Cherry Knoll, L.L.C. v. HDR Engineering, Incorpora

Case: 18-50494 Document: 00514925503 Page: 1 Date Filed: 04/22/2019
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
April 22, 2019
No. 18-50494
Lyle W. Cayce
Clerk
CHERRY KNOLL, L.L.C.,
Plaintiff - Appellant
v.
STEVEN JONES; HDR ENGINEERING, INCORPORATED; THE CITY OF
LAKEWAY,
Defendants - Appellees
Appeal from the United States District Court
for the Western District of Texas
Before STEWART, Chief Judge, DAVIS and ELROD, Circuit Judges.
W. EUGENE DAVIS, Circuit Judge:
Plaintiff-Appellant, Cherry Knoll, L.L.C., appeals the Rule 12(b)(6)
dismissal of its complaint against Defendants-Appellees, the City of Lakeway,
Texas, City Manager Steven Jones, and HDR Engineering, Inc. For the
reasons set forth below, we REVERSE and REMAND.
I.
Cherry Knoll alleges the following facts in its Second Amended
Complaint, which, at the motion to dismiss stage, we assume to be true. 1 In
1 See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
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November 2006, Cherry Knoll acquired 27.7 acres in the City of Lakeway (“the
City”) and sought to develop the property for mostly single-family residential
lots, with a small portion for commercial purposes. Larry Aiken, a developer
and member of Cherry Knoll, spearheaded the company’s development efforts.
In September 2007, the City approved a subdivision plat for the property, but
that plat was never recorded. Cherry Knoll subsequently modified its plans
for the property, determining that the property should be platted in two
subdivisions, one commercial and the other residential.
By the spring of 2008, however, the development project was having
financial difficulties, and Aiken advised the City Engineer, Paul Duncan, that
Cherry Knoll was placing the project on hold until further notice. Aiken and
Duncan agreed that it was best to preserve the progress that had already been
made, in case the project was later resurrected. Therefore, Cherry Knoll
prepared two Subdivision Plats, one commercial and one residential, that
reflected the configuration of the proposed development project as it existed at
that time. Aiken delivered the plats to Duncan, who agreed to hold the plats
until such time (if any) that Cherry Knoll was able financially to proceed with
the project. Cherry Knoll specifically alleges: “At no time whatsoever did Aiken
authorize Duncan to record the Subdivision Plats, and at no time did Duncan
suggest that the City might do so.”
The development project was never resurrected. Aiken ultimately sold
his interest in Cherry Knoll in April 2009 to two of its other members. Since
then, Cherry Knoll has explored other options for the property, having
determined that single-family residential use is no longer feasible because of
significant development of the surrounding area, including the 2012 opening
of Lakeway Regional Medical Center, a large medical campus located a few
hundred feet from the property.
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In 2013, approximately five years after Aiken delivered the Subdivision
Plats to Duncan, the City began moving forward with a planned improvement
of Flint Rock Road, which is adjacent to Cherry Knoll’s property. The City
hired an independent contractor, Schwendinger Advisory Services, L.L.C., for
consulting and project management services. The City hired another
independent contractor, HDR Engineering, Inc. (“HDR”), to provide a wide
range of services for the road improvement project, including “land acquisition”
services. Specifically, HDR was hired to handle all aspects of the City’s
acquisition of property from the various landowners affected by the City’s road
project, from the initial contact with the landowner through the closing of the
sale. HDR also was responsible for obtaining an independent condemnation
appraisal report for the City. 2
On March 12, 2014, the City wrote a letter to Cherry Knoll, stating that
its road improvement project made it “necessary for the City of Lakeway to
acquire a portion of property [Cherry Knoll] own[ed].” 3 As detailed in the
survey attached to the letter, the City needed to acquire 1.741 acres, described
as Parcel 16. The letter also explained the steps the City would have to
complete in acquiring the property, starting with an appraisal of the property.
