L & F Homes and Devel, L.L.C. v. City of Gulfport

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT United States Court of Appeals

Fifth Circuit

FILED

August 7, 2013

No. 12-60597, Cons. w/ 12-60600 Lyle W. Cayce

Clerk

L & F HOMES AND DEVELOPMENT, L.L.C., doing business as Hyneman

Homes; LARRY MITRENGA,

Plaintiffs-Appellants

v.

CITY OF GULFPORT, MISSISSIPPI,

Defendant-Appellee

-----------------------------------------------------------

Cons. w/ 12-60601

LARRY MITRENGA,

Plaintiff-Appellant

v.

CITY OF GULFPORT, MISSISSIPPI,

Defendant-Appellee

Appeals from the United States District Court

for the Southern District of Mississippi

USDC No. 1:10-CV-387

Before GARZA, SOUTHWICK, and HAYNES, Circuit Judges.

No. 12-60597, Cons. w/ 12-60600, 12-60601

PER CURIAM:*

L&F Homes and Development, LLC and Larry Mitrenga were denied

water service from the City of Gulfport for a planned residential development

called “Roundhill.” L&F and Mitrenga sued Gulfport for discrimination under

42 U.S.C. § 1982, the Fair Housing Act (“FHA”), and the Equal Protection

Clause; for violations of the Takings Clause and substantive due process; for

procedural due process deprivation; and on state law claims related to breach of

contract. The district court granted summary judgment to Gulfport on all

claims. We AFFIRM.

FACTUAL BACKGROUND

The relevant background of this case falls into three broad categories:

approvals granted to L&F’s Roundhill development, treatment of a neighboring

development tract referred to as “781,” and Gulfport’s fire flow requirements.

In March 2006, Gulfport issued what is called a “will serve letter” to the

predecessor in interest of Roundhill, which confirmed there was water and sewer

service available to the property. In August 2006, Gulfport entered into a

Wastewater Service Agreement with the then-owner of Roundhill.

Subsequently, Mississippi officials approved the sewer plan; Gulfport then

inspected the Roundhill property and prepared a list of items the developer had

to complete. In January 2007, a work order was issued for installation of a City

water meter on Roundhill. After 2007 there is some evidence that the water

system at Roundhill was at least partially active, but L&F never paid for water

service, and there is no evidence of payment by any other entity.

In 2008, Gulfport issued a will serve letter to the 781 development, which

was on land neighboring Roundhill and on the same Landon Road water line.

*

Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not

be published and is not precedent except under the limited circumstances set forth in 5TH CIR.

R. 47.5.4.

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At that time, the 781 project was a townhouse complex. Gulfport refused to

issue a new will serve letter in the fall of 2009, after 781’s development plan

shifted to a cottage complex. Later, at a June 2010 hearing before a governing

board for the county, 781 was further denied a conditional use permit on the

basis that “the development is incompatible with the neighborhood.” At this

hearing, various Gulfport representatives offered reasons why 781 would be

incompatible. These included problems regarding traffic and parking, light and

noise, danger to children posed by vehicles, fire protection, crime, and

consistency with other city development plans. One Gulfport representative

made references to crime problems at a Federal Emergency Management Agency

park in Gulfport, a park with predominantly black residents located in an area

that otherwise had primarily white residents.

In November 2006, City Ordinance 2501 increased the fire flow

requirements for residential developments such as Roundhill and 781 from 500

gallons per minute (“gpm”) to 1000 gpm. This measure identified the amount of

water available at a given location by connection to water sources for firefighting

needs. In November 2009, Gulfport received a hydraulic analysis by the Garner

Russell firm that stated the fire flow capacity for the water line servicing

Roundhill and 781 was only 600 gpm, not the required 1000 gpm. Subsequent

testing confirmed this deficiency.

In February 2010, Gulfport denied final approval of water service to

Roundhill. In March 2011, after this present lawsuit had been filed, Gulfport

began supplying water service to Roundhill from a new water line constructed

by the county. In March 2012, Gulfport excavated a portion of the Landon Road

line that had earlier been found insufficient to service Roundhill. A nearly-

closed water valve was discovered. After the valve was opened, it appears that

the Landon Road water line could supply the Roundhill property.

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The district court granted summary judgment in favor of Gulfport on all

claims arising from Gulfport’s denial of water service to Roundhill. Both L&F

and Mitrenga appeal.

DISCUSSION

We review a district court’s grant of summary judgment de novo. Onoh v.

