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Ace Partners, LLC v. Town of East Hartford

United States Court of Appeals, Second Circuit

February 28, 2018

Ace Partners, LLC d/b/a TC's Pawn Co., Plaintiff-Appellee,
v.
Town of East Hartford, East Hartford Police Department, Mark J. Sirois, Chief of Police, I/O, John Murphy, Deputy Chief of Police, I/O, Defendants-Appellants.

          Argued: June 23, 2017

         On Appeal from the United States District Court for the District of Connecticut

         On appeal from that part of a summary judgment granting ACE Partners, LLC, d/b/a TC's Pawn Co., compensatory damages and attorney's fees on its § 1983 procedural due process challenge to the Town of East Hartford's decision not to renew plaintiff's license to deal in precious metals, defendants argue that the United States District Court for the District of Connecticut (Chatigny, J.) misconstrued Conn. Gen. Stat. § 21-100(a) in finding plaintiff to hold a constitutionally protected property interest in the license renewal.

          Daniel J. Klau (James R. Smart, Rory M. Farrell, on the brief), McElroy, Deutsch, Mulvaney & Carpenter, LLP, Hartford, Connecticut, for Plaintiff-Appellee.

          Thomas R. Gerarde (Katherine E. Rule, on the brief), Howd & Ludorf, LLC, Hartford, Connecticut, for Defendants-Appellants.

          Before: Jacobs, Leval, Raggi, Circuit Judges.

          REENA RAGGI, CIRCUIT JUDGE

         This case concerns a 2009 decision by defendant East Hartford Chief of Police Mark J. Sirois not to renew pawnbroker and precious metals licenses held by plaintiff ACE Partners, LLC, d/b/a TC's Pawn Co. ("ACE") after the State Attorney searched ACE's East Hartford premises and arrested two of its employees for attempting to receive stolen property. ACE sued the Town of East Hartford, its Police Department, Chief Sirois, and then-Deputy Chief John Murphy in the United States District Court for the District of Connecticut (Robert N. Chatigny, Judge) pursuant to 42 U.S.C. § 1983 for alleged violations of substantive and procedural due process. See U.S. Const., amend. XIV. The district court awarded summary judgment to defendants on all of ACE's claims with one exception. It awarded ACE summary judgment against two defendants, the Town of East Hartford and Chief Sirois in his official capacity (hereafter, collectively, "the Town"), on ACE's claim that the decision not to renew its precious metals license violated procedural due process because it was made without adequate notice and opportunity to be heard. See Ace Partners, LLC v. Town of East Hartford, No. 3:09-CV-1282 (RNC), 2011 WL 4572109, at *5 (D. Conn. Sept. 30, 2011). The Town now appeals from that part of the amended final judgment, entered on August 11, 2016, as awards ACE $352, 660 plus interest in compensatory damages and $490, 831.75 in attorney's fees on this procedural due process claim.[1]

         For the reasons stated herein, we conclude that ACE was not entitled to summary judgment on this procedural due process challenge because Connecticut law does not afford it a constitutionally protected property interest in the renewal of its precious metals license. For the same reason, we conclude that the Town is entitled to judgment on this claim. Accordingly, we reverse that part of the final judgment in favor of ACE, and we remand this case to the district court for it to enter judgment in favor of defendants on all claims. That reversal extends to the award of attorney's fees because our ruling on the merits means that ACE is not now, and could not ever properly have been considered, a "prevailing party, " the necessary predicate for a fees award pursuant to 42 U.S.C. § 1988(b). In light of that ruling, there is no need to address the Town's proximate cause challenge to the award of compensatory damages or its reasonableness challenge to the award of attorney's fees.

         BACKGROUND

         I. ACE Procures Pawnbroker and Precious Metals Licenses for its East Hartford Location

         At times relevant to this case, ACE operated pawnbroker and precious metals businesses from locations in Waterbury and East Hartford, Connecticut. Connecticut law regulates such businesses, requiring each to be conducted pursuant to licenses issued for one- year terms by designated officials of the municipalities wherein the businesses are to be conducted. See Conn. Gen. Stat. §§ 21-39, 21-40, 21-100. Before opening its East Hartford store in October 2007, ACE owner Christa Matuschkowitz applied to the Town for and was granted one-year pawnbroker and precious metals licenses. The following year, Matuschkowitz applied to renew these licenses, which renewal was granted for one year running from August 9, 2008, through August 9, 2009.

