Petworth Holdings, LLC v. Bowser

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
PETWORTH HOLDINGS, LLC, et al.,
Plaintiffs,
v. Civil Action No. 18-3 (JEB)
MURIEL BOWSER, et al.,
Defendants.
MEMORANDUM OPINION
Early last year, Plaintiffs Petworth Holdings, LLC and John Formant filed suit in this
Court asserting that a local statute regulating certain gas stations in the District of Columbia
violates the Fifth Amendment to the United States Constitution. Citing an intervening change in
the law governing Fifth Amendment challenges, Plaintiffs now move to amend their Complaint
to add a new claim under 42 U.S.C. § 1983 and a new defendant, the District of Columbia. This
change would allow them to pursue monetary damages, as opposed to merely injunctive and
declaratory relief. Because Plaintiffs have offered a plausible rationale for their delay, no
prejudice would accrue from such an amendment, and Defendants have failed to establish
futility, the Court will grant the Motion.
I. Background
Plaintiffs are the owners of a property on which currently sits a full-service Shell gas
station. See Compl., ¶¶ 3–6. As the Court described in its prior Opinion, they allege that certain
recent amendments to a longstanding D.C. statute that regulates the alteration and conversion of
such gas stations in the District have unconstitutionally impeded their ability to sell this property.
1
See Petworth Holdings, LLC v. Bowser, 308 F. Supp. 3d 347, 350–51 (D.D.C. 2018). The Act
as amended provides: “No retail service station which is operated as a full service retail service
station on or after April 19, 1977, may be discontinued, nor may be structurally altered, modified
or otherwise converted . . . into a non full service facility or into any other use.” D.C. Code § 36-
304.01(b). Plaintiffs allege that the Act now prevents property owners such as themselves from
selling their land because potential purchasers do not want to operate a full-service gas station
“in perpetuity.” Compl., ¶ 36.
Plaintiffs originally filed their Complaint in January 2018, seeking a declaration that the
Act violates the Fifth and Thirteenth Amendments to the United States Constitution and an
injunction barring the City from enforcing it. Defendants moved to dismiss. In April 2018, the
Court granted Defendants’ Motion as to Plaintiffs’ Thirteenth Amendment claim only. In doing
so, the Court held that Plaintiffs had sufficiently pled that the Act “frustrated their reasonable
investment expectations” for their property and had thereby stated a plausible Fifth Amendment
claim. See Petworth, 308 F. Supp. 3d at 357. The parties proceeded to discovery, which is not
yet complete.
As noted above, Plaintiffs have recently moved to amend their Complaint, seeking to add
the District of Columbia as a defendant and a new claim under 42 U.S.C. § 1983. Defendants
consent to the former proposed addition but oppose the latter, which the Court now resolves. See
ECF No. 36 (Opp.) at 3 n.4.
II. Legal Standard
A plaintiff may amend her complaint once as a matter of right within 21 days of serving it
or within 21 days of being served a responsive pleading. See Fed. R. Civ. P. 15(a)(1).
Otherwise, a plaintiff must seek consent from the defendant or leave from the court. See Fed. R.
2
Civ. P. 15(a)(2). In such circumstances, however, the Court ought to “freely give leave [to
amend a pleading] when justice so requires.” Id. The Supreme Court has instructed that leave to
amend should accordingly be granted “[i]n the absence of . . . undue delay, bad faith or dilatory
motive on the part of the movant, repeated failure to cure deficiencies by amendments previously
allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, [or]
futility of amendment.” Foman v. Davis, 371 U.S. 178, 182 (1962). In this Circuit, “[a]lthough
the grant or denial of leave to amend is committed to a district court’s discretion, it is an abuse of
discretion to deny leave to amend unless there is sufficient reason.” Firestone v. Firestone, 76
F.3d 1205, 1208 (D.C. Cir. 1996) (citing Foman, 371 U.S. at 182). Under Rule 15(a), “the non-
movant generally carries the burden in persuading the court to deny leave to amend.”