Nw. Airlines, Inc., 613 F.3d 596, 599 (5th Cir. 2010). We view all evidence in the

light most favorable to the non-moving party. Id. Summary judgment should

be granted only if “there is no genuine dispute as to any material fact and the

movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). A

genuine issue of material fact exists if “a reasonable jury could return a verdict

for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248

(1986). Summary judgment is appropriate if the non-moving party “fails to

make a showing sufficient to establish the existence of an element essential to

that party’s case.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).

“We review questions of jurisdiction, and specifically standing, de novo.”

Bonds v. Tandy, 457 F.3d 409, 411 (5th Cir. 2006).

I. Section 1982

Section 1982 states: “All citizens of the United States shall have the same

right, in every State and Territory, as is enjoyed by white citizens thereof to

inherit, purchase, lease, sell, hold, and convey real and personal property.” 42

U.S.C. § 1982. A discrimination claim typically requires a showing that the

plaintiff is “a member of a racial minority.” See Bellows v. Amoco Oil Co., 118

F.3d 268, 274 (5th Cir. 1997). Yet “whites have a cause of action under Section

1982 when discriminatory actions are taken against them because of their

association with blacks.” Woods-Drake v. Lundy, 667 F.2d 1198, 1201 (5th Cir.

1982). The “association” in Woods-Drake was white resident-plaintiffs who were

threatened with eviction “if they continued to have black guests.” Id.

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L&F does not claim status as a racial minority. Instead, it asserts that

Roundhill was denied water service because of the development’s temporal and

physical proximity to 781, which was a housing development allegedly likely to

be occupied by a majority of black residents. Roundhill and 781, on adjacent

tracts, both applied for water service that would need to come from the same

Landon Road line. The properties are subject to different development plans and

owned by distinct corporate entities. In effect, L&F asserts Roundhill was

denied water service so that Gulfport’s denial of service to 781 would not appear

to be motivated by race. Woods-Drake protects whites who are punished for

their support of or interaction with minorities. Id. (summarizing cases). We do

not accept that the discrimination prohibited by the Woods-Drake reasoning

reaches situations where a non-minority alleges it was part of the collateral

damage resulting from its coincidental presence in the queue for a governmental

benefit at the same time and location as a minority.

L&F lacks standing to bring a Section 1982 claim.

II. Fair Housing Act

The FHA applies to “any person who . . . claims to have been injured by a

discriminatory housing practice.” 42 U.S.C. § 3602(i)(1). The “sole requirement

for standing under the FHA is the Article III minima.” Lincoln v. Case, 340 F.3d

283, 289 (5th Cir. 2003) (citation omitted). We analyze FHA claims under a

burden-shifting framework. See Simms v. First Gibraltar Bank, 83 F.3d 1546,

1556-57 (5th Cir. 1996).

Standing for an FHA claim does not require association with minorities.

It is enough that L&F claims that Gulfport’s supposed discrimination against

the other development led to its own damage. For example, the Supreme Court

noted that the distinction between standing for first-party test purchasers and

for third-party neighborhood residents was “of little significance [under the

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FHA;] . . . the only requirement for standing to sue” was distinct and palpable

injury fairly traceable to the challenged action (i.e., injury in fact). Havens

Realty Corp. v. Coleman, 455 U.S. 363, 375-76 (1982).

L&F has standing to claim that Gulfport discriminated for racial reasons

against another development and that discrimination injured L&F as well. It

must “show that race was a consideration and played some role in a real estate

transaction” to establish a prima facie case. Hanson v. Veterans Admin., 800

F.2d 1381, 1386 (5th Cir. 1986). Discriminatory consideration of race under the

FHA can be demonstrated by either “a showing of a significant discriminatory

effect” or “proof of discriminatory intent,” that is disparate impact or

discriminatory treatment. Id. L&F claims discrimination on both theories.

A. Disparate Impact

“[D]isparate-impact claims ‘involve [policies or] practices that are facially

neutral in their treatment of different groups but that in fact fall more harshly

on one group than another and cannot be justified by business necessity.’”

Raytheon Co. v. Hernandez, 540 U.S. 44, 52 (2003) (discussing claims under the

Americans with Disabilities Act). The Supreme Court has not previously

answered and has just granted a writ of certiorari on this question: “Are

disparate impact claims cognizable under the Fair Housing Act?” Mt. Holly

Gardens Citizens in Action, Inc. v. Township of Mount Holly, 658 F.3d 375 (3d

Cir. 2011), cert. granted, 133 S. Ct. 2824 (2013).

