Opinion

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF OHIO

EASTERN DIVISION

THE CROSSROADS GROUP, LLC, ) Case No. 1:23-cv-184

et al., )

) Judge J. Philip Calabrese

Plaintiffs, )

) Magistrate Judge

v. ) Jennifer Dowdell Armstrong

)

CITY OF CLEVELAND HEIGHTS, )

OHIO, et al., )

)

Defendants. )

)

OPINION AND ORDER

The City of Cleveland Heights requires homeowners who lease their property

to register and apply for a certificate of occupancy. If the homeowner resides outside

Cuyahoga County, Ohio, the owner must also pay an additional $100 fee. Plaintiffs

challenge that additional fee arguing that it (1) constitutes a taking and an

unconstitutional condition and (2) violates their rights to due process and equal

protection of the laws, all as guaranteed by the Fourteenth Amendment. Previously,

the Court certified a class of out-of-county owners of residential rental properties in

Cleveland Heights. Both Plaintiffs and Defendants seek summary judgment in their

favor. For the reasons that follow, the Court GRANTS IN PART Plaintiffs’ motion

for summary judgment (ECF No. 43) and GRANTS IN PART AND DENIES IN

PART Defendant’s motion for summary judgment (ECF No. 46).

STATEMENT OF FACTS

Section 1347.02 of the Cleveland Heights Housing Code requires any “owner,

agent, or person in charge of any dwelling structure” who “rent[s] or lease[s] such

structure for residential occupancy” to “hold a certificate of occupancy issued by the

Building Commissioner.” (ECF No. 43-2, PageID #889.) Owners must apply for the

certificate of occupancy on an annual basis. (Id., § 1347.03, PageID #890.) The

application requires a fee of $200 for the first dwelling unit in a building, $50 for the

second dwelling unit, and $25 for each additional unit, with the total for one building

not to exceed $1,225 annually. (Id., § 1347.06(a), PageID #892.) Among other

information, the application requires the “name, address[,] telephone number, and

email address” of the owner of the property and of the agent or person in charge of

the property. (Id., § 1347.03, PageID #890.)

A compliant structure receives a certificate of occupancy containing, among

other information, the name and contact information “of the owner and, if the owner

does not reside on the premises, the name, address, telephone number, and e-mail

address of the resident agent in charge of the building or structure, and the name,

address, telephone number, and email address of the non-resident agent, if any.” (Id.,

§ 1347.03(b)(2), PageID #890.) The Building Commissioner has the authority to

revoke a certificate of occupancy based on any false statement in connection with the

application or non-compliance with the housing code, among other things. (Id.,

§ 1347.03(c).) Additionally, a violation shall result in a $200 fine for each quarter of

the year during which the violation continues. (Id. § 1347.03(e), PageID # 891.)

Violations of the Housing Code, generally, are minor misdemeanors, punishable by a

fine, not to exceed $1,000, up to six months imprisonment, or both. See Cleveland

Hts. Codified Ordinances § 1345.99.

A. The Out-of-County Fee at Issue

In addition to procuring a certificate of occupancy like all owners of dwellings

for rent in Cleveland Heights, owners who reside outside Cuyahoga County must also

comply with the requirements of Section 1351.34, titled “Registration of Dwelling

Structure by Out-of-County Owners.” (Id., § 1351.34, PageID #912.) As currently in

effect, Section 1351.34 obligates owners of dwelling structures who reside outside

Cuyahoga County to register annually with the Building Commissioner and

designate an authorized agent “who maintains a physical office [in Cuyahoga County]

or resides within Cuyahoga County.” (Id., § 1351.34(a).) This agent “must be a

natural person” over the age of 18 who resides or maintains a physical office, not a

post office box, in Cuyahoga County. (Id.) Under the ordinance, “the owner consents

and agrees to receive any and all notices of violation of City ordinances and to receive

process in any court proceeding or administrative enforcement proceeding” relating

to the residential structure in Cleveland Heights. (Id.) The agent’s representations

in court bind the owner. (Id.) Annual registration requires the owner to include the

name and address of the designated agent. (Id.)

This ordinance carries a $100 annual fee. (Id., § 1351.34(c), PageID #912.) A

violation of Section 1351.34 is a first-degree misdemeanor punishable by a fine not to

exceed $1,000, imprisonment up to six months, or both; each day of a violation

constitutes a separate offense. (Id., § 1351.34(d), PageID #912.)

B. History of the Fee

In 2007, the Cleveland Heights city council first enacted Section 1351.34,

including its $100 registration fee for out-of-county owners. (ECF No. 43-5, PageID

#956.) In December 2020, the city council amended the ordinance, repealing its

provision for registration procedures—including the $100 annual fee. Cleveland

Heights Ordinance 124-2020, § 4 (Dec. 7, 2020) (“Current Section 1351.34 of Chapter

1351 of the Codified Ordinance of the City of Cleveland Heights, as it existed prior to

the effective date of the ordinance, is hereby repealed.”).

