Metropolitan Omaha Property v. City of Omaha, Nebraska

M
            United States Court of Appeals
                       For the Eighth Circuit
                   ___________________________

                           No. 20-1006
                   ___________________________

Metropolitan Omaha Property Owners Association, Inc.; Pierce Carpenter;
                        Hillcrest Apartments

                               Plaintiffs - Appellants

                                  v.

                       City of Omaha, Nebraska

                             Defendant - Appellee
                   ___________________________

                           No. 20-1851
                   ___________________________

Metropolitan Omaha Property Owners Association, Inc.; Pierce Carpenter;
                        Hillcrest Apartments

                               Plaintiffs - Appellants

                                  v.

                       City of Omaha, Nebraska

                               Defendant - Appellee
                            ____________

               Appeal from United States District Court
                for the District of Nebraska - Omaha
                           ____________
                          Submitted: November 17, 2020
                               Filed: March 15, 2021
                                 ____________

Before BENTON, ERICKSON, and GRASZ, Circuit Judges.
                          ____________

BENTON, Circuit Judge.

       Metropolitan Omaha Property Owners Association, Inc., Pierce Carpenter,
and Hillcrest Apartments sued the City of Omaha, asserting that the Rental Property
Registration and Inspection Ordinance violated their constitutional rights, breached
their consent decree with the City, and violated the Fair Housing Act. The district
court1 denied a preliminary injunction, eventually dismissing their claims. They
appeal. Having jurisdiction under 28 U.S.C. §§ 1291 and 1292(a)(1), this court
affirms.

                                         I.

      Metro Omaha, a Nebraska nonprofit corporation, has about 1,000 members
that own and operate real property in Omaha, including Carpenter and Hillcrest.

       In a prior suit, Metro Omaha claimed that the City conducted unlawful
searches and trespassed on rental properties. By a consent decree, Metro Omaha
agreed to dismiss its case, and the City agreed to amend the Omaha Municipal Code
and adopt standard operating procedures for housing inspections. See Consent
Decree, Metropolitan Omaha Property Owners Association, Inc. v. City of Omaha,
No. 8:13-cv-00230-LSC-FG3 (D. Neb. Mar. 4, 2015) (No. 36) (incorporating the
terms of the settlement agreement found at No. 35-2). These procedures are the
official policy of the City’s Permits and Inspection Division.


      1
        The Honorable Laurie Smith Camp, United States District Judge for the
District of Nebraska, now deceased.
                                    -2-
       Four years after the consent decree, the City enacted the Rental Property
Registration and Inspection Ordinance (effective January 1, 2020). Its stated
purpose is to “implement uniform residential rental property registration, and a
regular inspection program that is phased in accordance with the history of code
violations on each property,” and “to address the issue of substandard rental
properties, promote greater compliance with health and safety standards, and
preserve the quality of the city’s neighborhoods and available housing.” Omaha
Code § 48-201(b).

       The Ordinance requires all rental properties in the City (and three miles
outside it) to register with the Permits and Inspections Division before leasing to
tenants. §§ 48-202, 48-204(a). There is no fee to register. § 48-205(d). To maintain
registration, property owners must comply with the requirements of the Ordinance
and applicable laws, rules, and regulations. § 48-204(c).

       The Ordinance subjects all registered properties to City inspections. § 48-
206. Inspections are annual if properties had an unremedied code violation within
three years before the Ordinance’s effective date, if they fail to remedy an existing
violation, or if they are not timely registered. § 48-206(a). Properties not inspected
annually are inspected once every ten years. § 48-206(b). Property owners pay $125
for each inspection and for each failure to allow entry for a scheduled inspection
(unless the failure is due to a tenant’s refusal to consent to the inspection). § 48-
206(g).

      Section 48-206(c) outlines the procedure for inspections. Before an
inspection, City officials must give the property owner and tenant 14-days advance
written notice. § 48-206(c). The notice must include a form for the tenant “to
consent to entry of the rental dwelling, if desired”

Id. The Section states:

      If either the owner or tenant of the relevant rental dwelling refuses to
      consent to an inspection, the code official may obtain a warrant or other
      court order for the inspection in accordance with applicable law,
      including, but not limited to, Neb. Rev. Stat. sections 29-830 et seq.
                                         -3-

Id. The City may

not penalize a tenant, owner, or manager for a tenant’s refusal to
consent.

