Graftaire, LLC v. City of Shreveport

Judgment rendered July 17, 2024.
Application for rehearing may be filed
within the delay allowed by Art. 2166,
La. C.C.P.

No. 55,741-CA

COURT OF APPEAL
SECOND CIRCUIT
STATE OF LOUISIANA

*****

GRAFTAIRE, LLC Plaintiff-Appellee

versus

CITY OF SHREVEPORT Defendant-Appellant

*****

Appealed from the
First Judicial District Court for the
Parish of Caddo, Louisiana
Trial Court No. 638,359

Honorable Ramon Lafitte, Judge

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MAYER, SMITH & ROBERTS, LLP Counsel for Appellant
By: Deborah Shea Baukman

MARCUS E. EDWARDS
Shreveport City Attorney

HARPER LAW FIRM Counsel for Appellee,
By: Jerald R. Harper Graftaire, LLC
Anne E. Wilkes
Counsel for Intervenors/
Appellees,
Experimental Aircraft
Association, Shreveport
Chapter 343 of La., Inc.,
Terry M. Sullivan, Mark
Roberts and Randy A.
Northcutt

*****

Before THOMPSON, MARCOTTE, and ELLENDER, JJ.

MARCOTTE, J.

This appeal arises from the First Judicial District Court, Parish of

Caddo, the Honorable Ramon Lafitte presiding. Defendant-Appellant, the

City of Shreveport (the “City”) appeals the trial court’s ruling granting a

preliminary injunction prohibiting the City from terminating or threatening

to terminate the leases of plaintiff-intervenor-appellees Mark Roberts

(“Roberts”), Randy A. Northcutt (“Northcutt”), Terry M. Sullivan

(“Sullivan”), and Experimental Aircraft Association, Shreveport Chapter

343 of LA, Inc. (the “EAA”) (herein collectively referred to as (“plaintiffs”

or “appellees”).

FACTS AND PROCEDURAL HISTORY

For many years, Shreveport’s downtown airport leased raw land to

tenants to allow them to build hangars thereon. The City historically used

standard form leases, which contained the following term:

If LESSEE, having been given permission to remove
Improvements from the Leased Premises does not do so
and does not leave the Leased Premises in a clean and
appropriate condition within ninety (90) days following
termination of the lease, LESSEE’s right to remove shall
cease and at the option of LESSOR, the improvements
shall become the property of LESSOR without any
further action required of LESSOR, and LESSEE shall be
deemed to have forfeited any ownership right in and to
the Improvements and be deemed to have
conveyed the Improvements to LESSOR.

Citing this improvement reversion clause in letters dated June

16, 2022, Oliver Jenkins (“Mr. Jenkins”), chairman of the Shreveport

Airport Authority (“SAA”) Board, informed plaintiffs that their leases

were expiring and that they had to remove their hangars from the

premises within a contractual time period or the improvements would

revert to the City.

On July 14, 2022, the original plaintiff, Graftaire, L.L.C.

(“Graftaire”), filed a petition for declaratory judgment, preliminary

injunction and permanent injunction.1 In the petition and subsequent

motions for intervention, Graftaire argued that the City sought to

prematurely terminate the lease agreement and to take the lessees’ hangars

without compensation, in violation of the takings clause of the Louisiana

Constitution of 1974.

At the same time, Graftaire filed a motion for preliminary injunction.

In response, the City filed an answer setting forth affirmative defenses as

well as a reconventional petition to evict Graftaire. After significant motion

practice, the parties ultimately appeared before the trial court for a hearing

on the first preliminary injunction on August 17-18, 2022.

During that hearing, plaintiffs put on evidence through witness

testimony that the City was attempting to prematurely terminate their leases,

that the City was attempting to take their hangars without compensation, and

that the City had a long history of making prior assurances to lessees that it

would not enforce the provisions of the lease regarding termination. The

City also admitted that this was its practice, according to testimony from

Stacy Kuba (“Ms. Kuba”) (who, at the time of her testimony, was the City’s

Deputy Director of Airports) and Mr. Jenkins.

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Appellees, Roberts, the EAA, Northcutt, and Sullivan, later intervened. Since
Graftaire is no longer a lessee of the City, its claims are now moot.

2

On August 18, 2022, the trial court granted the first preliminary

injunction, finding that plaintiffs had a substantial likelihood of success on

the merits that the City was prematurely terminating the hangar owners’

leases. The trial court deferred ruling on the constitutional issues. At that

point, the parties agreed and advised that it would likely be necessary for the

trial court to address the constitutional issues at a later date in a second

preliminary injunction hearing, which was held on February 7-8, 2023.

