Case 1:13-cv-00736 Document 1 Filed 08/08/13 Page 1 of 34

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW MEXICO

HOT SPRINGS LAND DEVELOPMENT, LLC, A New Mexico Limited Liability Company, and HOT SPRINGS MOTORPLEX DEVELOPMENT, LLC A New Mexico Limited Liability Company, Plaintiffs, vs. CITY OF TRUTH OR CONSEQUENCES, A New Mexico Municipality, Defendant. No. 1:13-cv-736

COMPLAINT FOR DECLARATORY AND INJUNCTIVE RELIEF AND DAMAGES COME NOW Plaintiffs, Hot Springs Land Development, LLC and Hot Springs Motorplex Development, LLC, by and through their attorneys, Paul Kennedy & Associates, P.C., and bring this Complaint to remedy violations of their civil rights under the Fifth and Fourteenth Amendments to the United States Constitution and 42 U.S.C. 1983, as well as claims under New Mexico state law and for declaratory judgment pursuant to 28 U.S.C. 2201. Plaintiffs allege as follows: JURISDICTION AND VENUE 1. This Court has jurisdiction over this action pursuant to 42 U.S.C. 1983, 28

U.S.C. 1331, 28 U.S.C. 1343, and 49 U.S.C. 40101 et seq., with pendent jurisdiction over the state law claims. 2. Venue is proper in this district pursuant to 28 U.S.C. 1391, as Defendant City of

Truth or Consequences (City) is a governmental entity of the State of New Mexico and was subject to personal jurisdiction in this district at the time this action commenced. The acts
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complained of occurred in New Mexico, and Plaintiffs causes of action arose in New Mexico. PARTIES 3. Plaintiff Hot Springs Land Development, LLC (HSLD) is a New Mexico limited

liability company with its principal place of business located in Sierra County, New Mexico. Plaintiff HSLD owns land located in the County of Sierra, State of New Mexico. 4. Plaintiff Hot Springs Motorplex Development, LLC (HSMD) is a New Mexico

limited liability company with its principal place of business located in Sierra County, New Mexico. Plaintiff HSMD is the management and development company for HSLD. 5. New Mexico. 6. At all times material to this matter, HSLD and HSMD (collectively referred to as Defendant City is a municipality located in the County of Sierra and the State of

Plaintiffs) have transacted business in Sierra County, New Mexico. FACTUAL BASIS 7. Since 1946, the City has sponsored the Municipal Airport, with the land patented

to the City by the Federal Government for airport and aeronautical-related uses. 8. The City was originally named Hot Springs, but subsequently changed its name to

Truth or Consequences in or about 1950. 9. In 2003, the City annexed approximately 6,000 acres of land surrounding the

Citys Municipal Airport (Airport) in the unincorporated area of Sierra County. 10. At the time of the annexation, the New Mexico Boundary Commission found that

the City had provided satisfactory documentary and testimonial evidence that it would be able to provide utility and/or public safety services to the annexed land.

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11.

On or about January 2007, Plaintiffs recognized a highly profitable business

opportunity to develop and improve the Airport as well as the land surrounding the airport. 12. Plaintiffs plan was to make the Airport a self-sustaining and profitable enterprise

providing substantial long-term benefits to the local economy and the traveling public, while encouraging the investment of private capital into the City and Plaintiffs development. 13. In order to improve the Airport and encourage investment of private capital into

the City, Plaintiffs sought to purchase land surrounding the airport. 14. Plaintiffs proposed this plan to the City, and the City agreed to cooperate with

Plaintiffs in order to facilitate the development of the Municipal Airport and the land surrounding the Airport. 15. The Commissioners of the City of Truth or Consequences have at all times

relevant been directly involved in the actions taken by the City. 16. On or about April 16, 2007, the City and Plaintiffs signed a Letter of Intent for an

exclusive operating and development agreement for the Citys Municipal Airport. 17. The Letter of Intent set forth the terms under which Plaintiffs and/or its assigns

would enter into an exclusive operating and development agreement with the City regarding the Airport. 18. On or about August 17, 2007, the City entered into an Airport Development

Agreement (ADA) with Plaintiffs to oversee airport management, make facility improvements, and develop the Airport into a positive revenue generating facility. 19. As part of the ADA, the City granted exclusive commercial development rights of

the Airport to HSMD in exchange for the engineering of an Airport Layout Plan.

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20.

The City was aware that HSLD intended to purchase 7,387.56 acres m.o.l. fee-

simple land (Property) surrounding the Municipal Airport. 21. The City had been advised by Plaintiffs and knew that Plaintiffs intended to

purchase this Property surrounding the airport for the sole purpose of using the land in reliance on the ADA and for Plaintiffs development. 22. In reliance on the representations of the City and the contractual terms of the

ADA between HSMD and the City, HSMD expended significant funds to engineer an Airport Layout Plan. 23. HSMD also pledged a portion of the Property for the extension of a primary

runway and for the creation of a paved crosswind runway. 24. On August 17, 2007 the City entered into a contractual Option Agreement for

Purchase and Sale of Rights (Option Agreement) with HSMD. 25. In accordance with the Option Agreement, the City granted HSMD an exclusive

option to purchase rights to eighty percent (80%) of its current excess water and sewer capacity and ninety-five percent (95%) of its planned future water and sewer capacity, in exchange for initial deposits totaling $200,000 from HSMD. 26. In signing the Option Agreement, the City warranted that it was the owner of the

water and sewer rights and that that ownership was unencumbered. 27. The City further warranted that it had no knowledge of any material defective

condition of such Rights, nor any violation of any law or regulation affecting such rights. 28. Upon information and belief, at the time of the agreement, there was a substantial

failure of consideration, as the City did not have the ability or authority to ability to provide

