Ronald Loesel v. City of Frankenmuth , 692 F.3d 452 ( 2012 )

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 12a0270p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
X
LOESEL, ELAINE LOESEL, VALERIAN NOWAK, -
RONALD LOESEL, ARTHUR LOESEL, GAYLE
and VALERIAN NOWAK AND ALICE B. NOWAK --
-
No. 10-2354
TRUST BY VALERIAN NOWAK,
Plaintiffs-Appellees, ,>
-
-
-
v.
-
-
Defendant-Appellant. N
CITY OF FRANKENMUTH,
Appeal from the United States District Court
for the Eastern District of Michigan at Bay City.
No. 1:08-cv-11131—Thomas L. Ludington, District Judge.
Argued: May 29, 2012
Decided and Filed: August 20, 2012
Before: MARTIN, GILMAN, and WHITE, Circuit Judges.
_________________
COUNSEL
ARGUED: Mary Massaron Ross, PLUNKETT COONEY, Bloomfield Hills, Michigan,
for Appellant. Andrew Kochanowski, SOMMERS SCHWARTZ, P.C., Southfield,
Michigan, for Appellees. ON BRIEF: Mary Massaron Ross, PLUNKETT COONEY,
Detroit, Michigan, for Appellant. Andrew Kochanowski, Jesse Young, SOMMERS
SCHWARTZ, P.C., Southfield, Michigan, for Appellees.
_________________
OPINION
_________________
RONALD LEE GILMAN, Circuit Judge. This appeal concerns the legality of
actions taken by the City of Frankenmuth (the City) to keep a Wal-Mart supercenter
from being built on land owned by the Loesel family in Frankenmuth Township (the
Township). As the result of a post purchase-agreement ordinance that restricted the size
No. 10-2354 Loesel, et al. v. City of Frankenmuth Page 2
of any new buildings on the property to 65,000 square feet or less, Wal-Mart Real Estate
Business Trust (Wal-Mart) terminated its conditional agreement to purchase the Loesels’
land for $4 million.
The Loesels sued the City for damages, claiming that the selective zoning
ordinance violated their rights under the Equal Protection Clause of the Fourteenth
Amendment to the U.S. Constitution. A jury agreed, awarding the Loesels $3.6 million
in damages. For the reasons set forth below, we REVERSE the judgment of the district
court and REMAND the case for further proceedings consistent with this opinion.
I. BACKGROUND
A. Factual background
Frankenmuth, “Michigan’s Little Bavaria,” is one of the top tourist destinations
in Michigan. Despite its popularity with tourists, Frankenmuth maintains a small town
atmosphere with a population of 4,838 in the City and 2,049 in the Township, according
to the 2000 U.S. Census (the last Census taken before the events relevant to this case
occurred). The City is famous for its Bavarian-themed stores, restaurants such as the
Bavarian Inn and Zehnder’s serving family-style chicken dinners, and its gift shops.
Bronner’s Christmas Wonderland, the world’s largest year-round Christmas store, draws
over two million visitors annually.
The plaintiffs, Ronald Loesel, Arthur Loesel, Gayle Loesel, Elaine Loesel,
Valerian Nowak, and The Valerian Nowak and Alice B. Nowak Trust (collectively, the
Loesels), are the co-owners of a 37-acre tract of land that borders Main Street just
outside the Frankenmuth city limits. They inherited the property from their mother when
she died in 2003. A 2003 property-tax appraisal valued the land at $95,000.
The Loesels’ property has been used as farmland for nearly 100 years. Although
not within the City’s boundaries, the property is within the urban growth area that was
established jointly by the City and the Township in 1985 to confine and guide urban
growth in order to retain the character of the Frankenmuth community. The City’s and
the Township’s growth is guided by their Joint Growth Management Plan (the Plan) that
No. 10-2354 Loesel, et al. v. City of Frankenmuth Page 3
sets forth the goals for Frankenmuth’s expansion. In 1985, the first version of the Plan
was drafted and, in June 2005, the second version of the Plan was formally adopted.
The two governments agreed as part of the Plan that they should “[p]romote
compact residential and commercial development inside the urban limit line,” which
included the Loesels’ property. To promote growth, the western portion of the Loesels’
property along Main Street, approximately 15 acres in size, was zoned as Commercial
Local Planned Unit Development (CL-PUD), with the remaining 22 acres to the east
designated as Residential Planned Unit Development (R-PUD). Permitted uses for CL-
PUD-zoned properties include developments that “provide principally for sale of goods
and services to meet the general needs of the residents of the Frankenmuth community,
including but not limited to grocery, department, drug and hardware stores, financial
institutions, professional and personal service offices and transportation sale and service
businesses.” City of Frankenmuth, Mich., Zoning & Planning Code § 5.241.3(1) (2009).
At the time the Loesels inherited the property, the land was being leased to a
tenant farmer. In 2004, however, the Loesels were approached by a real-estate broker
who told them he had a client interested in purchasing their property. The Loesels met
with the broker and discovered that he represented Wal-Mart. Because the western
portion of the Loesels’ property abuts Main Street and is commercially zoned, Wal-Mart
was interested in buying the property to build a store.
In early 2005, City officials became aware that Wal-Mart was interested in
purchasing and developing the Loesels’ property. The district court summarized the
reaction of the City Manager as follows:
On March 29, 2005, upon learning that Plaintiffs were talking to
Wal-Mart, . . . City Manager Charles Graham emailed a planner
acquaintance at the Michigan Department of Transportation (“MDOT”)
stating that “[City Clerk] Phil Kerns has now confirmed there will be a
meeting here on April 7th pertaining to the Loesel property on North
Main.” The next day, Graham emailed the planner at MDOT and said,
“We have heard rumors that the proposed project is a Walmart which I
am totally opposed to, and I think most people in Frankenmuth will be
opposed to.” However, Graham acknowledged that [the Loesels’]
property was properly commercially zoned and that as a consequence,
No. 10-2354 Loesel, et al. v. City of Frankenmuth Page 4
absent action by [the City], [the Loesels] had a right to sell the property
to Wal-Mart for a store to be built in the northern end of town.
