Cars Northwest Inc. v. City of Gladstone

UNITED STATES DISTRICT COURT

DISTRICT OF OREGON

PORTLAND DIVISION

CARS NORTHWEST, INC., a corporation Case No. 3:17-cv-01950-AC

doing business as Cars-R-Us, and MICHAEL

MAES, OPINION AND ORDER

Plaintiffs,

v.

CITY OF GLADSTONE, a municipal entity,

ERIC SWANSON, an individual, LINDA

NEACE, an individual, PATRICK

McMAHON, an individual, NEIL REISNER,

an individual, STEVE JOHNSON, an

individual, THOMAS MERSEREAU, an

individual, KEVIN JOHNSON, an

individual, JACQUE BETZ, an individual,

and TAMMY STEMPEL, an individual,

Defendants.

ACOSTA, Magistrate Judge:

Plaintiffs Cars Northwest, Inc. (“Cars” or “Cars-R-Us”), and Michael Maes (“Maes”)

(collectively “Plaintiffs”) bring this action pursuant to 42 U.S.C. § 1983 against Defendants the

Page 1 — OPINION AND ORDER

City of Gladstone (“the City’), Eric Swanson, Linda Neach, Patrick McMahon, Neil Reisner, Steve

Johnson, Thomas Mersereau, Kevin Johnson, Jacque Betz, and Tammy Stempel’s (the “Individual

Defendants”) (collectively “Defendants”). Plaintiffs allege Defendants violated their Fourteenth

Amendment due process rights by depriving them of relocation benefits under Oregon Revised

Statute (“O.R.S.”) § 35.510 and the Uniform Relocation Assistance and Real Property

Acquisitions Policy Act ““URA”), 42 U.S.C. §§ 4601 et seq., when Defendants purchased property

they were leasing in order to develop a new City Hall and Police Station. Presently before the court

is Defendants’ motion for summary judgment (ECF No. 24). For the following reasons, the court

grants Defendants’ motion.

Factual Background

Maes is the sole owner of Cars-R-Us, a wholesale and retail business selling used cars,

boats, motorcycles, and other vehicles. (Decl. Michael Maes Supp. Pl.’s Resp. Mot. Summ. J.

(“Maes Decl.”) J] 2-5, ECF No. 33-1.) For over twenty years, Cars operated on a gravel parking

lot at 18565 Portland Avenue, Gladstone, Oregon (“the Portland Avenue Property” or “the

Property’). Ud. ¥ 4.) The Portland Avenue Property was owned by the Kmetic family, specifically

Kenneth Kmetic and Steven and Kevin Kmetic as trustees of the Walter J. Kmetic Trust. (Decl.

Bradley F. Piscadlo (“Piscadlo Decl.”) Ex. 7, attaching Dep. Steven Kmetic (“Steven Kmetic

Dep.”) at 7:2-23, ECF No. 24-1 at 60.) Maes leased space on the Property from Kmetic RV Storage

on a month-to-month basis for $463 per month. (Piscadlo Decl. Ex. 4, attaching Dep. Michael

Maes (“Maes Dep.”) at 38:20-24, 39:3-11, ECF No. 24-1 at 27-28; Maes Decl. 4, ECF No. 33-1

at 2.) Lynne Kmetic, spouse of Kenneth Kmetic, also rented space at the Portland Avenue Property

for a hair salon. (Maes Decl. § 8, ECF No. 33-1 at 3.) Multiple other businesses leased property

Page 2 — OPINION AND ORDER

from the Kmetics at the Portland Avenue Property on a month-to-month basis. (Piscadlo Decl. Ex.

6, attaching Dep. of Lynne Kmetic (“Lynne Kmetic Dep.”) at 6:5-15, ECF No. 24-1 at 48.)

In March 2016, the City approached the Kmetic family about possibly purchasing the

Property. The City used real estate agent Tony Reser and the Kidder Matthews real estate firm to

assist the City in negotiating the purchase. (Decl. Tony Reser (“Reser Decl.”) § 1, ECF No. 24-2.)

The City had identified the Property for expansion of the City’s Public Works Building and as a

staging area while the new City Hall was being built. (Decl. Cameron Ramelli Supp. Pl.’s Resp.

Mot. Summ. J. (““Ramelli Decl.”) Ex. 5, ECF No. 33-2.) In a draft letter, Reser suggested that the

City approach the Kmetic family to suggest a “friendly condemnation” in order to allow the Kmetic

family to defer potential taxes on the sale. (Ramelli Decl. Ex. 5, ECF No. 33-2.) The City’s

attorney, David Doughman, and Reser arranged a meeting with the Kmetic family to discuss sale

of the Property. The Kmetics were receptive to selling the Property, and in April 2016, negotiated

a sale price of $910,000. (Piscadlo Decl. Ex. 9 at 4, ECF No. 24-1 at 78.) Pursuant to the agreement,

the Kmetics were to deliver the Property free and clear of all tenants. Ud.) Additionally, an

addendum to the Purchase and Sale agreement provided that the “[s]ubject purchase by the City

of Gladstone is contemplated as an acquisition in lieu of condemnation (involuntary conversion)”

pursuant to a Section 1033 Exchange. Ud. at 24, ECF No. 24-1 at 98.)

In early August 2016, shortly before closing, the City became aware that some of tenants

on the Property believed they were entitled to relocation benefits and that the Kmetic family was

willing to sell only because condemnation had been threatened. (Maes Decl. ¥ 11, ECF No. 33-1.)

The City agreed to provide the tenants cash settlements in the amount of two months’ rent and to

provide additional lease time on the Property in exchange for signed agreements releasing the City

Page 3 —- OPINION AND ORDER

from any potential claims for relocation benefits. (Piscadlo Decl. Ex. 15, ECF No. 24-1 at 108;

Maes Decl. 12, ECF No. 33-1.)

On September 20, 2016, the Clackamas Review, a local newspaper, published an article

about the City’s purchase of the Property. (Maes Decl. Ex. 1 at 1, ECF No. 33-1 at 7.) The article

highlighted concerns expressed by some of the tenants and suggested that the Kmetic family had

been forced to sell. (/d.) The article indicated that the City believed the site would be ideal for a

new Police Station. (/d.) Tenant Bruce Hildreth, president of the Sherie Hildreth Ovarian Cancer

Foundation (“SHOC”), operated the Teal Ribbon Boutique on the Property. Hildreth indicated in

the article that he had received an eviction notice and had no plans of relocating. Ud.) The article

also quoted Lynne Kmetic as indicating that the family did not want to sell the property, but “we

didn’t have a choice. [That is what happens] when you deal with government entities.” (/d. at 2,

ECF No. 33-1 at 8; Lynne Kmetic Dep. 6:5-15, ECF No. 24-1 at 48.)

The following day, the City sent an email to the reporter asking the Clackamas Review to

run a response to the article that provided the following:

The [C]ity has expressed in a public meeting it has no plans to force a sale of the

Kmetic property or use its eminent domain authority to acquire the property. The

[C]ity has always understood the property owner would terminate the month-to-

month tenancies in advance of a sale of the property to any buyer, the [C]ity or

otherwise. For these reasons, the [C]ity does not believe it is obligated to provide

relocation assistance to the tenants. However, the fact is the [C]ity has offered

money to the tenants in the form of two month’s rent. Two of the tenants do not

pay any monthly rent to the property owner, yet the [Clity is offering those tenants

money as well. We are awaiting confirmation from the property owner that the

tenants have accepted the [C]ity’s offer.

(Piscadlo Decl. Ex. 11, ECF No. 24-1 at 103 (emphasis in original).) The Clackamas Review did

not run the City’s response.

Page 4 — OPINION AND ORDER

On October 5, 2016, Reser received a text message from Lynne Kmetic indicating that

some of the tenants were unwilling to sign the releases “because their attorneys have told them the

release is not legal and that they should get 60 days to move.” (Piscadlo Decl. Ex. 12, ECF No.

24-1 at 104.) On October 7, 2016, Reser requested a meeting with Steve Kmetic prior to a

Gladstone City Council meeting scheduled for October 11, 2016, to discuss the issue with the

tenants. (Ud. Ex. 13, ECF No. 24-1 at 105-06.) Additionally on October 7, 2016, the City’s attorney

Doughman, sent an email to Steve Kmetic providing that the City needed to better understand the

issue with the tenants. (/d.) Doughman noted that he understood some tenants were unwilling to

sign the releases, and that the City may be “amenable to allowing some or all of them more time

to vacate the property.” Ud.) However, Doughman provided that:

in light of the newspaper article from a couple of weeks ago, and, candidly, the

comment from Ms. Kmetic alluding to the [C]ity’s purchase of the property as

“forced”, I cannot recommend the [C]ity close on the property unless it is clear that

it will not face a legal action from the tenants after we close on the property.

