Parvati Corp. v. City of Oak Forest

In the
United States Court of Appeals
For the Seventh Circuit
No. 12-1954
P ARVATI C ORP.,
Plaintiff-Appellant,
v.
C ITY OF O AK F OREST, et al.,
Defendants-Appellees.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 08 C 702—Amy J. St. Eve, Judge.
A RGUED F EBRUARY 11, 2013—D ECIDED M ARCH 1, 2013
Before E ASTERBROOK, Chief Judge, and P OSNER and
T INDER, Circuit Judges.
P OSNER, Circuit Judge. The City of Oak Forest, Illinois,
is a largely suburban community about a half hour’s
drive from downtown Chicago. A company named
Parvati that owned a hotel in Oak Forest sued the City
and a number of its officials charging racial discrimina-
tion in zoning, in violation of 42 U.S.C. §§ 1981 and 1982,
and also charging that the City’s zoning ordinance is
2 No. 12-1954
unconstitutionally vague. The company seeks damages
caused by the City’s refusal to allow it to sell the
hotel for conversion to a retirement home likely to be
occupied mainly or exclusively by black people. (It is
unclear what relief it seeks for the vagueness of the ordi-
nance.) The district court granted summary judgment
in favor of the defendants on both charges.
Parvati had built the hotel, a 60-room Ramada
Inn, in 2000 in an “M” (Limited Manufacturing)
zoning district, a district in which “highway oriented
commercial/retail uses” were permitted at the time.
The hotel qualified as such a use because it was
close to Interstate 57, a major highway that traverses
Oak Forest.
But the hotel proved to be a flop commercially, and
Parvati decided to try to sell it for use as a “senior inde-
pendent living facility”—a retirement home or equivalent.
Parvati’s real estate listing agent met with some of
the City’s officials to discuss the idea of converting the
hotel to such a use. The agent testified in his deposition
that he had the “impression” that the officials favored
the idea, though he didn’t testify to what they
actually said.
In 2004 Parvati signed a contract to sell the hotel to
a company affiliated with the Bethlehem Mis-
sionary Temple Baptist Church of Harvey, Illinois,
www.bethlehemtemplembchurch.org/ (visited Feb. 19,
2013), for use as a retirement home. The church’s pastor
and most (maybe all) of its members are black; and al-
though membership in the church was not intended to
No. 12-1954 3
be a requirement of residence in the retirement home,
doubtless most of the residents would be members of
the church. The contract of sale was contingent, how-
ever, on Parvati’s obtaining a zoning change, since a
retirement home would not be “highway oriented.” A
representative of Parvati, accompanied by the pastor of
the church, Reverend J. C. Smith, met with City officials
to discuss the possibility of amending Oak Forest’s
zoning ordinance to authorize the changed use of
Parvati’s property. As a result of meeting Smith and
learning about his church, the officials would have
realized that the hotel, if converted to a retirement
home, would house black people.
Two weeks after the meeting, the City’s Community
Development Department asked the City’s zoning com-
mission to recommend to the City Council that the
M zoning classification be replaced by two new classifica-
tions—M-1 for light industrial uses and M-2 for heavy
industrial uses. The Council amended the City’s zoning
ordinance accordingly. The amended ordinance does
not authorize nonindustrial highway-oriented uses, or
residential uses whether transient, permanent, or other,
in either type of district. Parvati concedes that
the amendment made its hotel a “nonconforming,”
that is, a forbidden, use, though its use as a “highway
oriented” hotel was grandfathered. Reverend Smith
sought a further amendment to the zoning ordinance,
to permit the conversion of the hotel to a retirement
home. The zoning commission recommended to the
City Council that his application be denied, and it was.
