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183 Eustis Ave LLC v. City of Newport

Superior Court of Rhode Island, Newport

October 1, 2019

183 EUSTIS AVE LLC; 477 THAMES STREET LLC; 517 THAMES ST LLC; MEAGHAN M. ADAMS; DAVID R. AHOUSE, JR.; MICHELE AHOUSE; IRIT ALTMAN; PHILIP ALTMAN; BEAR AND LION LLC; BRENDA E. MORRISON-BOLDT; RICHARD F. BOLDT; ANTHONY CIOFFI; BARBARA CIOFFI; JUSTIN CLOUGHER; KERRY CLOUGHER; PATRICK BRENNAN DANIELS; DAVID S. DROOKER; MARINA M. DROOKER; JAMES G. DUSTY; LISA T. DUSTY; LAURA GILL; LESLIE GILLETTE; HAMISH A. GUNN; GEORGE C. KARAGEORGOS; BRIAN J. KIRACOFE; TIMOTHY LAUGHRIDGE; ANTHONY LORUSSO; MONTGOMERY MCFATE; DANIELLE MCNAMARA; SUSAN AVINO MITCHELL; NANCY O. MORTON; PHILIP A. MORTON; NEWPORT SYNDICATION GROUP, LLC; GAIL M. NORTON; JAMES PALLIS; BRANDON PICO; ANDREA L. RESTREPO; SCHMITZ FAMILY TRUST; STEVEN L. SMITH; LAURIE J. DANIELS; ERICA ZAP, Plaintiffs,
v.
CITY OF NEWPORT; and LAURA L. SITRIN, in her capacity as Finance Director for the City of Newport, Defendants.

          For Plaintiff: Michael A. Kelly, Esq. Joelle C. Rocha, Esq.

          For Defendant: Christopher J. Behan, Esq. Michael DeSisto, Esq.

          DECISION

          LICHT, MAGISTRATE J.

         This matter arises out of Plaintiffs' short-term rental of their properties (Properties) and the decision of the City of Newport (City) to require Plaintiffs to register those Properties. Plaintiffs move for partial summary judgment on Counts I and II of the Amended Complaint, and Defendants move for summary judgment on all counts of the Amended Complaint. Jurisdiction is pursuant to G.L. 1956 §§ 8-2-13, 8-2-14 and 9-30-1 et seq.

         I Facts and Travel

         Plaintiffs are all record owners of different pieces of property (single-family, two-family, multifamily, and residential condominiums) located in the City who have rented either individual dwelling units in multiunit properties or entire single-family homes to other individuals. They do not rent individual rooms. All of Plaintiffs' Properties have less than ten dwelling units, and none of the units are dependent on external facilities for the furnishing of meals, meaning there is a full kitchen within each dwelling unit.

         The City sent notices of violation (Notices) to Plaintiffs, stating that they are required to register their Properties under the Newport Code of Ordinances Chapter 5.40, Section 5.40.020 (Section 5.40.020) which provides that "transient guest facilit[ies]" and "guest houses" must be registered with the City clerk. See Pls.' Mot. Partial Summ. J. (Pls.' Motion), Ex. C. The Notices further advised that the City intended to begin issuing citations if Plaintiffs did not discontinue short-term renting or apply for a special use permit, and the fine for operating an unregistered short-term rental unit is $200.00 per day. See id. For purposes of summary judgment, Defendants do not contest these facts.[1]

         In response to the Notices, Plaintiffs filed a Complaint in Newport County Superior Court on June 8, 2018, and an Amended Complaint thereafter on July 8, 2019, that removed the allegations in the Complaint related to a class action. Plaintiffs' Amended Complaint contains counts seeking declaratory relief: Count I, that their Properties are not subject to the requirements of Section 5.40.020; Count II, that renting property does not constitute a change in use; Count III, that the application of Section 5.40.020 to Plaintiffs' Properties constitutes a taking; and Count IV, that such application violates Plaintiffs' equal protection rights. The Amended Complaint also contains Counts V and VI for violations of procedural and substantive due process rights, respectively, and Count VII seeks a prohibitory injunction against the City. Oral argument was heard on July 16, 2019. During oral argument, all parties agreed on the record that the Plaintiffs' Motion and Defendants' Crossmotion for Summary Judgment (the Motions) applied to the Amended Complaint.