(Brackets around “[City Clerk]” in original; all other brackets added.)
On May 26, 2005, the Loesels entered into a conditional agreement to sell 23.55
acres of their land to Wal-Mart for $2,943,750, which works out to precisely $125,000
per acre. Wal-Mart had 180 days under the agreement to determine the feasibility of its
planned development of the property. “At any time prior to the end of the Feasibility
Period, Wal-Mart [was permitted to], for any reason in its sole and absolute discretion,
cancel [the] Agreement and receive a refund of the [$50,000] Deposit.”
City Manager Graham, however, did not give up his fight against Wal-Mart, as
the following excerpt from the district court’s opinion explains:
At a point after [the Loesels] had signed the agreement with
Wal-Mart, Graham began to solicit information concerning other
communities’ efforts to exclude Wal-Mart from their towns. On June 22,
2005, in response to an email he sent requesting assistance on how to
oppose the Wal-Mart, Graham was told that [the City] could[] “[a]dd a
provision to the zoning ordinance that limits the size of any commercial
building. That will stop them from enlarging and may stop them from
beginning if they know they cannot enlarge.” In the same email, Graham
was advised: “Be sure to do a good internet search first because
WalMart has challenged some of those provisions and won when they
were poorly drafted, but lost when they weren’t, if I recall correctly.”
Graham was further advised: “It is definitely better for citizens to fight
it instead of the city and township.”
On July 14, 2005, Graham attended a meeting of the Frankenmuth
Economic Development Corporation (“EDC”). At the meeting Graham
acknowledged that he had reviewed the proposed site plan submitted by
Wal-Mart’s engineers, and admitted that, as shown, it appeared that the
zoning allowed the proposed project. The EDC estimated that the
Wal-Mart store would generate between $40,000 and $50,000 in annual
[property] tax revenue for [the City], which would have added an
additional two-percent to [the City’s] annual property tax revenue, with
total tax revenue for [all local taxing entities] amounting to between
$200,000 and $250,000.
. . . . On July 15, 2005, Sheila Stamiris, Executive Director of the
DDA [(Frankenmuth Downtown Development Authority)], sent a
No. 10-2354 Loesel, et al. v. City of Frankenmuth Page 5
memorandum to the Frankenmuth Mayor and City Council. She advised
[the] Mayor and the City Council that [the Loesels] had been offered a
large sum of money by Wal-Mart for their land. She said:
Tuesday we awkwardly discussed the proposed Walmart
project. As I already suggested, we have not brought the
discussion to the public agenda. If there is anything good
to say about the project, we can say that we have been
given a heads up by the owner and perhaps we have been
given a gift of time to adequately plan for this
controversial project. I feel strongly that the City should
remain neutral while fact finding is completed.
Stamiris expressly advised [City officials] that the proposed store
was a 104,000 square-foot super-center including sundry and drygoods,
a grocery, a pharmacy, and a tire center. Stamiris identified the precise
location of the proposed store. Shortly after writing the memorandum,
Stamiris advised Graham and other [City] officials that other Michigan
towns had not experienced problems with Wal-Mart stores. She
forwarded an email from the Downtown Development Authority of
DeWitt, Michigan, a town roughly the same size as [the City], that said
in response to her inquiry:
We have three Wal-Marts within a twenty mile radius.
To this point we have not noticed that specifically,
Wal-Mart has negatively impacted our downtown. We
recently lost a dollar store, but [I] am not sure it could be
contributed [sic] to the opening of a Wal-Mart. It seems
that folks in this area are of the opinion that shoppers will
go where they can get the best deal and Wal-Mart has
good deals. We feel that the Big Box stores offering one
stop shopping appeal to younger shoppers with
convenience as their goal.
Stamiris also forwarded to [City officials] an Economic Impact
Report that estimated the new Wal-Mart store would generate between
three- and five-hundred jobs and contribute $70,000 in taxes in the first
year of operation. After receiving the report, Graham again solicited an
MDOT planner for help in opposing the proposed store. In an email that
acknowledged that Wal-Mart itself advised that it would create three-
hundred jobs paying nearly ten dollars per hour, he asked MDOT, “Do
you know of any localities that have ordinances that prohibit 24 hour
operation?”
On July 20, 2005, [City officials were] advised by Tom Johnston,
a prominent local businessman [and co-owner of the Bavarian Mall], that
an anti-Wal-Mart group called Citizens for Frankenmuth First had been
No. 10-2354 Loesel, et al. v. City of Frankenmuth Page 6
set up, and that Johnston was involved in the group as a Vice-President.
Johnston had operated an IGA store for several years until it was
purchased by the Kroger Company, which operates over three-thousand
stores in the United States, in 2003. The Kroger is located on North
Main Street, several blocks north of Genesee Street within the Bavarian
Mall, which is zoned B-3, highway commercial. Previously, Greg
Rummel, a member of [the City’s] Planning Commission[,] helped to set
up the citizens group in its initial stages, as citizens contacted him with
concerns. He discontinued official participation with the group when he
perceived a potential conflict of interest with his role on the Planning
Commission.
(Brackets for “[a]dd” in original; all other brackets added.)
In August 2005, at the suggestion of the City’s Planning Commission, the City
passed Resolution No. 2005-92, a 120-day moratorium on the construction of any
facility with an area of 70,000 square feet or more. This temporary respite gave City
officials time to consider legislation that would stop Wal-Mart from proceeding to
develop the Loesels’ property, as the district court detailed:
An individual who was known for his anti-Wal-Mart views[]
transmitted to Graham and Kerns the text of a Maryland ordinance that
limited retail establishments to 65,000 square feet. Later, Graham and
Kerns obtained an article from the American Planning Association
entitled “Practice Big Box Regulation,” which explained some methods
by which towns could zone away stores like Wal-Mart. On September
14, Graham sent an email to Kerns that suggested how such an ordinance
could be formulated.