After the December 2020 amendments repealed the $100 fee from Section

1351.34, the City continued to collect the fee from out-of-county owners of rental

dwellings. (ECF No. 43-4, PageID #938.) When asked for its basis for continuing to

do so, the City cited Section 1369.16. (ECF No. 1-3, PageID #34 & #41.) That

ordinance is part of the Cleveland Heights Business Maintenance Code and bears the

title, “Registration of Business Structures by Out-of-County Owners.” Section

1369.16 is largely identical to Section 1351.34—with three substantive differences.

First, Section 1369.16 does not contain language stating that the registration must

reflect the owner’s and agent’s express agreement to appear in court and that the

agent’s testimony will bind the owner. That language appears only in Section

1351.34.

Second, as its title and placement suggest, Section 1369.16 applies to

out-of-county owners of “business structure[s], including . . . commercial, industrial[,]

or institutional structure[s].” (ECF No. 1-2, § 1369.16(a), PageID #31.) At the time

of the December 2020 amendment, however, Section 1369.16 described such business

structures as “dwellings.” (Id.) In its entirety, the relevant language appeared as

follows:

If a business structure, including without limitation a commercial,

industrial or institutional structure, located within the City is owned by

a person or persons, none of whom reside within Cuyahoga County, the

owner(s) of the dwelling structure, [within a certain timeframe], shall

register with the Commissioner of Buildings . . . and designate an

authorized agent for each structure.

(Id. (emphasis added).) In this ordinance, “‘[b]usiness’ means all uses or occupancies

other than residential.” Cleveland Heights Codified Ordinances § 1361.06.

Third, when the city council repealed the $100 registration fee for out-of-county

owners of residential dwellings in Section 1351.34, it left untouched the $100

registration fee in Section 1369.16. Therefore, after the December 2020 amendments,

Section 1369.16 continued to authorize collection of the fee from the owners to whom

it applied, but Section 1351.34 no longer did.

C. Reenactment of the Fee

On June 22, 2023, after the commencement of this litigation, the city council

restored the registration provision in Section 1351.34, including the $100 fee. (ECF

No. 43-4, PageID #939–40.) In doing so, the city council declared that “the December

2020 amendments were never intended to eliminate the long-standing requirement

that all out-of-county owners that are involved in the business of leasing dwelling

structures . . . must pay the same $100 registration fee that all other out-of-county

property owners must pay.” (Id., PageID #938.) Further, it characterized removal of

the fee in the December 2020 amendment as “duplicative of the $100 registration fee

set forth in Section 1369.16(c).” (Id.)

Also, the June 2023 amendment replaced the word “dwelling” in Section

1369.16(a) with the word “business.” (Id., PageID #939.) The city council

characterized that change as an effort “to clarify the legislative intent and to ensure

that all of the out-of-county registration requirements set forth in Sections 1351.34

and 1369.16 are the same.” (Id., PageID #938.) The city council did not make the

changes in these ordinances retroactive. (Id., PageID #940.)

STATEMENT OF THE CASE

Plaintiff Sole Houses, LLC owns rental homes in Cleveland Heights for which

the City assessed the $100 annual registration fee for out-of-county ownership. (ECF

No. 5, ¶¶ 7 & 9, PageID #56.) Plaintiff The Crossroads Group, LLC is the sole member

of Sole Houses. (Id., ¶ 7, PageID #56.) Plaintiff Andrew Strigle is a member of The

Crossroads Group. (Id., ¶ 8, PageID #56.)

On January 31, 2023, The Crossroads Group and Mr. Strigle sued the City of

Cleveland Heights, Ohio, and City employees Pamela Roessner and Gajane Zaharan.

(ECF No. 1.) On February 9, 2023, Plaintiffs amended their complaint as of right to

include Sole Houses as a Plaintiff. (ECF No. 5.) Plaintiffs challenge the $100 annual

registration fee for out-of-county owners of residential dwellings. Plaintiffs seek a

declaratory judgment, injunctive relief, and restitution based on alleged violations of

due process and equal protection under the Fourteenth Amendment, unconstitutional

conditions and takings under the Fifth and Fourteenth Amendments, and unjust

enrichment under State law.

Plaintiffs moved to certify a class of similarly situated owners of houses in

Cleveland Heights who do not reside in Cuyahoga County. (ECF No. 13.) The Court

granted in part Plaintiffs’ motion for class certification. (ECF No. 32.) Mindful of the

applicable limitations period, the Court certified the following class:

All individuals and businesses who own residential rental property in

the City of Cleveland Heights and, while residing outside of Cuyahoga

County, on or after January 31, 2021, paid to the City of Cleveland

Heights one or more $100 annual out-of-county owner registration fees.

(Id., PageID #803.) In certifying the class, the Court noted that Defendants

questioned the standing of The Crossroads Group and Mr. Strigle, who do not directly

own property in Cleveland Heights and did not directly pay the fee, and whether the

individual Defendants might be entitled to qualified immunity. (Id., PageID #779 &

#802–03.) However, the Court declined to decide those merits questions at the class

certification stage. (Id., 802 (citing Glazer v. Whirlpool Corp. (In re Whirlpool Corp.

Front-Loading Washer Prods. Liab. Litig.), 722 F.3d 838, 851 (6th Cir. 2013)).)