Prior to the second preliminary injunction hearing, the parties

expressly agreed that the evidence and testimony adduced, introduced, and

admitted during the hearing on the first preliminary injunction would be

incorporated and admitted at the second hearing.

At the second preliminary injunction hearing, plaintiffs presented

three bases for an injunction: (1) constitutional waiver, that the lease

agreement did not constitute an appropriate, knowing, and voluntary waiver

of plaintiffs’ constitutional rights to compensation for a taking; (2)

Shreveport City Code of Ordinances Section 18-33, which requires City

Council approval for the SAA to acquire any immovable property, for which

the SAA had none; and, (3) detrimental reliance, that there were

representations made by SAA administration and board members assuring

plaintiffs that there would be no action taken at the conclusion of the lease

and that plaintiffs would merely be offered a new lease with the same terms

and conditions. The trial court, however, granted a motion in limine from

the City to exclude testimony based on detrimental reliance.

Mr. Jenkins testified at the second preliminary injunction hearing that,

in his opinion, Section 18-33 of the City of Shreveport Code of Ordinances

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was only meant to apply to instances of expropriation and thus did not

prevent the City from lawfully asserting its rights under the improvement

reversion clauses in the leases.

Ms. Kuba testified at the second preliminary injunction hearing that

the improvement reversion provisions in the lease agreements were standard

and not negotiable. Ms. Kuba further testified that the lease language at

issue was vague and needed clarification, and that in 2019, the standard form

leases were modified to make them more clear about improvement reversion

at the conclusion of the lease.

George Carroll, President of the EAA, testified that the EAA was a

charitable organization which owned a hangar and had a lease at the

downtown airport. He testified that he never understood that the EAA was

giving up ownership of its hangar to the City without any compensation.

Northcutt, who owned a hangar and had a lease at the downtown

airport, also testified. He said that the new lease he was offered by the City

included provisions requiring him to make upgrades and improvements to

his hangar in addition to paying the City $20,000 for the first ten years of the

lease. In regards to his current lease with the SAA, Mr. Northcutt testified

that when he signed the lease, he never thought he would be forfeiting any

constitutional rights he had with respect to his property. He said it never

occurred to him that the City would attempt to take his hangar without

compensating him for it.

Sullivan, another hangar owner with a lease at the downtown airport,

also testified. He said that if he thought he would have been relinquishing

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any of his constitutional rights by signing his lease with the SAA, he never

would have signed it.

On July 7, 2023, the trial court granted plaintiffs’ preliminary

injunction, providing two bases for it:

COURT: [T]he issues that were presented – there were two
issues presented during the hearing. Number 1
was by what authority does the Shreveport Airport
Authority have to acquire the hangars in
connection with City Ordinance Section 18-33
subsection B; and Number 2, whether the actions
of the Shreveport Airport Authority constitutes an
unauthorized taking in connection with Louisiana
Constitution Article 1, Section 4.
....

COURT: In connection with the first issue . . . During the
hearing on this matter there was no evidence
presented indicating that the Shreveport Airport
Authority was authorized by the City Council to
acquire the hangars, which are immovable
property. There was some argument or testimony
presented by the City that this ordinance was only
limited to expropriations but that is not the case,
the ordinance is not limited to expropriation, as
was suggested by the City witness. As presently
presented, this Court finds that the movers have a
likelihood of— substantial likelihood of prevailing
on this issue at trial.
...

COURT: Issue Number 2, whether the actions of the
Authority, Shreveport Airport Authority, constitute
an unauthorized taking in connection with
Louisiana Constitution Article 1, Section 4 . . . In
this matter the City of Shreveport, of course, is
seeking to have the hangar owners at the end of the
lease remove the hangars, demolish the hangars, or
surrender the hangars to the City. The lease does
not – the lease at issue, they do not specifically
indicate that the hangars would be surrendered to
the City without just compensation. The issue is
whether there was a waiver of constitutional rights
when the leases were signed and if so whether
such waiver was knowing, voluntary and
expressed in the lease.

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The lease – there was some testimony that the
lease was later changed and the new leases that the
Shreveport Airport Authority is executing
indicates that the leases will be surrendered
without compensation.

The Court finds in connection with Issue Number
2 that there is a substantial likelihood of prevailing
on this issue, of the plaintiff prevailing on this
issue at the trial.

On July 18, 2023, the trial judge signed an order enjoining the City of

Shreveport “from terminating or threatening to terminate the leases of the

Plaintiff-Intervenors under penalty of possible loss of ownership of hangars

or other improvements in connection with the Leased Premises without the

payment of compensation.”

