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The Alpha Upsilon Chapter of Fraternity of Beta Theta PI, Inc. v. The Pennsylvania State University

United States District Court, M.D. Pennsylvania

November 12, 2019



          Matthew W. Brann, United States District Judge.

         I. BACKGROUND

         On June 21, 2019, Plaintiff, Alpha Upsilon Chapter of the Fraternity of Beta Theta Pi, Inc. (hereinafter “House Corp.”), filed a seven-count complaint against Defendants, The Pennsylvania State University (hereinafter “Penn State”), Damon Sims (“Sims”), Danny Shaha (“Shaha”), and Eric J. Barron (“Barron”). On August 26, 2019, Defendants filed a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction and to Rule 12(b)(6) for failure to state a claim.

         For the reasons that follow, I deny the motion in part and grant it in part. House Corp. will be provided leave to amend its complaint with respect to its due process claim (Count 1) and its third-party beneficiary claim (Count 7). House Corp.'s equal protection, negligence, fraud and deceit, civil conspiracy, and tortious interference claims (Counts 2, 3, 4, 5, and 6) are dismissed with prejudice.[1]House Corp.'s breach of the covenant of good faith and fair dealing claim (Count 5) survives Defendants' motion to dismiss.


         A. Motion to Dismiss Standard

         1. Federal Rule of Civil Procedure 12(b)(1) - Lack of Subject Matter Jurisdiction

         Under Federal Rule of Civil Procedure 12(b)(1), the Court dismisses a complaint if it lacks the “very power to hear the case.” Mortensen v. First Fed. Sav. & Loan Ass'n, 549 F.2d 884, 891 (3d Cir. 1977). “If a party asserts several objections and defenses to a complaint, including a F.R.C.P. 12(b)(1) defense for lack of subject matter jurisdiction, ‘the cases are legion stating that the district court should consider the Rule 12(b)(1) challenge first because if it must dismiss the complaint for lack of subject matter jurisdiction, the accompanying defenses and objections become moot and do not need to be determined by the judge.'”[2]

         Additionally, “[t]he procedure under a motion to dismiss for lack of subject matter jurisdiction is quite different” from the familiar procedure under Rule 12(b)(6).[3] “At the outset we must emphasize a crucial distinction, often overlooked, between 12(b)(1) motions that attack the complaint on its face and 12(b)(1) motions that attack the existence of subject matter jurisdiction in fact, quite apart from any pleadings.”[4] “The facial attack does offer similar safeguards to the plaintiff: the court must consider the allegations of the complaint as true.”[5]“The factual attack, however, differs greatly, for here the trial court may proceed as it never could under 12(b)(6) or Fed.R.Civ.P. 56.”[6] “Because at issue in a factual 12(b)(1) motion is the trial court's jurisdiction (its very power to hear the case) there is substantial authority that the trial court is free to weigh the evidence and satisfy itself as to the existence of its power to hear the case.”[7] “In short, no presumptive truthfulness attaches to plaintiff's allegations, and the existence of disputed material facts will not preclude the trial court from evaluating for itself the merits of jurisdictional claims.”[8] “Moreover, the plaintiff will have the burden of proof that jurisdiction does in fact exist.”[9]

         2. Federal Rule of Civil Procedure 12(b)(6) - Failure to State a Claim

         Under Federal Rule of Civil Procedure 12(b)(6), the Court dismisses a complaint, in whole or in part, if the plaintiff has failed to “state a claim upon which relief can be granted.” A motion to dismiss “tests the legal sufficiency of a pleading”[10] and “streamlines litigation by dispensing with needless discovery and factfinding.”[11] “Rule 12(b)(6) authorizes a court to dismiss a claim on the basis of a dispositive issue of law.”[12] This is true of any claim, “without regard to whether it is based on an outlandish legal theory or on a close but ultimately unavailing one.”[13]

         Following the Roberts Court's “civil procedure revival, ”[14] the landmark decisions of Bell Atlantic Corporation v. Twombly[15] and Ashcroft v. Iqbal[16] tightened the standard that district courts must apply to 12(b)(6) motions.[17] These cases “retired” the lenient “no-set-of-facts test” set forth in Conley v. Gibson and replaced it with a more exacting “plausibility” standard.[18]

         Accordingly, after Twombly and Iqbal, “[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'”[19] “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”[20] “Although the plausibility standard does not impose a probability requirement, it does require a pleading to show more than a sheer possibility that a defendant has acted unlawfully.”[21] Moreover, “[a]sking for plausible grounds . . . calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of [wrongdoing].”[22]