On October 10, 2016, Reser met with Steve Kmetic, and reported to Doughman that the

tenants were under the “mistaken impression” that the property was being condemned, and that

Kmetic indicated that “now that they know it is an outright sale he doesn’t think they will object.”

(Id. at Ex. 14, ECF No. 24-1 at 107.) Mr. Reser also indicated that Kmetic requested that new

releases be drafted on “Gladstone letterhead” and explain that it is not a condemnation, but an

arm’s length sale. (/d.) The City revised the releases to include the following language: “The City

is not using its eminent domain authority to acquire the Portland Avenue Property or otherwise

forcing the sale of the Property.” (Piscadlo Decl. Ex. 15 at 1, ECF No. 24-1 at 108.) On October

18, 2016, Maes, on behalf of Cars, signed the revised release which stated “[a]s the City and Trust

Page 5 — OPINION AND ORDER

have explained to Cars, the City and the Trust are engaged in an arms-length, negotiated purchase

and sale of the Property.” (/d.) Specifically, Plaintiff agreed to the sum of $926 and the right to

stay on the Property through January 1, 2017 in exchange for releasing the City “from any

obligation it may have under state or federal law, including ORS 35.500 — 35.530, to provide

relocation assistance to Cars if it purchases the property.” (/d.)

At a November 9, 2016 City Council Meeting, the City passed Resolution 1093 which

approved the purchase of the Property. Ud. at Ex. 16 at 3-4, ECF No. 24-1 at 111-12; /d. at Ex. 17,

ECF No. 24-1 at 116.) At the November 9 Meeting, Councilor Steve Johnson noted that there had

been a lot of misinformation about the Portland Avenue Property purchase, and asked Doughman

to clarify some issues. (/d. at 3.) Doughman confirmed that the City was not using its eminent

domain authority to purchase the Property. (/d.) Also at the November 9 Meeting, several tenants

attempted to rescind their agreements to release the City, including Maes. (Exhibit 4 to Maes Decl.,

ECF No. 34 (audio file of November 9, 2016 Gladstone City Council meeting). Some tenants were

frustrated and expressed that the compensation they received was not equitable compared to other

tenants. (Piscadlo Decl. Ex. 16 at 4, ECF No. 112.) The City closed the sale on the Portland Avenue

Property on December 21, 2016. Ud. at Ex. 18, ECF No. 24-1 at 117.)

On December 28, 2016, Maes sent a letter to Gladstone Mayor Tammy Stepel, Gladstone

City Councilors, and Doughman requesting relocation benefits pursuant to O.R.S. § 35.500. (Maes

Decl. 14, Ex. 2, ECF No. 33-1 at 12.) In the letter, Maes contended that the City failed to provide

adequate notice to tenants of their eligibility for relocation benefits, assistance, and reimbursement

of moving expenses. (/d.) Maes stated that if his request for benefits was denied, that he was

requesting an appeal under O.R.S. § 35.520. Ud) And, Maes attempted to rescind his release,

Page 6 — OPINION AND ORDER

contending that he was coerced into signing it and that he was not given notice as required under

the statute. /d.).

On January 12, 2017, the City responded to Maes, denying his request for relocation

benefits and refusing to conduct an “appeal.” (Piscadlo Decl. Ex. 20, ECF No. 24-1 at 119.)

According to the City, Maes was not entitled to benefits under the statute for several reasons,

including: he is not a “displaced person” under the Oregon statute; the Kmetics terminated his

lease; he agreed to move; he released the City from any potential relocation benefits; and the City

did not utilize its eminent domain authority to acquire the Property. 7d.) On January 20, 2017,

Maes’s attorney David Griggs sent an email to Doughman contending that O.R.S. § 35.510 applies,

that all the tenants were entitled to relocation benefits, the releases are unenforceable, and that the

City should follow the process for determining the relocation benefit amounts. (/d. at Ex. 21, ECF

No. 24-1 at 120.)

In response, Doughman set up a meeting with Griggs to explore whether a resolution could

be reached. Ud. at Ex. 21, ECF No. 24-1 at 121.) In February 2017, the City sent Maes a letter

indicating that although they disputed that he was entitled to relocation benefits, the City was

agreeable to terms that would facilitate removal of his property from the Portland Avenue Property,

including potentially providing him additional time and/or additional money beyond what it had

already paid. (Id. at Ex. 24, ECF No. 24-1 at 123.)

On March 6, 2017, Maes and Griggs met with Doughman, and Mayor Tammy Stempel,

City Councilor Patrick McMahon, City Councilor Kim Sieckmann, and City Administrator Eric

Swanson. (Ud. at Ex. 24, ECF No. 24-1 at 123-24; Maes Dep at 126:6-127:18, ECF No. 24-1 at

31.) At the March 6 meeting, the City reiterated its belief that the relocation statute did not apply

Page 7 — OPINION AND ORDER

to Maes and rejected Maes’s offer of $40,000, and Maes rejected the City’s offer of $13,500. (Maes

Dep. at 127:10-15; Maes Decl. {| 16, ECF No. 33-1 at 4.) At a second meeting, Maes again

demanded $40,000 and the City lowered its offer to $7,000. (Maes Decl. 16-17, ECF No. 33-1

at 4.) On July 26, 2017, City Administrator Jacque Betz, informed Maes that the City considered

the release he signed in October 2016 valid, that it would not engage in further negotiations, and

considered the matter closed. (Piscadlo Decl. Ex. 26, ECF No. 24-1 at 126.)

Maes currently operates Cars-R-Us out of his home; he has not found another location for

his business. (Maes Decl. 19, ECF No. 33-1 at 5.)

On December 7, 2017, Plaintiffs filed this lawsuit, asserting two § 1983 claims: (1) the

City and all Defendants violated Plaintiffs’ procedural due process rights guaranteed by the

Fourteenth Amendment by denying him relocation benefits under O.R.S. § 35.510 and the URA;

and (2) Defendants violated Maes’s substantive due process rights by ignoring the processes for

providing him relocation benefits.

Legal Standard

Summary judgment is appropriate when “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 party seeking

summary judgment bears the burden of establishing the absence of a genuine issue of material fact.

Celotex v. Catrett, 477 U.S. 317, 323 (1986). Ifthe moving party demonstrates no issue of material

fact exists, the nonmoving party must go beyond the pleadings and identify facts which show a

genuine issue for trial. Jd. at 324. A party cannot defeat a summary judgment motion by relying

on the allegations set forth in the complaint, unsupported conjecture, or conclusory statements.

Hernandez v. Spacelabs Med., Inc., 343 F.3d 1107, 1112 (9th Cir. 2003). Summary judgment thus

Page 8 — OPINION AND ORDER

should be entered against “a party who fails to make a showing sufficient to establish the existence

of an element essential to that party’s case, and on which that party will bear the burden of proof

at trial.” Celotex, 477 U.S. at 322.

To determine whether summary judgment is proper, the court must view the evidence in

the light most favorable to the nonmoving party. Curley v. City of N. Las Vegas, 772 F.3d 629,

631 (9th Cir. 2014); Hernandez, 343 F.3d at 1112. All reasonable doubt as to the existence of a

genuine issue of fact should be resolved against the moving party. Hector v. Wiens, 533 F.2d 429,

432 (9th Cir. 1976).

However, deference to the nonmoving party has limits. The nonmoving party must set forth

“specific facts showing a genuine issue for trial.” FED. R. Civ. P. 56(e) (emphasis added). The

“mere existence of a scintilla of evidence in support of the plaintiffs position [is] insufficient.”

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986). Therefore, where “the record taken as

a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine

issue for trial.” Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)

(internal quotation marks omitted).

Preliminary Procedural Matters

The evidence presented in support of or in opposition to a motion for summary judgment

must be based on personal knowledge, properly authenticated, and admissible under the Federal

Rules of Evidence. FED. R. CIv. P. 56(c). The court must determine what evidence is admissible,

relevant, and substantive. FED. R. EvID. 104. A party filing a motion for summary judgment will

generally support that motion with affidavits or declarations. Federal Rule of Civil Procedure 56

requires that the affidavits or declarations “be made on personal knowledge, set out facts that

Page 9 —- OPINION AND ORDER

would be admissible in evidence, and show that the affiant or declarant is competent to testify on

the matters stated.” FED. R. Civ. P. 56(c)(4). In ruling on a motion for summary judgment, the

court will consider the admissibility of the proffered evidence’s contents, not its form. Fraser v.