Following certification, notice was issued to class members (ECF No. 40; ECF

No. 44.) No member of the class opted out. (ECF No. 44, PageID #1027.)

After the close of discovery, Plaintiffs and Defendants filed cross-motions for

summary judgment. (ECF No. 43; ECF No. 46.) In the course of briefing, Plaintiffs

abandoned the following issues: (1) the standing of The Crossroads Group and

Mr. Strigle; (2) qualified immunity for the two individual Defendants; (3) whether

there is a private right of action to recover damages for violations of the Ohio

Constitution; and (4) their equitable claim for restitution based on a theory of unjust

enrichment under Ohio law. Therefore, the Court has no occasion to consider them

on their merits and GRANTS summary judgment in favor of Defendants on those

issues. See Everson v. Leis, 556 F.3d 484, 496 (6th Cir. 2009); Hicks v. Concorde

Career Coll., 449 F. App’x 484, 487 (6th Cir. 2011); see also Rugiero v. Nationstar

Mortg., LLC, 580 F. App’x 376, 378 (6th Cir. 2014); Scottsdale Ins. Co. v. Flowers, 513

F.3d 546, 553 (6th Cir. 2008).

ANALYSIS

Summary judgment is appropriate “if the movant shows that 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). On a motion for summary judgment, the Court

must view the evidence in the light most favorable to the non-moving party.

Kirilenko-Ison v. Board of Educ. of Danville Indep. Schs., 974 F.3d 652, 660 (6th Cir.

2020) (citing Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574,

587 (1986)).

The moving party has the initial burden of establishing that there are no

genuine issues of material fact as to an essential element of the claim or defense at

issue. Street v. J.C. Bradford & Co., 886 F.2d 1472, 1479–80 & n.12 (6th Cir. 1989);

Chappell v. City of Cleveland, 584 F. Supp. 2d 974, 988 (N.D. Ohio 2008). After

discovery, summary judgment is appropriate if the nonmoving party fails to establish

“an element essential to that party’s case and upon which that party will bear the

burden of proof at trial.” Tokmenko v. MetroHealth Sys., 488 F. Supp. 3d 571, 576

(N.D. Ohio 2020) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986)).

The Court’s function at this stage is not “to weigh the evidence and determine

the truth of the matter but to determine whether there is a genuine issue for trial.”

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). To determine whether a

genuine dispute about material facts exists, it is not the Court’s duty to search the

record; instead, the parties must bring those facts to the Court’s attention. See

Betkerur v. Aultman Hosp. Ass’n, 78 F.3d 1079, 1087 (6th Cir. 1996). “The party

seeking summary judgment has the initial burden of informing the court of the basis

for its motion” and identifying the portions of the record “which it believes

demonstrate the absence of a genuine issue of material fact.” Tokmenko, 488 F. Supp.

3d at 576 (citing Celotex Corp., 477 U.S. at 322). Then, the nonmoving party must

“set forth specific facts showing there is a genuine issue for trial.” Id. (citing

Anderson, 477 U.S. at 250). “When the moving party has carried its burden under

Rule 56(c), its opponent must do more than show there is some metaphysical doubt

as to the material facts.” Matsushita Elec. Indus. Co., 475 U.S. at 586.

“[W]here, as here, the parties filed cross-motions for summary judgment, ‘the

court must evaluate each party’s motion on its own merits, taking care in each

instance to draw all reasonable inferences against the party whose motion is under

consideration.’” McKay v. Federspiel, 823 F.3d 862, 866 (6th Cir. 2016) (quoting Taft

Broad. Co. v. United States, 929 F.2d 240, 248 (6th Cir. 1991)). Therefore,

cross-motions for summary judgment do not warrant granting summary judgment

unless one of the parties is entitled to judgment as a matter of law on facts that are

not genuinely disputed. Langston v. Charter Twp. of Redford, 623 F. App’x 749, 755

(6th Cir. 2015). Ultimately, the Court must determine “whether the evidence

presents a sufficient disagreement to require submission to a jury or whether it is so

one-sided that one party must prevail as a matter of law.” Anderson, 477 U.S. at 251.

I. January 31, 2021 to June 22, 2023

The parties agree that language authorizing collection of the $100 annual

registration fee did not appear in Section 1351.34, “Registration of Dwelling

Structure by Out-of-County Owners,” from January 31, 2021 (the beginning of the

class period) to June 22, 2023 (when the city council passed an amendment restoring

that provision to Section 1351.34). Because the presence of that authorizing language

changes the applicable legal analysis, the Court first examines the undisputed facts

before June 22, 2023.

