Filed: Apr. 29, 1998
Latest Update: Mar. 02, 2020
Summary: UNITED STATES COURT OF APPEALS FIFTH CIRCUIT _ No. 96-50837 _ HIDDEN OAKS LIMITED, ET AL Plaintiffs HIDDEN OAKS LIMITED Plaintiff - Appellee-Cross-Appellant, versus THE CITY OF AUSTIN, Defendant - Appellant-Cross-Appellee. Appeals from the United States District Court for the Western District of Texas April 29, 1998 Before JOHN R. GIBSON*, JOLLY, and EMILIO M. GARZA, Circuit Judges. EMILIO M. GARZA, Circuit Judge: Hidden Oaks Limited (“Hidden Oaks”) and the City of Austin (the “City”) cross-appe
Summary: UNITED STATES COURT OF APPEALS FIFTH CIRCUIT _ No. 96-50837 _ HIDDEN OAKS LIMITED, ET AL Plaintiffs HIDDEN OAKS LIMITED Plaintiff - Appellee-Cross-Appellant, versus THE CITY OF AUSTIN, Defendant - Appellant-Cross-Appellee. Appeals from the United States District Court for the Western District of Texas April 29, 1998 Before JOHN R. GIBSON*, JOLLY, and EMILIO M. GARZA, Circuit Judges. EMILIO M. GARZA, Circuit Judge: Hidden Oaks Limited (“Hidden Oaks”) and the City of Austin (the “City”) cross-appea..
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UNITED STATES COURT OF APPEALS
FIFTH CIRCUIT
____________
No. 96-50837
____________
HIDDEN OAKS LIMITED, ET AL
Plaintiffs
HIDDEN OAKS LIMITED
Plaintiff - Appellee-Cross-Appellant,
versus
THE CITY OF AUSTIN,
Defendant - Appellant-Cross-Appellee.
Appeals from the United States District Court
for the Western District of Texas
April 29, 1998
Before JOHN R. GIBSON*, JOLLY, and EMILIO M. GARZA, Circuit Judges.
EMILIO M. GARZA, Circuit Judge:
Hidden Oaks Limited (“Hidden Oaks”) and the City of Austin
(the “City”) cross-appeal the district court’s entry of judgment
for Hidden Oaks on claims of breach of contract and procedural due
process, its dismissal of Hidden Oaks’ substantive due process and
takings claims, and its award of $115,000 in attorney’s fees to
Hidden Oaks. We affirm in part, reverse and vacate in part, and
remand.
*
Circuit Judge of the Eighth Circuit, sitting by designation.
I
Hidden Oaks owns Stoneridge Apartments (“Stoneridge”), an
eight-building, 137-unit complex located in Austin, Texas. In
August 1994, the City served on Hidden Oaks eight written Notices
of Violation (one for each of the complex’s buildings) asserting
that Stoneridge failed to comply with certain provisions of the
City Uniform Housing Code (“housing code” or “code”).
Specifically, the City alleged that some of the windows in
Stoneridge were not large enough to serve as exit routes in case of
a fire and also that certain exterior structures such as balconies
and walkways were rotting and in need of repair. The notices
advised that if Hidden Oaks “disagree[d] with these findings, [it]
ha[d] appeal rights as set forth in the Housing Code,” which stated
that “[a]ny person affected by any notice of substandard violations
may request and shall be granted an appeal and hearing before the
Building and Standards Commission.”
The notices also threatened that as long as Stoneridge
remained in violation of the code, the City “reserve[d] the right
to place a hold on all utilities,” meaning that once the current
tenant moved out of a unit, the new tenant could not reconnect
utility service. The notices did not specify the circumstances
under which the City would exercise its right to impose a utility
hold on a property, but the City’s deputy building official, Stuart
Hersch, testified at trial that his inspectors generally made these
determinations based on factors such as the owner’s overall
cooperativeness and willingness to make repairs.
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The parties produced conflicting evidence at trial as to
whether the City provided any way to appeal a building inspector’s
imposition of a hold, separate and apart from the appeal procedure
provided to challenge an inspector’s citation of a property as
substandard. The City argued that even an owner who admitted the
presence of code violations could appeal to the Building and
Standards Commission (the “Commission”), seeking a reprieve or
variance from the imposition of a hold——just as the building
inspector in the first instance might find code violations and yet
refrain from placing the hold at all. Hidden Oaks, on the other
hand, claimed that the City entrusted its building inspectors with
final, unreviewable authority over which substandard buildings
would suffer holds and which would not.
In any event, the parties did not dispute that the Commission
routinely heard appeals related to the correctness of the building
inspector’s citations, i.e., the Notices of Violation. Indeed,
shortly after receiving the notices at issue here, Hidden Oaks
filed an appeal with the Commission, asserting that “our 30-year-
old apartment complex meets the requirements” for egress windows
and “retrofitting of buildings would not achieve a significant
life/safety improvement and would place an undue financial hardship
on [the] owner.” Hidden Oaks did not appeal the citations of the
building inspector regarding the condition of the balconies and
walkways, nor did Hidden Oaks petition the Commission for a
reprieve from the threatened holds.
Prior to the hearing on Hidden Oaks’ appeal, Hersch, along
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with another employee of the City, Terri Hasbrook, set up a meeting
with Chip McLelland, an employee of Hidden Oaks, to discuss Hidden
Oaks’ pending appeal. During the meeting, McLelland expressed his
desire to cooperate fully with the City and avoid the imposition of
utility holds. The City, for its part, suggested that it might
provide some fire-safety-related alternatives for Stoneridge,
rather than insisting that Hidden Oaks essentially tear down the
complex to expand the size of every window.
At the end of the meeting, McLelland asked Hersch to “put
[their agreement] in writing.” Hersch suggested instead that
McLelland draft a letter, which Hersch then would approve.
McLelland sent the letter several days later, stating that Hidden
Oaks was “requesting a postponement of [their] appeals to the
Board,” and setting forth a proposal by which Hidden Oaks would
install “hard wired smoke detector[s] with battery back-up[s] in
each unit which has deficient egress” and “electronically
interconnect smoke detectors in each sleeping room [of the] multi-
bedroom units.” In closing, McLelland noted: “I believe this
[proposal] addresses the major safety concerns expressed by your
Code Enforcement inspector and along with the now completed
electrical repairs, removed sign wiring, and the progress being
made on A/C platform repair, will avoid any further necessity of
threatened utility holds.” Hersch wrote “approved” in one corner,
along with his signature, and placed the letter in Hidden Oaks’
file.
Shortly after sending the letter (“September 1994 letter
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agreement”), Hidden Oaks learned that the City in fact had placed
a utility hold on Stoneridge, contrary to Hidden Oaks’
understanding of the meeting with Hersch and the subsequent
September 1994 letter agreement. Following this discovery, Hidden
Oaks continued to negotiate with the City for the removal of the
hold, but the City did not release the last unit in Stoneridge
until February 1996.1
Hidden Oaks filed this suit in December 1995, alleging breach
of contract, violation of the Fifth Amendment takings clause, and
violation of various sections of the Texas Local Government Code.
The district court dismissed the Fifth Amendment takings claim as
unripe, and Hidden Oaks subsequently amended its complaint to
include an inverse condemnation claim under Article I, § 17 of the
Texas Constitution as well as several federal claims for violations
of substantive and procedural due process. The case proceeded to
trial in late September 1996. At the close of Hidden Oaks’
presentation of evidence, the district court dismissed the
substantive due process and inverse condemnation claims, finding
that the City’s actions were “rationally related to . . .
protect[ing] [the] health and safety of citizens” and that “under
the law, [the City] can’t be unreasonable when they are enforcing
safety and health codes.”
