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Denver Homeless Out Loud v. Denver, Colorado.

No. 21-1025.  D.Colo. Judge McHugh. Homeless Encampments Sweeps—Preliminary Injunction—Preclusive Effect of Prior Settlement Agreement—Jurisdiction—Preservation—Claim Preclusion.

May 3, 2022

The City and County of Denver (Denver) banned unauthorized camping on public or private property. In 2016, people affected by these sweeps filed a class action against Denver and certain city officials in the US District Court for the District of Colorado in Lyall v. City of Denver, 319 F.R.D. 558 (D.Colo. 2017). Lyall was resolved in 2019 with a settlement that set forth detailed protocols for Denver’s future enforcement of the camping ban and released a broad range of city parties from present and future liabilities.

Sweeps continued post-Lyall, and Denver Homeless Out Loud, an advocacy organization, and several people experiencing homelessness (collectively, the DHOL plaintiffs) filed a putative class action and corresponding motion for preliminary injunction. The DHOL plaintiffs contended that the homeless encampment sweeps conducted or authorized by Denver and other city officials (collectively, the Denver defendants) violated their procedural due process rights. They alleged that the Denver defendants seized and summarily destroyed property belonging to the DHOL plaintiffs without providing adequate notice before the seizure and destruction of property. The Denver defendants filed a motion to dismiss based on the preclusive effect of the Lyall settlement agreement. The district court struck the motion for procedural defects. After expedited discovery, the court conducted a three-day evidentiary hearing on the preliminary injunction motion. The Denver defendants did not raise the preclusive effect of the Lyall settlement agreement in opposition to the preliminary injunction. Without considering whether the Lyall settlement agreement barred the claim, the district court granted an injunction based on its finding that the procedural due process claim was likely to succeed. The injunction requires the Denver defendants to satisfy additional notice and procedural requirements before conducting future sweeps. About two months later, the Denver defendants filed a motion to dismiss, arguing the Lyall settlement agreement precluded the due process claim under the doctrines of collateral estoppel and res judicata. While that motion was pending, the Denver defendants filed this interlocutory appeal.

Though the Denver defendants did not assert or argue the preclusion defense, the Tenth Circuit opted to exercise its discretion to consider the defense, even though jurisdiction to enforce the Lyall settlement agreement rests with state courts. The Tenth Circuit concluded that the DHOL plaintiffs are unlikely to succeed on the merits of their procedural due process claim because the Lyall settlement agreement expressly releases the Denver defendants from the instant procedural due process claim, which arises from the same municipal custom of sweeping homeless encampments at issue in Lyall. Accordingly, the DHOL plaintiffs’ procedural due process claim was claim-precluded.

The Tenth Circuit then reviewed the district court’s grant of a preliminary injunction for abuse of discretion, which occurs where a decision is premised on an erroneous conclusion of law or where there is no rational basis in the evidence for the ruling. Here, without argument from the Denver defendants, the district court did not evaluate the preclusion defense when it analyzed whether the DHOL plaintiffs’ procedural due process claim was likely to succeed on the merits. The court legally erred by (1) not finding that the DHOL plaintiffs’ procedural due process claim was precluded, and (2) holding a precluded claim was likely to succeed on the merits. Further, the court failed to consider record evidence of potentially dispositive terms in the Lyall settlement agreement, so its conclusion lacked a rational basis. Accordingly, the district court abused its discretion in ruling that the first preliminary injunction factor weighed in the DHOL plaintiffs’ favor. Because a movant must stablish four factors before a preliminary injunction can issue, the district court also abused its discretion by granting the preliminary injunction.

The order was vacated and the case was remanded for further proceedings.

Official US Court of Appeals for the Tenth Circuit proceedings can be found at the US Court of Appeals for the Tenth Circuit website.

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