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Lennon v. Overlook Condominium Assoc.: US District Court : REAL PROPERTY | 1983 - condo association not state actor

1
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
________________________________________________________________
JAMES E. LENNON, CARMELITA
A. LENNON, JAMES J. LENNON,
CINDY M. LENNON, MARK W.
PROKOP, AND JACQUELINE A.
PROKOP,
Plaintiffs,
v. MEMORANDUM OF LAW & ORDER
Civil File No. 08‐357 (MJD/SRN)
OVERLOOK CONDOMINIUM
ASSOCIATION, a Minnesota
non‐profit corporation,
Defendant.
________________________________________________________________
Chad D. Lemmons, Kelly & Fawcett, PA, Counsel for Plaintiffs.
John J. Gores, Gores Law Office, Counsel for Defendant.
_________________________________________________________________
I. INTRODUCTION
This matter is before the Court on cross motions. Defendant has filed a
Motion to Dismiss [Docket No. 2], asking the Court to dismiss Plaintiffs 1983
2
claim with prejudice and remand the remaining state law claims. Plaintiffs James
E. Lennon and Carmelita A. Lennon have filed a Motion for Judgment on the
Pleadings [Docket No. 14], seeking judgment on their 1983 claim only. The
Court heard oral argument on May 9, 2008.
II. BACKGROUND
A. Factual Background
1. Parties
Defendant Overlook Condominium Association (Overlook) is a
non‐profit corporation organized under Minnesota law to manage the affairs of
Overlook Condominium.
Plaintiffs James E. Lennon and Carmelita A. Lennon purport to be the life
tenants of Apartment 211 and Garage Apartment 6 and 7, Overlook
Condominium, Condominium No. 17 (Unit 211), located in Dakota County,
Minnesota. Plaintiffs James J. Lennon, Cindy M. Lennon, Mark W. Prokop, and
Jacqueline A. Prokop purport to hold the remainder in Unit 211. James E.
Lennon and Carmelita A. Lennon are the parents of James J. Lennon and
Jacqueline A. Prokop.
According to Plaintiffs, from October 24, 2002, until June 1, 2003, Unit 211
3
was owned in fee title by James J. Lennon, Cindy M. Lennon, Mark W. Prokop,
and Jacqueline A. Prokop. From June 1, 2003 to May 13, 2004, fee title in Unit 211
was held by New Liberty Investments, an entity controlled by James J. Lennon,
Cindy M. Lennon, Mark W. Prokop, and Jacqueline A. Prokop. On May 13, 2004,
fee title to Unit 211 returned to James J. Lennon, Cindy M. Lennon, Mark W.
Prokop, and Jacqueline A. Prokop. In mid‐July 2007, Mark W. Prokop, Jacqueline
A. Prokop, James J. Lennon, and Cindy M. Lennon purport to have quit‐claimed
a life estate to James E. Lennon and Carmelita A. Lennon.
According to the December 4, 2007 Board Decision, James E. Lennon and
Carmelita A. Lennon moved into Unit 211 and represented to Overlook that they
were the owners of Unit 211, when, in fact, they were not. (Plaintiffs purport to
attach portions of the Board Decision to their Amended Complaint; however, no
exhibit is attached. Portions of the Decision were attached to the original
Complaint. Defendant has attached the Board Decision to its Answer to the
Amended Complaint.) Also according to the Board Decision, James J. Lennon
and Cindy M. Lennon, leased Unit 211 to James E. Lennon and Carmelita A.
Lennon.
The declaration of floor plans creating Overlook Condominium was filed
4
November 14, 1974, with the Office of the Registrar of Titles of Dakota County.
The declaration was amended and restated by a subsequent declaration filed
October 1, 1982. The amended declaration included the amended bylaws
(Bylaws) governing Overlook Condominium.
Article 6.11 of Overlooks Bylaws authorizes Overlooks Board of Directors
(Board) to levy reasonable fines for violations of Overlooks rules: The Board
of Directors may, after notice and on opportunity to be heard, levy reasonable
fines for violations of the Restated Declarations, Bylaws and Rules of Conduct of
the Association.