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Plaintiffs with eighty percent (80%) of the Citys current excess water and sewer capacity and ninety-five percent (95%) of the Citys planned future water and sewer capacity. 29. Upon information and belief, the City entered into the Option Agreement without

approval from the New Mexico Office of the State Engineer, which is the governing entity for water rights and water management. 30. Upon information and belief, the City failed to petition the Office of the State

Engineer to ascertain whether or not it had the ability to contractually obligate itself under the Option Agreement. 31. Plaintiffs relied on the representations of the Citys ability to provide water and

wastewater services to their property when the Plaintiffs entered into a subsequent Operating Agreement with the City. 32. On August 28, 2007, eleven days after the parties had signed the ADA, the City

Commission passed an Airport Impact Overlay District Ordinance No. 574 on land located in Sierra County and surrounding the airport. 33. Ordinance No. 574 contained unreasonable height, density, and noise restrictions,

which had the effect of disallowing Plaintiffs from proceeding with all or virtually all commercial and residential development on their Property. 34. Prior to this date, Plaintiffs had communicated their development plans widely,

both to the City and to the general public. 35. Through the enactment of Ordinance No. 574, the City intentionally and

maliciously restricted Plaintiffs of all beneficial use of its future property. 36. Through the enactment of Ordinance No. 574, the City intentionally and

maliciously restricted Plaintiffs ability to develop and market their future property.

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37.

The Citys restrictive zoning enacted through Ordinance No. 574 rendered the ADA

and related agreements impossible to perform. 38. The City had specific knowledge at least four months prior to enacting Ordinance

No. 574, that Plaintiffs intended to purchase the 7,387.56 acres m.o.l. fee-simple land surrounding the airport (hereinafter referred to as the Property) for their development, the ADA, and related agreements. 39. The City failed to comply with state statutes and with the City Code in enacting

Ordinance No. 574. 40. The City made numerous material misrepresentations to Plaintiffs in order to induce

Plaintiffs to petition to annex the Property that Plaintiffs had informed the City they were going to purchase from the New Mexico State Land Office and the Bureau of Land Management. 41. The City represented that it would provide certain municipal services, including

sewer, water, and other utilities to Plaintiffs development if, after Plaintiffs purchased the Property, Plaintiffs would petition to have the Property annexed into the City. 42. On April 16, 2008, Plaintiffs purchased and closed on the Property with the State

Land Office for $2,530,000 and an additional $1,470,000 of pre-acquisition expenses, for a total purchase price of $4,000,000. 43. Plaintiffs purchased the Property in reliance on its agreements with the City, and the

Citys representations regarding its ability and intention to provide water, sewer and other services on the Property. 44. From April, 2008 to August, 2008, Plaintiffs spent over $738,000.00 on their

Submittal Package to the City, for Zoning, Prescribed Uses, a Master Plan Concept, Civil Engineering, Traffic Studies, an Environmental Plan, Flood and Storm Water Plan, Soil Studies,

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a Water Consumption Plan, Internal Roads, Population Densities, Project Phasing and more, based on the Citys representations that it was collaborating with Plaintiffs to provide utility and infrastructure development. 45. On May 19, 2008, Plaintiffs submitted a Petition and payment for the City to

annex the portion of the Property that had not already been annexed in 2003. 46. Plaintiffs submitted their Petition and payment in reliance on the ADA, the

Option Agreement, representations made by the City, and Plaintiffs understanding that the City would deliver water and sewer services to Plaintiffs development pursuant to the Option Agreement. 47. Annexation. 48. On numerous occasions, the City and or its agents represented that the City had On May 23, 2008, the City accepted Plaintiffs application and payment for

sufficient water and sewer resources to serve the Property, given the development schedule proposed in Plaintiffs Master Plan. 49. On or about August 5, 2008, the City Planning & Zoning Commission had a

public hearing to discuss annexing the six sections of land surrounding the municipal airport and to discuss Plaintiffs Subdivision Master Plan. 50. On or about August 5, 2008, the City published a staff report authored by then

City Manager Jaime Aguilera, for the Planning and Zoning Commission Meeting, stating that [t]here [was] quality and quantity of water available in the vicinity [of the land to be annexed]. 51. On August 18, 2008, the City and its Commission approved the annexation, based

on Plaintiffs specified uses and Plaintiffs Master Plan Concept, despite the fact that all of the

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plans and Annexation were in direct conflict with City's previous Zoning Ordinance No. 574 of August 27, 2007. 52. Plaintiffs relied on the Citys promises and representations when it petitioned to

have its land annexed into the City of Truth or Consequences, including but not limited to the following: a. That the City would perform under the ADA and would cooperate with Plaintiffs regarding their development of their land surrounding the Airport; b. That the City would perform under the Option Agreement and that it could deliver water, sewer, and other municipal services to the Plaintiffs annexed property and Development; and c. That at such time as Plaintiffs, as a new developer, demanded services, the City would promptly provide such services to the development. 53. Plaintiffs would not have applied to have their Property annexed into the City of

Truth or Consequences had the City disclosed that it did not have the capacity and/or ability to provide water and sewer services to Plaintiffs development in accordance with the Option Agreement. 54. The City made subsequent representations to Plaintiffs assuring Plaintiffs that the

City had the ability to provide water and sewer capacity by suggesting a northern well site. 55. On or about September 9, 2008, the City and HSLD entered into a water well

agreement, which provided a means for the parties to collaborate in developing a diversion point in order to extend the Citys utility infrastructure, so that the City could provide water to the Property.

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56.