4 No. 12-1954
Parvati persisted. It signed a contract to sell its hotel to
a different company affiliated with Reverend Smith’s
church. The company applied to the City for a license
to convert the hotel to an “extended stay hotel,” a term
that the parties agree includes a retirement home. The
provision of “extended stay services,” though it is a
land use mentioned in the City’s zoning ordinance, is not
a use that is permitted in M-1 or M-2 districts, and it
was not permitted in their predecessors, the M districts,
either. The City Administrator rejected the application,
pointing out that not only had the original ordinance,
which permitted hotels as a “highway oriented” use,
limited that permission to hotels providing temporary
lodging, as distinct from “extended stay services,” but
even the original use of the hotel, as a highway
oriented facility, was now, under the amended
ordinance, a nonconforming use, and the City’s zoning
ordinance forbade replacing one nonconforming use
with another nonconforming use. The City Administrator
offered to assist the church in finding alternative sites
in Oak Forest for its retirement home in zoning districts
in which such a use was permissible. Reverend Smith
did not take up the invitation.
Parvati’s last hope was to obtain a “special use” permit
for conversion of its hotel to a retirement home. The
2004 zoning amendment that had split the M districts
into M-1 and M-2 districts had not spelled out what uses
would be permitted in either type of district. Discovering
the oversight in 2007, the City amended the ordinance
to add a list of permitted uses—and the list included
“extended stay hotels” as “special permitted uses” in both
No. 12-1954 5
types of M district. So Parvati applied for a special use
permit, and again was turned down. This time the
ground was that the inclusion of “extended stay hotels”
in the list of specially permitted uses had been a
scrivener’s error.
Parvati later lost the hotel to foreclosure. Another
corporation bought the hotel at the foreclosure sale and
is continuing to operate it as a conventional “highway
oriented” hotel, though under the Best Western rather
than Ramada Inn trade name.
Parvati’s owners are of Indian (Asian Indian, not Ameri-
can Indian) origin, and initially they claimed that that
was why the City had discriminated against them by
preventing their selling the hotel for use as a retirement
home for members of Reverend Smith’s church. They
have abandoned this claim, and now argue only that
the defendants discriminated against Reverend Smith, his
flock, and the church’s affiliated companies on grounds
of race. But a company can complain about financial
harm caused it by racial discrimination against potential
customers. Sullivan v. Little Hunting Park, Inc., 396 U.S.
229, 237 (1969); New West, L.P. v. City of Joliet, 491 F.3d 717,
720 (7th Cir. 2007); Des Vergnes v. Seekonk Water District,
601 F.2d 9, 13-14 (1st Cir. 1979). Smith’s black church
was a potential buyer of Parvati’s hotel; that the church
dealt with Parvati and the zoning authorities through
corporate affiliates is of no significance.
Parvati relies for evidence of racial discrimination
primarily on irregularities in the rezoning of the district
in which the hotel is located. It presented no evidence of
6 No. 12-1954
racially tinged remarks or actions by the City’s officials or
indeed of any racial tensions in Oak Forest. It also pre-
sented no evidence that a retirement home catering to
white people has ever been allowed in an M district
(whether M, M-1, or M-2)—and so Parvati cannot, and
it does not, invoke the method endorsed in McDonnell
Douglas Corp. v. Green, 411 U.S. 792 (1973), for establishing
a prima facie case of racial discrimination.
But the irregularities in the zoning process relating to
Parvati’s efforts to convert its hotel to a retirement
home were indeed numerous. They included, besides the
quick retraction of the authorization for special-use
permits for extended-stay hotels in M-2 districts, failing
to indicate in the original amendment which former
M districts were now M-1 and which M-2 (eventually
this omission was repaired and the district in which
the hotel is located was designated M-2); omitting from
the amended ordinance “Appendix A,” which was sup-
posed to list the land uses permitted in M-1 and M-2
districts; and providing 13 days’ notice of the public
hearing on the proposed amendment that created the
new districts rather than the 15 days that the City’s
zoning ordinance required. Nor was any explanation
given for why the amendment was adopted when it
was, which is to say shortly after Reverend Smith’s ap-
pearance on the scene.
