Preston Hollow Capital, LLC v. Cottonwood Development Corp.
Opinion Date: January 14, 2022
Judge: James C. Ho
Areas of Law: Constitutional Law
The Fifth Circuit affirmed the district court's dismissal, based on failure to state a claim, of the complaint alleging a 42 U.S.C. 1983 claim theorizing that defendants' refusal to return loaned funds violated the Takings Clause. The court applied Massó-Torrellas v. Mun. of Toa Alta, 845 F.3d 461, 468 (1st Cir. 2017), which held that when a municipality acts in a contractual or proprietary capacity, actions such as contract termination or detention of property under the contract that would constitute a simple breach of contract when a non-governmental entity is involved do not become a constitutional violation simply because the contracting party is a municipality. In this case, all of the misconduct in the complaint involves "commercial" and not "sovereign" acts, and thus any claim that Preston Hollow may have asserted should be a breach of contract claim rather than a taking claim.
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