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Southersby Development Corporation v. Township of South Park

United States District Court, W.D. Pennsylvania

April 17, 2015

TOWNSHIP OF SOUTH PARK, MICHAEL G. WARGO, in his individual and official capacity, HERBERT, ROWLAND & GRUBIC, INC., AND SCOTT SWANSINGER, Defendants.



I. Introduction

Presently before the Court are two Motions to Dismiss filed by Defendants Township of South Park ("the Township") and Michael Wargo ("Wargo") (collectively "Township Defendants"), (Docket No. 32), and Defendants Herbert, Rowland & Grubic, Inc. ("HRG") and Scott Swansinger's ("Swansinger") (collectively "HRG Defendants"), (Docket No. 36). The Township and HRG Defendants submitted briefs in support, (Docket Nos. 33, 42), and Plaintiff filed Responses and Briefs in opposition, (Docket Nos. 42-45). The HRG Defendants then filed a Reply. (Docket No. 48).

The Court has heard Argument from the parties, (Docket No. 52), and already dismissed Plaintiff's RICO claims by Memorandum Order, (Docket No. 59). The Motions otherwise are ripe for disposition.

II. Relevant Facts[1]

This matter involves a dispute between the real estate developer Plaintiff, the Township and its manager, Wargo, the engineering firm HRG, and its engineer-in-training, Swansinger. Plaintiff owns real property in the Township known as the Della Strada subdivision, which was purchased to be developed and then sold as individual lots for profit. (Docket No. 28 at ¶¶ 11-12). Plaintiff is developing Della Strada in two phases: Phase 1 and Phase 2. ( Id. at ¶ 11).

Plaintiff and the Township are parties to two agreements, the Subdivision Development Agreement ("SDA") and the Erosion Sedimentation Control and Storm Water Facilities Maintenance and Monitoring Agreement ("ECA"), both of which were negotiated with the assistance of counsel. ( Id. at ¶¶ 27, 37); (Jan. 12, 2015 Trans. at 6:6-7:1).[2] Paragraphs 19 and 24 of the SDA, Paragraph 5d of the ECA, and Township Ordinance 118.60.3 require Plaintiff to post a cash escrow with the Township. (Docket No. 28 at ¶ 29). The Township, as escrow agent, was to use the funds for payment of inspection services rendered by the Township Engineer, Swansinger. ( Id. at ¶¶ 18, 27). Neither Swansinger nor HRG are parties to either agreement, but HRG represents the Township, and Swansinger is designated as the Township Engineer. ( Id. at ¶ 18).

As this Court has previously written, the central disputes here include fee disputes for alleged excess billing by HRG and the Township Solicitor, Paul Gitnik, Esq. ("Gitnik"), and conflicting interpretations of Pennsylvania's Municipal Planning Code. (Docket No. 59 at 9). Plaintiff contends that Swansinger falsified digital photographs to support his fraudulent and/or excess bills. (Docket No. 28 at ¶ 224). In turn, it claims that the Township Defendants approved the fraudulent invoices and facilitated payment from the escrow account over its objections. ( Id. at ¶ 229). Further, Plaintiff alleges that the Township Defendants actively concealed said fraudulent scheme by withholding the identified invoices despite Plaintiff's demands for same and creating false escrow activity statements. ( Id. at ¶¶ 230-31).

Plaintiff's remaining claims include violations of its substantive due process, Equal Protection, and First Amendment rights under the Pennsylvania and United States Constitutions. (Docket No. 28). It also alleges state fraud, civil conspiracy, breach of contract, negligence, unjust enrichment, breach of fiduciary duty, and aiding and abetting claims. ( Id. ). The HRG Defendants moved to dismiss all of the federal question claims and request that this Court remand the state law claims to state court. (Docket Nos. 36, 37, 48). The Township Defendants seek dismissal of all claims other than the breach of contract claims. (Docket Nos. 32, 33). For the reasons discussed below, the Motions are denied, in part, and granted, in part.

III. Standard of Review

A motion to dismiss pursuant to FED.R.CIV.P. 12(b)(6) challenges the legal sufficiency of a complaint. The Supreme Court of the United States has held that "a plaintiff's obligation to provide the grounds' of his entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)) (alterations in original).

The Court must accept as true all well-pleaded facts and allegations and must draw all reasonable inferences therefrom in favor of the plaintiff. See Iqbal, 556 U.S. at 678-79; Twombly, 550 U.S. at 555. As the Supreme Court made clear in Twombly, however, the "factual allegations must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555. The Supreme Court has subsequently broadened the scope of this requirement, stating that "only a complaint that states a plausible claim for relief survives a motion to dismiss." Iqbal, 556 U.S. at 679 (citing Twombly, 550 U.S. at 556). This standard requires showing "more than a sheer possibility that a defendant has acted unlawfully." Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 556). "Where a complaint pleads facts that are merely consistent with' a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief." Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 557). "This plausibility' determination will be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.'" Fowler v. UPMC Shadyside, 578 F.3d 203, 211 (3d Cir. 2009) (quoting Iqbal, 556 U.S. at 679).