The letter stated that the City was required by law to provide Cherry Knoll
with a copy of the appraisal and that, after the appraisal was completed, an
agent from HDR would contact Cherry Knoll to discuss an offer. The letter
also enclosed a summary of the state statutes governing the process for the
2 Under state law, such reports establish the minimum amount a would-be condemnor
must offer to pay the landowner for the affected property prior to instituting a condemnation
proceeding. TEX. PROP. CODE § 21.0113(b)(4), (5).
3 This Court may review documents attached to the complaint in an appeal of a Rule
12(b)(6) dismissal. See Ironshore Europe DAC v. Schiff Hardin, L.L.P., 912 F.3d 759, 763
(5th Cir. 2019).
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City to acquire the property entitled “State of Texas Landowner’s Bill of
Rights.”
On March 25, 2014, Schwendinger emailed HDR Vice President, Teri
Morgan, indicating that he had made contact with the principals of Cherry
Knoll, Kay and Jim Wolverton. Although the City had sent a letter to Cherry
Knoll stating that the process for acquiring the property would begin with an
appraisal, Morgan replied that it was her understanding that she should
discuss “waiving the appraisal and a donation of the property” with the
Wolvertons. However, Schwendinger cautioned Morgan that they might “want
to strategize a bit before [they] start[ed] the process with the Wolverton’s [sic].”
Specifically, Schwendinger explained:
While we think there is a path to dedication, I don’t think that has
been discussed with [the Wolvertons]. We may need to have a
short conference call with [City Manager] Steve [Jones] on this
because as I understand it, they came to the city a few years ago
and submitted a plat but then never had it recorded. We need to
know when that was and what was said or implied regarding any
dedication.
Cherry Knoll alleges that this email shows that Schwendinger and Jones were
aware that, several years previously, Cherry Knoll had submitted a plat to the
City which Cherry Knoll never had recorded. Cherry Knoll further alleges that
the email shows that Jones and Schwendinger understood that the unrecorded
plat included a dedication to the City of part of Cherry Knoll’s property, which
overlapped with some of the property the City needed for its road project.
Cherry Knoll alleges that, in fact, the commercial subdivision plat Aiken
submitted to Duncan in 2008 included a swath of land, described as a “future”
right of way, that overlapped considerably with Parcel 16. Specifically, “[t]he
overlapping area comprise[d] approximately 48% of Parcel 16.”
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On or about April 7, 2014, Morgan called Kay Wolverton regarding the
City’s acquisition of Parcel 16. They discussed Cherry Knoll’s prior efforts to
develop the property and the “approved plats with the property to be set aside
for [a] roadway.” Wolverton “confirmed that the plat was never recorded and
[the] roadway was never dedicated to the City.” Morgan asked whether
Wolverton would consider donating Parcel 16 to the City. Wolverton “did not
think so” because potential buyers of Cherry Knoll’s property wanted the City
to change the zoning, but “were told there was no way it would ever happen.”
Morgan, Schwendinger, and Jones discussed the conversation that Morgan
had with Wolverton, and Jones instructed Morgan to continue with the
appraisal and offer process as outlined in the City’s letter to Cherry Knoll. On
April 8, 2014, Morgan emailed Wolverton providing a summary of the
appraisal and offer process that would follow and attached another copy of the
“Landowner’s Bill of Rights.”
On July 21, 2014, the appraisal firm (Atrium Real Estate Services)
issued its appraisal report for Parcel 16. The report recommended a total
compensation amount of $381,266. This first appraisal report was never sent
to Cherry Knoll, and Cherry Knoll alleges that it only learned of the report’s
existence through discovery in this matter.
On August 5, 2014, Schwendinger emailed Jones stating that if the
appraisal of Parcel 16 “stood as currently appraised,” then they “would be
forced into looking into other cost savings opportunities.” Schwendinger
suggested re-designing the road to reduce the amount of land needed from
Cherry Knoll’s property. Schwendinger stated that they could discuss this
option at an upcoming meeting “regarding the appraisal.”
