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Gulf Shores Properties, LLC v. City of Waveland

United States District Court, S.D. Mississippi, Southern Division

January 25, 2018




         BEFORE THE COURT is the Motion [45] to Dismiss Plaintiffs' Second Amended Complaint filed by Defendants/Counter-Plaintiffs the Board of Mayor and Aldermen of the City of Waveland, Mississippi, and the City of Waveland, Mississippi (“Waveland” or “the City”). Plaintiffs/Counter-Defendants in this litigation are Gulf Shore Properties, LLC, Oak Park Mississippi Properties, LLC, Waveland Properties, LLC, and Michael Brown[1] (collectively, “Gulf Shore”). Gulf Shore's Second Amended Complaint advances several claims against Waveland arising from Waveland's water ordinance and charges for water usage.

         Waveland seeks dismissal on grounds that the applicable statutes of limitations bar Gulf Shore's claims. Waveland also contends that it is immune from Gulf Shore's unjust enrichment claim under state law and that Gulf Shore fails to state a procedural due process claim upon which relief can be granted. Based upon its review of the record and relevant legal authority, the Court finds that Waveland's Motion [45] should be granted in part as to Gulf Shore's claim for violation of procedural due process and denied in part as to Gulf Shore's remaining claims.

         I. BACKGROUND

         A. Gulf Shore's Factual Allegations

         According to the Second Amended Complaint and attached exhibit, Gulf Shore purchased two apartment complexes within the City of Waveland, Mississippi, in 2011. Not. of Claim [28-1] at 1. When Gulf Shore took possession of the properties, it began utilizing the City of Waveland's water service. Id. Gulf Shore alleges that since the date of purchase of the complexes, it has been charged excessive and incorrect monthly rates for water service. Id. at 2. Waveland assesses Gulf Shore fees based on an estimated monthly usage rate that is much higher than the actual usage. Id. at 2-3. The monthly statement includes a charge for wastewater disposal, which Gulf Shore claims Waveland does not have the authority to collect. Id. at 2.

         Late fees and charges incurred by the previous owner of the complexes have also been allegedly included in Gulf Shore's water bill. Id. at 2. Gulf Shore further complains that monthly statements regularly include charges for improperly computed late fees, and late fees upon late fees, which compounds the charges. Id. Gulf Shore asserts that on several occasions, it submitted checks for payment of the water bills, but Waveland did not properly credit these checks, resulting in improper imposition of late fees. Id. at 5. A Notice of Claim, which is attached as an exhibit to the Second Amended Complaint, contends that these injuries occurred “[b]etween February 28, 2011 and June 6, 2016.” Id.

         On November 16, 2016, Waveland held a meeting of its Board of Aldermen to vote on and ultimately approve an amended water and sewer ordinance, Ordinance #371, which purportedly affected Gulf Shore's rights. Second Am. Compl. [28] at 6. Gulf Shore claims that Waveland failed to provide Gulf Shore with notice that Ordinance #371 had been placed on the agenda for the Board's consideration at this meeting. Id. Waveland was allegedly aware of Gulf Shore's concerns about the water rates and fees because the parties were regularly communicating with each other regarding Waveland's practices and ordinances. Id.

         B. Procedural History

         On June 23, 2016, Gulf Shore submitted a Notice of Claim[2] “pursuant to the provisions of the Mississippi Tort Claims Act, ” alleging that Waveland had excessively and improperly charged Gulf Shore. Not. of Claim [28-1]. No. action was taken on the Notice of Claim, Second. Am. Compl. [28] at 2, following which Gulf Shore filed a Complaint in the Circuit Court of Hancock County, Mississippi, on November 3, 2016, Compl. [1-1] at 24. On November 17, 2016, Gulf Shore filed an Amended Complaint. Am. Compl. [1-1] at 4. Waveland removed the case to this Court on December 16, 2016, on grounds of both diversity and federal question jurisdiction. Not. of Removal [1-1] at 1-2. Gulf Shore filed the Second Amended Complaint on April 25, 2017. Second Am. Compl. [28].

         The Second Amended Complaint alleges seven counts against Waveland. Count I seeks a declaration that Waveland: 1) is assessing an unlawful tax against Gulf Shore, or, alternatively, is assessing water and sewer rates and fees in violation of state law; 2) is in breach of its contract with Gulf Shore; 3) is violating Gulf Shore's equal protection rights by failing to categorize water and sewer users fairly; and 4) is violating Gulf Shore's due process rights. Id. at 7-8.

