Discovery House Inc v. Consolidated City IN ( 2003 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 02-2326
DISCOVERY HOUSE, INC.,
Plaintiff-Appellee,
v.
CONSOLIDATED CITY OF INDIANAPOLIS and
METROPOLITAN BOARD OF ZONING APPEALS
OF MARION COUNTY, INDIANA,
Defendants-Appellants.
____________
Appeal from the United States District Court
for the Northern District of Indiana, Hammond Division.
No. 2:98-CV-437—James T. Moody, Judge.
____________
ARGUED NOVEMBER 4, 2002—DECIDED JANUARY 30, 2003
____________
Before BAUER, KANNE, and EVANS, Circuit Judges.
EVANS, Circuit Judge. Most people are in favor of
programs that help drug addicts shake their addictions.
But a lot of people also do not want drug treatment pro-
grams operating in their neighborhoods. These programs,
some fear (whether the fear is rational or not is anoth-
er question), will bring hoards of drug addicts, many of
whom are embroiled in the criminal justice system, to
“centers” that dispense one drug, methadone for instance,
to the addicts who are trying to free themselves from the
grip of another, more dangerous drug, like heroin. Today’s
case is about the drug treatment business and a million
2 No. 02-2326
dollar judgment against Indiana’s capital city in a dis-
pute that started as a zoning squabble. It raises inter-
esting questions about the scope of remedies available
under various laws when a zoning dispute delays the
opening of a drug treatment clinic.
Discovery House, Inc. is a for-profit corporation that
operates drug-addiction rehabilitation programs. It (and
its corporate affiliates) operate about a dozen substance
abuse clinics in three states, including one in Indiana. In
the fall of 1995, Discovery House hoped to open a metha-
done distribution facility in Indianapolis. It was told by
an employee of the Department of Metropolitan Develop-
ment that zoning regulations would allow a facility in
the site it had chosen. That decision was later challenged
by persons opposed to the facility, and in 1996 the Metro-
politan Board of Zoning Appeals (BZA) of Marion County,
Indiana, determined, after a contested hearing, that the
Discovery House facility was not a permitted use for the
area, which was zoned for doctor’s offices and hospitals.
Discovery House filed a writ of certiorari, and an Indiana
state trial judge upheld the BZA determination. Discovery
House appealed to the Indiana Court of Appeals, which
overturned the decision holding that a methadone treat-
ment center was a permitted use under the zoning laws
at the requested location. The court of appeals decision
was issued in 1998.
One month before the Indiana Court of Appeals decision,
Discovery House filed suit in state court, claiming that
the BZA and the City (we will refer to both as BZA) vio-
lated its civil and constitutional rights under the Ameri-
cans With Disabilities Act (ADA), the Rehabilitation Act
(RA), and the Equal Protection Clause by determining
that a methadone treatment center was not a permitted
use. The case was removed to federal court, a trial was held,
and the jury awarded a little over a million dollars to
Discovery House. The damages were awarded for the time
No. 02-2326 3
between the BZA denial of a zoning permit and the deci-
sion of the Indiana Appeals Court giving Discovery House
the green light to open its clinic.
BZA sees a number of things wrong with the result. Its
eyesight, as we shall see, is pretty good. One problem
involves whether Discovery House has standing to bring
this suit under the ADA, the RA, and § 1983. BZA’s argu-
ment is that the corporation is not protected under the
ADA and the RA; for instance, it is not a “qualified indi-
vidual with a disability” and thus it lacks standing, and
because in these circumstances the § 1983 claim tracks
the other claims, standing is lacking under that statute
as well.
As a constitutional matter, standing involves whether
a plaintiff has made out a “case or controversy” between
himself and the defendant within the meaning of Article
III. Put otherwise, it involves whether the plaintiff has
“ ‘alleged such a personal stake in the outcome of the con-
troversy’ as to warrant his invocation of federal-court
jurisdiction and to justify exercise of the court’s remedial
powers on his behalf.” Warth v. Seldin, 422 U.S. 490, 498-
99 (1975), quoting Baker v. Carr, 369 U.S. 186, 204 (1962).
