Housing4All, LLC v. City of Portland

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF OREGON

HOUSING4ALL, LLC, Case No. 3:20-cv-368-JR

Plaintiff, ORDER

v.

CITY OF PORTLAND, JOHN DOES 1-5,

Defendants.

Michael H. Simon, District Judge.

United States Magistrate Judge Jolie A. Russo issued Findings and Recommendation in

this case on December 17, 2020. ECF 46. Judge Russo recommended that this Court grant in part

and deny in part Defendant City of Portland’s (the City) Motion to Dismiss for Failure to State a

Claim and Lack of Jurisdiction (ECF 9). Judge Russo found that Plaintiff Housing4All failed to

state a claim for unjust enrichment.1 Judge Russo also found that a factual dispute existed as to

whether Housing4All’s inverse condemnation claim challenged a “final” decision (the Finality

1 No party objects to this portion of Judge Russo’s Findings and Recommendation. The

Court accepts Judge Russo’s recommendation that the Court dismiss Housing4All’s unjust

enrichment claim.

Requirement). Judge Russo recommended that the Court deny the City’s motion to dismiss for

lack of jurisdiction because of the factual dispute surrounding whether Housing4All satisfied the

finality requirement.

Under the Federal Magistrates Act (Act), the Court may “accept, reject, or modify, in

whole or in part, the findings or recommendations made by the magistrate.” 28 U.S.C.

§ 636(b)(1). If a party files objections to a magistrate judge’s findings and recommendations,

“the court shall make a de novo determination of those portions of the report or specified

proposed findings or recommendations to which objection is made.” Id.; Fed. R. Civ. P. 72(b)(3).

For those portions of a magistrate judge’s findings and recommendations to which neither

party has objected, the Act does not prescribe any standard of review. See Thomas v. Arn, 474

U.S. 140, 152 (1985) (“There is no indication that Congress, in enacting [the Act], intended to

require a district judge to review a magistrate’s report to which no objections are filed.”); United

States. v. Reyna-Tapia, 328 F.3d 1114, 1121 (9th Cir. 2003) (en banc) (holding that the court

must review de novo magistrate judge’s findings and recommendations if objection is made, “but

not otherwise”). Although in the absence of objections no review is required, the Act “does not

preclude further review by the district judge[] sua sponte . . . under a de novo or any other

standard.” Thomas, 474 U.S. at 154. Indeed, the Advisory Committee Notes to Fed. R. Civ.

P. 72(b) recommend that “[w]hen no timely objection is filed,” the Court review the magistrate

judge’s recommendations for “clear error on the face of the record.”

The City and Housing4All both timely filed objections, to which the other responded.

Housing4All objects to Judge Russo’s finding that the City’s decision was a public works

decision rather than a land-use decision. If the City’s decision were a land-use decision,

Housing4All argues, there would be no question about the Court’s jurisdiction. The City,

however, objects to Judge Russo’s finding that a factual dispute existed as to whether

Housing4All satisfied the finality requirement. Even if a factual dispute exists, the City also

argues, Judge Russo should not have denied the City’s motion without making factual findings.

The Court agrees with the City’s latter argument. Thus, the Court adopts in part and declines to

adopt in part the Findings and Recommendation and remands to Judge Russo for further

proceedings consistent with opinion.

DISCUSSION

Housing4All sought a permit to build an apartment complex on a one-acre site located

at 2242 SE 158th Avenue, Portland, Oregon. The City conditioned the grant of any building

permit for that location on Housing4All agreeing to set aside a portion of the property to

construct a road extending SE Sherman Street to connect SE 158th Avenue and 159th Avenue

(the Sherman Connection) at Housing4All’s expense. Housing4All contends that this

requirement is a regulatory taking for which the both the United States and Oregon constitutions

compel the City to compensate Housing4All.

Regulatory takings claims are unripe—and therefore not within the Court’s jurisdiction—

unless the regulatory takings claim stems from a “final decision regarding the application of the

regulations to the property at issue.” Pakdel v. City & County of San Francisco, 952 F.3d 1157,

1163 (9th Cir. 2020). Thus, to adjudicate the City’s motion to dismiss for lack of jurisdiction, the

critical question is whether Housing4All obtained a final decision—i.e., a decision from the last

available administrative appeal offered by the City, see Guatay Christian Fellowship v. County

of San Diego, 670 F.3d 957, 981 (9th Cir. 2011)—about the Sherman Connection. At first

glance, that question appears easy to answer: Housing4All did not. After all, no one disputes that

Housing4All did not appeal the City’s June 2019 approval of Housing4All’s building permit

(which included the Sherman Connection) to either the City’s Public Works Administrative

Appeal Panel (PWAAP) or the Public Works Board of Appeal (PWBA).

