Flying J Incorporated v. City of New Haven, Indiana ( 2008 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 08-2319
F LYING J INC.,
Plaintiff-Appellant,
v.
C ITY OF N EW H AVEN , a political subdivision of the state of
Indiana, B RIAN Y OH, individually and as Plan Director and
Zoning Administrator of the City of New Haven, and
T ERRY E. M C D ONALD, individually and as mayor of the City
of New Haven,
Defendants-Appellees.
Appeal from the United States District Court
for the Northern District of Indiana, Fort Wayne Division.
No. 1:07-CV-237 RM—Robert L. Miller, Jr., Chief Judge.
A RGUED N OVEMBER 4, 2008—D ECIDED D ECEMBER 5, 2008
Before B AUER, F LAUM, and W ILLIAMS, Circuit Judges.
F LAUM, Circuit Judge. Flying J purchased 53.3 acres in
New Haven, Indiana in the hopes of constructing a travel
plaza and various other developments, including hotels
2 No. 08-2319
and restaurants, on that land. Unfortunately, the New
Haven Plan Commission was not as sanguine about the
development plans, and after two adverse zoning decisions
Flying J sued New Haven in Indiana state court. After
losing in the trial court, Flying J prevailed on appeal, and
the Indiana Supreme Court’s decision not to review the
case made Flying J’s victory final. The victory proved to be
short-lived, however. As the state court litigation was
winding down, New Haven amended its zoning ordinance
and limited all service stations (such as Flying J’s travel
plaza) to two acres in size. Needless to say, Flying J’s
proposed development was not permitted under the
amended ordinance. Flying J then filed suit in federal
court, alleging that New Haven’s actions violated their
rights to equal protection and due process. New Haven
then filed a motion to dismiss for lack of subject matter
jurisdiction, charging that the case was not ripe, and a
motion to dismiss for failure to state a claim. The district
court found that the controversy was ripe and thus that it
had subject matter jurisdiction over the case, but granted
the motion to dismiss for failure to state a claim.
Flying J appeals this decision, and for the following
reasons we affirm the district court’s dismissal.
I. Background
Flying J develops travel plazas, facilities that offer food,
fuel, groceries, financial services, and other services to
truck drivers and other travelers. Flying J was planning on
constructing a new travel plaza on 53.3 acres that Flying J
purchased in New Haven, Indiana. The land is designated
No. 08-2319 3
as a C-1(P) General Commercial Planned District, which
permits a variety of uses including automobile service
stations, stores, businesses, general retail, food service,
motels, and various other uses. Flying J’s proposed use of
the site would include a 17.7 acre travel plaza and room to
expand with other developments, including hotels and
restaurants.
To start the development process, in 2005 Flying J made
a presentation to Brian Yoh, the Plan Director and Zoning
Administrator for the City of New Haven. Yoh determined
that some of the proposed uses were not permitted in
property with a C-1 zoning designation, and he informed
Flying J of this fact shortly after they gave their initial
presentation. Displeased, Flying J appealed to the Board of
Zoning Appeals, which affirmed Yoh’s decision. Flying J
then took the matter to the Indiana state courts. The Circuit
Court of Allen County granted summary judgment for the
Board of Zoning Appeals on September 23, 2005. Flying J
then appealed to the Indiana Court of Appeals, and in 2006
that court reversed the circuit court and instructed it to
enter summary judgment for Flying J, concluding that Yoh
and the Board of Zoning Appeals had erroneously ruled
that some of Flying J’s proposed uses were not permitted
in property zoned C-1. The Board of Zoning Appeals
unsuccessfully filed petitions for rehearing and for transfer
to the Indiana Supreme Court, and the appellate court
decision became final on May 3, 2007.
In light of this ruling, Flying J’s representatives met with
Yoh and other city officials in late 2006 and 2007 to discuss
how they could move forward with their development
4 No. 08-2319
plans. At this time, and unbeknownst to Flying J, the City
of New Haven was moving forward with plans to amend
the zoning ordinance in a way that would eliminate Flying
J’s plans to construct a service center on the property. The
amendment limited “service stations” in property zoned
C-1 to two acres, an amendment that apparently would not
affect any of the existing service stations in the area. The
City Plan Commission conducted a public hearing on the
change on February 20 but did not give Flying J specific
notice of the hearing. The Common Council of the City of
New Haven voted to adopt the amendment on February
27, 2007. Flying J, once again, was not given notice of this
meeting. At a third meeting two weeks later, the Common
Council again voted to adopt the amendment. Again,
Flying J did not receive notice of the meeting.