         II Standard of Review

         "[S]ummary judgment is a drastic remedy, and a motion for summary judgment should be dealt with cautiously." Cruz v. DaimlerChrysler Motors Corp., 66 A.3d 446, 451 (R.I. 2013). "[S]ummary judgment is appropriate when, viewing the facts and all reasonable inferences therefrom in the light most favorable to the nonmoving party, the [C]ourt determines that there are no issues of material fact in dispute, and the moving party is entitled to judgment as a matter of law." Quest Diagnostics, LLC v. Pinnacle Consortium of Higher Educ., 93 A.3d 949, 951 (R.I. 2014) (internal quotations omitted).

         Under the Uniform Declaratory Judgments Act found in §§ 9-30-1 et seq., the Superior Court has the "power to declare rights, status, and other legal relations whether or not further relief is or could be claimed." Sec. 9-30-1. "This power is broadly construed, to allow the trial justice to facilitate the termination of controversies." Bradford Assocs. v. Rhode Island Div. of Purchases, 772 A.2d 485, 489 (R.I. 2001) (internal quotations omitted). Therefore, it is the function of this Court to "decide whether declaratory relief is appropriate." Town of Barrington v. Williams, 972 A.2d 603, 608 (R.I. 2009).

         III Analysis

         Before the Court addresses the merits of the Motions as they relate to the Amended Complaint, it must first address two preliminary arguments raised by Defendants: first, that Plaintiffs have no standing to bring this suit and second, that Plaintiffs have failed to exhaust their administrative remedies. Standing is a threshold determination, and thus, the Court will address it first.

         Defendants first contend that Plaintiffs lack standing to bring the instant suit because "there is no evidence that the City has prevented Plaintiffs from renting their dwelling units or penalized them for these rentals," nor has the City fined Plaintiffs for their failure to register their rentals. Defs.' Mem. 3-4. Plaintiffs counter that they have standing because the Notices assert that the City intends to begin imposing fines in the amount of $200 per day. Additionally, Plaintiffs contend that they have suffered a "destruction of property rights, loss of due process protections, and . . . future economic harm." Pls.' Reply Defs.' Obj. to Pls.' Motion 3.[2] Plaintiffs contend that their Properties were reclassified from single family residential to guest houses that require a special use permit, which destroys their grandfathered rights to dwell in houses built in the 1880s. Id. at 3-4.

         "[W]hen standing is at issue, the focal point shifts to the claimant, not the claim, and a court must determine if the plaintiff whose standing is challenged is a proper party to request an adjudication of a particular issue and not whether the issue itself is justiciable." McKenna v. Williams, 874 A.2d 217, 226 (R.I. 2005) (internal quotations omitted). To have standing, the claimant must allege an injury in fact, which must be "an invasion of a legally protected interest which is (a) concrete and particularized . . . and (b) actual or imminent, not conjectural or hypothetical." Narragansett Indian Tribe v. State, 81 A.3d 1106, 1110 (R.I. 2014) (internal quotations omitted). "The line is not between a substantial injury and an insubstantial injury. The line is between injury and no injury." Pontbriand v. Sundlun, 699 A.2d 856, 862 (R.I. 1997). Where future harm is the injury alleged, such allegations "require greater caution and scrutiny because the assessment of risk is both less certain, and whether the risk constitutes injury is likely to be more controversial." Kerin v. Titeflex Corp., 770 F.3d 978, 982 (1st Cir. 2014). Standing remains a requirement when the Court is faced with a request for a declaratory judgment. "[W]hen confronted with a UDJA claim, the inquiry is whether the Superior Court has been presented with an actual case or controversy. Without making this determination, the Court will not have jurisdiction to entertain the claim." Key, 163 A.3d at 1168 (internal quotations and citations omitted).