Eleven years after Overlook publicly filed its Amended Bylaws, the
Minnesota legislature enacted Minnesota Statute 515B.3‐102, subdivision 11, of
the Minnesota Common Interest Ownership Act, effective in 1994. This provision
permits condominium associations to impose reasonable fines, after notice and
an opportunity to be heard.
2. Fines Levied Against Plaintiffs
On November 29, 2007, the Board held a hearing to determine whether
Plaintiffs should be assessed fines for violations of the Bylaws and Rules.
Overlook asserted that James E. Lennon and Carmelita A. Lennon had violated
5
various Bylaws, for example by misrepresenting that they were the owners of
Unit 211, resulting in James E. Lennons improper election to the Board of
Directors and appointment as president.
There was no fine schedule in place before the November 29, 2007 meeting.
Thus, while the Board purportedly provided notice of the meeting to Plaintiffs, it
did not provide notice of any potential fine schedule.
According to the Board Decision, James E. Lennon appeared at the start of
the hearing but did not remain for the entire hearing. The Board proceeded with
the hearing without James E. Lennons presence, adopted a fine schedule, and, by
a resolution dated December 4, 2007, levied fines and costs in the amount of
,421.52 against Unit 211. On January 4, 2008, Overlook filed a lien against
Unit 211 for ,421.52.
B. Procedural History
On January 23, 2008, Plaintiffs provided Defendant with a Summons and
Complaint, based in Dakota County District Court, State of Minnesota. The
Complaint alleged five counts against Overlook four state law claims and one
federal claim, violation of 42 U.S.C. 1983. On February 11, 2008, Overlook
removed the case to this Court based on federal question jurisdiction due solely
6
to the claim under 1983.
Plaintiffs Amended Complaint was filed in this Court on March 10, 2008.
Plaintiffs allege five claims against Overlook: Count One, Void Fines, alleges the
fines imposed by Overlook are void and unenforceable; Count Two, Estoppel,
alleges that Overlook is estopped from claiming that James E. Lennon violated
any term or condition of the Bylaws by serving as a director or officer of
Overlook and taking actions in that position; Count Three, Ratification, alleges
that the Board ratified the actions of James E. Lennon by accepting the benefits of
the contract he entered and failing to object to checks executed solely by James E.
Lennon on behalf of Overlook; Count Four, Lease, alleges that James E. Lennon
and Carmelita A. Lennon did not lease Unit 211, but occupied it with permission,
as other family members have done in other Overlook units, and, as a result,
Plaintiffs have not violated any rules regarding leasing; and Count Five,
Violation of 42 U.S.C. 1983, alleges that Overlook violated 1983 by denying
Plaintiffs substantive and procedural due process and equal protection under
state and local law. Plaintiffs seek an order declaring that the fines levied by
Overlook are void and unenforceable, declaring that the lien statement is null
and void, ordering the Registrar of Titles of Dakota County to delete the lien
7
statement, and awarding costs and attorney fees.
Overlook has filed a Motion to Dismiss Count V, the 1983 claim, and to
remand the remaining claims to state court. Plaintiffs James E. Lennon and
Carmelita A. Lennon have filed a Motion for Judgment on the Pleadings on
Count V to the extent that count is based on due process violations.
III. DISCUSSION
A. Standard
When reviewing a motion to dismiss, the Court takes all facts alleged in the
complaint as true and grants all reasonable inferences in favor of the non‐moving
party. Gilmore v. County of Douglas, Neb., 406 F.3d 935, 937 (8th Cir. 2005). A
motion to dismiss should be granted only if it appears beyond doubt that the
plaintiff can prove no set of facts to warrant a grant of relief. Id. (citation
omitted). When deciding a motion to dismiss the Court considers the
complaint, matters of public record, orders, materials embraced by the complaint,
and exhibits attached to the complaint. PureChoice, Inc. v. Macke, No. 07‐1290
(DWF/SRN), 2007 WL 2023568, at *5 (D. Minn. July 10, 2007) (unpublished)
(citing Porous Media Corp. v. Pall Corp., 186 F.3d 1077, 1079 (8th. Cir. 1999)).