We need not await the Supreme Court’s decision because the plaintiffs’

claim fails regardless of the answer. Beyond just alleging the existence of a

disparate impact, L&F would have to identify a “specific test, requirement, or

practice” that is responsible for the disparity. Smith v. City of Jackson, 544 U.S.

228, 241 (2005) (discussing claim under the Age Discrimination in Employment

Act). L&F asserts that the likely racial composition of the hypothetical 781

development would be at least 60% black and that denying 781 the ability to

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develop creates a disparate impact. Even if that is true, L&F has failed to

describe a specific neutral practice or policy that “falls more harshly” on a

protected group than on others; that failure means the disparate-impact theory

is inapplicable. Cf. Pacheco v. Mineta, 448 F.3d 783, 792 (5th Cir. 2006)

(dismissing disparate-impact claims where an administrative charge complained

only of disparate treatment).

If there is a claim under the FHA, it is for disparate treatment.

B. Disparate Treatment

“Disparate treatment” is “deliberate discrimination.” Munoz v. Orr, 200

F.3d 291, 299 (5th Cir. 2000). Such discrimination is shown by evidence of

discriminatory action or by inferences from the “fact of differences in treatment.”

See Int’l Bhd. of Teamsters v. United States, 431 U.S. 324, 335 n.15 (1977).

Turning first to direct evidence of discrimination, L&F points to

statements made by Gulfport representatives at a June 2010 public hearing

conducted by the county on the subject of 781’s conditional use permit. L&F

highlights the testimony of a police officer who stated: “What I see is this is a

footprint the same as a FEMA park. If you know of anything that we dealt with

in a FEMA park, we were constantly having drug problems, shootings, rapes,

and stuff like that. Now I feel we are going to have the same issues here . . . .

You may have someone there that is a [pedophile] that is going to be watching

kids over there.” Other concerns included problems with traffic and parking,

light and noise, danger to children posed by vehicles, fire protection issues, and

consistency with other city development plans. One city resident also mentioned

concern over the depression of property values. No speaker at the hearing

mentioned race.

This evidence does not support that any City official acted with racial

motivations. L&F also points to evidence that when it requested testing of the

Landon Road line in April 2010, Gulfport expressed concerns that testing on

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behalf of L&F could adversely impact settlement negotiations in Gulfport’s

litigation with 781. Without more, the stated concerns about a lawsuit being at

a delicate stage of settlement do not equate to evidence of discrimination.

L&F also attempts to show that the Roundhill development was qualified

for water service but had the service denied, whereas similarly situated

residents were treated differently. See Munoz, 200 F.3d at 299. As a threshold

matter, L&F does not claim that prior to the excavation of the Landon Road line

in March 2012, Roundhill or 781 satisfied the fire flow requirements of the 2006

ordinance. Rather, L&F asserts that the Landon Road line “had the capacity to

provide ample fire flow” such that if the closed valve had been open in 2010,

Roundhill would have been qualified. What might have occurred had all the

facts been known does not matter. On February 22, 2010, the Landon Road line

as then-operational could not supply fire flow of 1000 gpm to Roundhill. There

is no evidence Gulfport knew of the closed valve, which might make the denial

pretextual. Roundhill was, therefore, not qualified.

Even though Roundhill was not qualified, L&F attempts to show “that race

was a significant factor in the refusal” because other similarly situated

developments were approved notwithstanding a lack of verification of compliance

with the ordinance. See Artisan/Am. Corp. v. City of Alvin, Tex., 588 F.3d 291,

295 (5th Cir. 2009). A proper point of comparison is a “nearly identical, similarly

situated individual[ ].” Bryant v. Compass Group USA Inc., 413 F.3d 471, 478

(5th Cir. 2005).

The most relevant comparator to which L&F points is Holliman Place, a

residential development within Gulfport city limits, which received a will serve

letter in 2008. Holliman did not receive final approval until 2011 after

satisfactory fire flow testing. Although testing demonstrated inadequate fire

flow on December 8, 2011, uncontradicted evidence suggests that a “looping”

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modification rendered the fire flow adequate on December 9, 2011. This looping

modification means Holliman was not a nearly identical comparator.

L&F also identifies Sam’s Club, Rooms to Go, and the English Manor

residential development, as comparators. L&F does not point to inadequate fire

flow testing on these sites in a contemporary time period, prior to final approval.

