Legend's Creek LLC et al v. State of Rhode Island et al

OCR transcription for search; preserved printed pages are authoritative

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UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND

)

LEGEND’S CREEK LLC; JON )
RESTIVO; and ADEN MOTT, )
Plaintiffs, )

)

v. C.A. No. 22-309-JJM-PAS
STATE OF RHODE ISLAND; and )
RHODE ISLAND DEPARTMENT OF _ )
HEALTH, )

Defendants. )

)
ORDER

Plaintiffs Jon Restivo and Aden Mott operate Plaintiff Legend’s Creek LLC, a
business located in Foster, Rhode Island (collectively “Plaintiffs” or “Legend’s
Creek”). Legend’s Creek sought a public water supply well permit from the Rhode
Island Department of Health (‘“RIDOH”) in order to install a commercial kitchen
where it intended to process food product on site. RIDOH investigated and denied its
application, finding no definitive evidence that a junkyard located on an adjoining
property would not contaminate the groundwater for the public supply well.

After appealing RIDOH’s decision to the Rhode Island Superior Court and
being denied, Legend’s Creek filed this suit, alleging six counts against Defendants
the State of Rhode Island and RIDOH for violating their civil rights by wrongfully
taking their property and other due process violations. Before the Court is

Defendants’ Motion to Dismiss Legend’s Creek’s Complaint. ECF No. 18.

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I. BACKGROUND

Mr. Restivo and Mr. Mott are members of and operate Legend’s Creek, LLC.
After selling personal care products over the internet from a location on Hartford Pike
in Foster, Mr. Restivo purchased property at 27 Mill Road in Foster hoping to reside
there and operate Legend’s Creek Farm, where they would grow raw materials and
process personal care products. They hoped to eventually operate a commercial
kitchen to process and sell food at the farm.

In order to have a commercial kitchen, Legend’s Creek needed to apply for a
public water supply permit because the existing well did not meet RIDOH
requirements. In their application, Plaintiffs identified an adjoining junkyard,
Wright’s Auto Salvage (“Wright’s”), as a potential source of contamination. Plaintiffs
allege that RIDOH asked the Rhode Island Department of Environmental
Management (“RIDEM”) about Wright’s and reported that it had no information that
the junkyard contaminated the groundwater. Plaintiffs began to drill the well before
any permit was issued.

RIDOH denied Plaintiffs’ permit application. Plaintiffs later attempted to
work with RIDOH who said they might approve the permit if Plaintiffs conducted a
hydrogeological study to determine whether Wright’s was polluting the groundwater.
Legend’s Creek Farm and Mr. Restivo filed an administrative appeal of RIDOH’s
denial to the Rhode Island Superior Court pursuant to § 42-35-15 of the Rhode Island
Administrative Procedures Act (“RIAPA”). That court dismissed the appeal when

Plaintiffs sold the property for $804,000.

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Next, Plaintiffs filed this six count complaint: Count I, Physical Taking under
the Fifth Amendment to the United States Constitution and Article 1, § 16 of the
Rhode Island Constitution; Count II, Regulatory Taking; Count III, Violation of
Procedural Due Process under the Fourteenth Amendment to the United States
Constitution and Article 1, § 2 of the Rhode Island Constitution; Count IV, Violation
of the Rhode Island Administrative Procedures Act R.I. Gen. Laws § 42-35-15;! Count
V, Violation of Equal Protection Clause under the Fourteenth Amendment to the
United States Constitution and Article 1, § 2 of the Rhode Island Constitution; and
Count VI, Violation of Substantive Due Process. They allege damages of lost property
value—they believe the property could have sold for over $1 million if it received the
public water supply permit—and millions of dollars in lost profits from Legend’s
Creek’s potential business operations. Defendants move to dismiss all counts. ECF
No. 13.

II. STANDARD OF REVIEW

Federal Rule of Civil Procedure 12(b)(6) tests the plausibility of the claims
presented in a plaintiffs complaint. “To avoid dismissal, a complaint must provide ‘a
short and plain statement of the claim showing that the pleader is entitled to relief.”
Garcia-Catalin v. United States, 734 F.3d 100, 102 (1st Cir. 2013) (quoting Fed. R.
Civ. P. 8(a)(2)). At this stage, “the plaintiff need not demonstrate that she is likely to

prevail, but her claim must suggest ‘more than a sheer possibility that a defendant

1 Legend’s Creek agrees that the RIAPA claim should be dismissed so the Court
DISMISSES Count IV.

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has acted unlawfully.” Jd. at 102-03 (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009)). The “complaint must contain sufficient factual matter, accepted as true, to
‘state a claim to relief that is plausible on its face.” Jgbal, 556 U.S. at 678 (quoting
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).