Flying J in fact learned about the ordinance through
litigation, when the Zoning Board filed a Motion to Correct
Error with the Circuit Court, claiming that Flying J’s
proposed use was permitted only under the old zoning
plan, in effect when they first applied in 2005, but not the
new zoning plan. The Circuit Court denied this motion, but
nevertheless in August 2007, Yoh informed Flying J that its
application for development of its 53.3 acre tract in New
Haven must comply with the amended zoning ordinance.
On appeal, Flying J makes additional factual allegations,
which they claim are consistent with the general tenor of
the complaint and thus are appropriate to add at the
appellate stage. These facts allege conflicts of interest on
the part of Ronald Steinman, a member of the New Haven
Common Council who voted for the amended ordinance,
No. 08-2319 5
and Michelle Hill, a member of the Board of Zoning
Appeals. According to the allegations, both separately own
parcels of land near the 53.3 acres that Flying J is planning
to develop. Flying J argues that its proposed development
would affect the value of the property owned by Hill and
Steinman, and that this conflict explains New Haven’s
vigilance in attempting to stop the development of the
travel plaza.1
On September 11, 2007, Flying J filed suit in federal court
alleging that the City of New Haven, Yoh, and the city’s
mayor, Terry McDonald (collectively “New Haven”) had
violated its rights to substantive due process, procedural
due process, and equal protection under both the United
States Constitution and the Indiana Constitution, and
seeking declaratory relief and damages. New Haven
responded by filing a motion to dismiss for lack of subject
matter jurisdiction, arguing that Flying J was actually
positing a Takings Clause claim that was not yet ripe, and
an alternative motion to dismiss for failure to state a claim
1
New Haven objects to the inclusion of these facts in the appeal
because they lack record support and were not presented in the
complaint to the district court. However, recognizing the early
procedural stage of this case and the need to give the plaintiff
the benefit of the broad Rule 12(b)(6) standard, the additional
facts can be presented as long as they are consistent with the
complaint. Hrubec v. National R.R. Passenger Corp., 981 F.2d 962,
963-64 (7th Cir. 1992). Given that Flying J’s complaint focuses on
accusations of bias and animus on the part of various adminis-
trators from New Haven, these additional facts are generally
consistent with the complaint and can be presented here.
6 No. 08-2319
under Rule 12(b)(6). On April 28, 2008, the district court
granted the city’s Rule 12(b)(6) motion. This appeal
followed.
II. Discussion
This appeal involves two issues. First, New Haven
challenges the subject matter jurisdiction of this court,
arguing that Flying J’s constitutional claims are actually
takings claims, and that because Flying J has not gone
through the process for receiving compensation from the
city for the alleged taking the claim is not ripe. Flying J
challenges the district court’s dismissal of the case under
Rule 12(b)(6) for failure to state a claim upon which relief
could be granted. We take each argument in turn.
A. Whether the district court improperly assumed
subject matter jurisdiction over the case in violation of
the ripeness requirements of Williamson County Regional
Planning Commission v. Hamilton Bank.
As an initial matter, New Haven argues that this court
lacks subject matter jurisdiction over the case because
Flying J is really asserting a takings claim cloaked as an
equal protection claim, and that because Flying J has not
exhausted its zoning application or its state remedies the
case is not ripe. The Supreme Court’s decision in William-
son County Regional Planning Commission v. Hamilton Bank
holds that in land use cases “a claim that the application of
government regulations effects a taking of a property
interest is not ripe until the government entity charged
No. 08-2319 7
with implementing the regulations has reached a final
decision regarding the application of the regulations to the
property at issue.” 473 U.S. 172, 186 (1985). Even in cases
where a developer’s proposed use is clearly at odds with
local zoning ordinances, the developer must first seek a
variance in the local zoning laws and then pursue what-
ever state court remedies are available before filing a
takings claim in federal court. Id. at 193-94. The rationale
for this rule is that “[t]he Fifth Amendment does not
proscribe the taking of property; it proscribes the taking of
property without just compensation.” Id. at 194. If a state
has a procedure in place to compensate landowners for
takings, regulatory and otherwise, then the property
owner’s Fifth Amendment rights have not been violated
until the state process is completed and the owner has still
been denied just compensation. Id. at 195.
