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Schwab v. Hansen

United States District Court, E.D. Virginia, Norfolk Division

November 16, 2017

EDWARD AND REIKO SCHWAB, JR., ET AL., Plaintiffs,
v.
DAVE HANSEN, ET AL., Defendants.

          MEMORANDUM OPINION AND ORDER

          ROBERT G. DOUMAR UNITED STATES DISTRICT JUDGE

         This matter comes before the Court on two motions to dismiss filed in the above-captioned case: one filed by defendants Dave Hansen, Thomas J. Gay, and Philip J. Roehrs ("City Employees' Motion to Dismiss"), ECF No. 6, and the other filed by defendant Frank Gurdziel ("Gurdziel's Motion to Dismiss''). ECF No. 3. For the reasons stated herein, both motions to dismiss are hereby GRANTED, in part, and the instant action is DISMISSED WITHOUT PREJUDICE.

         I. PROCEDURAL BACKGROUND

         On July 26, 2017, Edward and Reiko Schwab, Jr., James and Carol Melvin, Sandra D. Harris, and Michael Aschkenas (collectively, "Plaintiffs''') filed the instant action pursuant to 42 U.S.C. § 1983 against the following four defendants: Dave Hansen, Frank Gurdziel. Thomas J. Gay, and Philip J. Roehrs (collectively, "Defendants"). Complaint ("Compl."), HCF No. 1. Plaintiffs' complaint alleges that Defendants violated Plaintiffs' rights to due process under the Fifth and Fourteenth Amendments in connection with the creation of special taxation district by the City of Virginia Beach between 2011 and 2013. Id. Plaintiffs request $575, 174.00 in damages as well as declaratory and injunctive relief, Id.

         On September 1, 2017, Frank Gurdziel, by counsel, filed a motion to dismiss Plaintiffs' complaint pursuant to Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure. ECF No. 3. His motion also requests an award of costs and attorneys' fees pursuant to 42 U.S.C. § 1988. Id. On the same day, the remaining defendants, Dave Hansen, Thomas Gay, and Philip Roehrs, by counsel, jointly filed a motion to dismiss Plaintiffs' complaint on largely the same grounds. ECF No. 6. On September 15, 2017, Plaintiffs filed a brief in opposition to both motions to dismiss ("Resp."). ECF No. 9. On September 21, 2017, Frank Gurdziel and the remaining defendants filed their respective reply briefs. See Gurdziel's Reply, ECF No. 11; City Employees' Reply, ECF No. 10. Defendants' motions to dismiss are now ripe for decision.

         II. FACTUAL BACKGROUND

         A. Summary of Facts Alleged in the Complaint

         Plaintiffs' complaint alleges the following relevant facts. Plaintiffs are residents of Virginia and waterfront property owners in the Chesopeian Colony subdivision located in the City of Virginia Beach. Compl. ¶¶ 3, 23. Defendants are also residents of Virginia. Id. ¶¶ 4-7. At all times relevant to the complaint's allegations, defendant Dave Hansen was Deputy City Manager or the City Manager for the City of Virginia Beach; defendant Thomas Gay was the Water Resources Project Manager or Coastal Project Manager with the Public Works Engineering Department of the City of Virginia Beach; and defendant Philip Roehrs was a Water Resources Engineer with the Public Works Engineering Department of the City of Virginia Beach. Id. ¶¶ 4, 6-7. Defendant Frank Gurdziel was not an employee of the City of Virginia Beach but was "in charge of securing citizen approval for the Special Service District" described in the complaint. Id. ¶ 5.

         Beginning in or around July, 2011, Defendants worked together to create a special taxation district known as a "Special Service District" (hereinafter, "SSD") for waterfront property owners in the Chesopeian Colony subdivision in the City of Virginia Beach. Compl. ¶¶ 10, 25. The stated purpose of the proposed SSD was to fund a dredging project that would supposedly (1) increase deep-water access for the waterfront property owners in the SSD; (2) increase property values for such owners; and (3) increase tax revenue to the City of Virginia Beach as a result of the increased property values. Id. ¶¶ 11-13. To fund the dredging project, waterfront property owners within the SSD would be subject to additional taxes. Id. ¶ 14. For the proposed SSD to be approved, "80% of the waterfront property owners in the Chesopeian Colony [subdivision] needed to be in favor of its creation." Id. ¶ 15.

         In or around March, 2013, Defendants circulated "willingness petitions" to Plaintiffs and other waterfront property owners in the Chesopeian Colony subdivision to garner support for the creation of the SSD. Compl. ¶ 16. In May, 2013, "all of the waterfront property owners in the Chesopeian Colony" voted on the proposed SSD, and fewer than 80% of such owners approved. Id. ¶ 17. As a result, in June, 2013, Defendants worked together to redraw the boundary lines of the proposed SSD by "add[ing] and subtract[ing] waterfront property owners as they saw fit for the specific purpose of surpassing the 80% threshold." Id. ¶¶ 19, 21. By the end of June, 2013, Defendants were successful in obtaining 80% approval of waterfront property owners within the redrawn boundary lines of the proposed SSD, and the SSD was created. Id. ¶ 22.

         B. Plaintiffs' Claims

         Plaintiffs' complaint alleges that, by "creat[ing] an illegal, non-contiguous SSD without a proper public hearing, " Defendants, "individually and collectively, deprived Plaintiffs of their respective rights to Due Process, " Compl. ¶ 23, and are therefore individually liable under 42 U.S.C. § 1983, id ¶ 26. The complaint further alleges that Defendants, individually and collectively, continue to deprive Plaintiffs of such rights because the "dredging project is ongoing and not yet complete." Id. ¶ 24. As a result, Plaintiffs demand $575, 174.00 in total damages, which accounts for the additional taxes levied against them as part of the SSD plus punitive damages, and they seek declaratory and injunctive relief in the form of a Court order "declaring that no dredging is to occur on or near any of Plaintiffs' property" at their respective property addresses. Id. ¶¶ 27, 32; Id. at 8.

         III. DEFENDANTS' MOTIONS TO DISMISS

         In Gurdziel's and the City Employees' Motions to Dismiss, the Defendants assert several grounds for dismissing Plaintiffs' complaint. ECF Nos. 3, 6. The first is that the Court lacks subject matter jurisdiction pursuant to the Tax Injunction Act, 28 U.S.C. § 1341, and thus must dismiss the action pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure (hereinafter, "Rule 12(b)(1)"). See ECF No. 4 at 7 (relying on Burris v. Little Rock,941 F.2d 717 (8th Cir. 1991)); ECF No. 7 at 4 (same). This threshold jurisdictional claim is now before the Court. A. Legal Standard A defendant may challenge subject matter jurisdiction under Rule 12(b)(1) in one of two ways: (1) by contending that the complaint is insufficient on its face to establish such jurisdiction or (2) by challenging the factual predicate of subject matter jurisdiction set forth in the complaint. Kerns v. United States, 585 F.3d 187, 192 (4th Cir. 2009) (citing Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir. 1982)). In the first case, the facts alleged in the complaint are taken as true, and the motion must be denied if the complaint alleges sufficient facts to invoke subject matter jurisdiction. Id. In the second case, the plaintiff is afforded less procedural protection: the district court need not presume the truthfulness of the complaint and is instead "entitled to decide disputed ...


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