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VR Acquisitions, LLC v. Wasatch County

United States Court of Appeals, Tenth Circuit

April 10, 2017

VR ACQUISITIONS, LLC, Plaintiff - Appellant,

         Appeal from the United States District Court for the District of Utah (D.C. No. 2:15-CV-00018-DAK-EJF)

          Timothy McCaffrey, Freeborn & Peters LLP, Chicago, Illinois (Michael R. Johnson, Robert G. Wing, and Matthew M. Cannon, Ray Quinney & Nebeker, Salt Lake City, Utah, with him on the briefs), for Plaintiff-Appellant.

          Mark R. Gaylord, Ballard Spahr, Salt Lake City, Utah (Melanie J. Vartabedian and Tyler Hawkins, Ballard Spahr, LLP, Salt Lake City, Utah, Barton H. Kunz, II, and Bryson R. Brown, Christensen & Jensen, P.C., Salt Lake City, Utah, with him on the brief), for Defendants-Appellees.

          Before HOLMES, SEYMOUR, and MORITZ, Circuit Judges.

          MORITZ, Circuit Judge.

         VR Acquisitions, LLC (VRA) owns a roughly 6, 700-acre property in Utah's Jordanelle Basin (the VR property). VRA brought this action in 2015, asserting three federal constitutional claims under 42 U.S.C. § 1983 and five state-law claims. All of the claims rested, to some degree, on VRA's assertion that an invalid assessment lien was recorded against the VR property in 2009-three years before VRA bought the property. The district court dismissed all eight claims with prejudice under Fed.R.Civ.P. 12(b)(6), and VRA appeals. Because the district court properly dismissed VRA's § 1983 claims for lack of prudential standing, we affirm the dismissal of those claims with prejudice. But because the district court should have declined to exercise supplemental jurisdiction over VRA's state-law claims, we reverse its dismissal with prejudice of those claims and remand with directions for the district court to dismiss those claims without prejudice.[1]


         In 1993, the Wasatch County Council (the Council) established the Jordanelle Special Service District (the JSSD) to provide sewer and water services to residents in the Jordanelle Basin. During the time period relevant to VRA's allegations, Jay Price was a member of the Council and Dan Matthews was the JSSD's manager.

         At least as early as 2002, the JSSD intended to construct a regional sewage treatment facility and provide wastewater treatment services to both the JSSD service area and properties in neighboring special service districts. In 2005, the JSSD adopted Resolution No. 2005-18 (the Notice of Intention), declaring its intent to create the Jordanelle Special Service Improvement District No. 2005-2 (the District) and to levy assessments against properties within the District. In 2006, the JSSD adopted Resolution 2006-04 (the Creation Ordinance), creating the District and authorizing financing for the improvements described in the Notice of Intention. In 2009, after a period of public comment, the JSSD enacted Ordinance No. 09-10 (the Assessment Ordinance), levying assessments against properties within the District- including the VR property.

         The assessment against the VR property totaled nearly $17.5 million. The property's prior owner elected to pay the assessment over 20 years. On September 24, 2009, the JSSD recorded a Notice of Assessment Interest (the Assessment Lien) against the VR property.

         ATC Realty Sixteen, Inc. obtained title to the VR property from the prior owner in 2010 through a deed in lieu of foreclosure. VRA bought the VR property from ATC Realty in 2012 with knowledge of the Assessment Lien.[2]

         Nearly three years later, VRA brought this action asserting three § 1983 claims: (1) a Fourteenth Amendment procedural due process claim, (2) a Fourteenth Amendment substantive due process claim, and (3) a Fifth and Fourteenth Amendment takings claim. VRA primarily sought a declaration that the Assessment Ordinance, the Creation Ordinance, and the Notice of Intention are void ab initio, and also sought removal of the Assessment Lien.

         In support of these claims, VRA primarily alleged that the JSSD intentionally issued a false and misleading Notice of Intention in 2005 so property owners wouldn't object to the creation of the District or the proposed assessments against their properties. VRA further attacked the validity of the Assessment Lien by alleging that the JSSD misused bond money and unlawfully permitted non-assessed property owners to benefit from water and sewer improvements that were paid for only by assessed property owners. Finally, VRA alleged that Price and Matthews abused their public positions by funneling bond money to friends and family through questionable real estate and water rights transactions related to construction of the improvements.

         The defendants moved under Rule 12(b)(6) to dismiss VRA's complaint. The district court granted the defendants' motion and dismissed all of VRA's claims with prejudice, reasoning that (1) the claims are time-barred under Utah Code Ann. § 11- 42-106's 30-day limitation period for contesting an assessment; (2) the claims are time-barred under Utah Code Ann. § 78B-2-307(3)'s four-year statute of limitations; (3) VRA lacks standing to assert claims that belong to the VR property's prior owner; ...

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