Defendants rely on Section 1369.16 for the authority to collect the fee during

this period. Section 1351.34 and Section 1369.16 have parallels, but there are

important differences. Chapter 1351 is a part of the Cleveland Heights Housing

Code; Chapter 1369 is part of its Business Maintenance Code. (ECF No. 43-2; ECF

No. 43-3.) The title of Chapter 1351 is “Basic Standards for Residential Occupancy”;

the title of Chapter 1369 is “Basic Standards for Business Occupancy.” (ECF

No. 43-2, PageID #896; ECF No. 43-3; PageID #927.) Section 1351.34 is the

penultimate section of Chapter 1351; Section 1369.16 is the penultimate section of

Chapter 1369. (ECF No. 43-2, PageID #912; ECF No. 43-3, PageID #932.) The title

of Section 1351.34 is “Registration of Dwelling Structure by Out-of-County Owners”;

the title of Section 1369.16 is “Registration of Business Structures by Out-of-County

Owners.” (ECF No. 1-2.) Section 1351.34 applies “[i]f a dwelling structure located

within the City is owned by” out-of-county residents; Section 1369.16 applies “[i]f a

business structure, including without limitation a commercial, industrial or

institutional structure, located within the City is owned by” out-of-county residents.

(Id.) Section 1351.34 requires registration from “the owner(s) of the dwelling

structure”; Section 1369.16 requires registration from . . . “the owners(s) of the

dwelling structure.” (Id.) (emphasis added).

The use of the word “dwelling” in Section 1369.16 is odd. Plaintiffs surmise

that “the City copied and pasted its preexisting” language from Section 1351.34 and

mistakenly failed to change the word “dwelling” to “business.” (ECF No. 46, PageID

#1098.) Defendants argue that the use of the word “dwelling” in Section 1369.16

expands the reach of the ordinance from “commercial, industrial or institutional

structure[s]” to residential “dwelling structure[s]” or to dwellings that out-of-county

owners rent out, making them businesses. (ECF No. 48, PageID #1134.)

I.A. Interpretation of the Ordinance

“To interpret a state or municipal ordinance, federal courts look to see whether

state courts have spoken on the issue.” O’Neill v. Louisville/Jefferson Cnty. Metro

Gov’t, 662 F.3d 723, 728 (6th Cir. 2011) (quoting Gaughan v. City of Cleveland, 212

F. App’x 405, 409 (6th Cir. 2007)). Here, the parties identify no authority interpreting

Section 1369.16, and the Court has found none. “Where no state court has interpreted

the term at issue,” federal courts examine the text of the ordinance. Id. Words

undefined by the ordinance “should be interpreted according to their common

meaning and in reference to the context in which they appear.” Id.

Before its amendment in 2023, Section 1369.16(a) provided that, “[i]f a

business structure” met certain conditions, then “the owner(s) of the dwelling

structure” had to take certain actions. Business structures generally are not

dwellings. Nor are commercial or industrial structures. And it would be unnatural

in the same sentence to shift from regulating business structures to residential

dwellings, particularly in a chapter of the ordinances dedicated to the former:

If a business structure, including without limitation a commercial,

industrial or institutional structure, located within the City is owned by

a person or persons, none of whom reside within Cuyahoga County, the

owner(s) of the dwelling structure, [within a certain timeframe], shall

register with the Commissioner of Buildings . . . and designate an

authorized agent for each structure.

(See ECF No. 1-2, § 1369.16(a), PageID #31.) Using a definition of the term “business”

the excludes residences confirms that Section 1369.16 does not apply to residential

dwellings. See Cleveland Heights Codified Ordinances § 1361.06 (“‘Business’ means

all uses or occupancies other than residential.”). Likewise, as used in the Business

Maintenance Code where Section 1369.16 is located, the term “business” means “all

uses or occupancies other than residential.” Cleveland Heights Codified Ordinances

§ 1361.06 (emphasis added).

Tellingly, the Business Maintenance Code does not define the terms “dwelling”

or “dwelling structure.” But the Housing Code, which contains Section 1351.34, does.

It defines a “dwelling structure” as “a building or structure used or designed to be

used all or in part, for residential purposes.” Id. § 1341.10 (emphasis added). In other

words, the definitions of “business structure” and “dwelling structure” are mutually

exclusive, but pre-amendment Section 1369.16(a) regarding business structures at

one point uses the term “dwelling structure.” This is a classic scrivener’s error.

When amending the ordinance to correct this language in June 2023, the city

council attempted to reconcile these terms by characterizing owners of residential

rental properties as “those in the business of leasing dwelling structures.” (ECF

No. 43-4; PageID #938.) This face-saving effort fails on three fronts.

First, dwelling structures do not lose their residential character merely

because their residents are renters. See, e.g., Kinzel v. Ebner, 2020-Ohio-4165,

¶¶ 69–71, 157 N.E.3d 898 (Ohio Ct. App. 2020); Catawba Orchard Beach Ass’n, Inc.

v. Basinger, 115 Ohio App. 3d 402, 409, 685 N.E. 2d 584 (1996).

Second, even if a “business” includes “leasing dwelling structures,” the plain

language of the ordinance does not treat such a use as a business under the ordinance

in effect at the time. Defendants read the language “commercial, industrial or

institutional” structures (which are plainly not dwellings within any ordinary

meaning of the terms) out of the requirements of the ordinance. That is, their reading

narrows the ordinance such that only an out-of-county landlord in the business of

renting a dwelling had to register and designate an agent before the 2023

amendment. That result makes no sense and is not how the City or anyone else

treated the ordinance in practice.