This circuit has read Williamson County broadly, “reject-
ing attempts to label ‘takings’ claims as ‘equal protection’
claims and thus requiring ‘ripeness.’ ” Forseth v. Vill. of
Sussex, 199 F.3d 363, 368 (7th Cir. 2000). This circuit also
applies the ripeness requirements to most claims labeled as
“substantive due process” or “procedural due process”
claims. Id. However, courts in this circuit have recognized
an exception for “bona fide equal protection claims,” and
held that, in some circumstances, land use cases raising
equal protection issues are not subject to Williamson
County’s ripeness requirements. Id. at 370. Litigants making
these claims, however, must place them into one of two
categories, pleading either: “(1) the malicious conduct of a
government agent, in other words, conduct that evidences
a spiteful effort to ‘get’ him for reasons unrelated to any
8 No. 08-2319
legitimate state objective; or (2) circumstances, such as
prayer for equitable relief and a claim that would evapo-
rate if the government body treated everyone equally that
sufficiently suggest that the plaintiff has not raised just a
single takings claim with different disguises.” Id. at 371(internal quotation marks and citations omitted).
New Haven raises this issue in their reply brief, after
raising it in their motion to dismiss to the district court.
The city argues that because Flying J has not applied for a
variance or gone through the state procedures for seeking
compensation for the taking, the issue is not ripe for review
and accordingly this court lacks subject matter jurisdiction.
Flying J responds that the district court determined that
the ripeness requirements of Williamson County did not
apply and that because New Haven did not cross-appeal
the issue they are precluded from bringing it up here. This
last assertion is incorrect, however, because ripeness
“when it implicates the possibility of this Court issuing an
advisory opinion, is a question of subject matter jurisdic-
tion under the case-or-controversy requirement.” Wisconsin
Cent., Ltd. v. Shannon, 539 F.3d 751, 759 (7th Cir. 2008). The
point of Williamson County is that there is no case or
controversy within the meaning of Article III until the
plaintiff has pursued all available remedies in state court,
since zoning boards are capable of granting variances from
the challenged zoning ordinance, and local authorities are
capable of granting compensation. See Sprint Spectrum v.
City of Carmel, Ind., 361 F.3d 998, 1004 (7th Cir. 2004). New
Haven’s argument thus concerns this court’s subject matter
jurisdiction over the appeal. We are obliged to consider
No. 08-2319 9
that at any point in the litigation. Wisconsin v. Ho-Chunk
Nation, 512 F.3d 921, 935 (7th Cir. 2008).
Accepting all well-pleaded facts as true, however, it
appears that Flying J has presented a bona fide equal
protection claim. Flying J alleges that New Haven has
engaged in costly and protracted litigation in an effort to
draw out the application process for Flying J, covertly
passed an amended zoning ordinance that invalidated the
results of the litigation after the city lost, and that it wrote
the ordinance in such a way that it would only affect Flying
J and no other service station owners in the area. Flying J
has also presented additional allegations to the appellate
court, arguing that various members of the Common
Council and the Plan Commission have conflicts of interest
because they own parcels of land around the proposed
development. Without passing judgment on the ultimate
viability of these allegations, they are sufficient to allege
that the ordinance was passed because of ill-will or malice
toward Flying J, and thus fit within the first of the two
categories of bona fide equal protection violations.
New Haven claims that recent decisions from this circuit,
most notably Patel v. City of Chicago, 383 F.3d 569 (7th Cir.