         The plausibility determination is “a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.”[23] No matter the context, however, “[w]here 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.'”[24]

         When disposing of a motion to dismiss, the Court “accept[s] as true all factual allegations in the complaint and draw[s] all inferences from the facts alleged in the light most favorable to [the plaintiff].”[25] However, “the tenet that a court must accept as true all of the allegations contained in the complaint is inapplicable to legal conclusions.”[26] “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.”[27]

         As a matter of procedure, the United States Court of Appeals for the Third Circuit has instructed that:

Under the pleading regime established by Twombly and Iqbal, a court reviewing the sufficiency of a complaint must take three steps. First, it must tak[e] note of the elements [the] plaintiff must plead to state a claim. Second, it should identify allegations that, because they are no more than conclusions, are not entitled to the assumption of truth. Finally, [w]hen there are well-pleaded factual allegations, [the] court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.[28]

         “Generally, consideration of a motion to dismiss under Rule 12(b)(6) is limited to consideration of the complaint itself.”[29] Typically, to consider materials outside the complaint, a motion to dismiss must be converted to a motion for summary judgment.[30] However, “[c]onsideration of materials outside the complaint is not entirely foreclosed on a 12(b)(6) motion.”[31] It is permissible to consider full text of documents partially quoted in the complaint.[32] It is also permissible to consider documents relied upon by plaintiff in drafting the complaint and integral to the complaint.[33] “However, before materials outside the record may become the basis for a dismissal, several conditions must be met.”[34] “For example, even if a document is ‘integral' to the complaint, it must be clear on the record that no dispute exists regarding the authenticity or accuracy of the document.”[35] It must also be clear that there exist no material disputed issues of fact regarding the relevance of the document.[36] In this matter, I find that these conditions have been met, and will consequently consider Defendants' attachments.

         B. Facts Alleged in the Complaint

         The relevant facts alleged in the Complaint, which I must accept as true for the purposes of this motion, are as follows.

         1. The Deed

         On or about October 29, 1928, Howard Walton Mitchell, an original organizer of House Corp, and the then-president of the Board of Trustees for The Pennsylvania State College, [37] executed a certain Deed transferring certain real property now known as 220 North Burrowes Road to House Corp. The current chapter house (the “Beta house”) was built upon this real property and has been used by House Corp. to serve as a fraternity house continuously from 1928 to the present, as a place where the unincorporated association of Penn State students and members of the national fraternity Beta Theta Pi (“Beta”) known as “the Chapter” live.[38]

         2. Penn State's Student Conduct Policies

         All Penn State students are governed by the Office of Student Conduct, which oversees the University's disciplinary process, as administered by the Office of Student Affairs of the Penn State University. Shaha is the Senior Director of the Office of Student Conduct at Penn State and is responsible for complying with the terms of the Code of Conduct and the Student Conduct Procedures, which are particular policies and agreements that govern Penn State student conduct.[39]

         Barron is the President of Penn State and is responsible for overseeing the programs, policies, and governing bodies that affect student conduct. This role includes implementing policies and procedures that ensure a safe environment for all students, and assuring compliance with the rules and regulations published by Penn State that govern such conduct.[40]

         The Office of Student Affairs of Penn State regulates the conduct of the Penn State student population, including students living in dormitories owned by Penn State and properties not owned by Penn State, such as fraternities, apartments, houses, and other alternative living arrangements. In other words, the Office of Student Affairs purports to exercise disciplinary control over all Penn State students regardless of the living arrangements for any particular student.[41]

         3. The Chapter's Relationship with Penn State

         As part of the Penn State community, the Chapter also participates in the governing body for fraternities known as the Inter Fraternity Council of the Pennsylvania State University (“IFC”). The IFC is a branch of Penn State that participates in setting and enforcing policies, procedures and regulations relating to Greek life. The IFC regulates the conduct of students living in fraternities. Penn State and the Chapter are signatories to the Conduct Process, an agreement that governs the relationship between the Chapter and Penn State.[42]

         Sims is the Vice President of Student Affairs at Penn State and is responsible for complying with the terms of the Conduct Process. He is also responsible for implementing programs and policies to ensure that all Penn State students are safe.[43]

         Penn State also acted as House Corp's landlord by collecting, administering and processing payment of rents and other fees for members of the Chapter; withholding registration for Penn State classes if such rent and fees were not paid; and charging a fee on behalf of Penn State for such services provided. Penn State, acting through the IFC, regularly conducted monitoring and approval of social events hosted by the Chapter to confirm compliance with the IFC Code of Conduct. In addition, by the terms of the Deed from Penn State to House Corp., Penn State purported to exercise supervision and/or control of the Beta house.[44]