“The plausibility inquiry necessitates a two-step pavane.” Garcia-Catalan, 734
F.3d at 103. “First, the court must distinguish ‘the complaint’s factual allegations
(which must be accepted as true) from its conclusory legal allegations (which need
not be credited).” Jd. (quoting Morales-Cruz v. Univ. of P.R., 676 F.3d 220, 224 (1st
Cir. 2012)). “Second, the court must determine whether the factual allegations are
sufficient to support ‘the reasonable inference that the defendant is liable for the
misconduct alleged.” Jd. (quoting Haley v. City of Boston, 657 F.3d 39, 46 (1st Cir.
2011)). “In determining whether a complaint crosses the plausibility threshold, ‘the
reviewing court [must] draw on its judicial experience and common sense.” Jd.
(alteration in original) (quoting Jgbal, 556 U.S. at 679).
III. DISCUSSION

The State seeks to dismiss the five remaining claims under various theories of
immunity, preclusion, and for failure to state a claim.

A. Eleventh Amendment Immunity

The Eleventh Amendment provides a state immunity from “any suit in law or
equity, commenced or prosecuted ... by Citizens of another State, or by Citizens or
Subjects of any Foreign State.” U.S. Const. amend. XI. This immunity also applies

to suits by a state’s own citizens. Tennessee v. Lane, 541 U.S. 509, 517 (2004).

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RIDOH “stands in the shoes of Rhode Island itself, as an arm of the state.” Sinapi v.
R. L. Bd. of Bar Examiners, 910 F.3d 544, 553 (1st Cir. 2018). Therefore, “[a state
agency] and its members in their official capacities would appear to be protected by
the Eleventh Amendment from any suits for money damages.” Jd.

“Congress, however, has the power to abrogate Eleventh Amendment
immunity when properly exercising its power under Section 5 of the Fourteenth
Amendment. No immunity protects states from a claim for monetary damages based
on “actual violations” of the Fourteenth Amendment.” Jd. (citing United States v.
Georgia, 546 U.S. 151, 158 (2006) (emphasis in original)). Because Plaintiffs takings
claims in Counts I and II allege actual violations of the Fourteenth and Fifth
Amendments and the Fourteenth Amendment incorporates the Fifth Amendment
against the states, the State’s Eleventh Amendment immunity is superseded and the

Court finds that the State is not immune under the Eleventh Amendment.?

2 The State also advocates for dismissal under the well “settled beyond
peradventure” legal maxim “that neither a state agency nor a state official acting in
his official capacity may be sued for damages in a § 1983 action.” See Johnson v.
Rodriguez, 943 F.2d 104, 108 (1st Cir. 1991) (citing Will v. Mich. Dep't of State Police,
491 U.S. 58, 71 (1989)). However, the First Circuit has held that “a state like Rhode
Island, which has waived its eleventh amendment immunity, is a person for 1983
purposes.” Della Grotta v. Rhode Island, 781 F.2d 348, 348 (1st Cir. 1986); Marrapese
v. Rhode Island, 500 F. Supp. 1207, 1223 (D.R.I. 1980) (“Rhode Island, through the
enactment of § 9-31-1, did consent to liability under § 19838, at least insofar as the
challenged official conduct would have been tortious at common law.”). The Court
declines to weigh in on whether Legend’s Creek’s takings claims sound in tort
considering its conclusions on the unavailability of Eleventh Amendment Immunity

on these claims.

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B. Quasi-Judicial Immunity

In this case, RIDOH considered Legend’s Creek’s permit application, applied
the regulations to the facts presented in the application, and issued a decision
denying the permit. Defendants argue that they have absolute quasi-judicial
immunity afforded by common law because they are adjudicatory bodies that
functioned in this case in ways similar to judges. Legend’s Creek argues that quasi-
judicial immunity does not apply here because it has not sued individual state actors
or the State under a theory of respondeat superior.

