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MT Holly Citizens in Action, Inc v. Township of Mount Holly

October 23, 2009

MT HOLLY CITIZENS IN ACTION, INC., ET AL., PLAINTIFFS,
v.
TOWNSHIP OF MOUNT HOLLY, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Hillman, District Judge

OPINION

This matter comes before the Court on defendants' motions to dismiss all counts in plaintiffs' complaint pursuant to Federal Civil Procedure Rule 12(b)(6). For the reasons expressed below, defendants' motions will be granted in part, denied in part, and continued in part.

BACKGROUND

This case involves the redevelopment of the Mount Holly Gardens neighborhood (the "Gardens") in Mount Holly, New Jersey. Plaintiffs are low-income, African-American, Hispanic and "white," residents of the Gardens, who object to the plan because they are being forcibly removed from their homes, which are being replaced with new, much higher-priced market rate homes. Plaintiffs claim that defendants--the Township of Mt. Holly, its manager and mayor, the construction company selected to undertake the redevelopment, Keating Urban Partners, LLC, and the company hired by Keating to conduct the relocation activities, Triad Associates, Inc.-- violated Title VIII of the Civil Rights Act of 1968 (the Fair Housing Act or FHA), 42 U.S.C. § 3601 et seq. (Count One against all defendants); the Civil Rights Act of 1866, 42 U.S.C. § 1982 (Count Two against the Township); the Equal Protection Clause of the U.S. Constitution, brought pursuant to 42 U.S.C. § 1983 (Count Three against the Township); New Jersey Law Against Discrimination, N.J.S.A. 10:5-1 et seq. (Count Four against all defendants); Equal Protection Clause of the New Jersey State Constitution (Count Five against the Township); Due Process Clause of the New Jersey State Constitution (Count Six against the Township); Due Process Clause of the U.S. Constitution, brought pursuant to 42 U.S.C. § 1983 (Count Seven against the Township); New Jersey Local Redevelopment and Housing Law, N.J.S.A. 40A:12A-1 et seq. (Count Eight against the Township); and the General Welfare Clause of the New Jersey State Constitution (Count Nine against the Township).

Defendants have moved to dismiss all these claims against them. During the briefing of these motions, this case has involved several hearings, a denial of a TRO, the filing of a second amended complaint, and the issuance of three Opinions. Most recently, the Court denied plaintiffs' request for a preliminary injunction to stop the redevelopment based on the defendants' alleged violation of the FHA. (Docket No. 94.) The plaintiffs had argued that the redevelopment plan has a disparate impact on the African-American and Hispanic residents, and they are facing irreparable harm from the threat of losing their homes and their community ties, being inadequately compensated for their properties, and being unable to obtain affordable and decent replacement housing. The defendants had countered that they did not violate the FHA because there is no intentional discrimination or disparate impact on the Garden residents, and even if there were, the defendants are proceeding pursuant to a bona fide governmental interest in the least restrictive way. The Court found that, for the purposes of denying a preliminary injunction, plaintiffs had not pleaded a successful Fair Housing Act claim. Specifically, the Court found that plaintiffs could not prove their prima facie case of disparate impact, and even if they were able to establish their prima facie case, they did not rebut the Township's legitimate interest in the redevelopment, and they did not show how an alternative course of action would have a lesser impact.

The Court's holding on the preliminary injunction motion presents a peculiar procedural posture in which to hear defendants' motions to dismiss. Defendants filed their motions to dismiss prior to the preliminary injunction hearing, and even though plaintiffs' opposition and defendants' replies were filed a few days after, none of the briefing mentions the Court's findings with regard to the preliminary injunction. This is understandable, because in deciding defendants' motions to dismiss plaintiffs' complaint for failure to state a claim upon which relief can be granted pursuant to Fed. R. Civ. P. 12(b)(6), the Court must accept all well-pleaded allegations in the complaint as true, view them in the light most favorable to the plaintiff, and must only consider the facts alleged in the pleadings, the documents attached thereto as exhibits, and matters of judicial notice. Southern Cross Overseas Agencies, Inc. v. Kwong Shipping Group Ltd., 181 F.3d 410, 426 (3d Cir. 1999). The Court, however, cannot ignore the parties' briefing and representations at oral argument on the preliminary injunction motion, and the Court cannot ignore its findings and legal conclusions. Thus, the question is whether the Court's Opinion and Order on the preliminary injunction motion can be considered a "matter of judicial notice," and to what extent can the Court rely on that Opinion and Order in deciding the instant motions to dismiss.