After Iqbal, the United States Court of Appeals for the Third Circuit explained that a district court must conduct the following analysis to determine the sufficiency of a complaint:

First, the court must "tak[e] note of the elements a plaintiff must plead to state a claim." Second, the court should identify allegations that, "because they are no more than conclusions, are not entitled to the assumption of truth." Finally, "where there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement for relief."

Santiago v. Warminster Twp., 629 F.3d 121, 130 (3d Cir. 2010) (quoting Iqbal, 556 U.S. at 675, 679); see also Burtch v. Milberg Factors, Inc., 662 F.3d 212, 221 (3d Cir. 2011), cert. denied, 132 S.Ct. 1861 (Apr. 2, 2012); Malleus v. George, 641 F.3d 560, 563 (3d Cir. 2011).

Twombly and Iqbal have not changed the other pleading standards for a motion to dismiss pursuant to FED.R.CIV.P. 12(b)(6), and the requirements of FED.R.CIV.P. 8 must still be met. See Burtch, 662 F.3d at 220. Rule 8 requires a showing, rather than a blanket assertion, of entitlement to relief, and "contemplates the statement of circumstances, occurrences, and events in support of the claim presented and does not authorize a pleader's bare averment that he wants relief and is entitled to it." Twombly, 550 U.S. at 555 n.3 (internal alterations, citations, and quotations omitted). The Supreme Court has explained that a complaint need not be "a model of the careful drafter's art" or "pin plaintiffs' claim for relief to a precise legal theory" so long as it states "a plausible short and plain' statement of the plaintiff's claim." Skinner v. Switzer, 562 U.S. 521 (2011); see also Matrixx Initiatives, Inc. v. Siracusano, 131 S.Ct. 1309, 1322 n.12 (2011) (emphasizing that "to survive a motion to dismiss, respondents need only allege enough facts to state a claim to relief that is plausible on its face'") (quoting Twombly, 550 U.S. at 570)). With respect to allegations of fraud, "a party must state with particularity the circumstances constituting fraud or mistake." Fed.R.Civ.P. 9(b).

In deciding a Rule 12(b)(6) motion to dismiss, the Court generally may consider "only the allegations in the complaint, exhibits attached to the complaint, matters of public record, and documents that form the basis of a claim." Lum v. Bank of Am., 361 F.3d 217, 222 n.3 (3d Cir. 2004). A court may, however, "look beyond the complaint to matters of public record, including court files and records, decisions of government agencies and administrative bodies, and documents referenced in the complaint or essential to a plaintiff's claim which are attached to either the [c]omplaint or the defendant's motion." Spence v. Brownsville Area Sch. Dist., 2008 WL 2779079, at *3 (W.D. Pa. July 15, 2008) (citing Pension Benefit Guar. Corp. v. White Consol. Indus., 998 F.2d 1192, 1196 (3d Cir. 1993)).


A. Constitutional Claims

Plaintiff sets forth claims pursuant to 42 U.S.C. § 1983 for alleged violations of: substantive due process; equal protection of the laws; and retaliation for invoking protections secured by the First Amendment. (Docket No. 28). It also brings parallel claims under the Pennsylvania Constitution. ( Id. ). The HRG and Township Defendants move to dismiss all of the constitutional claims. (Docket Nos. 32, 33, 36, 37).

Section 1983 provides that "every person who, under color of [state law] subjects, or causes to be subjected, any... person within the jurisdiction [of the United States] to the deprivation of any rights... secured by the Constitution and laws, shall be liable to the party injured in an action at law [or] suit in equity." 42 U.S.C. § 1983. In other words, section 1983 does not create substantive rights but provides a vehicle by which violation of rights created by the Constitution or federal law may be vindicated. Baker v. McCollan, 443 U.S. 137, 144 n. 3 (1979); Morse v. Lower Merion School Dist., 132 F.3d 902, 907 (3d Cir. 1997). To state a claim under 42 U.S.C. § 1983, a plaintiff must meet two threshold requirements: 1) the alleged misconduct was committed by a person acting under color of state law; and 2) the defendants' conduct deprived the plaintiff of rights, privileges, or immunities secured by the Constitution or laws of the United States. Parratt v. Taylor, 451 U.S. 527, 535 (1981), overruled in part on other grounds by Daniels v. Williams, 474 U.S. 327, 330-31 (1986).