The standard for reviewing a motion for judgment on the pleadings is
8
similar: A motion for judgment on the pleadings will be granted only where the
moving party has clearly established that no material issue of fact remains and
the moving party is entitled to judgment as a matter of law. In our evaluation of
the motion, we accept all facts pled by the nonmoving party as true and draw all
reasonable inferences from the facts in favor of the nonmovant. Waldron v.
Boeing Co., 388 F.3d 591, 593 (8th Cir. 2004) (citations omitted).
B. Requirement for 1983
When bringing a section 1983 claim a plaintiff must establish (1) that he
was deprived of a right secured by the Constitution or laws of the United States
and (2) that the deprivation was committed under color of state law. Lugar v.
Edmondson Oil Co., 457 U.S. 922, 931 (1982). Section 1983 is not itself a source
of substantive rights, but merely provides a method for vindicating federal rights
elsewhere conferred. Graham v. Connor, 490 U.S. 386, 393‐94 (1989) (citation
omitted). Plaintiffs allege that Overlook violated their due process rights granted
by the Fourteenth Amendment by levying fines.
Private misuse of a statute by a private actor is not sufficient to state a
claim under section 1983. Hassett v. Lemay Bank & Trust Co., 851 F.2d 1127,
1129 (8th Cir. 1988) (citation omitted). Also, allegations[] that a private party
9
acted unlawfully with respect to a constitutional state statute[] fail to state a claim
for relief. Id. at 1130 (citations omitted).
In Lugar v. Edmondson Oil Co., the Supreme Court held that in a
section 1983 case where a private party defendant performs an act
ordinarily performed by private parties and it triggers action by state
officials, the defendants actions are committed under color of state
law if the conduct qualifies as state action under the fourteenth
amendment. The issue thus hinges on whether the defendants
conduct allegedly causing the deprivation of a federal right [is] fairly
attributable to the State.
This fair attribution test has two components: a state policy
and a state actor. The state policy component requires that the
deprivation must be caused by the exercise of some right or privilege
created by the State or by a rule of conduct imposed by the State or
by a person for whom the State is responsible. A state policy may be
inferred from either a state statute, or a well‐settled custom or
practice. The state actor component requires that the defendant
must be a person who may fairly be said to be a state actor. This
may be because he is a state official, because he has acted together
with or has obtained significant aid from state officials, or because
his conduct is otherwise chargeable to the State.
Roudybush v. Zabel, 813 F.2d 173, 176‐77 (8th Cir. 1987) (citations omitted).
With regard to the state actor element,
[t]he second element requires more than the private misuse of a state
statute (as alleged in the taking of the personal property in this case);
a plaintiff must show that the private party acted in concert with or
obtained significant aid from state officials who were themselves
involved in a constitutional violation. Otherwise stated, there must
be a meeting of the minds or a mutual understanding between a
10
private party and public officials to engage in conduct that violates
the plaintiffs federal rights.
Audio Odyssey, Ltd. v. Brenton First Natl Bank, 245 F.3d 721, 740 (8th Cir. 2001)
(citations omitted), opinion reinstated by 286 F.3d 498 (8th Cir. 2002) (en banc).
Additionally, with regard to the underlying due process constitutional
violation alleged, state action is required:
The Due Process Clause of the Fifth Amendment to the United
States Constitution provides that: No person shall . . . be deprived
of . . . property, without due process of law; . . . It applies to
federal government not private action, while the fourteenth
amendment due process clause applies to the states. The standard
for finding federal government action under the fifth amendment is
the same as that for finding state action under the fourteenth
amendment. That standard is that there must exist a sufficiently
close nexus between the (government) and the challenged action of
the regulated entity so that the action of the latter may be fairly
treated as that of the (government) itself.
Warren v. Govt Natl Mortgage Assn, 611 F.2d 1229, 1232 (8th Cir. 1980)
(citations omitted).
