United States District Court, M.D. Tennessee, Nashville Division
VISION REAL ESTATE INVESTMENT CORP., AUTUMN ASSISTED LIVING PARTNERS, INC., and MICHAEL HAMPTON Plaintiffs,
METROPOLITAN GOVERNMENT OF NASHVILLE & DAVIDSON COUNTY, METROPOLITAN DEVELOPMENT AND HOUSING AGENCY, JIM SHULMAN, and DOMINICK LEONARDO, Defendants.
NEWBERN, MAGISTRATE JUDGE
WILLIAM L. CAMPBELL, JR, UNITED STATES DISTRICT JUDGE
before the Court are Defendant Metropolitan Development and
Housing Agency's Motion to Dismiss (Doc. No. 72) and
Motion to Dismiss by Defendants Jim Shulman and Dominick
Leonardo. (Doc. No. 68). Plaintiffs Vision Real Estate
Investment Corporation, Autumn Assisted Living Partners,
Inc., and Michael Hampton (collectively
“Plaintiffs”) filed responses to each motion
(Doc. Nos. 78 and 81), and Defendants Metropolitan
Development and Housing Agency (“MDHA”), and
Shulman and Leonardo filed replies. (Doc. Nos. 86 and 89).
For the reasons stated below, MDHA's Motion to Dismiss is
GRANTED, in part, DENIED,
in part. The Motion to Dismiss by Defendants Shulman and
Leonardo Motion is GRANTED.
FACTUAL ALLEGATIONS 
Vision Real Estate Investment Corporation
(“Vision”) and Autumn Assisted Living Partners,
Inc. (“Autumn”), are Tennessee corporations.
Michael Hampton is the sole owner of those companies.
(Compl., Doc. No. 45, ¶¶ 1-2). Hampton formed the
companies in anticipation of purchasing and developing a
parcel of land in north Nashville known as the
“Bordeaux Hospital Property.” (Id. at
Metropolitan Government of Nashville and Davidson County
(“Metro”) is a Tennessee municipal corporation.
(Id., ¶ 4). Defendant MDHA is a public body
corporate and politic formed under the Housing Authority Law
of Tennessee. Tenn. Code Ann §§ 13-20-101 et
seq. Defendants Jim Shulman and Leonardo are or were
Metro Councilmembers. (Id. ¶ 7).
the Bordeaux Hospital Property was largely undeveloped, it
was the site of the Metro-owned JB Knowles Assisted Living
Facility (the “Facility”). (Id. at
¶ 13). On January 10, 2014, Plaintiffs Vision and Autumn
entered into a series of three separate agreements relating
to the Bordeaux Hospital Property.
entered into the Agreement to Lease and Purchase (Doc. No.
45-2) (the “Lease Purchase Agreement”) with Metro
and the Hospital Authority of the Metropolitan Government of
Nashville and Davidson County (the “Hospital
Authority”) whereby Metro agreed to “lease and
eventually sell” the Assisted Living Facility to
Autumn. (Doc. No. 45-2 at 1). The Lease Purchase Agreement
provided that Autumn would purchase the Assisted Living
Facility from Metro not later than July 1, 2016, for a
purchase price of $500, 000. (Id. at 2).
Additionally, Autumn agreed to make at least $300, 000 in
capitol improvements to the Assisted Living Facility during
the first eighteen months of the lease. (Id. at 1).
same day, Autumn entered into a Lease Agreement (Doc. No.
45-1) (the “Lease Agreement”) with Metro whereby
Autumn agreed to lease and operate the Facility from July 1,
2014 to July 1, 2016, or until such time, no later than July
1, 2016, as Autumn purchased the property in accordance with
the Lease Purchase Agreement. (Id.). The Lease
Agreement contains terms and conditions requiring, among
other things, that Autumn maintain commercial general
liability insurance ($1 million) and property insurance
($750, 000). (Id. at 4). The Lease Agreement
provides that, in the event of default, Autumn will have 30
days to cure. (Id. at 7).