1. Whether the HRG Defendants Are State Actors

As a threshold matter, the Court addresses the HRG Defendants' argument that HRG, as a private corporate entity, and Swansinger, as a private individual, are not state actors and did not act under color of state law. (Docket No. 37 at 21-22). The Amended Complaint avers that "[a]t all times relevant hereto, the actions and conduct of Wargo, HRG and Swansinger were under the color of state law." (Docket No. 28 at ¶ 211). Further, Plaintiff claims that "through a formal procedure or working relationship with the Township [Defendants], " the HRG Defendants "were draped with the power of the state." (Docket No. 45 at 16). It contends that the HRG Defendants "acted in concert with, and took orders directly from, the Township." (Docket No. 45 at 15-18) (citing Docket No. 44 at ¶¶ 10, 47-49).

Accepting Plaintiff's allegations as true and drawing all reasonable inferences in the light most favorable to the plaintiff, as this Court must, it is plausible that the HRG Defendants acted under color of state law. At a minimum, Plaintiff has alleged that HRG and its employee, Swansinger, as the designated Township Engineer, conspired with the Township to excessively bill for their engineering services. ( See Docket No. 28 at ¶¶ 64, 89, 90, 114, 116, 117). In furtherance of the alleged conspiracy, Plaintiff avers that Swansinger falsified digital photographs to support HRG's bills, which were submitted to the Township. ( Id. at ¶¶ 134-38, 153-56). Further, Plaintiff contends that Wargo instructed HRG to provide full-time inspection services at the Della Strada subdivision and knowingly permitted HRG to submit the false and fraudulent invoices to the Township. ( Id. at ¶ 228). The Amended Complaint alleges that HRG and/or the Township intentionally made misrepresentations to Plaintiff with respect to these invoices, that Plaintiff objected to these invoices, and Plaintiff was subject to disparate treatment compared to other similarly situated developments in the Township. ( Id. at ¶ 157).

In this Court's estimation, taking Plaintiff's allegations as true, it is plausible that the HRG Defendants played a role, either directly or indirectly, in causing the alleged constitutional harms suffered by Plaintiff. Where a plaintiff has claimed that similar engineer defendants: "(1) prohibited Plaintiff from accessing the public water system, (2) intentionally and arbitrarily refused to undertake any actions in conformity with the Berks County Court of Common Pleas Consent Order, and (3) refused to start the necessary process with the PADEP in violation of the Consent Order, " such claims have survived a motion to dismiss. Perano v. Twp. of Tilden, 2010 WL 1462367, at *5 (E.D. Pa. Apr. 12, 2010) aff'd, 423 F.Appx. 234 (3d Cir. 2011). Another Court in this district denied a motion to dismiss an engineer defendant because "[t]he plaintiffs allege[d] that the Engineer defendant is a person acting under color of state law, who irrationally singled them out for disparate treatment, and conspired with the other defendants and Carnegie Borough to prevent them from occupying their home, resulting in a temporary loss of the use and enjoyment of their property, for which the plaintiffs suffered damages." Prosperi v. Twp. of Scott, 2006 WL 2583754, at *8-9 (W.D. Pa. Sept. 7, 2006) (J. Cercone) (internal docket citations omitted).

Accordingly, in light of this authority and the governing legal standard as to a motion to dismiss, the HRG Defendants' Motion to Dismiss is denied. Said Defendants can renew this argument at the summary judgment stage.[3]

2. Substantive Due Process

"To establish a substantive due process claim, a plaintiff must prove the particular interest at issue is protected by the... due process clause and the government's deprivation of that protected interest shocks the conscience." Chainey v. Street, 536 F.3d 200, 219 (3d Cir. 2008) (citing United Artists Theatre Circuit v. Twp. of Warrington, 316 F.3d 392, 400-02 (3d Cir. 2003)). The Court addresses the parties' arguments as to these requirements, in turn.

Defendants argue that Plaintiff has failed to allege the loss of a fundamental property right. (Docket No. 32 at 4); (Docket No. 36 at ¶ 51); (Docket No. 37 at 25-26). Plaintiff responds that the HRG Defendants "interrupted, interfered with, or impinged upon Plaintiff's property rights, " i.e. the real property it is seeking to develop in the Township. (Docket No. 44 at ¶ 57). Further, it argues that it does not need to show that the interest was terminated or that the development was rendered impossible. (Docket No. 43 at 11). The Court agrees.