Goodale, 342 F.3d 1032, 1036 (9th Cir. 2003) (“At the summary judgment stage, we do not focus

on the admissibility of the evidence’s form. We instead focus on the admissibility of its content.”);

Celotex, 477 U.S. at 324 (“We do not mean that the nonmoving party must produce evidence in a

form that would be admissible at trial in order to avoid summary judgment.)

Defendants object to two exhibits attached to Maes’s Declaration in Support of Plaintiffs’

Response to Defendants’ Motion for Summary Judgment. Local Rule of Civil Procedure 56-1

provides:

Rather than filing a motion to strike, a party must assert any evidentiary objections

in its response or reply memorandum. Evidentiary objections in a response or reply

memorandum are subject to the certification requirement of LR 7-1(a).... If an

evidentiary objection is raised by the moving party in its reply memorandum, the

non-moving party may file a surreply memorandum pursuant to this subparagraph

within seven days addressing only the evidentiary objection; the moving party may

not file further briefing on its evidentiary objection.

LR 56-1(b). Plaintiffs did not file a surreply responding to the evidentiary objections. The court

discusses them below.

I. Exhibit 1 — The September 20, 2016 Newspaper Article

Attached to Maes’s Declaration in Support of their Response, Plaintiffs have attached a

newspaper article appearing in the Clackamas Review entitled “Gladstone Set To Purchase

Property on Portland Avenue,” by Ellen Spitaleri, dated September 20, 2016. (Maes Decl. Ex. 1,

ECF No. 33-1 at 7.) Defendants object to Exhibit 1, contending that it is inadmissible hearsay and

that the quoted statements in the article are hearsay within hearsay. FED. R. EVID. 802; Larez v.

Page 10 — OPINION AND ORDER

City of Los Angeles, 946 F.2d 630, 641 (9th Cir. 1991). Defendants argue that if the newspaper

atticle is admitted and relied upon by the court, the court also should include in the record a

correction offered in an email sent to the report on the day the article was published. According to

Defendants, the newspaper did not publish the City’s proposed correction. Plaintiffs did not

respond to Defendants’ evidentiary objections.

Hearsay is defined as an out-of-court statement offered in evidence to prove the truth of

the matter asserted. FED. R. EVID. 801. Hearsay is admissible only if it qualifies as an exception

to the general hearsay rule. The Ninth Circuit has generally applied the limitations found in the

hearsay rule, set forth in Rule 802 of the Federal Rules of Evidence, to evidence offered by parties

at the summary judgment stage. Orr v. Bank of America, 285 F.3d 764, 778 (9th Cir. 2002); Beyene

v. Coleman Sec. Servs., Inc., 854 F.2d 1179, 1182 (9th Cir. 1988). When a statement is hearsay

within hearsay, or double hearsay, each statement must qualify under some exemption or exception

to the hearsay rule. FED. R. EVID. 805; United States v. Arteaga, 117 F.3d 388, 396 n.12 (9th Cir.

1997).

In his Declaration, Maes states he believed the Kmetic family was willing to sell the

Portland Avenue Property solely because the City threatened to acquire it through condemnation,

based in part on the newspaper article. According to Maes, the September 2016 article suggests

that the Kmetics had been forced to sell the property. (Maes Decl. § 11, ECF 33-1 at 3.) The article

indicates that the reporter spoke with Lynne Kmetic who indicated that the Kmetic family did not

really want to sell, quoting her as stating “we didn’t have a choice. [That is what happens] when

you deal with government entities.” Ud. at Ex. 1, ECF No. 33-1 at 7.)

Page 11 — OPINION AND ORDER

Typically, newspaper articles are considered hearsay and are inadmissible when submitted

for the truth of the matters asserted within the articles. See Larez, 946 F.2d at 642 (“newspaper

articles have been held inadmissible hearsay as to their content”); Hilsley v. Ocean Spray

Cranberries, Inc., Case No. 17¢v2335-GPC (MDD), 2018 WL 5617701, at *9 (S.D. Cal. Oct. 30,

2018) (noting that newspaper articles by their nature are hearsay evidence and are inadmissible if

offered to prove the truth of the matter asserted). However, in this instance, the court finds that the

newspaper article is being submitted to demonstrate, at least in part, the timing and source of the

alleged “misinformation” about whether the Portland Avenue Property, in fact, was being

condemned. Whether the property was purchased through an arm’s length negotiation or through

eminent domain is at the heart of this action, and therefore, the article is relevant to issues in this

case. Accordingly, Defendants’ objection to Exhibit 1 is OVERRULED. Additionally, the court

will consider the Defendants’ email to the reporter. The City’s email response to the article

likewise is relevant to the same issues. Notably, Plaintiff does not object to admission of the City’s

email response.

I. Exhibit 9 — The Department of Justice Letter dated April 12, 1996

Defendants object to a Department of Justice (“DOJ”) Letter dated April 12, 1996 attached

as Exhibit 9 to the Declaration of Cameron Ramelli. (Ramelli Decl. § 6 & Ex. 9, ECF No. 33-2 at

2, 14.) Defendants argue that the DOJ Letter is hearsay and irrelevant. FED. R. EVID. 402, 403,

802. Defendants argue the letter is not a formal DOJ opinion letter, was authored by an assistant

attorney general, and thus has no precedential value. Defendants contend that the Letter fails to

discuss any facts or legal issues relevant to the issues in this case, and therefore, the letter must be

excluded from the court’s consideration of these issues on summary judgment.

Page 12 —- OPINION AND ORDER

Exhibit 9 consists of a letter dated March 12, 1996, authored by Dale K. Hormann,

Assistant Attorney General, addressed to Dennis Wiegal of the Oregon Department of

Transportation (“ODOT”). (Ramelli Decl. Ex. 9.) In the letter, Hormann provides that a local

government entity asked ODOT to enter into a right-of-way services agreement for a non-federally

funded project, and whether relocation benefits must be paid pursuant to O.R.S. §§ 281.045 to

281.105, a predecessor statute to O.R.S. § 35.510. Ud.) Hormann opines that the statutory

obligation to pay relocation benefits applies regardless of the source of funding. (/d.)

The court concludes that Exhibit 9 is not relevant to the issues in this case. Exhibit 9 does

not involve either party to this action and pertains to ODOT entering into a right-of-way

arrangement with a private party. Unlike this action, Exhibit 9 does not involve an arm’s length

negotiated purchase of real estate from a private party. Accordingly, Defendants’ objection to

Exhibit 9 is GRANTED.

Discussion

In their motion, Defendants argue that they are entitled to summary judgment because: (1)

Maes has no protectable property interest in relocation benefits under the federal or state relocation

assistance statutes; (2) Maes was not denied notice or an opportunity to be heard; (3) Maes was

not subjected to arbitrary and capricious behavior; and (4) the individual Defendants are entitled

to qualified immunity and there is no evidence that they acted outside of their official duties for

the City.

Plaintiffs insist that they have a protected property right in relocation benefits under O.R.S.

§§ 35.500 — 35.530, that his tenancy was terminated because of the City’s acquisition of the

Property, that the City fraudulently misrepresented the nature of their right to relocation benefits,

Page 13 —OPINION AND ORDER

and their release is therefore invalid. Plaintiffs contend that the City refused to listen to Maes’s

concerns at the November 8, 2016 City Council Meeting, and that his later meetings with City

officials did not provide meaningful review, thereby denying them procedural due process. And,

Plaintiffs contend that by denying them relocation benefits, the City’s actions were unlawful,

arbitrary, and an abuse of power, violating substantive due process.

I. Procedural Due Process

A. Standards

The Due Process Clause of the Fourteenth Amendment “forbids the State to deprive any

person of life, liberty or property without due process of law.” Goss v. Lopez, 419 U.S. 565, 572

(1975). To establish a procedural due process violation, Plaintiffs must show: (1) a constitutionally

protected liberty or property interest; (2) a deprivation of that interest by the government; and (3)

the lack of adequate process. Shanks v. Dressel, 540 F.3d 1082, 1090-91 (9th Cir. 2008); Icon

Groupe, LLC v. Washington County, 948 F. Supp. 2d 1202, 1209 (D. Or. 2013). “The requirements

of procedural due process apply only to the deprivation of interests encompassed by the Fourteenth

Amendment’s protection of liberty and property.” Board of Regents of State Colleges v. Roth, 408

U.S. 564, 569 (1972); Foss v. Nat’l Marine Fisheries Serv., 161 F.3d 584, 588 (9th Cir. 1998).