January 10, 2014, Metro and Vision entered into a contract
(“First Contract”) for Vision to purchase and
develop approximately 74.8 acres of the Bordeaux Hospital
Property. (Id. at ¶ 14). Metro agreed to sell
the property to Vision to help offset the operating losses
related to operation of the Facility. The sales agreement in the
First Contract was consideration for Autumn entering into the
Lease Purchase Agreement. (Doc. No. 45, ¶ 15). Execution
of the First Contract was contingent on the Tennessee
Legislature passing certain legislation. (Id.,
¶ 18). When the Tennessee Legislature did not pass the
required legislation, Vision and Metro renegotiated and
entered into a second Purchase and Sale Agreement on June 26,
2015 (the “Second Contract”). (Id.,
¶¶ 18, 22; Doc. No. 45-3).
August 2014, between the execution of the First Contract and
the Second Contract, the Metro Council passed an ordinance
reallocating $10 million of Federal Community Development
Block Grant Disaster Recovery funds (the “federal
funds”) to “the community of Bordeaux.”
(Compl., ¶¶ 27, 31, 81, 82). Plaintiff alleges MDHA
advocated for the reallocation of the federal funds.
(Id., ¶¶ 27, 31, 81). The “community
of Bordeaux” included a portion of the real property
that was the subject of the First Contract. (Id.,
¶ 31). According to the Complaint, the federal funds
were required to be used to construct new housing in a flood
impacted area, and the Bordeaux Hospital Property was the
only property in Nashville that qualified. (Id.,
¶¶ 31, 81). If the federal money was not spent at
the Bordeaux Hospital Property, Nashville's Housing
Agency would be required to return the $10 million federal
grant. (Id., ¶ 82).
Second Contract was for the sale of two smaller tracts of
land at the Bordeaux Hospital Property - Tract 1 (29 acres)
for $300, 000; and Tract 2 (16.5 acres) for $300, 000. (Doc.
No. 45-3). Pursuant to the terms of the Second Contract,
Vision paid $25, 000 in non-refundable earnest money to
Metro, and Metro incurred an obligation “to support
Vision's application to rezone the subject Property to
allow construction of project specified in the Bordeaux Hills
Redevelopment District.” (Id. at 3). The
Second Contract provided that as conditions precedent to the
sale of Tract 1: (1) Autumn must complete the capital
improvements to the Facility as required by the Lease
Purchase Agreement; and (2) Autumn must have completed the
purchase of the Facility and be operating the Facility as
“an assisted living facility fully licensed by the
State of Tennessee.” (Id. at 4). The sale of
Tract Two was conditioned upon the completion of the sale of
Tract One and the construction of at least 32 affordable,
senior housing units on Tract One. (Id.).
April 2014, Vision applied to the Metro Planning Department
for rezoning of the First Tract. (Doc. No. 45, ¶ 28).
The following year, in April 2015, Vision requested signatory
approval for a rezoning application from the Metro Department
of Law. (Id., ¶ 32). Metro's Director of
Law stated that Vision was to work with MDHA, which had been
charged with ensuring “the Bordeaux property was
developed in accordance with the approved development
plan.” (Id.). Plaintiffs allege they made
“numerous requests for signatory approval to submit the
needed zoning change” over a 16-month period.
(Id.) Plaintiffs allege a policy of
“Councilmanic courtesy” a result of which is that
rezoning of property cannot occur unless the application is
supported by the Metro Councilmember in whose district the
property sits and that Councilmanic courtesy caused their
rezoning application not to be heard. (Id.,
¶¶ 29, 30).
Complaint does not specify the sequence of events, by which
the zoning application was signed by Metro, but states that
the Metro Councilperson for the First District (the district
in which the Bordeaux Hospital Property is located)
“supported a zone change request for the Bordeaux
property as submitted by MDHA” and submitted a zone
change bill (BL2015-1209) on June 2, 2015. (Id.,
¶ 33). The zoning bill passed two readings of the Metro
Council, but was withdrawn at the request of MDHA at the July
21, 2015 Metro Council public hearing, prior to the third and
final reading. (Id.).
the July 21, 2015 meeting, Vision learned that BL2015-1209
would be withdrawn and formally requested MDHA reinstate the
bill with a change in the parcel of land from 192 acres to
11.5 acres. (Id. at ¶ 34). MDHA responded to
the request to reinstate the zoning application:
“[W]e're moving with the redevelopment district at
Bordeaux as planned. I can't speak to the zoning issues
you site [sic]. At MDHA, we're focused on informing on
the wisdom of the development district for now.”