         Gulf Shore brings two claims pursuant to 42 U.S.C. § 1983 in Counts II and III. Gulf Shore brings a due process claim in Count II, and complains that Waveland deprived Gulf Shore of procedural and substantive due process by withholding notice of the City's consideration of changes to the ordinance at the Board meeting and by then amending the ordinance. Second Am. Compl. [28] at 8-9. Count III claims that Waveland violated Gulf Shore's equal protection rights by imposing water and sewer charges based on discriminatory, unfair, arbitrary, and/or capricious factors. Id. at 9-10.

         Count IV alleges that Waveland breached its contracts with Gulf Shore by charging rates and fees inconsistent with City ordinances. Id. at 10. Count V raises a tort claim for ultra vires conduct, claiming that Waveland violated state law by levying an impermissible tax disguised as a fee or, alternatively, by charging rates that are unreasonable and unfairly applied, exceeding Waveland's authority. Id. at 10-11. Count VI sets forth an unjust enrichment claim for Waveland continuing to retain monies Gulf Shore has paid, even though Waveland illegally charged rates and fees. Id. at 11-12. Lastly, Count VII claims that Waveland's water and sewer ordinance is unconstitutionally vague as written and as applied. Id. at 12.

         Pursuant to Federal Rule of Civil Procedure 12(b)(6), Waveland now moves to dismiss the Second Amended Complaint, raising three main arguments. Mot. [45]. Waveland first contends that Gulf Shore's claims are all time-barred by the relevant statutes of limitations. Defs.' Mem. [46] at 4. Waveland posits that the claims accrued in 2011 as indicated by the Notice of Claim and that Gulf Shore failed to file suit within the applicable three- and one-year statutes of limitations. Id. at 5-6.

         In the alternative, Waveland argues that some of Gulf Shore's claims are due to be dismissed on their merits under a Rule 12(b)(6) standard. Specifically, Waveland asserts that it is immune from Gulf Shore's unjust enrichment claim under state law. Id. at 6. Next, Waveland maintains that Gulf Shore's procedural due process claim fails to state a claim upon which relief can be granted, on grounds that Gulf Shore was not entitled to notice of Waveland's adoption of the new water ordinance because procedural due process requirements do not apply to legislative functions, and because Gulf Shore failed to file its statutorily required appeal to state court to oppose the adoption of Ordinance #371. Id. at 7-8. Waveland offers no other Rule 12(b)(6) arguments, beyond the statutes of limitations defense, as to Gulf Shore's remaining claims.

         Gulf Shore responds that except for its due process claim, all claims arise from Waveland's repeated, continuous, and ongoing improper billing; therefore, the continuing tort doctrine tolled the statutes of limitations. Pls.' Mem. [51] at 5. Gulf Shore asserts that the Mississippi Tort Claims Act (“MTCA”) waives Waveland's immunity for its unjust enrichment claim. Id. at 8. Regarding the lack of notice of Waveland's adoption of Ordinance #371, Gulf Shore counters that utility ratepayers have a recognized property interest in proceedings related to utility rates, thus triggering procedural due process rights. Id. at 11. Gulf Shore further maintains that there is no requirement to exhaust state remedies in order to bring a claim under 42 U.S.C. § 1983. Id. at 12. Waveland argues in its Reply that the continuing tort doctrine does not apply against governmental entities. Reply [52] at 2.


         A. Legal Standard

         When presented with a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), a court “must assess whether the complaint contains sufficient factual matter, accepted as true, to state a claim for relief that is plausible on its face[.]” Spitzberg v. Houston Am. Energy Corp., 758 F.3d 676, 683 (5th Cir. 2014) (citing Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A court must accept all well-pleaded facts as true and view those facts in the light most favorable to the plaintiff. Varela v. Gonzales, 773 F.3d 704, 707 (5th Cir. 2014) (citation omitted). This tenet, however, is inapplicable to legal conclusions. Id. (citation omitted). “A statute of limitations may support dismissal under Rule 12(b)(6) where it is evident from the plaintiff's pleadings that the action is barred and the pleadings fail to raise some basis for tolling or the like.” Jones v. Alcoa, Inc., 339 F.3d 359, 366 (5th Cir. 2003).

         B. Whether the Pertinent Statutes of Limitations Bar ...

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