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Kole v. Village of Norridge

United States District Court, N.D. Illinois, Eastern Division

November 6, 2017

Tony Kole and Ghost Industries, LLC, Plaintiffs,
v.
Village of Norridge, Defendant.

          AMENDED MEMORANDUM OPINION & ORDER

          Honorable Thomas M. Durkin United States District Judge.

         Plaintiffs Tony Kole and Ghost Industries, LLC sued the Village of Norridge (the “Village”) for impeding plaintiffs' attempts to operate a licensed gun store in the Village. Plaintiffs raise a variety of constitutional claims pursuant to 42 U.S.C. § 1983, including for violations of the Second and Fourteenth Amendments (Count I), violations of Fourteenth Amendment substantive due process (Count II), violations of the dormant commerce clause (Count III), violations of the First Amendment (Count IV), and violations of the Fourteenth Amendment right to equal protection of the law (Count VIII). Plaintiffs also seek declaratory relief under the Illinois Constitution (Count V) and claim that the Village retaliated against them for asserting their Second and Fourteenth Amendment rights (Counts VI and VII).

         Several months after this Court denied in part a motion to dismiss plaintiffs' claims and a few weeks after the Court entered a temporary restraining order to preserve the status quo, the Village amended its weapons dealer ordinance from an outright ban (with a time-limited exception for plaintiffs) to a set of zoning requirements. Plaintiffs sought to enjoin enforcement of the amended ordinance, and this Court held a preliminary injunction hearing. When the Court was about to rule on plaintiffs' motion for a preliminary injunction, the Village again amended its weapons dealer ordinance to make the zoning requirements less restrictive.

         Plaintiffs do not challenge the legality of the most recent ordinance, and they have stopped pursuing the possibility of operating a gun store in the Village. They therefore no longer make facial constitutional challenges to the Village's ordinances or request injunctive relief. R. 226 at 3. Instead, they make as-applied challenges to the prior ordinances and to an agreement they signed with the Village, and they seek damages for the time period those ordinances and agreement were in effect. Id.

         Plaintiffs and the Village have filed cross-motions for summary judgment. R. 191; R. 196. Plaintiffs seek summary judgment on Counts I, III, IV (in part), VI, and VII only. R. 196; R. 206 at 2. The Village seeks summary judgment on all claims. R. 191; R. 195. The Court ordered the parties to file summary judgment motions on liability only as an initial matter, leaving the issue of damages for another day.

         For the reasons explained below, the Court denies both parties' motions for summary judgment on Counts I, IV (in part), VI, and VII. The Court grants the Village's motion for summary judgment on the remaining counts.

         Background[1]

         Although most of the material facts in this case are undisputed, several fact disputes remain as set forth below. In July 2010, Kole organized Ghost Industries, a firearm sales business engaged in interstate commerce. DR ¶¶ 3, 4; PR ¶¶ 4-5, 8. Kole originally told the Village he planned to operate an online-only business and to lease office space “for administrative purposes only.” PR ¶¶ 9, 12. In an August 11, 2010 email, the Village's engineer and building commissioner Brian Gaseor advised Kole to “check our ordinance for Weapons Dealers” and informed him that “[l]ots ‘B-3' GENERAL BUSINESS DISTRICT and ‘C' COMMERCIAL DISTRICT could accommodate your office.” R. 238 at 9; PSMF ¶ 8.

         After communicating with Gaseor, Kole entered into a one-year lease on October 1, 2010 for a property in the Village. DR ¶ 6; PR ¶ 13. That rental property would have needed to be renovated before it could be used as a retail space. PR ¶ 13. The lease allowed for mutual cancellation on or before December 31, 2010 if Kole “failed to obtain a Federal Firearms License [‘FFL']” as long as he “exercised due diligence” in the attempt. P-Ex 7 ¶ 9.

         Regulations give the Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”) the right to perform an inspection before issuing an FFL. PR ¶ 13. When Kole was en route to an ATF inspection for his FFL, he received a call from the ATF investigator cancelling it. DR ¶ 7; P-Ex. 16 at 31. The parties dispute whether the Village had a hand in the cancellation, with Kole testifying that it did. DR ¶ 7.

         Following the cancellation, Kole spoke with Gaseor and reminded him that Kole leased an office based on the Village's representations about zoning and the Village's weapons dealer ordinance. DR ¶ 8. Kole and his attorney then had numerous communications with the Village's attorney Mark Chester. DR ¶ 9; PR ¶ 15. Chester explained to Kole that the Village's weapons dealer ordinance was written in 1972 in response to a request by Kmart, and “everyone had forgotten the ordinance existed until Kole came along.” DR ¶ 10; PR ¶ 10.

         A. The Agreement

         On November 30, 2010, Kole and the Village entered into an Agreement whereby the Village would issue Kole a weapons dealer business license subject to a number of terms and conditions. PR ¶ 21; DR ¶ 11. Agreement negotiations involved several back-and-forth letters between Kole and Chester. PR ¶¶ 16-20. Kole's attorney was involved in this exchange and approved at least one version of the Agreement. PR ¶ 17.