C. Whether Overlook Acted Under Color of State Law
1. Introduction
Overlook asserts that Plaintiffs have failed to state a claim under 1983
because they fail to meet either element of the fair attribution test Plaintiffs fail
11
to allege either a state policy or a state actor.
Plaintiffs assert two theories under which Overlook could be construed as
a state actor: the public function doctrine and the in‐concert doctrine. Under the
first theory, they argue that levying fines and filing liens are sovereign functions
within the exclusive prerogative of the state, so the fact that Overlook took these
actions makes it a state actor. Under the second theory, Plaintiffs argue that the
Dakota County Sheriff will, at some point, execute the lien, and, at that point,
Overlook will be acting in concert with the state.
2. State Policy
Lugars state policy component is not met when the private party charged
with an unconstitutional deprivation has allegedly acted unlawfully with respect
to a constitutional state statute. Likewise, . . . Lugars state policy component is
met when the party charged with an unconstitutional deprivation has acted in
conformity with an allegedly unconstitutional state statute or well‐settled
custom. Roudybush, 813 F.2d at 177 (citations omitted).
Plaintiffs have failed to allege that Overlook deprived their rights by
exercising some right or privilege created by an unconstitutional statute or rule.
Minnesota Statute 515B.3‐102, subd. 11, grants Minnesota common interest
12
community owners associations the power to, after notice and an opportunity
to be heard, levy reasonable fines for violations of the declaration, bylaws, and
rules and regulations of the association. Nowhere in the Complaint or
Amended Complaint do Plaintiffs allege that Minnesota Statute 515B.3‐102 is
unconstitutional. Plaintiffs have not alleged why the statute would be
unconstitutional. The statute itself provides that reasonable fines may be
imposed after notice and opportunity to be heard, so there is no apparent
reason that the statute would be unconstitutional. Minn. Stat. 515B.3‐102, subd.
11.
The Court concludes that Plaintiffs have failed to meet the state policy
component. In any event, even if Plaintiffs had satisfied the first element of the
fair attribution test, but Plaintiffs cannot establish that Overlook is a state actor.
3. Public Function Doctrine
a. Standard
The public function doctrine holds that state action is present in the
exercise by a private entity of powers traditionally exclusively reserved to the
State. Jackson v. Metro. Edison Co., 419 U.S. 345, 352 (1974) (citations omitted).
The Supreme Court has held the following functions are exclusively reserved to
13
the State: the administration of elections; the operation of a company town;
eminent domain; peremptory challenges in jury selection; and, in at least limited
circumstances, the operation of a municipal park. United Auto Workers, Local
No. 5285 v. Gaston Festivals, Inc., 43 F.3d 902, 907 (4th Cir. 1995) (citations
omitted). The Supreme Court has further held that the following functions are
not exclusively reserved to the state: the provision of electricity and other
utilities; the operation of nursing homes; . . . the coordination and governance of
college and amateur athletics, and the provision of schooling. Id. (citations
omitted).
The fact that a state has specifically authorized or approved of private
conduct does not create state action. Jackson, 419 U.S. at 354. Private misuse of a
statute authorizing private action does not create state action. Audio Odyssey,
Ltd., 245 F.3d at 740.
b. Analysis
In this case, there are two powers wielded by Overlook that Plaintiffs
assert are exclusively reserved to the state: the power to file a lien and the power
to assess fines and penalties.
i. Power to Impose Fines
14
The Court concludes that the power to impose fines is not an exclusive
state power. It is simply not the type of power, such as eminent domain,
traditionally exclusively reserved for the state. Private entities, such as the
NCAA, legislate rules and impose penalties, but are not state actors. Natl
Collegiate Athletic Assn v. Tarkanian, 488 U.S. 179, 183‐84 (1988) (noting that
NCAA legislates rules, maintains an enforcement program complete with
investigative staff, and imposes penalties but is not a state actor); see also
Goldberg v. 400 E. Ohio Condo. Assn, 12 F. Supp. 2d 820, 823 (N.D. Ill. 1998)
(The National Basketball Association makes rules, conducts hearings, issues
decisions, and imposes fines, but it seems unlikely that the privately run sports
league is a government actor.).