Id. The City also

may not penalize if an inspection is “not conducted
because a warrant or other court order cannot be obtained . . . .”

Id. Metro Omaha sued

the City, invoking 42 U.S.C. §§ 1983, 1985, and 3613. It
asserted that the Ordinance violates the Fourth, Fifth, and Fourteenth Amendments,
breaches the consent decree, and violates the Fair Housing Act. Metro Omaha
moved for preliminary and permanent injunctions. The district court denied both,
dismissing its claims. Metro Omaha appeals.

                                         II.

      This court reviews de novo the grant of a motion to dismiss. Park Irmat Drug
Corp. v. Express Scripts Holding Co., 

911 F.3d 505

, 512 (8th Cir. 2018). This court
“accepts as true the complaint’s factual allegations and grants all reasonable
inferences to the non-moving party.”

Id. (cleaned up). To

survive a 12(b)(6) motion to dismiss, “a complaint must contain sufficient
factual matter, accepted as true, to state a claim to relief that is plausible on its
face.” McShane Constr. Co., LLC v. Gotham Ins. Co., 

867 F.3d 923

, 927 (8th Cir.
2017), quoting Ashcroft v. Iqbal, 

556 U.S. 662

, 678 (2009). The complaint “must
provide ‘more than labels and conclusions, and a formulaic recitation of the elements
of a cause of action will not do.’ ”

Id., quoting Bell Atl.

Corp. v. Twombly, 

550 U.S. 544

, 555 (2007). A claim is facially plausible when “the plaintiff pleads factual
content that allows the court to draw the reasonable inference that the defendant is
liable for the misconduct alleged.”

Id., quoting Iqbal, 556

U.S. at 678.

                                         A.

      According to Metro Omaha, the Ordinance violates its constitutional rights to
be free from unreasonable searches and seizures under the Fourth and Fourteenth


                                         -4-
Amendments. Metro Omaha asserts that the Ordinance authorizes warrantless
inspections of properties if consent is withheld.

       The Fourth Amendment protects the “right of the people to be secure in their
persons, houses, papers, and effects, against unreasonable searches and seizures,”
providing “no Warrants shall issue, but upon probable cause.” City of Los Angeles
v. Patel, 

576 U.S. 409

, 419 (2015). Searches conducted “outside the judicial process,
without prior approval by [a] judge” are “per se unreasonable.”

Id. (alteration in original)

(citations omitted). This “applies to commercial premises as well as to
homes.”

Id. at 419–20

(citation omitted). The Fourth Amendment is “enforceable
against the States through the Fourteenth Amendment.” Camara v. Mun. Court of
City & Cty. of San Francisco, 

387 U.S. 523

, 528 (1967).

      To determine the constitutionality of ordinances, this court follows the state
court’s interpretation, or if unavailable, uses that state court’s rules of construction.
See A.W. ex rel. Doe v. Nebraska, 

865 F.3d 1014

, 1017 (8th Cir. 2017). Because
Nebraska courts have not interpreted the Ordinance, this court must apply the
Nebraska Supreme Court’s rules of construction.

       The Nebraska Supreme Court interprets local ordinances using
“the same rules as those applied to statutory analysis.” Walsh v. City of Omaha
Police & Fire Ret. Sys., 

763 N.W.2d 411

, 412 (Neb. 2009) (citation omitted).
Statutory language is given its “plain and ordinary meaning.” 

A.W., 865 F.3d at 1017

, quoting State v. Gilliam, 

874 N.W.2d 48

, 56 (Neb. 2016). In “discerning the
meaning of a statute,” this court “determines and gives effect to the purpose and
intent of the Legislature as ascertained from the entire language of the statute
considered in its plain, ordinary, and popular sense.”

Id., quoting Farmers Coop.

v.
State, 

893 N.W.2d 728

, 735, opinion modified on denial of reh’g, 

898 N.W.2d 674

(Neb. 2017).




                                          -5-
       The Nebraska Supreme Court presumes that the enacting body intended a
sensible result; “an appellate court will, if possible, try to avoid a construction which
would lead to absurd, unconscionable, or unjust results.” Hayes v. Applegarth, 

631 N.W.2d 547

, 549 (Neb. 2001) (citation omitted). Given the choice “between two
reasonable constructions,” this court “will generally avoid a construction that raises
grave and doubtful constitutional questions.” 