         4. Timothy Piazza's Death, and Penn State's Ban of the Chapter

         On or about February 2, 2017, Timothy Piazza, a Penn State student who desired to join the chapter, died while at the Beta house.[45]

         After Mr. Piazza's death, Penn State officials, including Defendants, commenced an investigation without regard to the published procedures of the IFC and/or Office of Student Affairs. Penn State, among other things, conducted interviews directly with the local police department, reviewed grand jury information and interviewed grand jury witnesses without notice to House Corp. or the Chapter. House Corp. has repeatedly been denied access to a video recording which was confiscated from the Beta house showing the events of the evening of February 2, 2017.[46]

         On February 16, 2017, Penn State issued a press release stating that its Office of Student Conduct was conducting an inquiry into Mr. Piazza's death, “focusing on issues related to the University's Code of Student Conduct and behavioral expectations for the fraternities the University recognizes.” Penn State stated that based “on information gained through its inquiry thus far, the University has decided to withdraw immediately recognition of Beta Theta Pi fraternity. This revocation will remain in effect no less than five years and may be made permanent upon completion of the criminal and University investigations now underway.” Penn State also announced “additional measures impacting all Interfraternity Council chapters recognized by Penn State at University Park.”[47]

         On March 30, 2017, Penn State released a second press release announcing that it was permanently banning the Chapter from Penn State, and that the Chapter had no right to appeal this decision. Penn State stated that as its “student conduct investigation of the Beta Theta Pi fraternity continues, more disturbing facts have emerged, including a persistent pattern of serious alcohol abuse, hazing, and the use and sale of illicit drugs. The University has decided to permanently revoke recognition of Beta Theta Pi banning it from ever returning as a chapter at Penn State. This extraordinary action occurs in the context of a continuing criminal investigation into the death of Penn State sophomore Timothy Piazza.”[48]

         Penn State made the decision to permanently ban the Chapter from Penn State without following any of the published procedures and/or guidelines of the Office of Student Affairs and/or the IFC. As a direct result, House Corp. was forced to vacate the Beta house and House Corp. was cut off from all sources of income and/or ability to function as owner of the Beta house.[49] Further, Penn State made its announcement that it was permanently banning the Chapter without giving the Chapter or House Corp. any opportunity to state their respective positions in relation to Penn State's investigation. Penn State did not permit either the Chapter or House Corp. to review the information upon which Penn State allegedly based its decision-including, among other things, the video of February 2, 2017 (to which Penn State was granted access), witness statements, and other information which Penn State indicated that it received.[50]

         In previous situations, Sims and Penn State had recognized that an investigative and deliberative process was critical and needed to be relied upon to make decisions. Per Penn State's own guidelines and policies, a detailed report by the Office of Student Conduct and a hearing with the leadership of a fraternity charged with a violation must occur. Fraternities are private associations existing on private property and are governed by the IFC, which is associated with Penn State.[51]

         In purporting to permanently ban the Chapter from conducting business and operating as a Beta Theta Pi chapter, Penn State was attempting to surreptitiously trigger a deed provision purporting to grant Penn State the option of purchasing the valuable real estate owned by House Corp. if the property is not utilized as a Beta Theta Pi Chapter House at below-market rates, in order to convert such real estate for its own purposes. On August 28, 2018, Penn State provided notice of their intent to exercise these alleged property rights based upon their assertion that the property is no longer being used as a Chapter or fraternity house.[52]

         C. Analysis

         1. The Remedies House Corp. Seeks for Alleged Violations of the Pennsylvania Constitution

         There is no private cause of action for damages under the Pennsylvania Constitution. See Pocono Mountain Charter Sch. v. Pocono Mountain Sch. Dist., 442 Fed.Appx. 681, 687 (3d Cir. 2011). The Court therefore dismisses House Corp.'s claims for damages for alleged violations of the Pennsylvania Constitution.[53] House Corp.'s claims for declaratory relief for those alleged violations[54] remain intact. Id. at 688 (holding that “equitable remedies” such as “declaratory relief” were available under the Pennsylvania Constitution).