Further, Gulfport testified that Sam’s Club and Rooms to Go had internal

sprinkler systems that would justify a variance from the ordinance, and that

looping of water lines and the placement of fire hydrants were also

considerations. English Manor received final approval before the effective date

of the ordinance.1

Gulfport’s determination of compliance with the ordinance primarily relied

on a developer’s engineers. In November 2009, Gulfport received a report

indicating that the Landon Road line produced a fire flow below 1000 gpm,

putting Gulfport on notice that the general fire flow capacity of the Landon Road

line was inadequate. We have been pointed to no evidence that Gulfport

approved a residential development for water service after this date without

verifying compliance with the 1000 gpm requirement.

“The burden of establishing a prima facie case of disparate treatment is

not onerous.” Tex. Dep’t of Cmty. Affairs v. Burdine, 450 U.S. 248, 253 (1981).

Nonetheless, L&F has failed to carry it. The district court properly dismissed

the disparate treatment and disparate impact claims.

III. Equal Protection

1

L&F refers to other residential developments that Gulfport allowed to proceed after

the enactment of the ordinance, but discovery did not unearth relevant records of pre-approval,

inadequate fire flow testing supportive of discrimination. Although here, as in other instances,

L&F points to Gulfport’s unsatisfying production of records, L&F does not appeal any of the

district court’s discovery rulings.

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An equal protection claim may be “brought by a ‘class of one,’ where the

plaintiff alleges that she has been intentionally treated differently from others

similarly situated and that there is no rational basis for the difference in

treatment.” Vill. of Willowbrook v. Olech, 528 U.S. 562, 564 (2000). Similarly,

an equal protection plaintiff can prevail under a selective enforcement theory by

showing “that the selective enforcement was deliberately based upon an

unjustifiable standard such as race, religion, or other arbitrary classification.”

Allred’s Produce v. U.S. Dep’t of Agric., 178 F.3d 743, 748 (5th Cir. 1999)

(quotation marks omitted).

The ordinance establishes requirements in order to maintain sufficient

water pressure to fight fires. There is no evidence or even argument that the

ordinance, by utilizing the fire flow requirements of the 2003 International Fire

Code, is “irrational” or “arbitrary.” See Olech, 528 U.S. at 565. The ordinance

provides for differential treatment of property depending on the use to which the

property is put, and that too is not irrational. See Mikeska v. City of Galveston,

451 F.3d 376, 381 (5th Cir. 2006).

L&F does not really argue that the ordinance itself is irrational. Instead,

it claims that Gulfport selectively enforced the ordinance against Roundhill and

not against other developments. We have already discussed that L&F has not

identified in the record a similarly situated comparator against whom the

ordinance was not enforced. It was not until November 2009 that Gulfport

became aware of testing that documented the inadequacy of fire flow of the

relevant portion of the Landon Road line. Holliman satisfied the requirements

of the ordinance and was approved. The commercial buildings, though also

covered by the ordinance, qualified for exceptions or reductions in the fire flow

requirements. The record arguably does not demonstrate diligent inquiry,

enforcement, or record keeping by Gulfport, but there is no evidence of instances

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in which Gulfport was aware of noncompliance and nonetheless issued a final

approval of water service.

For L&F to succeed in a selective enforcement claim, it “must prove that

the government [was] motivated by improper considerations, such as race.”

Bryan v. City of Madison, 213 F.3d 267, 277 (5th Cir. 2000). L&F has not shown

evidence that, either by its statements or actions, Gulfport’s denial of water

service to Roundhill was “deliberately based upon an unjustifiable standard such

as race.” Allred’s Produce, 178 F.3d at 748.

The district court properly dismissed the Equal Protection claim.

IV. State Law Claims

L&F raises state law claims of breach of express contract, breach of

implied contract, and equitable estoppel.

A. Express Contract

In Mississippi, “an enforceable contract must appear in the official minutes

of a public board.” Bruner v. Univ. of S. Miss., 501 So. 2d 1113, 1115 (Miss.

1987). It is the responsibility of the contracting party to ensure that such

contracts are properly recorded in such minutes. Id. In a breach of contract

suit, the plaintiff must prove the existence of a valid contract by a preponderance

of the evidence. Garner v. Hickman, 733 So. 2d 191, 195 (Miss. 1999). “The

existence of a contract and its terms are questions of fact to be resolved by the

fact-finder, whether a jury or a judge in a bench-trial.” Weible v. Univ. of S.

