In August of 2005, Sprawl-Busters reported that Wal-Mart wanted to build a superstore in the city of Frankenmuth, Michigan, which prides itself of its “Little Bavaria” village appearance. At least half of the land Wal-Mart wanted was not zoned properly, and needed a rezoning from residential to commercial.
Sprawl-Busters was invited to speak in Frankenmuth in 2005, and one of the suggestions I had for the community was to cap the size of retail stores to keep land uses compatible with the existing built environment in this unusually picturesque city. In addition, a joint study by the Frankenmuth Economic Development Corp. and Downtown Development Authority released in December of 2005 estimated that a Wal-Mart supercenter would sap $9 million annually from local businesses.
The size ordinance, passed Nov. 22, 2005 by the Planning Commission, did not apply to businesses in the entire city. It was aimed at a developing area covering less than 1 square mile along M-83 north of the city’s center. Robert Labelle, an attorney for the anti-Wal-Mart group Citizens for Frankenmuth First, said the ordinance was legal, and that at least 35 other municipalities have adopted big-box measures.
But landowners Ronald Loesel, and his brother Arthur, who live now in Lady Lake. Florida, sued the city for keeping them from making millions off their family’s farmland. The Loesel brothers’ lawsuit filed on March 17, 2005, sought damages of $4 million — an amount the brothers say they lost when Frankenmuth officials “improperly” rezoned their 37-acre property by limiting any potential big-box retail development to 65,000 s.f.
Almost 9 years to the date later, the Loesel’s are still in court. MLive reports that the Loesel’s are taking Frankenmuth taxpayers to trial in federal court for the second time in 4 years.
In 2010, the Loesel’s won one round in their battle, when they were awarded $3.6 million after a six-day trial. But this verdict was overturned by the Sixth Circuit of the U.S. Court of Appeals in 2012 on a legal technicality. The federal Court of Appeals ruled that a new trial was necessary because it was not clear what theory the jury used to render its verdict.
The 6th Circuit panel determined that there were problems with the jury verdict form. The jury was instructed it could find the city of Frankenmuth liable for the deal falling through under either the “no-conceivable-basis” or “animus” theory of liability. But only the no-conceivable-basis theory was properly submitted to the jury. Because nothing on the verdict form indicated which theory formed the basis for the jury’s decision, the panel was unable to determine that the jury ruled under the factually sufficient no-conceivable-basis theory, and so the court ruled to “vacate the verdict and remand for a new trial.”
In addition, the court panel took issue with the damages awarded: “[It] strikes us as excessive, in large part because the verdict itself renders the zoning ordinance unconstitutional and unenforceable. Had the jury verdict been upheld, the Loesels would have retained their property unencumbered by the zoning ordinance and been awarded $3.6 million, which is 90% of the full purchase price from Wal-Mart. This outcome would have let the Loesels recover twice, an impermissible result.
The panel said that, should the case go back to the trial court, the damages should have a specific formula: the amount the plaintiffs would have received from Wal-Mart had the ordinance never been enacted minus the property’s value unencumbered by the zoning ordinance.
After the Appeal decision, the city asked the Judge to prevent a new trial, and to enter a judgment on its behalf regarding the animus aspect. But the Judge would not do so. The city appealed this decision to the Sixth Circuit Court of Appeals, but their appeal was denied.
So the case is ready to go to court for a second time. The Appeals Judge has also offered his onw solution to the issue of award amount: if the jury returns a $4 million verdict, the city would receive the Loesels’ property. “This way,” Judge wrote, “there will be no danger of a windfall — regardless of the land’s value — and time-consuming testimony concerning damage calculations will be unnecessary.”
So nine years after Wal-Mart first came to the city of Frankenmuth, and six years after litigation began in court, the two sides are back in court.
I was invited to Frankenmuth by a citizens group— Citizens for Frankenmuth First, which hosted a citywide strategy session that attracted hundreds of residents opposed to the Bentonville, Ark., company. The activists launched an organized effort to oppose the retailer, collecting more than 3,000 signatures from residents concerned about crime, traffic and business loss. I remember speaking in a nearby business lot with bales of hay behind me. We also held an indoor event with powerpoint slides about why a Wal-Mart superstore on 37 acres on the edge of the city made no sense. At the time, there was already a Wal-Mart 15 minutes away in Clio, Michigan.
When the city rezoned the land, Wal-Mart left. It was the landowners who stayed to fight, and now a technicality in the verdict has them heading back to court.
Readers are advised that all ordinances must avoid appearing to be arbitrary and capricious. In the case of a cap on the size of buildings, it is advisable not to limit the cap to one or two pieces of property, and not to wait to impose a cap until an unwanted development is in the wings. Cities and towns have the right to limit building height, and building scale. The Frankenmuth battle has turned into a legal marathon—and such battles rarely have any winners.
In August of 2005, Sprawl-Busters reported that Wal-Mart wanted to build a superstore in the city of Frankenmuth, Michigan, which prides itself of its “Little Bavaria” village appearance. At least half of the land Wal-Mart wanted was not zoned properly, and needed a rezoning from residential to commercial.
