THE PLAZA AT 835 WEST HAMILTON STREET LP v. ALLENTOWN NEIGHBORHOOD IMPROVEMENT ZONE DEVELOPMENT AUTHORITY et al
Filing
65
MEMORANDUM AND/OR OPINION. SIGNED BY CHIEF JUDGE LAWRENCE F. STENGEL ON 9/12/17. 9/12/17 ENTERED AND COPIES E-MAILED.(mbh, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
THE PLAZA AT 835 WEST
HAMILTON STREET LP
:
:
:
vs.
:
:
ALLENTOWN NEIGHBORHOOD
:
IMPROVEMENT ZONE
:
DEVELOPMENT AUTHORITY, et al. :
CIVIL ACTION
NO. 15-6616
MEMORANDUM
STENGEL, C. J.
September 12, 2017
In 2009, the Pennsylvania General Assembly passed the Neighborhood
Improvement Zone Act (“NIZ Act”), which subsidizes development projects in
downtown Allentown. Because of the subsidies, new developments are able to offer
cheaper rent to their tenants than preexisting, unsubsidized buildings. The plaintiff owns
an office building in Allentown that is ineligible for NIZ subsidies. The plaintiff projects
that its building will be unable to keep or acquire tenants and therefore expects to default
on its mortgage and face foreclosure. The plaintiff challenges the NIZ Act and its
implementation under the Pennsylvania Constitution and the Equal Protection Clause, the
Takings Clause, and the Contracts Clause of the United States Constitution through 28
U.S.C. § 1983 and the Declaratory Judgment Act, 28 U.S.C. §§ 2201–2202.
Motions to dismiss for failure to state a claim have been filed by the City of
Allentown and Mayor Pawlowski, as well as by Pennsylvania Revenue Secretary Eileen
McNulty. Defendant ANIZDA filed a motion for judgment on the pleadings. )1 For the
following reasons, I will grant the motions and dismiss the claims with leave to amend to
the extent the plaintiff can state a claim consistent with this memorandum.
I.
BACKGROUND
The heart of the plaintiff’s complaint is that the defendants did not interpret the
NIZ Act’s provision of funds for “improvement and development” to apply to preexisting
buildings and their tenants, thereby denying the plaintiff access to the NIZ funds to which
its competitors had access.
A. The Plaza
In November 2006, the plaintiff acquired PPL Plaza (“The Plaza”) for $92 million.
(Compl. ¶¶ 27–31.) The plaintiff paid over $13 million in cash at closing and financed
the remainder with two loans, one for $75 million and one for $7 million. Id. ¶ 33. The
plaintiff’s loans were to be repaid in monthly installments, with a final balloon payment
of all amounts outstanding on December 1, 2016. Id. ¶ 34.2 The plaintiff has spent
$334,000 on improvements to the property. Id. ¶ 37.
1
The plaintiff also initially sued Pennsylvania Treasurer Timothy Reese, Auditor General
Eugene DePasquale, and Governor Thomas Wolf, but the court approved the parties’ stipulations
dismissing them as defendants. (Doc. Nos. 30, 33 & 47).
2
The plaintiff filed its complaint on December 15, 2015. The plaintiff alleges that, as of
October 2015, it had paid almost $12 million in principal and over $41 million in interest on the
loans. Id. ¶ 36. On August 21, 2017, the plaintiff filed a memorandum with the court explaining
that the lender had initiated a foreclosure action in state court. (Pl.’s Supp. Mem. in Opp. to
Defs.’ Mot. to Dismiss, Document #64).
2
As of the filing of the complaint, the Plaza’s sole tenant (besides one small retail
tenant on the ground floor) was a company called Talen Energy Corp. Id. ¶ 44.3 Talen’s
lease, which was created in 2003, sets its rent at $27.20 per square foot. Id. ¶ 40, 42. The
lease expires on April 30, 2018. Id. ¶ 40.
B. NIZ Act
In an effort to stimulate the economy in Pennsylvania’s cities, the Pennsylvania
General Assembly passed the NIZ Act on October 9, 2009. Id. ¶ 52.4 The Act allowed
the city to create a municipal authority that would designate a “Neighborhood
Improvement Zone” (“NIZ”) of no more than 130 acres in which the city would enable
the construction of a sports facility and other developments. 72 Pa. Cons. Stat. §§ 8902B–8904-B. (Compl. ¶ 53.)