The jury responded to interrogatories on the breach of
contract and procedural due process claims, finding for Hidden Oaks
1
Although the City placed the original hold on the entire
complex, releases occurred first on a building-by-building and then
eventually on a unit-by-unit basis.
-5-
in both instances. The jury awarded damages of $231,089 and
attorney’s fees of $115,000 for the breach of contract claim, and
nominal damages of $1 for the procedural due process violation.
The district court entered judgment for a total sum of $346,090
plus interest and costs, and denied both parties’ requests for
attorney’s fees pursuant to 42 U.S.C. § 1988. Both the City and
Hidden Oaks filed timely appeals.
II
Before trial, the district court dismissed Hidden Oaks’
federal takings claim for lack of jurisdiction, relying on the two-
prong ripeness test of Williamson County Reg’l Planning Comm’n v.
Hamilton Bank, 473 U.S. 172, 186, 195,
105 S. Ct. 3108, 3116, 3121,
87 L. Ed. 2d 126 (1985) (holding that claims for compensation under
the Fifth Amendment takings clause are not ripe until (1) the
relevant governmental unit has reached a final decision as to what
will be done with the property and (2) the plaintiff has sought
compensation for the alleged taking through whatever adequate
procedures the state provides). We review jurisdictional
determinations de novo and are free to consider all issues relevant
to that inquiry, even those not addressed by the district court.
See Samaad v. City of Dallas,
940 F.2d 925, 934 (5th Cir. 1991)
(noting that the ripeness analysis of Williamson County “is a
jurisdictional requirement that cannot be waived”).
Here, the district court held that Hidden Oaks failed to
satisfy the first prong of Williamson——requiring that the City
“arrive[] at a final, definitive position regarding how it will
-6-
apply the regulations at issue to the particular land in
question”——because Hidden Oaks failed to petition the Commission
for a reprieve or “variance” from the building inspector’s decision
to impose a utility hold on Stoneridge. Williamson, 473 U.S. at
188, 105 S. Ct. at 3117 (holding federal takings claim unripe
because respondent did not seek variances that would have allowed
it to develop the property, notwithstanding the commission’s
finding that the plan as submitted did not comply with the relevant
regulations). Hidden Oaks disputes that the Commission would even
entertain such a variance petition, and urges that we reverse the
district court’s dismissal as based on the clearly erroneous
factual conclusion that such variance procedures were in fact
available.
We need not resolve this factual dispute,2 particularly in
light of Hidden Oaks’ failure to follow through with any formal
process of appeal. Both parties agree that regardless of whether
the Commission would hear a request for a reprieve or variance from
2
In its order of April 8, 1996, dismissing Hidden Oaks’
federal takings claim for lack of jurisdiction, the district court
resolved this factual dispute by explicitly crediting the affidavit
of Stuart Hersch, the City’s deputy building official, for the
proposition that “utility holds may be appealed to the Building and
Standards Commission.” Subsequent events at trial, however, raised
serious questions regarding Hersch’s credibility. At the close of
Hidden Oaks’ presentation of evidence, the district court expressed
concern over the fact that “[w]e have disputed evidence as to
whether or not there is in effect any appeal with regard to the
utility hold.” At that point, even the City agreed that the
factual question of whether the City provided an appeal on that
issue was disputed and in need of resolution by the jury. For
various reasons not relevant here, this issue never reached the
jury, ostensibly leaving the district court’s April 1996 order of
dismissal as the final factual determination regarding what methods
of appeal the City provided.
-7-
a utility hold, the Commission certainly would hear claims that a
hold had been wrongfully imposed, i.e., that the building in
question was not substandard. To the extent that Hidden Oaks
disputes the City’s characterization of Stoneridge as substandard
or dangerous, this route of appeal offers a relevant form of review
that Hidden Oaks admittedly abandoned, mandating that we dismiss
for lack of jurisdiction under Williamson.3 To the extent that
Hidden Oaks claims to have admitted the presence of certain
dangerous conditions, making this route of appeal irrelevant, it
has no cause of action under the Fifth Amendment. See United
States v. Locke, 471 U.S. 84, 107,
105 S. Ct. 1785, 1799,
85 L. Ed.
2d 64 (1985) (“Regulation of property rights does not ‘take’
private property when an individual’s reasonable, investment-backed
expectations can continue to be realized as long as he complies
with reasonable regulatory restrictions the legislature has
imposed.”); Texaco, Inc. v. Short,
454 U.S. 516, 530,
102 S. Ct.
781, 792,
70 L. Ed. 2d 738 (1982) (“[T]his Court has never required
3
In its brief to this court, Hidden Oaks attempts to evade
the issue of ripeness by recharacterizing its allegations as
fitting within the “temporary takings” analysis of First
Evangelical Lutheran Church v. County of Los Angeles, 482 U.S. 304,
107 S. Ct. 2378,
96 L. Ed. 2d 250 (1987). Hidden Oaks points out
that the City lifted the last holds on Stoneridge in February 1996,
several months after Hidden Oaks filed its complaint, and we
therefore now know exactly what has been done with the property.
This argument ignores the well-settled rule that jurisdiction “is
determined at the outset of the suit,” based on the allegations of
the plaintiff’s complaint. Mobil Oil Corp. v. Kelley,
493 F.2d
784, 786 (5th Cir. 1974). See also
Williamson, 473 U.S. at 183
n.7,
194, 105 S. Ct. at 3115 n.7, 3120 (finding respondent’s claim
unripe despite recognizing that during the pendency of the appeal,
the parties reached an agreement as to how Williamson County would
permit the Bank to develop its property).
-8-
the State to compensate the owner for the consequences of his own
neglect.”). Consequently, we hold that the district court did not
err in dismissing Hidden Oaks’ federal takings claim.
III
At the close of Hidden Oaks’ presentation of evidence, the
district court granted the City’s motion for judgment as a matter
of law with respect to Hidden Oaks’ claim for inverse condemnation
under Article I, § 17 of the Texas Constitution. Finding as a
matter of law that Hidden Oaks could demonstrate neither “actual
physical appropriation” of its property, nor “unreasonable
interference” with its use, the district court noted that “the City
can’t be unreasonable when they are enforcing safety and health
codes.” See generally Town of Sunnyvale v. Mayhew, 905 S.W.2d 234,
259 (Tex. 1995) (holding that a “taking” for purposes of a claim
for inverse condemnation under Article I, § 17 can be “either a
physical appropriation of the property or an unreasonable [i.e.,
arbitrary] interference with the landowner’s right to use and enjoy
his property”).
We review the district court’s grant of a motion for judgment
as a matter of law de novo. See Murray v. Red Kap Indus., Inc.,
124 F.3d 695, 697 (5th Cir. 1997). To the extent that our review
requires consideration of the evidence introduced by the parties,
as opposed to pure questions of law, we apply “the same standard as
the district court,” considering “[a]ll evidence with all
reasonable inferences in the light most favorable to the non-moving
party.” Gutierrez v. Excel Corp.,
106 F.3d 683, 686 (5th Cir.
-9-
1997). We affirm “if the facts and inferences point so strongly
and overwhelmingly in favor of one party that no reasonable juror
could arrive at a verdict contrary to the district court's
conclusion.” Id. We reverse if we find “substantial evidence” upon
which “reasonable jurors might reach different conclusions.”
Id.