Miss., 89 So. 3d 51, 59 (Miss. Ct. App. 2011). “Questions concerning the

construction of contracts are questions of law that are committed to the court,”

and which we review de novo. Facilities, Inc. v. Rogers-Usry Chevrolet, Inc., 908

So. 2d 107, 110 (Miss. 2005).

First, L&F argues that in early 2007, Gulfport approved and accepted

Roundhill’s water system. What we find in the record is a work order in January

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2007 for installation of a water meter at Roundhill. There was evidence that

after this date Roundhill received water. Gulfport counters that there is no

record of the actual installation of a water meter and that no entity ever paid for

water at Roundhill. Whatever the meaning of these 2007 events, there is no

evidence of a written agreement such as one in which Gulfport agreed to provide

water service.

Second, two documents appear in Gulfport’s official minutes: a will serve

letter and a wastewater service agreement. The will serve letter states that

Roundhill was eligible for sewer and water service. A notification of eligibility

does not constitute an agreement to provide water service. It instead

contemplates multiple additional steps and specifically references the need for

a future final approval and inspection. Among the requirements for a contract

is definiteness, which this letter does not provide. Rotenberry v. Hooker, 864

So.2d 266, 270 (Miss. 2003). The second writing is a “Wastewater Service

Agreement” through which Gulfport agreed to treat Roundhill’s wastewater; the

terms of this agreement plainly only apply to wastewater.

The will serve letter and the wastewater agreement do not establish that

Roundhill expressly contracted with Gulfport for water service.

B. Implied Contract

An implied contract arises “from a mutual agreement and intent to

promise, but where the agreement and promise have not been fully expressed in

words.” Kaiser Invs., Inc. v. Linn Agriprises, Inc., 538 So. 2d 409, 413 (Miss.

1989). A contract implied in fact has the same binding legal effect as an express

contract. Franklin v. Franklin ex rel. Phillips, 858 So. 2d 110, 120 (Miss. 2003).

The district court held that the claim is barred by sovereign immunity. We

agree. Mississippi provides for governmental immunity in breach of implied

contract suits involving “the issuance, denial, suspension or revocation of, or the

failure or refusal to issue, deny, suspend or revoke any privilege, ticket, pass,

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permit, license, certificate, approval, order or similar authorization . . . .” MISS.

CODE ANN. § 11-46-9(1)(h); see City of Jackson v. Estate of Stewart ex rel.

Womack, 908 So. 2d 703, 711 (Miss. 2005). The governmental unit forfeits this

immunity when a decision “is of a malicious or arbitrary and capricious nature.”

MISS. CODE ANN. § 11-46-9(1)(h).

A decision is not arbitrary and capricious when it is “fairly debatable” or

“supported by substantial evidence,” defined as “affording a substantial basis of

fact from which the fact in issue can be reasonably inferred.” Elec. Data Sys.

Corp. v. Miss. Div. of Medicaid, 853 So. 2d 1192, 1203 (Miss. 2003). This is a

highly deferential standard. Id. at 1202-03. As of February 22, 2010, Gulfport

understood that inadequate fire flow was then reaching Roundhill, and Gulfport

did not yet know of the closed valve. Consequently, Gulfport’s decision to deny

water service is at least fairly debatable. See Watkins v. Miss. Bd. of Bar

Admissions, 659 So. 2d 561, 568 (Miss. 1995).

Immunity is also waived when a decision is “malicious.” MISS. CODE ANN.

§ 11-46-9(1)(h). At least two definitions might be attributed to the word

malicious in this context. The first is that an act be “[w]ithout just cause or

excuse.” BLACK’S LAW DICTIONARY (9th ed. 2009). That definition does not differ

meaningfully from “arbitrary and capricious.” Gulfport’s denial was not

arbitrary based on what the city knew about water flow. A second definition is

more intent-based: “Substantially certain to cause injury” or with the “intention

or desire to harm another usu. seriously through doing something unlawful or

otherwise unjustified.” BLACK’S LAW DICTIONARY (9th ed. 2009); WEBSTER’S

THIRD NEW INTERNATIONAL DICTIONARY 1367 (Merriam-Webster 1993). In

applying a similar standard, Mississippi has at least suggested that a malicious

act may be one violative of the constitutional rights of a party. See In re Dean,

972 So. 2d 590, 594 (Miss. 2008) (“this Court will reverse the Board’s decision

only upon finding that it was ‘arbitrary, capricious or malicious’ in that it was

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unsupported by substantial evidence or violated a constitutional right of the

party”). We have already explained why the record does not support that

Gulfport’s denial was based on a constitutionally impermissible basis.