As explained by the late Magistrate Judge Amy Reynolds Hay in prior litigation involving another of Plaintiff's development disputes, "[i]t is undisputed that the Plaintiff's ownership of real property satisfies the first element." Southersby Devel. Corp. v. Boro. of Jefferson Hills, et al., No. 09-208 Docket No. 32 (W.D. Pa. Apr. 20, 2010) (Am. Memo. Opn.) (citing DeBlasio v. Zoning Bd. of Adjustment for Twp. of W. Amwell, 53 F.3d 592, 600 (3d Cir. 1995) abrogated on other grounds by United Artists, 316 F.3d 392 (recognizing that "ownership is a property interest worthy of substantive due process protection"). Defendant's Motion to Dismiss is denied to the extent that Defendants argue that Plaintiff does not have a sufficient property interest. The Court now continues its analysis.

The Township Defendants further contend that Plaintiff has "failed to allege any facts to establish the egregious official conduct needed to meet the shocks the conscience' standard for a substantive due process claim." (Docket No. 33 at 12). Plaintiff avers that "[i]t is axiomatic that land use decisions fall within this standard when government action to restrict use is arbitrary and irrational.'" (Docket No. 43 at 12). As support, it argues that the Amended Complaint alleges corruption or self-dealing. ( Id. ).

The test to determine whether official conduct shocks the conscience is "not precise" and "varies depending on the factual context." Eichenlaub v. Township of Indiana, 385 F.3d 274, 285 (3d Cir. 2004) (quotations omitted). To this end, conduct such as self-dealing, corruption of government officials, intentional bias against an ethnic group, interference with constitutionally protected activities or other sufficiently egregious conduct has been held to constitute a violation of substantive due process. Id. However, such allegations must be supported by facts. Southersby v. Jefferson Hills, No. 09-208, Docket No. 32 at 7-9 (citing Eichenlaub, 385 F.2d at 286). "The point at which conduct becomes conscience-shocking for constitutional purposes is a question of law for a court to decide, not a question of fact amenable to resolution by a jury." Whittaker v. County of Lawrence, 674 F.Supp.2d 668, 698 (W.D. Pa. Dec. 7, 2009) (citations omitted); see also Cranberry Promenade, Inc. v. Cranberry Twp., 2011 U.S. Dist. LEXIS 149222, 71 (W.D. Pa. Dec. 29, 2011).[4]

In its 2009 case before Judge Hay, Plaintiff's substantive due process claim was dismissed at the motion to dismiss stage. Southersby v. Jefferson Hills, No. 09-208 Docket No. 32. While many of the paragraphs in the instant Amended Complaint contain substantially similar, if not identical, language, the Court distinguishes the two matters. Here, the specific factual allegations supporting the claimed fraud and self-dealing by Defendants arguably rise to the level of "conscience shocking." To this end, Plaintiff contends that it has been charged for services that were not performed by HRG and Swansinger. ( See, e.g. Docket No. 28 at ¶ 215). It supports this position with its expert report from bit-x-bit[5] showing that Swansinger altered the metadata in his digital photographs to conform said photographs with the dates and times of the alleged overcharged services on the disputed HRG invoices. ( Id. at ¶ 155). Certainly, Plaintiff's allegations that the Township knowingly approved said false invoices could shock the conscience. ( Id. at ¶¶ 228-31). If true, such inflated engineering bills would inure to the benefit of HRG Defendants. Moreover, Plaintiff's allegations of conspiracy between HRG and Township Defendants to intentionally inflate Plaintiff's bills as retaliation for its complaints may rise to the level of egregious behavior by government officials, their agents, and co-conspirators. See Cnty. of Sacramento v. Lewis, 523 U.S. 833, 846 (1998) (citations and quotations omitted) ("[T]he Due Process Clause was intended to prevent government officials "from abusing [their] power, or employing it as an instrument of oppression."). was the case in Cranberry Promenade, this matter is distinguishable from Whittaker. In Whittaker, the Court had the "benefit of a complete record which was developed in state proceedings arising from a taking of property after the defendants' exercise of eminent domain power." Cranberry Promenade, Inc. v. Cranberry Twp., 2010 WL 653915, at *5 (W.D. Pa. Feb. 22, 2010) (citing Whittaker ). No such record is present here. In fact, whether Defendants actually violated the Municipal Planning Code remains an open question, as on January 12, 2015, Plaintiff filed a land use appeal related to this development dispute in the Court of Common Pleas of Allegheny County. ( Southersby Devel. Corp. v. Twp. of S. Park, Docket No. SA-15-39). Based on this Court's research, said appeal remains pending.

While discovery may reveal that this is a "fairly run-of-the-mill dispute between a developer and local government officials, " Cranberry Promenade, 2011 U.S. Dist. LEXIS 149222, at *71 (citing Maple Properties, Inc. v. Twp. of Upper Providence, 151 F.Appx. 174, 179 (3d Cir. 2005)), the Court must accept Plaintiff's allegations as true at this juncture. Having done so and for the ...

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