In the days that followed, but before any public hearing on the
issue, Graham continued to pursue “size-cap” ordinances as the means
of blocking Wal-Mart. On September 14, 2005, he contacted the
Institute for Local Self-Reliance, an anti-Wal-Mart website that sells
books entitled, “Big Box Swindle,” among others. He inquired about
anti-Wal-Mart ordinances as follows:
I read your article on store size caps. My question is:
Have any of these communities been sued for establishing
these store size caps and if so what were the results? If
we adopt this type of ordinance, does it have a chance of
withstanding potential litigation? Our recently updated
community master plan does provide a good foundation
for adoption of this type of ordinance. Our City Council
No. 10-2354 Loesel, et al. v. City of Frankenmuth Page 7
is interested in pursuing this type of ordinance, but there
is some hesitancy about it because of the fear of law suits.
. . . . On September 27, 2005, Graham first internally introduced
the idea of an ordinance capping the size of a retail establishment. Two
days later, Graham introduced [Robert] LaBelle [(an attorney retained by
Citizens for Frankenmuth First)] to the Frankenmuth Ordinance Review
Committee (“ORC”) and invited LaBelle to attend the meeting with the
ORC, scheduled for October 5, 2005.
At the time this occurred, [the City’s] only economic
development report concerning a Wal-Mart in Frankenmuth was the
positive assessment [the City] obtained during the summer of 2005. On
October 5, 2005, Graham sought an opinion from the City’s insurer about
liability coverage in the event of a lawsuit. On October 11, 2005,
Graham forwarded to members of the ORC committee a proposed
ordinance that would limit store size. The proposed ordinance was
drafted by LaBelle, and his services were paid for by Citizens for
Frankenmuth First. It is not known how the citizens group was funded.
The zoning ordinance would establish a Neighborhood Commercial
Overlay Zone, set standards and regulations within the zone, and limit
the size of retail establishments to 65,000 square feet. On October 18,
2005, Wal-Mart made a presentation to [the City] indicating that it was
willing to design its store to fit in architecturally with the Bavarian
appearance maintained in the historic part of town.
After the first draft of the ordinance was circulated, Graham
continued to communicate with LaBelle about the potential Wal-Mart
store. In an email dated October 21, 2005, Graham expressed concern to
LaBelle that having the ordinance apply only to the northern end of town
was discriminatory and Graham expressed further concern that were the
ordinance to be applied city-wide, the established, local businesses on the
southern end would object to having a limitation that stopped them from
building in the future. In his email to LaBelle, Graham said:
The Planning Commission will also have to decide which
of the two versions of the 65,000 square foot store
ordinance they want to adopt. As our Ordinance Review
Committee was reviewing the findings section at the
beginning of the ordinance, we could not see how those
findings justified only allowing a building of less than
65,000 square feet north of Genesee Street. We also felt
that in a court of law a judge would view this approach as
more even handed because it will be applicable to the
entire City. Having the ordinance only apply north of
Genesee is discriminatory to that area of town. That’s
No. 10-2354 Loesel, et al. v. City of Frankenmuth Page 8
why the one version of the ordinance would have to apply
to the entire City.
Genesee Street runs east and west and roughly bisects the City. The businesses south
of Genesee Street include Bronner’s Christmas Wonderland, and City officials were
concerned about what effect a 65,000-square-foot limitation would have on Bronner’s.
As the district court noted:
In the same email to LaBelle, Graham said:
However, the Committee also recognizes that the local
businesses who are in the tourist business may object to
having this limitation apply to their area of town, i.e., the
area south of Genesee. The example we keep hearing is,
What if Cabella’s wants to locate a store here? That’s the
reason for drafting the ordinance version that applies to
the area north of Genesee. I think this version of the
ordinance would be fine if we could all feel comfortable
with the justification of why it would only apply to the
area north of Genesee. Up to this point, I don’t think we
have adequate justification for restricting it to that area.
Graham then created two new drafts of the ordinance, with one draft
limiting the store cap size only to an area north of Genesee Street, and
one draft establishing a Commercial Overlay Zone encompassing all
properties within [Frankenmuth’s urban growth area].
....
. . . . Shortly before [the ordinance] was set for a vote by the
Planning Commission, Graham explicitly noted that the proposed zoning
ordinance should not be written to affect Bronner’s:
We . . . may have a proposed project in another
commercial zone such as B-3. The property where
Bronner’s is located is zoned B-3 and I don’t want to
have to tell them they can’t qualify for a 70,000 square
foot addition.
In addition, Graham was informed of Johnston’s concern that the ordinance might
hamper the ability of the Kroger located in Johnston’s Bavarian Mall to expand.
Because the Bavarian Mall is north of Genesee Street, the mall would be subject to the
draft of the ordinance that excluded only the properties south of Genesee.
No. 10-2354 Loesel, et al. v. City of Frankenmuth Page 9
As a result of these and other concerns, Graham, with the assistance and input
of others, decided to shrink the size of the area affected by the proposed ordinance even
further, to include only CL-PUD-zoned properties. This meant that the only properties
affected by the ordinance were the Loesels’ property and a handful of much smaller
parcels in its immediate vicinity. The proposed ordinance excluded the part of the town
immediately south of the Loesels’ property, including the Bavarian Mall and Bronner’s.
This version of the ordinance was ultimately adopted on December 7, 2005 as
Ordinance No. 2005-10. It established the “Commercial Local Planned Unit
Development Overlay Zone (CL-PUDOZ) encompassing all CL-PUD (Commercial
Local Planned Unit Development) zoning districts in the City of Frankenmuth” and
required that the floor area of any retail building in the CL-PUDOZ “shall not exceed
sixty-five thousand (65,000) square feet.”