On July 20, 2023, the City filed its motion for suspensive appeal

which was granted on July 24, 2023. Appellees objected to the appeal being

suspensive notwithstanding the provisions of La. C.C.P. art. 3612(B) barring

the suspension of a preliminary injunction during the pendency of an appeal.

On July 25, 2023, the City then filed its motion for devolutive appeal, which

was granted on July 27, 2023.

DISCUSSION

Preliminary Injunction Standard

A preliminary injunction is a procedural device interlocutory in nature

and designed to preserve the existing status pending a trial of the issues on

the merits of the case. La. C.C.P. art. 3601; Levine v. First Nat’l Bank of

Com., 06-0394 (La. 12/15/06), 948 So. 2d 1051; Tanner v. Succession of

Bourland, 52,918 (La. App. 2 Cir. 11/20/19), 285 So. 3d 104. A preliminary

injunction may be issued on merely a prima facie showing by the plaintiff

that he is entitled to relief. Rand v. City of New Orleans, 17-0596 (La.

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12/6/17), 235 So. 3d 1077. The grant or denial of preliminary injunction

will not be disturbed except for a clear abuse of the trial court’s discretion.

Praeses, L.L.C. v. Bell, 54,601 (La. App. 2 Cir. 6/29/22), 343 So. 3d 933;

Bd. of Sup’rs v. McCalmont, 54,451 (La. App. 2 Cir. 5/25/22), 339 So. 3d

1261.

While it is normally required to show irreparable injury in order to

succeed on a preliminary injunction, such a showing is unnecessary when

“the conduct sought to be restrained is unconstitutional or unlawful i.e.,

when the conduct sought to be enjoined constitutes a direct violation of a

prohibitory law and/or a violation of a constitutional right.” Jurisich v.

Jenkins, 99-0076 (La. 10/19/99), 749 So. 2d 597, 599 (citing S. Cent. Bell

Tel. Co. v. La. Pub. Serv. Comm’n, 555 So. 2d 1370 (La. 1990)).

Thus, “once a plaintiff has made a prima facie showing that the

conduct to be enjoined is reprobated by law, the petitioner is entitled to

injunctive relief without the necessity of showing that no other adequate

legal remedy exists.” Jurisich, supra, 749 So. 2d at 599.

The grant of a preliminary injunction will not be disturbed except for

a clear abuse of the trial court’s discretion. Tanner v. Succession of

Bourland, supra. In Cason v. Chesapeake Oper. Inc., 47,084 (La. App. 2

Cir. 4/11/12), 92 So. 3d 436, 441, writ denied, 12-1290 (La. 9/28/12), 98 So.

3d 840, we held that in the context of a preliminary injunction, “when a trial

court receives evidence and makes factual determinations, the proper

standard is abuse of discretion.” See also Town of Sterlington v. Greater

Ouachita Water Co., 52,482 (La. App. 2 Cir. 4/10/19), 268 So. 3d 1257, writ

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denied, 19-00913 (La. 9/24/19), 279 So. 3d 386, and writ denied, 19-00717

(La. 9/24/19), 279 So. 3d 931.

Constitutional Taking and Waiver

The City argues that appellees cannot establish their taking claim

because the City’s actions simply followed the lease agreements. The City

asserts that Louisiana courts look first to the rights and responsibilities

enumerated in lease agreements prior to reaching a constitutional analysis.

The City argues that the lease agreements provide that at lease termination,

the lessee has a right to remove improvements it owns from the leased

premises for a set period of time, and if the improvements are not removed

during that time, they become property of the City without any further action

required by the City.

The City avers that appellees signed leases agreeing that, if not

renewed when the leases expired, improvements would revert to the City, a

provision which relieves appellees from their obligation to restore the

property. Therefore, the City argues, this was not an instance of a taking

without just compensation.

The City also argues that even if improvement reversion by a

governmental lessor constitutes a taking, then this court should find that a

constitutional waiver was knowingly made when appellees entered into the

leases that plainly provided for reversion when the tenant elected not to

remove improvements to the leased premises at the termination of the lease

in lieu of exercising its obligation to restore the premises to its prior

condition. In support of its argument, the City asserts that the phrase

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“without further action” is commonly understood to mean with no action or

to have a self-operational effect.

Appellees, on the other hand, argue the lease agreements in question

did not contain a waiver of their constitutional right to compensation.