The Third Circuit has held that although "a prior judicial opinion constitutes a public record of which a court may take judicial notice, it may do so on a motion to dismiss only to establish the existence of the opinion, not for the truth of the facts asserted in the opinion." Lum v. Bank of America, 361 F.3d 217, 222 n.3 (3d Cir. 2004) (citation omitted). "'[A] court that examines a transcript of a prior proceeding to find facts converts a motion to dismiss into a motion for summary judgment.'" Id. (citing Southern Cross, 181 F.3d at 427 n.7 (explaining that "[i]t has been suggested that the appropriate analogy is the hearsay rule, which allows an out-of-court statement to be admitted into evidence for purposes other than establishing the truth of the statement")). Thus, to the extent that findings of fact were made in deciding the preliminary injunction, and the Court wishes to rely on those findings to decide the motions to dismiss, the motions to dismiss must be converted into one for summary judgment.

"When a District Court decides to convert a motion to dismiss into a motion for summary judgment, it must provide the parties 'reasonable opportunity' to present all material relevant to a summary judgment motion, and the parties can take advantage of this opportunity only if they have 'notice of the conversion.'" In re Rockefeller Center Properties, Inc. Securitites Litigation, 184 F.3d 280, 287-88 (3d Cir. 1999) (citing Rose v. Bartle, 871 F.2d 331, 340 (3d Cir. 1989)). Notice must be "unambiguous and must fairly apprise the parties that the court intends to convert the motion." Id. (citations and quotations omitted). Notice need not be express to meet these standards, but it is recommended that courts provide express notice when they intend to convert a motion to dismiss. Id.

Based on the foregoing, the Court will analyze each count in plaintiffs' complaint to determine whether defendants' motions can be decided as motions to dismiss, or whether they must be converted. If they must be converted, the Court will provide the parties with sufficient time to respond.

1. Count One - Fair Housing Act

The sole basis for plaintiffs' motion for a preliminary injunction was their Fair Housing Act claim. In the Opinion denying plaintiffs' motion, the Court explained the legal standard for proving an FHA claim, and determined that it did not appear that plaintiffs would be successful on that claim. The Court explained as follows:

Section 3604(a) of the Fair Housing Act makes it unlawful to "refuse to sell or rent after the making of a bona fide offer, or to refuse to negotiate for the sale or rental of, or otherwise make unavailable or deny, a dwelling to any person because of race, color, religion, sex, familial status, or national origin." 42 U.S.C. § 3604(a) (emphasis added). The FHA can be violated by either intentional discrimination or if a practice has a disparate impact on a protected class. Community Services, Inc. v. Wind Gap Mun. Authority, 421 F.3d 170, 176 (3d Cir. 2005). Plaintiffs here contend that the Gardens redevelopment plan has a disparate impact on the minorities living in the Gardens. In order to prove their claim, plaintiffs must first establish a prima facie case of disparate impact. Resident Advisory Board v. Rizzo, 564 F.2d 126, 148 (3d Cir. 1977). To show disparate impact, plaintiffs must show that the Township's actions have had a greater adverse impact on the protected groups (here, African-Americans and Hispanics) than on others. Lapid-Laurel, L.L.C. v. Zoning Bd. of Adjustment of Tp. of Scotch Plains, 284 F.3d 442, 466-67 (3d Cir. 2002). If a plaintiff establishes his prima facie case, the burden shifts to the defendant to demonstrate justification. The "justification must serve, in theory and practice, a legitimate, bona fide interest of the Title VIII defendant, and the defendant must show that no other alternative course of action could be adopted that would enable that interest to be served with less discriminatory impact." Rizzo, 564 F.2d at 149. Finally, "[i]f the defendant does introduce evidence that no such alternative course of action can be adopted, the burden will once again shift to the Plaintiff to demonstrate that other practices are available." Id. at 149 n.37. "If the Title VIII prima facie case is not rebutted, a violation is proved." Id. at 149.