Through this agreement, the City encouraged Plaintiffs to use Plaintiffs own funds

to develop a water well as a future point of diversion for the City and Plaintiffs consumptive use for commercial potable water. 57. The City agreed that if Plaintiffs completed a northern well test site in Cuchillo

Creek and established an exploratory production water well, the City would service the Plaintiffs development with water from that well. 58. In reliance on this agreement, Plaintiffs expended significant funds and completed

a northern well test site in Cuchillo Creek to service their development. 59. But for the Citys representation that Plaintiffs development would receive water

from the Cuchillo water well after the completion of that well site, Plaintiffs would not have entered into the agreement nor would they have expended significant time and money creating that well site. 60. On or about September 28, 2008, the City abandoned the project at Cuchillo,

refused to deliver water to Plaintiffs development using the well, thereby breached its agreement with HSLD for reasons unrelated to the viability of the well. 61. Jaime Aguilera, who was at that time the City manager, made representations to

Plaintiffs that the City would find ways to compensate for the financial loss as well as other means to deliver water to the Property. 62. Subsequent to breaching the agreement, the City paid HSLD $47,000, which was

at least $32,000 less than HSLD had spent in performing on the agreement. 63. On or about September 24, 2008, Mayor Lori Montgomery, City Clerk Mary

Penner, and City Attorney Jaime F. Rubin drafted and signed a Termination of Airport Development Agreement (ADA Termination).

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64.

Section VIII (2) of the ADA stated that the agreement could only be terminated

by the City in the event of a default by HSMD that is not cured. 65. HSMD did not default under any of the Events of Default pursuant to Section

VIII (3) of the ADA. 66. The City did not provide the contractually required notice of any alleged defaults

by HSLD in accordance with Section VIII (4) of the ADA. 67. The City did not provide HSMD with a cure period for any alleged defaults in

accordance with Section VIII (4) of the ADA. 68. Upon information and belief, the ADA Termination was based on the Citys

misrepresentation to Plaintiffs that the . . . FAA failed or refused to approve the Agreement . . . and that the ADA . . . was subject to approval by the United States Federal Aviation Association . . . 69. On or about October 1, 2008, in reliance on the Citys misrepresentations that it was

required by law for the FAA to approve the ADA and that the FAA had refused or failed to approve the ADA, a representative of HSMD signed the Termination. 70. As a result, Plaintiffs suffered significant financial loss and a loss of future

commercial aviation-related development opportunities, including but not limited to a loss of investment funds, of the opportunity to develop the area around the Airport, of the opportunity to pursue outside financing for runway construction, of the opportunity to market the property, and of the opportunity to pursue multiple other profitable commercial enterprises with respect to their Property.

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71.

Plaintiffs were subsequently informed that the FAA was not required to approve the

ADA and that the FAA had not in fact refused to approve the ADA, despite the Citys misrepresentation that FAA had refused such approval. 72. The Citys misrepresentations induced HSMDs representative into signing the

Termination, who would not have signed the Termination had it not been for those misrepresentations. 73. 74. On or about November 24, 2008, the City was sued by two local residents. The City made representations to Plaintiffs that it was responsible as a co-

claimant to pay for 95% of the legal fees associated with the defense of these claims, despite the fact that the claims centered on the Citys processes for zoning, open meetings and public hearings. 75. Based on the Citys demands, Plaintiffs paid in excess of $390,000 for attorneys

fees and costs in order to defend the City. 76. On March 18, 2009, the City approached Plaintiffs regarding the fact that

Plaintiffs owned 21.365 acres of its Airport property and infrastructure, which was a piece of the runway. 77. On August 15, 2010, the City, represented by then City Manager Weiser, met

with representatives of HSLD, and refused to participate with HSLD in utility and infrastructure planning, permitting processes, and other functions described in the City Municipal Services Code. 78. On September 1, 2010, Plaintiffs formally requested utility services consistent

with City ordinances and pursuant to the Option Agreement, but Plaintiffs request was ignored by the City, in direct violation of the Agreement as well as of Section 4-412 of the Citys code.

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79.

On October 5, 2010, Plaintiffs submitted a comprehensive and economically

advantageous proposal for a Spaceport Welcome and Visitors Center to the State of New Mexico. 80. Upon information and belief, on or about October 10, 2010, Sierra County

adopted a Memorandum of Agreement with Spaceport America that contained a map and language prepared by City Commissioner Steve Green and others that precluded Plaintiffs property from any commercial opportunity with the Authority, as it characterized Plaintiffs property as not part of the City of Truth or Consequences. 81. In misleading Sierra County and the Authority, the City and or its agents acted in

bad faith and violated terms of its agreements with Plaintiffs. 82. On June 14, 2011, the City demanded that HSLD place $28,000 in escrow

account for up to 12 months to cover potential FAA Grant-in-Aid funding losses, in consideration for good-faith negotiations on the lease of the 19.518 acres for the North Parcel controlled by the City. 83. On or about June 14, 2011, the City threatened to take the 21.365 acres at the Airport

from Plaintiffs through an eminent domain action if Plaintiffs did not agree to sell the property to the City. 84. The City, through Commissioner Steve Green, represented to Plaintiffs that if

Plaintiffs sold the 21.365 acres to the City, that the North Parcel Airport Lease would be completed within three weeks of the sale. 85. On June 16, 2011, HSLD agreed to sell the 21.365 acres at the Airport for its

approximate acquisition cost, or $350 per acre in reliance on the Citys representation that the FAA had demanded the sale in order for Plaintiffs to develop the airport.

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86.

HSLD relied on the Citys representations that the City would complete the

Airport Lease with Plaintiffs within three weeks of the sale when it agreed to sell the 21.365 acres at the Airport to the City. 87. Plaintiffs were induced to sell the 21.365 acres at the Airport based on the Citys

representation that the City would enter into a long-term lease for 19.518 acres and complete the North Parcel Lease within three weeks of the sale. 88. Contrary to the Citys representations, the North Parcel Airport Lease has still not

been completed. 89. City. 90. faith. 91. On August 9, 2011, Plaintiffs again attempted to exercise their option under the Throughout the North Parcel lease negotiations, the City continually acted in bad Plaintiffs would not have sold the 21.365 acres but for the representations by the

Water and Sewer Option Agreement with the City, this time to buy $200,000 worth of water rights for which they had pre-paid with their initial deposits. 92. On August 29, 2011, the City responded, denying Plaintiffs right to water under

the Option Agreement. 93. The City again refused to work with Plaintiffs in good faith negotiations relative

to the Option Agreement. 94. On January 11, 2012, the City, acting through its Airport Manager, sent detailed

information on Plaintiffs proposed Travel Center to the FAA in order to obtain a pre-emptive disapproval of the project as not consistent with aeronautical uses or airport related uses, directly interfering with Plaintiffs ability to conduct commerce.