On August 6, 2014, a meeting occurred at Lakeway City Hall to discuss
the appraisal of Parcel 16. Morgan emailed a meeting notification to Jones and
Schwendinger, as well as other representatives of HDR and Atrium. The next
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day, Troy Anderson, the City’s Building and Development Services Manager,
sent a letter to Cherry Knoll stating the following:
It has recently come to my attention that the approved
subdivision plat documents known as CHERRY KNOLL FARMS
SUBDIVISION PLAT and CHERRY KNOLL FARMS
COMMERCIAL PLAT were found in our offices, having not been
filed. Please allow this letter to serve as notice that the plat
documents have since been executed by Water Control and
Improvement District (WCID) No. 17, the Code Official, the Zoning
and Planning Commission Chair and the Mayor and will be filed
with the Travis County Clerk in the next five (5) to seven (7) days.
We apologize for any inconvenience this may have caused you.
If you have any questions or comments please feel free to
contact me directly at 512-314-7542 or via e-mail at
troyanderson@lakeway-tx.gov.
In response, on August 12, 2014, Jim Wolverton emailed Anderson the
following message:
Mr. Anderson: Let this E-Mail serve as notice, That the
Owners of Cherry Knoll do not wish to have you file the plats in
question.
We find it interesting that The City of Lakeway now chooses
to act on a SEVEN (7) year old plat which was not filed by the
current owners, and furthermore, we cannot find any fee paid by
the owners associated with the plat. The owners request a meeting
with you and the City to discuss this issue. ONCE again do not
file The PLATS in question.
Wolverton did not receive a response to his email. Cherry Knoll alleges that
Wolverton tried to reach Anderson over the ensuing days by phone and email,
but Wolverton’s messages were not returned.
On the same day that Wolverton emailed Anderson, Schwendinger
emailed HDR representative Bob Leahey (with a copy to Jones and Morgan)
explaining the City’s decision to record the Subdivision Plats. Schwendinger
wrote:
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After lots of consideration and legal counsel the city has decided to
record the 2008 plat which included a dedication of a right of way
for [Flint Rock Road]. It is not in the exact location but certainly
overlaps . . . . We sent notice to the property owner last Friday of
our intent to record the plat and we intend to record it this Friday.
We have concluded that we need to get them to the table to discuss
a resolution and this creates pressure for them to act. . . . Part of
our dilemma in determining our position is that it is apparent that
Atrium, the appraiser, was not given documents which included
key features of the property that the city feels materially impact
the valuation of parcel #16. We are talking here about the flood
plain and the power line easements plus other aspects. So it seems
that Atrium will need to rework the appraisal once that
information is provided to them. We expect the cost per square foot
to be reduced for the [right-of-way] take once all the aspects are
incorporated. Plus once the plat is recorded, we would be in a
position to better negotiate a settlement or at least have to only
buy the net difference between the 2008 dedication and the current
[right of way] take.
On August 15, 2014, Morgan contacted Kay Wolverton to set up a meeting “in
response to [Jim Wolverton’s] communications regarding the plat and sale of
the property and [right of way].” On August 18, 2014, although aware of
Cherry Knoll’s opposition and without meeting with the Wolvertons, the City
filed the Subdivision Plats in the Travis County Official Public Records.
Morgan (as instructed by Schwendinger) requested Atrium to complete
another appraisal of Parcel 16, but this time using “the flood plain and buffer
zones outlined on the [recently recorded] plat for appraisal and valuation
purposes,” instead of the FEMA flood plain studies apparently used in the first
appraisal. Considering the flood plain data in the recorded Subdivision Plats,
the second appraisal report, issued on August 22, 2014, recommended a total
compensation amount of $262,956 for Parcel 16. This appraisal report was not
disclosed to Cherry Knoll, and Cherry Knoll alleges that it only learned of the
report’s existence through discovery in this case.
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On August 29, 2014, Schwendinger, Jones, and Morgan met with Cherry
Knoll representatives. The City did not disclose the appraisals of Parcel 16
completed as of that date. Instead, the City made an offer to purchase the
parcel for approximately $130,000. The meeting did not result in any type of
agreement between the City and Cherry Knoll.
