November 19, 2012

Fighting for entrepreneurs in Texas

By Fighting for entrepreneurs in Texas

“There’s a vastness here and I believe that the people who are born here breathe that vastness into their soul.  They dream big dreams and think big thoughts, because there is nothing to hem them in.”  Hotelier & Texas native Conrad Hilton

Texas entrepreneur Marvin Atwood pursued his life-long dream of owning a restaurant where he could feature live, outdoor music.  Unfortunately, as soon as he opened the doors of Starvin Marvin’s Bar & Grill, he was immediately hemmed in by an archaic and unfair law that threatened his business.  PLF, joined by the Texas Landowners Council, filed an amicus brief in Starvin Marvin’s Bar and Grill, LLC v. City of Beaumont, urging the Texas Supreme Court to accept the case for review.  The Court initially declined to hear the case, but Atwood’s attorney filed a Motion for Rehearing last week, asking the Court to reconsider its decision in light of the significant ramifications for business owners across the state.  Atwood’s lawsuit asks the Court to overturn a 1972 case called City of University Park v. Benners, which held that “property owners do not acquire a constitutionally protected vested right in property uses once commenced or in zoning classifications once made.”  After Benners, the Texas Legislature enacted a Vested Rights Statute extending greater protections to property owners but unfortunately, Benners was never overturned, as Atwood discovered soon after opening Starvin Marvin’s.

He had established the restaurant on a piece of property in the City of Beaumont where outdoor musical performances had been held for over thirty years.  Prior to its opening, Atwood invested over a million dollars in renovating and expanding the outdoor patio and stage.  As a part of that process, he filed business plans and blueprints with the City, and obtained all of the necessary, myriad permits.  Shortly after the business opened, the City tried to cite Atwood for a noise violation when some neighbors complained, but it recanted after realizing that the restaurant’s noise levels fully complied with the existing zoning ordinance.  Instead, without issuing any formal notice, the City Council amended the City’s noise ordinance such that any use of Starvin Marvin’s patio, even without music, would violate the law.

This is the point at which Atwood got hemmed in by that 1972 Benners decision.  Believing that he had strong legal grounds to challenge the new noise ordinance, Atwood hired an attorney who won a temporary injunction against the City on the theory of “equitable estoppel”—meaning that the trial court thought it was unfair for the City to change the rules that applied to Atwood’s business after he had invested substantial money and energy in reliance on the existing regulatory scheme.  The Court of Appeals overturned the trial court’s decision on the basis that it should never have heard the case in the first place because it lacked jurisdiction.  It reasoned that because Atwood did not have a “constitutionally protected vested property right” in the existing use of his property as a restaurant that featured live outdoor music, the court could not hear his case.

Atwood’s attorney had sought equitable relief—i.e. an injunction—and Texas has a rule that courts of equity, as the trial court was, will not enjoin the enforcement of a penal ordinance unless it threatens irreparable injury to a vested property right.  Because Atwood lacked a vested property right, his only means of challenging the “penal” noise ordinance was to wait for the police to issue him a ticket and then raise his arguments as a defense to a criminal prosecution.  One Justice dissented from the Court of Appeals decision, noting that “Starvin Marvin’s should be able to challenge the validity of the ordinance governing its business without subjecting itself to a possible enforcement action.”  He undoubtedly recognized the fundamental unfairness of a rule that requires business owners to have to wait for the police to show up on their doorsteps before being able to challenge a law that directly threatens their livelihoods.  But unless the Texas Supreme Court reconsiders hearing this case, Atwood will be stuck in exactly that predicament.

PLF’s amicus brief noted that at least 21 other states would recognize a vested property right to business owners in Atwood’s position and would allow them to preemptively challenge this type of ordinance.  Moreover, the Texas Legislature signified in its Vested Rights Statute that public policy favors protecting business owners from sudden regulatory changes.  As a result, that 1972 Benners decision is a legal dinosaur which the Texas Supreme Court would be wise to overturn.  Let’s hope the Court decides to hear Atwood’s case after all, so that he and other Texas entrepreneurs like him can continue to dream big dreams and to realize those dreams without having to run such a tortured, legal gauntlet.

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