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95.

On July 30, 2012, after Plaintiffs repeatedly attempted to negotiate with the City

in good faith, the City requested that as a condition precedent to completing the North Parcel lease, the Plaintiffs waive all rights to damages and sign a release for any causes of action Plaintiffs may have against the City and for claims to the $200,000 Plaintiffs had paid in pre-paid impact fees as part of the Option Agreement. 96. 97. Plaintiffs informed the City that they would not sign a release of its claims. Even after Plaintiffs gave notice to the City stating Plaintiffs would not sign a

release, the City continued to represent to Plaintiffs that it was interested in working to resolve the issues between Plaintiffs and the City in order to complete the lease and allow Plaintiffs development to move forward. 98. On August 20, 2012, the City denied Plaintiffs requests to invalidate the

annexation and/or to reimburse Plaintiffs the amount it had paid in Impact Fees, with interest, that were taken in violation of NMSA 1978, 5-8-1 et. seq. 99. In an attempt to amicably resolve this matter, Plaintiffs met with the City,

including two of its commissioners and the City attorney, and representatives from the State of New Mexico on October 1, 2012. 100. At the October 1, 2012 meeting, the City agreed to complete the Airport Lease

Agreement, work to provide 300 acre feet of water to the development, apply Plaintiffs deposits and credits to infrastructure expenses and investments, and address the financial impact of the damages and delays to HSLD through rebates, transfer of assets or credits. 101. On October 3, 2012, the City informed Plaintiffs that it could only deal with one

issue at a time, further delaying and causing HSLD to spend money, lose market opportunities, and cause Plaintiffs further damages.

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102.

Despite Plaintiffs good faith efforts, the City continuously made new objections

to Plaintiffs proposed lease, thereby further delaying the completion of the lease as well as Plaintiffs ability to move forward with their development. 103. From October 1, 2012 through January 14, 2013, Plaintiffs attempted to work

with the City to complete the Airport Lease. 104. On or about January 2013, the City commission took action to repeal and replace

the existing Airport Overlay Ordinance, with a new overlay ordinance, No. 633. 105. The stated purpose of the ordinance is to provide supplemental development

requirements and restrictions on land in the airport environs, in order to protect the public safety and welfare of people and land uses on the ground and the safety of the flying public. 106. The ordinance purports to enact restrictions as prescribed in Federal Aviation

Regulations and Circulars. 107. The ordinance contains height limitations that disallow Plaintiffs from building

structures taller than 45 feet on their property and that are unreasonable and unduly restrictive. 108. Plaintiffs have a longstanding plan to build a hotel, which is planned to be taller

than 45 feet, adjacent to a planned travel center. 109. The City knew about and pledged to work with Plaintiff to complete development

plans, which included these structures, long before the enactment of ordinance No. 633. 110. Upon information and belief, the ordinance is more restrictive than the federal

regulations promulgated pursuant to the Federal Aviation Act (FAA), 49 U.S.C. 40101 et seq.
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111.

The height limitations provided in the ordinance are so restrictive as to constitute

a taking of property without compensation under local law. 112. The structures and development laid out in Plaintiffs development plans, as

detailed in part in Plaintiffs Master Plan, constituted legal uses at the time Ordinance 633 was enacted. 113. The City has noted its intent to impose noise and density requirements affecting

Plaintiffs property through its special use permitting process. 114. This process is expected to be more onerous and more restrictive than is allowed

under the FAA and regulations promulgated pursuant to the FAA. 115. On or about January 14, 2013, after months during which time the City refused to

negotiate in good faith, and after Plaintiffs had previously stated that they would not sign a release of their claims against the City, the City presented another Release and Waiver agreement to Plaintiffs as a condition to finalizing the Airport Lease agreement. 116. The City informed HSLD that it had to release its pre-paid Developer Impact Fees

of $200,000.00, plus interest, and deposits and expenses with the City totaling $750,000.00 and waive its claims to financial damages and loss of opportunities caused by the dilatory tactics and misrepresentations of the City in order to complete the Airport Lease negotiation with the City. 117. On Friday, January 18, 2013, the City released an Agenda and Briefing Packet to

the Public, as notification for its scheduled Commission meeting on Wednesday, January 23, 2013 and anticipated Executive Session.

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118. HSLD. 119.

The Briefing Packet contained several documents that pertained to and referenced

Without HSLDs knowledge or agreement, the City included in the Briefing

packet and published the following: a) a version of a contemplated commercial lease; b) a letter dated July 2, 2012 from HSLD to City Manager Juan Fuentes, itemizing the deposits, loans and expenses that Plaintiffs had incurred historically with the City, now in excess of $750,000; and c) a Release authored by the City for mutual considerations. 120. The January 18, 2013 Briefing Packet sent out by the City to the public was

intentionally different than the Briefing Packet sent to Plaintiffs. 121. Despite its prior agreements with Plaintiffs, the City attempted to create a pretext

not to approve Plaintiffs Airport Lease and development by making it seem as if Plaintiffs were attempting to extort or force the City into signing the Airport Lease. 122. The City prejudiced Plaintiffs from being able to do business with the City by

misrepresenting material facts to its residents. 123. A citizen of Truth or Consequences asked City Commissioner Steve Green and

Commissioner Mulcahy if HSLD was being forced to choose between giving up its potential legal claims, rights, and money that potentially total millions of dollars, in exchange for a possible 15 year lease for 19.5 acres of raw land appraised at $24,900.00. 124. Both Commissioner Green and Commissioner Mulcahy confirmed that the City

would not sign the lease unless HSLD gave up any potential legal claims against the City.

