8.28.14 CIty Motion to Dismiss Water Shut Off Case

22736800.10\022765-00202

UNITED STATES BANKRUPTCY COURTEASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

In re:

City of Detroit, Michigan,

Debtor.

Bankruptcy Case No. 13-53846

Honorable Steven W. Rhodes

Chapter 9

Maurikia Lyda, John Smith, Nicole Hill,Rosalyn Walker, Annette Parham, JaniceWard, Sylvia Taylor, Scott Eubank, JoannJackson, Tammika R. Williams, MichiganWelfare Rights Organization, Peoples WaterBoard, National Action Network-MichiganChapter, and Moratorium Now!

v.

City of Detroit, Michigan

Adv. Proc. No. 14-04732

CITY OF DETROITS MOTION TO DISMISSADVERSARY COMPLAINT FOR DECLARATIVE & INJUNCTIVE RELIEF

The City of Detroit (the City), by its undersigned counsel, files this motion (Motion)

to dismiss the First Amended Adversary Complaint for Declarative & Injunctive Relief

(Complaint, Doc. No. 3). As set forth more fully in the attached brief, the Complaint must be

dismissed because the Court may not grant any of the relief sought by the Plaintiffs. As this

Court recently held, the Bankruptcy Code and the United States Constitution prohibit the Court

from granting the relief the Plaintiffs request, namely injunctive relief directing the City in how it

provides water services to its citizens. Because the Court cannot grant any of the relief sought by

the Plaintiffs, there is no case or controversy and the Complaint must be dismissed because the

matter is constitutionally moot. Furthermore, the Complaint does not otherwise state a claim

upon which relief may be granted and must be dismissed for this additional reason.

14-04732-swr Doc 26 Filed 08/28/14 Entered 08/28/14 16:09:29 Page 1 of 23

22736800.10\022765-00202 2

Pursuant to Local Bankruptcy Rule 9014-1(g), the City contacted opposing counsel and

requested concurrence for the relief sought by this motion on August 28 at 2:05 p.m. by

telephone, but concurrence was denied.

August 28, 2014 Respectfully submitted,

By: /s/Timothy A. FuscoTimothy A. Fusco (P13768)Jonathan S. Green (P33140)Stephen S. LaPlante (P48063)

MILLER, CANFIELD, PADDOCK ANDSTONE, P.L.C.

150 West Jefferson, Suite 2500Detroit, Michigan 48226Telephone: (313) 963-6420Facsimile: (313) [email protected]@[email protected]

David G. Heiman (OH 0038271)Heather Lennox (OH 0059649)

JONES DAY

North Point901 Lakeside AvenueCleveland, Ohio 44114Telephone: (216) 586-3939Facsimile: (216) [email protected]@jonesday.com

Bruce Bennett (CA 105430)

JONES DAY

555 South Flower Street Fiftieth FloorLos Angeles, California 90071Telephone: (213) 243-2382Facsimile: (213) [email protected]

ATTORNEYS FOR THE CITY OF DETROIT


22736800.10\022765-00202

EXHIBIT 1 PROPOSED ORDER


SOUTHERN DIVISION

In re:


Debtor.



Chapter 9


v.


Adv. Proc. No. 14-04732

[PROPOSED] ORDER GRANTING THE CITY OF DETROITSMOTION TO DISMISS ADVERSARY COMPLAINT FOR

DECLARATIVE & INJUNCTIVE RELIEF

This matter, having come before the court on the City of Detroits Motion to Dismiss

Adversary Complaint for Declarative & Injunctive Relief, upon proper notice and a hearing, the

Court being fully advised in the premise, and there being good cause to grant the relief requested,

THE COURT ORDERS THAT the Motion is granted and the Complaint is dismissed.


22736800.10\022765-00202

EXHIBIT 2 NOTICE


SOUTHERN DIVISION

In re:


Debtor.



Chapter 9


v.


Adv. Proc. No. 14-04732

NOTICE OF OPPORTUNITY TO RESPOND TO CITY OF DETROITSMOTION TO DISMISS ADVERSARY COMPLAINT FOR


The City of Detroit has filed papers with the Court for an Order requesting that this

adversary proceeding be dismissed, along with other related relief.

Your rights may be affected. You should read these papers carefully and discuss

them with your attorney.

