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Oviedo Town Center II, L.L.L.P. v. City of Oviedo

United States District Court, M.D. Florida, Orlando Division

August 23, 2017

OVIEDO TOWN CENTER II, L.L.L.P.; OVIEDO LHC I, L.L.C.; OVIEDO LHC II, L.L.C.; OVIEDO LHC III, L.L.C.; OVIEDO LHC IV, L.L.C.; OVIEDO TOWN CENTRE DEVELOPMENT GROUP, L.L.L.P.; OVIEDO TOWN CENTRE II PARTNERS, L.L.L.P.; OVIEDO TOWN CENTRE III, L.L.L.P.; OVIEDO TOWN CENTRE IV, L.L.L.P.; ATLANTIC HOUSING PARTNERS L.L.L.P.; CONCORD MANAGEMENT, LTD.; SOUTH FORK FINANCIAL, L.L.C.; and CPG CONSTRUCTION, L.L.L.P., Plaintiffs,
v.
CITY OF OVIEDO, FLORIDA Defendant.

          ORDER

          ROY B. DALTON JR. UNITED STATES DISTRICT JUDGE.

         This action stems from a dramatic increase in water utility rates assessed for the Oviedo Town Centre (“OTC”)-an affordable-housing apartment complex serving low-income households. (See Doc. 52.) Specifically, in 2012, Defendant, the City of Oviedo, Florida (“the City”), amended its base charges for water services in multifamily residential properties, causing OTC to suffer a more than 2, 000% increase. Arguing that the increased rates would preclude Plaintiffs from providing affordable housing to OTC residents-the majority of whom are racial minorities-Plaintiffs: (1) filed suit under the federal Fair Housing Act and Florida's analogue statute (“FHA Claims”)[1]; and (2) later added a due process claim under 42 U.S.C. § 1983 (“Due Process Claim”).

         On May 1, 2017, Plaintiffs moved for summary judgment with respect to the FHA Claims. (See Docs. 57.) That same day, the City simultaneously moved to dismiss Plaintiffs' Due Process Claim (see Doc. 62 (“MTD”)) and filed a motion for summary judgment on all of Plaintiffs' claims (see Doc. 64). For the reasons set forth below, Plaintiffs' summary judgment motion is due to be denied, the City's summary judgment motion is due to be granted in part, and the MTD is due to be granted in part.

         I. Background

         A. Development of Oviedo Town Centre

         Plaintiffs in this action comprise a group of professionals with significant experience in developing and managing affordable housing. (See Doc. 82-2, pp. 6, 22-31.) Amid the collapsing housing market, Plaintiffs commenced development of OTC, an affordable-housing apartment community, consisting of twelve buildings and 236 units. (Doc. 70-1, ¶¶ 12, 17; Doc. 82-1, p. 1.)

         As is common with complex real estate transactions, Plaintiffs sought construction financing. (See Doc. 70-1, ¶ 9.) In 2007, the Orange County Housing Finance Authority approved bond financing (“Bond”) with the condition that Plaintiffs obtain secondary financing through the Florida Housing State Apartment Loan (“SAIL”) Program, [2] which they secured in 2008. (See Doc. 82-1, pp. 1-2; see also Doc. 82-2, p. 10.)[3] These funding sources restricted resident eligibility for OTC and the amount of rent Plaintiffs could collect from residents.[4] (Doc. 70-1, ¶ 9.) The Bond also required that each of OTC's 236 units be individually metered for electrical, water, and sewer services (“Individual Meter Requirement”). (Doc. 82-2, p. 16.)

         After Plaintiffs completed construction of OTC in 2008, each building was equipped with a single master meter that was connected to the City's water distribution system. (Doc. 70-1, ¶¶ 5, 12; see also Doc. 82-1, p. 2.) In accordance with the Individual Meter Requirement, OTC also included sub-meters within each individual unit, which were used to determine each unit's proportional share of the utility cost. (Doc. 54-2, p. 180.) Consequently, OTC residents initially shouldered the responsibility for paying their own utility costs. (Id. at 181.) But, in December of 2011, Plaintiffs began paying for utilities on behalf of OTC residents. (Doc. 84-2, p. 10.) This switch gave Plaintiffs the ability to collect a gross rent without reducing such amount by a utility allowance.[5] (Doc. 54-2, pp. 180-81.)

         To mitigate the risk of default, Plaintiffs provided several guarantees. (Doc. 82-2, p. 7; Doc. 82-14, pp. 6-8.) Specifically, Plaintiffs' partnership agreements required the general partners to finance operating deficiencies with non-interest bearing loans (“Operating Deficit Guarantee”). (See Doc. 82-1, p. 14.) In addition, a third-party, Allan H. Ginsburg, along with his related trust, provided operating and completion guarantees and an individual recourse guarantee[6] for the full amount of the SAIL loans for the life those loans (“Ginsburg Guarantees”). (Doc. 82-2, pp. 7, 21.)