2004), have further narrowed the window of equal protec-
tion claims. Patel recognized the validity of bona fide equal
protection claims, however. Id. at 573. The opinion did hold
that if a plaintiff only alleges an equal protection violation
based on depressed property values, and the parties file
suit primarily for relief from the operation of eminent
domain powers, then their claim is properly labeled a
takings claim rather than an equal protection claim. Id.10 No. 08-2319
However, while the plaintiffs in Patel alleged that the city
ordinance singled out their parcels for acquisition through
eminent domain, this court was uncertain about the precise
sort of equal protection claim that the plaintiffs in that case
were raising. Id. at 572 (“[T]hey appear to be claiming that
the ordinance is a law that rests on wholly irrational
distinctions, presumably between their properties and all
others in the city. Or they may in part be asserting the type
of equal protection claim that arises when a party is subject
to ‘a spiteful effort to “get” him for reasons wholly unre-
lated to any government objective.’ ”) (internal citations
omitted). We concluded, based on the asserted injury and
the requested relief, that the plaintiffs were essentially
asserting a takings claim recast as an equal protection
claim. Id. at 573-74.
The complaint in this case, however, more definitely
alleges the sort of “conduct that evidences a spiteful effort
to ‘get’ him” that serves as an exception to the ripeness
requirements of Williamson County. Specifically, Flying J
alleges that the city has improperly denied its development
plan and covertly drafted, noticed and passed an ordinance
that denies the company the right to develop its property
in order to void the result of earlier Indiana court case. The
complaint thus alleges the sort of ill-will and spiteful
conduct that brings this case within the ambit of Forseth’s
exception to the requirements of Williamson County.
Accordingly, we affirm the district court’s determination
that the ripeness requirements of Williamson County do not
apply to the present case.
No. 08-2319 11
B. Whether the district court properly dismissed the
case for failure to state a claim under Rule 12(b)(6).
The next issue is whether the district court properly
dismissed the suit for failing to state a claim under Rule
12(b)(6). The district court dismissed the complaint for
failure to state a claim after concluding that Flying J had
not pled sufficient facts to overcome the presumption of
rationality attached to government action and accordingly
had not pled the elements of its “class of one” equal
protection claim. In so doing, the district court went
through a two-step analysis. First, the district court
claimed that in assessing a class of one equal protection
claim at the Rule 12(b)(6) stage, the court should presume
the rationality of the law. Wroblewski v. City of Washburn,
965 F.2d 452, 459 (7th Cir. 1992). The district court then
proceeded to analyze the possible justifications for the
ordinance, in particular the need to control the secondary
impact of large service stations. The district court con-
cluded that while this particular amendment to the zoning
ordinance was adopted in response to Flying J’s plans to
construct a travel plaza on the land it had purchased in
New Haven, such a generally applicable zoning amend-
ment could be adopted because of a single proposed
development. Pro-Eco, Inc. v. Board of Commissioners of Jay
County, Ind., 57 F.3d 505, 515 (7th Cir. 1995). The district
court then proceeded to Flying J’s complaint, and deter-
mined that rather than provide facts that negated any
rational basis for the amendment, Flying J had proceeded
under the theory that the amended zoning ordinance was
adopted out of animus for Flying J and its development
plans, and as a way for the city to avoid the consequences
12 No. 08-2319
of the Indiana Court of Appeals’ decision. The district
court concluded, however, that because of this court’s
precedent in Lauth v. McCollum, 424 F.3d 631, 634 (7th Cir.
2005), evidence of animus was insufficient to negate the
hypothesized justifications for the zoning ordinance, and
accordingly that Flying J had not pled sufficient facts to
overcome the presumption of rationality that accompanies
the city’s action.
Flying J now argues that the district court committed
three errors when dismissing the case. First, the district
court incorrectly applied the standard from Lauth—which
Flying J claims applies only to public employment cases
and only at summary judgment—to a Rule 12(b)(6) motion.
Second, the district court incorrectly assumed the truth of
facts offered to establish the rational basis for the zoning
amendment while ignoring evidence that the law was
enacted to single out Flying J. Third, the district court
ignored the facts from the complaint that established an
unequal enforcement claim (that is, that the amended
zoning ordinance was only enforced with respect to Flying
J) in addition to their unequal enactment claim.