If you do not want the Court to enter an Order granting the City of Detroits Motion to

Dismiss Adversary Complaint for Declarative & Injunctive Relief, within 14 days, you or your

attorney must:

1. File with the court a written response or an answer, explaining your position at:1

1 Response or answer must comply with F. R. Civ. P. 8(b), (c) and (e).


22736800.10\022765-00202 2

United States Bankruptcy Court211 W. Fort St., Suite 1900

Detroit, Michigan 48226

If you mail your response to the court for filing, you must mail it early enough so that the

court will receive it on or before the date stated above. You must also mail a copy to:

Miller, Canfield, Paddock & Stone, PLCAttn: Timothy A. Fusco

150 West Jefferson, Suite 2500Detroit, Michigan 48226

2. If a response or answer is timely filed and served, the clerk will schedule a hearing on

the motion and you will be served with a notice of the date, time, and location of that hearing.

If you or your attorney do not take these steps, the court may decide that you do not

oppose the relief sought in the motion or objection and may enter an order granting that

relief.

MILLER, CANFIELD, PADDOCK AND STONE, P.L.C.

By: /s/Timothy A. FuscoTimothy A. Fusco (P13768)150 West Jefferson, Suite 2500Detroit, Michigan 48226Telephone: (313) 963-6420Facsimile: (313) [email protected]

Dated: August 28, 2014


22736800.10\022765-00202

EXHIBIT 3 BRIEF


SOUTHERN DIVISION

In re:


Debtor.



Chapter 9


v.


Adv. Proc. No. 14-04732

BRIEF IN SUPPORT OF THE CITY OF DETROITSMOTION TO DISMISS ADVERSARY COMPLAINT FOR



22736800.10\022765-00202

TABLE OF CONTENTS

I. INTRODUCTION................................................................................................................. 3

II. ARGUMENT......................................................................................................................... 3

A. SINCE THE COURT CANNOT GRANT THE PLAINTIFFS ANY RELIEF, IT SHOULD DISMISSTHE COMPLAINT BECAUSE THE MATTER IS CONSTITUTIONALLY MOOT. ................................3

B. THE COMPLAINT DOES NOT STATE A CLAIM UPON WHICH RELIEF CAN BEGRANTED. .............................................................................................................................7

1. The Complaint does not state a claim for breach of contract or untimely rejectionof an executory contract (Count I). ...............................................................................8

a. Rejection of executory contracts in bankruptcy. .....................................................8

b. Elements for breach of contract in Michigan...........................................................8

c. The Complaint does not state a cause of action for Breach of ExecutoryContract. ....................................................................................................................9

2. The Complaint does not state a claim for violation of Procedural Due Process(Count II)......................................................................................................................10

3. The Complaint does not state a claim for violation of Equal Rights (Count III).......11

4. The Complaint does not state a claim for Public Health Emergency (Count IV)......12

5. The Complaint does not state a claim for estoppel (Count V).......................................13

a. Elements for various forms of estoppel in Michigan. ............................................13

b. The Complaint does not state a claim for estoppel. ...............................................14

6. The Complaint does not state a claim for declaratory and injunctive relief (CountVI). ................................................................................................................................15

7. The Complaint does not state a claim for Public Trust and Human Rights toWater (Count VII). .....................................................................................................16

8. Conclusion.....................................................................................................................17

III. CONCLUSION ................................................................................................................... 17


22736800.10\022765-00202

I. INTRODUCTION

In their Complaint, the Plaintiffs attack, on a variety of theories, various policies and

regulations of the DWSD with respect to its residential water and sewer services including those

relating to termination of service and payment procedures for persons allegedly unable to pay for

their services. As this Court recently held in denying a motion to intervene filed by many of the

same parties as the Plaintiffs here, because of the constraints imposed by Bankruptcy Code

904, the Court does not have authority to require the DWSD to stop mass water shut-offs, to

require that the DWSD refrain from implementing a program of mass water shut-offs in the

future, or require the DWSD to implement procedures regarding rate setting or water

affordability plans. City of Detroit, Mich., Case No. 13-53846, Doc. No. 6708. The Plaintiffs

essentially seek this same general relief in the Complaint. Consequently, and under the same

rationale, the Complaint should be dismissed because the relief sought is simply beyond this

Courts authority, rendering the matter constitutionally moot. The Complaint should also be

dismissed because, as to substantive matters, the Complaint does not otherwise state a claim

upon which relief can be granted.

II. ARGUMENT

A. Since the Court cannot grant the Plaintiffs any relief, it should dismiss theComplaint because the matter is constitutionally moot.

The Complaint should be dismissed because the matter is constitutionally moot.