Wal-Mart and the Loesels, apparently unaware of the ordinance’s passage,
amended their purchase agreement on the same date to state that Wal-Mart would buy
all 37 acres of the Loesels’ property for $4 million. The amendment also provided that
Wal-Mart had to put a $5,000 nonrefundable deposit into escrow.
Wal-Mart continued for the time being to move forward with the project and
attended a pre-application meeting with the City and the Township on January 13, 2006.
Following the meeting, the City sent a list of additional items that would be needed for
Wal-Mart to proceed with the application process, such as traffic-impact and economic-
impact studies and a landscaping plan that complied with storm-water drainage
regulations. Wal-Mart was directed to submit these items before a second pre-
application meeting was scheduled. In light of the new size-cap ordinance, however,
Wal-Mart declined to continue with the approval process and never again communicated
with the City about the proposal.
In a letter dated March 16, 2006, Wal-Mart informed the Loesels that it intended
to terminate the purchase agreement pursuant to the “feasibility” clause. The Loesels
received the $5,000 from the escrow account and Wal-Mart recovered its $50,000
deposit. A representative from Wal-Mart testified (in a deposition that was read into the
No. 10-2354 Loesel, et al. v. City of Frankenmuth Page 10
record at trial) that the agreement was terminated because Wal-Mart would not have
been able to build its proposed supercenter on the Loesels’ property given the 65,000-
square-foot restriction.
B. Procedural background
In March 2008, the Loesels filed a complaint against the City. They brought suit
under 42 U.S.C. § 1983, alleging that the City’s 65,000-square-foot zoning restriction
violated their rights under the Equal Protection, Due Process, Privileges or Immunities,
and Commerce Clauses of the U.S. Constitution. As a remedy, they sought $4 million
in compensatory damages, attorney fees under 42 U.S.C. § 1988, costs, and an order
declaring that the ordinance is unconstitutional.
The district court granted summary judgment for the City on all but the Loesels’
equal protection claim. And even that claim, according to the court, was not viable as
an “as-applied” challenge, but could be submitted to a jury as a “facial” challenge. The
court ruled that to succeed on an “as-applied” challenge, the Loesels’ would have had
to show that the City actually applied the size-limitation ordinance to their property.
Wal-Mart, however, failed to complete the application process for approval of its store,
so the City never denied Wal-Mart’s application for development. Because the size-
limitation was never directly enforced against the Loesels, their as-applied challenge had
no merit. But the district court concluded that the Loesels had raised a genuine dispute
as to whether the size-limitation ordinance was invalid on its face (a “facial” challenge)
because they had presented evidence demonstrating that the mere existence and
threatened enforcement of the ordinance adversely affected the value of their property.
A trial was held on the Loesels’ facial equal protection claim in February and
March 2010. The City moved for judgment as a matter of law following the close of the
Loesels’ case-in-chief and again at the close of its own proof. Both times the district
court declined to rule, taking the matter “under advisement pending the determination
of the jury.” The jury then returned a verdict for the Loesels and awarded them
$3.6 million in damages.
No. 10-2354 Loesel, et al. v. City of Frankenmuth Page 11
Shortly thereafter, the City filed a renewed motion for judgment as a matter of
law or, in the alternative, for a new trial or remittitur, which the district court denied in
September 2010. The court then granted in part and denied in part the Loesels’ motion
for entry of judgment and assessment of attorney fees, interest, and costs. In its order,
the court determined that the Loesels were entitled to the declaratory relief
requested—that the challenged zoning ordinance be declared unconstitutional—and to
prejudgment interest, but denied their request for prefiling interests and costs. Loesel
v. City of Frankenmuth, 743 F. Supp. 2d 619, 641 (E.D. Mich. 2010) (“The Court is
persuaded by Plaintiffs’ arguments that declaratory relief is proper under the
circumstances of this case.”). The court also determined that an evidentiary hearing was
necessary before it could rule on the Loesels’ request for attorney fees. Before that
hearing occurred, and before judgment was entered, the City filed a timely notice of
appeal from the court’s September 27, 2010 Order.
II. ANALYSIS
A. Judgment as a matter of law
The City claims that the district court erred in denying its renewed motion for
judgment as a matter of law under Rule 50(b) of the Federal Rules of Civil Procedure.
We review a district court’s denial of a Rule 50(b) motion de novo. Radvansky v. City
of Olmsted Falls, 496 F.3d 609, 614 (6th Cir. 2007). “The motion may be granted only
if in viewing the evidence in the light most favorable to the non-moving party, there is
no genuine issue of material fact for the jury, and reasonable minds could come to but
one conclusion, in favor of the moving party.” Id. (internal quotation marks omitted).
Here, the City argues that there was insufficient evidence for the jury to
reasonably conclude that the 65,000-square-foot size restriction violated the Equal
Protection Clause. “The Equal Protection Clause prohibits discrimination by
government which either burdens a fundamental right, targets a suspect class, or
intentionally treats one differently than others similarly situated without any rational
basis for the difference.” Rondigo, L.L.C. v. Twp. of Richmond, 641 F.3d 673, 681-82
No. 10-2354 Loesel, et al. v. City of Frankenmuth Page 12
(6th Cir. 2011) (holding that the state officials’ motion to dismiss should have been
granted on the basis of qualified immunity where the plaintiffs alleged that the officials
violated their right to equal protection by treating female farm owners differently than
similarly situated male farm owners).