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125.

On January 30, 2012 in an Executive Session, the City unanimously voted in a 4-0

decision of the Commissioners to enforce the Release with HSLD and to refuse to sign the Airport Lease unless HSLD signed the release. 126. The City has taken numerous steps to directly impair or undermine Plaintiffs

contractual, constitutional, and statutory rights. 127. Plaintiffs have attempted to work in good faith with the City to proceed on their

development and airport project, pursuant to their agreements with the City. 128. Plaintiffs. 129. Without the Citys assurances and representations, Plaintiffs would not have The City has breached and materially repudiated numerous agreements with

entered into the Airport Development Agreement, the Option Agreement, or Water Well Agreement, nor would it have petitioned to have its Property annexed into the City, expended significant funds in reliance on those agreements and the representations of the City, or attempted to negotiate the supporting lease at the airport. 130. decisions. 131. Since 2007, Plaintiffs have devoted significant time and money to the Plaintiffs relied on the Citys representations in making numerous investment

development projects on the Property, have obtained capital from private investors sufficient to allow the project to proceed, have invested substantial capital in designing and planning improvements at the Airport, and in infrastructure projects related to the Property, all in direct reliance upon the representations of the City and in order to perform their contractual obligations to the City.

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132.

As a result of Plaintiffs time, money, and efforts, the City has benefitted to the

detriment of Plaintiffs. 133. The City has failed to act upon Plaintiffs development plans, and it has sought

instead to delay and interfere with Plaintiffs development through various dilatory tactics. 134. Throughout its dealings with Plaintiffs, the City has misrepresented and failed to

disclose material facts to Plaintiffs, directly affected the value of Plaintiffs Property and their rights under contractual agreements with the City. 135. Plaintiffs have fully complied with all of their obligations, have acted in good

faith to work with the City to complete their contractual obligations and their development, and have suffered damages as a result of the Citys actions, omissions, dilatory tactics, and efforts to prevent Plaintiffs development from progressing. 136. Property. 137. The City has deprived Plaintiff of the ability to market its property for sale and/or Through its actions, the City has deprived Plaintiffs of all beneficial use of their

market its property to attract potential investors and developers. 138. As a result of the Citys actions, Plaintiffs are entitled to declaratory and injunctive

relief, damages for the Citys breach of contract and other wrongful acts, as well as consequential damages, incidental damages, restitution for unjust enrichment, rescission of the option agreement, and attorneys fees. COUNT I: DECLARATORY JUDGMENT PURSUANT TO 49 U.S.C. 40101 ET SEQ, 42 U.S.C. 1983, 28 U.S.C. 2201 (a), AND FED. R. CIV. P. 57 (DECLARING CITY ORDINANCE NO. 633 INVALID) 139. Plaintiffs incorporate by reference each and every allegation contained in this

Complaint as if fully pled herein.

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140.

There is a present and actual controversy between the City and Plaintiffs

regarding the validity of Airport Overlay District Ordinance No. 633. 141. Prior to the enactment of this overlay zoning ordinance, Plaintiffs development

plans on the Property had been widely communicated to the City and the general public. 142. The City had full knowledge prior to enacting Ordinance No. 633 that Plaintiffs

intended to proceed with a development plan that included structures over the height of 45 feet. 143. The ordinance provides that its intent . . . is to provide supplemental

development requirements and restrictions on land in the airport environs, in order to protect the public safety and welfare of people and land uses on the ground and the safety of the flying public. 144. 145. The Citys Ordinance No. 633 falls within the field of aviation safety. Federal Aviation Act (FAA), 49 U.S.C. 40101 et seq, and the federal

regulations promulgated pursuant to the FAA, occupy the field of aviation safety to the exclusion of the Citys zoning and development restrictions, including Ordinance No. 633. 146. The FAA was enacted to create a uniform and exclusive system of federal

regulation in the field of air safety. 147. The Supremacy Clause provides that the laws of the United States shall be the

supreme Law of the Land; ... any Thing in the Constitution or Laws of any State to the Contrary notwithstanding. U.S. Const. art. VI, cl. 2. Pursuant to this provision, Congress has the power to enact statutes that preempt state law. 148. Such regulations also preempt any special use permits, which purport to restrict

noise, density or other factors, which the City may require Plaintiffs to acquire before proceeding
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with their development. 149. Applying Ordinance No. 633 to Plaintiffs Property implicates the field of

aviation safety that Congress intended federal law to regulate exclusively. 150. Federal law impliedly preempts the application of the Citys zoning ordinance to

restrict the height of structures on Plaintiffs Property, which federal law regulates to the exclusion of local regulation. WHEREFORE, Plaintiffs request a declaratory judgment, pursuant to 28 U.S.C. 2201(a) that: a. Airport Overlay District Ordinance No. 633 cannot be enforced against Plaintiffs because it is preempted by federal law; b. Plaintiffs are entitled to develop their property according to federal law, without adhering to the height and other restrictions contained in City Ordinance No. 633 and without being required to apply for and acquire special use permits pertaining to noise, density, and other factors; and c. The City intentionally deprived Plaintiffs of their property rights in violation of Plaintiffs Fifth and Fourteenth Amendment rights without just cause. as well as attorneys fees and costs on their claim for declaratory judgment. COUNT II: REQUEST FOR PRELIMINARY AND PERMANENT INJUNCTIVE RELIEF

151.

Plaintiffs incorporate by reference each and every allegation contained in this

Complaint as if fully pled herein. 152. Plaintiffs have a substantial likelihood of success on the merits.