Mootness is a threshold issue because the existence of a live caseor controversy is a constitutional prerequisite to federal courtjurisdiction. Without a live, concrete controversy, we lackjurisdiction to consider claims no matter how meritorious.Declaratory judgment actions must be sustainable under the samemootness criteria that apply to any other lawsuit. . . . [I]t is wellestablished that what makes a declaratory judgment action a properjudicial resolution of a case or controversy rather than an advisoryopinion is the settling of some dispute which affects the behaviorof the defendant toward the plaintiff. The crucial question is


22736800.10\022765-00202 4

whether granting a present determination of the issues offered willhave some effect in the real world.

Rio Grande Silvery Minnow v. Bureau of Reclamation, 601 F.3d 1096, 1109-10 (10th Cir. 2010)

(internal quotation marks and citations omitted). A federal court has no authority to render a

decision upon moot questions or to declare rules of law that cannot affect the matter at issue.

Cleveland Branch, NAACP v. City of Parma, OH, 263 F.3d 513, 530 (6th Cir. 2001) (citing

Church of Scientology v. United States, 506 U.S. 9, 12 (1992)). [A] case becomes moot when it

becomes impossible for the court to grant any effectual relief whatever to a prevailing party.

Boullioun Aircraft Holding Co. v. Smith Mgmt. (In re W. Pac. Airlines, Inc.), 181 F.3d 1191,

1194 (10th Cir. 1999) (quoting Mills v. Green, 159 U.S. 651, 653 (1895), and Church of

Scientology, 506 U.S. at 12) (internal quotation marks omitted).

Thus, [w]hen Congress enacts a statute prohibiting the federal courts from granting

certain remedies, such limitations are jurisdictional. King v. Long Beach Mortg. Co., 672 F.

Supp. 2d 238, 244 (D. Mass. 2009). When a bankruptcy court concludes that it lacks jurisdiction

over a matter, its inquiry immediately ends and the matter must be dismissed. See Pa. Cos. v.

Stone (In re Greenley Energy Holdings of Pa., Inc.), 110 B.R. 173, 180 (Bankr. E.D. Pa. 1990).

Bankruptcy Code 904 explicitly prevents this Court from granting the relief prayed for.

Notwithstanding any power of the court, unless the debtor consentsor the plan so provides, the court may not, by any stay, order, ordecree, in the case or otherwise, interfere with

(1) any of the political or governmental powers of the debtor;

(2) any of the property or revenues of the debtor; or

(3) the debtor's use or enjoyment of any income-producingproperty.

This section makes clear that the court may not interfere with the choices a municipality makes

as to what services and benefits it will provide. In re Addison Cmty. Hosp. Auth., 175 B.R. 646,


22736800.10\022765-00202 5

649 (Bankr. E.D. Mich. 1994) (citation omitted); see also Hollstein v. Sanitary & Improvement

Dist. No. 7 of Lancaster Cnty., Neb., 96 B.R. 967, 970 (Bankr. D. Neb. 1989).

In the overall construct, 904 performs the role of the clean-uphitter in baseball. Its preambular language [n]otwithstanding anypower of the court, . . . the court may not, by any stay, order, ordecree, in the case or otherwise . . . is so comprehensive that itcan only mean that a federal court can use no tool in its toolkitnoinherent authority power, no implied equitable power, noBankruptcy Code 105 power, no writ, no stay, no ordertointerfere with a municipality regarding political or governmentalpowers, property or revenues, or use or enjoyment of income-producing property. As a practical matter, the 904 restrictionfunctions as an anti-injunction statuteand more.

Assn of the Retired Emps. of the City of Stockton v. City of Stockton, Cal. (In re City of Stockton,

Cal.), 478 B.R. 8, 20 (Bankr. E.D. Cal. 2012).

These restrictions are based in the United States Constitution.

The foundation of 904 is the doctrine that neither Congress northe courts can change the existing system of government in thiscountry. The powers of the federal government are limited by theConstitution. The powers that are not given to the federalgovernment are reserved to the states. One of the powers reservedto the states is the power to create and govern municipalities.Therefore, chapter 9 was created to give courts only enoughjurisdiction to provide meaningful assistance to municipalities thatrequire it, not to address the policy matters that such municipalitiescontrol.

Addison Cmty. Hosp. Auth., 175 B.R. at 649. In the recent ruling by this Court on the motion to

intervene referenced earlier,2 this Court reaffirmed this understanding.

Unlike other chapters of the bankruptcy code, chapter 9 strictlylimits the Courts power in a municipal bankruptcy case. This is toensure that the separation of powers contemplated in the UnitedStates Constitution is upheld and the Court does not overstep itsbounds into the sovereign powers of states. Thus, section 904 ofthe bankruptcy code prohibits the Court from interfering with(1) any of the political or governmental powers of the debtor;

2 One of the Plaintiffs and one of the attorneys in this matter were involved in the motion to intervene;thus, the Plaintiffs here should be well aware of this ruling.