On August 31, 2014, Schwendinger emailed Leahey to request a new
survey and appraisal. Specifically, Schwendinger stated:
As a result of our recent meeting with representatives of
Cherry Knoll LLC it now seems that we will need to go ahead and
conduct a survey and obtain an appraisal on the portion of the
required [right of way] which was not included in the prior
dedication.
Schwendinger’s email included a table showing the reduced amount of acreage
to be surveyed and appraised. This smaller tract of land was referred to as
Parcel 16A and was a little over half the size of Parcel 16.
The appraisal report for Parcel 16A recommended a total compensation
amount of $134,532. On October 13, 2014, City Manager Jones sent a letter to
Cherry Knoll extending the City’s written “initial offer” to buy Parcel 16A for
the appraised amount and enclosing a copy of the appraisal. Cherry Knoll did
not accept the City’s initial offer or its “final offer” for the same amount. On
January 21, 2015, the City filed a condemnation suit in state court seeking
ownership of Parcel 16A for the road improvement project.
Just prior to receipt of the City’s final offer, Cherry Knoll entered into a
contract to sell its property to Coastal Rim Properties, Inc. for $4.2 million.
However, Coastal Rim wanted to develop the property into a “mixed-use”
project, which required the City to change the zoning classification for the
property. Therefore, the purchase contract was contingent upon the zoning
change and other governmental approvals. The contract also authorized
Coastal Rim to take the lead in negotiations with the City over the acquisition
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of the land needed for its road project and the removal of the Subdivision Plats
from the public record.
The City and Cherry Knoll ultimately entered into a settlement
agreement, entitled “Memorandum of Understanding,” in which the City
agreed to purchase Parcel 16 for $240,659. The City further agreed to vacate
the Subdivision Plats from the public record and terminate the condemnation
suit. Cherry Knoll agreed to allow the City early entry onto the property and
to execute a release in favor of the City.
Cherry Knoll, however, alleges that the settlement agreement is invalid
because Cherry Knoll entered into the agreement based on “at least three
mistaken beliefs and understandings of material fact.” Cherry Knoll asserts
that these mistakes were innocently shared by the City (mutual mistake) or
alternatively were fraudulently induced by the City. First, Cherry Knoll
believed that the filing of the Subdivision Plats was effective as a matter of
real property law and resulted in the City’s ownership of and immediate right
to possess a portion of Parcel 16. Second, Cherry Knoll believed that the City
had no appraisal for Parcel 16. Third, Cherry Knoll believed that Jones had
actually consulted with the City Council about rezoning the property for
development by Coastal Rim and that the council was at least willing to
consider the possibility of rezoning in good faith.
II.
In its complaint, Cherry Knoll asserts numerous federal and state law
causes of action based on the above facts. Pertinent to the issues on appeal,
Cherry Knoll asserts a claim against the City under 42 U.S.C. § 1983 for
violating its rights to procedural due process, substantive due process, and
equal protection. Specifically, Cherry Knoll contends that by filing the
Subdivision Plats without its consent and over its objection, the City deprived
Cherry Knoll of its right to determine the use and configuration of its property,
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deprived Cherry Knoll of its right to decide whether and when to dedicate
property to public use, and imposed an unauthorized, burdensome, and costly
encumbrance on the property. Alternatively, Cherry Knoll asserts § 1983
claims against City Manager Jones and HDR. 4 It contends that these
defendants agreed upon and jointly executed a plan to file the plats unlawfully
for the specific but hidden and coercive purpose of driving down the cost of
acquiring Parcel 16 and leveraging Cherry Knoll into a sale on favorable terms.
With respect to Jones, Cherry Knoll specifically alleges that he is not entitled
to qualified immunity. As to HDR, Cherry Knoll contends that although HDR
is a private contractor, it “acted under color of law.”
All of the defendants filed motions to dismiss pursuant to Rule 12(b)(6).
The district court, adopting the magistrate judge’s report and
recommendation, granted the motions. The district court determined that the
City was entitled to dismissal because the allegations did not demonstrate a
municipal “policy or custom” making the decision to file the plats attributable
to the City, that Jones was entitled to qualified immunity, and that HDR
should be dismissed because it was not part of a conspiracy to file the
Subdivision Plats over Cherry Knoll’s objections. Because the federal claims
were subject to dismissal, the district court declined to exercise supplemental
jurisdiction over the state law claims and dismissed all claims without
prejudice. Cherry Knoll timely appealed. 5
III.