In urging reversal of the district court’s judgment, Hidden
Oaks relies primarily on the federal takings analysis conducted by
the Supreme Court in Lucas v. South Carolina Coastal Council,
505
U.S. 1003, 1028,
112 S. Ct. 2886, 2900,
120 L. Ed. 2d 798 (1992)
(finding a compensable taking even assuming arguendo that the state
acted to protect the public health and safety). In this state-law
context, we find Lucas to be of doubtful relevance. See, e.g.,
Palacios Seafood, Inc. v. Piling, Inc.,
888 F.2d 1509, 1513 (5th
Cir. 1989) (noting differences between Article I, § 17 of the Texas
constitution and the federal Fifth Amendment). Moreover, even to
the extent that Hidden Oaks relies on more relevant state-law
standards, we find no evidence in the record to support any legally
colorable argument for an inverse condemnation.
At various stages of the proceedings below, Hidden Oaks argued
alternatively that the district court should find an inverse
condemnation because (1) as a matter of law, utility holds are not
related to health and safety; (2) as a matter of law, utility holds
should be placed only for reasons related to the safety of
providing utilities; and (3) factually, the City placed and/or kept
holds on units in Stoneridge that were admittedly up to code.
The first and second of these arguments merit little
-10-
discussion. As a matter of law, placing utility holds on
substandard property qualifies as a reasonable, non-arbitrary
decision designed to accomplish the “legitimate goal” of keeping
substandard housing unoccupied. See Nash v. City of Lubbock, 888
S.W.2d 557, 562-63 (Tex. App. 1994, no writ) (finding no
compensable violation of due process in city’s demolition of
substandard buildings); City of Lubbock v. Corbin,
942 S.W.2d 14,
22 (Tex. App. 1996, writ denied) (finding that “it was not
unreasonable” to refer even a newly constructed home to the Housing
Standards Commission for possible demolition); cf. Camara v.
Municipal Court of San Francisco,
387 U.S. 523, 535, 537,
87 S. Ct.
1727, 1734, 1735,
18 L. Ed. 2d 930 (1967) (upholding “the police
power of municipalities to impose and enforce . . . minimum
standards even upon existing structures” and noting that “the
public interest demands that all dangerous conditions be prevented
or abated”).
Hidden Oaks argues in response that utility holds cannot be
“reasonably related” to health and safety because they do not
immediately protect the current tenant from the allegedly
substandard conditions, and because a landlord may avoid the impact
altogether by placing utilities in its own name. Yet simply
demonstrating that a particular regulation is imperfectly adapted
to its end, or contains loopholes through which one might avoid the
desired impact, does not mean that the mechanism is unreasonable,
or, more to the point, arbitrary. See Hunt v. City of San Antonio,
462 S.W.2d 536, 539 (Tex. 1971) (“If reasonable minds may differ as
-11-
to whether or not a particular . . . ordinance has a substantial
relationship to the public health, safety, morals, or general
welfare . . . the ordinance must stand as a valid exercise of the
city’s police power.”); Webb v. Dameron, 219 S.W.2d 581, 584 (Tex.
Civ. App. 1949, writ ref’d n.r.e.) (“Action is not arbitrary or
capricious when exercised honestly and upon due consideration,
where there is room for two opinions, however much it may be
believed that an erroneous conclusion was reached.”) (quoting In re
Persons Employed at St. Paul & Tacoma Lumber Co.,
110 P.2d 877, 883
(Wash. 1941)); cf. United States R.R. Retirement Bd. v. Fritz,
449
U.S. 166, 175,
101 S. Ct. 453, 460,
66 L. Ed. 2d 368 (1980)
(holding that classifications challenged under the Equal Protection
Clause may be non-arbitrary even though imperfect). Similarly,
Hidden Oaks’ protestations regarding the “arbitrary” nature of
placing utility holds for reasons unrelated to the safety of
providing utilities ignores the City’s substantial and legitimate
interest in keeping substandard housing unoccupied, not simply in
ensuring the safe provision of electrical service. See Sims v.
Century Kiest Apartments,
567 S.W.2d 526, 531 (Tex. Civ. App. 1978,
no writ) (recognizing as valid a city’s interest in establishing
ordinances that ensure that “dwellings offered for rental be safe
and fit for habitation”).
Hidden Oaks’ remaining allegation))that the City placed
utility holds on non-substandard units in an effort to force Hidden
Oaks to bring other units in Stoneridge up to code))presents a more
troubling scenario, and a closer question of “unreasonableness”
-12-
under state law. See City of Pharr v. Pena, 853 S.W.2d 56, 61
(Tex. App. 1993, writ denied) (recognizing that courts may find a
taking when the government has acted with an “improper motive”);
Southwestern Gas & Elec. Co. v. Stanley,
70 S.W.2d 413, 415 (Tex.
1934) (authorizing punitive damages against utility for cutting off
service to a residence in order to force the owner to pay a
separately metered and contested bill for service to his business).
Nevertheless, in order to prevail on such a theory, Hidden Oaks
would need to demonstrate, at an absolute minimum, that at least
one non-substandard unit in Stoneridge suffered a utility hold at
some particular, definite moment in time.
The record reveals, however, that Hidden Oaks presented no
clear evidence at trial as to when particular units suffered the
imposition of utility holds, much less if those particular units,
at that particular time, met all applicable sections of the housing
code. On cross-examination, Hidden Oaks’ witness Brian Cunningham
admitted that he had records indicating when the City placed and
released holds on various units. Inexplicably, however, Hidden
Oaks failed to introduce that evidence and therefore failed to
demonstrate that any unit in Stoneridge suffered a utility hold at
the same time that it satisfied all sections of the City housing
code.4
4
Hidden Oaks did attempt to demonstrate this point by
eliciting testimony that (1) a substantial number of the units in
Stoneridge were efficiencies, (2) the alleged code violations
relating to window size would not apply to efficiencies, and (3)
the entire complex of Stoneridge suffered a utility hold for some
period of time. As the district court noted, however, this
argument ignores the other code violations alleged by the City,
-13-
As a result of this failure of proof, we see no substantial
evidence that would enable a reasonable juror to determine that
Hidden Oaks suffered an inverse condemnation of its property. We
therefore hold that the district court did not err in granting
judgment as a matter of law with respect to this claim.
IV
Following Hidden Oaks’ presentation of evidence, the City also
moved for judgment as a matter of law on Hidden Oaks’ claim for
damages, under 42 U.S.C. § 1983, based on a denial of substantive
due process. The district court granted the motion, finding as a
matter of law that the City’s actions were “rationally related to
protecting the health and safety of citizens.” See FM Properties
Operating Co. v. City of Austin, 93 F.3d 167, 174 (5th Cir. 1996)
(“[G]overnment action comports with substantive due process if the
action is rationally related to a legitimate government
interest.”). Whether this “rational relation” in fact exists is a
question of law that we review de novo. See
id. at 172 n.6.
In arguing that the district court erred in finding a rational
relation between the City’s placement of utility holds and the
protection of health and safety, Hidden Oaks does not appear to
appreciate the limited range of a substantive due process analysis.
See, e.g., Shelton v. City of College Station, 780 F.2d 475, 477
(5th Cir. 1986) (holding that decisions of state zoning boards do
not violate substantive due process unless the court finds no
“conceivable rational basis” on which the board might have based
which were not necessarily inapplicable to efficiencies.