22736800.10\022765-00202 6

(2) any of the property or revenues of the debtor; or (3) thedebtors use or enjoyment of any income-producing property. 11U.S.C. 904. This limitation means that the Court cannot interferewith the choices a municipality makes as to what services andbenefits it will provide. In re Addison Cmty. Hosp. Auth., 175B.R. 646, 649 (Bankr. E.D. Mich. 1994) (citing H.R. Rep. No. 595,398). Further, this provision makes clear that chapter 9 wascreated to give courts only enough jurisdiction to providemeaningful assistance to municipalities that require it, not toaddress the policy matters that such municipalities control. Id.Consequently, given the constraints of 904, the Court would nothave the authority to require the DWSD to stop mass water shut-offs, to require that the DWSD refrain from implementing aprogram of mass water shut-offs in the future, or require theDWSD to implement procedures regarding rate setting or wateraffordability plans. (emphasis added)

In re City of Detroit, Mich., Case No. 13-53846, Doc. No. 6708 (emphasis added). Further,

Bankruptcy Code 105 cannot be used to override specific prohibits in section 904. As the

United States Supreme Court explained,

It is hornbook law that 105(a) does not allow the bankruptcycourt to override explicit mandates of other sections of theBankruptcy Code. Section 105(a) confers authority to carry outthe provisions of the Code, but it is quite impossible to do that bytaking action that the Code prohibits. That is simply an applicationof the axiom that a statutes general permission to take actions of acertain type must yield to a specific prohibition found elsewhere.

Law v. Siegel, 134 S.Ct. 1188, 1194 (2014) (citation and internal quotation marks omitted).

Here, the Plaintiffs ask the Court for the exact relief the Court concluded it could not

grant: to enjoin the City from further water shutoffs, order restoration of service previously

terminated, provide declaratory relief that would interfere with the Citys policies, procedures,

and actions relating to provision of water, and order the City to set rates that the Plaintiffs

believe are fair.3 The Plaintiffs have made it clear that only injunctive relief would be effective;

monetary relief will not suffice. Plaintiffs Motion for a Temporary Restraining Order and to

3 The Plaintiffs also seek reasonable attorneys fees, but one cannot incur reasonable fees seekingimpermissible relief. The Court could not order the City to pay them, in any event. 11 U.S.C. 904(2).


22736800.10\022765-00202 7

Set a Hearing for a Preliminary Injunction, Doc. No. 20, p. 14. Bankruptcy Code 904 and the

United States Constitution, however, place such relief beyond the Bankruptcy Courts authority

to provide absent the Citys consent, which the City does not grant. City of Detroit, Mich., Case

No. 13-53846, Doc. No. 6708. Section 105 of the Bankruptcy Code does not provide a way to

avoid that prohibition. Law, 134 S.Ct. at 1194; City of Stockton, Cal., 478 B.R. at 20.

Since the Court cannot grant effectual relief to the Plaintiffs even if they prevail, the

Court should find that the adversary proceeding is moot and dismiss it. Cleveland Branch,

NAACP, 263 F.3d at 530; Boullioun Aircraft Holding, 181 F.3d at 1194; King, 672 F. Supp. at

244.

B. The Complaint Does Not State a Claim Upon Which Relief Can Be Granted.

To survive a motion to dismiss, a complaint must contain sufficient factual matter to

state a claim to relief that is plausible on its face. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)

(internal quotation mark omitted). Plausibility requires more than labels and conclusions, and a

formulaic recitation of the elements of a cause of action will not do. Bell Atl. Corp. v. Twombly,

550 U.S. 544, 555 (2007). If the Complaint does not set forth a plausible claim for relief, it must

be dismissed. Fremont Reorganizing Corp. v. Duke, 811 F. Supp. 2d 1323, 1333-34 (E.D. Mich.

2011); Harps v. TRW Auto., U.S., LLC, 351 F. Appx 52, 56 (6th Cir. 2009).

For purposes of this Motion only, and subject to the principles set forth above, the factual

allegations in the Complaint are taken as true. Because the facts alleged do not give rise to a

claim upon which relief can be granted, the Complaint should be dismissed.


22736800.10\022765-00202 8

1. The Complaint does not state a claim for breach of contract oruntimely rejection of an executory contract (Count I).

a. Rejection of executory contracts in bankruptcy.