The question is more complicated, however, because Housing4All alleges that it was not

made aware of the availability of appeals. There is conflicting evidence on this point. On the one

hand, the City failed to provide Housing4All with the final decision form from the City’s June

2019 approval of Housing4All’s building permit. That document would have informed

Housing4All of its right to appeal the decision to the PWAAP and, if necessary, the PWBA.

Additionally, two days before the City’s decision approving Housing4All’s building permit,

Housing4All’s counsel wrote to the City explaining that Housing4All “has not been informed of

any local rights to appeal” and asked the City to “provide information regarding the appropriate

land use appeal form and fee to submit an appeal, and direct [Housing4All] to the section of its

Code outlining the appeal procedure.” ECF 15-5 at 2. A City official replied that “no separate

appeal process should be implicated.” ECF 15-6 at 1 (emphasis in original). It is not clear from

the record what the City official intended to convey when he said there was “no separate appeal

process.”

On the other hand, Housing4All exercised its right to appeal decisions related to the

Sherman Connection before. In July 2017, for example, Housing4All proposed an alternative

plan for the Sherman Connection that the City’s Public Works Alternative Review Committee

(PWARC) rejected. Housing4All appealed that decision to the PWAAP. After PWAAP denied

Housing4All’s appeal, the City even informed Housing4All that PWAAP decisions could be

appealed to the PWBA. Housing4All did not appeal to the PWBA.

Nor was that the only time the City informed Housing4All of the availability of

administrative appeal procedures. In October 2017, Housing4All proposed a slightly different

alternative plan to the PWARC and this time the PWARC accepted Housing4All’s plan. The

City told Housing4All that, even though PWARC had accepted Housing4All’s proposed

alternative, Housing4All could nevertheless appeal PWARC’s decision if Housing4All continued

to object to the set aside requirement. Housing4All did not appeal. A City official also submitted

a declaration stating that he and others orally communicated to Housing4All’s attorneys the

relevant administrative appeal procedures. ECF 21-2 at 5.

The City argues that the Court should grant its motion to dismiss Housing4All’s inverse

condemnation claim for lack of jurisdiction. The City contends that there is no genuine factual

dispute over whether Housing4All was aware of the availability of administrative appeal

procedures and therefore no genuine dispute over whether Housing4All satisfied the finality

requirement. The City also argues that, even if there is a genuine factual dispute, the Court

should not automatically deny the City’s motion but should make factual findings and then rule

on the City’s motion based on those findings. The Court agrees with the City’s latter argument.

Federal courts are courts of limited jurisdiction. Gunn v. Minton, 568 U.S. 251, 256

(2013) (quotation marks omitted). As such, a court is to presume “that a cause lies outside this

limited jurisdiction, and the burden of establishing the contrary rests upon the party asserting

jurisdiction.” Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994) (citations

omitted); see also Robinson v. United States, 586 F.3d 683, 685 (9th Cir. 2009); Safe Air for

Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004). The Court must dismiss any case over

which it lacks subject matter jurisdiction. Fed. R. Civ. P. 12(h)(3); see also Pistor v. Garcia, 791

F.3d 1104, 1111 (9th Cir. 2015) (noting that when a court lacks subject-matter jurisdiction,

meaning it lacks the statutory or constitutional power to adjudicate a case, the court must dismiss

the complaint, even sua sponte if necessary).

A Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction may be

“factual.” See Safe Air for Everyone, 373 F.3d at 1039. “A jurisdictional challenge is factual

where ‘the challenger disputes the truth of the allegations that, by themselves, would otherwise

invoke federal jurisdiction.’” Pride v. Correa, 719 F.3d 1130, 1133 n.6 (9th Cir. 2013) (quoting

Safe Air for Everyone, 373 F.3d at 1039)). When a defendant factually challenges the plaintiff’s

assertion of jurisdiction, a court does not presume the truthfulness of the plaintiff’s allegations

and may consider evidence extrinsic to the complaint. See Terenkian v. Republic of Iraq, 694

F.3d 1122, 1131 (9th Cir. 2012); Robinson, 586 F.3d at 685; Safe Air for Everyone, 373 F.3d

at 1039. A factual challenge “can attack the substance of a complaint’s jurisdictional allegations

despite their formal sufficiency.” Dreier v. United States, 106 F.3d 844, 847 (9th Cir. 1996)

(citation and quotation marks omitted).

Unless the factual dispute on which the Court’s jurisdiction turns is “intertwined with an

element of the merits of the plaintiff’s claim,” Leite v. Crane Co., 749 F.3d 1117, 1122 n.3 (9th

Cir. 2014), the Court may resolve the factual dispute itself. Id. at 1121-22. “The plaintiff bears

the burden of proving by a preponderance of the evidence that each of the requirements for

subject-matter jurisdiction has been met.” Id. at 1121. A plaintiff must offer “competent proof,”

Hertz Corp. v. Friend, 599 U.S. 77, 96-97 (2010), “under the same evidentiary standard that

governs in the summary judgment context.” Leite, 749 F.3d at 1121. If there is a genuine dispute

of material fact as to jurisdiction, a court may hold an evidentiary hearing and make findings of

fact about jurisdiction. See Augustine v. United States, 704 F.2d 1074, 1079 (9th Cir. 1983)

(reversing a district court’s dismissal for lack of subject matter jurisdiction where the district

court declined to hold an evidentiary hearing even though the parties disputed jurisdictional

facts).

