to the City's Rental Ordinance (Counts Four, Five, and part of Count Seven, of the Amended Complaint).

         Count Five of the Amended Complaint alleges a violation of the Fourth Amendment of the United States Constitution, specifically that the Rental Ordinance is unconstitutional on its face and as-applied based on Safevest's allegation that the ordinances authorize warrantless searches.

         Count Four alleges that the Rental Ordinance violates the Fifth and Fourth Amendments of the United States Constitution, and specifically the unconstitutional conditions doctrine, by conditioning the sale or rental of a property on property owners' consent to relinquish their Fourth Amendment protection against warrantless searches. This claim is derivative of Count V in that Plaintiffs assert that by conditioning a rental certificate on an owner's agreement to refrain from exercising his or her constitutional right to be free from unlimited warrantless searches, the City has violated the unconstitutional conditions doctrine.

         Count Seven is also asserted by Safevest. In that count, Safevest seeks to bring a claim under § 1983 but does not raise any substantive claim, other than those asserted in Counts Four and Five.

         The City's motion asserts that Safevest lacks standing to bring all of those claims.

         1. Relevant Facts As To Rental Ordinance And Safevest

         The City has adopted the International Property Maintenance Code (“IPMC”) in Section 151.01 of the City's codes and ordinances. (Pls.' Ex. B).

         The City's local ordinances include a chapter that governs “Inspection of Rental Dwellings, ” Chapter 153. (Pls.' Ex. A). The Court will refer to this chapter as the “Rental Ordinance” as Plaintiffs do in the Amended Complaint.

         The City's Rental Ordinance requires owners of rental dwellings in the City to register each rental dwelling:

§ 153.02 Registration For Rental Or Lease Of Dwellings.
(A) It shall be unlawful for an owner to rent or lease a dwelling unless a registration certificate has been issued and maintained for the dwelling in the manner required by this subchapter.
(B) Any person who violates this section shall be responsible for a municipal civil infraction and subject to the civil fines set forth in § 41.06.

(Id. at 2-3). The City's Rental Ordinance requires the submission of an application for registration of such dwellings and requires that the “application shall be accompanied by a registration fee in such amount as City Council shall from time to time establish by resolution.” (Id. at 3). It further provides that an inspection of the dwelling is required for registration and for the issuance of a registration certificate as follows:

§ 153.04 Inspection Required For Registration.
The owner of the dwelling identified in the application shall make the dwelling available for inspection by the department as may be necessary for the department to determine whether the dwelling complies with the International Property Maintenance Code, the state building code, the state residential code, the state electrical code, the state mechanical code, the state plumbing code, the state uniform energy code, the state elevator code, the state housing law, and the city's zoning code, as amended.
§ 153.05 Issuance Of Registration Certificate.
After receiving the application and fee for registration, the department shall inspect the dwelling applying the standards set forth in the above-stated codes, housing law, and zoning code. Upon determining that the dwelling is in compliance, the department shall issue to the applicant a registration certificate, which shall be valid for three calendar years. The registration certificate shall be in the name of the owner and cannot be transferred.

(Id. at 3) (emphasis added).

         The IPMC, which has been adopted by the City, provides as follows regarding entries for inspections:

104.3 Right of entry. Where it is necessary to make an inspection to enforce the provisions of this code, or whenever the code official has reasonable cause to believe that there exists in a structure or upon a premises a condition in violation of this code, the code official is authorized to enter the structure or premises at reasonable times to inspect or perform the duties imposed by this code, provided that if such structure or premises is occupied the code official shall present credentials to the occupant and request entry. If structure or premises is unoccupied, the code official shall first make a reasonable effort to locate the owner, owner's authorized agent or other person having charge or control of the structure or premises and request entry. If entry is refused, the code official shall have recourse to the remedies provided by law to secure entry.

(See IPMC § 104.3, in Pls.' Ex. C) (bolding added for emphasis).

         If, after an inspection, the City finds that the property complies with the codes, the City issues a registration certificate that is valid for three calendar years. (§ 153.05). On the other hand, if the City finds that the property is not in compliance with the codes and denies the application (or suspends or revokes a certificate), the ordinance provides the owner the right to appeal the denial of the certificate to the Zoning Board of Appeals. (§ 153.07).

         On or about September 5, 2018, Safevest submitted an application for registration of a rental dwelling to the City for a property located at 5918 Cardwell. (First Am. Compl. at ¶ 48; Def.'s Ex. 13). Safevest paid a $200.00 fee along ...

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