“Not every procedural requirement ordained by state law, however, creates a substantive property

interest entitled to constitutional protection.” Shanks, 540 F.3d at 1091.

A property interest sufficient to support procedural due process claim is defined by

“existing rules or understandings that stem from an independent source such as state law — rules

or understandings that secure certain benefits and that support claims of entitlement to those

benefits.” Roth, 408 U.S. at 577; Goss, 419 U.S. at 572-73. The threshold inquiry is whether the

Page 14 — OPINION AND ORDER

plaintiff has “‘a legitimate claim of entitlement’ as opposed to a ‘unilateral expectation’ or an

‘abstract need or desire.’” Foss, 161 F.3d at 588 (quoting Roth, 408 U.S. at 577); Icon Groupe,

948 F. Supp. 2d at 1211. “To have a property interest in a benefit, a person clearly must have more

than an abstract need or desire and more than a unilateral expectation of it. He must, instead, have

a legitimate claim of entitlement to [such a benefit].” Town of Castle Rock, Colo. vy. Gonzales, 545

U.S. 748, 756 (2005) (quoting Roth, 408 U.S. at 577) (internal quotation marks omitted). If the

plaintiff satisfies this threshold burden, the court then considers whether he or she received all the

process that was due. Foss, 161 F.3d at 589.

B. Analysis

Defendants argue that Plaintiffs cannot establish a protectable property interest in

relocation benefits because neither the federal nor the Oregon statutes apply. Defendants contend

that the federal statute does not apply because no federal funding was used and that the Oregon

statute does not apply because the City and the Kmetic family engaged in an arm’s length,

negotiated purchase of the Property.

Plaintiffs respond that Oregon’s statute applies regardless of federal funding, and that the

City deprived Plaintiff of procedural due process by failing to provide him with adequate notice

of his entitlement to relocation assistance benefits, or providing him with an opportunity for a

hearing to challenge the amounts provided in the releases, as set forth in O.R.S. § 35.510. To

survive summary judgment, Plaintiffs must establish that they have a protectable property interest

in relocation assistance benefits under federal or state law. Shanks, 540 F.3d at 1091.

Hil

Page 15 — OPINION AND ORDER

1. The URA, 42 U.S.C. § 4601 of 1970

Under the URA, 42 U.S.C. §§ 4601 to 4655, when an agency undertakes a public project

with federal financial assistance, the agency is required to provide relocation assistance benefits

to displaced persons. See Transwestern Pipeline Co., LLC v. 16.19 Acres of Property Located in

Maricopa Cty., 627 F.3d 1268, 1269 (9th Cir. 2010) (stating that URA “sets forth procedures for

land acquisitions by certain federal and federally assisted programs”). The URA was designed to

establish a uniform, fair policy for agencies when negotiating with persons who are displaced when

their property is taken for projects by the federal government or state government with federal

assistance. Regional Transp. Dist. v. Outdoor Sys., Inc., 34 P.3d 408, 415-16 (Colo. 2001)

(discussing legislative history of URA).

Defendants argue that the City’s project did not utilize any federal funding, and therefore,

the URA simply does not apply. In their Response, Plaintiffs appear to concede that the federal

relocation statute itself does not apply. Thus, to the extent that Plaintiffs’ claims rest on the URA,

Defendants are entitled to summary judgment.

2. Oregon Relocation Assistance — O.R.S. § 35.510

The parties debate whether the City “acquired” the Portland Avenue Property and whether

Maes is a “displaced person” under the relevant statutory provisions. Defendants argue that O.R.S.

§ 35.510 does not apply to voluntary sales of property, but rather applies only where property is

acquired through condemnation or threats of condemnation. Plaintiffs respond that Oregon’s

statutory scheme applies whenever a public entity acquires property that results in displaced

persons. Plaintiffs maintain that under a plain reading of O.R.S. § 35.510, they are entitled to

relocation assistance benefits.

Page 16 — OPINION AND ORDER

The Oregon statute requires public entities to provide relocation assistance whenever a

public project will result in acquiring real property. OR. REV. STAT. § 35.510. The Oregon statute

provides:

Whenever any program or project is undertaken by a public entity which program

or project will result in the acquisition of real property, notwithstanding any other

statute, charter, ordinance, or rule or regulation, the public entity shall:

(1) Provide fair and reasonable relocation payments and assistance

to or for displaced persons as provided under sections 202, 203, 204

and 206 of the Federal Act!;

(2) Provide relocation assistance programs offering to displaced

persons and others occupying property immediately adjacent to the

real property acquired the services described in section 205 of the

Federal Act on the conditions prescribed therein;

(3) In acquiring the real property, be guided by the land acquisition

policies in sections 301 and 302 of the Federal Act;

(4) Pay or reimburse property owners for necessary expenses as

specified in sections 303 and 304 of the Federal Act;

(5) Share costs of providing payments and assistance with the

federal government in the manner and to the extent required by

sections 211 (a) and (b) of the Federal Act; and

(6) Appoint such officers, enter into such contracts, utilize federal

funds for planning and providing comparable replacement housing

and take such other actions as may be necessary to comply with the

conditions and requirements of the Federal Act.

Or. REV. STAT. § 35.510. Additionally, the term “displaced person” is defined as:

(1) “Displaced person” means any person who moves, or is required to move the

person’s residence and personal property incident thereto, or the person’s business

or farm operation as a result of:

' O.R.S. § 35.510 refers to the URA in effect on January 1, 2003. The URA was amended April

2, 1987. See Pub. L. No. 100-17, 101 Stat. 132 (Apr. 2, 1987).

Page 17 — OPINION AND ORDER

(a) Acquisition of the real property, in whole or in part, by a public

entity; or

(b) Receipt of a written order by such person from a public entity to

vacate the property for public use.

OR. REV. STAT. § 35.500. The statute does not, however, define the term “acquisition.”

a. Plaintiffs are not displaced persons

Defendants argue that Plaintiffs cannot establish a protectable property right in relocation

assistance benefits because their lease expired before the City acquired the property. According to

Defendants, tenants whose leases expire before the Property was acquired are not “displaced

persons” under O.R.S. § 35.510. Thus, Defendants maintain that Plaintiffs are not entitled to

relocation assistance, and their procedural due process claim fails as a matter of law, citing

Ackerley Comme ns, Inc. v. Mt. Hood Cmty. Coll., 51 Or. App. 801, 805 (1981).

In Ackerley, an advertising company had a ten-year lease for placement of a sign on what

became the college’s property. 51 Or. App. at 803. Eight years into the lease, the college purchased

the property for use as a parking lot and demanded the sign be removed. Jd. The advertising

company insisted that removal of the sign would give rise to relocation assistance benefits under

federal and state law. The college allowed the sign to remain through the initial ten-year lease

term. Jd. When the ten-year term expired, the college demanded the sign be removed. Jd. The

Oregon Court of Appeals concluded that the advertising company was not a “displaced person”

under either the federal or state act. Jd. at 804. The Ackerley court found that the removal of the

sign was not “required as a result of a written order to vacate the property” or as a result of the

college’s acquisition of the property because it was permitted to remain through expiration of the

lease. Id, at 804-05. The Ackerley court concluded that “[w]e do not understand the federal or state

Page 18 — OPINION AND ORDER

Acts to provide for relocation benefits where the legal right to maintain it at the location has

terminated.” Jd. at 805. Defendants contend that as in Ackerley, Plaintiffs’ month-to-month lease

was terminated pursuant to the terms of the lease.

Plaintiffs respond that Defendants read the definition of displaced persons too narrowly

and that Ackerley is distinguishable. According to Plaintiffs, they were long-term tenants on the

Property and were required to vacate solely because the City was buying the Property. The court

is not persuaded by Plaintiffs’ arguments.

The facts reveal that the Kmetics informed all the tenants on the Property that their leases

would be terminated as of December 15, 2016. The Notice from Kmetic RV Storage to the tenants

provided the following:

At this time, we would like to thank all of our customers, friends and tenants

for all their support throughout the years. You have all been great to work with,

helpful and supportive in our venture.

