Petworth Holdings, LLC v. Bowser

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

PETWORTH HOLDINGS, LLC, et al.,

Plaintiffs,
v. Civil Action No. 18-3 (JEB)

MURIEL BOWSER, et al.,

Defendants.

MEMORANDUM OPINION

Early last year, Plaintiffs Petworth Holdings, LLC and John Formant filed suit in this

Court asserting that a local statute regulating certain gas stations in the District of Columbia

violates the Fifth Amendment to the United States Constitution. Citing an intervening change in

the law governing Fifth Amendment challenges, Plaintiffs now move to amend their Complaint

to add a new claim under 42 U.S.C. § 1983 and a new defendant, the District of Columbia. This

change would allow them to pursue monetary damages, as opposed to merely injunctive and

declaratory relief. Because Plaintiffs have offered a plausible rationale for their delay, no

prejudice would accrue from such an amendment, and Defendants have failed to establish

futility, the Court will grant the Motion.

I. Background

Plaintiffs are the owners of a property on which currently sits a full-service Shell gas

station. See Compl., ¶¶ 3–6. As the Court described in its prior Opinion, they allege that certain

recent amendments to a longstanding D.C. statute that regulates the alteration and conversion of

such gas stations in the District have unconstitutionally impeded their ability to sell this property.

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See Petworth Holdings, LLC v. Bowser, 308 F. Supp. 3d 347, 350–51 (D.D.C. 2018). The Act

as amended provides: “No retail service station which is operated as a full service retail service

station on or after April 19, 1977, may be discontinued, nor may be structurally altered, modified

or otherwise converted . . . into a non full service facility or into any other use.” D.C. Code § 36-

304.01(b). Plaintiffs allege that the Act now prevents property owners such as themselves from

selling their land because potential purchasers do not want to operate a full-service gas station

“in perpetuity.” Compl., ¶ 36.

Plaintiffs originally filed their Complaint in January 2018, seeking a declaration that the

Act violates the Fifth and Thirteenth Amendments to the United States Constitution and an

injunction barring the City from enforcing it. Defendants moved to dismiss. In April 2018, the

Court granted Defendants’ Motion as to Plaintiffs’ Thirteenth Amendment claim only. In doing

so, the Court held that Plaintiffs had sufficiently pled that the Act “frustrated their reasonable

investment expectations” for their property and had thereby stated a plausible Fifth Amendment

claim. See Petworth, 308 F. Supp. 3d at 357. The parties proceeded to discovery, which is not

yet complete.

As noted above, Plaintiffs have recently moved to amend their Complaint, seeking to add

the District of Columbia as a defendant and a new claim under 42 U.S.C. § 1983. Defendants

consent to the former proposed addition but oppose the latter, which the Court now resolves. See

ECF No. 36 (Opp.) at 3 n.4.

II. Legal Standard

A plaintiff may amend her complaint once as a matter of right within 21 days of serving it

or within 21 days of being served a responsive pleading. See Fed. R. Civ. P. 15(a)(1).

Otherwise, a plaintiff must seek consent from the defendant or leave from the court. See Fed. R.

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Civ. P. 15(a)(2). In such circumstances, however, the Court ought to “freely give leave [to

amend a pleading] when justice so requires.” Id. The Supreme Court has instructed that leave to

amend should accordingly be granted “[i]n the absence of . . . undue delay, bad faith or dilatory

motive on the part of the movant, repeated failure to cure deficiencies by amendments previously

allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, [or]

futility of amendment.” Foman v. Davis, 371 U.S. 178, 182 (1962). In this Circuit, “[a]lthough

the grant or denial of leave to amend is committed to a district court’s discretion, it is an abuse of

discretion to deny leave to amend unless there is sufficient reason.” Firestone v. Firestone, 76

F.3d 1205, 1208 (D.C. Cir. 1996) (citing Foman, 371 U.S. at 182). Under Rule 15(a), “the non-

movant generally carries the burden in persuading the court to deny leave to amend.”