-14-
its decision). Thus, Hidden Oaks maintains strenuously on appeal
that the City behaves rationally in placing a utility hold on a
property only when allowing utility service to continue would
itself create a risk to public health or safety——as when faulty
wiring creates a risk of fire, or leaking pipes create a risk of
flood. Accordingly, Hidden Oaks argues that in placing a utility
hold on Stoneridge simply to force the repair of other types of
dangerous violations——such as rotting balconies or inadequate fire
escape routes——the City has stepped beyond the bounds of
rationality and violated Hidden Oaks’ right to substantive due
process.
In support of this proposition, Hidden Oaks cites
International Shoe Co. v. Washington, 326 U.S. 310,
66 S. Ct. 154,
90 L. Ed. 95 (1945), again a case we find to be of doubtful
relevance. In any event, we need not belabor our earlier
conclusion that municipalities do in fact have a substantial,
legitimate interest in keeping substandard housing unoccupied, and
are entitled to further this interest by ensuring that landlords
either repair their property during the current tenancy or face a
complete loss of income from the substandard unit. See
Camara, 387
U.S. at 537,
87 S. Ct. 1735 (“[T]he public interest demands that
all dangerous [housing] conditions be prevented or abated.”);
United States R.R. Retirement
Bd, 449 U.S. at 179, 101 S. Ct. at
461 (refusing to hold government action “arbitrary” when “plausible
reasons” exist for that action).
Given the limited nature of our review, we agree with the
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district court that the City’s actions were “rationally related to
the protection of [the] health and safety of citizens” and
therefore not actionable as violations of the Fourteenth Amendment.
Accordingly, we hold that the district court did not err in
granting judgment as a matter of law on this claim.5
V
At the close of all the evidence, the jury found for Hidden
Oaks on both the procedural due process and breach of contract
claims. In framing these issues for the jury, Hidden Oaks argued
that the September 1994 letter agreement formed an enforceable
contract, in which Hidden Oaks agreed to withdraw its appeal of the
window-size violations as consideration for the City’s promise not
to place a utility hold on Stoneridge. Hidden Oaks also alleged
that the City violated Hidden Oaks’ due process rights by
performing a sort of “bait and switch” with the appeal of the
underlying violations——convincing Hidden Oaks to withdraw its
appeal in exchange for a promise that no holds would be imposed,
and then breaching that agreement after the deadline for appeal had
passed.
The City asserted at the charge conference that these theories
of recovery were inconsistent. Either the City took away Hidden
Oaks’ right to appeal, or Hidden Oaks surrendered it voluntarily as
5
To the extent that Hidden Oaks may have stated a more
plausible claim for a violation of its right to substantive due
process by demonstrating that the City placed holds on non-
substandard units, we note again that we will not address the legal
merits of this claim in light of Hidden Oaks’ failure to prove the
necessary, underlying facts. See supra at 13.
-16-
consideration for certain benefits from the City. The district
court admitted the possibility of a conflict, but decided to wait
for the jury’s verdict before ruling on the City’s objection. Once
the jury returned, however, having found for Hidden Oaks on both
claims, the district court denied the City’s motion for a new trial
and renewed motion for judgment. The City appeals the denial of
these motions on the grounds that (1) Hidden Oaks failed to prove
a protected property interest either in continued utility service
or in renting the units at Stoneridge, (2) no valid contract
existed because the City Council never ratified the September 1994
letter agreement, (3) the contract as found by the jury would be
unenforceable, and (4) neither the text of nor the circumstances
surrounding the September 1994 letter agreement demonstrated mutual
assent to remove utility holds from Stoneridge.6
6
The City also alleges two additional points of error, which
we find unworthy of textual discussion. The first involves the
City’s allegation, raised for the first time in its reply brief,
that insufficient evidence supports the jury’s finding of a
procedural due process violation. Not only is this point of error
untimely, see United States v. Green, 46 F.3d 461, 465 n.3 (5th
Cir. 1995) (holding issue raised for the first time in a reply
brief waived), but additionally, in making the argument, the City
appears to fundamentally misunderstand the jury’s verdict.
Devoting itself to refuting “[p]laintiff’s argument of no valid
appeal for utilty holds,” this section of the City’s reply brief
continues to argue the issue of whether or not the Building and
Standards Commission would have entertained a petition for a
repreive or variance from a legally imposed utility hold. As noted
above, however, this factual dispute was not the basis for the
jury’s finding of a procedural due process violation; rather, the
basis for the verdict was the City’s allegedly intentional bait and
switch, resulting in Hidden Oaks losing its right to appeal even
the underlying notices of violation. As argued, therefore, this
point of error is irrelevant, and we need not address it.
The second point involves the City’s assertion that Hidden
Oaks’ procedural due process claim is unripe, citing Williamson
County Reg’l Planning Comm’n v. Hamilton Bank, 473 U.S. 172, 105 S.
-17-
For reasons unclear to us, the City did not raise the issue of
an inconsistent verdict in its brief to this court. We therefore
deem that issue waived. See Melton v. Teachers Ins. and Annuity
Ass’n of Am., 114 F.3d 557, 561 (5th Cir. 1997).7 With regard to
the remaining issues, we review the district court’s denial of a
motion for judgment as a matter of law de novo, assessing whether
the evidence produced at trial provided a “legally sufficient . .
Ct. 3108,
87 L. Ed. 2d 126 (1985), and Samaad v. City of Dallas,
940 F.2d 925 (5th Cir. 1991). Again, however, the City has
misunderstood the jury’s procedural due process verdict. For while
other circuits have held that Williamson may operate to bar a
procedural due process claim, see, e.g., Bigelow v. Michigan Dep’t
of Natural Resources,
970 F.2d 154 (6th Cir. 1992); Harris v.
Riverside County,
904 F.2d 497 (9th Cir. 1990), those cases involve
allegations of deprivations “ancillary” to or “arising from” a
takings claim. See
Bigelow, 970 F.2d at 160 (applying Williamson
ripeness test to a procedural due process claim that the court
found “ancillary” to the main issue of “whether the state properly
denied full compensation to the plaintiffs for their fishing
licenses”);
Harris, 904 F.2d at 501 (holding procedural due process
claim not subject to ripeness constraints because it did not
“directly arise from, or rely on, [a] taking claim”). Here,
however, the main thrust of Hidden Oaks’ suit is not a claim for a
taking. Indeed, both Hidden Oaks’ federal and state takings claims
were dismissed as a matter of law before the jury ever received the
case. Instead, the main thrust of Hidden Oaks’ complaint, as
reflected by the jury’s verdict, is the allegation that the City
made a deal with Hidden Oaks which it then chose not to keep.
7
We have found no case permitting us to raise the issue of
inconsistent verdicts sua sponte on appeal. In Brunner v. Maritime
Overseas Corp., 779 F.2d 296 (5th Cir. 1986), we did hold that
because a trial judge has “no authority” to enter judgment on an
inconsistent verdict, failure to object to the jury instructions
below would not prevent a litigant from arguing on appeal that the
verdicts were inconsistent.
Id. at 297. Nevertheless, Brunner
provides no explicit support for creating an exception to the well-
settled rule that arguments not raised on appeal are waived. See,
e.g.,
Melton, 114 F.3d at 561 (“This court has repeatedly stated
that the brief of the appellant is required to contain a statement
of the issues presented for review and an argument portion which
analyzes and supports those contentions. Consequently, issues not
raised or argued in the brief are considered waived and thus will
not be noticed or entertained by this Court on appeal.”)
-18-
. basis for a reasonable jury to find” as this particular jury did.
FED. R. CIV. P. 50(a)(1). We review the district court’s denial of
a motion for a new trial only for a “clear abuse of discretion.”
Dawsey v. Olin Corp., 782 F.2d 1254, 1261 (5th Cir. 1986).
