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Granahan v. Borough of Pennsburg

United States District Court, E.D. Pennsylvania
Aug 4, 2004
Civil Action No. 03-cv-719 (E.D. Pa. Aug. 4, 2004)

Summary

finding no equal protection violation where plaintiff admitted no knowledge of disparate treatment of those similarly situated

Summary of this case from Windsor Jewels of Pennsylvania, Inc. v. Bristol Township

Opinion

Civil Action No. 03-cv-719.

August 4, 2004


MEMORANDUM


I. INTRODUCTION

Plaintiffs John S. Granahan. Jr., Evelyn Granahan and Quaker Homes, Inc. filed a complaint against defendants the Borough of Pennsburg, the Borough Council of the Borough of Pennsburg, Diane L. Stevens, individually and in her capacity as President, Ethel G. Ritchey, individually and in her capacity as Vice President, John Kevin, individually and in his capacity as member of Borough Council, Phyllis Bittenbender, individually and in her capacity as member of Borough Council, Kenneth E. Bonser, individually and in his capacity as member of Borough Council, Scott Seip, individually and in his capacity as member of Borough Council, Michelle Drumheller, individually and in her capacity as member of Borough Council and Czop/Spector, Inc., Borough Engineer for the Borough of Pennsburg. Plaintiffs seek compensatory damages, punitive damages, equitable relief, attorneys' fees and any other relief arising from defendants' alleged violations of substantive due process, procedural due process and equal protection under the Fourteenth Amendment and 42 U.S.C. Section 1983. The remaining three counts of plaintiffs' six-count complaint are supplemental state law claims, which plaintiffs label constructive trust, breach of contract and mandamus.

Presently before me is defendants' motion for summary judgment, plaintiffs' brief in opposition to summary judgment and defendants' response thereto. For the reasons stated below, I will grant defendants' motion for summary judgment with respect to plaintiffs' federal claims and will dismiss plaintiffs' state law claims without prejudice to their filing in state court.

II. BACKGROUND

Plaintiff John S. Granahan, Jr. is the sole shareholder of plaintiff Quaker Homes, Inc., a residential builder and developer. In 1993, plaintiffs' final plan for a residential subdivision named Montgomery Meadows was approved by defendant Borough of Pennsburg. Montgomery Meadows was to be constructed in three phases, each approved separately. Phase I construction began in October 1993. All final improvements for Phase I were completed in 1997, and the last home in Phase I was sold in 1997.

All of plaintiffs' claims relate to Phase II construction and improvements. In November 1997, at or about the same time that Phase II construction began, plaintiffs and defendant Borough of Pennsburg entered into a Subdivision Development Improvement and Maintenance Agreement and a Financial Security Agreement. Together, these agreements provided for the completion by plaintiffs of certain improvements to Phase II, such as landscaping, streets, walkways, driveways and related drainage facilities. The agreements required the posting of financial security by plaintiffs and acknowledged that defendant Borough of Pennsburg agreed to accept as financial security from plaintiffs an irrevocable straight letter of credit through National Penn Bank in the amount of $505,100.

Paragraph 7 of the Financial Security Agreement provides, in relevant part:

[t]he improvements guaranteed hereby shall be completed in accordance with the approved Final Plan . . . within one (1) year from the date designated on the Final Plan for completion of such improvements, but if no such date has been established, then within one (1) year of the date of this Financial Security Agreement. In the event the Developer and Owner require more than one (1) year from such date to complete the required improvements, this Agreement shall remain in full force and effect during such additional period as the Developer and Owner shall require to complete the required improvements. In that event, the amount of the financial security shall be increased by Developer and Owner by an additional ten percent (10%) for each one (1) year period, or part thereof, beyond the first anniversary date of the initial posting of the financial security, or to an amount not exceeding one hundred and ten percent (110%) of the cost of completing the required improvements, as re-established by the Developer and Owner, not more than thirty (30) days prior to the expiration date of the initial one (1) year perioud, in accordance with the procedure set forth in paragraph eleven (11) of the Subdivision Improvement and Maintenance Agreement. Failure of the Developer and Owner to timely reestablish, supplement or tender the required financial security, as herein above provided, shall constitute a default of the Agreement and the Subdivision Development Improvement and Maintenance Agreement, and the Borough is authorized to cure the Developer and Owner's default by acting on the Letter of Credit in accordance with the provisions of this Agreement. The Borough shall not require the consent or approval of the Developer and Owner, at the time of such withdrawal, having issued their consent herein, for the application for release of the proceeds from the Bank.

