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LKS Enterprises, LLC v. City of Silverton

United States District Court, D. Oregon

March 6, 2017

LKS ENTERPRISES, LLC, an Oregon limited liability company, Plaintiff,
v.
CITY OF SILVERTON, a municipal corporation and DARYL JONES, Defendants.

          ORDER

          Michael McShane United States District Judge

         Plaintiff LKS Enterprises, LLC, a construction company, brings suit against the City of Silverton and its building inspector for violating plaintiff's right to substantive due process, interfering with its business relationships, and defamation. All of these claims are based on the plaintiff's belief that it was being treated unfairly by the building inspector when permits were not issued and code violations were found in connection with four residential construction projects. Plaintiff, for the most part, does not contest the validity of the inspector's decisions based on the building codes. Rather, plaintiff contends that they were arbitrarily being applied to it in a retaliatory manner. Because plaintiff was not entitled to have his work permitted due to code violations, he cannot establish he had a federally protected property interest under a substantive due process analysis. Because plaintiff's evidence of retaliation, defamation, and interference with economic relationships is based on rumor and mere speculation, its state claims fail as well. Defendants' motion for summary judgment, ECF No. 16, is GRANTED.

         BACKGROUND

         Bill Stanley is LKS's project manager.[1] In early 2015, he applied for and received building permits to construct four residential homes in Silverton. Just before the framing was completed on the first home (810 Pioneer) Stanley fired Todd Franks, the framing subcontractor, because Franks allowed his worker's compensation insurance to lapse. Franks had subcontracted the framing work to Jose Garcia Construction. Stanley Depo.; Piscadlo Decl. Ex. 1, 8; ECF No. 17. Garcia attempted to finish the job using his own insurance, but Stanley refused Garcia further access to the site and refused to pay Garcia's workers for the work that was substantially completed. Stanley hired another company to finish the framing.

         Stanley then requested a framing inspection from the City of Silverton. On April 16, 2016, Jones arrived to perform the “rough in - combo” inspection. Jones stopped the inspection because the house was not ready. Piscadlo Decl. Ex. 9, 6. Jones listed eight violations before stopping the inspection. Among the alleged violations were: fire blocking of garage ceiling to rear wall; post to beam attachment was inadequate; improper anchorage of 2x4 ledger to glue lam supporting floor joists; and additional engineering required due to variation of headers from approved plans. Id. Thus began the contentious relationship between Jones and Stanley.

         Stanley alleges “Jones began to single LKS Enterprises out for minor or, in some cases, nonexistent code violations.” Stanley Decl. ¶ 5; ECF No. 30. Curiously, despite pointing to the framing inspection in support of his claims, Stanley admits the house was not ready for inspection that day. In fact, Stanley “knew there was going to be some corrections on it because of the framing problems issues on it. And this was also going to be part of my leverage with the framer that you have some problems that you need to take care of.” Stanley Depo. Piscadlo Decl. Ex. 1, 13. Even after reviewing the codes, Stanley admits there were several code violations at the time of the framing inspection. Id. at 15.

         Stanley went to Jones's office and challenged some of the alleged violations. The two disagreed on whether Stanley could substitute 4 x 12 lumbar for 3 ½ x 9 ½ glulams shown on the plans. Stanley told Jones “he could not allege corrections without citing code” and that he would report Jones to the State of Oregon Building Code Division. Stanley Decl. ¶ 6; ECF No. 30. Jones subsequently began citing the code in all future inspections.

         On April 22, 2015, Jones issued a stop work notice on 810 Pioneer. Piscado Decl. Ex. 13. In Stanley's opinion, a stop work (or “red tag) notice is “extremely rare. None of the listed reasons for the red tag were health or safety-related, or have been the basis for any red tag in any project that I have dealt with in the past.” Stanley Decl. ¶ 7. On the stop work order, Jones noted:

         The above mentioned structure is not in compliance with the approved plans and engineering submitted for the issuance of a building permit.

• Engineered Structural beams have been changed without proper documentation from the engineer of record.
• Structural details outlined in the engineering for hardware have not been installed or have been substituted without approval by the building Official or the Engineer of Record.
• Ledger attachments are not in compliance with chapter 5 OSRC. Joist hangers shall be installed or ledger and attachment to be designed by engineer of record.
• Fire Blocking is lacking in garage walls to floor system.
• Stair system has been reconfigured from the approved plan and has questionable bearing and support.
• The approved plans show the furnace location on the slab in the back of the garage; the furnace has been installed in the attic imposing additional loads to the bottom of the trusses without proper documentation submitted to the building department.
• The platform supporting the furnace is lacking proper framing and access.
• Trusses installed do not match approved plans.
Due to the major structural changes and the extremely tall crawl space (12 feet plus) the Engineer of record shall make a site visit and perform a structural load path from the roofing to the foundation system, including but not limited to static and live loads, lateral loads, and connections. All results shall be shown on revised plans, all engineering shall display an original engineer seal and be submitted to the Building Official for review and approval.

Piscadlo Decl. Ex. 13, 1.

         A few days later, Jones lifted the stop work order. The parties continued to have a contentious relationship throughout the construction of the four homes. On tens of occasions, Jones did not approve requested permits.[2] There are hundreds of approved and denied requests for permits in the record. LKS never points specifically to any single permit it alleges it was entitled to but did not receive.

         For the purpose of resolving this motion, it is enough to say that generally LKS alleges Jones treated it unfairly and made it jump through hoops it allowed other builders to bypass. For example, Stanley alleges:

10. After construction was nearly complete on 812 Pioneer, Daryl Jones also required me to submit engineering for the deck, despite having previously approved the plans containing drawings of the deck. Mr. Jones claimed that a deck was not permitted even though the deck plans were contained in the original building plans that were approved.
11. Mr. Jones also required engineering for the retaining wall on 812 Pioneer even though grading had not yet been completed, and the wall was slightly under 4 feet in elevation.
12. In my review of the building permits and inspection notes, I did not find any other new construction projects in which the City required engineering to be submitted for a deck or retaining wall. The only such engineering was on permits by homeowners for additions, such as a new deck or retaining wall.

Stanley Decl., 3-4.

         Regarding the deck, Jones pointed out that decks over 30 inches above grade required plans and a permit. Piscadlo Decl, Ex. 19, 14. The deck was over 30 inches above grade. Additionally, the plans approved merely contained a conceptual drawing of what a deck would look like, even stating “NOT NECESSARILY HOW THE STRUCTURE WILL FINALLY APPEAR.” Piscadlo Decl. Ex. 18, 1. In his deposition, Stanley admitted there were no details regarding the deck on the approved plans. Piscadlo Decl. Ex. 1, 33. Some of the approved plans did not even contain the conceptual drawing of the deck, and none showed concrete footings or piers, or even whether the deck was on grade or raised. Id. at 33-34.

         Regarding the retaining wall that Stanley alleges was “slightly” under four feet tall, there is no evidence Jones (or any other inspector) required engineering for the retaining wall. Instead, the inspector merely informed Stanley that the retaining wall might need a permit. Piscadlo Decl. Ex. 23, 3. Walls over four feet or supporting a surcharge require a permit. ORSC R105.2.

         LKS's response in opposition, supported by several declarations, fails to identify a specific property interest, the denial of which is federally protected under a due process analysis.

         Ultimately, the city issued a final occupancy permit for three of the houses. LKS never requested a ...


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