         B. The City's Utility Rates

         Once a property becomes a utility customer, the City assesses a monthly amount for water comprised of a variable usage charge and a flat fee or base charge.[7] (See Doc. 70-1, ¶ 13; see also Doc. 65-1, p 30.) The city council sets base charges by resolution (“Base Charge Resolutions”). See Oviedo, Fla. Ordinances ch. 54, art. II, § 54-23.

         From 2007 to 2011, the City's Base Charge Resolutions classified water utility customers as either residential or commercial property.[8] (See Docs. 66-1, 66-2, 66-3, 66-4, 66-5.) Despite the sub-meters within OTC, it is undisputed that from 2008 through 2012, the City assessed OTC base charges on a per-meter basis by master meter only, which amounted to approximately $339 per month in base charges for OTC's twelve buildings. (Doc. 70-1, ¶¶ 13, 18; Doc. 82-1, p. 2.)

         C. The 2012 Rate Study and Resolution

         In late 2012, the City engaged a third party consultant, Public Resource Management Group (“PRMG”), to conduct a Water and Wastewater Rate and Capital Recovery Charge Study (“2012 Rate Study”). (See Doc. 60-2; 65-1, p. 25). The objective of the 2012 Rate Study was to set proposed utility rates at a level sufficient to cover the City's maintenance and operating costs. (See Doc. 60-2, p. 2.) Based on the 2012 Rate Study's findings and recommendations, the City adopted Resolution 2576-12 on December 3, 2012. (See Doc. 66-6 (“2012 Resolution”).)

         In addition to distinguishing between residential and commercial properties as the previous resolutions had done, the 2012 Resolution: (1) differentiated single-family residential properties from master-metered multi-family residential properties (“Multifamily Properties”); and (2) set a per-unit base charge for Multifamily Properties (“2012 Policy”). (Id.) Because OTC is a Multifamily Property, in 2013, the City began assessing OTC water base charges on a per-unit basis for OTC's 236 units. (See Doc. 82-1, pp. 2-3.) Plaintiffs thereafter requested an exception from the 2012 Policy (“Exception Request”) (see Doc. 70-1, ¶ 22), but the City denied their request in May of 2016 (id. ¶ 23).

         D. Plaintiffs' Allegations

         Following the City's denial of the Exception Request, Plaintiffs filed the FHA Claims against the City, alleging that it arbitrarily refused to return OTC to a per-meter base charge. (Doc. 52.) Specifically, Plaintiffs allege that the 2012 Policy causes them significant financial harm by increasing their base charges by more than 2, 000%-about $7, 557 per month. (Id. ¶¶ 33, 36, 42.) According to Plaintiffs, they cannot continue to operate OTC as an affordable-housing community under such an inflated utility cost and, if required to close, housing will become “unavailable” in Oviedo. (Id. ¶¶ 39, 41.) A substantial portion of Plaintiffs' FHA Claims seem to rest on the fact that the majority of OTC's heads of household are racial minorities. (See Id. ¶¶ 41-42; see also Doc. 70-1, ¶ 26; Doc. 70-2, p. 2.) To this end, Plaintiffs maintain that, if OTC is forced to close, OTC's racial minority residents will be disparately impacted by the reduced housing options. (Doc. 52, ¶ 41.) Additionally, Plaintiffs claim that they will lose the benefits of various operating agreements. (Id. ¶¶ 40-42.)

         As for their Due Process Claim, Plaintiffs allege that the City violated their substantive due process rights because the per-unit base charges have no rational nexus to the City's stated purpose for imposing such charges. (Doc. 52 ¶ 74; see also Doc. 100.)[9]According to Plaintiffs, the increase in base charges: (1) exceeds a pro rata share of the City's anticipated utility costs; and (2) denies them all reasonable use of OTC. (Doc. 100, p. 4; see also Doc. 52, ¶¶ 71-73, 75.)

         As the motions are fully briefed (see Docs. 80, 81, 85, 94, 95), the matters are now ripe for the Court's determination.

         II. The Summary Judgment Motions

         A. Legal Standards

         1. Summary Judgment

         Summary judgment is appropriate only “if the movant shows that there is no genuine dispute as to any material fact and that [it] is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). As to issues for which the movant would bear the burden of proof at trial, “[it] must affirmatively show the absence of a genuine issue of material fact and support its motion with credible evidence demonstrating that no reasonable jury could find for the nonmoving party on all of the essential elements of its case.” Landolfi v. City of Melbourne, Fla., 515 F.App'x 832, 834 (11th Cir. 2012) (citing Fitzpatrick v. City of Atlanta, 2 F.3d 1112, 1115 (11th Cir. 1993)).