A chapter 9 debtor may assume or reject executory contracts to which it is a party,

subject to certain conditions. 11 U.S.C. 365. Until a contract is rejected, it is enforceable

against the non-debtor, but not against the debtor. Hayes Lemmerz Intl, Inc. v. Epilogics Group,

531 F. Supp. 2d 789, 802 (E.D. Mich. 2007) (citation omitted). A chapter 9 debtor cannot reject

a contract prior to confirmation of a plan unless there is a specific court order affirming the

rejection. See S.N.A. Nut Co. v. Haagen-Dazs Co. (In re S.N.A. Nut Co.), 191 B.R. 117, 120

(Bankr. N.D. Ill. 1996). Thus, there is no such thing as implied rejection of an executory

contract or a cause of action for such an event.

Rejection of a contract acts like a breach of the contract and results in a pre-petition claim

for damages. Route 21 Assocs. of Belleville, Inc. v. MHC, Inc., 486 B.R. 75, 85 (S.D.N.Y. 2012).

Rejection usually deprives the non-debtor party of the remedy of specific performance. In re

TOUSA, Inc., 503 B.R. 499, 504 (Bankr. S.D. Fla. 2014).

b. Elements for breach of contract in Michigan.

Under Michigan law, the elements of a breach of contract claim are: (1) the existence

of a contract between the parties, (2) the terms of the contract require performance of certain

actions, (3) a party breached the contract, and (4) the breach caused the other party injury.

Ypsilanti Cmty. Utils. Auth. v. Meadwestvaco Air Sys., LLC, 678 F. Supp. 2d 553, 571 (E.D.

Mich. 2009) (citation and internal quotation marks omitted). Michigan law does not allow a

party who was the first to substantially breach a contract to later sue on the same contract.

Profit Pet v. Arthur Dogswell, LLC, 603 F.3d 308, 313 (6th Cir. 2010).


22736800.10\022765-00202 9

c. The Complaint does not state a cause of action for Breach ofExecutory Contract.

In support of Count I, the Plaintiffs allege that each account under which water was

provided is an executory contract. Complaint, 7. They allege that the City has rejected or

attempted to reject executory contracts in violation of 11 U.S.C. 365. Id., 12, 113. They

claim the right to enforce the alleged contracts. Id., 13. Finally, Plaintiffs allege that the City

has violated unspecified federal law and that the Plaintiffs will be permanently and totally

injured if the City is not ordered to cease and desist. Id., 114-15.

These allegations fail to state a claim for three main reasons. First, there are no factual

allegations to support the existence of the alleged contracts. Second, if these are contracts, the

Plaintiffs cannot enforce them. Third, and finally, if these truly are contracts, applicable

bankruptcy law yields results exactly opposite to those sought by the Plaintiffs.

First, the allegation that the provision of water and sewage services automatically creates

contracts between the City and residents is a legal conclusion unsupported by citation to law or

factual allegations which the Court need not accept as true. Duke, 811 F. Supp. 2d at 1333.

Second, assuming arguendo that each water account is a contract, in Michigan, a party

substantially in breach of a contract cannot sue to enforce it. Each residential Plaintiff (with the

possible exception of Hill) admits to facts which indicate that he or she substantially breached

any such contract,4 and not one Plaintiff alleges that he or she has performed all of his or her

obligations under the alleged contracts. Complaint, 36 (Lyda), 39 (Smith), 42 (Hill), 46-47

(Walker), 49 (Parham), 53 (Ward), 56 (Taylor), 60-61 (Jackson), 63 (Williams). The remaining

4 The only obligation that appears to exist under Plaintiffs purported contracts is an obligation to pay thewater bill on time, and thus failure to pay would have to constitute a substantial breach. Note that whilePlaintiff Eubank does not admit that he has breached the alleged water contract, his allegations indicatethat his landlord has. Complaint, 57. Even if there is a contract, (a) Eubank is not a party to it, and(b) the party supposedly in privity with the City has breached the alleged contract. Id., 57-58; see alsoMidkiff v. Adams Cnty. Reg. Water Dist., 409 F.3d 758, 763-65 (6th Cir. 2005).