Though Phase II home construction concluded in 2000, the required improvements were still not complete by 2002. On July 19, 2002, Charles D. Garner, Jr., Pennsburg Borough Solicitor, sent a letter to plaintiff John Granahan which stated in part:

[p]ursuant to Paragraph 7 of the Financial Security Agreement . . . the Borough is requesting that you reestablish/supplement the financial security as more than one (1) year has lapsed and the public improvements have not yet been completed. . . . Failure to comply with the terms of the Agreement will result in a default.

Plaintiff John Granahan received the July 19 letter, but he did not respond. On September 5, 2002, defendant Borough of Pennsburg declared plaintiffs in default under the Improvement and Maintenance Agreement and drew down plaintiffs' letter of credit in the amount of $136,698.15. Defendants did not give plaintiffs specific notice that plaintiffs' security would be taken and plaintiffs therefore had no notice that the funds were taken until September 9, 2002. On September 9, 2002, defendant Borough of Pennsburg through defendant Czop/Spector, Inc. ordered plaintiffs to stop working on the required improvements for Phase II.

In their complaint, plaintiffs allege that in drawing down plaintiffs' letter of credit and issuing the stop work order, defendants were motivated by bias, bad faith and improper motives to destroy plaintiffs' property interests. Plaintiffs allege that defendants Stevens and Richey encouraged residents of Phase II to complain about plaintiffs at Borough Council meetings and that defendant Richey stated that the Council was "going to shut Granahan down." Defendants Stevens and Richey deny making or hearing from the other members of Borough Council any statements regarding "getting" plaintiffs or putting plaintiffs out of business.

Plaintiffs further allege that defendants members of Borough Council made derogatory statements regarding plaintiffs' professionalism and quality, stated that they wanted to prevent plaintiff John Granahan from building in Pennsburg Borough and hired defendant CZOP/Specter, Inc. to "bring Mr. Granahan in line." Defendant Richey knew Mr. Czop of defendant CZOP/Specter, Inc. through political affiliations, and plaintiffs allege that defendant CZOP/Spector, Inc. subjected plaintiffs to a level of scrutiny which was arbitrary and higher than the scrutiny applied to other developers. However, in deposition testimony, plaintiff John Granahan admitted that he is unaware of any specific instance in which other developers were treated differently in Pennsburg Borough. Plaintiffs suggest that a possible motive for defendants' behavior was that plaintiffs had recently fired defendant Richey's husband, a concrete worker.

III. STANDARD OF REVIEW

Under Rule 56(c) of the Federal Rules of Civil Procedure, the moving party is entitled to summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact." Fed.R.Civ.P. 56(c).See also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact. See Celotex, 477 U.S. at 323. I must view the facts in the light most favorable to the non-moving party, and the nonmoving party is further entitled to all reasonable inferences that may be drawn from those facts.See Anderson, 477 U.S. at 248. However, the non-moving party must raise "more than a mere scintilla of evidence in its favor" in order to overcome a summary judgment motion, and cannot survive by relying on unsupported assertions, conclusory allegations, or mere suspicions. Williams v. Borough of West Chester, 891 F.2d 458, 460 (3d Cir. 1989). The nonmoving party still must establish the existence of each element of its case. See Celotex, 477 U.S. at 323.

IV. DISCUSSION

Defendants move for summary judgment based on the defense of qualified immunity. Under the qualified immunity analysis, I must ask: 1) whether plaintiffs successfully alleged a deprivation of a constitutional right; and 2) whether that right was clearly established at the time of the events in question. County of Sacramento v. Lewis, 523 U.S. 833, 841-42 n. 5 (1998). If I answer either of these questions in the negative, defendants are entitled to qualified immunity. Id. Plaintiffs have not successfully alleged deprivation of a constitutional right in each of their constitutional claims; therefore, defendants are entitled to qualified immunity, and I will grant defendants' motion for summary judgment with respect to the federal counts in plaintiffs' complaint.