L&F’s claim for breach of implied contract is therefore barred by sovereign

immunity.

C. Equitable Estoppel

L&F also seeks damages under an estoppel theory. The argument is that

after Gulfport assured L&F that its development could proceed, Gulfport was

estopped from reversing positions.

Estoppel may arise even though a defendant is a municipality. Mayor &

Bd. of Aldermen, City of Clinton v. Welch, 888 So. 2d 416, 432 (Miss. 2004). An

estoppel claim requires: “(1) belief and reliance on some representation; (2)

change of position, as a result thereof; and (3) detriment or prejudice as a result

of the change of position.” Id.

The relevant representations here are in the will serve letter and the

alleged oral statements made by City officials. As to the oral statements, L&F

alleges that the Gulfport Director of Public Works told Mitrenga and another

L&F representative, Steve Elrod, that there were no impediments to the

development of Roundhill, and that the project was “good to go.” Accepting as

true that these statements were uttered, these statements do not support

estoppel as a matter of law. There is no evidence that the Gulfport Director of

Public Works who made these statements had the power to authorize

exemptions from the ordinance, and “ordinarily the unauthorized acts of one of

its officials does not estop a municipality from acting in its governmental

capacity.” Suggs v. Town of Caledonia, 470 So. 2d 1055, 1057 (Miss. 1985).

The district court’s opinion did not address the will serve letter as a

representation potentially supportive of estoppel. L&F’s summary judgment

briefing on the issue refers only to “assurances improperly given” and discusses

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various oral representations. L&F’s complaint refers to “Gulfport’s

representations that the Roundhill subdivision was an existing entitled

community as of December 2009.” L&F did not urge before the district court

that it detrimentally relied on the will serve letter.2 Arguments not presented

to the district court are waived. Kirschbaum v. Reliant Energy, Inc., 526 F.3d

243, 257 n.15 (5th Cir. 2008).

L&F has failed to establish an equitable estoppel claim that withstands

summary judgment.

V. Substantive Due Process

“A violation of substantive due process . . . occurs only when the

government deprives someone of liberty or property.” Simi Inv. Co., v. Harris

Cnty., 236 F.3d 240, 249 (5th Cir. 2000). This claim requires a showing of (1) a

constitutionally protected right and (2) an arbitrary, irrational abuse of power

that effects that deprivation. Id.

Even if L&F had a constitutionally protected right to the relevant water

service, a deprivation is unconstitutional only if it is “clearly arbitrary and

unreasonable, having no substantial relation to the public health, safety, morals,

or general welfare.” FM Props. Operating Co. v. City of Austin, 93 F.3d 167, 174

(5th Cir. 1996) (quoting Vill. of Euclid v. Ambler Realty Co., 272 U.S. 365, 395

(1926)). By contrast, a deprivation will be sustained if “the question is at least

debatable” “whether a rational relationship exists between the [policy or

decision] and a conceivable legitimate objective.” Simi Inv. Co., 236 F.3d at 251.

2

Estoppel is an equitable remedy appropriate “only when equity clearly requires it” to

avoid a result that is unconscionable or the perpetuation of fraud or injustice. B.C. Rogers

Poultry, Inc. v. Wedgeworth, 911 So. 2d 483, 491 (Miss. 2005); Kimball Glassco, 64 So. 3d at

947. Here, the will serve letter was issued in 2006, before the passage of the ordinance, and

approximately four years prior to the denial of water service to Roundhill. To the extent that

L&F relied on the will serve letter, that reliance was not reasonable. See Trosclair v. Miss.

Dep’t of Transp., 757 So. 2d 178, 181 (Miss. 2000).

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We do not “insist that a local government be right” or that a regulation be

the best means of advancing a given end, only that the ordinance have a rational

relationship to a legitimate government interest. FM Properties, 93 F.3d at 174.

This ordinance has the required rational relationship. We cannot say Gulfport’s

fire flow ordinance is irrational or arbitrary.

VI. Procedural Due Process

The “guarantee of fair procedure” requires that when the government

invades a constitutionally protected interest in “life, liberty, or property,” the

government must provide due process of law. Zinermon v. Burch, 494 U.S. 113,

125 (1990). First, we ask whether a given interest “qualif[ies] as property

interests for purposes of procedural due process.” See Bowlby v. City of

Aberdeen, 681 F.3d 215, 220 (5th Cir. 2012). Second, we ask “what process the

State provided, and whether it was constitutionally adequate.” Id. Because we

find no recognized property right under state law, we do not discuss the

procedure.