Nwachukwu v. Karl, 222 F.R.D. 208, 211 (D.D.C. 2004).

III. Analysis

Defendants argue that Plaintiffs’ proposed amended Complaint is unduly delayed,

unfairly prejudicial, and futile. The Court considers each of these arguments in turn.

A. Undue Delay

Defendants first assert that Plaintiffs’ Motion to Amend — filed about twenty months

after their Complaint — should be rejected because they exhibited undue delay in filing it.

Delay, indeed, “is a valid reason to reject a party’s attempt to add a new theory of liability to a

complaint.” Elkins v. District of Columbia, 690 F.3d 554, 565 (D.C. Cir. 2012). But the delay

must be “undue” — that is, the reason for the delay is pertinent to the determination of whether

leave to amend should be granted. See Williamsburg Wax Museum, Inc. v. Historic Figures,

Inc., 810 F.2d 243, 247–48 (D.C. Cir. 1987) (affirming denial of leave to amend when plaintiff

“offered no explanation for its tardiness”). To justify their delay here, Plaintiffs point to a

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Supreme Court decision issued just a few months ago, which they argue cleared the way for their

proposed amendment. See ECF No. 35 (Pl. Motion to Amend) at 1 (citing Knick v. Township of

Scott, 139 S. Ct. 2162 (2019)).

By way of background, in Williamson County Regional Planning Commission v.

Hamilton Bank, 473 U.S. 172 (1985), the Supreme Court reversed the granting of a jury award of

$350,000 to a plaintiff who had brought a takings claim against a regional planning commission

under § 1983. In doing so, the Court held that plaintiffs could not bring certain takings claims in

federal court against state or local governments before seeking “compensation [for that taking of

property] through the procedures the State has provided for doing so.” Id. at 194–96. Knick,

however, overturned Williamson County and explicitly eliminated any “exhaustion requirement

for § 1983 takings claims.” 139 S. Ct. at 2172. The Court instead held that “a property owner

may bring a Fifth Amendment claim under § 1983 upon the taking of his property without just

compensation by a local government” and need not first seek compensation through

state-provided procedures. Id. at 2179. Plaintiffs therefore argue that Knick “represents a

change in the law” that justifies their addition of a § 1983 claim to their Complaint. See Pl.

Motion to Amend at 1–2.

The Court concurs with Plaintiffs that the Knick decision, at a minimum, clarified their

litigation options respecting their takings challenge, plausibly excusing their not including such a

claim in their original Complaint. It is true that prior to Knick, courts had sometimes waived

Williamson County’s exhaustion requirement (and perhaps this Court would have done the same

had Plaintiffs originally brought a § 1983 claim), but even then, confusion reigned among the

lower courts as to when, if at all, such waiver could occur. For example, courts were split as to

whether facial — as distinct from as-applied — takings claims were exempt from Williamson

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County’s state-litigation requirements. Compare Conjunta del Seguro de Responsabilidad

Obligatorio v. Flores Glarza, 484 F.3d 1, 14 (1st Cir. 2007) (holding that “facial statutory

challenges” are not blocked by Williamson County’s state-litigation requirement), with Alto

Eldorado Partnership v. County of Santa Fe, 634 F.3d 1170, 1175–77 (10th Cir. 2011) (reaching

the opposite conclusion). Courts were also split as to whether Williamson County was a

“prudential” doctrine (and thereby discretionary) or “jurisdictional” (and thereby mandatory).

Compare Peters v. Village of Clifton, 498 F.3d 727, 734 (7th Cir. 2007) (“Williamson County’s

ripeness requirements are prudential in nature.”), with Snaza v. City of St. Paul, 548 F.3d 1178,

1182 (8th Cir. 2008) (“We have held that Williamson County is jurisdictional.”). Surveying this

jumbled landscape, Plaintiffs could have reasonably concluded that this Court would not have

permitted them to pursue a takings challenge seeking monetary damages under § 1983 (the

precise claim that the Williamson County Court had rejected) without their first exhausting

available state procedures for seeking such compensation.