22736800.10\022765-00202 10

Plaintiffs have not alleged privity with the DWSD or any other facts that would show that they

have standing on their own. Thus, not one Plaintiff has alleged facts sufficient to show that he or

she could sue on these alleged contracts under Michigan law. Profit Pet, 603 F.3d at 313

Assuming, arguendo, that the Plaintiffs relationship with the City is governed by

contract, bankruptcy law would dictate its treatment. In spite of the Plaintiffs allegations, the

City could not reject the contracts without Court order. S.N.A. Nut Co., 191 B.R. at 120. And,

hypothetically, had the alleged contracts been rejected, all the Plaintiffs would receive is a pre-

petition claim for any provable damages; they would not be entitled to or be able to obtain an

injunction for specific performance. Route 21 Assocs. of Belleville, 486 B.R. at 85; TOUSA, 503

B.R. at 504. In fact, if the Plaintiffs claims were true, the City would have the right to pursue

the Plaintiffs for their contractual breaches while Plaintiffs would be barred from doing the

reverse. See Hayes Lemmerz, 531 F. Supp. 2d at 802.

Plaintiffs claims are unsupported and, even if true, lead to results opposite of what they

hope to accomplish. No claim for breach of contract has been stated. The Bankruptcy Court

should dismiss Count I.

2. The Complaint does not state a claim for violation of Procedural DueProcess (Count II).

The Fourteenth Amendment to the United States Constitutionprohibits states from depriving citizens of life, liberty, orproperty without due process of law. U.S. Const. amend. XIV.A two-step analysis guides our evaluation of procedural dueprocess claims. We must first determine whether there exists aliberty interest or property interest which has been interfered withby the defendants. Second, if such a deprivation occurred, wemust decide whether the procedures that accompanied theinterference were constitutionally sufficient.

Herrada v. City of Detroit, 275 F.3d 553, 556 (6th Cir. 2001) (citations and some internal

quotation marks omitted).


22736800.10\022765-00202 11

The Plaintiffs cite Memphis Light, Gas & Water Division v. Craft, 436 U.S. 1 (1978), to

demonstrate that they have a right to due process before water service may be terminated.

Complaint, 123. The Supreme Court did so findin Tennessee. That court reached this

conclusion only because it expressly found that Tennessee state law provides a right to water

service. Craft, 436 U.S. at 11-12. No comparable right exists under Michigan state law. Absent

such a state law right, there cannot be a cognizable violation of constitutional due process. See

Georgia v. City of East Ridge, Tenn., 949 F. Supp. 1571, 1582 (N.D. Ga. 1996) (analyzing Craft

and concluding that since there is no Georgia statute or case that recognizes a property interest in

sewer service, Plaintiffs are not entitled to due process before Defendant acts to terminate their

sewer services.).

In fact, the situation in Michigan is the reverse of that in Tennessee. In Michigan,

municipalities have a statutory right to disconnect water or sewer service for non-payment.

M.C.L. 123.166. Plaintiffs do not point to any Michigan statute or case recognizing a right to

water or sewer service. If the right does not exist, there can be no deprivation of the right in

violate of due process, and this Count should be dismissed.

3. The Complaint does not state a claim for violation of Equal Rights(Count III).

The Equal Protection Clause prohibits a state from denying to any person within its

jurisdiction the equal protection of the laws. Dixon v. Univ. of Toledo, 702 F.3d 269, 278 (6th

Cir. 2012) (quoting Scarbrough v. Morgan Cnty. Bd. of Educ., 470 F.3d 250, 260 (6th Cir.

2006)). For such a claim to succeed, a plaintiff must show it was deprived a fundamental right.

Id. The plaintiff must also show that similarly situated entities were not so deprived. Rondigo,

L.L.C. v. Casco Twp., Mich., 330 Fed. Appx. 511, 519 (6th Cir. 2009). An exact similarity is not

required, but there must be a least a relevant similarity. Id.at 520.


22736800.10\022765-00202 12

Here, both elements are missing. As noted previously, the Plaintiffs have not shown that

water service is a fundamental right in Michigan. Nor have they shown that corporate entities

are similarly situated to themselves. The types of connections involved, the quantities of water

used, and other differences separate them from the Plaintiffs. In any event, Michigan law

suggests that all water users are not similarly situated. See Sigal v. City of Detroit Water &

Sewerage Dept., 140 Mich. App. 39, 43-44 (1985) (finding that water departments have wide

latitude [to] charge different classes of customers different rates).