As set forth by the Supreme Court, “[t]o survive a motion to dismiss, a
complaint must contain sufficient factual matter, accepted as true, to ‘state a
4 Cherry Knoll also asserted claims against three other City officials (Troy Anderson,
David DeOme, and Ron Massa), James Schwendinger, and Schwendinger Advisory Services,
L.L.C.
5 Cherry Knoll appeals only the dismissal of the City, Jones, and HDR.
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claim to relief that is plausible on its face.’” 6 “A claim has facial plausibility
when the plaintiff pleads factual content that allows the court to draw the
reasonable inference that the defendant is liable for the misconduct alleged.” 7
“The plausibility standard is not akin to a ‘probability requirement,’ but it asks
for more than a sheer possibility that a defendant has acted unlawfully.” 8
“Determining whether a complaint states a plausible claim for relief” is “a
context-specific task that requires the reviewing court to draw on its judicial
experience and common sense.” 9 We review dismissals under Rule 12(b)(6) de
novo. 10
A. Cherry Knoll’s 42 U.S.C. § 1983 Claim Against the City.
In Monell v. New York City Department of Social Services, the Supreme
Court held that municipal liability under § 1983 is limited to deprivations of
federally protected rights caused by action taken “pursuant to official
municipal policy of some nature.” 11 In Pembaur v. City of Cincinnati, the Court
determined that this requirement may be satisfied by “a single decision by
municipal policymakers under appropriate circumstances.” 12 Specifically, the
Court held “that municipal liability under § 1983 attaches where—and only
where—a deliberate choice to follow a course of action is made from among
various alternatives by the official or officials responsible for establishing final
policy with respect to the subject matter in question.” 13
6 Ashcroft, 556 U.S. at 678 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007)).
7 Id. (citation omitted).
8 Id. (citation omitted).
9 Id. (citation omitted).
10 Magee v. Reed, 912 F.3d 820, 822 (5th Cir. 2019).
11 436 U.S. 658, 691 (1978). The Court also specifically concluded that “a municipality
cannot be held liable solely because it employs a tortfeasor—or, in other words, a municipality
cannot be held liable under § 1983 on a respondeat superior theory.” Id.
12 475 U.S. 469, 480 (1986).
13 Id. at 483 (citation omitted).
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As stated above, Cherry Knoll asserts a § 1983 claim against the City for
violating its rights to procedural due process, substantive due process, and
equal protection by filing the Subdivision Plats without its consent and over
its objection. Cherry Knoll alleges that this single decision was made “by City
authorities at the highest level—after careful consideration and legal advice.”
Cherry Knoll further alleges that the Lakeway City Council has “final
policymaking authority in substantially all areas of City governance, including
the areas of land acquisition and public works projects.” It asserts that the
“decision to record the Subdivision Plats and wield them as leverage in the
land-acquisition effort was made and approved by the City Council,” which
made the decision initially in private, and then “later expressly ratified” its
decision in a public meeting.
As support for its allegations, Cherry Knoll points to the various exhibits
attached to its complaint, including: (1) Schwendinger’s August 12, 2014 email
to HDR representative Bob Leahey, stating that “[a]fter lots of consideration
and legal counsel the city has decided to record the 2008 plat,” (2) the City’s
response to requests for admissions suggesting that the City Council was
consulted about filing the Subdivision Plats, (3) the City’s admissions that it
“caused the Recorded Subdivision Plats to be recorded on August 18, 2014” and
that it was aware that Cherry Knoll was opposed to the plats’ recordation when
it did so, (4) documentary evidence showing that the City Council used the
leverage that the recorded Subdivision Plats created by authorizing the filing
of a condemnation suit to acquire Parcel 16A, instead of Parcel 16, and (5) the
City Council’s ratification of the settlement agreement with Cherry Knoll.