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153.

Federal law impliedly preempts the application of the Citys Ordinance No. 633

to restrict the height of buildings in Plaintiffs development. 154. Absent preliminary and permanent injunctive relief, Plaintiffs will suffer

substantial, immediate and irreparable harm due to the limitations Ordinance No. 633 imposes on Plaintiffs development. 155. 156. The balance of equities favors the relief requested. The public interest supports the issuance of a preliminary injunction, as such

relief would facilitate significant infrastructure improvements, create jobs, and otherwise promote economic development at the Airport and the surrounding land. 157. Plaintiffs are entitled to equitable relief so that Plaintiffs can use their land

without interference from government and to prevent the City from continuing to prevent Plaintiffs from all beneficial use of their land. WHEREFORE, Plaintiffs request a preliminary and permanent injunction preventing Defendants from bringing any action under state or local law to prohibit or otherwise regulate the development of Plaintiffs land pursuant to Ordinance No. 633 or other local law which is preempted by federal law regarding aviation safety, as well as attorneys fees and costs on their claim for injunctive relief. COUNT III: DEPRIVATION OF PLAINTIFFS FIFTH AND FOURTEENTH AMENDMENT RIGHTS IN VIOLATION OF 42 U.S.C. 1983

158.

Plaintiffs re-allege each and every allegation contained in this Complaint as if

fully pled herein. 159. The Citys actions, including but not limited to its enactment of Ordinance No.

574, the enactment of Ordinance No. 633, the Citys inability and unwillingness to provide
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municipal services as represented by the City to Plaintiffs Property upon due demand, and its dilatory tactics, have deprived Plaintiffs of all economically beneficial use of their Property. 160. The City failed to comply with applicable state law and city code in enacting

Ordinance No. 574. 161. The Citys actions have amounted to an unconstitutional regulatory taking, as the

City has prevented Plaintiffs from being able to develop, market, sell, or use their land as a result of the Citys actions. 162. The City has deprived Plaintiffs of all beneficial use and of their property without

just cause, and the citys regulation effectively amounts to an exercise of its eminent domain power, without actually divesting Plaintiffs of title to the property. WHEREFORE, Plaintiffs request compensatory and punitive damages against Defendant, together with all costs and fees. COUNT IV: INVERSE CONDEMNATION (IN THE ALTERNATIVE TO COUNT III)

163.

Plaintiffs re-allege each and every allegation contained in this Complaint as if

fully pled herein. 164. The City has employed a number of tactics to prevent Plaintiffs from completing

their development. 165. The City has enacted two overlay zoning ordinances which restricted and

continue to restrict, respectively, Plaintiffs ability to use and derive benefit from the Property. 166. The Citys enactment of Ordinance No. 574, which was subsequently amended

with the enactment of Ordinance No. 633, was in effect a taking of Plaintiffs Property.

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167.

As a result of the Citys zoning, Plaintiffs have had to leave their Property

economically idle. 168. Plaintiffs have been deprived of all beneficial use of their Property and have

therefore suffered a taking and are entitled to just compensation under NMSA 1978 42A-1-29. WHEREFORE, Plaintiffs request damages amounting to just compensation for Defendants taking of Plaintiffs Property. COUNT V: DECLARATORY JUDGMENT PURSUANT TO 28 U.S.C. 2201(a) (DECLARING THE CITYS COLLECTION OF $200,000 IN IMPACT FEES FROM PLAINTIFFS INVALID)

169.

Plaintiffs incorporate by reference each and every allegation contained in this

Complaint as if fully pled herein. 170. There is a present and actual controversy between the City and Plaintiffs

regarding the validity of the Citys collection of $200,000 in impact fees from Plaintiffs. 171. As part of the Option Agreement, HSLD made an initial deposit of $20,000.00 for

Developer Impact Fees paid to the City and deposited on August 23, 2007. 172. On May 15, 2008, HSLD made an additional payment of $180,000 to the City, as

required by the City in the Option Contract. 173. The City has categorized the $200,000 it received from Plaintiffs pursuant to the

Option Agreement as Impact Fees. 174. The City did not comply with the procedural requirements of the Development

Fees Act, NMSA 1978, 5-8-1 et. seq., in assessing and collecting the $200,000 in impact fee sfrom Plaintiffs.

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175.

Upon information and belief, the City has used the fees that it received from

Plaintiffs pursuant to the Option Agreement for items other than its intended purpose, in violation of New Mexico statutes, NMSA 1978, 5-8-5 and NMSA 1978, 5-8-16, and Sec. 4-404 to 4-405 of the Citys Code of Ordinances. 176. The City never prepared a capital improvements plan pursuant to NMSA 1978, 5-

8-6 and Sec. 4-406 of the City Code but still collected impact fees from Plaintiffs. 177. The City never issued a building permit to HSMD, but still collected an impact

fee in violation of NMSA 1978, 5-8-8 and of Sec. 4-408 of the City Code. 408 of the City Code. 178. Upon information and belief, the City has failed to account for fees taken from

Plaintiffs and has failed to maintain impact fees in a separate interest-bearing account clearly identifying the payor and the category of capital improvements for which the fee was adopted in violation of NMSA 1978, 5-8-16 and Sec. 4-416 of the Code. 179. In accordance with NMSA 1978, 5-8-16, upon payment of the impact fee,

Plaintiffs were entitled to the permanent use and benefit of the services for which the fee was exacted and were entitled to receive prompt service from any existing facilities with actual capacity to serve the new units. 180. Under NMSA 1978, 5-8-17, the City is required to refund an impact fee if

existing facilities are available and service is not provided, and a refund shall bear interest calculated from the date of collection to the date of refund at the statutory rate. 181. Section 4-412 of the City Code provides that, [a]ny new development for which

an impact fee has been paid is entitled to the permanent use and benefit of the services for which