A bald allegation that all water users are similar without more is merely consistent with

a right to relief, and does not suffice to state a claim upon which relief can be granted. Duke,

811 F. Supp. 2d at 1334. The count, also, should be dismissed.

4. The Complaint does not state a claim for Public Health Emergency(Count IV).

The Plaintiffs allege that Article IV, 52 of the Michigan Constitution provides a right to

purified and delivered water. The section provides The conservation and development of the

natural resources of the state are hereby declared to be of paramount public concern in the

interest of the health, safety and general welfare of the people. The legislature shall provide for

the protection of the air, water and other natural resources of the state from pollution, impairment

and destruction. MICH. CONST. art. IV, 52. This section creates a mandatory duty on the part

of the legislature to act to provide for the protection of the air, water and other natural resources

of the state from pollution, impairment and destruction. Mich. Hwy. Commn v. Vanderkloot

(In re Petition of Highway US-24 in Bloomfield Twp., Oakland Cnty.), 392 Mich. 159, 182

(1974). However, while the Plaintiffs allege a public health emergency (see Complaint, 91-


22736800.10\022765-00202 13

92, 130-33), they add no allegations as to how this relates to the protection of water from

pollution or destruction.5

Since the Plaintiffs do not allege sufficient facts to state a claim (or even to show why

they have standing to sue under this section of the Constitution), this count should be dismissed.

5. The Complaint does not state a claim for estoppel (Count V).

a. Elements for various forms of estoppel in Michigan.

The Complaint is not clear as to which form of estoppel is asserted. Equitable estoppel,

estoppel by laches, estoppel by silence, or even waiver might be meant. The first, the doctrine of

equitable estoppel, previously has been explicated by this Court.

Estoppel is an equitable doctrine which a court may invoke toavoid injustice in particular cases.

The elements of equitable estoppel are: 1) conduct or languageamounting to a representation of material facts; 2) the party to beestopped must be aware of the true facts; 3) the party to beestopped must intend that the representation be acted on or actsuch that the party asserting the estoppel has a right to believe it sointended; 4) the party asserting the estoppel must be unaware ofthe true facts; and 5) the party asserting the estoppel mustdetrimentally and justifiably rely on the representation.

Qassis v. Republic Bank (In re Luna Land Dev., LLC), 325 B.R. 735, 739 (Bankr. E.D. Mich.

2005) (citations and internal quotation marks omitted). However, [a]rguments based on

equitable estoppel to avoid payment for public utility services received have been consistently

rejected. Sigal, 140 Mich. App. at 42. In particular, while water departments have wide

latitude [to] charge different classes of customers different rates, this does not allow courts to

create a new classification which would include those people harmed by the departments

negligence in collecting amounts due. Id. at 43-44.

5 Arguably, the reverse is trueprovision of water without requiring payment likely leads to water wasteand insufficient resources with which to maintain water system infrastructure.


22736800.10\022765-00202 14

Estoppel by laches is the failure to do something which should be done under the

circumstances or the failure to claim or enforce a right at a proper time. To successfully assert

laches as an affirmative defense, a defendant must demonstrate prejudice occasioned by the

delay. Wells Fargo Bank, N.A. v. Null, 304 Mich. App. 508; 847 N.W. 2d 657, 676-77 (2014)

(citations and internal quotation marks omitted).

For estoppel by silence, the party standing by and concealing its rights must have, by its

conduct, shown such gross negligence as to have encouraged or influenced the opposite party,

who was wholly ignorant of its adversarys claim, to act to the latters disadvantage. An

essential element of estoppel is that a party knowingly permitted the opposite party to act to its

own disadvantage. S. Macomb Disposal Auth. v. Mich. Mun. Risk Mgmt. Auth., 207 Mich. App.

475, 477 (1994). This is a form of equitable estoppel, and arises only when the silent party had a

duty to speak. See Conagra, Inc. v. Farmers State Bank, 237 Mich. App. 109, 141 (1999).

Last, [i]n order for defendant to waive its rights against plaintiff, it must have

intentionally and knowingly relinquished those rights. Id. at 476.

b. The Complaint does not state a claim for estoppel.

Count V should be dismissed because it fails to state a claim for any kind of estoppel.

The Plaintiffs allege that, in April 2014, the City began a program of mass shutoffs without

adequate notice or opportunity for hearing, violating the Citys written policies. Complaint,

69-71, 95-96. They allege that, prior to this date, the City ignored late payments or merely filed

liens on properties. Id., 93. Low-income residents relied on these practices to maintain water

service without paying, running up large bills as a result. Id., 94, 97-98, 134. Thus, Plaintiffs

allege, the City should be estopped from now collecting these bills. Id., 134.


22736800.10\022765-00202 15

Equitable estoppel does not apply as there is no allegation that residents were unaware of

their bills or the possibility of shutoff. Qassis, 325 B.R. at 739. Nor do Plaintiffs allege that

residents detrimentally and justifiably relied on the Citys posture in failing to pay; there is no

allegation that they would have paid had they been aware that the City would eventually enforce

collection procedures. Id. In any event, equitable estoppel cannot be used to avoid paying for

utility service. Sigal, 140 Mich. App. at 42.