Here, for the purposes of their motion for preliminary injunction, plaintiffs have not demonstrated that they will likely succeed with their FHA claim because they have not demonstrated that they can make their prima facie case. Plaintiffs argue that the redevelopment plan has a disparate impact on minorities in two ways. First, plaintiffs argue that the redevelopment more negatively affects minorities in Mt. Holly than non-minority residents because the redevelopment is driving out the minority population of Mt. Holly. To support their position, plaintiffs present a report of a demographic and statistical expert, Andrew A. Beveridge, Ph.D., who states that as of 2000, seventy-five percent of the people living in the Gardens were minority residents. Dr. Beveridge states that the Gardens contains a highly concentrated minority population, more than any other area of Mt. Holly. Consequently, Dr. Beveridge opines that the redevelopment of the Gardens effectively and significantly reduces the minority population in Mt. Holly. Plaintiffs contend that this violates the FHA.

Second, plaintiffs argue that the redevelopment plan has a disparate impact on minorities because the plan is targeted at an area that is populated by mostly minorities. Plaintiffs live in the Gardens because for families with limited income, the Gardens represented an attractive affordable housing opportunity. Demolishing the Gardens and replacing the current housing with higher-priced homes, and only a few low-income units, effectively causes the targeted reduction of Mt. Holly's minority population. This, too, plaintiffs argue is a violation of the FHA.

The statistical repercussions of redevelopment do not provide evidence that the Township implemented the plan to intentionally or effectively drive out the minority population of Mt. Holly. Indeed, even though plaintiffs have pointed out that the redevelopment of the Gardens has reduced the minority population of Mt. Holly, they have not accounted for how many minorities will move into the new housing. Furthermore, and more importantly for the plaintiffs' FHA claim of disparate impact, the redevelopment plan does not apply differently to minorities than non-minorities. Several plaintiffs classify themselves as "white," yet the plan affects them in the exact same way as their minority neighbors.

The real effect of the Gardens redevelopment is that there will be less lower-income housing in Mt. Holly. Although the Township may have some obligation with regard to providing a certain number of low-income housing pursuant to other law, the reduction of low-income housing is not a violation of the FHA. The FHA prohibits the Township from making unavailable a dwelling to any person because of race--it does not speak to income. Redevelopment of blighted, low-income housing is not, without more, a violation of the FHA. Here, where fourteen homes are occupied by African-American plaintiffs, thirteen homes are occupied by Hispanic plaintiffs, and six homes are occupied by "white" plaintiffs, and all are affected in the same way by the redevelopment, the Court cannot find, on the current record at this preliminary injunction stage, that plaintiffs will succeed on their disparate impact FHA claim.

Even if plaintiffs were able to establish their prima facie case, they have not rebutted the Township's legitimate interest in the redevelopment, and they have not shown how an alternative course of action would have a lesser impact. These points also speak to the three other elements plaintiffs must prove for a preliminary injunction--irreparable harm, public interest and equities--and these elements are discussed in depth below. For the purposes of establishing an FHA claim, however, it is important to note that redevelopment of the community to remove blight conditions is a bona fide interest of the State. In 1958, the New Jersey Supreme Court commented, "Community redevelopment is a modern facet of municipal government. Soundly planned redevelopment can make the difference between continued stagnation and decline and a resurgence of healthy growth. It provides the means of removing the decadent effect of slums and blight on neighboring property values, of opening up new areas for residence and industry." Wilson v. City of Long Branch, 142 A.2d 837, 842 (N.J. 1958). More specifically with regard to the Gardens redevelopment, the New Jersey Appellate Division found that "[t]he dilapidated, overcrowded, poorly designed community, in addition to the high level of crime in the area, is clearly detrimental to the safety, health, morals and welfare of the community." Citizens In Action v. Township Of Mt. Holly, 2007 WL 1930457, 13 (N.J. Super. Ct. App. Div. July 5, 2007). It is clear that the Township has a legitimate interest in the redevelopment of the Gardens. (Feb. 13 Op. at 5-9.)

Thus, based on the foregoing analysis of plaintiffs' FHA claim, it appears that when facts beyond those contained in the complaint are considered, plaintiffs do not have a viable claim. In order, however, for the Court to consider its previous findings and the evidence presented at the preliminary injunction hearing, the Court must convert the present motions to dismiss into ones for summary judgment on plaintiffs' FHA claim.

Upon conversion, defendants have the burden of demonstrating the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Their burden has already been met based on the findings of law and fact from the preliminary injunction hearing, which may now be considered due to the conversion of the motion. As the facts existed at the time of the ...


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