A.W., 865 F.3d at 1020

n.3 (internal
quotations omitted), citing State v. Norman, 

808 N.W.2d 48

, 58 (Neb. 2012) (it is
“the duty of a court to give a statute an interpretation that meets constitutional
requirements if it can reasonably be done.”). See generally Baggett v. Bullitt, 

377 U.S. 360

, 375 (1964) (stating that the Court generally presumes that a state statute
“will be construed in such a way as to avoid the constitutional question presented”).

       By its plain and ordinary meaning, the Ordinance does not violate Metro
Omaha’s constitutional rights. The Ordinance does not authorize warrantless
inspections of properties if consent is withheld. Under Section 48-206(c), the City
must give property owners and tenants notice before a scheduled inspection,
allowing them the option to consent or not. If both parties consent, the official may
inspect the property. Omaha Code § 48-206(c). “If either the owner or tenant . . .
refuses to consent to an inspection, the code official may obtain a warrant or other
court order for the inspection in accordance with applicable law . . . .”

Id. Under this plain

language, the official has two options if consent is withheld: (1) the official
may choose not to inspect, or (2) the official may obtain a warrant or other court
order, that is, seek a warrant or other court order, and if granted, inspect the property.
Neither option authorizes warrantless inspections if consent is withheld.

      Metro Omaha proffers a different reading of the text. It argues that under the
Ordinance, if consent is withheld, the official may inspect the property with or
without a warrant or court order. It reads the phrase “the code official may obtain a
warrant or other court order for the inspection in accordance with applicable law” to
mean that obtaining a warrant is discretionary and the official may conduct a
warrantless search. Metro Omaha would re-word the Ordinance to say: “if consent


                                           -6-
is withheld, the City official may either inspect the property or obtain a warrant or
other court order.”

       This court rejects Metro Omaha’s construction of the Ordinance. Its plain text
does not allow warrantless inspections if consent is withheld. The more reasonable
reading—that the Ordinance does not authorize warrantless inspections—avoids a
construction that raises grave and doubtful constitutional questions. See 

A.W., 865 F.3d at 1020

n.3, citing 

Norman, 808 N.W.2d at 58

. See also Mann v. Calumet
City, Ill., 

588 F.3d 949

, 953 (7th Cir. 2009) (“We cannot think of what more could
reasonably be required to protect the homeowner’s rights, including his Fourth
Amendment rights, which the ordinance’s warrant provisions fully protect.”).

       Metro Omaha argues that the Ordinance violates its Fourth Amendment rights
because it does not mandate pre-compliance review before inspections. True, the
Supreme Court emphasizes the importance of pre-compliance review before
warrantless inspections. See 

Patel, 576 U.S. at 420

. This requirement does not
apply here, where inspections are permitted only if there is consent, a warrant, or
court order.

        Metro Omaha also argues that the Ordinance punishes property owners for
withholding consent to searches. See Coates v. City of Cincinnati, 

402 U.S. 611

,
616 (1971) (stating that under the constitutional conditions doctrine, an ordinance
may not make “a crime out of what under the Constitution cannot be a crime.”). To
the contrary, the Ordinance says that property owners may not be penalized if “an
inspection is not conducted because a warrant or other court order cannot be
obtained . . . .” § 48-206(c). By withholding consent, property owners are not
subject to criminal liability or prohibited from renting their property. Metro Omaha
fails to plausibly plead a violation of the Fourth and Fourteenth Amendments.




                                         -7-
                                           B.

       According to Metro Omaha, the Ordinance is unconstitutionally vague in
violation of the Fifth Amendment. The Fifth Amendment “guarantees every citizen
the right to due process.” United States v. Birbragher, 

603 F.3d 478

, 484 (8th Cir.
2010) (citation omitted). “Stemming from this guarantee is the concept that vague
statutes are void.”

Id. (citation omitted). A

penal statute2 is “unconstitutionally vague” if it “fails to define the criminal
offense with sufficient definiteness that ordinary people can understand what
conduct is prohibited and in a manner that does not encourage arbitrary and
discriminatory enforcement.” United States v. Barraza, 

576 F.3d 798

, 806 (8th Cir.
2009) (internal quotations omitted) (citations omitted). A two-part test determines
whether a statute is vague: “The statute must first provide adequate notice of the
proscribed conduct, and second, not lend itself to arbitrary enforcement.”

