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NAHAS v. CITY OF MOUNTAIN VIEW

October 24, 2005.

Kareen Nahas, et al., Plaintiffs,
v.
City of Mountain View, et al., Defendants.



The opinion of the court was delivered by: JAMES WARE, District Judge

ORDER GRANTING DEFENDANTS' MOTION TO DISMISS; CONTINUING CASE MANAGEMENT CONFERENCE
I. INTRODUCTION
Plaintiffs ("Plaintiffs") in this case are Big Sky Entertainment, Inc. ("Big Sky") and Kareem Nahas and Andrew Nahas, shareholders in Big Sky. Defendants ("Defendants") are the City of Mountain View ("the City") and Whitney McNair ("McNair"), the City's Zoning Administrator. In 2001, Plaintiffs purchased The Limelight, a nightclub in downtown Mountain View. Plaintiffs' lawsuit arises out of the imposition of new permit conditions upon The Limelight, which allegedly put it out of business. Plaintiffs' first amended complaint contained claims for civil rights violations and torts. Defendants previously filed a motion for judgment on the pleadings, which the Court granted in part and denied in part. Thereafter, Plaintiffs filed a second amended complaint, which now includes six claims: (1) violation of equal protection rights; (2) violation of procedural due process; (3) violation of right to free speech; (4) promissory estoppel; (5) intentional interference with business relations/prospective economic advantage; and (6) negligent interference with business relations/prospective economic advantage. Presently before the Court is Defendants' Motion to Dismiss the first, second, fourth, fifth, and sixth claims for failure to state a claim upon which may be granted ("Motion") (Docket Item No. 157). The Motion was scheduled for a hearing on October 17, 2005. However, the Court finds it appropriate to take the motion under submission without oral argument pursuant to Civil Local Rule 7-1(b). For the reasons set forth below, the Court grants Defendants' Motion.

II. BACKGROUND

  In December 2001, Plaintiffs purchased The Limelight, a nightclub on Castro Street in downtown Mountain View. (Second Amended Complaint, hereinafter "SAC," Docket Item No. 155, ¶ 10.) At the time of the purchase, and prior thereto, The Limelight served patrons 18 years old and older seven days a week, except select Sundays when it had "youth nights" for patrons between ages 14 and 17. (SAC ¶ 10.) At that time, The Limelight's Community/Provisional Use Permit did not restrict hours of operation or patrons' ages. (SAC ¶ 12.) This Use Permit was transferred to Plaintiffs upon purchase of the Limelight. (SAC ¶ 12.) Prior to their purchase, Plaintiffs met with the City and The Limelight's then owner "to learn of any issues The City might have with the club's operations." (SAC ¶ 13.) The City affirmatively represented to Plaintiffs that there were no problems with the then current operations of the Limelight, and expressly agreed that Plaintiffs could continue to operate the Limelight without any restrictions on the age of the Limelight's patrons or limitation of its hours or days of operation. (SAC ¶ 13.) As a result, Plaintiffs believed that, if they purchased The Limelight, they could continue operating it under the same conditions. (SAC ¶ 14.) In addition to purchasing the nightclub, Plaintiffs executed a 10-year lease for the property, making them responsible for rent and property taxes totaling more than $2.5 million. (SAC ¶ 15.) Plaintiffs Kareem Nahas and Andrew Nahas personally guaranteed the payment of the property tax. (SAC ¶ 15.)

  Plaintiffs operated the Limelight the same way it was operated by its predecessor and without incident or concern from the City until about June 2002. (SAC ¶ 16.) In mid-2002, a nearby resident began complaining to the City's Zoning Administrator, Defendant McNair, about The Limelight's noise and about disruptive conduct of people in the public parking lot adjacent to The Limelight. (SAC ¶ 16.) Following these complaints, the City began a review of the conditions of operation of the Limelight. (SAC ¶ 16.) Additionally, the City itself complained that The Limelight's advertising materials, which contained images of scantily clad women, "did not promote a `family friendly' environment." (SAC ¶ 16.)

  Around October 2002, McNair imposed additional conditions upon The Limelight, requiring its patrons to be 21 years old or older, eliminating its patrons' "in-and-out" privileges, and restricting its evening operations to Thursday, Friday, and Saturday. (SAC ¶ 17.) There was no evidence, however, that the allegedly disruptive people in the parking lot were in fact patrons of The Limelight or that they were under 21 years old.*fn1 (SAC ¶ 17.)

  Plaintiffs appealed these additional conditions. (SAC ¶ 18.) The City Council heard Plaintiffs' appeal on December 10, 2002. (SAC ¶ 18.) At this hearing "Plaintiffs were [initially] only allowed ten minutes to speak. Thereafter, plaintiffs were only allowed three minutes each to speak." (SAC ¶ 18.) Plaintiffs offered to place security guards in the parking lot, provide the City Council with a sound report, soundproof the building, and offered to pay overtime to City's police officers who might have to come out to the Limelight. (SAC ¶ 18.) Despite these accommodations and despite Plaintiffs' statements that the additional conditions would cause The Limelight to go out of business, the City upheld the additional conditions and set a further hearing for January 22, 2003. (SAC ¶ 18.)