The doctrine of quasi-judicial? immunity “provides absolute immunity for
public officials, including agency officials, who perform quasi-judicial functions.”
Coggeshall v. Mass. Bd. of Registration of Psychologists, 604 F.3d 658, 662 (1st Cir.
2010) (citing Butz v. Economou, 438 U.S. 478, 508, 512-13 (1978)); Goldstein v.
Galvin, 719 F.3d 16, 24 (1st Cir. 2013) (absolute immunity applies to “agency officials
with functions similar to judges and/or prosecutors”; see Bettencourt v. Bd. of
Registration in Med. of Mass., 904 F.2d 772, 782 (Ist Cir. 1990). The immunity
“endures even if the official acted maliciously and corruptly in exercising his judicial
or prosecutorial functions.” Goldstein, 719 F.3d at 24 Gnternal quotation marks

omitted); see also Wang v. New Hampshire Bd. of Registration in Med., 55 F.3d 698,

3 Quasi-judicial “is defined as a term applied to the action and discretion of
public administrative officers, who are required to investigate facts, and draw
conclusions from them, as a basis for their official action, and to exercise discretion of
a judicial nature.” Gray v. Derderian, 400 F. Supp. 2d 415, 426 (D.R.I. 2005) (citing
Suitor v. Nugent, 199 A.2d 722, 724 (1964)); Destek Grp., Inc. v. State of New
Hampshire Pub. Utilities Comm'n, 318 F.3d 32, 41 (1st Cir. 2003).

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702 (1st Cir. 1995). “Although this concept of absolute immunity allows some abuses
of official power to go unredressed, it is necessary for the effective administration of
government that government workers be able to perform their jobs without fear of
liability.” Jd. (internal quotation marks omitted); see also Calhoun v. City of
Providence, 390 A.2d 350, 356 (1978) (“Certain types of activities, as for example
judicial decision-making * * * must be engaged in by these officials freely,
independently, and untrammeled by the possibilities of personal liability”).

Legend’s Creek contorts reality to make a distinction that there can be no
quasi-judicial immunity for Defendants because they are “the State” and not
individual actors. But Legend’s Creek’s allegations and arguments make clear that
the decisions they are suing over were made by individual RIDOH employees.
RIDOH officials engaged in judicial decision-making when they denied the permit
based on their knowledge, experience, and discretion. See ECF No. 11 §{ 29-32
(detailing meetings with individual RIDOH employees making decisions impacting
Plaintiffs’ application); See ECF No.15 at 19-20 (“Plaintiffs allege that the
Defendants’ actions in denying them the public water supply permit based on the
mere theoretical possibility of contamination from an adjoining property constitute a
taking in violation of the federal and state constitutions.”). “While immunizing
officials from personal liability is, of course, a separate concept from governmental
immunity, * * * substantial public policies necessitate that even when the state is the

defendant, recovery should be denied the injured party.” Calhoun, 390 A.2d 350.

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“[A] quasi-judicial determination made in good faith ... would be entitled to
immunity on the part of the agents as well as the sovereign entity that employed
them.” Psilopoulos v. State, 636 A.2d 727, 728 (R.I. 1994); Butz, 438 U.S. 478; Ryan
y. State Dep't of Transp., 420 A.2d 841 (R.1.1980); Mall at Coventry Joint Venture v.
McLeod, 721 A.2d 865, 869 (R.I. 1998) (quasi-judicial immunity was an appropriate
rationale for granting judgment as a matter of law where RIDEM passed on a
wetlands application). In short, Defendants are entitled to quasi-judicial immunity.
Therefore, the claims brought under state law in Counts I, III, V, and VI are
DISMISSED.

C. Rooker-Feldman

The State argues that Legend’s Creek’s claims are barred under the Rooker-
Feldman doctrine. Rooker-Feldman, which the United States Supreme Court
described as “a narrow doctrine,” Lance v. Dennis, 546 U.S. 459, 464 (2006), “is
confined to cases of the kind from which the doctrine acquired its name: cases brought
by state-court losers complaining of injuries caused by state-court judgments
rendered before the district court proceedings commenced and inviting district court
review and rejection of those judgments.” Hxxon Mobil Corp. v. Saudi Basic Indus.
Corp., 544 U.S. 280, 284 (2005).