In this case, the Loesels pursued their equal protection claim under the “class-of-
one” theory recognized by the Supreme Court in Village of Willowbrook v. Olech,
528 U.S. 562 (2000) (per curiam) (holding that the Olechs sufficiently stated an equal
protection claim where they alleged that, as a condition of being connected to the
municipal water supply, the village demanded a 33-foot easement from the Olechs but
required an easement of only 15 feet from similarly situated neighbors). Class-of-one
claims are generally viewed skeptically because such claims have the potential to turn
into an exercise in which juries are second-guessing the legislative process:
In the wake of Olech, the lower courts have struggled to define the
contours of class-of-one cases. All have recognized that, unless carefully
circumscribed, the concept of a class-of-one equal protection claim could
effectively provide a federal cause of action for review of almost every
executive and administrative decision made by state actors. It is always
possible for persons aggrieved by government action to allege, and
almost always possible to produce evidence, that they were treated
differently from others, with regard to everything from zoning to
licensing to speeding to tax evaluation. It would become the task of
federal courts and juries, then, to inquire into the grounds for differential
treatment and to decide whether those grounds were sufficiently
reasonable to satisfy equal protection review. This would constitute the
federal courts as general-purpose second-guessers of the reasonableness
of broad areas of state and local decisionmaking: a role that is both
ill-suited to the federal courts and offensive to state and local autonomy
in our federal system.
Jennings v. City of Stillwater, 383 F.3d 1199, 1210-11 (10th Cir. 2004) (footnote
omitted).
That is why a plaintiff must overcome a “heavy burden” to prevail based on the
class-of-one theory. See TriHealth, Inc. v. Bd. of Comm’rs, Hamilton Cnty., Ohio,
430 F.3d 783, 791 (6th Cir. 2005) (affirming the district court’s conclusion that the
No. 10-2354 Loesel, et al. v. City of Frankenmuth Page 13
plaintiff-hospitals “had not carried [their] heavy burden” of proving an equal protection
violation under the class-of-one theory where the plaintiffs alleged that awarding county
tax funds exclusively to the local university hospital and not the plaintiff-hospitals was
discriminatory). The Loesels must show that they were treated differently than those
similarly situated in all material respects. See Rondigo, 641 F.3d at 682. In addition,
they
must show that the adverse treatment they experienced was so unrelated
to the achievement of any combination of legitimate purposes that the
court can only conclude that the government’s actions were irrational.
This showing is made either by negativing every conceivable reason for
the government’s actions or by demonstrating that the actions were
motivated by animus or ill-will.
Id. (citations and internal quotation marks omitted).
The City argues that it is entitled to judgment as a matter of law because the
Loesels failed to show that (1) their property was similarly situated to other properties
that were treated differently under the zoning ordinance, (2) the ordinance lacked a
rational basis, or (3) the ordinance was passed because of any animosity against the
Loesels. Each of these arguments is addressed in turn below.
1. Similarly situated
The Loesels have the burden of demonstrating that they were treated differently
than other property owners who were similarly situated in all material respects. See
TriHealth, 430 F.3d at 790 (“Materiality is an integral element of the rational basis
inquiry. . . . [D]isparate treatment of persons is reasonably justified if they are dissimilar
in some material respect.”); see also Schellenberg v. Twp. of Bingham, 436 F. App’x
587, 591 (6th Cir. 2011) (holding that “plaintiffs must allege that they and other
individuals who were treated differently were similarly situated in all material respects”
(brackets and internal quotation marks omitted)).
“In determining whether individuals are ‘similarly situated,’ a court should ‘not
demand exact correlation, but should instead seek relevant similarity.’” Bench Billboard
No. 10-2354 Loesel, et al. v. City of Frankenmuth Page 14
v. City of Cincinnati, 675 F.3d 974, 987 (6th Cir. 2012) (quoting Perry v. McGinnis,
209 F.3d 597, 601 (6th Cir. 2000) (citation omitted)). “[M]ateriality cannot be evaluated
in a vacuum.” TriHealth, 430 F.3d at 790. “Inevitably, the degree to which others are
viewed as similarly situated depends substantially on the facts and context of the case.”
Jennings, 383 F.3d at 1214. Furthermore, “determining whether individuals are
similarly situated is generally a factual issue for the jury.” Eggleston v. Bieluch, 203 F.
App’x 257, 264 (11th Cir. 2006).
The Loesels asserted at trial that the two local properties containing the area’s
largest retail establishments—the Bavarian Mall and Bronner’s—were similarly situated
to their property. But the City contends that, as a matter of law, there are material
differences between the Loesels’ property and the other two properties. The district
court disagreed with the City and ruled that sufficient evidence existed for a jury to
reasonably conclude that the Bavarian Mall and Bronner’s were similarly situated to the
store that Wal-Mart proposed to build on the Loesels’ property:
[The City] contends that the Court erred in determining that Plaintiffs can
maintain a “class of one” equal protection claim because Bronner’s and
Kroger [(i.e., the Bavarian Mall)] are not similarly situated to Plaintiffs
in relevant, material aspects. [The City] contend[s] that Plaintiffs are not
similarly situated to Bronner’s and Kroger because the stores sell
different products than Wal-Mart and because the properties are zoned
differently. [The City] has not explained how any differences between
the products to be sold by Wal-Mart and those sold by either Bronner’s
or Kroger is relevant and material to the enactment of a size-cap and the
equal protection analysis. Additionally, as the Court explained in its
order, the fact that the properties are zoned differently and that the
requirements and goals of the different classifications are not identical
does not mean that the properties cannot be similarly situated. [The City]
has not explained how any differences in requirements and goals are
material to the analysis.
Loesel v. City of Frankenmuth, No. 08-11131-BC, 2009 WL 1449049, at *2 (E.D. Mich.
May 22, 2009) (unpublished opinion).
The district court’s analysis implies that the proper comparison is between the
stores on the properties (or, in the case of the Loesels, the store proposed for their
No. 10-2354 Loesel, et al. v. City of Frankenmuth Page 15
property), rather than between the property owners or the properties themselves. And
at times the court conflated the Loesels with Wal-Mart. The relevant question, however,
should be framed in terms of the properties and their owners, not in terms of the stores
located on those properties. In other words, the proper comparison is not between the
supercenter that Wal-Mart wanted to develop, on the one hand, and the Bavarian Mall
and Bronner’s on the other, but between the Loesels’ property and the properties on
which the Bavarian Mall and Bronner’s sit. See Taylor Acquisitions, L.L.C., v. City of
Taylor, 313 F. App’x 826, 838 (6th Cir. 2009) (holding that the plaintiff had to show in
its class-of-one equal protection claim that the government officials had personal animus
against the plaintiff, not against the development that the plaintiff was proposing).