Third, the structure of the ordinances confirms what the plain language and

natural reading suggest. The organization of the Cleveland Heights Codified

Ordinances clearly intends Section 1351.34 to govern rental dwelling structures and

Section 1369.16 to govern non-residential business structures. The code divides itself

into a “Housing Code” and a “Business Maintenance Code.” Within each, a chapter

establishes “Basic Standards” for “Occupancy.” And within each chapter, a largely

identical section requires registration from out-of-county owners—one for “dwelling”

structures and one for “business” structures. There is no definition for “dwelling” or

“dwelling structure” in the Business Maintenance Code, where Section 1369.16 is

located; those definitions are found in the Housing Code, where Section 1351.34 is

found. The Business Maintenance Code would be an odd place to look for the

requirements (and fees) for out-of-county owners of residential dwellings, even if

operated as a business. Similarly, there is no definition for the term “business” in the

Housing Code; only the Business Maintenance Code provides one. Reading Sections

1351.34 and 1369.16 as exclusively governing dwelling and business structures,

respectively, tracks this structure.

For these reasons, Defendants’ resort to the scrivener’s error in Section

1369.16 does not save it from invalidity as applied to the class members’ residential

rental properties. Section 1369.16 did not authorize the City to collect a $100 annual

registration fee from out-of-county owners of residential rental property. Before the

June 2023 amendments, neither did Section 1351.34. At bottom, Defendants’

argument based on Section 1369.16 amounts to an effort to find a legal basis for the

City’s actions. Such efforts have recently come into vogue, but the statutory language

does not support the City’s argument. Therefore, from the beginning of the class

period on January 31, 2021 through the amendment of Section 1351.34 on June 22,

2023, the City lacked a legal basis for the fee, making its collection arbitrary and

capricious.

I.B. Defenses Under Substantive Due Process

“Even if the City misinterpreted or misapplied the prior version of Section

1369.16(a),” Defendants argue that such a misinterpretation “does not give rise to a

substantive due process claim.” (ECF No. 48, PageID #1134.) Substantive due

process under the Fourteenth Amendment protects, among other interests, the “right

not to be subject to ‘arbitrary or capricious’ [government] action,” either “legislative

or administration action.” Johnson v. City of Saginaw, Mich., 980 F.3d 497, 513 (6th

Cir. 2020) (quoting Pearson v. City of Grand Blanc, 961 F.2d 1211, 1216 (6th Cir.

1992)). “Proving a violation of substantive due process requires not only that the

challenged state action was arbitrary and capricious, but also that the plaintiff has a

constitutionally protected property or liberty interest.” Johnson, 980 F.3d at 514.

Here, the parties do not dispute that class members have a property interest in the

money that Cleveland Heights collected. However, Defendants contend that an error

in the City’s interpretation or application of its own laws cannot amount to a

constitutional violation. Additionally, Defendants argue that the reference to

“dwelling structures” in pre-amendment Section 1369.16 provided a rational basis for

their interpretation of that provision. (ECF No. 48, PageID #1134–35.)

Assuming that substantive due process applies to a municipality’s

unauthorized collection of funds, Defendants’ arguments are unavailing.

I.B.1. Municipal Ordinances and Substantive Due Process

In support of their contention that misinterpretation of municipal ordinances

cannot give rise to substantive due process claims, Defendants cite two cases from

the Sixth Circuit. First, in Johnson, the plaintiff brought suit under Section 1983

against the city officials who turned off the water supply to a restaurant without

notice. 980 F.3d at 502. The district court denied qualified immunity on the

plaintiff’s substantive due process claim, in part because it concluded that the

ordinance authorizing disconnection of utilities did not apply. The defendants

appealed, and the Sixth Circuit ultimately affirmed the district court’s determination

that a constitutional violation occurred. However, the Sixth Circuit rejected the

district court’s reasoning, identifying no “controlling authority suggesting that the

simple misinterpretation and misapplication of a municipal ordinance constitutes a

violation of substantive due process” and listing cases where it had “rejected similar

arguments.” Id. at 514 & n.11.

The cases on which the Sixth Circuit drew for this proposition in its qualified

immunity analysis show that a violation of municipal or State law does not equate to

a constitutional violation. For example, in Lewellen v. Metropolitan Government of

Nashville & Davidson County, 34 F.3d 345, 351 (6th Cir. 1994), the court rejected the

substantive due process claim of a workman who was accidentally injured as a result

of construction code violations. And in Hutchison v. Marshall, 744 F.2d 44, 46 (6th

Cir. 1984), a habeas action, the court found no denial of constitutional due process

where Ohio courts erroneously interpreted the Ohio speedy trial statute. However,

Johnson did not hold that unconstitutional conduct cannot, as a matter of law, give

rise to a substantive due process claim where a misinterpretation or misapplication

of a local law results in a constitutional injury.

Second, Golf Village North, LLC v. City of Powell, Ohio, 42 F.4th 593 (6th Cir.

2022), confirms this reading of Johnson. There, the Sixth Circuit rejected the claim

that a substantive due process violation occurred where an official misinterpreted the

city’s own zoning ordinance. Id. at 602. Again, the court declined to elevate the

violation of a municipal ordinance to the status of a constitutional violation.

