M.A.K. Investment Group, LLC v. City of Glendale

          APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO (D.C. NO. 1:15-CV-02353-RBJ)

          R. Alexander Pilmer (Michael A. Onufer, and Lianna Bash on Opening Brief replaced by Allison Ozurovich on Reply Brief, Kirkland and Ellis LLP, Los Angeles, California, and Timothy G. Atkinson, Russell W. Kemp, and James R. Silvestro, Ireland Stapleton Pryor & Pascoe, P.C., Denver, Colorado, with him on the briefs), Kirkland and Ellis LLP, Los Angeles, California, for Appellant.

          Michael P. Zwiebel (Jeffrey A. Springer, Jason C. Astle, and Matthew R. Giacomoni with him on the brief), Springer & Steinberg, P.C., Denver, Colorado, for Appellees.

          Before TYMKOVICH, Chief Judge, SEYMOUR, and McHUGH, Circuit Judges.

         ORDER

         This matter is before the court on the Appellees' Petition for En Banc Determination, or, In the Alternative, for Panel Rehearing. We also have a response from the appellant.

         Upon consideration, that part of the Petition seeking panel rehearing is granted in part and to the extent of the amendments made to the attached revised Opinion. Panel rehearing is otherwise denied by the original panel members. The Clerk is directed to file the attached revised decision effective the date of this order.

         The Petition and response were also circulated to all the members of the court who are in regular active service. See Fed. R. App. P. 35(a). As no member on the original panel or the en banc court requested that a poll be called, the request for en banc determination and reconsideration is denied.

          TYMKOVICH, CHIEF JUDGE.

         M.A.K. Investment Group, LLC owns several parcels of property in Glendale, Colorado. The City of Glendale adopted a resolution declaring several of M.A.K.'s parcels "blighted" under state law. Glendale never notified M.A.K. of its resolution or the legal consequences flowing from it. In fact, the blight resolution began a seven-year window in which the City could begin condemnation proceedings against M.A.K.'s property. It also started the clock on a thirty-day window in which M.A.K. had a right to seek judicial review of the blight resolution under state law. Receiving no notice, M.A.K. did not timely seek review.

         M.A.K. argues Colorado's Urban Renewal statute- both on its face and as-applied to M.A.K.-violates due process because it does not require municipalities to notify property owners about (1) an adverse blight determination, or (2) the thirty days owners have to seek review. We conclude M.A.K.'s allegations state a claim that the statute is unconstitutional as applied to M.A.K. because M.A.K. did not receive notice that Glendale found its property blighted. Since we hold the statute violated due process as applied to M.A.K., we need not decide whether the statute is unconstitutional on its face.^[1] As for M.A.K.'s second argument, we hold that due process did not require Glendale to inform M.A.K. about the thirty-day review window.

         I. Background

         We begin by describing the relevant statutory framework.

         A. Colorado's urban renewal statute

         Colorado's Urban Renewal statute declares eliminating "blighted" areas to be a public use for which municipalities can use their power of eminent domain. Colo. Rev. Stat. § 31-25-102. The law enables municipalities to eventually transfer blighted private property to other private parties or public entities for redevelopment. After a municipality determines an area is blighted, it can begin condemnation proceedings against the blighted property at any time for seven years following the blight determination. § 31-25-105.5(2)(a)(I). The blight determination is therefore not a complete taking in the constitutional sense, but it slates the property for possible condemnation in the future.

         To label a property blighted, municipalities must meet certain statutory requirements.^[2] Municipalities must find that the property meets "at least five" of the eleven statutory blight factors. See § 31-25-105.5(5)(a).^[3] Those findings must be made at a public hearing. § 31-25-107(1)(a), (3)(a). And the findings must be based on "reasonably current information obtained at the time the blight determination is made." § 31-25-105.5(2)(a)(I).

         The Act allows property owners to challenge a city's blight determination. "Any owner of property located within the urban renewal area may challenge the determination of blight made by the governing body . . . by filing, not later than thirty days after the date the determination of blight is made, a civil action in district court for the county in which the property is located . . . ." § 31-25-105.5(2)(b). The civil action is "for judicial review of the exercise of discretion on the part of the governing body in making the determination of blight," and "the governing body shall have the burden of proving that, in making its determination of blight, it has neither exceeded its jurisdiction nor abused its discretion." Id.

         As for notice, the statute requires a city to notify property owners in two instances: (1) when the city begins a study regarding blight involving their properties, and (2) when the city will hold a hearing regarding its intention to acquire property for public or private redevelopment. See § 31-25-107(1)(b), (3)(b).

         But when it comes to the results of these blight hearings, the notice requirement depends on whether the city found the property at issue blighted or not. Strangely enough, Colorado's statute requires a city to mail notice to those whose property it does not find blighted, but does not require a city to notify those whose property it does find blighted. See § 31-25-107(1)(b). The statute also takes care to note that "[n]otwithstanding any other provision of law, any determination made by the governing body . . . shall be deemed a legislative determination and shall not be deemed a quasi-judicial determination." § 31-25-105.5(2)(c). This has consequences we will discuss below.

         B. The blight determination

         According to its complaint, M.A.K. owns several parcels of real property in Glendale, Colorado. Seeking to redevelop its property, M.A.K. began working with the city of Glendale on a private redevelopment plan.