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the fee was exacted and is entitled to receive prompt service from any existing facilities with actual capacity to serve the new service units. 182. To date, the City still has not provided Plaintiffs with the services for which fees

were exacted, in violation of NMSA 1978, 5-8-16 and Sec. 4-412 of the City Code. 183. The City collected impact fees from Plaintiffs despite its knowledge that services to

be provided for those fees were not available in violation of Sec. 4-411 of the City Code. 184. The City did not schedule and publish notice of a public hearing to consider land

use assumptions within the designated service area that will be used to develop the capital improvements plan in order to impose the impact fee on Plaintiffs in violation of NMSA 1978, 5-8-19 and Sec 4-419 of the City Code. 185. The City did not make available to the public its land use assumptions, the time

period of the projections and a description of the general nature of the capital improvement facilities that may be proposed on or before the date of the first publication of the notice of the hearing on land use assumptions in violation of NMSA 1978, 5-8-20. 186. The City failed to publish notice of the hearing on land use assumptions in

violation of NMSA 1978, 5-8-21. 187. Plaintiffs are entitled to equitable relief to prevent the City from continuing to

retain funds belonging to Plaintiffs. 188. Plaintiffs have exhausted all possible administrative remedies and avenues

available to them. WHEREFORE, Plaintiffs request a declaratory judgment that the City collected and retained $200,000 in impact fees from Plaintiffs in violation of state and city law, as well as all costs and fees incurred in bringing the claim for declaratory judgment.

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COUNT VI: BREACH OF OPTION AGREEMENT (CLAIM FOR MONEY DAMAGES)

189.

Plaintiffs incorporate by reference each and every allegation contained in this

Complaint as if fully pled herein. 190. The City and HSMD entered into a contractual Option Agreement for Purchase

and Sale of Rights On August 17, 2007. 191. The City first breached the Option Agreement by knowingly making material

representations and warranties that were false relative to the Citys ownership and ability to provide Plaintiffs with eighty percent (80%) of the Citys current excess water and sewer capacity and ninety-five percent (95%) of the Citys planned future water and sewer capacity when the City did not have the authority from the State Engineers Office nor the ability to provide such water and sewer capacity. 192. In accordance with paragraph nine of the Option Agreement, the City was in default

given knowledge that any representation or warranty made . . . [t]herein . . . is or bec[ame] false in any material respect 193. The City knew or subsequently became aware that it had made representations or

warranties in the Option Agreement that were false relative to certain water and sewer rights delineated in the Agreement. 194. The Citys knowledge that its representation that it could provide such water and

sewer capacity was false and therefore, was in direct violation of Paragraph 9 of the Option Agreement.

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195.

The City subsequently breached the Agreement when HSMD made several

attempts to exercise its option under the Agreement, and the City either failed to respond to, or rejected each of these attempts. 196. In accordance with Paragraph 2 (D) of the Option Agreement, the City was

required to return the $200,000 it had received from Plaintiffs due to its inability to deliver any or all of the rights pursuant to the agreement. 197. Despite demands from Plaintiffs, the City has refused to return the $200,000 that

it received from Plaintiffs. 198. As a result of the Citys breach and default, in accordance with Paragraph 9 of the

Option Agreement, Plaintiffs are entitled to the full refund of the $200,000 plus statutory interest. 199. But for the representations by the City that it could provide water and sewer

services in accordance with the terms of the Option Agreement, Plaintiffs would not have entered into the Option Agreement. 200. 201. The City wrongfully withheld the benefits of Option Agreement. The City breached the Contract with deliberate disregard to the potential harm to

Plaintiffs without just cause or excuse. 202. The Citys breach of the Option Agreement has delayed Plaintiffs from being able

to move forward with their development which has further damaged Plaintiffs. 203. The City has been unjustly enriched to the detriment of Plaintiffs by retaining the

$200,000 that it received from Plaintiffs. WHEREFORE, Plaintiffs request damages to include lost profits Plaintiffs would have earned on the project but for the Citys breaches, restitution damages, including the $200,000

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plus interest in impact fees the City illegally collected and have retained from Plaintiffs by which the City has been unjustly enriched, and consequential and incidental damages, including out-ofpocket expenses, attorneys fees, and court costs.

COUNT VII: BREACH OF OPTION AGREEMENT (CLAIM FOR EQUITABLE RELIEF, IN THE ALTERNATIVE)

204.

Plaintiffs incorporate by reference each and every allegation contained in this

Complaint as if fully pled herein. 205. The City has altogether failed to perform under the Option Agreement it entered

into with Plaintiffs, by refusing Plaintiffs several attempts to exercise its option under the agreement. 206. Although the parties option agreement was unilateral, it had to be supported by

mutual consideration. 207. Upon information and belief, at the time of the agreement, there was a substantial

failure of consideration on the part of the City, as the City did not have the ability or authority to ability to provide Plaintiffs with eighty percent (80%) of the Citys current excess water an d sewer capacity and ninety-five percent (95%) of the Citys planned future water and sewer capacity. 208. At the time of the Agreement, the City knew or should have known that it did not

have the authority to enter an agreement pledging eighty percent (80%) of its current excess water and sewer capacity and ninety-five percent (95%) of its planned future water and sewer capacity to Plaintiffs development.

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209.

