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Flat Iron Partners LP v. City of Covington

Court of Appeals of Tennessee, Jackson

April 30, 2015

FLAT IRON PARTNERS, LP, ET AL.
v.
THE CITY OF COVINGTON, ET AL.

Session March 10, 2015.

Appeal from the Circuit Court for Tipton County No. 5363 Ben H. Cantrell, Judge.

Edward J. McKenney, Jr., Memphis, Tennessee, for the appellants, City of Covington and City of Covington Municipal-Regional Planning Commission.

J. Houston Gordon, Covington, Tennessee, for the appellees, Cottonwood Associates, LLC; Cottonwood Properties, Inc.; Flat Iron Partners, LP; John Coleman Hayes, Jr.; Wilrus Company, LLC; and A. Richard Wilson.

Kenny Armstrong, J., delivered the opinion of the court, in which Arnold B. Goldin, J., and Brandon O. Gibson, J., joined.

OPINION

KENNY ARMSTRONG, JUDGE.

I. Background

There are two separate groups of Appellees in this case. The first group is comprised of Flat Iron Partners, LP, a Tennessee limited partnership; Wilrus Company, LLC, a Texas limited liability company; and Richard Wilson, a Texas resident, who was the managing member of the Wilrus Company and the personal guarantor of the financial obligations of Flat Iron. We will refer to these Appellees collectively as "Flat Iron." The second group of Appellees is comprised of Cottonwood Associates, LLC, a Tennessee limited liability company; Cottonwood Properties, Inc., the general partner of Cottonwood Associates, LLC; and John Coleman Hayes, Jr., a Tennessee resident, who was the president of Cottonwood Properties, Inc. and the individual guarantor of the financial obligations of Cottonwood Properties, Inc. and Cottonwood Associates, Inc. We will refer to these Appellees collectively as "Cottonwood." We will refer to Flat Iron and Cottonwood collectively as "Appellees."

On March 20, 2000, Flat Iron purchased land in Covington, Tennessee. The purchased tract of land was zoned R-3 (High Density Residential), and Flat Iron planned to construct multi-family unit housing ("MFUH") on the land. On November 28, 2000, Cottonwood purchased two tracts of land in Covington. These tracts, which were 9.99 acres and 8.399 acres respectively, were zoned R-2 (Medium Density Residential). Like Flat Iron, Cottonwood intended to construct MFUH on these tracts.

Although the plan "was nowhere near complete, " on September 5, 2000, Flat Iron was allowed to present a "conceptual plan" to the City of Covington Municipal-Regional Planning Commission (the "Commission"). As is relevant to the instant appeal, Flat Iron represented that its proposed development would not be Section 8 housing, but would be a gated community, targeting individuals making between $30, 000 and $40, 000 per year. Flat Iron's expert, Dr. John Gnuschke, conceded that the target tenant for both apartment projects was not considered "low income" for the City of Covington (the "City, " and together with the "Commission, " "Appellants").[1] At the time Flat Iron presented the conceptual plan, the City's Zoning Ordinances defined "multi-family" to include duplexes, triplexes, quadraplexes, and apartments. The City's Zoning Ordinances are liberal and would have allowed a multi-family dwelling to be built on a lot as small as 7, 000 square feet. It is undisputed that Flat Iron's proposed 104-units could have been built on a tract as small at 3.58 acres. Likewise, Cottonwood could have built the proposed 217-units on a 10-acre tract, and as many as 400 apartment units could have been built on a 20-acre tract.

At a Commission meeting on October 3, 2000, several deficiencies in Flat Iron's proposed plan were noted. Of particular concern with the proposed plan was drainage. The Flat Iron property bordered a flood zone that was known to experience flooding after heavy rain. Another concern was the fact that the proposed building was adjacent to a single-family neighborhood and was close to another MFUH development (Broadmeadow). Also of concern were: (1) the fact that the proposed plan did not satisfy the setback requirements of the City's subdivision regulations; the fact that the buildings were too close together; and (3) the fact that the streets within the proposed complex were not wide enough to allow a fire truck to turn around.

By the November 14, 2000 Commission meeting, Flat Iron still had not addressed all of the site plan concerns. Accordingly, the decision regarding the site plan was deferred until the December 5, 2000 meeting. However, on November 27, 2000, the City's Board of Mayor and Aldermen ("BMA") met with the City's attorney. The purpose of the meeting was informational-to advise the BMA members that a Resolution would be presented at the November 28, 2000 Commission meeting to impose a temporary moratorium on the issuance of building permits. Specifically, the temporary moratorium would impose a moratorium on the issuance of building permits until July 1, 2001. No vote was taken at the November 27 meeting, nor was there any decision or deliberation as to how any BMA member would vote.