Here, the alleged constitutional violation at issue is not the City’s

misinterpretation of its own municipal ordinance. Rather, Plaintiffs claim that the

City’s collection of the out-of-county fee at issue violates class members’ constitutional

rights, both on its own terms and because the City repealed the fee but collected it

nonetheless. That is, the municipal ordinance did not create the right that Plaintiffs

seek to vindicate.

I.B.2. Rational Basis

Finally, Defendants argue in passing that the reference to “dwelling

structures” in Section 1369.16 provided a “rational basis for their interpretation” of

the ordinance. (ECF No. 48, PageID #1135.) Rational basis review requires

government action to be “rationally related to a legitimate government purpose.”

Liberty Coins, LLC v. Goodman, 748 F.3d 682, 694 (6th Cir. 2014.) In other words,

courts uphold governmental action under rational basis review where “its goal is

permissible and the means by which it is designed to achieve that goal are rational.”

Id. Defendants do not explain what legitimate governmental purpose or permissible

goal could be served by collecting money from private parties without legal authority

to do so. Nor is the Court able to conjure any. See Puckett v. Lexington-Fayette Urb.

Cnty. Gov’t, 833 F.3d 590, 608 (6th Cir. 2016).

To the extent that Defendants intended to argue that the Court should defer

to its interpretation of the ordinance because it was rational, any deference the Court

might “perhaps to some degree [afford] the interpretation of the [ordinance] given by

those charged with enforcing it” does not withstand the weight of textual and

structural evidence against Defendants’ interpretation. See O’Neill v. Louisville/

Jefferson Cnty. Metro Gov’t, 662 F.3d 723, 728–30 (6th Cir. 2011).

* * *

For the foregoing reasons, the Court determines that the City had no legal

basis for collecting the $100 annual fee from class members from the beginning of the

class period until the amendments restored the fee provision to Section 1351.34 on

June 22, 2023.

II. From June 22, 2023 to the End of the Class Period

On June 22, 2023, the Cleveland Heights city council restored the $100 annual

out-of-county registration requirement, which authorized the fee for any residential

rental property owned by a person residing outside Cuyahoga County. (ECF No. 43-4,

PageID #939–40.) The parties dispute the proper framework for analyzing whether

the fee constitutes a taking under the Fifth Amendment. Specifically, the parties

dispute whether the Court should apply the “unconstitutional-conditions” test for

land-use permits that the Supreme Court adopted in Nollan v. California Coastal

Commission, 483 U.S. 825 (1987), Dolan v. City of Tigard, 512 U.S. 374 (1994), and

Koontz v. St. Johns River Water Management, 570 U.S. 595 (2013).

“[T]he government may not deny a benefit to a person because he exercises a

constitutional right.” Regan v. Taxation With Representation of Wash., 461 U. S. 540,

545 (1983). Nollan and Dolan “involve a special application” of this doctrine that

protects the Fifth Amendment right to just compensation for the taking of private

property. Koontz, 570 U.S. at 604 (quoting Lingle v. Chevron U. S. A. Inc., 544 U.S.

528, 547 (2005)). “A primary objective of the Takings Clause is to prevent the

government ‘from forcing some people alone to bear public burdens which, in all

fairness and justice, should be borne by the public as a whole.’” Lifestyle Cmtys., Ltd.

v. City of Worthington, Ohio, ___ F.4th ___, No. 25-3048, 2026 WL 206210, at *3 (6th

Cir. Jan. 27, 2026) (quoting Armstrong v. United States, 364 U.S. 40, 49 (1960)).

II.A. User Fee

Defendants maintain that unconstitutional conditions doctrine does not apply

as a matter of law. In their view, the out-of-county registration fee is not a monetary

exaction subject to the unconstitutional conditions doctrine but a “user fee”

implemented under its police powers to offset the City’s costs of administering the

registration program. (ECF No. 43, PageID #864–74.)

A user fee is a “charge assessed for the use of a particular item or facility.”

Black’s Law Dictionary (12th ed. 2024); see United States v. Sperry Corp., 493 U.S.

52, 63 (1989) (explaining that user fees are “reimbursement of the cost of government

services”). A user fee is meant to be a “fair approximation” of the cost of the benefits

supplied by the government to the user. Massachusetts v. United States, 435 U.S.

444, 463 n.19 (1978). Because the user pays for a benefit received, user fees are not

a taking under the Fifth Amendment. Koontz, 570 U.S. at 615 (quoting Brown v.

Legal Found. of Wash., 538 U.S. 216, 243 n.2 (2003) (Scalia, J., dissenting)). However,

a government cannot “appropriate all, or most, of the award to itself and label[] the

booty as a user fee.” Sperry, 493 U.S. at 62 (citing Webb’s Fabulous Pharmacies, Inc.

v. Beckwith, 449 U.S. 155, 162–64) (1980)). Doing so would constitute a taking. Id.