Because the City’s motion presents a genuine factual dispute and that factual dispute is

not intertwined with merits of Housing4All’s claims,2 the appropriate procedure if for a court to

make factual findings—aided, if necessary, by an evidentiary hearing—about whether

Housing4All satisfied the finality requirement.

Housing4All argues that fact finding is unnecessary and that the Court should instead rely

on Cintron v. State Board of Education, 384 F. Supp. 674 (D.P.R. 1974) to deny the City’s

motion. In Cintron, a district court denied a defendant’s motion to dismiss for lack of jurisdiction

even though the plaintiff failed to exhaust administrative remedies. 384 F. Supp. at 676. Citron,

however, is distinguishable. It is true that in Cintron, as here, it was unclear whether the

plaintiffs were notified of their administrative appeal rights. Id. It is also true, however, that there

was no “mention of a right to such appeal . . . in the Regulations.” Id. The court’s rejection of the

defendant’s jurisdictional argument, therefore, did not turn on whether the plaintiff had been

made aware of administrative appeal procedures, but whether any administrative appeal

procedures even existed. The Cintron court also rejected the defendant’s argument because the

court correctly observed “exhaustion is not generally required in Civil Rights Act cases.” Id. In

the takings context, however the Supreme Court has blessed the finality requirement. See Knick

v. Township of Scott, 139 S. Ct. 2161, 2169 (2019) (eliminating the requirement that the

plaintiffs seek compensation under state law in state court before bringing a federal takings claim

2 No one suggests that whether Housing4All satisfied the finality requirement relates to

the merits of its inverse condemnation claim. Nor would that suggestion have merit. Cf. Koontz

v. St. Johns River Water Mgmt. Dist., 570 U.S. 595, 599 (2013) (explaining that, when “a unit of

government conditions the approval of a land-use permit on the owner’s relinquishment of a

portion of his property” courts must ask whether “there is a ‘nexus’ and “rough proportionality

between the government’s demand and the effects of the proposed land use”).

under, but retaining the requirement that plaintiffs receive a final decision from the government

unit effecting the taking). The Court declines to follow Cintron.

The Court remands this case to the magistrate judge to engage in fact finding regarding

whether Housing4All satisfied the finality requirement and then issue a new Findings and

Recommendation on the City’s motion. An evidentiary hearing will likely aide fact finding.

Fruitful inquiries may include, but are not limited to: (1) what Housing4All understood about the

administrative appeal procedure, especially given that Housing4All had previously availed

themselves of those procedures; (2) what City officials meant when they emailed Housing4All’s

counsel that “no separate appeal process should be implicated”; and (3) what discussions the City

and Housing4All had about the City’s administrative appeal procedures during their negotiations

over the Sherman Connection. Additionally, the magistrate judge must permit the parties to

engage in limited discovery on this issue before the case advances. See Friends of Animals v.

U.S. Bureau of Land Mgmt., 2017 WL 1025669, *4 (D. Or. Mar. 16, 2017) (“‘Pertinent facts

bearing on the question of jurisdiction are controverted’ in this case; thus, leave . . . to conduct

limited discovery is appropriate.” (quoting Laub v. U.S. Dep’t of Interior, 342 F.3d 1080, 1093

(9th Cir. 2003))).

Housing4All objects to the Findings and Recommendation as well. Specifically,

Housing4All objects to Judge Russo’s finding that the Sherman Connection was a public works

decision, rather than a land-use decision. Housing4All argues that the Sherman Connection was a

land-use decision both because the relevant Portland City Code provision is a land-use regulation

and application of that provision is therefore a land use decision and because that provision does

not provide “clear and objective” standards calling for the Sherman Connection.

The Court has reviewed de novo those portions of Judge Russo’s Findings and

Recommendation to which Housing4All has objected, as well as Housing4All’s objections and

the City’s response. The Court agrees with Judge Russo’s reasoning and adopts those portions of

the Findings and Recommendation.

CONCLUSION

The Court ADOPTS IN PART and DECLINES TO ADOPT IN PART Judge Russo’s

Findings and Recommendation (ECF 46). The Court GRANTS IN PART and REMANDS FOR

FURTHER PROCEEDINGS the City’s Motion to Dismiss (ECF 9). The Court DISMISSES

Housing4All’s unjust enrichment claim and REMANDS FOR FURTHER PROCEEDINGS

Housing4All’s inverse condemnation claim.

IT IS SO ORDERED.

DATED this 1st day of April, 2021.

/s/ Michael H. Simon

Michael H. Simon

United States District Judge