On November 28, 2000, at the regularly scheduled Commission meeting, the Moratorium Resolution was presented to the BMA. After extensive public debate, during which members of the public were allowed to comment (including Mr. Johnny Howard, who spoke on behalf of Flat Iron), a public vote was taken, and the Moratorium Resolution was adopted. The BMA also adopted, on first reading, an Ordinance amending the Zoning Ordinances to impose the temporary moratorium until July 1, 2001 on the issuance of any building permits.

Special called meetings of the BMA, for which notices were given, were held on November 29 and November 30, 2000 to consider the moratorium resolution. There was public debate at both meetings, and spokespersons, on behalf of Flat Iron, were allowed to speak in opposition to the moratorium. Following a vote, the BMA adopted an Ordinance amending the Zoning Ordinance to impose the temporary moratorium upon the issuance of building permits.

On December 5, 2000, Flat Iron's lawyer, Michael Acree, appeared before the Commission and advised it that Flat Iron was amenable to comply with any amendments that might be made to the Zoning Ordinance so long as the Commission would approve Flat Iron's preliminary site plan.

In mid-January, 2001, Flat Iron requested a building permit. It is undisputed that Flat Iron had presented only a preliminary site plan at this time. Specifically, it had not submitted its building plans, had not completed its grading plans, drainage plans, water and sewer plans, or construction plans, and it had not submitted a final site plan for approval. Accordingly, its request for a building permit was denied at that time.[2]

On January 31, 2001, Flat Iron and Cottonwood filed suit against the Appellants.[3]Appellees' claims included: (1) a mandamus claim ordering the City to immediately issue building permits to Appellees; (2) issuance of a writ of certiorari under Tennessee Code Annotated Section 27-8-101 and a finding that the zoning amendments were illegal, unconstitutional, confiscatory, arbitrary and unreasonable; (3) a takings claim under federal law; (4) a State inverse condemnation claim under Tennessee Code Annotated Section 29-16-123; (5) a claim for violation of Tennessee Code Annotated Section 13-3-402, et seq.; (6) a claim for violation of State zoning statutes, Tennessee Code Annotated Section 13-2-401, et seq.; (7) a claim that the challenged actions were retrospective laws in violation of Art. I, § 20 of the Tennessee Constitution; (8) an Open Meetings Act claim pursuant to Tennessee Code Annotated Section 8-44-101, et seq.; (9) a claim for violation of Appellees' substantive and procedural due process rights; (10) a Section 1983 claim; (11) a Fair Housing Act ("FHA") violation claim; and (12) a declaratory judgment action. On February 14, 2001, Appellees filed a motion for preliminary injunction and partial summary judgment.

On August 15, 2001, the trial court granted in part and denied in part Appellees' motion. The trial court granted summary judgment to Appellees on the Open Meetings claim based upon its finding that no notice was given of the attorney-client meeting on November 27, 2000. Accordingly, the court reasoned that the subsequent actions taken at the public meetings on November 28 and 30, 2000 meetings were "null and void." The trial court also found that the ordinance imposing a temporary moratorium on the issuance of building permits until July 1, 2001 violated the provisions of Tennessee Code Annotated Section 13-7-203, which requires that zoning amendments be approved by the Commission and published in a newspaper fifteen days prior to adoption. The court denied Appellees' request for equitable relief requiring the City to approve Flat Iron's site plan as it existed before the amendment. Specifically, the court found that "Flat Iron must conform to any timely amendments, and is required to get a preliminary plan approved." The court subsequently reaffirmed, in its April 1, 2009 order, that it had "determined that the new ordinances passed in June 2001 must be complied with for a building permit to issue to [Appellees]."

The parties then filed cross motions for summary judgment. Appellees filed their motion on or about June 16, 2005; Appellants filed their motion on August 1, 2006. On April 1, 2009, the trial court ruled on these motions.[4] With respect to the FHA claims, the trial court denied Appellants' motion for summary judgment, stating that there were "contested issues of fact." As to Appellees' motion, the trial court also found that "there are contested issues of fact;" nonetheless, the court granted partial summary judgment to Appellees because it found that Appellees "have established a prima facie case of discriminatory intent and are entitled to summary judgment on the issue of liability under the Fair Housing Act as a matter of law." The court also found that Appellees "have shown facts to establish a prima facie case of disparate impact, " and, thus, "were entitled to summary judgment."