Appellees assert that the existence of a contract does not negate the City’s

responsibility and requirement to obtain an express, knowing, and voluntary

waiver of constitutional rights in that contract. Appellees note Ms. Kuba’s

acknowledgement that the lease provision at issue was less than clear

regarding the City’s right to take private property without compensation.

Thus, appellees claim that the lease language was ambiguous at best such

that the requirements to satisfy a constitutional waiver could not possibly

have been met.

The Louisiana Constitution provides safeguards against the taking of

private property by a governmental entity (including any political

subdivisions, including municipalities):

(A) Every person has the right to acquire, own, control,
use, enjoy, protect, and dispose of private property.
This right is subject to reasonable statutory
restrictions and the reasonable exercise of the
police power.

(B)(1) Property shall not be taken or damaged by the
state or its political subdivisions except for public
purposes and with just compensation paid to the
owner or into court for his benefit. Except as
specifically authorized by Article VI, Section 21 of
this Constitution property shall not be taken or
damaged by the state or its political subdivisions: (a)
for predominant use by any private person or entity;
or (b) for transfer of ownership to any private person
or entity.

La. Const. art. I, § 4(A)-(B)(l) (emphasis added).

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It has been settled jurisprudence in the United States for almost a

century that “we do not presume acquiescence in the loss of fundamental

rights.” Ohio Bell Tel. Co. v Pub. Utils. Comm’n, 301 U.S. 292, 307, 57 S.

Ct. 724, 731, 81 L. Ed. 1093 (1937). It is likewise settled law that the

waiver of constitutional rights must be knowing, intelligent, and voluntary

and courts will indulge every reasonable presumption against waiver of

those rights. Commodities Futures Trading Comm’n v. Schor, 478 U.S. 833,

106 S. Ct. 3245, 92 L. Ed. 675 (1986). This court has held that it is in full

accord with the federal authorities, noting that a waiver of constitutional

rights must be made voluntarily, intelligently, and knowingly, and that

“absent an effective waiver, courts will not presume that a person acquiesces

in the loss of fundamental rights.” Ogburn v. City of Shreveport, 614 So. 2d

748, 753 (La. App. 2 Cir. 1993), writ denied, 619 So. 2d 547 (La. 1993).

Regardless of who shoulders the burden, the factors used by federal

courts to decide whether a waiver was made knowingly, voluntarily, and

intelligently include: (1) whether there was gross disparity in bargaining

power between the parties; (2) the business or professional experience of the

party opposing the waiver; (3) whether the opposing party had an

opportunity to negotiate contract terms; and (4) whether the clause

containing the waiver was inconspicuous. RDO Fin. Servs. v. Powell, 191 F.

Supp. 2d 811 (N.D. Tex. 2002) (citing Westside-Marrero Jeep Eagle, Inc. v.

Chrysler Corp., Inc., 56 F. Supp. 2d 694 (E.D. La. 1999)).

Here, the evidence at trial showed that there are no competing general

aviation airports in the Shreveport-Bossier area and that the SAA enjoys

near-monopoly power with respect to general aviation services. Further, the

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City, through Ms. Kuba, acknowledged that the lease agreements are “form”

contracts, almost all the terms of which are nonnegotiable. Additionally, the

clause that the City argues contains the waiver was not conspicuous

inasmuch as the City itself admitted that it was unclear. Under these

circumstances, we do not find that a knowing, voluntary, intelligent waiver

of appellees’ constitutional right to just compensation following a taking

was made. Accordingly, we do not find that the trial court abused its

discretion in finding that there was a substantial likelihood of appellees’

prevailing on this issue.

Suppletive Law

The City also argues that appellees do not have a property right in the

improvements after the notice period following lease termination, and that

improvement reversion clauses in state and municipal lease agreements

allow for the lawful exercise of the City’s rights as the landowner via

accession. The City asserts that appellees are essentially making an as-

applied constitutional challenge to La. R.S. 2:135.1 and La. C.C. art. 2695,

both of which provide for reversion of leasehold improvements to the lessor

at lease termination.

While the City acknowledges that the new leases it proposed include

additional language plainly dismissing any notion of compensation, it claims

the leases at issue here also do not require compensation. To the extent that

the lease is found to be silent on the compensation issue, the City argues that

La. C.C. art. 2695, which provides a lessor with the option to demand

removal of improvements and appropriate ownership without any obligation

of reimbursement to the lessee, can be read into the subject leases.

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Appellees argue that the City’s position on the applicability of La.

C.C. art. 2695 ignores a necessary part of contract interpretation and

analysis: ambiguity. Appellees assert that the ambiguity regarding what

happens at the conclusion of the lease and the clear lack of explicit,

knowing, and voluntary waiver of constitutional rights means the City

cannot “take” the hangars without just compensation.