Questions of law receive de novo review. USX Corp. v. Tanenbaum,
868 F.2d 1455, 1457 (5th Cir.1989).
A
The City asserts that, as a matter of law, Hidden Oaks has
demonstrated no valid property interest either in continued utility
service or in lost rent. We disagree on both counts. The
Fourteenth Amendment to the United States Constitution provides, in
relevant part, that “[n]o State shall . . . deprive any person of
life, liberty, or property, without due process of law.” U.S.
CONST. amend. XIV. In order to assert a violation of this
amendment, one must at least demonstrate the deprivation of a
protected “property interest” established through “some independent
source such as state law.” Board of Regents v. Roth, 408 U.S. 564,
577,
92 S. Ct. 2701, 2709,
33 L. Ed. 2d 548 (1972). Under this
analysis, the “hallmark of property . . . is an individual
entitlement grounded in state law, which cannot be removed except
‘for cause.’” Logan v. Zimmerman Brush Co.,
455 U.S. 422, 430,
102
S. Ct. 1148, 1155,
71 L. Ed. 2d 265 (1982) (quoting Memphis Light,
Gas & Water Div. v. Craft,
436 U.S. 1, 11-12,
98 S. Ct. 1554, 1561-
62,
56 L. Ed. 2d 30 (1978)).
Texas law mandates that all utility providers “shall serve
every consumer within [their] certified area and shall render
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continuous and adequate service.” TEX. WATER CODE ANN. § 13.250.
Additionally, Texas law declares that utility providers “may not
discontinue, reduce, or impair service to any part of [a]
certificated service area except for: (1) nonpayment of charges;
(2) nonuse; or (3) another similar reason that occurs in the usual
course of business.” TEX. UTIL. CODE ANN. § 37.152.8 We find that
these provisions demonstrate an entitlement to continuous and
adequate utility service, which may be removed only “for cause.”
See Burgess v. City of Houston, 718 F.2d 151, 154 (5th Cir. 1983)
(recognizing “a constitutionally protected right to continued
utility service”) (citing Memphis
Light, 436 U.S. at 18, 98 S. Ct.
at 1565).
The City claims, however, that this entitlement proves
irrelevant here because the City is not disconnecting service to
Hidden Oaks, but merely refusing to connect service to the incoming
tenant. We find no merit in this distinction. This hypothetical
incoming tenant, after all, has nothing to do with the City’s
decision not to provide utilities to the unit in question. Rather,
it is the building’s owner, Hidden Oaks, that is the cause of the
8
The entirety of § 37.152 reads:
(a) Unless the commission issues a certificate that the
present and future convenience and necessity will not be
adversely affected, a certificate holder may not discontinue,
reduce, or impair service to any part of the holder’s
certificated service area except for: (1) nonpayment of
charges; (2) nonuse; or (3) another similar reason that occurs
in the usual course of business.
(b) A discontinuance, reduction, or impairment of service
must be in compliance with and subject to any condition or
restriction the commission prescribes.
-20-
denial of connection. In this context, the City can hardly claim
that it is depriving the tenant, and not Hidden Oaks, of
“continuous service” to its building.
We also find no merit in the City’s assertion that Hidden Oaks
has no constitutionally protected property interest in leasing
Stoneridge. Indeed, Texas recognizes that the ability to collect
rent for the use of one’s land is one of the most fundamental
sticks in the bundle of rights termed “property.” See F. Groos &
Co. v. Chittim, 100 S.W. 1006, 1010 (Tex. Civ. App. 1907, no writ)
(“[T]he rents accruing from lands are, unless in some way severed
from it, a part of the realty, and the right to them, as a part of
the freehold, rests in him who has the title.”).
As a matter of law, therefore, Texas recognizes entitlements
both to continuous utility service and to “the rents accruing from
land.” Given this holding, the district court did not err in
denying the City’s motion for judgment or abuse its discretion in
denying the City’s request for a new trial on this ground.
B
Moving to the jury’s contract findings, the City cites several
Texas cases in support of the proposition that, as a matter of law,
contracts with the City are invalid until explicitly authorized by
the City Council. See, e.g., City of Greenville v. Emerson, 740
S.W.2d 10, 13 (Tex. Civ. App. 1987, no writ). Hidden Oaks does not
dispute this argument directly, but rather asserts that the City
-21-
explicitly conceded the existence of a contract below.9
The support for this assertion in the record could not be more
clear. At the charge conference, the district court suggested
instructing the jury that “the City of Austin denies that any
contract was ever formed between the City and the Plaintiff in
September of 1994.” The City objected. Explicitly asserting
“that’s not true,” the City went on to explain that “the City is
not contending that we didn’t form a contract with the Plaintiff.”
Instead, the City asserted, “the issue [was] not did we have a
contract, but what did the contract require.”
Curiously, Hidden Oaks provides us with no authority
indicating the legal consequences of this exchange. We find,
however, that given the City’s clear concession, made in open court
and with the explicit intent to induce the district court’s
reliance, the City is judicially estopped from asserting that no
contract existed. See Ergo Science, Inc. v. Martin, 73 F.3d 595,
598 (5th Cir. 1996) (holding that the doctrine of judicial
estoppel, as a matter of federal procedure, entitles federal judges
to rely on “statements made by counsel in open court relinquishing
a specific claim”). Accordingly, we will not address the merits of
9
Hidden Oaks also invites us to reject the City’s claim of
invalidity because the City has disingenuously asserted it for the
first time on appeal. “Such infidelity,” Hidden Oaks opines,
“mocks the orderly administration of justice, and calls into
question the candor of its proponent.” While articulated with
admirable fervor, Hidden Oaks might wish to save such righteous
indignation for a nobler cause. The City did, in fact, raise this
argument below, not only in its pre-trial Reply to Plaintiffs’
Original Complaint, but also in its post-trial Motion for New Trial
and Renewed Motion for Judgment.
-22-
the City’s “invalid without authorization” argument.
C
The City also claims that even if the jury correctly found
that a contract existed, the contract as found by the jury could
not be enforceable because it would bargain away the City’s
governmental power to enforce the housing code. See Clear Lake
City Water Auth. v. Clear Lake Utils. Co., 549 S.W.2d 385, 391
(Tex. 1977) (holding that a municipality may not “by contract or
otherwise, bind itself in such a way as to restrict [the] free
exercise of [its] governmental powers”); accord Joleewu, Ltd. v.
City of Austin,
916 F.2d 250, 255 (5th Cir. 1990). We disagree.
Not every contract made by a municipality relating to its
governmental functions violates the rule of Clear Lake City.
Instead, the ultimate test concerns whether the contract at issue
will, as a matter of law, “potentially control or embarrass the
City in the exercise” of these powers. Cibolo Creek Mun. Auth. v.
City of Universal City, 568 S.W.2d 699, 702 (Tex. Civ. App. 1978,
writ ref’d n.r.e.). Here, the contract as found by the jury states
only that as long as Hidden Oaks adheres to a certain schedule of
repairs (and withdraws its challenge to the City’s findings of code
violations), the City will not impose utility holds related to the
current Notices of Violation. The contract does not mandate that
the City may never again impose utility holds on Stoneridge, nor
does it even purport to address, much less limit, the City’s
inherent power to find code violations at Stoneridge in the future.
In addition, because Hidden Oaks, as the owner of the
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apartment complex, is an “end user” of the City’s utility service,
the rule of Clear Lake City would not apply. See Brubaker v.
