# Cars Northwest Inc. v. City of Gladstone

> District Court, D. Oregon · January 23, 2020

URL: https://www.frixlaw.com/law-library/cases/10391700

## Case

- **Court:** District Court, D. Oregon
- **Decided:** January 23, 2020
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10391700

## How later opinions describe it (automated extraction)

- 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
- 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

## Opinion text

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.

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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

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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

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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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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10391700. Public record. Not legal advice.