A. The Procedural Due Process Claim

Plaintiffs' letter of credit in this case is not a property interest protectable by the due process clause, nor is the right to complete work on the improvements in Phase II. "[A] plaintiff must establish as a threshold matter that he has a protected property interest to which the Fourteenth Amendment's due process protection applies." Woodwind Estates, Ltd. v. Gretkowski, 205 F.3d 118, 123 (3d Cir. 2000). "[I]t is beyond dispute today that a contract with a state entity can give rise to a property right protected under the Fourteenth Amendment." Linan-Faye Const. Co., Inc. v. Hous. Auth. of City of Camden, 49 F.3d 915, 931 (3d Cir. 1995), citing Unger v. National Residents Matching Program, 928 F.2d 1392, 1397 (3d Cir. 1991). However, the Supreme Court has never held that every state contract gives rise to such a property right, and relevant Supreme Court and Courts of Appeals decisions recognize just two general types of contract rights as property protected under the Fourteenth Amendment: 1) where the contract confers a protected status; or 2) where the contract itself includes a provision that the state can terminate the contract only for cause. Linan-Faye Const. Co., Inc., 49 F.3d at 932, citing Unger, 928 F.2d at 1399. See, e.g., Goldberg v. Kelly, 397 U.S. 254 (1970) (recognizing entitlement to welfare benefits is property protected by due process); Board of Regents v. Roth, 408 U.S. 564 (1972) (recognizing tenured status in public employment is property protected by due process); Perry v. Sindermann, 408 U.S. 93 (1972) (recognizing tenured status in public employment is property protected by due process); Cleveland Bd. of Educ. v. Loudermill, 470 U.S. 532 (recognizing a protected property right created by a for-cause termination provision). The Court of Appeals for the Third Circuit has warned against expanding the applicability of the Fourteenth Amendment to other contractual rights, stating:

courts have observed that if every breach of contract by someone acting under color of state law constituted a deprivation of property for procedural due process purposes, the federal courts would be called upon to pass judgment on the procedural fairness of the processing of a myriad of contract claims against public entities. We agree that such a whole sale federalization of state public contract law seems far afield from the great purposes of the due process clause.
Reich v. Beharry, 883 F.2d 239, 242 (3d Cir. 1989) (citations omitted).

The letter of credit or the position as developer did not confer protected status on plaintiffs, nor was there a provision in the agreements stating that the contract between the parties was terminable only for cause. Because neither of these general types of contract rights applies in this case, plaintiffs' procedural due process claim must fail. Like courts before me, I will not "constitutionalize contractual interests that are not associated with any cognizable status of the claimant beyond its temporary role as a government contractor."S D Maint. Co. v. Goldin, 844 F.2d 962, 965-67 (2d Cir. 1988), cited in Unger, 928 F.2d at 1399.

The relevant facts here are analogous to those in Myers v. Penn Township Board of Commissioners, 50 F. Supp. 2d 385, 390 (M.D. Pa. 1999), where plaintiff, a developer, supplied a letter of credit to secure construction of improvements on a residential housing development, and defendant, the township, drew down the letter of credit without giving plaintiff a predeprivation notice and opportunity to be heard before the drawdown occurred. Id. at 387-88. The Court held that plaintiff's procedural due process claims lacked substance because defendants were merely enforcing a contractual right by which plaintiffs had explicitly agreed that defendants could demand payment on a letter of credit, and any property interest the plaintiff had in the money in security arose from contract. Id. at 390.

The Court in Myers additionally held that even if due process did apply to the letter of credit plaintiff would have no claim. I reach the same conclusion in this case. By its very terms, the letter of credit is a waiver of any due process right to notice before the drawdown. Id. at 391. The written agreements here expressly state that defendants do not require the consent or approval of plaintiffs to execute a drawdown. As the Court stated in Myers:

[a] letter of credit is not an extraordinary document in the business setting. It is used routinely in commercial transactions. The plaintiff is a real estate developer. He cannot now be heard to complain that the funds were taken without notice when the Township did what he explicitly agreed that it could do.
Id. Furthermore, no agreement between the parties here bestows on plaintiffs the exclusive and unconditional right to make the required improvements. Therefore, there is nothing to prevent defendants from ordering plaintiffs to stop working on the improvements in the event of plaintiffs' default.

As in Myers, instead of a federal cause of action, plaintiffs' remedy to vindicate their rights here is to pursue their state law right to contest defendants' declaration of plaintiffs' default and defendants' subsequent actions under the contract. See id. at 389 (asserting that plaintiff has the right under 53 P.S. §§ 10510-10511 to contest the drawdown).