Brookshire Mun. Water Dist., 808 S.W.2d 129, 132 (Tex. App. 1991,
no writ) (declining to apply Clear Lake City to plaintiffs because,
as owners of an apartment complex denied water and sewer service in
violation of an alleged oral agreement, they were “end users” of
the utility service, as opposed to the plaintiff in Clear Lake
City, which was itself a utility company and an intermediate
provider of service).
D
Even assuming that a contract did exist, however, and that it
could be enforced, the City asserts that the text and surrounding
circumstances of the September 1994 letter agreement support only
a finding that the City agreed to refrain from placing “any
further” utility holds on Stoneridge, not that the City agreed to
remove any utility holds already in place. As a general rule, “the
interpretation of a contract is a question of law, not fact.”
Thornton v. Bean Contracting Co., 592 F.2d 1287, 1290 (5th Cir.
1980). Even so, an exception to this rule applies when “extrinsic
evidence has been used in interpreting an ambiguous contract.”
Id.
Whether a contract term is indeed ambiguous is a question of law,
but once we determine legal ambiguity, the fact finder’s
interpretation deserves traditional deference. See Paragon
Resources, Inc. v. National Fuel Gas Distrib. Corp.,
695 F.2d 991,
995 (5th Cir. 1983).
Here, the district court made an implicit finding of legal
-24-
ambiguity by instructing the jury that “[i]n deciding whether the
parties reached an agreement, you may consider what they wrote,
said and did in light of the surrounding circumstances, including
any earlier course of dealing.” Moreover, in attempting to clarify
the parties’ positions for the jury, the district court noted that
Hidden Oaks interpreted the September 1994 letter agreement to mean
that the City, in return for certain promises from Hidden Oaks,
generally would not “use” utility holds on Stoneridge in order to
force compliance with the outstanding notices of violation. The
City, on the other hand, interpreted the September 1994 letter
agreement to mean only that the City would not use the outstanding
notices of violation to place additional holds on Stoneridge,
beyond those holds already imposed as of the date of the agreement.
Applying these instructions to the facts, the jury found both
that a contract existed and that the City had breached that
contract by refusing to remove utility holds from Stoneridge. In
doing so, the jury rejected the City’s characterization of the
September 1994 letter agreement——specifically, the City’s
suggestion that it had promised only to refrain from placing future
holds and not to remove any holds already in place.
Insofar as the City relies on the text of the September 1994
letter agreement to support a reversal of the jury’s verdict, we
construe this argument as an attack on the district court’s legal
conclusion that the language of the September 1994 letter agreement
was ambiguous, and in need of extrinsic evidence to determine the
true intent of the parties. So construed, we find the City’s
-25-
argument meritless. As the ambiguity of a contract is a question
of law, we review the district court’s determination de novo. See
Jhaver v. Zapata Off-Shore Co., 903 F.2d 381, 383 (5th Cir. 1990).
We affirm as long as the language at issue is “reasonably
susceptible to more than one meaning.” Constitution State Ins. Co.
v. Iso-Tex Inc.,
61 F.3d 405, 408 (5th Cir. 1995).
The September 1994 letter agreement reads, in relevant part:
“this proposal will . . . avoid any further necessity of threatened
utility holds.” Depending on whether one emphasizes the words “any
further” or the word “threatened,” one might come to different
conclusions about the content (and timing) of the City’s promise.
“Any further” tends to indicate that some holds might already be in
place, while “threatened” as a modifier of “utility holds” tends to
indicate quite the opposite. We therefore affirm the district
court’s holding that the contract is ambiguous.
Insofar as the City also challenges the verdict by asserting
error in the district court’s denial of its motion for judgment as
a matter of law, we construe this assertion of error as a challenge
to the legal sufficiency of the evidence. See Hiltgen v. Sumrall,
47 F.3d 695, 699 (5th Cir. 1995). We therefore review the district
court’s denial of the motion de novo, reversing that denial only
when “there is no legally sufficient evidentiary basis for a
reasonable jury to find” as this particular jury did.
Id. at 700.
In conducting this review, we must remember that “we are not free
to reweigh the evidence or to re-evaluate the credibility of
witnesses.”
Id. Instead, we must accept any reasonable factual
-26-
inferences made by the jury, being careful not to “substitute . .
. other inferences that we may regard as more reasonable.” Id.
The testimony at trial established that the City’s original
hold, placed on or about the date of the September 1994 letter
agreement, covered every unit in the Stoneridge complex. Based on
this fact, the jury might reasonably infer that a promise merely
not to impose “further” or “additional” holds on Stoneridge would
make no sense. At that point, after all, the City could do nothing
“further” in the way of utility holds but remove them. In
addition, the testimony at trial also established that at the time
the parties executed the September 1994 letter agreement, neither
McLelland nor Hersch understood that Stoneridge already suffered
from a utility hold. Based on this fact, the jury again might
reasonably infer that the distinction proffered by the
City——between holds already imposed and holds yet to be
imposed——was not what the parties had in mind when they formed the
September 1994 letter agreement.
Because these factual inference are reasonable and supported
by the evidence, we do not find it implausible that a reasonable
jury would determine, as this jury did, that the City promised in
the September 1994 letter agreement to remove any utility holds
already in place. We therefore hold that the district court did
not err in denying the City’s motion for judgment as a matter of
law with respect to the contract claim.10
10
In support of its claim of legally insufficient evidence,
the City also cites Gulf Coast Farmers Coop. v. Valley Co-op Mill,
572 S.W.2d 726 (Tex. Civ. App. 1978, no writ), for the proposition
-27-
With regard to the district court’s denial of the City’s
motion for a new trial on the breach of contract claim, we note
that our standard of review here is even more deferential than our
review of the denial of a motion for judgment as a matter of law.
See Hiltgen, 47 F.3d at 703. Absent “a clear showing of an abuse
of discretion,” we will not reverse the trial court’s decision to
deny a new trial. Dawsey v. Olin Corp.,
782 F.2d 1254, 1261 (5th
Cir. 1986). In order to make such a “clear showing,” the City
would have to demonstrate “an absolute absence of evidence to
support the jury’s verdict,” thus indicating that the trial court
had abused its discretion in refusing to find the jury’s verdict
“contrary to the great weight of the evidence.”
Id. at 1262;
Robin, 719 F.2d at 98. In light of our previous holding that the
district court correctly denied the City’s motion for judgment as
a matter of law on the breach of contract claim, we find no abuse
of discretion in the district court’s denial of the City’s motion
for a new trial. See
Hiltgen, 47 F.3d at 703.
VII
Having found that the City had breached its contract with
Hidden Oaks, the jury returned a verdict for $231,089 in damages,
which was precisely the amount Hidden Oaks claimed it had suffered
that an offer and acceptance must be “clear and definite” in order
to form a contract. Id. at 737. To the extent that this argument
challenges the existence of a contract, it is foreclosed by
judicial estoppel, as discussed above. To the extent that this
argument relates merely to the clarity of the parties’ agreement,
we note that the City’s own witness, Stuart Hersch, admitted on
cross-examination that the September 1994 letter agreement was
“clear” that Hidden Oaks was “looking to avoid utility holds being
placed on the property.”
-28-
in lost rent. Both the City and Hidden Oaks appeal this award——the
City alleging that the jury had insufficient evidence on which to
base its decision and Hidden Oaks arguing that the district court
erroneously limited the types of damage the jury could consider in
arriving at its final figure. We find no merit in Hidden Oaks’
allegations of error, but agree with the City that insufficient
evidence supports the jury’s verdict on damages.