         II. The Arrest of ACE Employees and the Search of its Store

         In the spring of 2009, ACE's East Hartford location came under scrutiny by the Connecticut State Attorney, who was then supervising a task force investigating suspected trafficking in stolen property by certain pawnshops across the state. Pursuant to that investigation, on or about April 14, 2009, a state police officer, operating undercover, offered to sell two ACE employees, subsequently identified as Nicholas Carbone and General Manager Jay Sargent, what appeared to be stolen property, specifically, a "new in box" power tool still equipped with "spider wrap, " an anti-theft device that emits a loud noise if its cable is cut. J.A. 198-201. In a recorded exchange with the officer, Sargent stated that he would not buy the tool with the spider wrap on it, but "if it wasn't on it I could buy it, but I can't take it off." Id. at 199. The officer briefly left the store and returned with the spider wrap removed from the tool, whereupon Carbone, in Sargent's presence, paid the officer $35 for the tool-which had a retail value of $214-and asked if he had "another one." Id. at 200.

         On or about June 3, 2009, other officers working with the State Attorney returned to ACE's East Hartford store and there conducted a buy-bust operation, arresting two participating employees, Carbone and Nicholas St. Peter, and seizing various items from the premises pursuant to a search warrant. Carbone and St. Peter were charged with misdemeanor larceny based on their attempted receipt of stolen property. See Conn. Gen. Stat. § 53a-125a. Sargent would also be arrested on misdemeanor larceny charges on August 11, 2009. See id. §§ 53a-125b; 53a-48.[2]

         III. The Town Decides Not To Renew ACE's Licenses

         On June 30, 2009, i.e., shortly after the Carbone-St. Peter arrests, East Hartford Deputy Police Chief Murphy prepared a letter for Chief Sirois's signature proposing to revoke ACE's pawnbroker and precious metals licenses "for cause, " pursuant to Conn. Gen. Stat. §§ 21-40, 21-100(a), based on the "[r]ecent occurrences" at its East Hartford location. J.A. 241. The letter advised ACE that it could request a hearing. Sirois, however, decided not to revoke ACE's licenses at that time, and the letter was never sent.

         The following month, on July 20 and 21, 2009, Matuschkowitz filed applications with the Town to renew ACE's pawnbroker and precious metals licenses, which were scheduled to expire on August 9, 2009. In these applications, Matuschkowitz identified General Manager Sargent, as well as herself, as among ACE's owners or officers. Chief Sirois denied renewal, advising Matuschkowitz of his decision in a letter dated Friday, August 7, 2009, which explained that "[r]ecent occurrences" at ACE's East Hartford location "demonstrate that there exists cause not to renew." Id. at 379. At his deposition in this action, Sirois testified that, at the time he reviewed ACE's renewal application, he had been advised by Murphy that the State Attorney had developed incriminating evidence of stolen property trafficking against ACE East Hartford employees, including a manager; that two such employees had already been arrested; and that the arrest of a third ACE employee was anticipated. Sirois acknowledged that he did not know the particular evidence supporting the State Attorney's actions.

         ACE received Sirois's letter denying renewal on Saturday, August 8, 2009, one day before its pawnbroker and precious metals licenses expired on Sunday, August 9. On Monday, August 10, ACE General Manager Sargent requested a meeting with Sirois to discuss his adverse renewal decision. The request was denied, with Deputy Chief Murphy advising Sargent that there was no reason for a meeting. The following day, August 11, the State Attorney arrested Sargent.

         Without the requisite licenses to operate as a pawnbroker or to deal in precious metals, ACE closed its East Hartford store.[3]

         IV. District Court Proceedings

         On August 12, 2009, ACE filed this action. Discovery ensued, after which the parties, on October 1, 2010, cross-moved for summary judgment, with defendants urging dismissal of all claims and ACE seeking judgment in its favor on its procedural due process claim. We here focus on the procedural claim, as the partial grant of summary judgment to ACE on the part of that claim pertaining to the precious metals license is the only ruling challenged on this appeal.

         The district court construed Connecticut's pawnbroker licensing statute, particularly the phrase stating that "the chief of police of any city may grant [pawnbroker] licenses to suitable persons, " see Conn. Gen. Stat. § 21-40 (emphasis added), to afford sufficient discretion to the licensing authority to preclude ACE from establishing a constitutionally protected property interest in the renewal of that license. See Ace Partners, LLC v. Town of East Hartford, 2011 WL 4572109, at *2-3. Accordingly, it awarded summary judgment to defendants on that part of ACE's procedural claim. See id. In the absence of comparable language in the precious metals licensing statute, however, the district court concluded that ACE had shown a constitutionally protected property interest in the renewal of ...


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