Furthermore, this Court notes that the Subdivision Plats indicate that they
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were “approved and authorized for record by the City Council of the City of
Lakeway.” 14
Although the district court acknowledged that Cherry Knoll had alleged
policymaker involvement, it determined that Cherry Knoll “implausibly
attempt[ed] to elevate the decision it alleges was made by staff to policy made
by the City Council.” We respectfully disagree. Cherry Knoll’s well-pleaded
factual allegations make it plausible that the City Council made the deliberate
decision in 2014 to file the Subdivision Plats over Cherry Knoll’s objection and
to use the filed plats as leverage in its land-acquisition effort. These
allegations satisfy the standard for official municipal policy under Pembaur,
and the district court erred in finding otherwise.
B. Cherry Knoll’s § 1983 Claim Against City Manager Jones.
In the alternative to its municipal liability claim under § 1983 against
the City, Cherry Knoll alleges that City Manager Jones, along with
Schwendinger and HDR, “agreed upon and jointly executed a plan by which
the Subdivision Plats would be filed unlawfully, without Cherry Knoll’s
permission and over its objection” to drive down the cost of Parcel 16 and
leverage Cherry Knoll into a sale on favorable terms, all in violation of § 1983.
In response, Jones moved to dismiss on the basis of qualified immunity.
“Qualified immunity shields government officials from liability when
they are acting within their discretionary authority and their conduct does not
violate clearly established statutory or constitutional law of which a reasonable
person would have known.” 15 “In this circuit, the qualified immunity defense
14 This is inconsistent with Cherry Knoll’s alternative allegation that the City
Council’s approval had been falsified. However, Federal Rule of Civil Procedure 8(d)(2)
allows for alternative pleading.
15 Gates v. Tex. Dep’t of Protective & Regulatory Servs., 537 F.3d 404, 418 (5th Cir.
2008) (citations omitted).
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involves a shifting burden of proof.” 16 The defendant official must first satisfy
his burden of establishing that the challenged conduct was within the scope of
his discretionary authority. 17 “An official acts within his discretionary
authority when he performs non-ministerial acts within the boundaries of his
official capacity.” 18 Once the defendant establishes that the challenged
conduct was within the scope of his discretionary authority, the burden then
shifts to the plaintiff to rebut the qualified immunity defense. 19 In evaluating
whether the plaintiff has rebutted the defense, we first determine whether the
plaintiff has alleged the violation of a clearly established constitutional right. 20
If the right was clearly established at the time of the incident at issue, we next
determine whether the defendant’s conduct was objectively reasonable in light
of the clearly established legal rules at the time of the alleged violation. 21
In this case, the threshold inquiry ends our analysis because Jones has
not satisfied his burden to show that the challenged conduct was within the
scope of his discretionary authority. 22 Cherry Knoll asserts that under Texas
law, the right to subdivide land belongs to the landowner. 23 The landowner
must prepare a plat and submit it to municipal authorities for approval. 24 The
City has enacted ordinances outlining its approval procedure. 25 As Cherry
Knoll points out, the ordinances require the “applicant” for plat approval to
have the plat recorded with the county clerk within sixty days after the City
16 Salas v. Carpenter, 980 F.2d 299, 306 (5th Cir. 1992).
17 Id.
18 Cronen v. Tex. Dep’t of Human Servs., 977 F.2d 934, 939 (5th Cir. 1992).
19 Salas, 980 F.2d at 306.
20 Bazan ex rel. Bazan v. Hidalgo Cty., 246 F.3d 481, 490 (5th Cir. 2001).
21 Id.
22 See Salas, 980 F.2d at 306.
23 See TEX. LOC. GOV’T CODE ANN. § 212.004 (providing procedures “owner of a tract
of land” must follow in order to subdivide property).
24 See id. § 212.008–010.
25 See Lakeway City Code §§ 28.03.001-010.
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Council approves a final plat. 26 The ordinances further require the applicant
to file a corporate surety bond or letter of credit after council approval but prior
to recordation of the plat. 27 Cherry Knoll asserts that under state law and the
City’s charter and ordinances, the City (and its officials) had no authority to
file plats affecting private property without the consent of the landowner.