Despite this weakness in the district court’s analysis, much of its reasoning can be
translated into a proper comparison between the various properties.
The first property that the Loesels assert is similarly situated to theirs is the
parcel on which the Bavarian Mall is located. This strip mall is the second-largest
commercial development in Frankenmuth, located on the east side of Main Street just
south of the Loesels’ property. The properties are in fact so close that only two small
parcels of land separate them. Originally constructed in 1973, the Bavarian Mall has
retail space measuring 104,000 square feet. Its tenants include a Kroger grocery store
and a gas station.
Two brothers, Dave and Tom Johnston, own a controlling interest in the Bavarian
Mall. Dave was a member of the Downtown Development Authority (DDA) in 2005,
and Tom had previously been on the City Council. Tom was the person who filed the
articles of incorporation for Citizens for Frankenmuth First in August 2005.
The 45-acre parcel on which Bronner’s Christmas Wonderland sits is the other
property that the Loesels assert is similarly situated to theirs. Located at the southern
end of Main Street, two miles south of the Loesels’ property, the parcel contains a
400,000 square-foot retail store. The owner of Bronner’s is the Bronner family. Wayne
Bronner, president and chief executive officer of Bronner’s, was chairman of the DDA
board of directors in 2005.
No. 10-2354 Loesel, et al. v. City of Frankenmuth Page 16
According to the City, the district court should have ruled as a matter of law that
the Loesels’ property is not similarly situated to the Bavarian Mall and Bronner’s
properties because of three alleged distinctions between them. The first alleged
difference concerns the zoning classification: both the Bavarian Mall and Bronner’s are
located on B-3-zoned properties, whereas the portion of the Loesels’ parcel affected by
the ordinance is zoned CL-PUD.
The Loesels’ respond by pointing out that this distinction is not a material one.
Indeed, even City Manager Graham conceded that there was “no difference in terms of
how the zoning treated the CL-PUD and the B-3” and that “essentially the same
regulations” apply to both zones. He also acknowledged that, had the Loesels’ property
been inside the City limits in 1985 when the zones were first applied, “It would probably
have been designated as B-3.” The jury could therefore have reasonably concluded that
the difference in “labels” for these commercially zoned properties is not material.
This leads to the City’s second alleged distinction: that the Loesels’ property
differs from the Bavarian Mall and Bronner’s properties because the Loesels’ property
is vacant land, whereas the properties containing the Bavarian Mall and Bronner’s were
already developed. The City’s argument would have more force had it not previously
designated the Loesels’ property as CL-PUD. As part of the City’s Plan, however, the
promotion of commercial development is encouraged on the CL-PUD properties.
Accordingly, the jury could have reasonably concluded that the developed/undeveloped
distinction is not material.
The City’s last alleged difference between the Loesels’ property and the other
two properties that it contends is material relates to their traffic capacities. Main Street
is five lanes wide at the entrances to both the Bavarian Mall and Bronner’s, but narrows
to three lanes at the Loesels’ property. The City contends that a three-lane road does not
provide adequate traffic capacity for a store with over 65,000 square feet of sales space.
Traffic-capacity considerations, however, are typically deferred until the development-
application process. To prevent a development from being built where traffic capacity
is inadequate, the City did not have to enact a size-restriction ordinance; it could have
No. 10-2354 Loesel, et al. v. City of Frankenmuth Page 17
simply rejected the application on the basis of inadequate traffic capacity. Moreover,
Main Street in front of the Loesels’ property would have the same traffic capacity as at
the other two locations simply by extending the extra two lanes the length of the
property. These facts lessen the importance of the difference in traffic capacity to the
point where the jury could have reasonably concluded that it is not material.
In sum, there is a genuine dispute of material fact as to whether the three
properties are similarly situated. This means that the district court did not err in denying
the City’s renewed motion for judgment as a matter of law on this issue.
2. Rational basis
The City next contends that it is entitled to judgment as a matter of law on the
issue of whether the zoning ordinance had a rational basis. Under rational basis review,
the defendant “has no obligation to produce evidence to sustain the rationality of its
actions; its choice is presumptively valid and may be based on rational speculation
unsupported by evidence or empirical data.” TriHealth, Inc. v. Bd. of Comm’rs,
Hamilton Cnty., Ohio, 430 F.3d 783, 790 (6th Cir. 2005). The burden instead falls on
the Loesels to “demonstrate that a government action lacks a rational basis . . . either by
negativing every conceivable basis which might support the government action or by
demonstrating that the challenged government action was motivated by animus or
ill-will.” Warren v. City of Athens, Ohio, 411 F.3d 697, 711 (6th Cir. 2005) (brackets
and internal quotation marks omitted).
a. No-conceivable-basis theory
The City contends that the Loesels did not present evidence sufficient to refute
every possible nondiscriminatory reason for enacting the 65,000 square-foot size
restriction. It argues that the testimony of its municipal-land-use expert Donald
Wortman demonstrated that a rational basis existed for applying the size limit to only
CL-PUD-zoned properties. Wortman testified that several characteristics of the Loesels’
property made it unsuitable for a large big-box retail store, including the parcel’s
inadequate depth (the CL-PUD portion of the Loesels’ property is only 660 feet deep as
No. 10-2354 Loesel, et al. v. City of Frankenmuth Page 18
opposed to the typical 1,000 feet or more of depth typical of large retail developments),
its close vicinity to residential property, its inadequate traffic capacity and space for
parking, and its potential storm-water retention issues.