In addition to constitutional requirements, standing
may exist because of statutorily created rights: “[T]he
standing question in such cases is whether the constitu-
tional or statutory provision on which the claim rests
properly can be understood as granting persons in the
plaintiff’s position a right to judicial relief.” Warth, at 500.
The question here is whether the ADA and the RA (which
run along the same path and can be treated in the same
way) grant standing to Discovery House. Title II of the
ADA prohibits a public entity from denying equal services
to individuals because of their disabilities. The enforce-
ment provision found in § 12133 extends relief not just
to “qualified individuals with a disability,” but to “any
4 No. 02-2326
person alleging discrimination on the basis of disabil-
ity . . . .” The RA at § 794a(a)(2) extends remedies to “any
person aggrieved” by discrimination on the basis of dis-
ability.
That a plaintiff in the position of Discovery House qual-
ifies as an entity which may sue to enforce the rights
of others under these provisions, or in fact has standing
on its own behalf, has been the conclusion of other courts.
See Regional Econ. Cmty. Action Program, Inc. v. City
of Middletown, 294 F.3d 35 n.2 (2d Cir. 2002); MX
Group, Inc. v. City of Covington, 293 F.3d 326 (6th Cir.
2002); Innovative Health Sys., Inc. v. City of White Plains,
117 F.3d 37 (2d Cir. 1997), overturned on other grounds,
Zervos v. Verizon New York, Inc., 252 F.3d 163 (2d Cir.
2001). For purposes of this case, we have no need to agree
or disagree with those courts because the reasoning ad-
vanced in those cases does not address the problem posed
by this case.
For the most part, the cases we just cited concern equita-
ble relief to allow facilities to exist where they had been
prohibited. In the case of Discovery House, relief of that
kind is unnecessary because the Indiana appellate court
has already determined that Discovery House can open
its clinic at its desired location. So, Discovery House does
not seek equitable relief in this case.
Which brings us to the fact that Discovery House seeks
relief which perhaps indirectly will benefit its clients,
but which primarily is designed to benefit its for-profit
business. Discovery House has won over a million dollars
in damages for lost profits for the time period between
the BZA decision and its reversal of the BZA decision by
the appellate court. The trial record, including the argu-
ments of counsel and the jury instructions, leaves no
doubt that it is only lost profits we are concerned with.
So our question becomes, does either the ADA or the RA
grant Discovery House standing to recover lost profits?
No. 02-2326 5
That the nature of the relief sought is a relevant con-
sideration in evaluating standing cannot seriously be
contested. In discussing associational standing, the Court
says in Warth that
whether an association has standing to invoke the
court’s remedial powers on behalf of its members
depends in substantial measure on the nature of the
relief sought. If in a proper case the association seeks
a declaration, injunction, or some other form of pro-
spective relief, it can reasonably be supposed that the
remedy, if granted, will inure to the benefit of those
members of the association actually injured. Indeed,
in all cases in which we have expressly recognized
standing in associations to represent their members,
the relief sought has been of this kind.
Warth, at 515. Even more clearly, the Court stated in
Friends of the Earth, Inc. v. Laidlaw Environmental
Services (TOC), Inc., 120 S. Ct. 693, 706 (2000) that “a
plaintiff must demonstrate standing separately for each
form of relief sought.”
Looking, then, to the nature of the relief sought and
the statutes under which standing is asserted, we see no
way that either the ADA or the RA contemplates a recov-
ery for lost profits for a business like that of the Discov-
ery House. The remedy provisions of the statutes send us
on a maze-like journey that starts with the ADA, § 12133,
which states:
The remedies, procedures, and rights set forth in
section 505 of the Rehabilitation Act of 1973 (29 U.S.C.
§ 794a) shall be the remedies, procedures, and rights
this title provides to any person alleging discrimina-
tion on the basis of disability in violation of section 202
[42 U.S.C. § 12132].
Looking at § 505 of the Rehabilitation Act (29 U.S.C.
