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Arkansas Riverview Development v. City of Little Rock

July 18, 2006

ARKANSAS RIVERVIEW DEVELOPMENT PLAINTIFF
v.
CITY OF LITTLE ROCK AND CAPITOL CITY HOTEL LIMITED PARTNERSHIP DEFENDANTS



The opinion of the court was delivered by: J. Leon Holmes United States District Judge

OPINION AND ORDER

This action arises out of the City of Little Rock's revocation of a construction permit issued to Arkansas Riverview Development, LLC ("ARD"), for development of the "Residences at Building 5" located at #5 Statehouse Plaza, Little Rock, Arkansas. ARD brings suit under 42 U.S.C. § 1983 against the City of Little Rock under the Fifth and Fourteenth Amendments to the United States Constitution for violations of substantive and procedural due process rights and under Arkansas state law for declaration of valid assignment of rights. It also brings suit against Capitol City Hotel Limited Partnership ("CCH") to quiet title against this party under state law. Before this Court is a motion for preliminary injunction in which ARD asks the Court to order the City to reinstate the permit immediately. The Court conducted an evidentiary hearing on this motion on July 17, 2006, at which ARD appeared through its attorneys, Philip S. Anderson, David M. Powell, and Cassandra P. Baldwin, and its representative, Bradley S. Canada; the City appeared through its attorneys, Thomas M. Carpenter and Beth Carpenter, and its representative, Bruce Moore; and CCH appeared by and through its attorneys, Garland J. Garrett and Meredith B. Switzer. The Court now grants a preliminary injunction in this case and hereby orders the City to reinstate Permit #200600876 until the City shows that it has granted ARD its rights to due process or until this Court issues a final judgment following trial on the merits, whichever occurs earlier.

Background

ARD is an Arkansas limited liability company with its principal place of business in Little Rock. On April 29, 2004, it purchased from the Arkansas Bar Foundation a building and real property located at #5 Statehouse Plaza, Little Rock, Arkansas. It then began a two-phase renovation of the existing building and construction of a five-floor upward addition for mixed use as residential condominiums and commercial space.

At the time of purchase by ARD, the existing building was located partially on real property owned in fee simple by the Arkansas Bar Foundation and partially in airspace owned by the City of Little Rock. The airspace in question is located over Garland Street. The Arkansas Bar Foundation leased rights to this airspace from the City pursuant to an original lease executed on May 10, 1971; amended on February 20, 1973; and extended on November 23, 1994 (collectively, "the city lease"). The city lease required the Arkansas Bar Foundation to obtain the City's written consent prior to assigning the rights therein to a third party but states that such consent will not be unreasonably withheld. It also includes a right of first refusal to "Camelot Inn - Little Rock, Inc. or its successors in the ownership and operation of the convention center hotel to be constructed over Garland Street west of the premises leased herein."*fn1

In October 2004, C.B.M. obtained a building permit to renovate the existing building in order to permit the upwards construction and, immediately after, began renovation. Ron Boyeskie, a representative of C.B.M. Construction Co., Inc., ARD's general contractor, met with representatives of the occupants of the adjacent properties, the Doubletree Hotel and the Old State House, to discuss the project. Occupants of both adjacent properties agreed to the closure of Conway Street to allow for the erection of the additional floors.

In August 2005, C.B.M. submitted to the City an application for a building permit for the upward construction, including in the application detailed plans, specifications, and dimensions of the renovation and new construction. The City commented on the plans. The City's Plans Examiner met with representatives of Taggart Foster Currence Gray Architects, Inc., the project design professionals, on several occasions during and prior to the submission of the plans. In November 2005, representatives of ARD, C.B.M., and Taggart Foster Currence Gray met with Mayor Jim Dailey, City Manager Bruce Moore, and perhaps others. During that meeting, ARD provided the City with drawings and pictures of the project as constructed and the group toured the project site. During the renovation period and prior to commencement of the upward construction, Canada met on occasion with Moore and others to discuss the project.