Defendants’ contrary arguments offer little. They first contend that Plaintiffs might have

been able to assert a § 1983 claim in their original Complaint, but do not give a specific reason as

to why this would have been the case. Indeed, Defendants themselves concede that –– at the

very least –– “it is not clear” that Plaintiffs could have previously brought a § 1983 claim

seeking monetary damages. See Opp. at 4. Defendants also argue that Knick is inapposite

because Plaintiffs originally sought declaratory and injunctive relief, and Knick –– in their

reading –– only affected claims for monetary damages. This argument simply misses the point,

as the purpose of Plaintiffs’ proposed amendment is precisely to add a cause of action that could

result in the imposition of monetary damages. See Armstrong v. Exceptional Child Care Center

Inc., 135 S. Ct. 1378, 1392 (2015) (Sotomayor, J., dissenting) (noting that unlike plaintiffs

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seeking equitable redress to “halt or prevent [a] constitutional violation,” plaintiffs bringing suit

under § 1983 may seek a “variety of remedies –– including damages”) (citing United States v.

Stanley, 483 U.S. 669, 683 (1987)).

B. Prejudice

Even if Plaintiffs could have brought a takings claim seeking monetary damages under

§ 1983 prior to Knick, an examination of any potential prejudice to Defendants also favors

granting their Motion to Amend. “Consideration of whether delay is undue . . . should generally

take into account the actions of other parties and the possibility of any resulting prejudice.”

Atchinson v. District of Columbia, 73 F.3d 418, 426 (D.C. Cir. 1996). Put differently, “the

significance of a delay depends on the prejudice it causes.” Washington Metro Area Transit

Auth. v. Aon Risk Servs., Inc., 2013 WL 12341689, at *2 (D.D.C. May 17, 2013). Thus, “[t]he

most important factor the Court must consider when determining whether to grant leave to

amend is the possibility of prejudice to the opposing party.” Djourabchi v. Self, 240 F.R.D. 5, 13

(D.D.C. 2006) (internal quotation marks omitted).

To establish prejudice from a proposed amended pleading, an “opposing party must show

that it was unfairly disadvantaged or deprived of the opportunity to present facts or evidence

which it would have offered had the amendments been timely.” In re Vitamins Antitrust

Litig., 217 F.R.D. 30, 32 (D.D.C. 2003). Defendants contend that they will be prejudiced by the

proposed amendments to the Complaint because they have conducted discovery “based on the

need to respond to plaintiffs’ Fifth Amendment claim” and have “sought no information

regarding the elements of a claim under Section 1983.” Opp. at 7.

The Court is unconvinced. First, Defendants will have ample opportunity to tweak their

discovery strategy because, as they concede, discovery has yet to close and both Plaintiffs are yet

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to be deposed. Id. at 6. Plaintiffs, in fact, have expressed a willingness to extend fact discovery

for as long as Defendants so desire, see ECF No. 37 (Pl. Reply) at 5, and the Court can certainly

accommodate their concerns. Second, and equally significant, Plaintiffs’ addition of a Fifth

Amendment challenge brought under § 1983 (rather than under the Constitution alone) merely

provides a means by which they can seek monetary damages should they prevail. Put

differently, Plaintiffs seek a new remedy but are not pursuing a new theory of the case. They are

“not adding any new factual allegations,” and the § 1983 claim is “closely related to (perhaps

even duplicative of) existing claims.” Washington Metro Area Transit Auth., 2013 WL

12341689, at *2 (granting motion to amend given lack of prejudice to nonmoving party); see also

State Teachers Retirement Bd. v. Flour Corp., 654 F.2d 843, 856 (2d Cir. 1981) (reversing

district court’s denial of leave to amend where new claim was closely related and there would be

no need for “a great deal of additional discovery”). The Court, accordingly, sees little prejudice

from amendment here.