         The Agreement's terms and conditions included:

• Plaintiffs could not deliver firearms or ammunition to any recipient at the premises (i.e., there could be no retail sales);
• All deliveries from the premises had to be sent in unmarked packaging for used firearms and in the original packaging for new firearms;
• Plaintiffs could not store firearms or ammunition on the premises overnight or for more than 12 hours a day, and any inventory had to be disabled by a locking device or secured in a locked cabinet;
• Plaintiffs could not maintain a sales or retail display of firearms or ammunition on the premises;
• Plaintiffs could not post exterior signage advertising their location to the public or indicating that they sell firearms and must comply with limits on interior signage;
• Plaintiffs' officers and employees had to submit to fingerprinting and annual criminal background checks, at the Village's expense;
• Plaintiffs had to install and maintain a video surveillance system;
• Plaintiffs had to abide by monthly limits on the quantity of firearms and ammunition received at the premises and a limit on the quantity of firearms and ammunition that may be on the premises at any one time; and
• Plaintiffs had to allow one random and two scheduled inspections of the premises per month.

P-Ex. 8.

         The Agreement provided that “Norridge will renew Ghost's License twice annually provided that Ghost remains in compliance with this Agreement and to exempt Ghost from any change in its business license ordinances and rules in any amendments Norridge may make to its Code of Ordinances.” PR ¶ 13. The Agreement explained that “in the event that Norridge repeals its Weapons Dealer Ordinance within thirty six months of the execution of the Agreement, Norridge will exempt Ghost from the repeal during that period.” P-Ex. 8.

         Fact disputes remain as to whether, and to what degree, Kole negotiated the Agreement with the Village under economic duress or unwillingly because it was the only way he could get a weapons dealer license. He was undisputedly unemployed at the time and had already signed a lease. PR ¶¶ 7, 13; DR ¶¶ 6, 8. He testified that he was “[u]nder duress” because he was “unemployed, ” “had a small amount of savings, ” and “was investing all of [his] savings into this business venture.” P-Ex 15 at 61; DR ¶ 11. He testified that he would not have agreed to any Agreement terms if he was not under such duress. P-Ex 15 at 62.

         But Kole also was represented by counsel during the Agreement negotiations, and, as the Village emphasizes, at one point Kole sent a letter to Chester with suggested terms, many of which closely resemble those in the Agreement. PR ¶ 16 (“I [Kole] am restating the negotiable terms that the Company would like to reach an agreement with the Village . . . . Please contact me at your earliest convenience so that we can schedule a meeting to discuss the terms of an agreement and allow the Company to address the Village's concerns with regard to ensuring that the safety of the community is the top priority of the Company.”). Among those terms were agreements not to “post or erect any signage” and to “sell the majority of firearms and ammunition to Nonlaw enforcement personnel through internet and direct sales.” PR ¶¶ 16 & 22. The Village also points out that other Agreement terms were requirements in plaintiffs' lease, and plaintiffs had the opportunity to cancel that lease prior to December 31, 2010 if, with due diligence, they were unable to obtain an FFL. PR ¶ 22; R. 238 at 10. The Village further notes that plaintiffs have not quantified the degree of savings Kole had invested at the time. DR ¶ 11.

         B. The 2011 Ordinance

         On February 9, 2011, the Village revised its weapons dealer ordinance. DR ¶ 17; PR ¶ 23. The 2011 Ordinance limited the number of weapons business licenses in the Village to one (i.e., the license issued to plaintiffs) through April 30, 2013. P-Ex. 10. The Ordinance stated that “the one current Village weapons dealers licensee has agreed that it will cease doing business in the Village no later than April 30, 2013.” P-Ex. 10. The Ordinance further provided that it would terminate weapons business licenses altogether as of April 30, 2013. P-Ex. 10.

         Kole testified that sometime in 2011, after operating for about six months to a year, he realized that he wanted to shift his business model to a retail sales business with outside signage and advertising in order to increase revenue, which he could not do pursuant to the Agreement. DR ¶ 16; PR ¶ 24. In June 2011, plaintiffs filed this lawsuit challenging the 2011 Ordinance and the conditions imposed by the Agreement. R. 1.

         In March 2013, Kole began working again in his former job as an elevator constructor. PR ¶ 39. He hired an independent contractor to operate Ghost Industries on a part-time basis. PR ¶ 39. A month later, in April 2013, this Court granted in part and denied in part a motion to dismiss, finding, among other things, that plaintiffs had stated a valid Second Amendment claim challenging the Agreement and 2011 Ordinance. R. 79.

         As of April 30, 2013, the status of plaintiffs' weapons dealer license was uncertain. The 2011 Ordinance, by its terms, terminated all weapons dealer licenses in the Village as of April 30, 2013. P-Ex. 10. The 2011 Ordinance further stated that plaintiffs “agreed” to “cease doing business in the Village no later than April 30, 2013.” P-Ex. 10. Under the Agreement, however, “Norridge . . . exempt[ed] Ghost from the repeal” of its prior ordinance for 36 months (i.e., from November 30, 2010 through November 30, 2013). P-Ex. 8. On November 27, 2013, this Court granted plaintiffs' motion for a temporary restraining order allowing plaintiffs to remain in business and preserving the status quo while this case was pending. R. 108.

