6th Circuit Court of Appeals Finds City’s Decision Not to Renew a Host Community Agreement Based on Fraud did not Violate Company’s Constitutional Rights

In 2006, the City of Detroit approved Systematic Recycling LLC a conditional zoning grant that permitted it to operate a large composting facility within city limits, subject to certain conditions. One of the conditions was that Systematic enter into a host community agreement (“HCA”) with Detroit to ensure that the city could adequately monitor its composting activities. After Systematic obtained the HCA, it was discovered that the individual who had procured the HCA had bribed certain members of the City Council in order to ensure its adoption by the city. Due to the fraud, the City of Detroit decided to allow the HCA to lapse rather than renewing it. As a result, Systematic’s conditional land use permit and associated zoning grant was revoked. The district court then granted Detroit’s motion for summary judgment, finding no reasonable jury could find Detroit violated Systematic’s constitutional rights by failing to renew the HCA and subsequently revoking the permit and zoning grant.

Systematic attempted to demonstrate that Detroit’s government action lacked a rational basis by negating every conceivable basis which might support the government action. However, the court found that the city officials had a rational basis to allow the Host Community Agreement to expire at the end of the term of two years in order to “uphold the integrity of the system that was compromised and insulted by the payment of a bribe.” Because no reasonable jury could conclude that Detroit singled out Systematic from similarly situated peers for no comprehensible reason, Systematic’s class of one claim and its due process claim failed. Finally, Systematic’s unjust enrichment claim failed because the court found Detroit did not receive money in return for nothing; Systematic received a decided benefit from Detroit in return for its payments, since it was allowed to operate its composting facility during the term of the HCA. Accordingly, the district court’s holding was affirmed.  

Systemic Recycling LLC v City of Detroit, 2015 WL 3620267 (6th Cir. CA 6/10/2015)

The opinion can be accessed at: http://law.justia.com/cases/federal/appellate-courts/ca6/13-1334/13-1334-2015-06-10.html