We regret to inform you that The City of Gladstone and The Kmetic’s have

come to an agreement in regards to the property. As of November 15, 2016 all

tenants rent will end and as of December 15, 2016 all tenants will have to be off the

property. Anything left on the property after that date will be removed at the owners

expense because the City of Gladstone wants everything removed before they take

possession. We appreciate all your cooperation, please feel free to call with any

questions you have.

(Piscadlo Decl. Ex. 27, ECF No. 24-1 at 127.) Plaintiffs do not dispute that they rented on a month-

to-month basis. And, although the Notice provides that the Kmetics are selling to the City and that

the City wants all of the tenants’ property removed, the Notice terminating the leases was clearly

provided by Kmetic RV Storage. Simply because Plaintiffs were long-term tenants does not

provide them with enforceable, legal rights to remain on the property. As the Ackerley court

determined, there is no right to relocation benefits for property “where the legal right to maintain

Page 19 - OPINION AND ORDER

it at the location has terminated.” Ackerley, 51 Or. App. at 805. Plaintiffs have not established that

after the Kmetics terminated the Cars-R-Us lease they had any legal, possessory right to maintain

the business on the Property. Therefore, because Plaintiffs did not have any possessory rights

extending beyond the City’s acquisition of the Property, they have not established any right to

relocation benefits as displaced persons.

b. the City did not “acquire” the Property

Oregon courts have not interpreted the term “acquire” under the relocation assistance

statute very frequently. When they have done so, the Oregon courts have interpreted “acquire” to

exclude arm’s length transactions. In Shepard v. Dep’t of Cmty. Corr., the Oregon Supreme Court

examined whether a month-to-month residential tenant was entitled to relocation assistance under

O.R.S. § 281.045, the statutory predecessor to O.R.S. § 35.510. Shepard, 293 Or. 191, 193 (1982).

In Shepard, Washington County Board of Commissioners (“the Board”) approached the

owner/landlord of two houses near the Washington County Courthouse expressing interest in

acquiring a leasehold interest to use the buildings as a restitution center for the Department of

Corrections (“the Department’). /d. Existing long-term tenants in the two houses learned of the

negotiations between the Board and the owner/landlord through newspaper articles. The tenants

had month-to-month leases that could be terminated with thirty days’ notice. Id at 194-95.

Eventually, the Board negotiated a five-year lease of the two houses and the owner/landlord

notified the tenants their leases were terminated and provided a date certain to vacate the premises.

Id. at 195. The tenants claimed they were entitled to relocation assistance pursuant to O.R.S. §

281.085. The Board denied the claim via letter, and again after a hearing finding that Washington

Page 20 — OPINION AND ORDER

County did not acquire real property under the terms of the statute, and that the lease agreement

did not result in tenants becoming displaced persons. Id. at 196.

On appeal, the Shepard court held that O.R.S. § 281.085 did not require the government

entity to actually exercise its power of eminent domain in order to trigger the right to assistance.

Id. at 203. However, examining the legislative history of the statute and its federal counterpart, 42

U.S.C. § 4651, the Shepard court recognized that relocation assistance statutes were intended to

alleviate the financial burdens of those displaced “by the kind of governmental acquisitions of real

property in which resort to condemnation proceeding would be at least a strong possibility if an

arm’s length purchase could not be accomplished.” Jd. at 203. Thus, the Shepard court concluded

that relocation assistance was not contemplated by the legislation for all month-to-month tenants

who might be displaced in every situation where a government agency acquires a leasehold interest

in a modest amount of floor space[]” and would restrict a governmental agency to shopping on

“the open market for rental space only in vacant properties unless the agency were willing an able

to commit a disproportionate amount of public funds to the acquisition of a lessee’s interest in

realty.” Id. at 204.

Plaintiffs attempt to distinguish Shepard, contending that it involved a lease of “a modest

amount” of office space for only a period of five years. Shepard, 293 Or. at 203 (noting that the

terms “programs or project” indicated that the legislation was concerned with the “displacement

of persons on a relatively large scale”). According to Plaintiffs, because this case involves the

purchase of a large amount of property for the construction of a new City Hall and/or Police

Station, the rationale in Shepard does not apply. The court is not convinced.

Page 21 — OPINION AND ORDER

As the Shepard court indicated, legislation providing for relocation assistance benefits was

concerned with projects and programs for “redevelopment, open space preservation and

construction of public facilities. Such projects are usually site specific; that is, the governmental

agency sets out to acquire certain property for the program.” Shepard, 203 Or. at 204. Continuing,

the Shepard court explained that the record there failed to disclose that “the county was determined

to obtain this specific rental space in this particular parcel of land” and that “there is nothing to

indicate that the county would not have sought rental space in some other parcel.” Jd. at 205. And,

the Shepard court reiterated that there was no “acquisition” as used in the statute because “[t]here

is nothing to indicate that had negotiations failed the county would have resorted to condemnation

proceedings to acquire the specific site to operate the center.” Jd.

The court agrees with Plaintiffs that the construction of a new Police Station or City Hall

is precisely the type of public facilities contemplated by the relocation assistance benefit statute.

However, as in Shepard, there is no indication in the record before the court that Kmetic property

was “site specific.” Indeed, the overwhelming evidence is to the contrary. Here, real estate agent

Mr. Reser indicated that the City was interested in purchasing the Property if the Kmetic family

was interested in selling; the City would not resort to condemnation and would walk away from

the transaction if a mutually agreeable purchase and sale could not be negotiated. (Reser Decl. □□

2-4, ECF No. 24-2.) One of the conditions the City required was that the seller (the Kmetics)

deliver the Property free and clear of all tenants at closing. (Piscadlo Decl. Ex. 9 at 4, ECF No. 24-

1 at 78.) Doughman, the City’s attorney, also provided that the City did not authorize

condemnation of the Property and that the City would find a different parcel of property if the

negotiations failed. (Doughman Decl. ff 4-6, ECF No. 24-3.) And, Doughman confirmed in an

Page 22 — OPINION AND ORDER

October 7, 2016 email that the City would not close with the tenants on the Property. (Piscadlo

Decl. Ex. 13, ECF No. 24-1 at 105.) Doughman clarified to Steven Kmetic that the sale was not

“forced” and that unless it was clear that the City would not face legal action from the tenants, it

would not close on the Property. (/d.) At a November 9, 2016 City Council meeting, the City

confirmed that it was not condemning or using eminent domain to force a sale of the Property.

(Doughman Decl. Ex. 16, ECF No. 24-1 at 111.)

Recognizing that the City’s evidence shows that it would not resort to condemnation if a

sale could not be negotiated, Plaintiffs suggest that the City implied that it would do so during

private negotiations with the Kmetics. Plaintiffs highlight a draft letter from Mr. Reser to Kenneth

Kmetic describing that the City wanted to acquire the Portland Avenue Property through a

“friendly condemnation” which would allow him to “defer taxes on the proceeds under Section

1033 of the Internal Revenue Code (Condemnation and Involuntary Conversion.) (Ramelli Decl.

Ex. 5, ECF No. 33-2 at 3.) Plaintiffs contend that the Kmetics did not fully understand the concept

of a “sale in lieu of condemnation” or “friendly condemnation,” but understood what

condemnation meant. Plaintiffs argue that the threat of condemnation was “very real’ to the

Kmetics, and that therefore, the relocation statute applies. Plaintiffs’ argument would be more

convincing if made by the Kmetics; here, that is not the case.

The evidence from the sellers consistently provides that the City did not threaten

condemnation if the sale did not go through. In his deposition, Kenneth Kmetic testified that he

received the draft letter, and that Mr. Reser met with him, his wife Lynne, and Steven Kmetic to

discuss the City’s offer. (Kenneth Kemetic Dep. 8:7-16, ECF No. 33-2 at 5.) Kenneth Kmetic

indicated that Mr. Reser was specific, and informed him that “it was not gonna go that far” and

Page 23 — OPINION AND ORDER

that it “was highly unlikely” that the City would condemn the property. (Kenneth Kemetic Dep.

9:1-12, ECF No. 33-2 at 6.) Later in his deposition, Kenneth Kmetic indicated that during their

conversation, Mr. Reser informed him that if he felt the City’s offer was not enough, he should not

accept it. (Kenneth Kemetic Dep. 15:6-16, ECF No. 24-1 at 71; Kenneth Kmetic Dep. 34:2-18,

ECF No. 33-2 at 9.) And, Kenneth Kmetic specifically denied that the City was threatening

condemnation, stating that he felt he could have just told the City he was not interested, and:

Q:... 1 think — think we went through this, but maybe just to make sure: The City

wasn’t threatening you that, “Hey, if you don’t sell us this, we’re gonna condemn

it”?