The City of Allentown designated a NIZ of 128 acres in downtown Allentown
along the western side of the Lehigh River on August 28, 2011, and this designation took
effect on September 6, 2012. Id. ¶ 56. The zone, which contains the Plaza, “is the only
zone designated or eligible for designation under the Act.” Id. ¶ 55.
The Act permits state taxes paid by businesses operating in the NIZ to go into a
fund, which can then pay debt service on bonds or loans issued to finance development,
improvement, and construction in the NIZ. 72 Pa. Cons. Stat. §§ 8903-B–8907-B; §§
8904-B(b)–(d), 8902-B. Id. ¶ 60. The Pennsylvania Department of Revenue (“DOR”)
3
Talen’s predecessor, PPL Energy Plus, LLC, a subsidiary of Pennsylvania Power and
Light (PPL), was the Plaza’s primary tenant from 2003 until 2015. Talen acquired PPL’s rights
and obligations under its lease. (Compl. ¶ 18.)
4
The NIZ Act was amended on July 9, 2013, and is now part of the Tax Reform Code of
1971, Article XIX-B, codified at 72 Pa. Cons. Stat. §§ 8901-B–8908-B.
3
certifies the amount of state and local taxes paid by businesses in the NIZ, which are put
into the fund and administered by a municipal authority, the Allentown Neighborhood
Improvement Zone Development Authority (“ANIZDA”). 72 Pa. Cons. Stat. § 8904B(d). (Compl. ¶¶ 11, 76.) According to the Act, the money in the fund can be used to
finance “the construction of all or part of a facility or facility complex” or “the
improvement and development of all or any part of the neighborhood improvement
zone.” 72 Pa. Cons. Stat. § 8904-B(e)(1).5
5
In full, the Act provides:
(1) The money may only be utilized as follows:
(i) For payment of debt service, directly or indirectly through a multi-tiered
ownership structure or other structure authorized by a contracting authority
to facilitate financing mechanisms, on bonds or on refinancing loans used to
repay bonds issued to finance or refinance:
(A) the improvement and development of all or any part of the
neighborhood improvement zone,
(B) the construction of all or part of a facility or facility complex.
(ii) For payment of debt service on bonds issued to refund those bonds.
(iii) For replenishment of amounts required in any debt service reserve funds
established to pay debt service on bonds.
(1.1) The term of a bond to be refunded shall not exceed the maximum term permitted for
the original bond issued for the improvement or development of the neighborhood
improvement zone and the construction of a facility or facility complex.
(2) The money may not be utilized for purposes of renovating or repairing a facility or
facility complex, except for capital maintenance and improvement projects.
Id. § 8904-B(e).
4
C. The Guidelines
ANIZDA promulgated guidelines regarding the use of the NIZ funds. (Compl. ¶
80; Reese Mot. to Dismiss Ex. 1 (ANIZDA Guidelines for Obtaining Financing for
Projects in the City of Allentown’s NIZ (“the Guidelines”), as amended Mar. 4, 2015)
(Doc. No. 15-2).)6 The Guidelines are “intended for informational purposes only” and
“shall not be construed to limit in any way the discretion of the Authority.” (Guidelines ¶
1.3.) According to the plaintiff, the Authority interpreted the Act’s language providing
funds for “the improvement and development of all or any part of the [NIZ]” to apply to
construction of a facility or complex, renovations, or capital improvements to the existing
building, but not to upkeep of preexisting buildings. (Compl. ¶¶ 86, 108). Although the
Guidelines do not explicitly state that a project must involve one of these three categories
to be eligible, they generally refer to projects as though they are construction projects.
(See, e.g., Guidelines #5 (describing preferences given to certain “certified subcontractors
in the construction of the Project”); #8 (“Applicant should provide a timeline of major
milestones and construction activities.”); #13 (“The Authority shall have the right to
review construction inspection reports being prepared for the Applicant’s financial
institution . . . .”).) The plaintiff alleges that ANIZDA also restricted NIZ funds to “new
businesses starting up or moving into the NIZ.” (Compl. ¶ 82).7
6
In ruling on a motion to dismiss, a district court may rely on matters of public record
and documents integral to or relied upon in the complaint. Sands v. McCormick, 502 F. 3d 263,
268 (3d Cir. 2007); Pryor v. NCAA, 288 F.3d 548, 560 (3d Cir. 2002). The Complaint repeatedly
references the Guidelines, which are also a matter of public record.