Nwachukwu v. Karl, 222 F.R.D. 208, 211 (D.D.C. 2004).
III. Analysis
Defendants argue that Plaintiffs’ proposed amended Complaint is unduly delayed,
unfairly prejudicial, and futile. The Court considers each of these arguments in turn.
A. Undue Delay
Defendants first assert that Plaintiffs’ Motion to Amend — filed about twenty months
after their Complaint — should be rejected because they exhibited undue delay in filing it.
Delay, indeed, “is a valid reason to reject a party’s attempt to add a new theory of liability to a
complaint.” Elkins v. District of Columbia, 690 F.3d 554, 565 (D.C. Cir. 2012). But the delay
must be “undue” — that is, the reason for the delay is pertinent to the determination of whether
leave to amend should be granted. See Williamsburg Wax Museum, Inc. v. Historic Figures,
Inc., 810 F.2d 243, 247–48 (D.C. Cir. 1987) (affirming denial of leave to amend when plaintiff
“offered no explanation for its tardiness”). To justify their delay here, Plaintiffs point to a
3
Supreme Court decision issued just a few months ago, which they argue cleared the way for their
proposed amendment. See ECF No. 35 (Pl. Motion to Amend) at 1 (citing Knick v. Township of
Scott, 139 S. Ct. 2162 (2019)).
By way of background, in Williamson County Regional Planning Commission v.
Hamilton Bank, 473 U.S. 172 (1985), the Supreme Court reversed the granting of a jury award of
$350,000 to a plaintiff who had brought a takings claim against a regional planning commission
under § 1983. In doing so, the Court held that plaintiffs could not bring certain takings claims in
federal court against state or local governments before seeking “compensation [for that taking of
property] through the procedures the State has provided for doing so.” Id. at 194–96. Knick,
however, overturned Williamson County and explicitly eliminated any “exhaustion requirement
for § 1983 takings claims.” 139 S. Ct. at 2172. The Court instead held that “a property owner
may bring a Fifth Amendment claim under § 1983 upon the taking of his property without just
compensation by a local government” and need not first seek compensation through
state-provided procedures. Id. at 2179. Plaintiffs therefore argue that Knick “represents a
change in the law” that justifies their addition of a § 1983 claim to their Complaint. See Pl.
Motion to Amend at 1–2.
The Court concurs with Plaintiffs that the Knick decision, at a minimum, clarified their
litigation options respecting their takings challenge, plausibly excusing their not including such a
claim in their original Complaint. It is true that prior to Knick, courts had sometimes waived
Williamson County’s exhaustion requirement (and perhaps this Court would have done the same
had Plaintiffs originally brought a § 1983 claim), but even then, confusion reigned among the
lower courts as to when, if at all, such waiver could occur. For example, courts were split as to
whether facial — as distinct from as-applied — takings claims were exempt from Williamson
4
County’s state-litigation requirements. Compare Conjunta del Seguro de Responsabilidad
Obligatorio v. Flores Glarza, 484 F.3d 1, 14 (1st Cir. 2007) (holding that “facial statutory
challenges” are not blocked by Williamson County’s state-litigation requirement), with Alto
Eldorado Partnership v. County of Santa Fe, 634 F.3d 1170, 1175–77 (10th Cir. 2011) (reaching
the opposite conclusion). Courts were also split as to whether Williamson County was a
“prudential” doctrine (and thereby discretionary) or “jurisdictional” (and thereby mandatory).
Compare Peters v. Village of Clifton, 498 F.3d 727, 734 (7th Cir. 2007) (“Williamson County’s
ripeness requirements are prudential in nature.”), with Snaza v. City of St. Paul, 548 F.3d 1178,
1182 (8th Cir. 2008) (“We have held that Williamson County is jurisdictional.”). Surveying this
jumbled landscape, Plaintiffs could have reasonably concluded that this Court would not have
permitted them to pursue a takings challenge seeking monetary damages under § 1983 (the
precise claim that the Williamson County Court had rejected) without their first exhausting
available state procedures for seeking such compensation.
