City of Clarkedale v. Lackey

October 16, 2009
2009 WL 3387959, 2009 U.S. Dist. LEXIS 104458
U.S. District Court for the Eastern District of Arkansas

Susan Webber Wright, District Judge.

FACTS:  On August 5, 2008, the City of Clarkedale (“City”) sought an injunction against Lackey enjoining him from 1) continuing a construction project in violation of a construction moratorium and 2) storing containers used for transporting commercial waste in violation of a zoning ordinance.  Lackey answered the complaint on May 7, 2009, claiming that no zoning ordinance or land use restrictions prohibited the construction when it was first commenced, and that the construction moratorium was void because the City was not legally incorporated as required by Arkansas law.   Later that same day, Lackey exercised a right, which he expressly reserved in his answer, removing the case from state court to this court.  He asserted that this court had subject matter jurisdiction pursuant to 28 U.S.C. §§ 1331, 1343 and 1367.  Also on May 7, 2009, Lackey filed a separate cause of action claiming that the City had violated his constitutional rights by attempting to deprive him of the use of his property, and he sought an injunction prohibiting the City from interfering with those rights without just compensation and compensatory damages.  Finally, on May 22, 2009, Lackey filed a motion to consolidate the case the City initiated with the one he initiated on May 7, 2009.  The motion was granted.

ISSUES AND ANALYSIS:  These consolidated cases involved three issues.  The first issue concerned subject matter jurisdiction in an action arising under local and state law instead of federal law, and one where there was no diversity of citizenship between the parties.  A defendant can remove state cases to federal court as long as the case could have been brought in federal court originally pursuant to 28 U.S.C. § 1441(a).  However, the City’s action arose under state law, and diversity of citizenship was lacking between these parties as well.  It would make no difference even if Lackey had asserted his claims as counterclaims in state court instead of a separate action in federal court because jurisdiction would still be lacking.  There must be a well-pleaded complaint stated on the face of the complaint that establishes either that federal law creates the cause of action or that a resolution depends upon a substantial question of federal law.  In re Otter Tail Power Co., 116 F.3d 1207, 1213 (8th Cir. 1997)(citing Peters v. Union Pacific R. Co., 80 F.3d 257, 260 (8th Cir. 1996) and Gaming Corp. v. Dorsey & Whitney, 88 F.3d 536, 542-43 (8th Cir. 1996)).

The second issue arose from the City’s motion to dismiss Lackey’s claims because he failed to assert them as compulsory counterclaims to the City’s state court action.  Under Rule 13(a) of the Federal Rules of Civil Procedure, failure to plead a compulsory counterclaim prohibits a party from bringing a later independent action.  However, Rule 13(a) cannot be invoked until the City’s action has proceeded to a final judgment in state court.  See Fullerton Aircraft Sales & Rentals, Inc., v. Beech Aircraft Corp., 842 F.2d 717, 722 (4th Cir. 1988).

The third issue was whether a stay should be ordered on Lackey’s cause of action pursuant to the Younger abstention doctrine pending resolution of the state court proceedings.  Younger v. Harris, 401 U.S. 37 (1971).  Under Younger, a federal court is prohibited from accepting jurisdiction in cases where equitable relief is requested and granting relief would interfere with pending state proceedings.  See Night Clubs, Inc. v. City of Fort Smith, Ark. 163 F.3d 475, 477 n1. (8th Cir. 1998).  Proper application of the Younger abstention doctrine demands three requirements:  1) the action constitutes the basis of an ongoing state judicial proceeding, 2) the proceedings implicate important state interests, and 3) an adequate opportunity exists in the state proceedings to raise constitutional challenges.  Harmon v. City of Kansas City, Mo., 197 F.3d 321, 325 (8th Cir. 1999) (citing Fuller v. Ulland, 76 F.3d 957, 959 (8th Cir. 1996)).  Here, Lackey’s action is dependant upon the outcome of the City’s pending state judicial proceeding which could render his claims moot.  The important state and local interest requirement is met because this action involves local city ordinances and land use restrictions.  And finally, Lackey is required to attempt to assert his claims in state court before this court should consider whether it would be impossible to do so.  There are exclusions to the Younger abstention doctrine such as harassment from the state as motivation for the proceedings as well as if the regulations are “flagrantly and patently” in violation of constitutional prohibitions.  Hufman v. Pursue, Ltd. 420 U.S. 592, 611 (1975).  The Younger requirements are met in this case while none of the exclusions apply.

HOLDING AND DISPOSITIONS:  Lackey has no basis for removing the City’s action to this court, so the lead case must be remanded to state court for lack of subject matter jurisdiction.  Rule 13(a) cannot be invoked to bar Lackey’s claims until the City’s action has proceeded to a final judgment in state court, so the City’s motion to dismiss is denied.  Pursuant to Younger, Lackey’s action should be stayed pending resolution of the state court proceedings of the lead case.

-justin downum

Published in the Arkansas Real Estate Review
Vol. 3 No. 1, Spring 2010