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Sixth Circuit Rules in Favor of MI Business on First Amendment Retaliation, Equal Protection Claims

Written by Kate Brink Harrison on September 14, 2015 Category: Business Law & Transactions, Commercial Litigation

Last week, the Sixth Circuit Court of Appeals ruled in favor of a Michigan business on its First Amendment retaliation, due process and equal protection claims brought against the Village of Armada, Michigan. The Sixth Circuit’s opinion largely reversed a district court decision that had granted Armada’s motion for summary judgment.

The case involves an injection molding company that sought to relocate to a former high school auto shop in Armada. The auto shop was in a zone limited to “general business” while injection molding was classified as “light industrial,” so Plaintiffs (the business owners) needed a Special Approval Land Use permit (Permit) from the Armada Planning Commission. The Planning Commission issued the Permit but with multiple restrictions. The business then grew substantially and Plaintiffs were concerned about complying with the Permit’s restrictions, so Plaintiffs sought to modify the Permit’s terms. One Planning Commissioner (Delecke) moved to reject the proposed modifications, which was unanimously carried. After the decision, Commissioner Delecke made disparaging remarks in an effort to embarrass and harass Plaintiffs.

In 2004, one of the Plaintiffs (Paterek) was appointed Chairman of the Armada Downtown Development Authority (DDA). Commissioner Delecke unsuccessfully campaigned to have him removed from this role. By 2011, Plaintiff Paterek remained DDA Chairman and was also elected Supervisor of Armada Township. At this point, the Commissioner Delecke’s harassment of Plaintiffs intensified. In 2013, the Armada Village Council dissolved the DDA Board, appointed Commissioner Delecke as the new DDA Chairman, and replaced the DDA Board with the Planning Commission.

In 2012, Commissioner Delecke alleged Plaintiffs were knowingly violating the terms of their Permit, and said Plaintiffs would be fined between $100-$1,000 per infraction if they did not comply with the Permit. Historically, the Planning Commission declined to ticket other businesses for similar violations. However, Commissioner Delecke justified the differential treatment by saying he “had a personality conflict” with Plaintiff Paterek and Paterek should be held to a higher standard since he was Supervisor of Armada Township.

In early 2013, Plaintiffs purchased a neighboring property that already held a Permit for light industrial activity in order to expand its business. Soon after, an Armada official told Plaintiffs any new business at that property needed to be approved by the Planning Commission and needed a new Certificate of Occupancy (COO). Plaintiffs applied for a new Permit, but withdrew the application after their attorney informed them the existing Permit and COO were still valid.

In August 2013, Village officials began issuing Plaintiffs $150 tickets daily for not applying for a new COO or obtaining a new Permit. Plaintiffs received at least 25 tickets. When Plaintiff Paterek contacted Village officials, he was told Commissioner Delecke was the driving force behind the tickets. Plaintiffs contended the tickets were improper for two reasons. First, Special Approval Land Use Permits ran with the property and did not need to be renewed by new owners. Second, COOs were handled by the Building Inspector, so the Planning Commission and Delecke had no jurisdiction over them. Plaintiffs also learned 7 local businesses did not even have a COO on file.

Soon after, Plaintiffs filed suit in federal court against Armada and Commissioner Delecke individually, asserting claims for First Amendment retaliation, substantive and procedural due process, and equal protection. Armada moved for summary judgment on all of Plaintiffs’ constitutional claims, which the district court granted in full. Plaintiffs then appealed the decision to the Sixth Circuit.

With respect to Plaintiffs’ First Amendment retaliation claim, Defendants conceded two of the three elements: that Plaintiffs had been engaged in protected conduct, and the numerous tickets issued to Plaintiffs and Paterek’s loss of his DDA position were adverse actions. The only question was whether there was a connection between these elements. The Sixth Circuit agreed with Plaintiffs that their multiple efforts to speak out against Defendants over the years led to Defendants’ adverse actions. As such, the Sixth Circuit reversed summary judgment in favor of Defendants on the First Amendment retaliation claim.

The Sixth Circuit also reversed summary judgment on the Substantive Due Process claim, finding there was a disputed issue of fact as to whether Defendants’ activities against Plaintiffs were arbitrary and capricious. With respect to the Procedural Due Process claim, the Sixth Circuit found summary judgment in favor of Defendants was proper, since Plaintiffs were never deprived of a property interest. While Defendants threatened to revoke Plaintiffs’ Permit, it was never actually revoked.

Finally, the Sixth Circuit reversed summary judgment on Plaintiffs’ Equal Protection claim. Plaintiffs claimed that due to Defendants’ animus, their business was treated differently than similarly situated businesses in Armada. Plaintiffs identified many businesses that were allowed to operate without a COO or were issued a COO after a failed inspection, which Defendants justified based on Defendant Delecke’s “personality conflict” with Plaintiff Paterek. According to the Sixth Circuit, a jury could reasonably find that this amounts to differential treatment. The case was then remanded back to the district court.

This case should serve as a cautionary tale for municipal officials. In the past, First Amendment retaliation and due process claims have proven costly for municipalities. For example, in Paeth v. Worth Twp., MI, a case litigated by Dalton & Tomich, the jury awarded a record $600,000 in damages. In a 2014 New Jersey case, a New Jersey jury awarded more than $1.5 million against a city that blocked a business owner’s attempt to open a sports bar and restaurant.

A full copy of the Paterek v. Village of Armada et al. opinion is available here.

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