But Parvati presented no evidence that the irregularities
were more numerous or serious than in other zoning
proceedings in Oak Forest, which though called a City
is really just a town, with fewer than 30,000 inhabitants,
No. 12-1954 7
and may have decided not to invest in sophisticated
legal advice and drafting concerning zoning. Besides
the irregularities and the timing of the amendment, no
evidence of racial discrimination has been offered other
than the listing agent’s “impression” that City officials
had been amenable to the proposed change in the use
of the hotel building before they discovered it would be
a retirement home for blacks.
Parvati points out that “a case of discrimination can . . .
be made by assembling a number of pieces of evidence
none meaningful in itself, consistent with the proposi-
tion of statistical theory that a number of observations
each of which supports a proposition only weakly can,
when taken as a whole, provide strong support if all
point in the same direction: ‘a number of weak proofs
can add up to a strong proof.’ Mataya v. Kingston, 371
F.3d 353, 358 (7th Cir. 2004).” Sylvester v. SOS Children’s
Villages Illinois, Inc., 453 F.3d 900, 903 (7th Cir. 2006). But
the context in which the “weak proofs” of discrimination
in this case are embedded tends to refute them.
It is easy to see why it would make sense to
zone heavy and light manufacturing districts differ-
ently. Oak Forest’s decision to do so is not unique. See
Atlantic Container, Inc. v. Township of Eagleswood Planning
Board, 728 A.2d 849, 856 (N.J. App. 1999); 1 Patricia E.
Salkin, American Law of Zoning § 9:46 (5th ed. 2012). The
amended ordinance (like the ordinance in the Atlantic
Container case) sets higher limits for emissions of smoke,
particulates, and odors in the heavy-industry (M-2)
districts, and specifies larger lot-size and setback require-
8 No. 12-1954
ments in those districts. Light industry, which includes
for example the production and distribution of food,
may be as sensitive to smoke, particulate matter, and
odors as residential or commercial establishments are,
and so may need the protection conferred by ex-
cluding heavy industrial uses. A decision to separate
the two types of activity is not an “obvious pretext”
for discrimination, as Parvati argues.
It is even easier to see why a retirement home would
be an inappropriate use in a heavy industrial district,
and specifically in the M-2 district in which Parvati’s
former hotel is located. We were told at the oral argument
without contradiction that there are no sidewalks in
the district. There is significant truck traffic and there
are industrial establishments cheek by jowl to the hotel.
It is not a salubrious environment for old people,
or indeed for residents of any age. And once there
were long-term residents in the district, rather than
transients, the City would face a demand for amenities
such as sidewalks and street lights. Industrial tenants
might be driven away by the increased risk of accidents
and illness to the oldsters caused by the proximate in-
dustrial activities. There might even be suits for abate-
ment of nuisances, consisting of the very activities, indus-
trial in character, that the district is intended to host,
brought by the owner or the residents of a retirement
home if a retirement home were allowed in the district.
For Illinois like most states rejects the doctrine of
“coming to the nuisance.” Guth v. Tazewell County, 698 F.3d
580, 584 (7th Cir. 2012) (Illinois law); Oehler v. Levy, 85
N.E. 271, 273 (Ill. 1908); Woods v. Khan, 420 N.E.2d 1028,
No. 12-1954 9
1030-31 (Ill. App. 1981). That is, it is no defense (corre-
sponding to assumption of risk) to a suit to abate a nui-
sance that the plaintiff moved to the area knowing that
the existing occupants had created a nuisance.
It is true that the population of Oak Forest is more
than 90 percent white, and maybe some or even many
of the white residents would like to preserve the City’s
existing racial composition. But there is no evidence
of that; and the City’s layout (the City is the irregularly
shaped area in the middle of the Google map of Oak
Forest below) suggests the improbability of a racial
motive for the rezoning. The sliver of the City to the
right (east) of Interstate 57 is the area in which the
hotel is located. That it is indeed an industrial area,
hardly likely to be a magnet for householders of any
race, is shown in the aerial photo of the area, also below.
(Both the aerial photo, and a detailed map of the
area shown in the photo, can be viewed online at
http://maps.google.com/?ll=41.5892,-87.7227&z=17 (visited
Feb. 21, 2013).) Notice that the hotel, which is marked
by the oval at the bottom of the photo, is sandwiched
between the highway and the industrial establishments.