§ 794a), we find that subsection (a)(1) provides for reme-
6 No. 02-2326
dies for employment discrimination, which are clearly
not relevant for our purposes. Subsection (a)(2) tells us that
[t]he remedies, procedures, and rights set forth in title
VI of the Civil Rights Act of 1964 [42 U.S.C. §§ 2000d
et seq.] shall be available to any person aggrieved by
any act or failure to act by any recipient of Federal
assistance or Federal provider of such assistance
under section 504 of this Act [29 USCS § 794].
Continuing our journey, we get to § 2000d, which is not
at all helpful. It provides for judicial review in some cir-
cumstances, § 2000d-2, but beyond that we look to
cases discussing remedies and find, once again, that
equitable relief is the order of the day. See, e.g., Hills v.
Gautreaux, 425 U.S. 284 (1976). The one thing that is
clear, however, is that lost profits are not expressly pro-
vided for.
That is not the end of the inquiry, however, for we
also know that “federal courts may use any available
remedy to make good the wrong done.” Bell v. Hood, 327
U.S. 678, 684 (1946). This principle, however, is not with-
out limits. Where a party is wronged by disregard of a
statute, and “where it results in damage to one of the
class for whose especial benefit the statute was enacted,”
there is a right to recover damages. Texas & Pacific R.R.
Co. v. Rigsby, 241 U.S. 33, 39 (1916); see also Franklin
v. Gwinnett County Pub. Sch., 503 U.S. 60 (1992). Discov-
ery House has a claim to standing under the ADA and
RA only because it runs a business which provides ser-
vices—like dispersing methadone—to persons presumably
covered by those Acts. If it were running a plumbing
business, it could hardly claim relief under either statute.
It follows, in our view, that the remedies we may find
(other than those specifically set out in the statute) must,
at the very least, be those which directly benefit the
disabled. It would stretch the principle of Bell v. Hood
No. 02-2326 7
too far to find that Discovery House has standing to re-
cover lost profits under these statutes.
Given that the remedy Discovery House seeks is not
available under the two statutes on which it relies—the
ADA and the RA—we find that it does not have standing
to seek lost profits, and the claims that seek them
should have been dismissed from the case. And the dis-
missal of those claims leaves the § 1983 claim, where
the standing question takes on a different form. For a
§ 1983 claim to exist, there must be a deprivation of either
a constitutional right or a federal statutory right, and
the action must be taken under color of state law. Maine
v. Thiboutot, 448 U.S. 1 (1980). When the violation is of
a statutory right, a plaintiff runs the risk that a court
might decide that the statutory scheme in one way or
another forecloses § 1983 relief. Wright v. Roanoke Redev.
and Hous. Auth., 479 U.S. 418 (1987); Middlesex County
Sewerage Auth. v. National Sea Clammers Ass’n, 453 U.S.
1 (1981). In fact, some courts have determined that the
ADA is such a statute. See Grey v. Wilburn, 270 F.3d 607(8th Cir. 2001); Alsbrook v. City of Maumelle, Arkansas, 184
F.3d 999 (8th Cir. 1999); Holbrook v. City of Alpharetta,
Georgia, 112 F.3d 1522 (11th Cir. 1997). Our court, how-
ever, has consistently declined to find that other similar
statutes preclude § 1983 relief when the § 1983 claim is
based directly on a constitutional violation, not a statu-
tory one. See, e.g., Trigg v. Fort Wayne Cmty. Sch., 766
F.2d 299 (7th Cir. 1985).
Discovery House neatly avoided this potential pitfall. It
did not base its § 1983 claim on statutory rights; it claimed
in its complaint that the BZA violated its rights under
the Equal Protection Clause of the Fourteenth Amend-
ment because the decision to turn down its request “was
arbitrary and the ordinance was applied and enforced
with a discriminatory intent and purpose.” Although seek-
ing damages for a period of time between the original
8 No. 02-2326
BZA decision and the time that decision was reversed on
appeal seems somehow inherently wrong, the claim is
similar to claims we have previously allowed. In Forseth
v. Village of Sussex, 199 F.3d 363 (7th Cir. 2000), we
distinguished equal protection claims from takings claims.