In theory, the result in Sigal should apply to all other forms of estoppel, especially

estoppel by silence, since it is a form of equitable estoppel, see Conagra, 237 Mich. App. at 141,

but the other forms fail on their own in any event. Estoppel by laches fails because there is no

detrimental reliance or prejudice. Null, 847 N.W. 2d at 676-77. At most, the residents received

water longer than they would have had the City more aggressively pursued its shut off policies.

As noted before, even if arguendo the City could be accused of gross negligence in not pursuing

more strict enforcement of its shut off policies, the Plaintiffs do not aver that they were wholly

ignorant of [the Citys] claim and that the City encouraged them to run up high water bills to

their own disadvantage. S. Macomb Disposal Auth., 207 Mich. App. at 477. Finally, there is no

allegation that the City intentionally waived its right to collect on these bills. Id. at 476.

Thus, the Bankruptcy Court should dismiss Count V.

6. The Complaint does not state a claim for declaratory and injunctiverelief (Count VI).

The Court should dismiss Count VI for failing to state a claim. A declaratory judgment

is a remedy for an underlying cause of action, not a separate, substantive claim for relief.

Brinson, 485 B.R. at 904; McCann v. U.S. Bank, N.A., 873 F. Supp. 2d 823, 848 (E.D. Mich.

2012) (Declaratory relief is a remedy, not a claim.) (internal quotation marks, alterations, and

citations omitted). There are no new legal theories or facts set forth paragraph 135 of the


22736800.10\022765-00202 16

Complaint, just a bare legal conclusion that Plaintiffs are entitled to relief. This does not suffice

to state a claim. Id.

7. The Complaint does not state a claim for Public Trust and HumanRights to Water (Count VII).

This count is perhaps the most confusing, but boiled down, the City believes that the

Plaintiffs are alleging that since the water supplied by the City comes from rivers and lakes held

in the public trust, and since the money used to build the systems that purify the water and

deliver it came from government sources, the Plaintiffs thus have a right to partake in this water

free of charge, or at least at a rate dependent strictly upon income and not usage. Complaint,

139-41, 153-57, 165-66. Additionally, the Plaintiffs appear to take umbrage with the Citys

investigation into privatizing the DWSD. Id., 170-72, 175-76. Last, they allege that

resolutions of the United Nations provide them with a right to free water. Id., 158-160.

None of these assertions states a cognizable claim. The Plaintiffs cite little in the way of

United States or Michigan law. The citations to the United Nations General Assembly

resolutions do not avail the Plaintiffs as such resolutions are typically nonbinding on member

states. See, e.g., Flores v. S. Peru Copper Corp., 414 F.3d 233, 259 (2d Cir. 2003). Although

various references to the Constitution are provided, it is unclear how these references translate

into a legal right to force the City to provide the Plaintiffs with a free and unlimited supply of

water, especially as it has not been shown that Michigan state law provides for such a right.

While the Court can provide relief if it perceives a cognizable claim, neither it nor the

City is obligated to do the Plaintiffs homework for them. The Court should dismiss this count

since it fails to assert a cognizable legal theory upon which relief could be granted.


22736800.10\022765-00202 17

8. Conclusion.

Each and every count of the Complaint fails to state a claim upon which relief can be

granted. Therefore, the matter as a whole should be dismissed with prejudice.

III. CONCLUSION

WHEREFORE, the City asks this Court to DISMISS the adversary proceeding either on

the ground of constitutional mootness or failure to state a claim upon which relief can be granted.

The City further asks the Court for such additional relief as may be just.

August 28, 2014 Respectfully submitted,

By: /s/Timothy A. FuscoTimothy A. Fusco (P13768)Jonathan S. Green (P33140)Stephen S. LaPlante (P48063)

MILLER, CANFIELD, PADDOCK ANDSTONE, P.L.C.

150 West Jefferson, Suite 2500Detroit, Michigan 48226Telephone: (313) 963-6420Facsimile: (313) [email protected]@[email protected]

David G. Heiman (OH 0038271)Heather Lennox (OH 0059649)

JONES DAY

North Point901 Lakeside AvenueCleveland, Ohio 44114Telephone: (216) 586-3939Facsimile: (216) [email protected]@jonesday.com


22736800.10\022765-00202 18

Bruce Bennett (CA 105430)

JONES DAY

555 South Flower Street Fiftieth FloorLos Angeles, California 90071Telephone: (213) 243-2382Facsimile: (213) [email protected]

ATTORNEYS FOR THE CITY OF DETROIT


Documents

8.28.14 CIty Motion to Dismiss Water Shut Off Case