Ariyan v. Sewerage and Water Board

Case: 21-30335 Document: 00516246287 Page: 1 Date Filed: 03/21/2022
United States Court of Appeals
for the Fifth Circuit
United States Court of Appeals
Fifth Circuit
FILED
March 21, 2022
No. 21-30335 Lyle W. Cayce
Clerk
Ariyan, Incorporated, doing business as Discount Corner; M.
Langenstein & Sons, Incorporated; Prytania Liquor
Store, Incorporated; West Prytania, Incorporated, doing
business as Prytania Mail Service/Barbara West; British
Antiques, L.L.C., Bennet Powell; Arlen Brunson;
Kristina Dupre; Brett Dupre; Gail Marie Hatcher;
Betty Price; Et Al.,
Plaintiffs—Appellants,
versus
Sewerage & Water Board of New Orleans; Ghassan
Korban, In his Capacity as Executive Director of Sewerage & Water
Board of New Orleans,
Defendants—Appellees.
Appeal from the United States District Court
for the Eastern District of Louisiana
USDC No. 2:21-CV-534
Before Barksdale, Stewart, and Dennis, Circuit Judges.
James L. Dennis, Circuit Judge:
Plaintiffs who succeed in winning a money judgment against a state
governmental entity in state court in Louisiana often find themselves in a
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frustrating situation. Though they have obtained a favorable judgment, they
lack the means to enforce it. The Louisiana Constitution bars the seizure of
public funds or property to satisfy a judgment against the state or its political
subdivisions. La. Const. art. XII, § 10(c). Instead, the Legislature or the
political subdivision must make a specific appropriation in order to satisfy the
judgment. Id.; La. R.S. 13:5109. And since Louisiana courts lack the power to
force another branch of government to make an appropriation, the prevailing
plaintiff has no judicial mechanism to compel the defendant to pay. See
Newman Marchive P’ship, Inc. v. City of Shreveport, 979 So. 2d 1262, 1265 (La.
2008). The “plaintiff who succeeds in an action against a governmental unit
thus becomes a supplicant,” relying on the grace of the government to
appropriate funds to satisfy her judgment. David W. Robertson, Tort Liability
of Governmental Units in Louisiana, 64 Tul. L. Rev. 857, 881 (1990).
Finding themselves in this position, the Plaintiffs in this case, like
others before them, have turned to the federal courts to force payment on
their state court judgment. They claim that the Defendants’ failure to timely
satisfy a state court judgment violates the Takings Clause of the Fifth
Amendment. The district court granted the Defendants’ motion to dismiss,
applying long-standing precedent that there is no property right to timely
payment on a judgment.
We agree and AFFIRM.
I.
In 2013, the United States Army Corps of Engineers and the Sewerage
and Water Board of New Orleans (the “SWB”) began construction on a
massive flood control project across Uptown New Orleans as part of the
Southeast Louisiana Urban Flood Control Program (“SELA”). The Uptown
phase involved the construction of underground box culverts that run the
length of several major thoroughfares. Plaintiffs are seventy landowners,
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including both businesses and private homeowners, who suffered property
damage and economic loss as the result of SELA construction. The Plaintiffs
filed suit in state court and obtained final judgments against the SWB for a
combined $10.5 million. Some of these judgments became final in early 2018
and 2019, others as recently as fall 2020.
As of January 2021, though, the Plaintiffs had not received any
payment from the SWB. So, in March 2021 they filed a § 1983 suit in district
court under the theory that the SWB’s failure to comply with the state court
judgments “creates a secondary Constitutional violation of Plaintiffs’ Fifth
Amendment rights,” more specifically a violation of their due process rights
and their rights to just compensation for a taking. As relief, the Plaintiffs
requested a writ of execution seizing the SWB’s property in order to satisfy
the judgments. Separately, the Plaintiffs’ complaint sought a declaration that
the SWB is contractually obligated to seek reimbursement from the Army
Corps for the judgments via a procedure the two entities agreed to, called the
“Damages SOP.”
The SWB filed a motion to dismiss under Rule 12(b)(6) and the
district court granted it. The court sympathized with the Plaintiffs’
frustrations, but noted that there were “centuries of precedent” establishing
that a state’s failure to timely pay a state court judgment did not violate any
federal constitutional right. With no underlying constitutional right at issue,
Plaintiffs’ § 1983 claim was “legally baseless.” The district court also
declined to exercise jurisdiction over Plaintiffs’ request for declaratory relief
as a standalone claim, citing the “particularly local nature of this dispute.”
Finally, the court denied Plaintiffs’ generic request to amend their complaint
should a failure to state a claim be found, holding that any amendment would
be futile. Plaintiffs appealed.
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II.
We review dismissal of a case under Rule 12(b)(6) de novo, accepting
all well-pleaded facts as true and viewing those facts in the light most
favorable to the plaintiff. Allen v. Walmart Stores, L.L.C., 907 F.3d 170, 177
(5th Cir. 2018). “In the context of a 12(b)(6) motion in a section 1983 suit,
the focus should be whether the complaint properly sets forth a claim of a
deprivation of rights, privileges, or immunities secured by the Constitution
or laws of the United States caused by persons acting under color of state law.