Wortman then identified about one dozen parcels of land within Frankenmuth’s
urban growth area that he believed were better suited for the development of a big-box
store than was the Loesels’ property. He also explained that Wal-Mart’s planned
supercenter would attract more than Frankenmuth residents because the stores generally
require a population of at least 30,000, whereas the City and Township total less than
7,000 residents. This would, according to Wortman, make a Walmart supercenter more
appropriate for CT-PUD-zoned properties in the southern end of the urban growth area,
which were designated to serve visitors, than the local-resident-oriented CL-PUD district
in the northern end. He further reasoned that the ordinance bolstered the City’s desire
to maintain “a compact commercial core” in the downtown city center that is “pedestrian
friendly [and] a benefit to the residents.”
In Wortman’s professional opinion, the City reasonably decided to apply the size
limit to only CL-PUD-zoned properties because there were already properties in the B-3
zone—specifically the Bavarian Mall and Bronner’s—that were over the 65,000-square-
foot size limit. He explained that there would be negative consequences to applying a
size limit to a building that already exceeded the limit. One such consequence would be
that an existing building exceeding the new size limit would be considered “non-
conforming” and, although the structure could remain as is, the property owner would
be unable to enlarge the existing structure without receiving a variance from the zoning
board. In addition, “financial institutions are reluctant to extend loans or mortgages to
structures that are non-conforming,” in part because if more than 50% of the structure
were destroyed, the new zoning ordinance would not permit the structure to be rebuilt.
The Loesels respond by arguing that the jury correctly rejected Wortman’s
opinions because his testimony was undercut on cross-examination and by the testimony
of City Manager Graham. Wortman conceded, for example, that he had no idea whether
the parcels that he identified in the southern end of the City were available for sale, what
No. 10-2354 Loesel, et al. v. City of Frankenmuth Page 19
the current uses of those properties were, or whether any of the parcels contained
undeveloped wetlands or had appropriate road access.
Moreover, City Manager Graham contradicted Wortman’s opinion that the Plan
called for growth in the southern end of Frankenmuth rather than in the northern end.
Graham testified that the Plan made no distinction between the two areas of the City.
Language directly from the Plan supports Graham’s view:
As demand for additional local commercial businesses becomes evident,
additional local commercial establishments should be located in the
northern end of the city, north of the Bavarian Mall area along Main
Street in Section 23.
In sum, a genuine dispute exists as to whether the ordinance lacked a rational
basis. The jury could therefore have rejected Wortman’s testimony in finding for the
Loesels on this issue.
b. Animus or ill will
Finally, the City contends that the district court should have granted the City
judgment as a matter of law on the issue of whether animus or ill will against the Loesels
motivated the enactment of the 65,000-square-foot size restriction. The district court
determined that a reasonable jury could conclude that the City harbored animus against
the Loesels because no invitations or notices were sent to the Loesels concerning the city
council meeting at which the proposed size-limitation ordinance was discussed. But the
fact that the City was not cognizant of or proactively seeking the Loesels’ opinions is a
far cry from harboring animus or ill will. Animus is defined as “ill will, antagonism, or
hostility usually controlled but deep-seated and sometimes virulent.” Webster’s Third
New International Dictionary, Unabridged (2002). Similarly, ill will is defined as an
“unfriendly feeling: animosity, hostility.” Id. These definitions indicate that a showing
of animus or ill will (hereinafter collectively referred to as “animus”) requires more than
simply failing to invite the Loesels to a meeting.
The Loesels attempt to bolster the district court’s determination on this issue by
claiming that Sheila Stamiris, Executive Director of the DDA, harbored feelings of envy
No. 10-2354 Loesel, et al. v. City of Frankenmuth Page 20
because, when Stamiris first heard rumors of the potential sale of Loesels’ property to
Wal-Mart, she informed City officials in a memorandum that the Loesels were selling
their land for a “great deal of money.” But Stamiris never indicated in the memorandum
that the amount of money bothered her, nor did she say anything negative about the
Loesels in the document. She even mentioned in the memorandum that she was grateful
that the City had “been given the ‘heads up’ by the [Loesels]” about the proposed sale.
Furthermore, her statement about the money involved in the deal was true: by that date,
the Loesels had been offered nearly $3 million by Wal-Mart. Stamiris’s isolated remark
is therefore insufficient to prove that Stamiris—much less the City officials who actually
enacted the ordinance—was motivated by any animus against the Loesels.
Although the Loesels presented abundant evidence showing that certain City
officials, such as City Manager Graham, strongly opposed having a Wal-Mart
supercenter in Frankenmuth, the animus had to be directed against the Loesels to be
relevant to their claim. See Taylor Acquisitions, L.L.C., v. City of Taylor, 313 F. App’x
826, 838 (6th Cir. 2009) (holding that the plaintiff had to show in its class-of-one equal
protection claim that government officials expressed animus against the plaintiff, not
against the development it was proposing); see also Ziss Bros. Constr. Co. v. City of
Independence, Ohio, 439 F. App’x 467, 479 (6th Cir. 2011) (concluding that the
plaintiff failed to allege an equal protection violation based on animus where the plaintiff
alleged that the animus of the defendant-city was directed at the plaintiff’s proposed
development plan and not at the plaintiff itself); McDonald v. Vill. of Winnetka, 371 F.3d
992, 1001 (7th Cir. 2004) (holding that a class-of-one claim may be established by
showing that there “is a totally illegitimate animus toward the plaintiff by the defendant”
(emphasis added) (internal quotation marks omitted)). The district court, therefore,
should have granted the City’s motion for judgment as a matter of law on the animus
theory of liability.