ii. Power to Impose and Enforce Liens
Plaintiffs also assert that Overlooks power to impose and enforce a lien on
the unit is an exclusive state function. The Court rejects this assertion. See, e.g.,
Goldberg, 12 F. Supp. 2d at 823 (holding that condominium association did not
become state actor by virtue of its power to impose and enforce its own lien
because various other private actors, such as unions and corporations, have that
same power). In Minnesota, many private entities other than condominium
15
associations have this power. For example, mechanics, under Minnesota Statute
514.18, and veterinarians, under 514.93, are granted lien power.
c. Conclusion
The Court finds that neither the power to file liens, nor the power to assess
fines is a power reserved for the state. Both powers are exercised regularly by
private entities: mechanics file liens and the NCAA assesses penalties. See
Goldberg, 12 F. Supp. 2d at 823 (rejecting argument that condominium
association acted under color of state law because condominium associations
have powers traditionally associated with the state such as the power to make
rules, conduct hearings, issue decisions, and impose fines and liens) (emphasis
added). See also Alberto San, Inc. v. Consejo De Titulares Del Condominio San
Alberto, F.3d , 2008 WL 820883, at *2 (1st Cir. Mar. 28, 2008) (holding that
defendants in managing their condominium association were not performing a
public function that has been traditionally the exclusive prerogative of the State)
(citation omitted). Furthermore, the Court rejects Plaintiffs attempt to compare
Overlook to the company town in Marsh v. Alabama, 326 U.S. 501 (1946), and
adopts the reasoning of the court in Kalian at Poconos, LLC v. Saw Creek Estates
Community Assn, Inc., 275 F. Supp. 2d 578, 589‐90 (M.D. Pa. 2003)
16
(distinguishing Marsh because, among other things, Marsh was a First
Amendment case, involved an outsider who unwittingly ran afoul of some
privately‐imposed rule and involved acorporation [that had] assumed all the
attributes of a state‐created municipality).
4. Joint Participation/In Concert Doctrine
a. Standard
In order to succeed under the joint participation or in‐concert doctrine,
plaintiffs must plead facts that show that the defendant and a state actor reached
a mutual understanding or meeting of the minds to deprive the plaintiffs of their
constitutional rights. See, e.g., Miller v. Compton, 122 F.3d 1094, 1098 (8th Cir.
1997) ([A] private actor[] may be liable under 1983 only if she is a willing
participant in joint action with the State or its agents. In construing that test in
terms of the allegations necessary to survive a motion to dismiss, this circuit has
held that a plaintiff seeking to hold a private party liable under 1983 must
allege, at the very least, that there was a mutual understanding, or a meeting of
the minds, between the private party and the state actor.) (citations omitted).
b. Possibility of Future Foreclosure
Plaintiffs speculate that sometime in the future, Overlook might invoke the
17
legal procedure for foreclosure through advertisement and then use the Dakota
County Sheriff to have Unit 211 sold by sheriffs sale. They claim that this
possibility meets the state actor test. This assertion is speculative and does not
appear in the Amended Complaint. Here, Plaintiffs have not pled any mutual
understanding or meeting of the minds between Overlook and a state actor. Cf.
Rullan v. Council of Co‐owners of McKinley Court Condo., 899 F. Supp. 857, 860
(D.P.R. 1995) (dismissing 1983 claim against condominium association when
[t]here is not one allegation that the [association] acted as private persons jointly
engaged with state officials or that their conduct is otherwise chargeable to the
state).
c. Filing Lien with Dakota County
Plaintiffs also assert that the County Recorder has participated by
permitting the filing of the lien statement against Plaintiffs property. Plaintiffs
cite no case law supporting this proposition. The Court rejects this argument.
The County Recorder was merely a passive agent in accepting and maintaining
the lien filing. Cf. Church of Human Potential, Inc. v. Vorsky, 636 F. Supp. 93, 97
(D.N.J. 1986) (Indeed, it would be unreasonable to conclude that the mere filing
of a federal tax lien in a state office constitutes state action attributable to the
18
federal official responsible for its origination.).