Appellants then filed a motion for interlocutory appeal on May 1, 2009. The motion was denied by the trial court on April 6, 2011 in an order, which, again, noted that the trial court had found that "there are contested issues of fact for determination by the trier of fact" with respect to Appellees' FHA claim. Appellants then filed a Tennessee Rule of Appellate Procedure 10 appeal on April 25, 2011; the application was denied on May 6, 2011. Following additional discovery, Appellants filed a motion to revise the trial court's ruling on the FHA claim. The case was set for trial on August 20, 2012. On August 14, 2012, the trial judge issued an order recusing himself. The case was then assigned to Senior Judge Ben H. Cantrell, who denied Appellants' motion to revise the FHA ruling. Appellants' motion to revise the Open Meetings Act ruling was also denied by order of January 13, 2013.

The case was tried to a jury beginning on February 5, 2013. The sole issue was the amount of damages on Appellees' FHA claim. At the beginning of the trial, the trial court denied Appellants' renewed motion to reconsider the summary judgment rulings and denied Appellants' motion to be allowed to present evidence as to the reasons for the challenged actions. The court reasoned that the initial trial judge had already determined that issue. Likewise, the trial court denied Appellants' motion in limine to exclude evidence or argument to the jury that the moratorium ordinance was "illegal" or "unlawful" or anything more than a violation of Tennessee Code Annotated Section 8-44-102 and 103 or Tennessee Code Annotated Sections 13-7-203 and 204.

On February 15, 2014, the jury returned a verdict in favor of Flat Iron in the amount of $1, 201, 095 and in favor of Cottonwood in the amount of $4, 551, 835. As to both Appellees, the jury found that they had suffered damages as a result of the actions of the City, but found that Appellees had suffered no damages as a result of the actions of the Commission. The trial court entered judgment on the jury verdict on March 21, 2013. On April 19, 2014, Appellants filed a motion for judgment notwithstanding the verdict, for new trial, or, in the alternative, for remittitur. By order of September 3, 2013, the trial court denied the motion for judgment notwithstanding the verdict, denied the motion for new trial, denied the motion for remittitur as to Flat Iron, but granted remittitur as to the Cottonwood verdict, reducing its judgment to $2, 983, 744. Cottonwood accepted the remittur under protest on September 3, 2013.

II. Issues

Appellants appeal. They raise seven issues for review as stated in their brief:

1.Whether the trial court erred in ruling that [Appellees] were entitled to summary judgment on their Open Meeting Act claim based upon its finding that there was no notice given of an attorney-client meeting on November 27, 2000, when Flat Iron lacked standing to assert an Open Meetings claim and the pending ordinance doctrine made the moratorium issue irrelevant as to Cottonwood, and when it was undisputed that no decision was made nor was their deliberation towards a decision at that meeting; that the termporary moratorium on the issue of building permits for multi-family housing was debated in three subsequent public meetings on November 28-30, 2000, at which the public was allowed to speak reagarding the moratorium; and that a public vote was taken on November 30, 2000, which had the legal effect of curing any Open Meetings Act violation?
2. Whether the trial court erred in ruling that [Appellees] were entitled to summary judgment on their claim of disparate treatment under the Fair Housing Act and denying [Appellants'] motion for summary judgment and their motions to revise and reconsider based upon its finding that [Appellees] had established a prima facie case, despite finding that there were disputed issues of fact; when [Appellees] lacked standing to assert a Fair Housing Act claim; when [Appellants] came forward with sworn testimony not only denying discriminatory intent but setting forth legitimate, non-discriminatory reasons for their actions; when there was no evidence that the moratorium or new density regulations were adopted because of the FHA-protected status of [Appellees'] prospective tenants; and when the trial court failed to utilize the applicable burden-shifting principles?
3. Whether the trial court erred in ruling that [Appellees] were entitled to summary judgment on their claim of disparate impact under the Fair Housing Act and denying [Appellants'] motion for summary judgment and their motions to revise and to reconsider based upon its finding that [Appellees] had established a prima facie case, despite finding that there were disputed issues of fact; when [Appellees] did not allege a disparate impact claim in their complaint or amended complaint; when the express language of the Fair Housing Act does not include "effects" language and the Supreme Court has never recognized such a claim; when Plaintiffs lacked standing to assert a FHA claim; when [Appellees] failed to prove that the moratorium and new density regulations had a significant disparate impact upon the FHA-protected classes as compared with non-FHA-protected classes; when there was no evidence that the moratorium and new density regulations were adopted because of the FHA-protected status of [Appellees'] prosepective tenants; and when the trial court failed to utilize the applicable burden-shifting principles?
4. Whether the trial court erred in allowing improper arguments to be made by counsel for [Appellees'] in the presence of the jury which made it impossible for [Appellants] to get a fair trial?
5. Whether the trial court erred in making comments in the presence of the jury which were prejudicial to [Appellants]?
6. Whether the jury verdicts are inconsistent?
7. Whether the jury instructions given by the trial court did not fairly define the legal issues ...

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