         2. Whether Statutes of Limitations Bar House Corp.'s Claims

         House Corp.'s alleged claims for breach of contractual duty of good faith and fair dealing and breach of contract under a third-party beneficiary theory each have a four-year statute of limitations.[55] House Corp.'s other claims (its constitutional claims, negligence claim, and tortious interference claim) are all subject to a two-year statute of limitations.[56] The parties dispute when the non-contract claims accrued. Defendants argue these claims accrued on March 30, 2017, when Penn State issued its second press release and banned the Chapter.[57]House Corp. argues the other claims accrued on August 28, 2018, when Penn State tried to exercise its right to purchase the Beta house pursuant to the Deed provision.[58]

         “Federal law governs a cause of action's accrual date. Under federal law, a cause of action accrues, and the statute of limitations begins to run, when the plaintiff knew or should have known of the injury upon which its action is based. The determination of the time at which a claim accrues is an objective inquiry; we ask not what the plaintiff actually knew but what a reasonable person should have known. As a general matter, a cause of action accrues at the time of the last event necessary to complete the tort, usually at the time the plaintiff suffers an injury. The cause of action accrues even though the full extent of the injury is not then known or predictable. Were it otherwise, the statute would begin to run only after a plaintiff became satisfied that he had been harmed enough, placing the supposed statute of repose in the sole hands of the party seeking relief.” Kach v. Hose, 589 F.3d 626, 634 (3d Cir. 2009) (internal citations and quotations omitted).

         I analyze below the accrual dates of House Corp.'s various non-contract claims. I keep in mind the standards that the Third Circuit laid down in Kach.

         a. Accrual of House Corp.'s Due Process Claim

         House Corp. argues that Defendants violated its substantive and procedural due process rights by depriving it of its property interest in the Beta house and its liberty interest in its reputation.[59] Per the Complaint, this deprivation happened when Defendants exercised their Deed right on August 28, 2018. So the two-year statute of limitations does not bar House Corp.'s due process claim.

         b. Accrual of House Corp.'s Equal Protection Claim

         House Corp. argues that Defendants denied it equal protection by “subjecting the House Corp. to disparate treatment.”[60] But the only “disparate treatment” to which House Corp. points is Penn State's ban of the Chapter.[61] The two-year statute of limitations thus bars House Corp.'s equal protection claim. The Court dismisses this claim without leave to amend.

         c. Accrual of House Corp.'s Negligence Claim

         House Corp. argues that Penn State's “revocation of the Chapter's recognition” injured House Corp. by “cut[ting it] off from all sources of income and/or ability to function as the owner of the Beta house.”[62] This claim therefore accrued when Penn State banned the Chapter. The two-year statute of limitations bars House Corp.'s negligence claim. The Court dismisses this claim without leave to amend.

         d. Accrual of House Corp.'s Tortious Interference Claim

         The sections of the Complaint describing House Corp.'s tortious interference claim don't mention Penn State's exercising its Deed right at all. House Corp. premises this claim on “Defendants' unilateral, arbitrary and capricious ban of the Chapter.”[63] This claim therefore accrued when Penn State banned the Chapter. The two-year statute of limitations bars House Corp.'s tortious interference claim. The Court dismisses this claim without leave to amend.

         e. The Continuing Violations Doctrine

         The “continuing violations doctrine” could give House Corp.'s equal protection, negligence and tortious interference claims a chance to survive their facial violation of the two-year statutes of limitations. This doctrine tolls a statute of limitations period when a defendant's conduct (here, the ban of the Chapter) “is part of a continuing practice.” Cowell v. Palmer Twp., 263 F.3d 286, 292 (3d Cir. 2001). In deciding whether to apply this doctrine, “courts should consider at least [two] factors: (1) subject matter-whether the violations constitute the same type of discrimination, tending to connect them in a continuing violation; [and] (2) frequency-whether the acts are recurring or more in the nature of isolated incidents.”[64]

         The continuing violations doctrine does not apply here, as House Corp. does not satisfy either of the above factors. As for subject matter, Penn State deciding to revoke its recognition of a fraternity chapter is sufficiently different from Penn State deciding to exercise its rights to obtain property. It does not “constitute the same type of discrimination.” See Cowell, 263 F.3d at 294 (acts that each constituted “an independent violation of [plaintiff's] substantive due process rights and therefore [were] individually actionable” were sufficiently different in subject matter).[65]

         My analysis on frequency in part follows the same road. Penn State deciding to exercise its rights to obtain property was not an “act[] of substantially similar nature to” Penn State's revocation of its recognition of the Chapter. SeeCowell, 267 F.3d at 295 (act that constituted “a different due process claim” was not “substantially similar”). Further, Penn State's exercising of Deed rights happened about seventeen months after the revocation. The Third Circuit has held that, even if a defendant's acts had the same subject matter, “[f]our instances within the context of four years does not rise to a level of recurrence anticipated by the continuing violations ...

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