         To date, the only injury the City has inflicted on Plaintiffs is the issuance of the Notices. Those Notices state that the Plaintiffs-recipients have "30 days from the issuance of [the Notice] to apply for a special permit with the City or discontinue" renting the properties or the City will assess penalties in the amount of $200.00 per day. This is not a hypothetical injury nor is the risk to Plaintiffs uncertain because the Notices give both a timeframe for compliance and a specific penalty that will be assessed for noncompliance. Thus, the Court finds that Plaintiffs have standing to bring this suit as it relates to the determination of whether Plaintiffs must register their Properties.

         Plaintiffs' allegation that their Properties have been rezoned and their argument that renting does not constitute a change in use for zoning purposes is a separate issue requiring a separate analysis of standing. Plaintiffs admit that they have not received Notices of Violation or any other administrative notice from the City Zoning Official that their Properties are not in compliance with City Zoning Ordinances. Am. Compl. ¶ 51. The City also confirmed in oral argument that it has taken no zoning action against these Plaintiffs. Additionally, all parties conceded at oral argument that the City Director of Finance who sent the Notices regarding Plaintiffs' failure to register, has no authority to make zoning determinations; therefore, Plaintiffs cannot use the Notices to show standing to contest the City's alleged categorization of short-term renting as a special use because it has done no such thing. Because the Notices do not relate to zoning and the City has taken no zoning-related actions, there is no case or controversy between these Plaintiffs and Defendants regarding zoning. Moreover, some Plaintiffs may need to apply for a special use permit to rent their Properties and some may not;[3] therefore, even if there was a case or controversy related to zoning, any zoning-related injury is speculative, at best. There is no controversy and no injury to Plaintiffs concerning zoning of the Properties, and thus, as to zoning, Plaintiffs lack standing.[4]Consequently, the Court declines to address whether short-term renting constitutes a change in use.

         Next, Defendants argue that Plaintiffs have failed to exhaust their administrative remedies, and thus cannot come to this Court seeking relief. To support this contention, Defendants cite to Nardi v. City of Providence, 89 R.I. 437, 449, 153 A.2d 136, 143 (1959). Defendants point to Plaintiffs' arguments that the City has characterized Plaintiffs' Properties as uses which are inapplicable, that renting is a change in use, and that the Properties fit within the City's definition of a guest facility to contend that a zoning question is at issue, and this suit circumvents the administrative process. Defendants note that if the City determined a zoning violation existed, it would have filed a complaint against the offending party in Newport Municipal Court to adjudicate the same.

         Plaintiffs counter that the issues in this case are outside of the scope of powers given to municipal zoning boards under the Rhode Island Zoning Enabling Act of 1991 (ZEA) found at G.L. 1956 § 45-24-27 et seq. Plaintiffs note that they are not appealing from a zoning board decision, and there is no power under ZEA for the board to review determinations made by the Director of Finance. Alternatively, Plaintiffs argue that even if there were an administrative remedy available, such availability does not preclude a party from seeking declaratory relief because the questions presented in this case are purely questions of law which the Court can adjudicate.

         "The existence of another adequate remedy does not preclude a judgment for declaratory relief in cases where it is appropriate." Super. R. Civ. P. 57. Likewise, the Rhode Island Supreme Court has held that "persons whose rights are affected by an ordinance . . . are entitled to bring a declaratory judgment suit despite the possibility that administrative remedies might be available." Taylor v. Marshall, 119 R.I. 171, 180, 376 A.2d 712, 717 (1977).[5] Furthermore, a party is not required to exhaust administrative ...


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