New Haven argues that the district court correctly
applied Lauth, because that case created a two-step inquiry
for class of one equal protection cases, first requiring facts
to show that the government action in question could not
be connected to any rational basis and then requiring facts
to show that the action was motivated by animus. They
add that while Lauth was not a case decided under Rule
12(b)(6), the opinion signals that its standard can be
applied at earlier stages of the litigation. As for Flying J’s
No. 08-2319 13
claim that the district court improperly assumed a rational
basis for the law, New Haven replies that the district court
properly followed precedent such as Pro-Eco in hypothesiz-
ing a rational basis for the law, which Flying J did not
plead sufficient facts to overcome, and that it was permissi-
ble for the city of New Haven to adopt a generally applica-
ble zoning ordinance in response to a single proposed
development. Finally, they argue that the facts in Flying J’s
complaint establishing animus are merely speculative, and
that the actions of the city have a rational basis.
Flying J is correct that Lauth concerned a different legal
subject matter and had a different procedural posture than
the present case, but the district court did not err by citing
that case in its ruling on the 12(b)(6) motion. Indeed, the
opinion in Lauth invites courts to apply the standard that
it announced to lawsuits earlier than the summary judg-
ment stage: “Since hypothesis is not proof, this test that we
have articulated can often be applied in advance of discov-
ery. It could have been here.” Lauth, 424 F.3d at 634. This
part of the Lauth opinion cited Wroblewski, the case con-
cerning Rule 12(b)(6) that Flying J claims set the only
applicable standard for class of one equal protection
claims. Nor is Lauth limited to employment litigation,
although that was the instant subject matter of the case;
rather, the opinion discusses two strands of class of one
equal protection claims, rational basis claims and animus
claims, and develops a test that can apply uniformly to
both types of cases (including cases involving such far-
flung topics as liquor license renewals).
Lauth creates a standard that “a plaintiff who does not
belong to any ‘suspect’ (that is, favored) class—by defini-
14 No. 08-2319
tion, the situation of a class-of-one plaintiff—must,
to prevail, negative any reasonably conceivable state of
facts that could provide a rational basis for the classifica-
tion. . . . Animus comes into play only when, no rational
reason or motive being imaginable for the injurious action
taken by the defendant against the plaintiff, the action
would be inexplicable unless animus had motivated it.” Id.This standard harmonizes well with the standard for Rule
12(b)(6) motions in class of one equal protection claims that
this circuit developed in Wroblewski. That opinion acknowl-
edged the “perplexing situation” that arises when a lawsuit
challenging a government action subject only to rational
basis review is evaluated under the deferential standard of
a Rule 12(b)(6) motion to dismiss. Wroblewski, 965 F.2d at
459. The solution is to “take as true all of the complaint’s
allegations and reasonable inferences that follow, [and
then] apply the resulting ‘facts’ in light of the deferential
rational basis standard.” Id. at 460. Wroblewski ultimately
holds that to get past a Rule 12(b)(6) motion to dismiss on
a class of one equal protection claim, “a plaintiff must
allege facts sufficient to overcome the presumption of
rationality that applies to government classifications.”
Wroblewski, 965 F.2d at 460.
Lauth simply elaborates on the pleading requirements of
Wroblewski. While district courts continue to presume the
truth of all allegations in the complaint when evaluating a
Rule 12(b)(6) motion to dismiss, allegations of animus do
not overcome the presumption of rationality and the court
evaluates those allegations once a plaintiff has pled facts
that show the irrationality of the government action in
question. This standard reflects the fairly intuitive idea that
No. 08-2319 15
a given action can have a rational basis and be a perfectly
logical action for a government entity to take even if there
are facts casting it as one taken out of animosity.2 It is only
when courts can hypothesize no rational basis for the
action that allegations of animus come into play. For
instance, the classic example of irrational government
action in a class of one equal protection case in this circuit
is “an ordinance saying: ‘No one whose last name begins
with “F” may use a portable sign in front of a 24-hour food
shop, but everyone else may.’ ” Falls v. Town of Dyer, 875
F.2d 146, 147 (7th Cir. 1989). What makes the ordinance in
the example irrational is not simply the act of singling out,
but rather that the singling out is done in such an arbitrary
way. See Esmail v. Macrane, 53 F.3d 176, 180 (7th Cir. 1995).