Moreover, the Supreme Court has rejected the argument that a private
partys mere invocation of state legal procedures constitutes joint participation or
conspiracy with state officials satisfying the 1983 requirement of action under
color of law. Miller v. Compton, 122 F.3d 1094, 1098 (8th Cir. 1997) (quoting
Lugar v. Edmondson Oil Co., Inc.,457 U.S. 922, 939 n.21 (1982)). See also Flagg
Bros., Inc. v. Brooks, 436 U.S. 149, 166 (1978) (holding that warehousemans
private sale of items stored with him under self‐help provision of New York
U.C.C. was not a state action although state acquiesced to this private action).
d. Conclusion
First, the possibility of a future foreclosure and sheriffs sale is not pled and
is speculative. Plaintiffs admit that the Dakota County Sheriff, to this point, has
had no participation in the process. See Goldberg, 12 F. Supp. 2d. at 823 (holding
that there is no state action inherent in the possible future state court
enforcement of a private property agreement). Second, the possible sheriffs
sale has no relation to the alleged due process violation at issue lack of notice
for the fee schedule. Third, such action would still not make Overlook a state
actor, particularly when Plaintiffs have not alleged that the applicable statute is
19
unconstitutional. Cf. Northrip v. Fed. Natl Mortgage Assn, 527 F.2d 23, 28‐29
(6th Cir. 1975) (rejecting finding state action merely because mortgage holder
utilized sheriffs sale after conducting foreclosure by advertisement). See also
Vail v. Derwinski, 946 F.2d 589, 593 n.9 (8th Cir. 1991) (Most state courts
considering due process challenges to non‐judicial foreclosure statutes have
upheld the procedure on the ground that there is no state action.) (citations
omitted), amended in other part by 956 F.2d 812 (8th Cir. 1992).
Finally, as previously noted, merely filing a lien is insufficient to make
Overlook a state actor.
D. Cross Motion and Attorney Fees
Because the Court has granted Defendants Motion to Dismiss, Plaintiffs
Motion for Judgment on the Pleadings is denied.
A federal district court has the discretionary power to decline jurisdiction
where it has dismissed all claims over which it has original jurisdiction.
Johnson v. City of Shorewood, Minn., 360 F.3d 810, 819 (8th Cir. 2004) (quoting 28
U.S.C. 1367(c)(3)). The Supreme Court has noted that in the usual case in
which all federal‐law claims are eliminated before trial, the balance of factors to
be considered under the pendent jurisdiction doctrine . . . will point toward
20
declining to exercise jurisdiction over the remaining state‐law claims. Id.
(quoting Carnegie‐Mellon Univ. v. Cohill, 484 U.S. 343, 350 n. 7 (1988)). The
Court concludes that, at this early stage in the litigation, the elimination of
Plaintiffs only federal claim should result in remand to state court. Judicial
economy, convenience, fairness, and comity all way in favor of remand.
Overlook seeks attorney fees under 42 U.S.C. 1988(b). However,
Overlook has not briefed this issue, and Plaintiffs have not responded to it. The
issue is not fully before the Court. If Overlook does seek attorney fees, it must
file a separate motion and brief addressing that issue.
Accordingly, based upon the files, records, and proceedings herein, IT IS
HEREBY ORDERED that:
1. Defendants Motion to Dismiss [Docket No. 2] is GRANTED. Count
Five, Violation of 42 U.S.C. 1983, is DISMISSED WITH
PREJUDICE.
2. Plaintiffs Motion for Judgment on the Pleadings [Docket No. 14] is
DENIED.
3. If Defendant seeks attorney fees pursuant to 42 U.S.C. 1988 (b),
Defendant shall submit a motion for attorney fees, and supporting
memorandum, within 30 days of the date of this Order.
21
4. This matter is REMANDED to the District Court for the First
Judicial District, Dakota County, Minnesota.
LET JUDGMENT BE ENTERED ACCORDINGLY.
Dated May 13, 2008 s / Michael J. Davis
Judge Michael J. Davis
United States District Court
 

 
 
 

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