7
The plaintiff also points out that Guidelines further deem ineligible “any project
proposing to relocate tenants, occupants, or business existing in the NIZ to another location
5
As the plaintiff was not planning construction, renovations, or capital
improvements, it was ineligible for those subsidies. Id. ¶ 108. And its tenant, Talen, was
already operating within the NIZ and therefore was not eligible for NIZ funds given to
new businesses moving into the NIZ. Id. ¶ 84. As a result, “the NIZ affords benefits to
every new building inside its boundaries except for PPL Plaza.” Id. ¶ 60 (emphasis
omitted).
The plaintiff met with city and state officials, ANIZDA officials, and developers,
but was unable to obtain a modification of the Guidelines or other accommodations to
give it access to NIZ funds. Id. ¶¶ 102–08.
The NIZ Act has spurred development in the NIZ. Since 2009, two office and
residential complexes have begun construction: the City Center Lehigh Valley, which
consists of four office buildings with 650,000 square feet of rentable office space, a fullservice hotel, 170 luxury apartments, and 100,000 square feet of upscale retail and
restaurant space (id. ¶ 64), and the Waterfront Development,8 which includes six office
buildings, 124 residences, and restaurant and retail space. Id. ¶ 65. The developers of
these complexes anticipate receiving NIZ subsidies of more than $40 million. Id. ¶¶ 67,
69. Because of these subsidies, they are able to charge tenants prices significantly below
pre-NIZ market rates. Id. ¶¶ 68, 70–71.
within the NIZ”; “working capital,” “rolling stock,” and “inventory/receivable financing,”
“relocation costs for a business or its employees moving into the NIZ,” and “molds and dies.”
Id. ¶ 84. The plaintiff does not explain, however, how these restrictions affected it.
8
The plaintiff argues that the Waterfront Development is outside the walkable downtown
center of Allentown and therefore subsidizing it is diverting resources from the downtown,
contrary to the NIZ Act’s purpose. Id. ¶¶ 66–67.
6
The value of PPL Plaza has plummeted since the designation of the NIZ. 9 Under
the lease, the plaintiff charges Talen $27.20 per square foot. Id. ¶ 42. In January 2015,
after the NIZ Act and Guidelines were promulgated, Talen’s parent company asked to
renegotiate its lease at a base rent of $8.00 per square foot. Id. ¶ 90. It also offered to
purchase PPL Plaza for $41 million—a loss to the plaintiff of over $51 million. Id. ¶ 90.
In October 2015, Talen explained that, although it would be “ideal” for Talen to stay in
the Plaza, it had received lower rent offers from the new, NIZ-financed buildings, and it
was “close on a final lease solution for a new building” in the Waterfront Development.
Id. ¶ 94. It is therefore “evident that Talen will vacate the Plaza when the Lease expires
in April 2018.” Id. ¶ 97. The plaintiff explains that the loss of Talen, and the plaintiff’s
likely inability to find a replacement tenant willing to pay a high enough rate of rent, will
likely result in the plaintiff’s default on its loans and a foreclosure sale of the Plaza. Id. ¶
101.
On August 21, 2017, the plaintiff filed a supplemental memorandum explaining
that the owner of its debt had initiated a foreclosure action against it in the Pennsylvania
Court of Common Pleas for Lehigh County. (Pl.’s Supp. Mem. in Opp. to Defs.’ Mot. to
Dismiss ¶ 2 (Document # 64)).
D. The Resolutions
The plaintiff contends that, in addition to incentivizing Talen to leave the Plaza by
making cheaper rent rates available in the new buildings, ANIZDA made a special deal
9
The defendants point out that the plaintiff purchased the Plaza in 2006, at the height of
the real estate bubble, and argue that its loss in value is largely due to a nationwide collapse in
the real estate market. (ANIZDA Reply Br. 5 (Document #55)).
7
for Talen with two resolutions. (Compl. ¶¶ 109–113.) The first addressed the fact that
Talen’s relocation would have cost Talen money for which it was ineligible for NIZ
subsidies, as the Guidelines deemed ineligible “any project proposing to relocate tenants,
occupants, or business existing in the NIZ to another location within the NIZ.” Id. ¶ 84.