L&F argues that it has a property interest in water service and “should be

treated as an existing water recipient . . . [,] not a mere applicant for new

service.” Evidence allegedly supporting the claim is that Gulfport issued a will

serve letter to Roundhill. L&F also argues that Roundhill was receiving water

service as of January 2007 based on evidence that in January 2007, Southwest

Water, a utility contractor with Gulfport, verified with the Gulfport Department

of Public Works that water service was available for irrigation purposes.

Subsequently, Southwest Water issued a work order and installed a yard meter,

which would be used for landscaping or irrigation purposes.3

3

As noted above, although L&F discusses Gulfport’s unsatisfying production of records

on this point, L&F does not appeal any of the district court’s discovery rulings.

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Gulfport responds that the will serve letter indicated by its own terms that

Roundhill was merely eligible for water service. The letter identified multiple

additional steps prior to final approval. Further, Gulfport argues that no yard

meter was ever installed by Gulfport, L&F was never billed for any water, and

even if a yard meter had been installed and irrigation water flowing, this water

“would not qualify for potable use as water to a residence.”

The district court determined that L&F was seeking “new, as opposed to

continued, water service.” We agree that the evidence did not create a dispute

of material fact that L&F’s project had ever been approved for or received the

relevant water service. As noted, the will serve letter was a declaration of

eligibility for service and not an indication that water service was being

provided. Even if Roundhill had been connected to an irrigation water source,

this does not establish that L&F was a recipient of the water service to which

the fire flow requirements applied.

Protected property interests are those “that rise to the level of a ‘legitimate

claim of entitlement’” and not “mere expectations.” Walsh v. La. High Sch.

Athletic Ass’n, 616 F.2d 152, 159 (5th Cir. 1980). Property interests are matters

of state law, and they “stem from independent sources such as state statutes,

local ordinances, existing rules, contractual provisions, or mutually explicit

understandings.” Blackburn v. City of Marshall, 42 F.3d 925, 936-37 (5th Cir.

1995). L&F has not pointed to Mississippi caselaw, statutes, or a local ordinance

that creates a right to obtain water service. The district court also noted L&F’s

failure to identify any state authority on the question and relied on that

omission to reject the existence of a right.

When determining state law in the absence of any controlling authority,

“it is the duty of the federal court to determine as best it can, what the highest

court of the state would decide.” Transcon. Gas Pipe Line Corp. v. Transp. Ins.

Co., 953 F.2d 985, 988 (5th Cir. 1992). Mississippi has recognized a property

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interest in the continuation of existing electrical service. Tucker v. Hinds Cnty.,

558 So. 2d 869, 874 (Miss. 1990). The court relied on the fact that an

“overwhelming majority of courts which have considered this question have

found that continuance of electrical power is a property interest worthy of

protection under the due process clause of the Fourteenth Amendment.” Id. at

873. If there is similar substantial agreement that a property right exists in

obtaining water service, not just continuing service in place, the agreement is a

stranger to the parties’ briefing. We will not brief the possibility for them. In

fact, L&F has not argued that such a right exists, as it has understandably

insisted that it has been denied a more recognizable right to maintain existing

water service. We have already shown why we agree with the district court that

there is no evidence of prior service.

We will not take Mississippi caselaw further than it has gone on the issue

of property rights in utility service, as we do not see a basis to predict the state’s

highest court would recognize the right relevant here.

L&F has similarly failed to show that there was a mutually explicit

understanding that Gulfport would provide water service based on either the

will serve letter or the installation of the yard meter. Although L&F argues it

expected ultimately to receive approval for water service and expended financial

resources in reliance on this expectation, “a unilateral expectation” is not enough

to create a protected property interest. Blackburn, 42 F.3d at 936.

The failure to identify a protected property interest is fatal to L&F’s

procedural due process claim. See Baldwin v. Daniels, 250 F.3d 943, 946-47 (5th

Cir. 2001).

VII. Takings

The Takings Clause of the Fifth Amendment, made applicable to states

through the Fourteenth Amendment, is relevant when private property is taken

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No. 12-60597, Cons. w/ 12-60600, 12-60601

either for private use or without just compensation. Urban Developers LLC v.