“[Llower courts cannot rely on Rooker-Feldman to dismiss a case unless, inter
alia, the federal plaintiff seeks redress of an injury caused by an allegedly erroneous
state court decision; if the plaintiff alleges a constitutional violation by an adverse

party independent of the injury caused by the state court judgment, the doctrine does

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not bar jurisdiction.” Davison v. Gov't of Puerto Rico-Puerto kico Firefighters Corps.,
471 F.3d 220, 222-23 (1st Cir. 2006) (citing Exxon Mobil Corp., 544 U.S. at 284); see
also Washington v. Wilmore, 407 F.3d 274, 280 (4th Cir. 2005) (holding that Rooker-
Feldman does not apply when the plaintiffs “injury rests not on the state court
judgment itself but rather on the alleged violation of his constitutional rights by [the
defendant]”). That is the situation in this case; Legend’s Creek brings claims alleging
- that the State violated its constitutional rights. As such, the Court cannot dismiss

Legend’s Creek’s claims under Rooker-Feldman.

D. Res Judicata and Collateral Estoppel

Similarly, the doctrines of res judicata and collateral estoppel do not bar
Legend’s Creek’s claims. Those concepts require a final adjudication on the merits of
the same claims that are currently before this Court. Weaver's Cove Energy, LLC y.
Rhode Island Conservation Res. Mgmt. Council, 583 F. Supp. 2d. 259, 278 (D.R.L.
2008). The state court proceedings did not consider or decide any constitutional
challenges to RIDOH’s decision. As such, Legend’s Creek’s claims here survive
despite the State’s argument that they be dismissed as already adjudicated at the
state level.

K. Remaining Claims

The Court now turns to Legend’s Creek’s remaining claims: two counts of an
unconstitutional taking (I and ID; violations of procedural due process and equal
protection (III and V), and a violation of substantive due process (VI).

1. Takings Claims

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The Takings Clause of the Fifth Amendment, which provides that private
property shall not be taken for public use without just compensation, applies to the
states through the Fourteenth Amendment. ZYorromeo v. Town of Fremont, 438 F.3d
113, 114 n.1 (Ast Cir. 2006). As Plaintiffs point out, the State did not substantively
argue that the takings claims should be dismissed, relying on its immunity and
estoppel arguments. But essentially, the State seeks to defeat Legend’s Creek’s
takings claims on the grounds that its denial of the water supply permit was at its
discretion and in furtherance of the public health and safety as the regulations
dictate. The property was not “taken for public use” because the proposed well was
to expand Legend’s Creek’s own existing business in which the public has no interest.

Reviewing the Amended Complaint, the Court finds that it sufficiently alleges
a taking. Legend’s Creek alleges that Defendants’ refusal to permit them to operate
a public water supply well on its property because the adjoining junkyard might be
polluting the ground water or water table constitutes the imposition of a negative or
restrictive easement and/or a regulatory taking on the Mill Road Property without
just compensation. ECF No. 11 {{ 54-65; see also id. § 19-27, 39 (alleging lack of
data supporting contamination). Plaintiffs allege that Defendants have no evidence
that the junkyard is contaminating or could contaminate their property and unfairly
places the burden of disproving potential contamination on them which amounts to
an unconstitutional taking and diminishes the property’s value. Jd. At this early
stage of the proceedings, the Court finds that Legend’s Creek has put forth sufficient

allegations of an unconstitutional taking without compensation against the State.

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Therefore, the Court declines at this time to dismiss Plaintiffs’ Fifth Amendment
claims brought pursuant to Section 1983. Defendants’ motion as to the federal claims
Counts I and IJ is DENIED.

2. Procedural Due Process and Equal Protection

“To establish a procedural due process violation, the plaintiff ‘must identify a
protected liberty or property interest and allege that the defendants, acting under
color of state law, deprived [it] of that interest without constitutionally adequate
process.” Gonzalez-Droz v. Gonzalez-Colon, 660 F.3d 1, 18 (1st Cir. 2011) (quoting
Aponte—Torres v. Univ. of P.R., 445 F.3d 50, 56 (1st Cir. 2006)). “The test for a
procedural due process violation requires the plaintiffs to show first, a deprivation of
a protected property interest, and second, a denial of due process. To meet the first
prong and show that a “statutorily created benefit” is a property interest, “a person
‘must have more than a unilateral expectation of it. He must, instead, have a
legitimate claim of entitlement to it.” Perez-Acevedo v. Rivero-Cubano, 520 F.3d 26,
30 (1st Cir. 2008) (quoting Coyne v. City of Somerville, 972 F.2d 440, 443 (1st
Cir.1992) (quoting Bd. of Regents v. Roth, 408 U.S. 564, 577 (1972)). A “legitimate”
entitlement “must be grounded in some statute, rule, or policy.” oth, 408 U.S.
at 576.