Defendants’ contrary arguments offer little. They first contend that Plaintiffs might have
been able to assert a § 1983 claim in their original Complaint, but do not give a specific reason as
to why this would have been the case. Indeed, Defendants themselves concede that –– at the
very least –– “it is not clear” that Plaintiffs could have previously brought a § 1983 claim
seeking monetary damages. See Opp. at 4. Defendants also argue that Knick is inapposite
because Plaintiffs originally sought declaratory and injunctive relief, and Knick –– in their
reading –– only affected claims for monetary damages. This argument simply misses the point,
as the purpose of Plaintiffs’ proposed amendment is precisely to add a cause of action that could
result in the imposition of monetary damages. See Armstrong v. Exceptional Child Care Center
Inc., 135 S. Ct. 1378, 1392 (2015) (Sotomayor, J., dissenting) (noting that unlike plaintiffs
5
seeking equitable redress to “halt or prevent [a] constitutional violation,” plaintiffs bringing suit
under § 1983 may seek a “variety of remedies –– including damages”) (citing United States v.
Stanley, 483 U.S. 669, 683 (1987)).
B. Prejudice
Even if Plaintiffs could have brought a takings claim seeking monetary damages under
§ 1983 prior to Knick, an examination of any potential prejudice to Defendants also favors
granting their Motion to Amend. “Consideration of whether delay is undue . . . should generally
take into account the actions of other parties and the possibility of any resulting prejudice.”
Atchinson v. District of Columbia, 73 F.3d 418, 426 (D.C. Cir. 1996). Put differently, “the
significance of a delay depends on the prejudice it causes.” Washington Metro Area Transit
Auth. v. Aon Risk Servs., Inc., 2013 WL 12341689, at *2 (D.D.C. May 17, 2013). Thus, “[t]he
most important factor the Court must consider when determining whether to grant leave to
amend is the possibility of prejudice to the opposing party.” Djourabchi v. Self, 240 F.R.D. 5, 13
(D.D.C. 2006) (internal quotation marks omitted).
To establish prejudice from a proposed amended pleading, an “opposing party must show
that it was unfairly disadvantaged or deprived of the opportunity to present facts or evidence
which it would have offered had the amendments been timely.” In re Vitamins Antitrust
Litig., 217 F.R.D. 30, 32 (D.D.C. 2003). Defendants contend that they will be prejudiced by the
proposed amendments to the Complaint because they have conducted discovery “based on the
need to respond to plaintiffs’ Fifth Amendment claim” and have “sought no information
regarding the elements of a claim under Section 1983.” Opp. at 7.
The Court is unconvinced. First, Defendants will have ample opportunity to tweak their
discovery strategy because, as they concede, discovery has yet to close and both Plaintiffs are yet
6
to be deposed. Id. at 6. Plaintiffs, in fact, have expressed a willingness to extend fact discovery
for as long as Defendants so desire, see ECF No. 37 (Pl. Reply) at 5, and the Court can certainly
accommodate their concerns. Second, and equally significant, Plaintiffs’ addition of a Fifth
Amendment challenge brought under § 1983 (rather than under the Constitution alone) merely
provides a means by which they can seek monetary damages should they prevail. Put
differently, Plaintiffs seek a new remedy but are not pursuing a new theory of the case. They are
“not adding any new factual allegations,” and the § 1983 claim is “closely related to (perhaps
even duplicative of) existing claims.” Washington Metro Area Transit Auth., 2013 WL
12341689, at *2 (granting motion to amend given lack of prejudice to nonmoving party); see also
State Teachers Retirement Bd. v. Flour Corp., 654 F.2d 843, 856 (2d Cir. 1981) (reversing
district court’s denial of leave to amend where new claim was closely related and there would be
no need for “a great deal of additional discovery”). The Court, accordingly, sees little prejudice
from amendment here.