Nothing in the record supports a determination that the out-of-county

registration fee is a user fee. Plaintiffs are not paying for a benefit received. Nor is

the City charging for one. Instead, as out-of-county landlords, Plaintiffs pay for the

same opportunity as in-county landlords to lease residential property in Cleveland

Heights. (ECF No. 43-2, PageID #890–91.) Indeed, by virtue of living outside

Cuyahoga County, Plaintiffs must pay an additional $100 fee without receiving any

additional benefit. Therefore, the registration fee more closely resembles a “booty”

that the City has labeled a user fee (though it does not use that label anywhere except

in its papers filed with the Court) or, in other words, a monetary exaction. Sperry,

493 U.S. at 62 (citing Webb’s, 449 U.S. at 162–64). Therefore, Defendants’ argument

that the out-of-county fee is a user fee is not well taken.

II.B. Unconstitutional Conditions

Recently, the Supreme Court ruled that its decisions in Nollan and Dolan

address potential abuses in the permitting process. Sheetz v. County of El Dorado,

Calif., 601 U.S. 267, 275 (2024). The Court reads Sheetz as applying “regardless of

whether the condition requires the landowner to relinquish property or requires her

to pay a ‘monetary exactio[n].’” Id. at 276 (quoting Koontz, 570 U.S. at 612–15). Other

analytical frameworks are underdeveloped in the courts or undertheorized. For these

reasons, the Court will analyze the fee at issue under Nollan and Dolan.

This framework requires that monetary exactions satisfy the nexus and rough

proportionality requirements of Nollan and Dolan. Koontz, 570 U.S. at 612. That is,

they must have (1) “an ‘essential nexus’ to the government’s land use-interest” and

(2) “‘rough proportionality’ to the development’s impact on the land-use interest.”

Sheetz, 601 U.S. at 275. The essential nexus requirement “ensures that the

government is acting to further its stated purpose, not leveraging its permitting

monopoly to exact private property without paying for it.” Id. Under the rough

proportionality requirement, a landowner is not required to pay “more than is

necessary to mitigate harms” from allowing the permit to be issued. Id. at 276. This

test applies equally to all branches of the government. Sheetz, 601 U.S. at 279.

II.B.1. Threshold Question

There is “an important threshold question to any application of Nollan/Dolan:

whether the exaction would be a compensable taking if imposed outside the

permitting context.” Sheetz, 601 U.S. at 280–81. “At the ‘first step,’ a court asks

whether the condition would qualify as a taking if the government had directly

required it.” Knight v. Metropolitan Gov’t of Nashville & Davidson Cnty., 67 F.4th

816, 825 (6th Cir. 2023) (citation omitted). Knight predated and, at least in some

respects, anticipated the Supreme Court’s subsequent decision in Sheetz. In Sheetz,

however, the Supreme Court did not adopt this threshold requirement. Therefore, it

is not clear whether this additional step in the analysis is required. The Court

proceeds on the assumption that it is.

The City argues that because it “has the police power to advance the public

health, safety, and welfare by directly imposing an out-of-county registration

requirement and related registration fee upon landlords, then the unconstitutional

conditions doctrine has not been violated.” (ECF No. 48, PageID #1113.) But an

obligation to spend money can provide the basis for a takings claim. Koontz, 570 U.S.

at 612. If not, then “it would be very easy for land-use permitting officials to evade

the limitations of Nollan and Dolan.” Id. While the government may tax and charge

user fees, where it exacts money from a landowner, it must satisfy the Nollan/Dolan

requirements and not simply act pursuant to its police powers, as Defendants

contend.

Here, there is a direct link between the registration fee and specific properties

just as there was a direct link between the government’s demand for money and a

specific parcel of real property in Koontz. This link between the out-of-county

registration fee and the issuance of a permit implicates the “central concern” of

Nollan and Dolan. There is a risk that the City may use its substantial power and

discretion in land-use permitting to pursue governmental ends that lack an essential

nexus to the governmental interest and rough proportionality to the property’s

impact. Id. at 614. Accordingly, assuming this threshold requirement in the Sixth

Circuit’s decision in Knight retains its viability after Sheetz, the Court examines

whether the out-of-county registration fee satisfies the Nollan/Dolan essential nexus

and rough proportionality test.

II.B.2. Essential Nexus

The City contends that “there is an ‘essential nexus’ between a ‘legitimate state

interest and the $100 registration fee” because (1) the City “has a valid and legitimate

state interest in having out-of-county landlords designate a local agent to receive

service of process and notices of violation” and (2) the City “may impose a reasonable

fee to offset the costs of advancing a city’s public safety and welfare interests.” (ECF

No. 48, PageID #1126.)

On summary judgment, the record does not provide evidence supporting an

essential nexus between the City’s interest and the $100 fee imposed on out-of-county

landlords. To obtain a certificate of occupancy, Section 1347.03 of the Housing Code

requires those who own residential rental property in Cleveland Heights to provide

the “name, address telephone number, and email address of the agent or person in

charge of the property” and of “the resident in charge of the building or structure, and

the name, address[,] telephone number, and email address of the nonresident agent,

if any, if the owner does not reside on the premises.” (ECF No. 43-2, PageID #890.)