Thus, Talen would have to bear the cost of moving to the Waterfront Development. The
plaintiff alleges that, to prevent Talen from bearing this cost, ANIZDA passed Resolution
#73, which directed tax revenues to be returned to businesses that relocate from another
place within the NIZ to the Waterfront Development. (Id. ¶¶ 117, 118; ANIZDA’s Mot.
for Leave to File a Mot. for J. on the Pleadings in Excess of the Ct.’s P. Limit, Ex. D
(Resolution 2015-73) (Documents #37-8)).
Second, ANIZDA gave Talen a special tax break. Resolution #74 allows Talen to
“recoup all state and local taxes above the amount paid by its predecessor, PPL, in 2014.”
(Compl. ¶ 19; see also ANIZDA’s Mot. for Leave to File a Mot. for J. on the Pleadings in
Excess of the Ct.’s P. Limit, Ex. E (Resolution 2015-74) (Doc. No. 37-9).) The plaintiff
argues that these resolutions “reveal how the Act has been arbitrarily and irrationally
manipulated to provide benefits to favored entities, while at the same time denying the
same benefits to Plaintiff.” Id. ¶ 123.10
10
The plaintiff alleges that the president of PPL Electric Utilities—the company that
owned Talen’s predecessor, PPL Energy Plus, LLC, (id. ¶ 18)—is on ANIZDA’s board of eight
or nine directors. Id. ¶ 75. The plaintiff does not, however, allege that PPL’s Electric Utilities’
president has any continued interest in Talen or reaped any benefit from any of ANIZDA’s
decisions with respect to Talen.
8
E. Procedural History
The plaintiff brought claims for violation of its rights under the United States
Constitution pursuant to 18 U.S.C. § 1983 and the Declaratory Judgment Act and its
rights under the Pennsylvania Constitution against ANIZDA, the City of Allentown,
Mayor of Allentown Ed Pawlowski, Pennsylvania Governor Thomas Wolf, Pennsylvania
Secretary of Revenue Eileen McNulty, Pennsylvania Treasurer Timothy Reese, and
Pennsylvania Auditor General Eugene DePasquale. I approved the parties’ stipulations to
dismiss the claims against Defendants Treasurer Reese (Document #31), Auditor General
DePasquale (Document #33), and Governor Wolf (Document #47).
ANIZDA filed an answer (Document #36) and then a motion for judgment on the
pleadings (Document #46). Defendant City of Allentown and Ed Pawlowski filed a
motion to dismiss (Documents #38 & 39). Defendant Secretary McNulty filed a motion
to dismiss. (Document #44.)11 The plaintiff responded in opposition to these motions,
and the defendants replied. The plaintiff filed a sur-reply in opposition to ANIZDA’s
reply. Lastly, the plaintiff filed a supplemental memorandum in support of its opposition
to the defendants’ motions, updating the court on recent changes to its financial situation.
(Document #64).
II.
STANDARD OF REVIEW
Federal Rule of Civil Procedure 12(b)(6) permits a court to dismiss all or part of
an action for “failure to state a claim upon which relief can be granted.” Typically, “a
11
Secretary McNulty filed this motion with then-defendant Governor Wolf, who was
subsequently dismissed from the case by stipulation. (Document #47).
9
complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual
allegations,” though plaintiff’s obligation to state the grounds of entitlement to relief
“requires more than labels and conclusions, and a formulaic recitation of the elements of
a cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).
“Factual allegations must be enough to raise a right to relief above the speculative level . .
. on the assumption that all of the allegations in the complaint are true (even if doubtful in
fact).” Id. (citations omitted). A well-pleaded complaint may not be dismissed simply
because “it strikes a savvy judge that actual proof of those facts is improbable, and that a
recovery is very remote and unlikely.” Id. at 556. However, a complaint must provide
“enough fact[s] to raise a reasonable expectation that discovery will reveal evidence of”
the necessary element. Id. at 556. In reviewing a complaint on a motion to dismiss, “the
factual and legal elements of a claim should be separated,” and while all well-pleaded
facts should be accepted as true, the court “may disregard any legal conclusions.” Fowler
v. UPMC Shadyside, 578 F.3d 203, 210–11 (3d Cir. 2009); see also Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009).
III.
DISCUSSION
The plaintiff’s allegations show that a paradoxical consequence of the NIZ Act’s
implementation is that new buildings are being built while the plaintiff’s existing building
is the subject of a foreclosure action. But, paradoxical as this may be, it does not state a
claim for violation of the plaintiff’s constitutional rights.
