179 F. Supp. 3d 522
D. Maryland2016Background
- Plaintiffs are business entities owning large apartment complexes in Frederick, MD; some properties were managed by Maryland Management Company and others by Home Properties.
- The City adopted a five-tier progressive water-rate structure in 2002 that charged properties served by a single meter at higher marginal rates as usage increased.
- Between 2003–2005 the City implemented a “Multi‑Residential Discount” treating condominium units as separate billing units despite common meters; plaintiffs contend this was done without proper process and advantaged condominiums over apartment owners.
- Plaintiffs discovered the discount in 2013, delivered a memorandum to City officials in 2014, and the City adopted Resolution No. 14‑11 in 2014 to revise rates to charge multifamily properties by meter flow (removing the discount differential).
- Plaintiffs sued in state court in 2015 asserting breach of contract, breach of good faith, unjust enrichment, federal and state constitutional claims (equal protection and procedural due process), and declaratory relief; the City removed the case to federal court.
- The district court (Bredar, J.) denied leave to add a procedural due process claim as futile, dismissed the federal equal protection claim for failure to state a claim, declined supplemental jurisdiction over state-law claims, denied several motions without prejudice, and remanded the case to state court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Motion to Amend to add a procedural due process claim | City secretly bypassed required process and overcharged plaintiffs by denying a discount given to condominiums, depriving them of property without notice/hearing | The discount was legislative in nature or, alternatively, plaintiffs had no property entitlement to a benefit conferred on others and had available administrative remedies they did not use | Denied as futile: legislative action (Bi‑Metallic) not subject to individual due‑process protections; no entitlement to others’ discount; available city remedies not pursued |
| Equal protection challenge (Count IV) | Discount irrationally discriminated between apartment owners (plaintiffs) and condominium owners without a rational basis | Classification between residential ownership structures is rationally related to legitimate municipal objectives (e.g., treating owner‑occupied residences differently from commercial operators) | Dismissed: plaintiffs failed to plead they were similarly situated to condominium owners and the City’s classification survives rational‑basis review |
| Supplemental jurisdiction over state‑law claims | Plaintiffs sought to proceed on state-law causes (contract, unjust enrichment, etc.) in federal court | With federal claims dismissed, federal court should decline supplemental jurisdiction and remand | Court declined supplemental jurisdiction and remanded remaining state-law claims to state court |
| Motion to Proceed under Local Government Tort Claims Act / procedural posture | Plaintiffs sought leave to proceed under local statute | Court evaluated motions in light of dismissal/remand | Motion denied without prejudice; plaintiffs may pursue appropriate state-court relief after remand |
Key Cases Cited
- Bi‑Metallic Inv. Co. v. State Bd. of Equalization, 239 U.S. 441 (U.S. 1915) (legislative general rules are not subject to individual notice-and‑hearing due‑process requirements)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (pleading must state a plausible claim to survive a motion to dismiss)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (complaints must contain more than legal conclusions; factual enhancement required)
- Bd. of Regents v. Roth, 408 U.S. 564 (U.S. 1972) (property interest requires a legitimate claim of entitlement, not a unilateral expectation)
- Mathews v. Eldridge, 424 U.S. 319 (U.S. 1976) (due‑process balancing test for required procedural protections)
- Nordlinger v. Hahn, 505 U.S. 1 (U.S. 1992) (rational‑basis review permits upholding classifications on any conceivable rational basis)
- Van Der Linde Hous., Inc. v. Rivanna Solid Waste Auth., 507 F.3d 290 (4th Cir. 2007) (Equal Protection: plaintiffs must negate every conceivable rational basis for a classification)
- Iota Xi Chapter of Sigma Chi Fraternity v. Patterson, 566 F.3d 138 (4th Cir. 2009) (no due process issue without a state‑action deprivation of protected interest)
- Barefoot v. City of Wilmington, 306 F.3d 113 (4th Cir. 2002) (political process provides due process for generally applicable legislative enactments)