A. No.

(Kenneth Kemetic Dep. 15:12-16, ECF No. 24-1 at 71.)

Lynne Kmetic admitted in her deposition that Mr. Reser never mentioned the term

condemnation in their March 2016 meeting when discussing sale of the property. (Lynne Kmetic

Dep. 17:5-11, ECF No. 33-2 at 17.) And, Steven Kmetic testified that the sale of the Property was

a voluntary transaction and that the City was not threatening condemnation. (Steven Kmetic Dep.

14:18-23, 15:18-16:1, ECF No. 24-1 at 61-63.) Contrary to Plaintiffs’ perception of the transaction,

the evidence clearly shows that the Kmetics were not selling the Portland Avenue Property because

the City was threatening condemnation.

The court is not convinced that simply because the City offered to structure the sale through

a tax-advantageous 1033 exchange, that offer equates to the City threatening to condemn the

Property. A 1033 exchange would provide tax benefits to the sellers should they choose to purchase

other property within a specified time frame. Aside from suggesting that the Kmetics did not fully

understand the concept of a “sale in lieu of condemnation” Plaintiffs have not demonstrated that

Page 24 — OPINION AND ORDER

the City either implicitly or explicitly intended to pursue condemnation if the sale could not be

negotiated.” As discussed above, the evidence is clear that the sellers understood that the City was

not threatening condemnation, and that the City on numerous occasions made it clear in the public

record and its correspondence with the Kmetics that it would not close on the sale if the agreed

upon terms could not be satisfied. Thus, it is undisputed that the City purchased the Property

through a voluntary, arm’s length negotiated sale.

Plaintiffs have failed to establish a genuine issue of fact that the City would have resorted

to condemnation proceedings to acquire the Portland Avenue Property in the event negotiations

failed. Accordingly, there was no “acquisition” within the meaning of O.R.S. § 35.510. Moreover,

because there was no acquisition, O.R.S. § 35.510 does not apply, and thus, Plaintiffs have failed

to establish that they were entitled to relocation assistance benefits under the statute. Without a

right to the relocation assistance benefits, Plaintiffs have no protectable property interest, and their

procedural due process claim fails as a matter of law. Shanks, 540 F.3d at 1091-92 (holding that

where there is no “constitutionally cognizable property interest,” the plaintiff's procedural due

process claim fails as a matter of law); Gagliardi v. Village of Pawling, 18 F.3d 188, 193 (2d Cir.

1994) (holding that “[s]ince the Gagliardis lack a property interest in the enforcement of the

Pawling zoning laws, they are unable to state an actionable claim for deprivation of procedural

due process.”).

Hil

2 Additionally, there is no evidence in the record indicating whether the Kmetic family structured

the sale as a 1033 exchange at closing. (Piscadlo Decl. Ex. 9 at 24, ECF No. 24-1 at 98.)

Page 25 — OPINION AND ORDER

Plaintiffs released the City

The City also argues that Plaintiffs do not have a protectable property interest because they

signed a release waiving any potential relocation assistance benefits under O.R.S. § 35.510. As

described above, in light of the newspaper article and the statements from Lynne Kmetic, there

was confusion among the long-term tenants on the Property, including Plaintiffs. The City

amended original purchase and sale agreement and asked each tenant to sign a release that offered

two months’ rent in exchange for releasing the City from any potential obligations under O.R.S.

§§ 35.500 — 35.530. (Piscadlo Decl. Ex. 10 at 2, ECF No. 24-1 at 102.) Some of the tenants did

not want to sign the releases, asserted they were not legal, and demanded additional time to vacate

the property. (Piscadlo Decl. Ex. 12, ECF No. 24-1 at 104.) Doughman reiterated to the sellers that

the City was not “forcing the sale” of the Property, and that he could not recommend closing on

the Property if the City would face legal action from the tenants, and he threatened to back out of

the sale if the issues with the tenants could not be resolved. (Piscadlo Decl. Ex. 13, ECF No. 105.)

In response, Steven Kmetic relayed that he had spoken with two of the tenants who now understood

the City’s purchase was not a condemnation, and that they would agree to sign the releases if they

were provided additional time to vacate. (Piscadlo Decl. Ex. 14, ECF No. 24-1 at 107.)

On October 18, 2016, Plaintiffs signed a release that provided the following, in relevant

part:

The Trust is seeking to sell the Property and will terminate Cars’ tenancy prior to

closing a sale of the Property. The City of Gladstone (“City”) is seeking to purchase

the Property. The City is not using its eminent domain authority to acquire the

Property or otherwise forcing a sale of the [P]roperty. As the City and Trust have

explained to Cars, the City and the Trust are engaged in an arms-length, negotiated

purchase and sale of the Property.

Page 26 — OPINION AND ORDER

In exchange for Nine Hundred Twenty Six Dollars and No Cents ($926.00), and

the right to stay on the Property through January 1, 2017, Cars releases the City

from any obligation it may have under state or federal law, including ORS 35.500-

35.530, to provide relocation assistance to Cars if it purchases the Property.

(Piscadlo Decl. Ex. 15, ECF No. 24-1 at 108.) Maes appeared at a November 9, 2016 City of

Gladstone Council Meeting and complained that the releases were not equitable, and attempted to

rescind his release.

Defendants argue that Plaintiffs are bound by their release and that there is no evidence in

the record that Plaintiffs were coerced into signing it. According to Defendants, Plaintiffs have not

proffered any viable reason for revoking the release; therefore, Plaintiffs have waived any potential

property interest in relocation assistance benefits and they are entitled to summary judgment as a

matter of law.

Plaintiffs argue that the release is not valid for two primary reasons. First, Plaintiffs contend

that O.R.S. § 35.510 is for the public benefit and that the City could not ask Plaintiffs to contract

away those benefits. Second, Plaintiffs argue that Defendants misrepresented that they were not

entitled to any relocation benefits and that they were fraudulently induced to enter the contract.

According to Plaintiffs, because of the City’s fraudulent inducement, they may freely void the

release. See Bodenhamer vy. Patterson, 278 Or. 367, 374 (1977) (‘[A] purchaser who has, in fact,

been induced to enter a contract by an intentional misrepresentation may rescind the contract even

though his reliance may have been negligent.”’).

As discussed above, the court has determined that the O.R.S. §§ 35.500-35.530 does not

apply. Therefore, the Defendants did not misrepresent that fact to Plaintiffs when asking them to

waive any potential benefits under the statute. Additionally, the release provides that the Kmetic

Trust is seeking to sell the Property and that the City is seeking to purchase the Property in an

Page 27 — OPINION AND ORDER

arm’s length negotiation. Further, the release clearly provides that the Trust is terminating Cars’

lease prior to the close of the sale. Aside from the Oregon statute, Plaintiffs assert no other basis

for rescinding the release in this action. Because Plaintiffs have not established that they have a

protected property right in relocation benefits under Oregon’s statute, their procedural due process

claim fails as a matter of law.

In short, viewing all the evidence in the light most favorable to Plaintiffs, they have not

established they have a protectable property interest in relocation benefits under federal or state

law. Accordingly, Defendants are entitled summary motion judgment on Plaintiffs’ procedural due

process claim. Shanks, 540 F.3d at 1092 (holding that absent a protectable property interest in

enforcement of historic preservation ordinance, procedural due process claim fails).

C. Plaintiffs Received Adequate Notice and Opportunity To Be Heard

Defendants argue that even if Plaintiffs could establish that they have a protectable property

interest in relocation benefits, their procedural due process claim under the Fourteenth Amendment

would fail as a matter of law because they were afforded adequate procedural protections. Plaintiffs

respond that City officials did not listen to his concerns in a meaningful way and that the writ of

review process was not available to appeal the City’s denial of relocation benefits.

1. standards

Procedural due process provides that person may not be deprived of a life, liberty or

property without an opportunity to be heard “at a meaningful time and in a meaningful manner.”