B. The Substantive Due Process Claim

Plaintiffs assert that the Fourteenth Amendment's substantive due process protection applies because defendants' actions impacted their property interests in their account, together with their right to operate a business free from state interference. I disagree. Defendants simply exercised their right under the letter of credit to draw down the proper amount and, after finding plaintiffs in default, asked plaintiffs to stop work on Phase II. Defendants did not take action outside of the parameters set forth in the agreements for the purpose of negatively impacting plaintiffs' business. Therefore, the key issue in this case is a contractual dispute. Defendants did not violate plaintiffs' substantive due process in exercising what defendants believed to be their contractual rights.

Indeed, "[e]xecutive action violates substantive due process only when it shocks the conscience." United Artists Theatre Circuit, Inc. v. Township of Warrington, 316 F.3d 392, 399-400 (3d Cir. 2003). The "shocks the conscience" standard encompasses "only the most egregious official conduct." Id. at 400, citing Lewis, 523 U.S. at 846. See also Rochin v. California, 342 U.S. 165, 172-73 (1952) (holding that the "shocks the conscience" standard encompasses those acts which "violate the decencies of civilized conduct"); Breithaupt v. Abram, 352 U.S. 432, 435 (1957) (holding that the "shocks the conscience" standard encompasses those acts which are "so `brutal' and `offensive' that it [does] not comport with traditional ideas of fair play and decency").

Defendants' desire to complete the required improvements to Phase II constitutes a rational basis for their actions. Therefore, regardless of plaintiffs' allegations of personal animus between plaintiffs and certain defendants, defendants did not violate plaintiffs' substantive due process rights in this case. In their complaint, plaintiffs allege that defendants acted with improper motive. Mere improper motives, including personal animus, are not consciousshocking. See Corneal v. Jackson Township, 94 Fed. Appx. 76, 78 (3d Cir. 2004) (holding that calling plaintiff "that trouble-making yuppie from over the mountain" evidenced personal animus, but not conscious-shocking behavior); American Marine Rail NJ, LLC v. City of Bayonne, 289 F. Supp. 2d 569, 584 (D.N.J. 2003) ("[I]mproper motives, particularly personal animus toward a plaintiff, do not shock the conscience for constitutional purposes.").

C. The Equal Protection Claim

In Count III of their complaint, plaintiffs allege that defendants intentionally treated plaintiffs differently from others similarly situated, without rational basis for such difference in treatment. A "class of one" may bring an equal protection claim "where the plaintiff alleges that [it] has been intentionally treated differently from others similarly situated and that there is no rational basis for the difference in treatment." Village of Willowbrook v. Olech, 528 U.S. 562, 564 (2000). However, "to survive summary judgment plaintiff must do more than merely state an equal protection claim; it must produce evidence to support its claims of disparate treatment." American Fabricare v. Township of Falls, 101 F. Supp. 2d 301, 309 n. 14 (E.D. Pa. 2000).

In his deposition testimony, plaintiff John Granahan admitted that he had no knowledge that other developers were ever treated differently by the Borough of Pennsburg. Because plaintiffs make this admission and do not produce any evidence indicating that defendants treated other developers differently, plaintiffs' equal protection claim must fail, as it relies simply on unsupported assertions, conclusory allegations, or mere suspicions. Williams, 891 F.2d at 460.

D. The State Law Claims

Because I grant summary judgment for defendants with respect to plaintiffs' federal claims, I will dismiss plaintiffs' supplemental state law claims without prejudice to their filing in state court. See 28 U.S.C. § 1367(c)(3).

An appropriate order follows.

ORDER

AND NOW, this day of August 2004, after considering defendants' motion for summary judgment, plaintiffs' brief in opposition to summary judgment and defendants' response thereto, it is ORDERED that defendants' motion is GRANTED. Judgment is entered in favor of defendants with respect to plaintiffs' federal claims. Plaintiffs' state law claims are dismissed without prejudice to their filing in state court.


Summaries of

Granahan v. Borough of Pennsburg

United States District Court, E.D. Pennsylvania
Aug 4, 2004
Civil Action No. 03-cv-719 (E.D. Pa. Aug. 4, 2004)

finding no equal protection violation where plaintiff admitted no knowledge of disparate treatment of those similarly situated

Summary of this case from Windsor Jewels of Pennsylvania, Inc. v. Bristol Township
Case details for

Granahan v. Borough of Pennsburg

Case Details

Full title:JOHN S. GRANAHAN, JR., EVELYN GRANAHAN, and QUAKER HOMES, INC. v. THE…

Court:United States District Court, E.D. Pennsylvania

Date published: Aug 4, 2004

Citations

Civil Action No. 03-cv-719 (E.D. Pa. Aug. 4, 2004)

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