If there is no deprivation of any protected right the claim is properly
dismissed.” S. Christian Leadership Conf. v. Supreme Ct. of State of La., 252
F.3d 781, 786 (5th Cir. 2001) (internal citation omitted).
Ordinarily a district court’s denial of a motion to amend a complaint
is reviewed for abuse of discretion. Stripling v. Jordan Prod. Co., LLC, 234
F.3d 863, 872 (5th Cir. 2000). However, when denial is based on the futility
of amendment, we “apply the same standard of legal sufficiency as applies
under Rule 12(b)(6).” Id. at 873 (citation omitted). If the complaint, as
amended, would be subject to dismissal, then amendment is futile and the
district court was within its discretion to deny leave to amend. Id.III.
A.
The Plaintiffs’ claim is fairly discrete. They “do not seek to re-litigate
the legal or factual issues or compensation awards decided in the state
courts.” Rather, their case “concerns an independent Takings Clause
violation—the failure to timely pay just compensation once the
compensation was determined and awarded.” This nonpayment is,
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according to the Plaintiffs, a “second taking,” and the only one at issue in
their case. 1
More than a century ago, the Supreme Court decided the case of a pair
of litigants in a similar situation as the Plaintiffs here. In Folsom v. City of New
Orleans, 109 U.S. 285 (1883), two relators had obtained state court judgments
against the City of New Orleans for property damage caused by riots in 1873.
In 1879, a new state constitution limited the taxes New Orleans could levy to
just enough to cover the City’s budget. Id. at 287. The effect was that the
relators were prevented from collecting on their judgments. Id. The relators
argued that this state constitutional change deprived them of property
without due process of law in violation of the Fourteenth Amendment. Id.The Supreme Court rejected the argument, agreeing that the judgments were
property, but holding that “the relators cannot be said to be deprived of them
so long as they continue an existing liability against the city.” Id. at 289. In
dissent, Justice Harlan wrote that an unenforceable judgment is no judgment
at all. “Since the value of the judgment, as property, depends necessarily
upon the remedies given for its enforcement, the withdrawal of all remedies
for its enforcement, and compelling the owner to rely exclusively upon the
generosity of the judgment debtor, is, I submit, to deprive the owner of his
property.” Id. at 295.
The Folsom majority’s notion of a judgment as an “existing liability,”
conceptually distinct from its recovery, has only been reinforced in the
intervening years. In Minton v. St. Bernard Parish School Board, this Court,
1
In their complaint, Plaintiffs asserted a separate due process violation “because
Defendants have treated them differently than non-litigants merely because Plaintiffs have
exercised their constitutional right to file suit.” Plaintiffs did not argue this claim in their
briefs before the district court or in their briefs before this Court. It is therefore deemed
abandoned. Yohey v. Collins, 985 F.2d 222, 224 (5th Cir. 1993).
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citing Folsom, reiterated that “the property right created by a judgment
against a government entity is not a right to payment at a particular time but
merely the recognition of a continuing debt of that government entity.” 803
F.2d 129, 132 (5th Cir. 1986). Based on that principle, we held that the
government defendant’s “failure to appropriate funds to pay the debt to the
Mintons does not constitute a taking in violation of the due process clause.”
Id.Again, in Freeman Decorating Company v. Encuentro Las Americas
Trade Corporation, our Court held that there was no Takings Clause violation
where the City of New Orleans failed to make timely payment on a state court
judgment because there had been no taking of any property. “[T]he only
property right [the plaintiff] has is the recognition of City’s [sic] continuing
debt.” 352 F. App’x 921, 924 (5th Cir. 2009); see also Guilbeau v. Par. of St.
Landry, 341 F. App’x 974 (5th Cir. 2009); cf. Evans v. City of Chicago, 689
F.2d 1286, 1297 n.13 (7th Cir. 1982) (distinguishing Folsom because Illinois
Constitution created property right to immediate payment on a judgment).
In short, “[a] party cannot be said to be deprived of his property in a
judgment because at the time he is unable to collect it.” Folsom, 109 U.S. at
289. Thus, Plaintiffs’ claim that their property has been taken by the SWB’s
failure to timely pay must fail under Folsom.
The Plaintiffs try to get around this precedent in two ways. First, they
argue that Folsom and its progeny are distinguishable because the underlying
judgments in those cases sounded in state tort and contract law, while the
Plaintiffs’ judgments are based on violations of a federal constitutional right.
But Plaintiffs’ underlying state court cases were not based on any asserted
federal right. As the SWB pointed out in briefing, and as the record shows,
Plaintiffs’ state court judgments were for violations of Louisiana law, not for
violations of the Fifth Amendment Takings Clause as the Plaintiffs have
asserted to this Court. But even if the underlying judgments were based on
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violations of federal rights, we are not sure why that distinction would make
a difference. After all, under Plaintiffs’ theory, the SWB’s failure to pay the
judgments constitutes an “independent” or “second” Fifth Amendment
taking of their property, namely the purported property right to be paid
timely on a judgment. But since Folsom said there is no property right to
timely payment on a judgment, there must be something special about a
judgment based on federal constitutional rights that confers this additional
property interest for the Plaintiffs’ argument to succeed. Plaintiffs do not
explain why the legal right underlying a judgment would create this additional
property right for some judgments and not others, and it remains unclear to
us. It seems that a judgment compensating someone for a breach of contract
should confer no less a property interest than a judgment compensating
someone for the police’s excessive force.