         C. The 2013 Ordinance

         On December 11, 2013, a few weeks after this Court granted plaintiffs' motion for a TRO, the Village again revised its weapons dealer ordinance. The 2013 Ordinance contained zoning restrictions rather than a limitation on weapons business licenses. DR ¶ 20; PR ¶ 32. The 2013 Ordinance prohibited gun stores from operating “within one thousand feet (1, 000') of the property boundary of any: a) public or private nursery, elementary, or secondary school; b) childcare facility; c) government building; d) public park, playground, playing field, forest preserve, or other recreational area; or (e) place of religious worship.” P-Ex. 11 § 22-362. It further provided that a “licensee hereunder may locate its business as a special use in the Village's B-3 General Business District, subject to the requirements of the Zoning Ordinance of the Village of Norridge, as amended.” P-Ex. 11 § 22-364(G).

         These restrictions undisputedly left only 0.57% of the total Village land area including roads available to locate a gun store (or 0.76% of the total Village land area excluding roads). DR ¶ 23 & P-Exs. 12, 16. More than half (62.61%) of the Village's total land area is zoned for residential use, and 10.32% is zoned for commercial use. PR ¶ 32.

         The property Kole was leasing for his online sales business did not meet the 2013 Ordinance's requirements. DR ¶ 22; PR ¶ 14. He began to look for available space for a retail store, including using a feature on the Village's website that would tell him if a selected location met the 2013 Ordinance's requirements. DR ¶ 22.

         Unless Kole first obtained a zoning variance, the 2013 Ordinance restricted potential locations for a gun store to one strip mall with two potential rental units available. DR ¶¶ 24-25; P-Ex. 16 at 54-55, 192-96, 238; P-Ex. 14 at ¶ 10; P-Ex. 15 at 73. Kole called the leasing agent of those two rental units multiple times, but she never called him back. DR ¶ 25. As of February 9, 2016, these rental units were still vacant. DR ¶ 25. Kole found one potential rental space for a retail store with a landlord who was initially agreeable, but that space did not meet the zoning requirement. DR ¶ 26.

         As of August 8, 2014, Ghost was operating on a limited basis, DR ¶ 30, Kole let his rental lease lapse at his original location. DR ¶ 32; PR ¶ 7. After that, plaintiffs' only sales were from Kole's personal collection. DR ¶ 34.

         The parties dispute the reason for Ghost's decline. Kole claims the reason he began operating on a limited basis was because he did not have a retail storefront, which reduced his profitability. P-Ex 15 at 96-97, 101. He points out that his two main distributors revoked his credit lines because they required a physical storefront. DR ¶ 30; P-Ex 15 at 97; P-Ex 16 at 69-70; P-Exs. 20-21. Without these credit lines, Kole's business options were limited, including because he could not purchase from a distributor until he took a payment from a customer. DR ¶ 31.

         The Village disputes that the lack of a retail storefront “caused Plaintiffs to not have the resources to remain a viable business.” DR ¶ 30. The Village points to plaintiffs' decent profits from its online business: $64, 053 in 2011, $141, 162 in 2012, and $136, 450 in 2013. PR ¶¶ 26-28. The Village claims the reason for plaintiffs' limited operations and decline in 2014 was that Kole had returned to work as a fulltime elevator constructor in March 2013. DR ¶ 30. And the Village notes that Kole's creditors never accommodated his online business model. DR ¶ 30.

         On August 18, 2014, this Court held a preliminary injunction hearing to determine whether to enjoin the 2013 Ordinance. At that hearing, the Village's engineer and building commissioner Gaseor testified that it was “Correct” that “literally then, the only area [plaintiffs] could move into without having a zoning variance is that [strip mall] area we spoke of.” P-Ex. 16 at 195. Gaseor testified that it would be possible for plaintiffs to apply for a zoning variance, but no one had ever tried to do so for a gun store to his knowledge, and so he had no basis for knowing what would happen if plaintiffs did. DR ¶ 26 & P-Ex 16 at 190-9. And Gaseor testified that plaintiffs could not apply for a zoning variance without first obtaining a lease agreement or demonstrating an intent to purchase the property in question. P-Ex 16 at 228. Gaseor also acknowledged at the hearing that he is not “aware of any studies, any data, regarding any negative effects of gun stores.” DR ¶ 26.

         D. The 2014 Ordinance

         On December 10, 2014, prior to this Court's ruling on plaintiffs' preliminary injunction motion, the Village again amended its weapons dealer ordinance. PR ¶ 41. The 2014 Ordinance added more zoning districts for weapons dealers to locate (B-2, B-3, B-5, and C districts as opposed to just C districts under the 2013 Ordinance). PR ¶ 41. The 2014 Ordinance also reduced the distancing requirement to within 500 feet of a sensitive site. PR ¶ 41.

         In mid-2015, Kole attempted to re-lease his old premises, but the owner did not agree. DR ¶ 35. As of August 2016, Ghost was out of business and Kole's ...


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