Another example, tailored to the present case, would be a
zoning ordinance saying that any corporation whose name
begins with “F” may not construct any development larger
than a half-acre in size.
Flying J’s complaint focuses on the allegation that
the amended zoning ordinance was adopted in order to
avoid the Indiana Court of Appeals decision holding that
2
Wroblewski also makes the point that a court can hypothesize
a rational basis for an action even if the plaintiff’s pleading
states facts demonstrating that the action was also motivated by
animus. “[I]n this context animosity is not necessarily inconsis-
tent with a rational basis. . . . A city presumably could not reject
a bid for work on the grounds of race or sex or political animus;
it could, however, decide that it cannot get along productively
with someone, at least when that someone has done work on the
city’s property before.” Wroblewski, 965 F.2d at 460.
16 No. 08-2319
Flying J’s travel plaza was permitted under the old zoning
ordinance. Flying J’s equal protection claim is based on
allegations that New Haven “maliciously and spitefully”
sought to keep Flying J from developing the travel plaza,
“maliciously and spitefully” creating an amended zoning
ordinance that was directed at Flying J’s proposed devel-
opment, and “maliciously and spitefully” enforcing
the zoning ordinance against Flying J, “all in a manner
that was wholly unrelated to legitimate, non-discrimina-
tory governmental objectives.” Pl. First Amended Com-
plaint ¶ 64.
Aside from the conclusory statement at the end of the
paragraph, however, this allegation does not establish that
the amended zoning ordinance is irrational, only that it
was adopted in response to Flying J’s proposed develop-
ment. The district court was able to hypothesize several
reasons for the amended ordinance, including the need
to control the secondary effects of large developments.
Flying J argues that the amended zoning ordinance is
written in a way that applies only to service stations two
acres or larger, and thus that it singles out Flying J. But the
ordinance would presumably apply to any developer
trying to construct a large-scale service station, and the
citation to Pro-Eco in the district court’s opinion establishes
the salient point that a classification is not irrational simply
because it was adopted in response to a specific proposed
development. Pro-Eco, Inc., 57 F.3d at 515.
Nor are the allegations of a conflict of interest on the part
of a member of the New Haven Common Council and a
member of the Board of Zoning Appeals sufficient to plead
No. 08-2319 17
an equal protection claim. This circuit of course recognizes
that questionable behavior on the part of elected officials
can give rise to a class of one equal protection claim, as in
Forseth v. Village of Sussex where a city official premised
government approval of a development plan on the plain-
tiffs’ selling a strip of land to a town official at a heavily
discounted price. Forseth, 199 F.3d at 371. The conflict of
interest alleged in this case stems from the officials’
ownership of adjoining property, which Flying J claims
will be affected by the proposed travel plaza; there is no
allegation that city officials sought any personal gain or
conditioned any government action on such gain. Instead,
the conflict of interest allegations, taken as true, are used as
another means of explaining the city’s animus to the
proposed development. As outlined above, however, such
allegations of animus are only considered once the plaintiff
has pled sufficient facts to demonstrate the irrationality of
the government action that the court is asked to evaluate.
By not pleading such facts, Flying J is unable to establish a
class of one equal protection claim.
Finally, the district court did not err by construing the
plaintiff’s equal protection claim as one of unequal enact-
ment and not unequal enforcement. Flying J’s complaint
does not contain allegations that the zoning ordinance has
only been applied to its development while other develop-
ers of similarly-sized travel plazas have been granted
variances. Rather, the complaint claims that New Haven
passed the ordinance in order to apply it to Flying J, and
that another similar development is not forthcoming (this,
in fact, is the essence of their claim that the amended
ordinance singled out Flying J); but without alleging that
18 No. 08-2319
New Haven has declined to apply the ordinance to devel-
opers of similar properties, Flying J’s complaint is properly
read as alleging unequal enactment rather than unequal
enforcement.
The allegations in Flying J’s complaint are thus insuffi-
cient to overcome the presumption of rationality that
attaches to government actions in a class of one equal
protection case, and the district court properly dismissed
it for failing to state a claim under Rule 12(b)(6).
III. Conclusion
For the foregoing reasons, we AFFIRM the opinion of the
district court granting the defendants’ motion to dismiss.
12-5-08