Vogt v. Board of Commissioners of Orleans Levee District, 294 F.3d 684(5th Cir. 2002), and Lafaye v. City of New Orleans, No. 2:20-CV-41, 2021 WL
886118 (E.D. La. Mar. 9, 2021), also do not aid the Plaintiffs in escaping
Folsom’s holding. In Vogt, the Court stated in dicta that the governmental
defendant’s refusal to satisfy a judgment could constitute a taking. 294 F.3d
at 697. But the judgment in that case was, in part, a declaratory judgment by
the state courts that mineral royalties in the government defendant’s possession
were the property of the plaintiff. Id. at 688. The government’s refusal to
“pay over the retained royalties constitutes a taking because the
governmental entity is withholding private property from its owners.” Id. at
697. This situation, where the judgment debtor is in possession of property
determined to belong to the creditor, is different from a judgment wherein
the debtor owes compensation to the creditor. Lafaye turns on the exact same
distinction. As the district court wrote in that case, “[b]oth Vogt and this case
involve the government’s refusal to return private property to its rightful
owner.” Lafaye, 2021 WL 886118, at *9. Plaintiffs’ judgments here are for
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compensation and damages, not for the return of private property that “the
government has forcibly appropriated . . . without a claim of right.” Vogt, 294
F.3d at 697.
Plaintiffs’ second argument is that two Supreme Court cases—
Williamson County Regional Planning Commission v. Hamilton Bank of Johnson
City, 473 U.S. 172 (1985) and Knick v. Township of Scott, Pennsylvania, 139 S.
Ct. 2162 (2019)—provide a federal forum for their claim. Plaintiffs
misunderstand those cases. They are right that Knick and Williamson County
discuss when a plaintiff may file a Takings Clause claim in federal court, but
the cases say nothing about whether failure to timely pay a state court
judgment constitutes a taking or any other deprivation of a federal right
actionable under § 1983. Whether a claim is ripe for federal adjudication, as
Williamson County and Knick decided, is very different from whether certain
facts state a claim at all. Amici’s citations to Supreme Court dicta that the
Fifth Amendment is “self-executing” and that a property owner “acquires a
right to compensation immediately upon an uncompensated taking” also fail
to address the actual issue presented by Plaintiffs’ appeal, namely whether a
government’s failure to timely pay a court judgment constitutes a taking in
the first place. Neither Williamson County nor Knick speak to that question.
Plaintiffs’ § 1983 claim remains foreclosed by Folsom.
B.
Plaintiffs invoked federal question jurisdiction, relying on their Fifth
Amendment claim, to bring this suit. With that claim dismissed, the district
court declined to exercise jurisdiction over Plaintiffs’ separate claim for a
declaration of the parties’ rights and duties under the Damages SOP. The
Declaratory Judgment Act “does not of itself confer jurisdiction on the
federal courts.” Jolly v. United States, 488 F.2d 35, 36 (5th Cir. 1974).
Without an underlying federal claim, or any other basis for jurisdiction
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asserted by the Plaintiffs, the district court properly declined to hear
Plaintiffs’ standalone claim to declaratory relief.
As a final matter, the district court also properly declined to grant
leave to Plaintiffs to amend their complaint. Though Rule 15(a)’s mandate
that leave to amend must be “freely give[n] . . . when justice so requires”
significantly limits a district court’s discretion, a district court still acts within
its bounds when it denies leave because amendment would be futile. Fed.
R. Civ. P. 15(a)(2). Futility here means “that the amended complaint
would fail to state a claim upon which relief could be granted.” Stripling, 234
F.3d at 873. The Plaintiffs did not specify what amendments they wished to
make, or attach an amended pleading. Rather they simply asked for leave to
amend “if their pleadings are found to be deficient in any manner.” This
failure to specify how amendment would cure the fundamental deficiencies
in their pleading, especially when the core of Plaintiffs’ claims is so clearly
foreclosed by settled law, supports the district court’s determination that
amendment would be futile. See Legate v. Livingston, 822 F.3d 207, 212 (5th
Cir. 2016). We cannot say the court abused its discretion.
IV.
Like the district court, we understand the Plaintiffs’ frustration. They
have succeeded in winning a money judgment. Without any judicial means to
recover, they are compelled “to rely exclusively upon the generosity of the
judgment debtor.” Folsom, 109 U.S. at 295 (Harlan, J., dissenting). But the
Plaintiffs’ case before the district court turned entirely on a purported
property interest not recognized in Fifth Amendment jurisprudence. They
therefore failed to state a claim for relief, and the district court properly
dismissed their case.
We AFFIRM the district court’s judgment.
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