C. Futility
Finally, Defendants argue that Plaintiffs’ proposed § 1983 claim should be rejected as
futile. “[A] district court may properly deny a motion to amend if the amended pleading would
not survive a motion to dismiss.” In re Interbank Funding Corp. Sec. Litig., 629 F.3d 213, 218
(D.C. Cir. 2010). Defendants correctly note that Knick did not overturn Williamson County’s
so-called “finality” requirement, which dictates that before a regulatory-taking claim be brought,
“the responsible state agency [must have] made a final decision as to the ‘application of the
challenged regulation to the property at issue.’” Dist. Intown Properties Ltd. Partnership v. Dist.
of Columbia, 23 F. Supp. 2d 30, 33 (D.D.C. 1998) (quoting Williamson County, 473 U.S. at
194). Defendants therefore argue that Plaintiffs’ compensatory-damages claim is futile because
7
they have not received a “final” decision from a state administrative body as to whether they are
subject to the regulation at issue. Defendants also point out that Plaintiffs’ claim for punitive
damages cannot stand because “absent extraordinary circumstances, punitive damages are
unavailable against the District of Columbia under District of Columbia law.” Opp. at 9 (quoting
Mpoy v. Fenty, 870 F. Supp. 2d 173, 181–82 (D.D.C. 2012)).
Taking Defendants’ arguments in reverse order, it will certainly be challenging for
Plaintiffs to demonstrate the “extraordinary circumstances,” necessary for maintaining a
§ 1983 claim for punitive damages. See Lucero-Nelson v. Washington Metro. Area Transit
Auth., 1 F. Supp. 2d 1,11 (D.D.C. 1998) (noting that “extraordinary circumstances” exception is
“narrowly construed”). Plaintiffs do not offer much in the way of a defense of their claim for
punitive damages, but Defendants’ mere citation to the legal standard here –– without more ––
cannot sustain an argument to the contrary. If Defendants would like to fully brief this issue and
file a motion to strike punitive damages, they are, of course, free to do so at any time.
Finally, under the motion-to-dismiss standard, Plaintiffs have sufficiently established that
their claim for compensatory damages does not run afoul of Williamson County’s finality
requirement. Defendants contend that Plaintiffs have not pursued to conclusion all available
avenues of administrative review because they can seek an exemption from the challenged
statute from the Department of Energy and Environment. Plaintiffs counter with their own
futility-based argument, claiming that the exemption by its terms cannot apply to property
owners such as themselves, who are not also “distributor[s]” or “retail dealer[s].” See D.C. Code
§ 36-304.01(d)(1). According to Plaintiffs, it would be fruitless for them to apply for an
exemption.
8
Given these competing arguments, Defendants have simply failed to carry their burden of
establishing the futility of Plaintiffs’ proposed additional claim. As the Supreme Court has held,
“[O]nce it becomes clear that the agency lacks discretion to permit [the proposed land use], or
the permissible uses of the property are known to a reasonable degree of certainty, a takings
claim is likely to have ripened.” Palazzolo v. Rhode Island, 533 U.S. 606, 620 (2001). In other
words, “ripeness doctrine does not require a landowner to submit applications for their own
sake.” Id. at 622. Defendants have not offered any arguments as to why, notwithstanding the
seemingly clear statutory language at issue, Plaintiffs (who are not “distributors” or “retail
dealers” as defined by the statute, see D.C. Code § 36-301.01) could be granted an exemption.
They never explain, moreover, why Plaintiffs should have pursued an administrative process that
came into existence 15 months after the filing of their Complaint. The Court is thus unconvinced
at this time that the proposed claim for compensatory damages is futile.
IV. Conclusion
For the foregoing reasons, the Court will grant Plaintiffs’ Motion to Amend their
Complaint. A separate Order consistent with this Opinion shall issue this day.
/s/ James E. Boasberg
JAMES E. BOASBERG
United States District Judge
Date: October 3, 2019
9