In attacking the damage award, Hidden Oaks asserts that the
district court’s instructions and evidentiary rulings prevented the
jury from considering two additional types of damage: (1) lost re-
sale value of the property because of the “stigma” of the utility
holds, and (2) unnecessary repairs made in an effort to convince
the City to lift the holds. We review challenges to the district
court’s jury instructions in order to determine if “the charge as
a whole” creates a “substantial” doubt, incapable of eradication,
as to whether the jury has been “properly guided in its
deliberations.” Russell v. Plano Bank and Trust, 130 F.3d 715, 719
(5th Cir. 1997) (internal quotation marks and citations omitted).11
We review the trial court’s evidentiary rulings for an abuse of
discretion. See Kelly v. Boeing Petroleum Serv.,
61 F.3d 350, 356
(5th Cir. 1995).
In instructing the jury on breach-of-contract damages, the
district court directed that the jury should “consider only the
11
Russell also provides that even assuming we find such doubt,
“we will not reverse if we determine, based upon the entire record,
that the challenged instruction could not have affected the outcome
of the case.” Id. at 719 (quoting FDIC v. Mijalis,
15 F.3d 1314,
1318 (5th Cir.1994)).
-29-
. . .[r]ents lost, if any, between the day the contract was
breached and the day the utility holds that were placed on
Stoneridge in August or September 1994 were released.” Hidden Oaks
complains that this instruction prevented the jury from considering
the evidence introduced at trial as to unnecessary repairs.
Because Hidden Oaks failed to object to this instruction at trial,
it has waived this claim. See Tandy Brands Inc. v. Harper, 760
F.2d 648, 653 (5th Cir. 1985) (finding that defendant had waived
any error resulting from the trial court’s failure to instruct the
jury on a specific claim when defendant did not object to this
omission in the instructions).
With regard to the lost value claim, Hidden Oaks argues that
the district court erred in refusing to permit the opinion
testimony of Jim Maloney as to how the City’s wrongful imposition
of utility holds had lowered Stoneridge’s market value below what
it would have been without the holds. The district court
consistently sustained the City’s objections to this testimony
because the court found Maloney unqualified to testify as an expert
in appraising property.
In challenging this decision, Hidden Oaks bears a heavy
burden. Trial courts have “wide discretion” in deciding whether or
not a particular witness qualifies as an expert under the Federal
Rules of Evidence. See FED. R. EVID. 702 (providing that a witness
may qualify as “expert” through “knowledge, skill, experience,
training, or education.”); Ellis v. K-Lan Co., 695 F.2d 157, 162
(5th Cir. 1983). The district court heard a substantial amount of
-30-
testimony from Maloney, both with and without the jury, in an
attempt to determine his qualifications. Hidden Oaks elicited
testimony that Maloney visited Austin about once a month to
purchase and sell property for his employer, Cunningham Capital,
and that part of his job was to evaluate the worth of various
properties in order to determine if Cunningham should make an offer
and at what price. On cross examination, the City elicited
testimony that Maloney was not a licensed appraiser in any state,
nor was he a licensed real estate broker. In addition, Maloney had
no formal schooling in the methods of appraisal and was unable to
respond fully to the City attorney’s questions regarding standard
appraisal theory. In light of these concessions, the district
court acted well within its discretion in refusing to permit
Maloney to testify as an expert regarding the worth of Stoneridge.
See United States v. 60.14 Acres of Land, 362 F.2d 660, 668 (3d
Cir. 1966) (“[T]he essential elements of the real estate expert’s
competency include his knowledge of the property and of the real
estate market in which it is situated, as well as his evaluating
skill and experience as an appraiser.”) (emphasis added) (quoted
favorably in United States v. 71.29 Acres of Land,
376 F. Supp.
1221, 1226 (W.D. La. 1974)).
Hidden Oaks argues in the alternative that the district court
erred by not permitting Maloney to testify at least as an owner
regarding the value of the property at different times. Hidden
Oaks correctly points out that we adhere to the general rule that
an owner always may testify as to value, whether assessed as of the
-31-
time of trial, or at some definitive point in the past. See United
States v. 329.73 Acres of Land, 666 F.2d 281, 284 (5th Cir. 1982),
reh’g granted and rev’d on other grounds,
704 F.2d 800 (5th Cir.
1983) (rejecting appellant’s attack on the probative value of a
landowner’s testimony regarding the value of his land before and
after the imposition of a flowage easement because appellant’s
argument “overlooks the fact that the opinion testimony of a
landowner as to the value of his land is admissible without further
qualification”).
Here, however, the trial court not only permitted Hidden Oaks
to ask Maloney, as an owner, what he thought the property was worth
today, but also ruled that Hidden Oaks could ask Maloney what he,
as an owner, thought the property was worth in 1994, before the
utility holds went on. Hidden Oaks nevertheless made a deliberate
decision not to ask Maloney about the property value in 1994, and
even objected when the City attorney attempted to cross-examine
Maloney on this issue.12 Having made such a choice at trial,
Hidden Oaks hardly can request now that we reverse and remand in
order for it to reassess its earlier strategy.
The City, on the other hand, urges that the district court
erred in denying its motion for a new trial on damages because the
award was speculative and supported by “no evidence.” As noted
above, we will reverse a district court’s denial of a motion for a
12
The reason for this omission appears to lie in the fact that
the resale value of Stoneridge had in fact increased from 1994 to
the time of trial, just not as much as Hidden Oaks would have
expected.
-32-
new trial only upon a “clear showing of an abuse of discretion.”
See Dawsey, 782 F.2d at 1261. In order to make such a “clear
showing,” the City would need to demonstrate “an absolute absence
of evidence to support the jury’s verdict.”
Id.
Here, in support of its request for $231,089 in damages
flowing from lost rent, Hidden Oaks relied solely on the testimony
of Jim Maloney, senior vice-president of Cunningham Capital
Corporation. Maloney testified that he arrived at the $231,089
figure by calculating the rent Hidden Oaks should have been able to
collect from September 1994 to December 1995 and then subtracting
out Hidden Oaks’s actual gross receipts for that time period. From
September through December 1994, Maloney calculated the rent Hidden
Oaks should have received by multiplying the rentable square
footage at Stoneridge times $.74, which was the rent per square
foot being charged at Stoneridge in July 1994. For January through
December 1995, Maloney multiplied the rentable square footage at
Stoneridge times $.78 per square foot, which Maloney alleged was
the “market rent” during this time period. The resulting amounts
represented what Hidden Oaks should have made per month during the
relevant time period if Stoneridge had (a) been able to charge the
“average” rate for its apartments throughout 1995 and (b) enjoyed
a 100% occupancy rate. These monthly figures, added together,
represented the total amount that Hidden Oaks thought it should
have taken in from September 1994 to December 1995.
Maloney then subtracted 5% off this total, making the
assumption that throughout the period of damage, Hidden Oaks would
-33-
have enjoyed a 95% rather than a 100% occupancy rate. On cross-
examination, Maloney admitted that Stoneridge was only 60% occupied
when Cunningham bought the property and reached a high of only 93%
occupancy before the imposition of the utility holds.
Nevertheless, Maloney defended his assumption of 95% occupancy by
pointing to the market average in Austin at the time of trial.
At the outset, we question whether these calculations
accurately depict the gross income Hidden Oaks could have expected
to receive from September 1994 to December 1995. Hidden Oaks
introduced no evidence at trial that Stoneridge ever had enjoyed an
occupancy rate as high as 95%, or had occupancy rates comparable to
the market average. Indeed, all the testimony regarding occupancy
rates indicated that Stoneridge had a history of severe problems
filling its units.