         In 2013, the City of Glendale embarked on a "Riverwalk Urban Renewal Plan." The Plan entailed declaring a group of properties blighted under the Urban Renewal Law, allowing the City to condemn the properties and commence their private redevelopment. M.A.K.'s property was among the properties affected by the Plan. In April of the same year, Glendale notified M.A.K. it was commencing a study on whether an area that included M.A.K.'s property was blighted. The notice explained that Glendale would hold a hearing on May 7, 2013 to approve the Riverwalk Urban Renewal Plan. According to M.A.K.'s complaint, the notice did not explain that the hearing related to the possibility of future condemnation proceedings against M.A.K.'s property.

         After receiving this letter, M.A.K. claims one of its principals met with a representative of Glendale and asked what "blight" meant and whether M.A.K. should take any action in response. The representative answered that M.A.K. "did not need to worry about the notice." App. 15. Having worked with the City representative before, M.A.K. relied on his statement and did not attend the hearing.

         At the May 7 hearing, Glendale found M.A.K.'s property blighted pursuant to the statutory factors. Glendale did not notify M.A.K. of this determination. Nor did Glendale inform M.A.K. of the thirty-day window to challenge it in state court. For that reason, M.A.K. claims it did not learn about the blight determination until November 2013, when it engaged a real estate attorney to assist in M.A.K.'s private redevelopment of its property. By that time, the thirty-day window to challenge the determination had closed.

         C. The suit

         M.A.K. brought suit against Glendale under 42 U.S.C. § 1983, challenging Colorado's Urban Renewal statute both facially and as applied to its property. M.A.K. alleged the statute violated both the Due Process and Equal Protection Clauses of the Fourteenth Amendment. The district court granted Glendale's motion to dismiss both claims. In the district court's view, M.A.K. did not have due process rights at stake because the blight determination was legislative in nature. M.A.K.'s equal protection claim, on the other hand, failed because the statute did not treat M.A.K. differently from others similarly situated. M.A.K. appealed only the court's dismissal of its procedural due process claim.

         II. Analysis

         M.A.K. argues Colorado's Urban Renewal Statute fails due process as applied to M.A.K. because (1) it does not provide for adequate notice when a city finds a landowner's property blighted, (2) it does not provide for notice of the thirty-day review period, and (3) M.A.K. in fact did not know about the blight determination or the right of review within thirty days. We agree only with its first proposition: the city's failure to notify M.A.K. of the blight determination violated M.A.K.'s right to due process.^[4]

         We "review the grant of a Rule 12(b)(6) motion to dismiss de novo." Christy Sports, LLC v. Deer Valley Resort Co., 555 F.3d 1188, 1191 (10th Cir. 2009). In doing so, we "must accept all the well-pleaded allegations of the complaint as true and must construe them in the light most favorable to the plaintiff." Albers v. Bd. of Cnty. Comm'rs of Jefferson Cty., 771 F.3d 697, 700 (10th Cir. 2014). A district court must deny a motion to dismiss if the complaint provides "facts sufficient to state a claim to relief that is plausible on its face." Id. (internal quotation omitted).

         Since M.A.K. claims the statute's application in this case violated its procedural due process rights, we undertake the familiar "two-step inquiry" for procedural due process cases. See Pater v. City of Casper, 646 F.3d 1290, 1293 (10th Cir. 2011). First, "we ask whether the City's actions deprived plaintiffs of a constitutionally protected property interest." Id. "If plaintiffs can satisfy this requirement, we then consider whether they were afforded the appropriate level of process." Id. "In so doing, we note the procedural due process analysis is not a technical conception with a fixed content unrelated to time, place and circumstances, but rather is flexible and calls for such procedural protections as the particular situation demands." Id. at 1298 (internal quotation marks and citation omitted).

         Accordingly, we must answer two questions in this case. First, does M.A.K. have a constitutionally protected property interest at stake? Second, if it does, did Glendale provide M.A.K. sufficient notice that its property interests were in danger? We take each question in turn.

         A. Protected property interest

         The blight determination does not effect a complete taking of M.A.K.'s property. As explained above, it is only the first step toward condemnation. The parties therefore debate whether M.A.K. has a protected property interest at stake in this case at all.

         M.A.K. contends it has a property interest in the statutory right to seek review within thirty days of the blight finding. We agree with M.A.K. that it has a protected property right in the statutory cause of action.^[5]

         Colorado's statute gives property owners a right to "judicial review of the exercise of discretion on the part of the governing body in making the determination of blight." Colo. Rev. Stat. § 31-25-105.5(2)(b). And in the proceeding, the city has the burden of proving that "it has neither exceeded its jurisdiction nor abused its discretion." Id. This state-created cause of action constitutes a protected property interest.

         The Supreme Court's decision in Logan v. Zimmerman Brush Company, 455 U.S. 422 (1982), makes that much clear. There, the plaintiff's state-law cause of action was dismissed because the state's Fair Employment Practices Commission, through no fault of the plaintiff's, failed to hold a timely conference. Id. at 424-427. The Supreme Court explained that "the Due Process Clauses protect civil litigants who seek recourse in the courts, either as defendants hoping to protect their property or as plaintiffs attempting to redress grievances." Id. at 429. "The hallmark of property," the Court emphasized, "is an individual entitlement grounded in state law, which cannot be removed except 'for cause.'" Id. at 430. The Court explained the right to bring a cause of action is just such an entitlement, and therefore "a species of property protected by the Fourteenth Amendment's Due Process Clause." Id. at 428.

         Under Logan, then, M.A.K. had a property interest in its statutory cause of action to challenge the blight ...