(Id.). The property that was the subject of the
Second Contract was never rezoned. (Id., ¶ 30).
The Funding Applications
with Vision's efforts to rezone the property, Autumn and
Hampton were attempting to secure financing to permit them to
purchase the Assisted Living Facility pursuant to the Lease
Purchase Agreement. (Id., ¶ 36). As part of
their efforts, Autumn (through a to-be-formed affiliate)
submitted an application for Tax Increment Financing
(“TIF”) to MDHA on February 23, 2016.
(Id., ¶¶ 38, 69). On February 16, 2016,
before the application was complete, MDHA executive Joe Cain
told the appraiser who had been hired by Autumn that Autumn
would not qualify for TIF. (Id.). MDHA advised
Autumn that review of the completed application would take
four to six weeks, but MDHA rejected the application on
February 26, 2016, three days after it was
complete. (Id.). MDHA told Autumn that the
“existing currently operated assisted living facility
is not considered a redevelopment eligible for tax increment
financing dollars as anticipated in the Bordeaux
redevelopment plan.” (Id., ¶ 96). Autumn
requested a hearing before the MDHA Board, but MDHA did not
respond to the request. (Id., ¶ 69).
allege MDHA treated Autumn's TIF application differently
than those of non-minority owned businesses, and allege
Autumn is the only African American owned company to apply
for TIF in the last five-years. (Id., ¶ 67).
then sought to finance the purchase of the Facility and the
First Tract through tax-exempt bonds. (Id., ¶
54). After a series of meetings, the Metro Nashville
Industrial Development Board (“IDB”) approved
Plaintiffs' application for the issuance of tax-exempt
revenue bonds on or about December 14, 2016. (Id., ¶ 56,
59). The final step for issuance of the tax-exempt bonds was
approval of the Nashville mayor. (Id., ¶ 59).
The mayor never responded to Autumn's request to approve
the bond. (Id., ¶ 61).
allege Defendant Shulman, then a member of the Metro Council,
interfered with the bond approval process in an attempt to
“intentionally block approval of the financing.”
(Id., ¶ 56). Plaintiffs allege Shulman attended
IDB meetings, “made representations to the [IDB],
” had ex parte communications with the IDB
chairperson Ginger Houser (who was also a Metro
councilperson), and exerted pressure on state surveyors to be
“especially critical” in inspections of the
Facility. (Id., ¶¶ 56-58, 105).
2016, Metro informed Hampton and Vision that Autumn was in
breach of the Lease Purchase Agreement as it had not made
$300, 000 in capital improvements to the facility (it had
made only $211, 782 in capital improvements). (Comp., Doc.
No. 45, ¶ 39). Metro said if Vision agreed to sell MDHA
six acres of the land covered by the Second Contract, it
would forgive the requirements for an audit and $300, 000 in
capital improvements; and it would extend the closing date to
allow MDHA time to complete its environmental review.
(Id.). MDHA also promised Vision it would
“promptly advance a zoning change on the front 11.25
acres” of the Bordeaux Hospital Property, to allow two
100-unit apartment buildings and a strip center as provided
in the development plan. (Id. at ¶ 40).
about August 10, 2016, Vision told MDHA it would sell the six
acres for $250, 000. (Id.). MDHA informed Vision
that because it planned to use federal money for the
purchase, it could not enter into a formal land purchase
contract until completion of an environmental review.
(Id.). MDHA estimated the environmental review would
take 90 to 120 days. (Id.). MDHA drafted a letter of
intent, which Vision signed on or about August 11, 2016.
(Id.). The letter of intent stated the environmental
review would be complete by October 31, 2016. (Id.).