City of Jackson, 468 F.3d 281, 292 (5th Cir. 2006). With respect to claims based

on insufficient compensation, “no constitutional violation occurs until just

compensation has been denied.” Williamson Cnty. Reg’l Planning Comm’n v.

Hamilton Bank of Johnson City, 473 U.S. 172, 194 n.13 (1985). Only when “the

relevant governmental unit has reached a final decision” and “the plaintiff has

sought compensation for the alleged taking” through applicable procedures is the

claim ripe. Urban Developers, 468 F.3d at 292-93.

L&F acknowledges that Mississippi provides relief for inverse

condemnation. See MISS. CONST. art. 3, § 17. L&F appealed the denial of service

to the Harrison County Circuit Court, but the appeal was dismissed without

prejudice because L&F had not exhausted its remedies. The record does not

reflect further action by L&F with respect to exhaustion of municipal and state

procedures. Therefore, “the relevant governmental unit” has not “reached a final

decision,” and L&F’s appeal to this court is not ripe for adjudication. See Urban

Developers, 468 F.3d at 292-93.

VIII. Larry Mitrenga’s Individual Claims

Both L&F and Mitrenga individually filed claims in this suit. Mitrenga

appeals the grant of summary judgment on his claims.

A. Mitrenga’s Federal Law Claims

The “irreducible constitutional minimum of standing” requires injury in

fact, a causal connection between that injury and the complained of conduct, and

a likelihood that the injury can be redressed by a favorable decision. Lujan v.

Defenders of Wildlife, 504 U.S. 555, 560-61 (1992). Mitrenga asserts two

injuries: economic and psychological.

Mitrenga’s alleged economic injury stems from his personal guarantee of

a loan to L&F. Although the bank has not seized Mitrenga’s collateral for the

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No. 12-60597, Cons. w/ 12-60600, 12-60601

loan, his assets remain encumbered by the personal guarantee. A stockholder

in a corporation does not have standing to bring suit in his own name for injuries

sustained by the corporation. Bellows v. Amoco Oil Co., 118 F.3d 268, 277 (5th

Cir. 1997). This is true even where that individual is the sole shareholder of a

corporation. Id. at 276-77. As an individual, Mitrenga has not been injured by

Gulfport; rather Gulfport’s actions have affected L&F as an LLC, which in turn

has been unable to distribute funds to its creditors and shareholders, namely

Mitrenga.

Mitrenga also asserts that he has suffered “mental anguish” as a result of

Gulfport’s discrimination. The only evidence Mitrenga has offered is a two-

sentence doctor’s letter stating: “Mr. Mitrenga’s legal problems have caused a

situational reactive disorder” and alluding to medication and more frequent

doctor visits. This evidence is rather thin even to establish actual injury, but it

is wholly inadequate to establish causation. An injury must be fairly traceable

to the challenged actions of the defendant. Lujan, 504 U.S. at 560. Mitrenga’s

allusion to “this whole situation” and the doctor’s to “legal problems” fails to

establish the requisite nexus between Gulfport’s underlying conduct and

Mitrenga’s mental anguish.

There is insufficient evidence to raise a genuine dispute of material fact

that Mitrenga’s mental anguish was caused by Gulfport’s alleged underlying

unlawful conduct, as apart from general litigation fatigue. On a different set of

facts evidencing clear and egregious racial discrimination in the context of an

eviction, this court “presumed . . . some degree of emotional distress.”

Woods-Drake v. Lundy, 667 F.2d 1198, 1203 (5th Cir. 1982). That atypical

presumption does not apply in this case.

B. Mitrenga’s State Law Claims

Mississippi law also establishes that an individual shareholder does not

have standing to bring suit in his own name for injuries to a corporation. Mathis

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No. 12-60597, Cons. w/ 12-60600, 12-60601

v. ERA Franchise Sys., Inc., 25 So. 3d 298, 301 (Miss. 2009). On the express and

implied contract claims, any contract to provide water service was between

Gulfport and L&F, not Mitrenga individually.

As to the estoppel claim, Mitrenga asserts that he relied, individually, on

the oral representations of City officials in making the decision to pledge

personal assets in support of a loan to L&F. As discussed above, the equitable

estoppel claim does not have merit as the unauthorized statements of an official

do “not estop a municipality from acting in its governmental capacity.” Suggs

v. Town of Caledonia, 470 So. 2d 1055, 1057 (Miss. 1985).

AFFIRMED.

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