The City knew or should have known that it did not have the ability to pledge eighty

percent (80%) of its current excess water and sewer capacity and ninety-five percent (95%) of its planned future water and sewer capacity to Plaintiffs development. 210. contract. 211. The Citys inability to provide the services it represented it could provide in the The Citys inability to provide water and sewer services went to root of the

Option Agreement rendered the performance of the Option Agreement different in substance from that which was contracted for. WHEREFORE, Plaintiffs request rescission of the Option Agreement and the return of the $200,000 in deposits or impact fees paid to the City, plus interest. COUNT VIII: BREACH OF CONTRACT (AIRPORT DEVELOPMENT AGREEMENT) 212. Plaintiffs re-allege each and every allegation contained in this Complaint as if

fully pled herein. 213. On or about August 17, 2007, the City entered into a written contract, the ADA,

with HSMD to oversee airport management, make facility improvements, and develop the Airport into a positive revenue generating facility. 214. Upon information and belief, the City breached the ADA when it misrepresented

to HSMD that federal law required that the ADA be approved by the FAA and that the FAA had refused to approve the ADA. 215. the FAA. 216. HSMD agreed to terminate the ADA based on the Citys representation that the HSMD relied on the Citys misrepresentation that the ADA had to be approved by

Agreement had to be terminated due to disapproval by the FAA.

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217.

After the ADA was terminated, HSMD learned that the FAA had not rendered any

opinion as to its approval or non-approval of the ADA. 218. The City breached the ADA by terminating the ADA without any default from

Plaintiffs and without providing proper notice of any alleged default from Plaintiffs in violation of Section VIII, paragraphs 2, 3, and 4 of the ADA. 219. As a result of the Citys breach of the ADA, Plaintiffs were deprived of

significant monetary benefits and opportunities that they reasonably expected to receive under the Agreement. 220. Plaintiffs expended significant resources performing their obligations under the

ADA, thereby conferring valuable benefits on the City. 221. 222. Plaintiffs performed all of their obligations under the ADA in a timely manner. The City breached the Contract with deliberate disregard to the potential harm to

Plaintiffs and without just cause. WHEREFORE, Plaintiffs request compensatory damages, including lost profits Plaintiffs would have earned but for the Citys breaches, restitution damages, including amounts by which the City has been unjustly enriched through the Plaintiffs performance of the ADA, and consequential and incidental damages, including out-of-pocket expenses, attorneys fees, and court costs. COUNT VIII: BREACH OF CONTRACT (WATER WELL DEVELOPMENT AGREEMENT) 223. Plaintiffs incorporate by reference each and every allegation contained in this

Complaint as if fully pled herein. 224. On September 9, 2008, the City and HSLD entered into a written Water Well

Development Agreement.
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225.

After HSLD completed all of ITS obligations under the Agreement, and the

Cuchillo water well was constructed and functioning, the City refused to provide water from the Cuchillo water well to Plaintiffs development. 226. The City has benefitted to Plaintiffs detriment from HSLDs performance under

the agreement in building, designing, engineering, and financing a fully functioning water well. 227. HSLD was deprived of significant benefits that it reasonably expected to receive

under the Agreement. 228. But for the Citys representation that Plaintiffs development would receive water

from the Cuchillo water well after the completion of that well site, HSLD would not have entered into the Agreement and/or expended significant time and money creating that well site. 229. 230. The City wrongfully withheld the benefit of the Water Well Agreement. The City breached its Agreement with deliberate disregard to the potential harm

to HSLD without just cause or excuse. WHEREFORE, Plaintiffs request compensatory damages including, among others, restitution damages for amounts by which the City has been unjustly enriched through the Plaintiffs performance of the Water Well Agreement, and consequential and incidental damages, including out-of-pocket expenses, attorneys fees and costs. COUNT IX: BREACH OF COVENANT OF GOOD FAITH AND FAIR DEALING

231.

Plaintiffs incorporate by reference each and every allegation contained in this

Complaint as if fully pled herein. 232. The covenant of good faith and fair dealing is an implied term to every contract,

including the contracts between Plaintiffs and the City.

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233.

Plaintiffs entered into certain contracts with the City and fully expected to receive

benefits from those contracts. 234. Plaintiffs worked in good faith to execute and carry out their contractual

obligations under the contracts they had with the City. 235. 236. The City did not act in good faith in its dealings with the Plaintiffs. The City breached the covenant of good faith and fair dealing by its dilatory

tactics, intentional withholding of information pertinent to the contracts, knowingly and intentionally making false representations to Plaintiffs to induce Plaintiffs to enter the contracts, terminating contracts without just cause or reason, and unilaterally breaching contractual agreements with Plaintiffs. 237. The City breached the covenant of good faith and fair dealing with respect to the

ADA by enacting Ordinance No. 574 and subsequently Ordinance No. 633, which each deprived Plaintiffs of receiving the benefits of exclusive operation and development of the Airport and prevented Plaintiffs from being able to implement its master plan and the development of its land near the airport. 238. The City also breached the covenant of good faith and fair dealing with respect to

the ADA by misrepresenting to Plaintiffs that the FAA had to approve and had failed to approve the ADA. 239. The City breached its covenant of good faith and fair dealing with respect to the

Option Agreement by representing to Plaintiffs that it could provide Plaintiffs with eighty percent (80%) of the Citys current excess water and sewer capacity and ninety-five percent (95%) of the Citys planned future water and sewer capacity when the City did not have the ability to provide such services to Plaintiffs.

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240.

Through its actions, the City intentionally impaired Plaintiffs rights to receive the

benefit of the Option Agreement, the ADA, and the Cuchillo Well Agreement. Plaintiffs are entitled to all remedies and relief available under the law, including punitive damages for the bad faith acts of the City that constituted breach of the covenant of good faith and fair dealing and any other relief deemed just and proper by this Court. WHEREFORE, the Plaintiffs request compensatory damages including, among others, restitution damages for amounts by which the City has been unjustly enriched through the Plaintiffs performance of the Water Well Agreement, and consequential and incidental damages, including out-of-pocket expenses, attorneys fees and costs.

Respectfully submitted, PAUL KENNEDY & ASSOCIATES, P.C. /s/ Justine Fox-Young__________________ Paul J. Kennedy Arne R. Leonard Justine Fox-Young Nan E. Erdman 201 12th St NW Albuquerque, NM 87102 505.842.8662 505.842.0653 fax

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