10
A.
Standing
ANIZDA argues that the plaintiff does not have standing to bring its claims
because it has not alleged an injury-in-fact, causation, or redressability. I agree.
To have standing to bring a federal action under Article III of the United States
Constitution, the plaintiff must show that it meets three requirements:
First, the plaintiff must have suffered an ‘injury-in-fact’—an
invasion of a legally protected interest which is (a) concrete
and particularized, . . . and (b) actual or imminent, not
conjectural or hypothetical. Second, there must be a causal
connection between the injury and the conduct complained
of—the injury has to be fairly traceable to the challenged
action of the defendant, and not the result of the independent
action of some third party not before the court. Third, it must
be likely, as opposed to merely speculative, that the injury
will be redressed by a favorable decision.
Lujan v. Defs. of Wildlife, 504 U.S. 555, 560-61 (1992) (internal quotation marks,
alterations, and citations omitted).
The allegations in the plaintiff’s complaint are insufficient to show standing. The
plaintiff does not show how the NIZ Act and its implementation caused the plaintiff’s
inability to pay its debt. According to the complaint, the plaintiff entered into its lease
with Talen before the NIZ Act was passed, and that lease extends until April 2018 at a
fixed rate of rent. (Compl. ¶¶ 40-45.) The plaintiff’s repayment of its loans was due
December 2016. Id. ¶ 33. Thus, it is not apparent from the complaint why a decrease in
the market rate for rent in the NIZ affected the plaintiff’s ability to pay its mortgage in
light of its continued lease agreement with Talen.
11
The plaintiff also argues that the decreased value of the Plaza constitutes an injury.
(Pl.’s Br. in Opp. to Defs. Mots. to Dismiss 24.) But the plaintiff does not show how it
has realized this loss, especially in light of its likelihood of facing foreclosure. The
plaintiff has not shown how it, rather than the party that owns its debt, is harmed by the
diminished value of the Plaza.
Even if the plaintiff is able to file an amended complaint sufficient to satisfy
Article III’s standing requirements, there are other reasons that the plaintiff’s complaint
does not state a claim that I will address here.
B.
Pennsylvania Constitutional Claims
There is no private cause of action under the Pennsylvania Constitution. Gary v.
Braddock Cemetery, 517 F.3d 195, 207 n.4 (3d Cir.2008) (“The prevailing view is that
Pennsylvania does not recognize a private right of action for damages in a suit alleging
violation of the Pennsylvania Constitution.”). I will therefore dismiss the plaintiff’s
claims brought under Article I of the Pennsylvania Constitution with prejudice.
C.
McNulty’s Immunity under the Eleventh Amendment
Secretary McNulty argues that the claims against her are barred by the Eleventh
Amendment and should be dismissed with prejudice. I agree that the plaintiff cannot sue
Secretary McNulty for damages, but hold that the plaintiff’s claims against her for
prospective injunctive relief are not barred.
To the extent the plaintiff seeks damages from Secretary McNulty, this relief is
barred under the Eleventh Amendment. Idaho v. Coeur d’Alene Tribe of Idaho, 521 U.S.
261, 267–70 (1997). (Compl. ¶¶ 14–15). The Eleventh Amendment prohibits suits in
12
federal court by citizens against states for damages. Id. “[A] suit against a state official
in his or her official capacity . . . is a suit against the official’s office,” Will v. Mich.
Dep’t of State Police, 491 U.S. 58, 71 (1989), and therefore triggers Eleventh
Amendment immunity.
A suit for prospective injunctive relief against state officers is also barred by
Eleventh Amendment immunity when the state is “the real, substantial party in interest.”
Coeur D’Alene Tribe, 521 U.S. at 277. A state is the real party in interest when “the
essential nature and effect of the proceeding” is not against the officer but against the
state. Id. This is true when “the relief sought . . . has an impact directly on the State
itself.” Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 117 (1984). However,
an exception to this immunity allows suits against state officials where, first, “the
complaint alleges an ongoing violation of federal law and seeks relief properly
characterized as prospective,” Verizon Md., Inc. v. PSC, 535 U.S. 635, 645 (2002)
(quoting Coeur d’Alene Tribe, 521 U.S. at 296), and, second, the state officer has a
sufficient connection to the unconstitutional conduct. NCAA v. Governor of N.J., 799
F.3d 259, 263 n.3 (3d Cir. 2015). Here, the plaintiff is both seeking prospective
injunctive relief and has alleged a sufficiently close connection between Secretary
McNulty’s duties and the allegedly unconstitutional conduct.