Mathews y. Eldridge, 424 U.S. 319, 333 (1976) (internal quotations and citations omitted); see

U.S. Const., amend. XIV § 1 (“No State shall .. . deprive any person of life, liberty, or property,

without due process of law.”) Procedural due process does not require that the notice and

Page 28 — OPINION AND ORDER

opportunity to be heard occur before the deprivation, or that a hearing be conducted, so long as

pre- or post-deprivation procedures are adequate. Buckingham v. Sec’y of U.S. Dep’t of Agric., 603

F.3d 1073, 1082 (9th Cir. 2010). The factors to be weighed are: (1) the importance of the private

interest that will be affected by the official action; (2) the risk of an erroneous deprivation of a

property interest through the procedures used and the probable value of additional safeguards; and

(3) the government’s interest, including any monetary or efficiency costs associated with increased

procedural safeguards. Mathews, 424 U.S. at 335. At bottom, the due process evaluation “‘is

flexible and calls for such procedural protections as the particular situation demands.’” Mathews,

424 US. at 334; Morrissey v. Brewer, 408 U.S. 471, 481 (1972).

2. process was adequate

Presuming arguendo that Plaintiffs have established a property right, there can be no

question that Plaintiffs received actual notice that the City denied his entitlement to such benefits.

See Espinosa vy. U.S. Aid Funds, Inc., 553 F.3d 1193, 1203 (9th Cir. 2008) (holding actual notice

satisfies notice component of procedural due process). Thus, the question is whether Plaintiffs

were afforded an opportunity to be heard.

Due process does not always require an adversarial or evidentiary hearing. Buckingham,

603 F.3d at 1082-83; see also Memphis Light, Gas, & Water Div. v. Craft, 436 U.S. 1, 16 n.17

(1978) (“The opportunity for informal consultation with designated personnel empowered to

correct a mistaken determination constitutes a due process hearing in appropriate circumstances.”)

“The core requirement is to give the individual the ‘opportunity to speak up in his own defense’

while the government ‘listen[s] to what he has to say,” because ‘fairness rarely can be obtained by

secret, one-sided determination of facts decisive of rights.’” Elizondo v. City of Junction City, 6:15-

Page 29 — OPINION AND ORDER

cv-01853-AA, 2016 WL 659082, *4 (D. Or. Feb. 16, 2016) (quoting Fuentes v. Shevin, 407 U.S.

67, 81 (1972)), aff'd 669 F. App’x 855, 856 (9th Cir. 2016). Under some circumstances, notice

and an opportunity to be heard at a public meeting may satisfy the requirements of procedural due

process. Littlefield v. City of Afton, 785 F.2d 596, 603 (8th Cir. 1986), overruled on other grounds

as recognized by Bituminous Materials, Inc. vy. Rice Cty., Minn., 126 F.3d 1068, 1070 (8th Cir.

1997) (holding that city council meetings satisfied procedural due process protections where

appellants given notice of meetings and opportunity to be heard at meetings).

Plaintiffs complain that the City did not listen to Maes’s concerns at the November 9, 2016

City Council hearing, and that they were deprived of a meaningful opportunity to have their

concerns heard. As discussed above, Plaintiffs had multiple opportunities to be heard on their

contention that they were entitled to relocation benefits. Contrary to Plaintiffs’ assertion, Maes

was provided with an opportunity to speak at the November 9, 2016 City Council hearing, at which

he challenged the City’s position that he and the other tenants were not entitled to relocation

benefits. Additionally, on December 28, 2016, Maes sent a letter to the mayor and City Councilors

requesting relocation benefits and reiterating his position that the City failed to provide adequate

notice of eligibility for benefits, assistance, and moving expenses, and requested an appeal. The

City responded to Maes’s letter on January 12, 2017, denying his request for benefits and that it

would not conduct an appeal because the relocation benefits statute did not apply. In February

2017, Doughman set up a meeting with Maes’s attorney to explore resolution. In March 2017,

Maes and his attorney met with Doughman and numerous City officials engaged in negotiations

at which Plaintiffs rejected the City’s offer of $13,500, instead demanding $40,000.

Page 30 — OPINION AND ORDER

Although Plaintiffs did not reach an agreement with the City for relocation benefits, there

can be no question that Plaintiffs and their attorneys had ample opportunity over several months

to make their position known through meetings and correspondence with City officials. Plaintiffs

clearly communicated their position to the City and voiced their disagreement about the City’s

interpretation of relocation benefits. While Plaintiffs’ efforts were unsuccessful, the court cannot

conclude that he was denied an opportunity to be heard.

The court concludes that Plaintiffs’ opportunities to challenge the City’s decision to deny

relocation benefits at the City Council hearing and through multiple later meetings satisfies due

process under these circumstances. Therefore, the court concludes that the process was

constitutionally adequate under the circumstances. See Cleveland Bd. of Educ. y. Loudermill, 470

U.S. 532, 546 (1985) (holding that procedural due process simply requires notice of the proposed

decision, an explanation of the evidence supporting the decision, and a meaningful opportunity for

the affected party to tell his side of the story).

The parties appear to dispute whether Plaintiffs could have pursued an appeal from the

City’s denial by pursuing a writ of review, a writ of mandamus, or a declaratory judgment action.

See OR. REV. STAT. §§ 34.020 (writ of review), 34.110 (writ of mandamus), 28.020 (declaratory

judgment action). This court need not determine which route is the correct procedure to follow

here because the court has determined that the City provided the constitutionally adequate due

process protections in this instance. Moreover, Plaintiffs do not articulate what additional

procedural safeguards are necessary to comport with Fourteenth Amendment procedural due

process requirements under these circumstances, or cite to case law requiring more process than

that accorded by the City in this instance. Accordingly, because the court finds that Plaintiffs were

Page 31 — OPINION AND ORDER

provided notice and an opportunity to be heard, the court concludes that Plaintiffs’ procedural due

process claim fails as a matter of law. Elizondo, 2016 WL 659082, at *4 (holding that home-owners

were afforded adequate procedural protections where they presented concerns about tree removal

to city committee members and city council).

Il. Substantive Due Process

A. Standards

Substantive due process “forbids the government from depriving a person of life, liberty,

or property in such a way that shocks the conscience or interferes with rights implicit in the concept

of ordered liberty.” Nunez v. City of Los Angeles, 147 F.3d 867, 871 (9th Cir. 1998) (internal

quotations and citations omitted). “To state a substantive due process claim,” a plaintiff must

typically “show as a threshold matter that a state actor deprived it of a constitutionally protected

life, liberty or property interest.” Shanks, 540 F.3d at 1087. “Substantive due process protection is

usually reserved for the vindication of fundamental rights, such as matters relating to marriage,

family, procreation, and bodily integrity.” Merrill v. Cty. of Madera, No. 1:05-cv-0195 AWI SMS,

2013 WL 1326542, at *4 (E.D. Cal. Mar. 29, 2013) (citing Albright v. Oliver, 510 U.S. 266, 272

(1994)). Typically, where a plaintiff relies on substantive due process to challenge governmental

actions that do not impinge on fundamental rights, the court is not required to find that the

defendant’s actions actually advanced their stated purposes; instead, the court must “merely look

to see whether the government could have had a legitimate reason for acting as it did.” Halverson

v. Skagit County, 42 F.3d 1257, 1262 (9th Cir. 1994). Decisions based on erroneous legal

interpretations or decisions made without due care are not constitutionally arbitrary. Shanks, 540

Page 32 ~ OPINION AND ORDER

F.3d at 1088; Merrill, 2013 WL 1326542, at *6 (holding that county’s delay in issuing permits and

citation for ordinance violations was not constitutionally arbitrary).

Thus, to survive Defendants’ summary judgment motion on their substantive due process

claim, Plaintiffs must show that the City’s actions were arbitrary and capricious and denied them

a legally cognizable property interest. Because Plaintiffs’ claim does not involve a fundamental

right, Plaintiffs must demonstrate the City’s actions “‘could have had no legitimate reasons for its

decision.’” Halverson, 42 F.3d at 1262 (quoting Kawaoka v. City of Arroyo Grande, 17 F.3d 1227,

1238 (9th Cir. 1994)). If it is “at least fairly debatable” that the City’s decision to deny relocation

benefits is rationally related to a legitimate government interest, there is no substantive due process

violation. /d. (holding that a plaintiff alleging a violation of substantive due process bears a “heavy

burden”’).

B. Analysis

As discussed above, the court has determined that Plaintiffs have failed to establish that

they have a protected property right in relocation benefits. Therefore, Plaintiffs’ substantive due

process claim fails as a matter of law. Shanks, 540 F.3d at 1091-92 (holding that where there is no

substantive property interest at stake, the plaintiff may not insist on compliance with a particular

procedure; rejecting substantive due process claim); see Crown Point I, LLC y. Intermountain

Rural Elec. Ass’n, 319 F.3d 1211, 1216 (9th Cir. 2003) (holding that where there is no protected

property interest, the court need not address whether the defendant’s procedures may have violated

that interest).