Were the claim a takings claim or one based on substan-
tive or procedural due process, it would be subject to
requirements somewhat unusual for a § 1983 claim—the
ripeness requirements set out in Williamson County
Regional Planning Commission v. Hamilton Bank, 473 U.S.
172 (1985). But in Forseth, we said that equal protection
claims based on land-use decisions can be made independ-
ently from takings claims.
Exactly what relief is available is not entirely clear. In
Esmail v. Macrane, 53 F.3d 176 (7th Cir. 1995), the plain-
tiff was allowed to go forward with his equal protec-
tion claim to recover legal expenses incurred in his effort
to get his liquor license applications granted. In contrast,
in Gamble v. Eau Claire County, 5 F.3d 285, 288 (7th
Cir. 1993), we implied that having a state court grant a
permit would have “spared” the plaintiff of “all the harm
of which she complains.” We did not say she would be
entitled to damages for the delay in obtaining a permit;
in fact, it seems fair to say we implied she would not
be. Nevertheless, for purposes of today’s decision, we will
assume Discovery House’s § 1983 equal protection claim
is viable. But, as we shall see in a moment, a plaintiff
has an uphill fight in prevailing on an equal protection
claim in a zoning case.
Given the assumption that damages are available,
standing is not an obstacle to the § 1983 claim. A corpora-
tion can bring a suit on its own behalf under § 1983 for
its own damages. Adams v. Park Ridge, 293 F.2d 585(7th Cir. 1961). The standing issues under the ADA and
the RA no longer present obstacles to the suit. Addition-
ally, a “class of one” is viable under the Equal Protection
No. 02-2326 9
Clause. Village of Willowbrook v. Olech, 528 U.S. 562(2000).
Although these determinations are a boon to Discovery
House’s case, the case still has a fatal flaw: there is a lack
of evidence of discriminatory intent. The proper level of
scrutiny in this circumstance is the rational relationship
test, for our case does not involve a fundamental right,
and there is no suspect class. Discovery House claims it
was discriminated against because its clients are drug
addicts. The claim is similar to the one in City of Cleburne
v. Cleburne Living Center, Inc., 473 U.S. 432 (1985), in
which the Court determined that the mentally retarded
did not form a quasi-suspect classification for equal pro-
tection analysis. The standard of judicial review applied
to a classification based on mental retardation is that
accorded economic and social legislation: the classifica-
tion drawn by a statute must be rationally related to a
legitimate state interest. In Board of Trustees of Univer-
sity of Alabama v. Garrett, 121 S. Ct. 955, 964 (2001), the
Court reaffirmed the Cleburne standard for equal protec-
tion claims based on disability and said that “[s]uch a
classification cannot run afoul of the Equal Protection
Clause if there is a rational relationship between the
disparity of treatment and some legitimate governmental
purpose” (citing Heller v. Doe, 509 U.S. 312 (1993)). Fur-
thermore, the government entity does not need to articu-
late its reasoning when the decision is made. The burden
is upon the challenging party to eliminate any “reason-
ably conceivable state of facts that could provide a ra-
tional basis for the classification.” At 964. So here, the
BZA decision must have a rational relationship to a legiti-
mate state interest, and any reasonably conceivable facts
can make the classification rational. The fact that the
disabled are protected under the ADA and RA, and the
fact that some (or most, or all) of Discovery House’s pro-
spective “clients” are disabled, is irrelevant.
10 No. 02-2326
In Forseth, the case in which we allowed an equal pro-
tection claim to go forward, we said that absent a fun-
damental right or a suspect class, for a “viable equal
protection claim in the land-use context, the plaintiff
must demonstrate ‘governmental action wholly impos-
sible to relate to legitimate governmental objectivesl’ ” At
371, citing Esmail. This is a very significant burden.