         As to issues for which the nonmovant would bear the burden of proof at trial, the movant has two options: (1) it may simply point out an absence of evidence to support the nonmoving party's case; or (2) it may provide “affirmative evidence demonstrating that the nonmoving party will be unable to prove its case at trial.” U.S. v. Four Parcels of Real Prop. in Green & Tuscaloosa Ctys., 941 F.2d 1428, 1438 (11th Cir. 1991) (citing Celotex Corp., 477 U.S. at 325). “The burden then shifts to the nonmoving party, who must go beyond the pleadings and present affirmative evidence to show that a genuine issue of material fact exists.” Porter v. Ray, 461 F.3d 1315, 1320 (11th Cir. 2006) (citing Fitzpatrick, 2 F.3d at 1115-17).

         “A factual dispute is genuine ‘if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.'” Four Parcels, 941 F.2d at 1437 (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). A court must view the evidence and all reasonable inferences drawn from the evidence in the light most favorable to the nonmovant, Battle v. Bd. of Regents, 468 F.3d 755, 759 (11th Cir. 2006), such that “when conflict arises between the facts evidenced by the parties, [the] court credit[s] the nonmoving party's version, ” Evans v. Stephens, 407 F.3d 1272, 1278 (11th Cir. 2005). However, “[the] court need not permit a case to go to a jury . . . when the inferences that are drawn from the evidence, and upon which the nonmovant relies, are ‘implausible.'” Mize v. Jefferson City Bd. of Educ., 93 F.3d 739, 743 (11th Cir. 1996). This standard is not altered by cross motions for summary judgment and “will not, in themselves, warrant a court in granting summary judgment unless one of the parties is entitled to judgment as a matter of law on facts that are not genuinely disputed.” Bricklayers Int'l Union Local 15 v. Stuart Plastering Co., 512 F.2d 1017, 1023 (5th Cir. 1979).[10] Nevertheless, “cross motions may be probative of the non-existence of a factual dispute.” Id.

         2. The Fair Housing Act

         The FHA prohibits racial discrimination, in selling, renting, or otherwise making a dwelling unavailable. 42 U.S.C. § 3604(a). Liability under the FHA encompasses both disparate treatment and disparate impact claims. Tex. Dep't of Hous. & Cmty. Affairs v. Inclusive Cmtys. Project, Inc., 135 S.Ct. 2507, 2533 (2015); see also Hallmark Dev., Inc. v. Fulton Cty., Ga., 466 F.3d 1276, 1286 (11th Cir. 2006); United States v. Marengo Cty. Comm'n, 731 F.2d 1546, 1559 n.20 (11th Cir. 1984). Disparate treatment claims require a plaintiff to establish that “the defendant had a discriminatory intent or motive.” Id. (quoting Ricci v. DeStefano, 557 U.S. 557, 577 (2009)). In contrast, disparate-impact claims challenge practices that have a “disproportionately adverse effect on minorities and are otherwise unjustified by a legitimate rationale.” Inclusive Cmtys., 135 S.Ct. at 2513. To establish discriminatory effect, and thus demonstrate that housing has become discriminatorily “unavailable” to a protected class, a plaintiff can either show that the decision has a segregative effect or that it makes housing options significantly more restrictive for members of a protected group than for persons outside that group. See Hallmark Dev., Inc., 466 F.3d at 1286; see also 24 C.F.R. § 100.500(a).

         In disparate-impact cases, courts employ a burden-shifting framework, which requires plaintiffs to first establish a prima facie case. Id. at 2514. The burden then shifts to the defendant to prove that the challenged practice “is necessary to achieve one or more [of its] substantial, legitimate, nondiscriminatory interests.” 24 C.F.R. § 100.500(b)(1), (c)(2). Such interests must be supported by evidence and may not be hypothetical or speculative. 24 C.F.R. § 100.500(b)(2). If the defendant satisfies its burden, the plaintiff may still prevail by proving that the defendant's interests could be served by another practice that has a less discriminatory effect. 24 C.F.R. § 100.500(c)(3).[11]

         Additionally, plaintiffs prosecuting FHA claims must demonstrate proximate cause. “The FHA permits any ‘aggrieved person' to bring a housing-discrimination lawsuit” and “defines ‘aggrieved person' as any person who either claims to have been injured by a discriminatory housing practice or believes that such an injury is about to occur.” Bank of Am. Corp. v. City of Miami, Fla., 137 S.Ct. 1296, 1303 (2017). However, “proximate cause generally bars suits for alleged harm that is ‘too remote' from the defendant's unlawful conduct.” Id. at 1306 (quoting Lexmark Int'l, Inc. v. Static Control Components, Inc., 134 S.Ct. 1377, 1390 (2014)). Thus, “proximate cause under the FHA ...


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