Parvati has presented no evidence that any comparable
facility, serving a white clientele, has ever been per-
mitted by Oak Forest in a district comparable to the
district in which the hotel is located.
10 No. 12-1954
No. 12-1954 11
And if the City wanted the industrial zone to be lily-
white, it didn’t have to amend the zoning ordinance.
The existing ordinance limited nonindustrial uses in a
manufacturing district to uses that are highway oriented,
12 No. 12-1954
which the hotel was as long as it was operated as a hotel,
but would cease to be if it became a retirement home.
In sum, Parvati has failed to make a prima facie case
of racial discrimination.
We can be brief concerning its other claim, that the
zoning ordinance is unconstitutionally vague. It certainly
was vague when, as a result of the omission of the ap-
pendix designating the M-1 and M-2 districts, Parvati
didn’t know which kind of district its hotel was in. But
that omission was rectified, and there is no indication
that Parvati was harmed by the glitch.
The main complaints about vague statutes or regulations
are that they operate as traps for the unwary and that
they induce careful people to steer far clear of the pro-
hibitions, forgoing lawful activity because they can’t be
sure what uses of their property are lawful and what
unlawful. Another concern is with the unlimited discre-
tion that a vague statute or regulation may confer on
the officials responsible for enforcing it. (See Grayned v.
City of Rockford, 408 U.S. 104, 108-09 (1972), and LC&S,
Inc. v. Warren County Area Plan Commission, 244 F.3d 601,
605 (7th Cir. 2001)—decisions that mention both con-
cerns.) Vagueness in zoning can thus undermine property
rights; property owners subject to an extremely vague
zoning ordinance wouldn’t know their rights because
they wouldn’t know what uses of their land were permit-
ted. See Baer v. City of Wauwatosa, 716 F.2d 1117, 1124-25
(7th Cir. 1983). Parvati, however, is seeking damages
not for delay in obtaining a definitive ruling on the con-
No. 12-1954 13
version of its hotel to a retirement home but for the dif-
ference between the building’s value as a hotel and as
a retirement home, and that difference is not claimed to
be a result of the delays and irregularities in the zoning
proceedings involving the property.
So Parvati must lose its appeal. But for completeness
we note with disapproval the City’s invocation of the
“new business” rule as a bar to damages in this case even
if liability could be shown. This discredited rule, see
MindGames, Inc. v. Western Publishing Co., 218 F.3d 652,
657 (7th Cir. 2000), precludes an award of damages
for losses to a new business. The rule is based on the
correct observation that it is more difficult to establish
loss objectively when a business is strangled in its cradle,
for then there is no history of profit and loss from which
to extrapolate lost future profit—the profit the business
would have earned had it not been killed or wounded
by the defendant. But it doesn’t make sense to build on
this insight a flat prohibition against awarding damages
in such a case; the general standard governing proof of
damages, which requires a plaintiff to make a reasonable
estimate of its damages as distinct from relying on
hope and a guess, is adequate for cases in which a new
business is snuffed out by a wrongdoer. Id. at 658; TAS
Distributing Co. v. Cummins Engine Co., 491 F.3d 625, 633
(7th Cir. 2007); Ashland Management Inc. v. Janien, 624 N.E.
2d 1007, 1012 (N.Y. 1993).
The City’s invocation of the new-business rule is per-
verse, because this is not a new-business case. Parvati
had a contract to sell the hotel to the church’s affiliate
14 No. 12-1954
for $4.5 million, contingent on a change in zoning. Its
damages would therefore be the difference between
the value of the hotel as a hotel for transients, Parvati’s
“old” business—probably a slight value because Parvati’s
lender foreclosed on the hotel—and $4.5 million. The
difference would be readily calculable, which would
have enabled a confident estimate of Parvati’s dam-
ages had it been able to prove that the sale fell
through because of racial discrimination against the
buyer’s principal (the church).
A FFIRMED.
3-1-13