Appellees note that the City admitted that lease terms at issue needed

clarification and that the City tried to do just that in its attempt to revise the

form leases in 2019. Appellees also dispute the City’s claim that they are

making a constitutional challenge to La. C.C. art. 2695, claiming instead that

the lease agreements at issue have a constitutional dimension by their nature

since they are between a private person and the government, but that does

not mean that La. C.C. art. 2695 is unconstitutional.

La. C.C. art. 2695 states:

In the absence of contrary agreement, upon termination of the
lease, the rights and obligations of the parties with regard to
attachments, additions, or other improvements made to the
leased thing by the lessee are as follows:

(1) The lessee may remove all improvements that he
made to the leased thing, provided that he restore the
thing to its former condition.

(2) If the lessee does not remove the improvements, the
lessor may:

(a) Appropriate ownership of the improvements by
reimbursing the lessee for their costs or for the
enhanced value of the leased thing whichever is
less; or

(b) Demand that the lessee remove the improvements
within a reasonable time and restore the leased
thing to its former condition. If the lessee fails to
do so, the lessor may remove the improvements
and restore the leased thing to its former condition

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at the expense of the lessee or appropriate
ownership of the improvements without any
obligation of reimbursement to the lessee.
Appropriation of the improvement by the lessor
may only be accomplished by providing additional
notice by certified mail to the lessee after
expiration of the time given the lessee to remove
the improvements.

La. C.C. art. 2695(1)-(2)(b).

Here, the provisions of appellees’ leases addressing what happens at

the conclusion of the lease with regard to compensation obligations are

ambiguous. It is well settled that any ambiguity in a contract is interpreted

against the drafter (here, the City) and in favor of the lessee (here, the

appellees). Moreover, since the language in the lease agreements does not,

in fact, contemplate an unrestricted right to remove the improvements at the

conclusion of the lease, and is unclear on the issue of payment of

compensation for the taking of the hangars (or rather the City addressed by

amending the later leases), another “canon” of contractual interpretation

instructs us to look to other sections of the contract. In each of appellees’

leases, there is a revocability clause, which states as follows:

This lease is revocable by the City of Shreveport at any
time that a public use of the property should be found to
exist by the City Council. In such event, LESSOR agrees
to compensate LESSEE for LESSEE’s interest in the
lease and LESSEE’s improvements pursuant to the
guidelines used by the City of Shreveport when it
expropriates private property for public use.

First, the leases identify appellees’ property as “private property.”

Secondly, the only purpose for which the City – per its Charter – can

acquire property, is for “any municipal purpose.” Shreveport City Charter

Sec. 2.03(a). Necessarily, this means for a municipally related “public

purpose.” Accordingly, the City may only “take” private property for a

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municipal public purpose, and such taking requires just compensation.

Following the language of the revocability clause of the subject leases, in

light of: (a) the ambiguity of the lease language regarding what happens at

the conclusion/termination of the lease; and (b) the clear lack of explicit,

knowing, and voluntary waiver of the appellees’ constitutional rights, the

City cannot “take” the hangars without just compensation for same.

The City also attempts to invoke the provisions of La. R.S.

2:135.1(B)(2)(b). This statute, however, is not applicable to the Shreveport

Downtown Airport, which is where appellees’ hangars are located. Indeed,

La. R.S. 2:135.1(B)(2)(c) states that “the provisions of this Paragraph shall

not apply to the . . . Shreveport Downtown Airport.”

We do not find La. C.C. art. 2695 unconstitutional. Rather, we hold

that because the lease agreements at issue sought to appropriate appellees’

property without compensation at the end of the term, the addition of an

unambiguous, clear, voluntary, and express waiver of that right was

necessary. The City has admitted that the lease terms at issue needed

clarification, and that clarification was to specifically inform lessees that, at

the conclusion of their lease, the City could take their hangar on the leased

property without compensation.

In fact, the City attempted to do just that in its 2019 lease revisions.

This effectively acknowledged ambiguity in the prior form leases. However,

the leases in the record before us are not clear or express. Accordingly, we

find no abuse of the trial court’s discretion in finding that because of the lack

of clarity and express language, appellees did not effectively waive their

constitutional rights.

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CONCLUSION

For the foregoing reasons, we affirm the judgment of the trial court

granting the temporary restraining order filed by appellees. The appellate

court costs in the amount of $2,144 are assessed to the City of Shreveport.

AFFIRMED.

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