Id. (citation omitted). Metro

Omaha focuses its Fifth Amendment challenge on Section 48-204(c):

      To maintain a registration in effect requires ongoing compliance with
      applicable requirements of this article and other laws, rules and
      regulations during the duration of the registration, including ongoing
      compliance with the IPMC [International Property Maintenance Code]
      and other requirements that are the subject of periodic inspections
      hereunder or under other applicable laws, rules, or regulations. Any
      deficiency or failure to comply shall be subject to such actions, orders,
      rights and remedies of the code official as set forth in this article, the
      IPMC or other applicable laws, rules or regulations as enacted or
      amended from time to time, up to and including issuance of notices or
      orders under chapter 48 or other applicable chapters of this Code,
      charges, and issuance or assessment of citations, fines, penalties and/or


      2
       The district court and the parties do not discuss whether the Ordinance is a
penal statute. This court need not address the issue.
                                         -8-
      criminal prosecutions, all of which shall be carried out in accordance
      with applicable law.

Metro Omaha asserts that this gives City officials unlimited discretion to initiate
severe penalties for any deficiencies under the Ordinance, IMPC, and “other
unknown, unidentified, and even non-existent” laws, rules, and regulations.

      The Ordinance is not unconstitutionally vague. First, the ordinance provides
adequate notice of the proscribed conduct. Any “citations, fines, penalties and/or
criminal prosecutions” must be for violations of the Omaha Municipal Code, the
IPMC, and other “applicable laws, rules, or regulations.” See § 48-204(c). If
property owners comply with applicable laws, rules, and regulations, they avoid
penalties under the Ordinance. This is not the case of “wholly subjective judgments
without statutory definitions, narrowing context, or settled legal meanings.” Holder
v. Humanitarian Law Project, 

561 U.S. 1

, 20 (2010) (citations omitted). Property
owners have adequate notice of the laws, rules, and regulations that proscribe their
conduct.

      Second, the Ordinance does not lend itself to arbitrary enforcement. The City
may penalize property owners only for violations of applicable laws, rules, and
regulations. It may not penalize for violations of inapplicable laws, rules, and
regulations. Further, the Ordinance has an appeal procedure if property owners
disagree with any decision: “Any person aggrieved by any decision or order by the
city under this article may appeal the same to the property maintenance appeals
board . . . .” § 48-208. This procedure acts as a check on wrongful decisions or
orders. Metro Omaha fails to plausibly plead a Fifth Amendment violation.

                                          C.

        Metro Omaha argues that the Ordinance breaches its consent decree with the
City. It asserts that the consent decree requires the City to receive a complaint before
initiating an inspection. To analyze this claim, this court must interpret the consent

                                          -9-
decree and incorporated settlement agreement. The scope of this interpretation is
limited to the decree’s “four corners” and the decree must be “sufficiently specific
to be enforceable.” United States v. Armour & Co., 

402 U.S. 673

, 682 (1971);
Hazen v. Reagen, 

16 F.3d 921

, 924 (8th Cir. 1994).

       After Metro Omaha and the City settled the prior case, the City adopted a
standard operating procedure for housing-violation complaints. The procedure
states, “Complaints will be taken” by the City, and all complaints must contain the
name and phone number of the complainant, and the address and nature of the
complaint. The complainant’s identity and certain complaint information must be
disclosed, upon request, to the property owner.

      Metro Omaha believes that the Ordinance directly conflicts with the standard
operating procedure for taking complaints. The Ordinance says:

      Inspections provided under this article shall be in addition and
      supplemental to any other inspection or access authorized under
      applicable law. Inspections may also be conducted at other times as the
      code official determines necessary, including inspections initiated
      because of a complaint or other means outside of the inspection
      program of this article.

§ 48-206(i). According to Metro Omaha, this language disregards a requirement in
the standard operating procedure that the receipt of a complaint is a prerequisite to
an inspection.

      The consent decree’s four corners do not support Metro Omaha’s argument.
The standard operating procedure does not prohibit the City from initiating an
inspection of a property without a complaint. The standard operating procedure is
not sufficiently specific to require complaints as a prerequisite to all inspections.
Where a prerequisite is not in the consent decree’s four corners, this court will not
require it. See Armour & 

Co., 402 U.S. at 682

.