1.
Prospective Injunctive Relief
The exception allowing suits for prospective injunctive relief against state officers
for ongoing violation of federal law originated in Ex parte Young, 209 U.S. 123, 159
(1908). The Supreme Court held that state officials could be enjoined from enforcing a
13
railroad commission’s order requiring a reduction in rates. Id. at 129. Because the act
was alleged to be unconstitutional, “the use of the name of the State to enforce an
unconstitutional act to the injury of complainants is a proceeding without the authority of
and one which does not affect the State in its sovereign or governmental capacity.” Id. at
159. Thus, the proceeding against the state officer was not barred by the Eleventh
Amendment. Id.
Applying the principal in Ex parte Young, the Court in Verizon Maryland v. PSC
held that the petitioner’s request for injunctive and declaratory relief against a state
commission “clearly satisfied” the Ex parte Young exception. 535 U.S. at 645. In that
case, the Maryland Public Service Commission had approved an agreement between the
petitioner and respondent phone companies respecting an agreement relating to the use of
phone lines. Id. at 639. The FCC then issued a ruling relevant to the parties’
implementation of the agreement. Id. at 640. They brought their disagreement before the
Commission, which issued an order in the respondent’s favor. Id. The petitioner then
brought claims in federal court, seeking a declaration that the commission’s order was
unlawful and an injunction to prevent its enforcement. Id. at 642. The Supreme Court
held that this was a “straightforward” application of Ex parte Young, because the
complaint alleged an ongoing violation of federal law and sought prospective injunctive
relief. Id. at 645.
Here, the plaintiff is seeking prospective injunctive relief against Secretary
McNulty for a violation of the federal Constitution. Therefore, the plaintiffs’ claims fall
14
within the exception described in Ex parte Young and Secretary McNulty is not immune
on this basis.
2.
Sufficient Connection
In order to obtain an injunction against a state officer, a plaintiff must also allege
that officer is actually involved in the unconstitutional conduct. NCAA, 799 F.3d at 263
n.3 (explaining that plaintiffs cannot “name officials who bear no connection whatsoever
to the [challenged] Law” and citing Ex parte Young for the proposition that “plaintiffs
cannot name just any state official, such as a ‘state superintendent of schools’ simply ‘to
test the constitutionality’ of a law”). In other words, the plaintiff must allege a “sufficient
connection between the state official and the offending conduct in question.” Doe v.
Wolf, No. 16-6039, 2017 U.S. Dist. LEXIS 134853, at *28 (E.D. Pa. Aug. 23, 2017).
A sufficient connection between the defendant and the offending conduct exists
where the defendant has a duty to enforce the offending regulation, not merely a general
power to review and approve regulations. Rode v. Dellarciprete, 845 F.2d 1195, 1208
(3d Cir. 1980); 1st Westco Corp. v. School Dist. of Phila., 6 F.3d 108, 112–116 (3d Cir.
1993). In order to bring such a claim against a state official, there must be a “realistic
potential” that the defendant’s power would have been applied to the conduct at issue.
Rode, 845 F.3d at 1208. In Rode, the Court of Appeals determined that neither the
governor nor the attorney general, both of whom were named as defendants, were
charged with the “duty to enforce” an allegedly offending regulation regarding the
Pennsylvania State Police simply because they had the “power to review and approve a
departmental regulation for form and legality.” Id. at 1208. The court in Rode did,
15
however, hold that “[the plaintiff] was able to challenge the constitutionality of the
regulation by naming the [Police] administrators.” Id. at 1209.
Similarly, in 1st Westco Corp. v. School District of Philadelphia, the Court of
Appeals again dismissed the governor and attorney general as defendants, explaining that
“neither of the Commonwealth officials possesse[d] a statutory duty to enforce” the Code
provision. 6 F.3d at 113. But the court allowed the suit to proceed against other officials
charged with enforcing the allegedly offending section of the Pennsylvania School Code.
Id.12
Here, the plaintiff’s claims against McNulty are not barred by the Eleventh
Amendment because the plaintiff seeks an injunction against the DOR’s allegedly
unconstitutional implementation of the NIZ Act. Specifically, the plaintiff alleges the
DOR, of which McNulty is Secretary, was directly involved in ANIZDA Resolution 74.