  After the December hearing, Plaintiffs served the City Attorney Michael Martello with a petition for writ of mandamus seeking to stay enforcement of the new conditions. (SAC ¶ 19.) The City attorney asked Plaintiffs to try to resolve the matter without litigation and agreed to stay enforcement until the end of the year to allow some time for negotiations. (SAC ¶ 19.) During these negotiations, the parties discussed the possibility of finding a new buyer for The Limelight. (SAC ¶ 20.) In February 2003, Plaintiffs found a potential buyer, who was led by the City to believe that the new conditions would be rescinded. (SAC ¶ 21.) The potential buyer made an offer and escrow opened but, in April 2003, McNair refused to rescind the new conditions. (SAC ¶ 22.) Instead, McNair imposed yet additional costly conditions; for example, McNair required the club to close at 1:00 a.m. instead of 2:00 a.m. (SAC ¶ 22.) Consequently, the buyer decided not to finalize the purchase of The Limelight. (SAC ¶ 23.) Plaintiffs have been unable to locate another buyer. (SAC ¶ 23.)

  Plaintiffs have continued to make efforts to resolve their dispute with the City. (SAC ¶¶ 242-5.) At a meeting with the City on May 12, 2003, the City expressed concerns about the content of Plaintiffs' advertising material and the disruptiveness of the people in the parking lot. (SAC ¶ 25.) The City suggested that "the property would serve the community better as a restaurant." (SAC ¶ 25.) Plaintiffs submitted a report to the City, which sought to address the City's concerns by proposing additional security, sound proofing, etc. (SAC ¶ 26.) Plaintiffs agreed to virtually all of the City's new conditions. (SAC ¶ 26.) Plaintiffs asked, however, that The Limelight be allowed to continue serving patrons 18 years old and older, to continue staying open until 2 a.m., and to continue having "youth nights" on Sundays. (SAC ¶ 26.) Plaintiffs suggested that these allowances be made for a probationary period during which Plaintiffs would prove that they could operate The Limelight without disturbances. (SAC ¶ 26.) Despite Plaintiffs' reiteration that imposition of all the new conditions would put The Limelight out of business, McNair upheld them. (SAC ¶¶ 26-27.) McNair attached a copy of the Petition for Writ of Mandate that Plaintiffs earlier served on the City attorney. (SAC ¶ 27.)

  At a final hearing on May 27, 2003, the City upheld the new conditions. (SAC ¶ 28.) Plaintiffs then operated The Limelight in compliance therewith. (SAC ¶ 29.) However, the club lost most of its patrons and was "forced to close down in July, 2003." (SAC ¶ 29.)

  Since February 2003, Plaintiffs have been unable to pay rent on the property and are now defendants in an unlawful detainer action. (SAC ¶ 30.) Additionally, Plaintiffs allegedly have suffered "injury to their business goodwill and reputation" and loss of business opportunity. (SAC ¶¶ 31-34.) Plaintiffs allege that subsequent attempts to open a nightclub on a property in Burlingame, California, have been frustrated because the City of Mountain View persuaded City of Burlingame that Plaintiffs did not properly follow the conditions of their permit. (SAC ¶¶ 31-34.) Allegedly, the landlord of the Burlingame property is suing Plaintiffs as a result. (SAC ¶ 35.)

  On November 14, 2003, Plaintiffs initiated the instant suit, arising out of the imposition of new permit conditions upon The Limelight, which allegedly put it out of business. Plaintiffs' First Amended Complaint ("FAC") alleged claims for civil rights violations and torts. Thereafter, Defendants filed a motion for judgment on the pleadings, which the Court granted in part and denied in part. ("July 19, 2005 Order") (Docket Item No. 147.) Plaintiffs filed a Second Amended Complaint ("SAC") (Docket Item No. 155), which now includes six claims: (1) violation of equal protection rights; (2) violation of procedural due process; (3) violation of right to free speech; (4) promissory estoppel; (5) intentional interference with business relations/prospective economic advantage; and (6) negligent interference with business relations/prospective economic advantage.

  Presently before the Court is Defendants' Motion to Dismiss the first, second, fourth, fifth, and sixth claims for failure to state a claim upon which may be granted ("Motion"). Based on the arguments advanced by counsel in their briefs, the Court grants Defendants' Motion.

  III. STANDARDS

  Motion to Dismiss under Rule 12(b)(6)

  The strict standard for granting a motion to dismiss under Rule 12(b)(6) is set forth in Conley v. Gibson, 355 U.S. 41 (1957). A motion to dismiss under Rule 12(b)(6) must not be granted "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Id. at 45-46. As the Ninth Circuit observed, a "motion to dismiss for failure to state a claim is viewed with disfavor and is rarely granted." Gilligan v. Jamco Develop. Corp., 108 F.3d 246, 249 (9th Cir. 1997).

  In ruling on a motion to dismiss, the Court must accept as true all material allegations in the complaint, as well as reasonable inferences to be drawn from them. Leatherman v. Tarrant County Narcotics Intelligence and Coordination Unit, 507 U.S. 163, 164 (1993); Pareto v. FDIC, 139 F.3d 696, 699 (9th Cir. 1998). However, the court need not accept as true conclusionary allegations or legal characterizations. Pareto, 139 F.3d at 699. Also, the court need not accept unreasonable inferences or unwarranted deductions of fact. Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001).

  IV. DISCUSSION

  A. Plaintiffs' Equal Protection Claims (First ...


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