                                        -10-
      Further, the consent decree did not prospectively prevent the City from
enacting future ordinances (such as the Ordinance) that add additional inspection
procedures. The consent decree amended the Omaha Municipal Code as it existed
before the enactment of the Ordinance. The settlement agreement does not prohibit
the City from modifying the Code after settlement. The settlement agreement also
allows the City to modify the standard operating procedures “as necessary to
accommodate changes or updates in . . . code changes [or] changes in
circumstances . . . , provided that the essential protections and safeguards granted to
the property owners are not impaired.” Because the settlement agreement does not
require complaints as a prerequisite to all inspections, they are not an essential
protection or safeguard in the settlement agreement.

       Metro Omaha also argues that the Ordinance breaches the consent decree’s
requirement that all inspections comply with Section 48-34 of the Omaha Municipal
Code. That section authorizes City officials to enter the interior of a structure or unit
for inspection only if there is consent from the owner or occupant, an emergency, or
an authorizing warrant or court order. § 48-34(c). Because the Ordinance, as
discussed, does not authorize warrantless inspections of properties, it does not
conflict with Section 48-34. Metro Omaha fails to plausibly plead a breach of the
consent decree.

                                           D.

       According to Metro Omaha, the Ordinance violates the Fair Housing Act. It
asserts that the Ordinance results in disparate treatment and disparate impact on
minority tenants in Metro Omaha’s owned and managed properties, and on property
owners subject to the Ordinance.

      Under the FHA, it is illegal to “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) (comma omitted). The FHA prohibits discriminatory municipal
government acts. Gallagher v. Magner, 

619 F.3d 823

, 831 (8th Cir. 2010).
                                          -11-
                                          1.

       Metro Omaha argues that the Ordinance results in disparate treatment of
minority tenants and of property owners renting to them. Metro Omaha must thus
show that the City “treat[ed] the plaintiff(s) less favorably than others based on their
race, color, religion, sex or national origin.”

Id. (alteration added). Proof

of
“discriminatory purpose” is “crucial for a disparate treatment claim.”

Id. (citation omitted). Without

a showing of intent, a showing of “discriminatory impact alone
is not determinative outside of ‘rare’ cases where the pattern of discriminatory effect
is ‘stark.’ ”

Id. at 833,

quoting Vill. of Arlington Heights v. Metro. Hous. Dev.
Corp., 

429 U.S. 252

, 266 (1977).

       Metro Omaha does not plead facts showing “a specific link between the
alleged discriminatory animus and the challenged decision[] sufficient to support a
finding by a reasonable fact finder that an illegitimate criterion actually motived the
adverse [] action.”

Id. at 831

(alterations added) (citation omitted). It also fails to
plausibly plead that this is a rare case where the discriminatory effect is so stark as
to evidence discriminatory intent. See

id. at 833.

Metro Omaha’s specific allegation
of mistreatment of refugee tenants is not related to the Ordinance, and does not
permit a plausible inference that the City had a discriminatory purpose in enacting
the Ordinance. The intensity of the discriminatory effect is not sufficiently pled
here. Metro Omaha fails to plausibly plead a disparate treatment claim under the
FHA.

                                           2.

      Metro Omaha asserts that the Ordinance results in a disparate impact on
minority tenants and property owners subject to the Ordinance. To prove disparate
impact, Metro Omaha must plead that “a facially neutral policy ha[d] a significant
adverse impact on members of a protected minority group.”

Id. (alteration in original)

(citation omitted). Metro Omaha is “not required to show that the


                                         -12-
[Ordinance] was formulated with discriminatory intent” to prove disparate impact.

Id. (alteration added) (citations

omitted).

      Metro Omaha has not alleged a plausible disparate impact claim. Its amended
complaint states that the Ordinance will result in disparate impact on minority
tenants, increase the cost of housing for minority tenants, and reduce the quantity
and quality of housing available to minority tenants (and property owners renting to
minority tenants). But Metro Omaha “cannot make out a prima facie case of
disparate impact” because it “fails to allege facts at the pleading stage demonstrating
a causal connection” between the policy and the disparity. Ellis v. City of
Minneapolis, 

860 F.3d 1106

, 1112 (8th Cir. 2017) (cleaned up). See 

McShane, 867 F.3d at 927

. Metro Omaha fails to plausibly plead a disparate impact claim under
the FHA. 3

                                    *******

      The judgment is affirmed.
                      ______________________________




      3
        For the reasons stated in this opinion, the district court did not abuse its
discretion in denying the preliminary injunction.
                                        -13-

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