“In considering whether state law creates an entitlement, we look primarily to
the discretion state law accords state actors to withhold the entitlement from
individuals. In general, ‘a benefit is not a protected entitlement if government officials

may grant or deny it in their discretion.” Clukey v. Town of Camden, 717 F.8d 52,

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56 (1st Cir. 2013) (quoting Town of Castle Rock, Colo. v. Gonzales, 545 U.S. at 748,
756 (2005)). “[Tlhe more circumscribed is the government’s discretion (under
substantive state or federal law) to withhold a benefit, the more likely that benefit
constitutes ‘property.” Bertzell v. Jeffrey, 643 F.2d 870, 874 (1st Cir. 1981).

Plaintiffs did not have a property interest in the public water supply permit
and so their claim fails on the first prong of the procedural due process analysis. The
state law involved here gives the State the discretion to apply the chapter's
requirements and approve or deny an application commensurate with its compliance
or noncompliance. See R.I.G.L. §§ 46-13-2.1 and 46-13-2.2. When that discretion is
not only based on the statutory language but also the public health and safety
purpose of the law, Plaintiffs did not have legitimate claim of entitlement to the public
water supply permit. The Court dismisses Counts III and V.

3. Substantive Due Process

Defendants move to dismiss Plaintiffs’ claim in Count VI where they allege
that Defendants’ decision to deny them a public water supply permit violates
substantive due process. In opposing the motion, Legend’s Creek asks the Court to
apply an arbitrary and capricious standard in analyzing the adequacy of their
complaint, which would match their allegations of an “arbitrary, subjective, and
unjustified” permit denial. The Court declines to do so in the face of the First Circuit's
statement made “with ‘a regularity bordering on the monotonous’ that to be liable for
a violation of substantive due process rights, a defendant must have engaged in

behavior that is ‘conscience-shocking.” Mongeau v. City of Marlborough, 492 F.3d

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14, 17 (1st Cir. 2007). Examples of conduct that has been found to be conscience:
shocking are in “cases involving corruption or self-dealing, hampering development
to interfere with otherwise constitutionally protected activity, bias against an ethnic
group, bribery, and the threatening of municipal officials by political leaders.”
Wyrostek v. Nash, 984 F. Supp. 2d 22, 27-28 (D.R.I. 2013) (internal citations
omitted).

In essence, Legend’s Creek alleges that RIDOH decided to deny their public
water supply permit without knowing whether the property’s ground water was
polluted or would eventually become polluted. The State counters that it conducted
an extensive investigation and determined, in its discretion as allowed under the
regulations, that the potential contamination was too much of a risk to the public
health to allow the permit. “[T]he substantive due process doctrine may not, in the
ordinary course, be invoked to challenge discretionary permitting or licensing
determinations of state or local decisionmakers, whether those decisions are right or
wrong.” Pagén v. Calderén, 448 F.3d 16, 33 (1st Cir. 2006); PFZ Prop., Inc. v.
Rodriguez, 928 F.2d 28, 31 (1st Cir. 1991) (“[Rlejections of development projects and
refusals to issue building permits do not ordinarily implicate substantive due process.
Even where state officials have allegedly violated state law or administrative
procedures, such violations do not ordinarily rise to the level of a constitutional
deprivation.” (internal citations omitted)). Plaintiffs’ allegations rooted in the permit
denial do not rise to the level of a conscience-shocking deprivation of substantive due

process. The Court dismisses Count VI.

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IV. CONCLUSION

The Court DISMISSES Counts III, IV, V, and VI. The Court also dismisses

the claims brought under state law in Counts I and II.

ITIS SO pe / I

body. Uh

John J. McConnell Jr.
Chief Judge
United States District Court

June 16, 2023

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