On November 8, 2005, the City sent to Taggart Foster Currence Gray an Acknowledgment of Franchise Conditions that granted ARD permission to construct balconies over Garland Street in accordance with approval provided by the Little Rock Board of Adjustment on October 31, 2005. On January 25, 2006, after review of ARD's permit application, the City issued Building Permit No. 200600876 ("the permit") for construction of the additional floors. Construction began almost immediately.

While obtaining financing for the construction project in January 2006, ARD learned that a portion of the building was located in airspace leased to the Arkansas Bar Foundation by the City. ARD obtained from the Arkansas Bar Foundation an assignment of the city lease, effective April 29, 2004, and recorded on February 3, 2006. It did not obtain written consent from the City nor did the Arkansas Bar Foundation offer right of first refusal to CCH.*fn2 Subsequent to the assignment, CCH refused to sign any relinquishment of the right of first refusal and allegedly began working with the City of Little Rock and the Advertising and Promotion Commission to stop upward construction of the building. Efforts were undertaken by all parties to resolve the issues in dispute. However, on July 12, 2006, the City revoked the permit and demanded that all work pursuant to the permit immediately cease. Letter notice to this effect stated as the basis for the revocation the fact that the permit did not "accurately reflect the owner of all the property in question" and that "the owner of a substantial portion of the property has not provided permission." Specifically, the letter confirmed that the City of Little Rock owned the airspace rights and stated that the City could not find any document authorizing C.B.M. to undertake construction over this space.

Preliminary Injunction Standard

A district court has broad discretion to grant or deny a preliminary injunction. United Indus. Corp. v. Clorox Co.,140 F.3d 1175, 1179 (8th Cir. 1998). In making the determination in this case, the Court considers (1) the threat of irreparable harm to ARD; (2) the balance between harm to ARD and injury to other interested parties; (3) the likelihood that ARD will succeed on the merits; and (4) the public's interest in the issuance of an injunction. Blue Moon Entm't, LLC v. City of Bates City, Mo.,441 F.3d 561, 564 (8th Cir. 2006) (citing Dataphase Sys., Inc. v. C L Sys., Inc., 640 F.2d 109, 113 (8th Cir. 1981) (en banc)). No factor, by itself, is dispositive. United Indus. Corp.,140 F.3d at 1179. "In essence, the inquiry is an equitable one, requiring that [the Court] consider 'whether the balance of equities so favors the movant that justice requires the court to intervene to preserve the status quo until the merits are determined.'" Glenwood Bridge, Inc. v. City of Minneapolis,940 F.2d 367, 370 (8th Cir. 1991) (quoting Dataphase, 640 F.2d at 113).

Threat of Irreparable Harm

The Eighth Circuit repeatedly emphasizes the importance of irreparable harm in the granting of preliminary injunctions. See e.g., Adam-Mellang v. Apartment Search, Inc., 96 F.3d 297, 299 (8th Cir. 1996) (quoting Beacon Theatres, Inc., v. Westover, 359 U.S. 500, 506-07, 79 S.Ct. 948, 3 L.Ed. 2d 988 (1959) ("The basis of injunctive relief in the federal courts has always been irreparable harm and inadequacy of legal remedies."). At the hearing, ARD presented satisfactory and ample proof that it will suffer irreparable harm if the City successfully halts construction of the project in its current vulnerable state. Construction of the project is at a critical stage. Both Canada and Boyeskie testified to this effect. Upon revocation of the permit, ARD was within weeks of completing the exterior of the building. As it stands, the building has not been "topped off," the elevator shaft remains unfinished and open, and portions of the interior are exposed to the elements, presenting serious risks of water damage and, in the event of strong summer storms like those recently experienced in Little Rock, flooding. Had the City taken action at an earlier or, perhaps even, later stage of construction, ARD might not face the same threat of irreparable harm. As it is, the threat is palpable and warrants immediate injunctive relief. Furthermore, Boyeskie testified to the harm that occurs when a complex commercial construction project is forced to demobilize and then, later, tries ...


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