More problematic is Hidden Oaks’s complete lack of evidence
tying the unrented apartments to the City’s imposition of utility
holds. Given that the property had not performed to market
expectations in the past, Hidden Oaks could not simply cite market
statistics and assume that any differentiation in actual income was
the result of the utility holds. See City of Denton v. Weems, 456
S.W.2d 207, 210 (Tex. Civ. App. 1970, writ ref’d n.r.e.) (finding
plaintiff’s alleged damages for lost apartment rentals speculative
because “[n]one of the reported damages [were] tied to the
termination of electrical current,” and “[t]here was no evidence
that [any potential tenants] saw the apartment or would consider
renting it”); cf. Marks v. Pan Am. World Airways, Inc., 785 F.2d
-34-
539, 542 (5th Cir. 1986) (affirming district court’s grant of
judgment notwithstanding the verdict when testimony from expert
economist was “merely speculative”). We find such assumptions
particularly troubling in light of certain evidence introduced at
trial indicating that Hidden Oaks could have readily determined
which units suffered utility holds at which times simply by
consulting the apartment manager or by calling the City utility
office. See Richter, S.A. v. Bank of Am. Nat’l Trust & Sav. Ass’n,
939 F.2d 1176, 1188 (5th Cir. 1991) (rejecting a requirement of
“mathematical precision” in proving damages, but noting that Texas
law requires one to “bring forward the best evidence of the damage
of which the situation admits, [providing] some basis for
reasonable inferences”).
Thus, because Hidden Oaks produced “absolutely no evidence”
indicating that the vacancies at Stoneridge were due solely or even
primarily to the City’s imposition of utility holds, we reverse the
district court’s denial of the City’s motion for a new trial on
contract damages. On remand, Hidden Oaks should produce whatever
evidence it may have in its possession relating to which units at
Stoneridge remained vacant and why. Without this information, we
cannot allow the jury to simply assume that a complex with a
history of vacancy problems suddenly would perform up to market
standards, but for the City’s breach of contract. We therefore
vacate the contractual damage award and remand for further
proceedings in accordance with this opinion.
VI
-35-
After the jury returned its verdict, both the City and Hidden
Oaks moved for an award of attorney’s fees under 42 U.S.C. § 1988,
both parties alleging that they had prevailed on the claim of
procedural due process and the City requesting additional fees as
the prevailing party on Hidden Oaks’s claims under the federal
takings clause and the substantive component of the due process
clause. The district court denied the motions of both parties, and
we affirm.
Section 1988 provides that a court “in its discretion, may
allow the prevailing party . . . a reasonable attorney’s fee as
part of the costs.” 42 U.S.C. § 1988. Even a plaintiff who wins
only nominal damages qualifies as such a “prevailing party.”
Farrar v. Hobby, 506 U.S. 103, 112,
113 S. Ct. 566, 573,
121 L. Ed.
2d 494 (1992). Nevertheless, in determining the reasonableness of
a fee award, courts must consider “the degree of the plaintiff’s
overall success,” recognizing that often a plaintiff who “seeks
compensatory damages but receives no more than nominal damages”
will be the kind of prevailing party that merits no attorney’s fee
at all.
Id. at 114-15, 574-75 (quoting Texas State Teachers Ass’n
v. Garland Indep. Sch. Dist.,
489 U.S. 782, 793,
109 S. Ct. 1486,
1494,
103 L. Ed. 2d 866 (1989)). In assessing the district court’s
application of these standards, we review only for an abuse of
discretion. See United States v. Mississippi,
921 F.2d 604, 609
(5th Cir. 1991).
With regard to Hidden Oaks’s request for fees as a prevailing
party on the procedural due process claim, we find that the
-36-
district court acted well within its discretion by denying this
request. The district court instructed the jury to award only
nominal damages on this claim because Hidden Oaks produced no
evidence at trial indicating any damage specifically arising from
the procedural due process violation. See Farrar, 506 U.S. at 115
(“In a civil rights suit for damages . . . the awarding of nominal
damages . . . highlights the plaintiff’s failure to prove actual,
compensable injury.”); cf. Riley v. City of Jackson,
99 F.3d 757,
760 (5th Cir. 1996) (distinguishing Farrar where plaintiff
primarily sought and obtained injunctive relief, in addition to
winning an award of nominal damages). Moreover, Hidden Oaks’s
victory produced no “public benefit” justifying an award of fees in
spite of receiving only nominal damages. See
Farrar, 506 U.S. at
121 (O’Connor, J., concurring) (noting that an award of merely
nominal damages may support an award of fees when the litigation
has “accomplished some public goal”). Indeed, as the district
court noted, the procedural due process violation as found by the
jury was peculiar to Hidden Oaks, not general in the sense that the
City would be forced to change its dealings with other landowners
as a result. On these facts, therefore, we find that the jury’s
award of nominal damages to Hidden Oaks on its procedural due
process claim gave Hidden Oaks little more than “the moral
satisfaction of knowing that a federal court concluded that [its]
rights had been violated.” Hewitt v. Helms,
482 U.S. 755, 762,
107
S. Ct. 2672, 2676,
96 L. Ed. 2d 654 (1987). Accordingly, we affirm
the district court’s denial of § 1988 attorney’s fees to Hidden
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Oaks.
The City also alleges error in the district court’s § 1988
rulings, claiming that the City should receive fees as the
“prevailing party” on Hidden Oaks’s claims under the federal
takings clause and the substantive component of the due process
clause. Unlike prevailing plaintiffs, however, who are generally
entitled to § 1988 fees absent special circumstances, prevailing
defendants cannot recover § 1988 fees without demonstrating that
the plaintiff’s underlying claim was frivolous, unreasonable or
groundless. See United States v. Mississippi, 921 F.2d at 609
(citing Christiansburg Garment Co. v. EEOC,
434 U.S. 412, 422,
98
S. Ct. 694, 700,
54 L. Ed. 2d 648 (1978)).
Here, the City noted in its motion for attorney’s fees that
the district court granted both its motion to dismiss Hidden Oaks’s
federal takings claim, and its motion for judgment as a matter of
law with respect to Hidden Oaks’s claim for a violation of
substantive due process. These rulings, however, do not establish
that the underlying claims were “frivolous, unreasonable or
groundless.” See Hughes v. Rowe, 449 U.S. 5, 15-16 (1980) (“The
fact that the Court dismissed Plaintiffs’ suit is not in itself a
sufficient justification for the fee award.”). Other than pointing
out these rulings, the City made no argument to the district court
that Hidden Oaks’s claims were frivolous in the sense required by
Christiansburg. We cannot say, therefore, that the district court
abused its discretion in denying the City’s motion for § 1988 fees.
VIII
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In summary, we affirm the district court in all respects
except in its denial of the City’s motion for a new trial on
contract damages. Thus, we affirm the district court’s dismissal
without prejudice of Hidden Oaks’s federal takings claim; we
affirm the district court’s dismissal with prejudice of Hidden
Oaks’s claims under Article I, § 17 of the Texas Constitution and
the substantive component of the Fourteenth Amendment due process
clause; we affirm the judgment of the district court as to
liability and attorney’s fees on the breach of contract claim; we
affirm the judgment of the district court as to liability and
damages on the procedural due process claim; and we affirm the
judgment of the district court as to attorney’s fees under § 1988.
With regard to the district court’s judgment as to damages on
Hidden Oaks’s breach of contract claim, however, we reverse the
court’s decision to deny the City’s motion for a new trial on
damages, vacate the damage award, and remand to the district court
for further proceedings consistent with this opinion.
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