Even assuming arguendo that Plaintiffs could establish a protectable property interest in

relocation benefits, Plaintiffs have not demonstrated that the City’s determination that they were

Page 33 — OPINION AND ORDER

not entitled to relocation benefits is constitutionally arbitrary. See Samson v. City of Bainbridge

Island, 683 F.3d 1051, 1058 (9th Cir. 2012) (holding that even if plaintiffs could establish property

right in development of shoreline, they could not establish that the city’s building moratorium

violated substantive due process). It is clearly established that even if the City has erroneously

interpreted state law, “not every violation of state law amounts to an infringement of constitutional

rights.” Samson, 683 F.3d at 1060 (citing Paul v. Davis, 424 U.S. 693, 700 (1976)); Shanks, 540

F.3d at 1088.

Furthermore, Plaintiffs have not presented any evidence that City abused its power or was

engaged in deception in negotiating the purchase of the Property. While it is unfortunate that

misinformation about the nature of the purchase may have engendered confusion, resentment, or

hostility with the tenants, Plaintiffs have not offered any evidence to refute that the Property was

purchased through an arm’s length negotiation. Plaintiffs have not demonstrated that the City’s

offer of two months’ rent in exchange for releases was an abuse of power or otherwise egregious

behavior. Here, the City could rationally decide that providing compensation to tenants in

exchange for releases would save taxpayer resources and was preferable to costly litigation. And,

Plaintiffs have failed to show that the City’s unsuccessful attempts to resolve their claims by

offering up to $13,500 was arbitrary and capricious. Likewise, the City could rationally attempt to

resolve Plaintiffs’ claims in a cost-effective manner and could rationally reject Plaintiffs’ $40,000

offer as too expensive in light of nature of the claims.

Therefore, the court concludes that no rational trier of fact could conclude that the City’s

denial of Plaintiffs’ request for relocation benefits was arbitrary or capricious. Shanks, 540 F.3d at

1088 (holding building permit was not egregious or arbitrary government conduct and rejecting

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substantive due process claim); Hoeck v. City of Portland, 57 F.3d 781, 786 (9th Cir. 1995)

(granting summary judgment on substantive due process claim where city’s demolition of

plaintiff's vacant building had a rational basis); Halverson, 42 F.3d at 1263 (granting summary

judgment on substantive due process claim where plaintiffs failed to show county’s decision to

build and maintain dike to prevent flooding was arbitrary or capricious). .

Il. Qualified Immunity

A. Standards

“The doctrine of qualified immunity protects government officials “from liability for civil

damages insofar as their conduct does not violate clearly established statutory or constitutional

rights of which a reasonable person would have known.’” Pearson v. Callahan, 555 U.S. 223, 231

(2009) (quoting Harlow v. Fitzgerald, 457 U.S. 800, 818 (1982)); Sjurset v. Button, 810 F.3d 609,

614 (9th Cir. 2015). Qualified immunity balances the “need to hold public officials accountable

when they exercise power irresponsibly and the need to shield officials from harassment,

distraction, and liability when they perform their duties reasonably.” Pearson, 555 U.S. at 231.

Qualified immunity “gives government officials breathing room to make reasonable but mistaken

judgments about open legal questions. When properly applied, it protects ‘all but the plainly

incompetent or those who knowingly violate the law.’” Ashcroft v. al-Kidd, 563 U.S. 731, 743

(2011) (quoting Malley v. Briggs, 475 U.S. 335, 341 (1986)). “In determining whether qualified

immunity applies, courts ‘must determine whether: (1) the facts adduced constitute the violation

of a constitutional right; and (2) the constitutional right was clearly established at the time of the

alleged violation.’” Daniels Sharpsmart, Inc. v. Smith, 889 F.3d 608, 617 (9th Cir. 2018) (quoting

Mitchell v. Washington, 818 F.3d 436, 443 (9th Cir. 2016)). The court may examine these two

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requirements in either order; failure of either precludes Plaintiffs’ claim against the Individual

Defendants.

To determine if a constitutional right was clearly established at the time, the key question

is whether the officials ““should have known their specific actions were unconstitutional given the

specific facts under review.’” Daniels Sharpsmart, 889 F.3d at 617 (quoting Hamby v. Hammond,

821 F.3d 1085, 1090 (9th Cir. 2016)). To be considered “clearly understood,” the right must be

sufficiently clear that “every reasonable official would have understood that what he is doing

violates that right” and that existing legal precedent put the constitutional question “beyond

debate.” Hamby, 821 F.3d at 1090-91 (internal quotations and citations omitted). Thus, state and

local officials are entitled to qualified immunity so long as no precedent squarely governs the

officials’ conduct at issue, and the court must conclude that only someone “plainly incompetent”

or who knowingly violated the law would have acted as the officials did. Jd. at 1091.

B. Analysis

Plaintiffs attempt to hold the Individual Defendants, who are various Gladstone City

officials, personally liable in damages for their participation in the decisions to deny them

relocation benefits. To survive summary judgment, Plaintiffs must defeat the Individual

Defendants’ defense of qualified immunity. To defeat the qualified immunity defense, Plaintiffs

must show that they suffered a deprivation of a constitutional right and that the right was clearly

established at the time of the alleged misconduct. Plaintiffs are unable to do so.

As discussed above, viewing the evidence in the light most favorable to Plaintiffs, they

have not placed “beyond debate” the unconstitutionality of the Individual Defendants’ actions.

Here, Plaintiffs have not pointed to any precedential authority in existence at the time the

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Individual Defendants approved the City’s purchase of the Property or were engaging in

negotiations with Plaintiffs’ counsel that Plaintiffs were entitled to relocation benefits. To be sure,

there was no “precedent on the books” from April 2016 through December 2017 that would have

made clear to the various Individual Defendants that their actions clearly were violating the

Constitution. Taylor v. Barkes, 135 S. Ct. 2042, 2045 (2015) (holding prison officials entitled to

qualified immunity where no “precedent on the books” would have made it clear that lack of

adequate suicide prevention protocols violated the Constitution); see Cmty. House, Inc. v. City of

Boise, Idaho, 623 F.3d 945, 967 (9th Cir. 2010) (“To determine whether a right was clearly

established, a court turns to Supreme Court and Ninth Circuit law existing at the time of the alleged

act.”). Therefore, because the Individual Defendants were not contravening clearly established

law, they are entitled to qualified immunity. Hamby, 821 F.3d at 1092 (granting qualified

immunity to prison officials where inmate could not establish that prison officials knew their

actions violated clearly established legal precedent at the time of their actions).

Additionally, as Defendants correctly contend, each Individual Defendant’s understanding

of the law was reasonable at the time. Here, the facts show that the Individual Defendants relied

on the advice of Mr. Doughman who advised them that Plaintiffs were not entitled to relocation

benefits under state or federal law. As noted, Plaintiffs have not identified any legal authority

clearly establishing that they had a protectable property interest in relocation benefits. Thus,

based on Mr. Doughman’s advice and the facts of this case, the Individual Defendants had

sufficient reason to believe that their actions were justified. Hamby, 821 F.3d at 1095 (holding

prison officials entitled to qualified immunity where they acted on bona fide medical advice that

surgical intervention was unnecessary); Los Angeles Police Protective League v. Gates, 907 F.2d

Page 37 — OPINION AND ORDER

879, 888 (9th Cir. 1990) (holding that police officers could not hide behind advice of attorney, but

where officers faced complex legal issue, sought legal advice and followed it, applying qualified

immunity to situation reasonable). Plaintiffs have failed to establish that each Individual

Defendant’s actions were unreasonable under the circumstances. Anoushiravani v. Fishel, Case

No. CV 04-212-MO, 2004 WL 1630240, at *14 (D. Or. July 19, 2004) (noting that reasonable

reliance on advice of counsel factors in favor of finding qualified immunity).

In short, even when viewing the evidence in the light most favorable to Plaintiffs, they have

not demonstrated that the Individual Defendants’ actions clearly violated Plaintiffs’ Constitutional

rights. Consequently, each of the Individual Defendants is entitled to qualified immunity, and

summary judgment must be entered in their favor.

Conclusion

Based on the foregoing, Defendants’ Motion for Summary Judgment (ECF No. 24) is

GRANTED. This action is DISMISSED.

IT IS SO ORDERED,

DATED ise 3 os January, 2020.

q GZ

QHN V. ACOSTA

U i States Magistrate Judge

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