In addition, we have consistently held that the federal
courts are not zoning boards of appeal. Esmail; New
Burnham Prairie Homes v. Village of Burnham, 910 F.2d
1474 (7th Cir. 1990). Similarly, the concurring opinion in
Olech, supra, cautions that zoning decisions “will often,
perhaps almost always, treat one landowner differently
from another, and one might claim that, when a city’s
zoning authority takes an action that fails to conform to
a city zoning regulation, it lacks a ‘rational basis’ for
its action . . . .” 528 U.S. at 565. Olech could proceed,
however, because the board had taken “vindictive ac-
tion” and had exhibited “illegitimate animus” and “ill will.”
Here, the record shows that when Discovery House
looked into opening its methadone treatment facility,
an employee of the Department of Metropolitan Develop-
ment said the site it selected was in a location where
the zoning ordinance permitted such an operation. It
was zoned HD-2, which permitted the operation of offices
for physicians and other professions dealing with public
health, for pharmacies, and for other hospital related
uses. Petitions were then filed arguing that Discovery
House’s proposal for the site was not a permitted use. The
BZA held a public hearing on the issue and ruled that
in fact it was not a permitted use.
The BZA found that there was no evidence that the
Discovery House facility was a hospital or healthcare
institution. It concluded that, while a physician would
be designated as medical director of the facility, that per-
No. 02-2326 11
son would be present only on a part-time basis. No other
methadone distribution facilities had been approved in
areas zoned HD-2. Importantly, there were two other
methadone distribution facilities in Indianapolis, and
both were in areas zoned for commercial use. As a result,
the BZA concluded that the Discovery House facility
was not an office for physicians, dentists, or other profes-
sionals dealing with public health as required by the HD-2
zoning ordinance, nor would it be a pharmacy, nor would
it offer hospital related services. And so it concluded
that Discovery House’s proposed facility was not a permit-
ted use under HD-2 zoning.
Discovery House attempts to negate this reason for the
decision; it says the BZA members were, in fact, discrimi-
nating against its proposed clientele. While that may be
a possible conclusion, in the speculative sense, the evi-
dence falls short of proving the point. While several per-
sons who testified against the proposed clinic at the hear-
ing before the BZA might have been motivated by dis-
criminatory intent, there is a paucity of evidence to show
that the board itself, or its individual members, were. The
motivations of witnesses cannot be held against the
decisionmakers.
Additionally, the Marion Superior Court’s decision
upholding the BZA determination is further evidence that
the BZA’s assessment of the situation was far from arbi-
trary and unreasonable. It shows that an independent
judicial officer found the BZA decision to be rational and
consistent with the zoning laws.
As we close, we note that the trial of this case was
permeated with principles relevant to the ADA and RA
claims. In fact, Discovery House’s brief states that the
evidence at trial “must be considered by the reviewing court
in light of the purposes of the ADA and the RA, and the
various methods of proving discrimination approved by
12 No. 02-2326
the federal courts. The goal of the ADA is the ‘elimination
of discrimination against individuals with disabilities.’ ”
At 31. That is true under the statutes but not under the
Equal Protection Clause, which is the only claim left. A fair
inference about what happened at this trial is that
the equal protection claim was judged under a de facto
higher lever of scrutiny than the law allows because of the
presence of the ADA and RA claims. Because of those
claims, the jury was told that discrimination against the
disabled is prohibited. The equal protection claim was
tried as if there were a suspect classification involved,
when in fact there is not, and the decision of the BZA
should have been honored unless it was irrational and
unrelated to any legitimate governmental interest. This
was not established. The lack of evidence of discrimina-
tory animus on the part of the BZA members them-
selves and the fact that the HD-2 zoning does not with-
out question allow for a methadone distribution facility
required an end to the equal protection claim before
the case went to the jury.
In short, the ADA and the RA do not grant standing to
Discovery House to recover lost profits. For the reasons
stated, judgment as a matter of law should have been
granted on the equal protection claim. We therefore
REVERSE the judgment of the district court denying the
Rule 50 motion for judgment as a matter of law and
REMAND this case for entry of judgment for the BZA.
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—1-30-03