In response, Jones points to the various City ordinances governing the
plat approval process. Although these ordinances delineate the various steps
a landowner/applicant must complete in order to obtain the City’s approval of
a subdivision plat, none of the ordinances authorize the City, or any of its
officials, to file approved plats. The ordinances also do not indicate that the
City’s plat approval process includes its filing of an approved plat, or that when
a landowner requests approval of a plat, he is thereby also giving the City or
any of its officials the authority to file the approved plat.
Jones has failed to meet his burden of showing that the filing of the
Subdivision Plats was within the scope of his discretionary authority.
Therefore, the district court erred in determining that Jones was entitled to
the protection of qualified immunity at the Rule 12(b)(6) stage.
C. Cherry Knoll’s § 1983 Claim Against HDR.
In its complaint, Cherry Knoll asserts that HDR “acted under color of
law” as contemplated by the “joint activity test.” Under Supreme Court
precedent, “to act ‘under color of’ state law for § 1983 purposes does not require
that the defendant be an officer of the State. It is enough that he is a willful
participant in joint action with the State or its agents.” 28 “Private persons,
26 See id. § 28.03.003(m).
27 See id. §§ 28.03.003(n), 28.07.006.
28 Dennis v. Sparks, 449 U.S. 24, 27 (1980).
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jointly engaged with state [or municipal] officials in the challenged action, are
acting ‘under color’ of law for purposes of § 1983 actions.” 29
The district court determined that Cherry Knoll’s allegations against
HDR did “little more than demonstrate that the City had indeed engaged HDR”
as a consultant on the road project and that HDR “acted on instructions and
information provided by Jones and the City on steps that were ancillary to the
legitimate goals of their engagement.” The district court concluded that the
allegations “d[id] not plausibly give rise to the conclusions that the Subdivision
Plats were filed over Cherry Knoll’s objection as a result of a conspiracy
concocted by Jones, Schwendinger, and HDR.”
As Cherry Knoll argues, however, its complaint specifically alleges that
HDR was more than a consultant; it was hired by the City to handle all aspects
of the City’s acquisition of property from the various landowners affected by
the City’s road project. The documents attached to Cherry Knoll’s complaint
reflect that HDR representative Morgan was informed of the history of Cherry
Knoll’s prior efforts to develop the property and the fact that a plat had been
submitted to the City but never recorded; was told by Schwendinger (who was
informed by Jones) of a potential “path to dedication” during Morgan’s early
negotiation efforts with Wolverton; was present at the meeting with Jones and
others at Lakeway City Hall when the first appraisal was discussed, which
meeting occurred the day before the City sent its letter informing Cherry Knoll
that it intended to file the Subdivision Plats; contacted Kay Wolverton “in
response to” Jim Wolverton’s communications to the City objecting to the filing
of the Subdivision Plats; and scheduled a meeting with the Wolvertons to take
place after the City filed the Subdivision Plats over Cherry Knoll’s specific
objection.
29 Id. at 27– 28 (citations omitted).
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Case: 18-50494 Document: 00514925503 Page: 17 Date Filed: 04/22/2019
No. 18-50494
We find that Cherry Knoll’s well-pleaded factual allegations and
supporting documents make plausible its claim that HDR was a “willful
participant in joint action” with Jones and Schwendinger for purposes of
§ 1983. The district court erred in determining otherwise.
IV.
Based on the foregoing, the district court’s judgment dismissing Cherry
Knoll’s § 1983 claims against the City of Lakeway, City Manager Steven Jones,
and HDR Engineering, Inc., is REVERSED, and this matter is REMANDED. 30
This Court further REINSTATES Cherry Knoll’s state law claims over which
the district court may now exercise supplemental jurisdiction under 28 U.S.C.
§ 1367(a).
30We emphasize that our ruling today is made within the confines of the plausibility
standard under Rule 12(b)(6) and does not preclude defendants from moving for summary
judgment at an appropriate time, if the evidence produced in discovery so warrants.
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