C. Futility

Finally, Defendants argue that Plaintiffs’ proposed § 1983 claim should be rejected as

futile. “[A] district court may properly deny a motion to amend if the amended pleading would

not survive a motion to dismiss.” In re Interbank Funding Corp. Sec. Litig., 629 F.3d 213, 218

(D.C. Cir. 2010). Defendants correctly note that Knick did not overturn Williamson County’s

so-called “finality” requirement, which dictates that before a regulatory-taking claim be brought,

“the responsible state agency [must have] made a final decision as to the ‘application of the

challenged regulation to the property at issue.’” Dist. Intown Properties Ltd. Partnership v. Dist.

of Columbia, 23 F. Supp. 2d 30, 33 (D.D.C. 1998) (quoting Williamson County, 473 U.S. at

194). Defendants therefore argue that Plaintiffs’ compensatory-damages claim is futile because

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they have not received a “final” decision from a state administrative body as to whether they are

subject to the regulation at issue. Defendants also point out that Plaintiffs’ claim for punitive

damages cannot stand because “absent extraordinary circumstances, punitive damages are

unavailable against the District of Columbia under District of Columbia law.” Opp. at 9 (quoting

Mpoy v. Fenty, 870 F. Supp. 2d 173, 181–82 (D.D.C. 2012)).

Taking Defendants’ arguments in reverse order, it will certainly be challenging for

Plaintiffs to demonstrate the “extraordinary circumstances,” necessary for maintaining a

§ 1983 claim for punitive damages. See Lucero-Nelson v. Washington Metro. Area Transit

Auth., 1 F. Supp. 2d 1,11 (D.D.C. 1998) (noting that “extraordinary circumstances” exception is

“narrowly construed”). Plaintiffs do not offer much in the way of a defense of their claim for

punitive damages, but Defendants’ mere citation to the legal standard here –– without more ––

cannot sustain an argument to the contrary. If Defendants would like to fully brief this issue and

file a motion to strike punitive damages, they are, of course, free to do so at any time.

Finally, under the motion-to-dismiss standard, Plaintiffs have sufficiently established that

their claim for compensatory damages does not run afoul of Williamson County’s finality

requirement. Defendants contend that Plaintiffs have not pursued to conclusion all available

avenues of administrative review because they can seek an exemption from the challenged

statute from the Department of Energy and Environment. Plaintiffs counter with their own

futility-based argument, claiming that the exemption by its terms cannot apply to property

owners such as themselves, who are not also “distributor[s]” or “retail dealer[s].” See D.C. Code

§ 36-304.01(d)(1). According to Plaintiffs, it would be fruitless for them to apply for an

exemption.

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 Given these competing arguments, Defendants have simply failed to carry their burden of

establishing the futility of Plaintiffs’ proposed additional claim. As the Supreme Court has held,

“[O]nce it becomes clear that the agency lacks discretion to permit [the proposed land use], or

the permissible uses of the property are known to a reasonable degree of certainty, a takings

claim is likely to have ripened.” Palazzolo v. Rhode Island, 533 U.S. 606, 620 (2001). In other

words, “ripeness doctrine does not require a landowner to submit applications for their own

sake.” Id. at 622. Defendants have not offered any arguments as to why, notwithstanding the

seemingly clear statutory language at issue, Plaintiffs (who are not “distributors” or “retail

dealers” as defined by the statute, see D.C. Code § 36-301.01) could be granted an exemption.

They never explain, moreover, why Plaintiffs should have pursued an administrative process that

came into existence 15 months after the filing of their Complaint. The Court is thus unconvinced

at this time that the proposed claim for compensatory damages is futile.

IV. Conclusion

For the foregoing reasons, the Court will grant Plaintiffs’ Motion to Amend their

Complaint. A separate Order consistent with this Opinion shall issue this day.

/s/ James E. Boasberg
JAMES E. BOASBERG
United States District Judge
Date: October 3, 2019

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