This requirement applies without regard to whether the person who owns a

residential rental structure resides inside or outside Cuyahoga County.

But out-of-county landlords are required to provide substantially the same

information a second time. (Id., PageID #912.) Under Section 1351.34, out-of-county

landlords must designate an “authorized agent” who “maintains a physical office with

a street address in Cuyahoga County, Ohio, or who resides in Cuyahoga County” and

“include the name and address of the designated agent.” (Id.) This ordinance

requires that the out-of-county landlord only provide a name and address for the

authorized agent. (Id.) In contrast, to obtain a certificate of occupancy, the City

already receives a name, address, telephone number, and email address for the

resident in charge or nonresident agent. (ECF No. 43-2, PageID #890.) In some cases,

then, the City already has the information. When it does not, this additional

requirement for out-of-county owners requires less information, limiting the ways

that the City can contact the designated authorized agent. Put another way, the

information obtained through the additional registration requirement makes little

material difference because it does not fundamentally change the City’s ability to

obtain the information from the initial certificate of occupancy with little to no

additional burden.

The City maintains that the out-of-county registration fee offsets the cost of

“advancing the City’s public and safety welfare interests.” (ECF No. 48, PageID

#1126 (citing Dolan, 512 U.S. at 386–87).) However, the record provides no support

for this argument. Indeed, the record shows that the City does not track the costs

associated with properties that are owned by out-of-county landlords. (ECF No. 24-1,

PageID #460; ECF No. 24-2, PageID #467 & #469; ECF No. 45-1, PageID #1034–36.)

To the extent the City relies on the housing impact study in the record to

support the need for an out-of-county registration requirement (ECF No. 43-8), that

report did not study Cleveland Heights specifically or even mention the City. Instead,

it reviews rental properties throughout Cuyahoga County. Therefore, the study

provides no evidence justifying the fee at issue in this case. What the record does

show is that the City did not have a problem contacting property owners residing

outside of Cuyahoga County to provide them with a certificate of registration or

contact them to pay the required fee using the information on file. (ECF No. 23-1;

ECF No. 24-1.)

Following oral argument, Defendants offered a new justification for the out-of-

county fee and registration requirement in Section 1354.34. In a supplemental brief

Defendants filed on their own initiative, the City argues that designating a local

agent “advances the goal of ensuring that the Cuyahoga County Sheriff can effectuate

personal service upon the defendant via a natural person who is located within the

Cuyahoga County Sheriff’s territorial jurisdiction.” (ECF No. 55, PageID #1175.) But

Ohio law provides multiple methods of service, such as certified mail, which do not

require personal service. See Ohio R. Civ. P. 4.1. Cleveland Heights already employs

these methods. See Cleveland Hts. Codified Ordinances § 1345.03(a) & (b). In any

event, the record contains no evidence that the City ever considered this justification

until it filed its brief after oral argument. No meeting minutes, deposition transcript,

or response to written discovery includes this justification for the fee at issue. Nor

did the City advance it in its summary judgment papers.

II.B.3. Rough Proportionality

Defendants argue that the $100 out-of-county registration fee satisfies the

requirement for rough proportionality because “it was set by City Council based upon

a reasonable ‘estimate’ of the approximate cost of processing out-of-county

registration applications and enforcing the out-of-county registration requirement.”

(ECF No. 48, PageID #1126.) Courts do not rigorously require equivalence between

the exaction and the costs or externalities it seeks to offset. Sperry, 493 U.S. at 60.

Still, the record in this case contains no evidence about the administrative or

enforcement costs that the fee purportedly seeks to mitigate. Indeed, the City does

not track such data. (ECF No. 24-1, PageID #460; ECF No. 24-2, PageID #467 &

#469; ECF No. 45-1, PageID #1034–36.) Nor does the record contain evidence that

out-of-county owners of residential rental structures create negative externalities or

burdens for the City. Again, the City does not track whether a property owner which

fails to maintain the condition of its rental property resides inside or outside

Cuyahoga County. (ECF No. 45-1, PageID #1034.) Accordingly, the City does not

know whether out-of-county landlords increase costs for the City that must be offset

by an additional registration fee. Put another way, the record contains no evidence

that would allow the Court to undertake rough proportionality analysis under any

standard.

CONCLUSION

For these reasons, the $100 out-of-county registration fee does not satisfy the

essential nexus and rough proportionality requirements of Nollan and Dolan.

Accordingly, this monetary exaction since its reenactment on June 22, 2023

constitutes a taking without just compensation under the Fifth Amendment, made

applicable to the City by the Fourteenth Amendment. See Cedar Point Nursery v.

Hassid, 594 U.S. 139, 147 (2021). With that determination, the Court has no need

to address Plaintiffs’ remaining constitutional claims. Therefore, the Court

GRANTS IN PART Plaintiffs’ motion for summary judgment (ECF No. 43) and

GRANTS IN PART AND DENIES IN PART Defendant’s motion for summary

judgment (ECF No. 46).

SO ORDERED.

Dated: January 29, 2026

J. Philip Calabrese

United States District Judge

Northern District of Ohio

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