October 20, 2016, Vision requested an update on the
environmental review, and MDHA said the surveyor for the
review should be on site the next week. (Id., ¶
43). On November 1, 2016, Vision informed MDHA that it was
ready to close on the property. (Id. at ¶ 44). MDHA
responded that it would be approximately three weeks before
MDHA would hear back from the surveyor. (Id.). On
December 22, 2016, MDHA informed Vision that the Metro
Council was considering legislation (Bill BL2016-540) that
would affect the sale and that MDHA would take no further
action until the outcome of the legislation was resolved.
(Id., ¶ 45).
The Contract Terminations
about December 20, 2016, Defendants Shulman and Leonardo
submitted emergency legislation, Bill BL2016-540 (the
“Bill”),  to rescind the Lease Purchase Agreement on
grounds that Autumn was not properly operating the Facility
and had allowed insurance to lapse, and to repeal the 2015
ordinance approving the Second Contract. (Id.,
¶ 46, 102). The Bill directed the Metro Clerk to give
notice of the legislation to Autumn, but notice was not given
to Autumn or Vision. (Id., ¶ 49). Plaintiffs
learned of the pending legislation on January 2, 2017, the
day before the public meeting, but did not obtain a copy of
the Bill until after the meeting on January 5, 2017.
(Id., ¶¶ 49-50, 110).
January 3, 2017, Councilman Leonardo told Plaintiffs he would
defer a vote on BL2016-540 for two weeks to allow Autumn time
to close and that the Council meeting would “go
smoother” if the Autumn representative was not at the
meeting. (Id., ¶ 48, 109). Plaintiffs did not
attend the January 3, 2017 Council meeting. (Id.,
¶ 48, 50).
January 6, 2017, Autumn's attorney gave notice to Metro
of its desire to close on January 10, 2017 and delivered
certified funds to Metro in the required amount of $500, 000.
(Id. at ¶ 51, 111). The closing documents had
been prepared and approved by both parties. (Id.,
¶¶ 55, 111). A few hours later, Metro sent Vision a
letter terminating the Lease Purchase Agreement. The letter
As you know, § 4.01 of the agreement conditions
Metro's obligation to consummate the agreement upon the
successful purchase of [the Facility] by Autumn . While
Metro appreciates the hard work that has been put into [the
Facility], … Autumn has not complied with its
contractual responsibilities, including completing the
purchase of [the Facility] by July 1, 2016. Further a number
of additional concerns about [the Facility's] current
operating conditions have come to light, including
maintenance of required insurance coverages and regulatory
deficiencies identified by the State of Tennessee. Metro has
continued to work with Autumn to ensure quality care to the
residents of the facility. However, Metro is no longer under
any obligation to sell the facility to Autumn. Accordingly,
this condition was not fulfilled within the anticipated time
and cannot be met.
final and third reading of the Bill was on January 17, 2017,
two weeks after Leonadro allegedly told Plaintiffs he would
delay the bill for two weeks. Plaintiffs attended this
Council meeting, but were not permitted to speak because it
was not a public meeting. (Compl., Doc. No. 45, ¶ 110).
The Bill passed, and on January 20, 2017, the mayor signed
the Bill rescinding the Lease Purchase Agreement. (Doc. No.
45 at ¶ 53).
the Bill was pending before the Metro Council, Metro proposed
to Autumn that another management company take over
management of the Facility. (Id.). Metro's
selected management company, Anthem, assumed operations of
the Facility on February 1, 2017. Anthem operated under
Autumn's lease and state license. (Id.).
Metro terminated its contracts with Plaintiffs, it
transferred a portion of the Bordeaux Hospital Property that
was the subject of the Second Contract to MDHA. MDHA
successfully rezoned the property. (Id., ¶ 70,
72). MDHA has a 40 unit, $9.5 million project, to be paid for
with the federal funds, planned on 5.5 acres of the Bordeaux
Hospital Property that “closely approximate the same
property” Vision planned to use. (Id.).
Allegations of Discrimination
allege they were discriminated against on the basis of race
during the TIF application process. Plaintiffs state that
Autumn was the only minority-owned business to apply for TIF
funds in the past five years, and it was rejected.
(Id., ¶ 67). Plaintiffs allege systematic
discrimination by Metro and MDHA with regard to the
allocation of tax increment financing and allege
discrimination against the historically black communities of
North Nashville and Bordeaux has caused ...