This leaves us with the question of whether the district court’s error requires that
we remand the case for a new trial. Before deliberations, the jury was instructed that it
could find the City liable under either the no-conceivable-basis or the animus theory of
No. 10-2354 Loesel, et al. v. City of Frankenmuth Page 21
liability. The jury returned a general verdict form answering “Yes” to the following
question of liability: “Did the plaintiff[s] prove their equal protection claim by a
preponderance of the evidence?” But as determined above, only the no-conceivable-
basis theory was properly submitted to the jury. Because nothing on the verdict form
indicated which theory formed the basis for the jury’s decision, the question is whether
we may presume that the jury found for the Loesels’ under the factually sufficient no-
conceivable-basis theory or whether we must vacate the verdict and remand for a new
trial.
If this were a criminal case, we would follow the Supreme Court’s decision in
Griffin v. United States, 502 U.S. 46 (1991), which held that “‘in the absence of anything
in the record to show the contrary, the presumption of law is that’ . . . [the] jurors
convicted [the defendant] on the factually sufficient theory.” United States v. Henning,
286 F.3d 914, 921-22 (6th Cir. 2002) (emphasis omitted) (quoting Griffin, 502 U.S. at
50). The Henning court reasoned that “[w]hen faced with alternative theories of
liability, jurors can rely on their own intelligence and experience to save them from
relying upon a factually inadequate theory.” Id. at 921.
Many circuits have extended the holding in Griffin to civil cases. See, e.g., i4i
Ltd. P’ship v. Microsoft Corp., 598 F.3d 831, 849-50 (Fed. Cir. 2010) (applying the
Griffin rule in the civil context); Walther v. Lone Star Gas Co., 952 F.2d 119, 126
(5th Cir. 1992) (same); Sandberg v. Va. Bankshares, Inc., 891 F.2d 1112, 1122 (4th Cir.
1989) (same), rev’d on other grounds, 501 U.S. 1083 (1991); McCord v. Maguire,
873 F.2d 1271, 1274 (9th Cir. 1989) (same). But our circuit has declined to apply
Griffin in civil cases tried before a jury. See Virtual Maint., Inc. v. Prime Computer,
Inc., 11 F.3d 660, 667 (6th Cir. 1993).
In Virtual Maintenance, the plaintiff (VM) presented to the jury three alternative
theories of liability to support its claim that “product bundling” by the defendant Prime
Computer violated the Sherman Act. The jury returned a verdict in favor of VM. On
appeal, however, this court determined that VM had failed to produce evidence sufficient
to find Prime Computer liable on two of the three theories and, therefore, Prime
No. 10-2354 Loesel, et al. v. City of Frankenmuth Page 22
Computer should have been granted judgment as a matter of law on those theories. But
the court also concluded that evidence presented on the third theory was sufficient to
support the jury’s verdict. Nonetheless, the court determined that it could not let the
jury’s verdict stand. It ruled that, despite the existence of a viable theory of liability,
“[b]ecause the general jury verdict in the first trial provides no indication of the jury’s
reliance on [the factually sufficient] theory in support of the original verdict, we are
obligated to reverse the verdict and remand for a new trial.” Id.
VM then petitioned for rehearing, specifically requesting that this court follow
the presumption outlined in Griffin (which had been decided by the Supreme Court in
the same year that Virtual Maintenance was heard) and allow the verdict to stand. But
the court denied VM’s request, holding that “Griffin, a criminal case, does not alter the
longstanding civil general verdict rule, a principle to which this circuit has consistently
adhered.” Virtual Maintenance, 11 F.3d at 667 (citation omitted); but see Ellis v.
Gallatin Steel Co., 390 F.3d 461, 472 (6th Cir. 2002) (applying the Griffin rule in a civil
case where the factfinder was the district court rather than a jury).
Because Virtual Mainenance has not been overturned by an en banc opinion of
this court or by a Supreme Court decision, we are bound by it. See Salmi v. Sec’y of
Health & Human Servs., 774 F.2d 685, 689 (6th Cir. 1985) (noting that “[a] panel of this
Court cannot overrule the decision of another panel . . . unless an inconsistent decision
of the United States Supreme Court requires modification of the decision or this Court
sitting en banc overrules the prior decision”). We therefore must vacate the judgment
for the Loesels and remand this case for a new trial. Consequently, we need not reach
the City’s alternative arguments that it is entitled to a new trial because of improper jury
instructions and erroneous evidentiary rulings.
B. Damages
Although we also need not reach the issue of whether the district court erred in
denying the City’s motion for a remittitur, we believe that the potential for reversible
error on the issue of damages will be reduced by offering some guidance to the district
court. The damages awarded by the jury, $3.6 million, strikes us as excessive, in large
No. 10-2354 Loesel, et al. v. City of Frankenmuth Page 23
part because the verdict itself renders the zoning ordinance unconstitutional and
unenforceable. Had the jury verdict been upheld, the Loesels would have retained their
property unencumbered by the zoning ordinance and been awarded $3.6 million, which
is 90% of the full purchase price from Wal-Mart. This outcome would have let the
Loesels recover twice, an impermissible result. See Gen. Tel. Co. of the Nw. v. EEOC,
446 U.S. 318, 333 (1980) (“It also goes without saying that the courts can and should
preclude double recovery by an individual.”).
In the event that the case is tried again, the jury should be instructed that the
proper damages award in this case is the amount that the Loesels would have received
from Wal-Mart had the ordinance never been enacted minus the property’s value
unencumbered by the zoning ordinance. Although the jury was instructed by the district
court to “award [the Loesels] such a sum as you find by the preponderance of the
evidence will fairly and justly compensate them for actual losses you find they have
suffered as a direct result of the defendant’s conduct,” we believe that this instruction
was overly vague. While deliberating, the jury sent a note to the district court asking:
“Is there any possibility of transferring the land to the City/township if a monetary award
of 4 million dollars is awarded to the Loesels?” This suggests that the jury struggled
with how to award damages without giving the Loesels a windfall. That is why, if tried
again by a jury, we recommend that the jury instructions on damages include a specific
formula to aid the jury in calculating damages.
III. CONCLUSION
For all of the reasons set forth above, we REVERSE the judgment of the district
court and REMAND the case for further proceedings consistent with this opinion.