(Pl.’s Mem. in Opp. to Def. McNulty’s Mot. to Dismiss 41 (Doc. No. 50).) Resolution 74
states that the DOR is a party to the agreement that forms the basis of the resolution
(Resolution 2015-74 at ¶ 1), and it requires the DOR, “through its Office of the Budget
. . . to accelerate transfer of funds from the Excess NIZ Revenue account to the DOR and
the method of reporting and allocation of taxes paid by Talen.” Id. at 1. Defendant
McNulty, as DOR Secretary, is therefore sufficiently involved in the resolution’s
enforcement to be a defendant in this case.
12
The Pennsylvania Code is a compendium of Pennsylvania’s administrative law. It is
distinct from the Pennsylvania Consolidated Statutes or Pennsylvania Annotated Statutes, which
are codified legislation.
16
Defendant McNulty argues the plaintiff has not alleged a sufficiently close
connection between her conduct and the allegedly unconstitutional activity, citing Rode
and 1st Westco Corp. In another recent case, Doe v. Wolf, the Commonwealth of
Pennsylvania put forth the same argument and cited the same two cases. 2017 U.S. Dist.
LEXIS 134853, at *28. In that case, the court held that Defendant Pennsylvania State
Police Commissioner was a proper defendant because he had the power to enforce the
allegedly offending statute. Id. at *32. Defendant Police Commissioner in Doe v. Wolf
was in a position similar to the one McNulty is in here—both state officers are charged
with enforcing the allegedly unlawful state policy. Therefore, the plaintiff alleges a
sufficiently close connection between McNulty and Resolution 74. The plaintiff’s pursuit
of a prospective injunctive relief against Secretary McNulty is therefore not barred by the
Eleventh Amendment and I will not dismiss all claims against her with prejudice. For the
reasons described below, however, I find that the plaintiff has not stated a claim against
her and will dismiss the plaintiff’s complaint with leave to amend.
D.
Equal Protection
In Count II, the plaintiff alleges “the NIZ Act, by its very terms arbitrarily and
capriciously treats Plaintiff and its property, PPL Plaza, differently from all other Class A
office buildings in the zone.” (Compl. ¶ 131.) “In addition, in implementing the Act and
passing the Resolutions, Defendants’ singular, discriminatory treatment of the Plaza puts
Plaintiff in a class-of-one” (id. ¶ 132), and “unreasonably and arbitrarily has created
substantial economic hardship for PPL Plaza.” Id. ¶ 133. But while the plaintiff shows,
taking as true the facts described in its complaint and interpreting them in the light most
17
favorable to the plaintiff, that the NIZ Act and its implementation may have been unwise,
the plaintiff does not show that they had no rational basis.
“[T]o state a claim for ‘class of one’ equal protection, a plaintiff must at a
minimum allege that he was intentionally treated differently from others similarly
situated by the defendant and that there was no rational basis for such treatment.”
Phillips v. Cty. of Allegheny, 515 F.3d 224, 243 (3d Cir. 2008). The rational basis
standard is met where “a plausible policy reason explains the classification and the
relationship of the classification to its policy goal is not so weak as to suggest that the
distinction is arbitrary or irrational.” United States v. Walker, 473 F.3d 71, 77 (3d Cir.
2007) (citing Fitzgerald v. Racing Ass’n of Cent. Iowa, 539 U.S. 103, 107 (2003)).
[T]he rational basis test is a very deferential standard. Under
rational basis review, a classification must be upheld against
equal protection challenge if there is any reasonably
conceivable state of facts that could provide a rational basis
for the classification. A statute is presumed constitutional,
and the burden is on the one attacking the legislative
arrangement to negate every conceivable basis which might
support it . . . . In this context, equal protection is not a
license for courts to judge the wisdom, fairness, or logic of
legislative choices. The threshold for upholding distinctions
in a statute under rational basis review is extremely low, and
it is not within the purview of the courts to conduct anything
but a limited review of the reasons that legislation subject to
rational-basis review classifies among similarly situated
persons. Even if the law seems unwise or works to the
disadvantage of a particular group, or if the rationale for it
seems tenuous, where there are plausible reasons for the
legislature’s action, our inquiry is at an end.
Doe v. Pa. Bd. of Prob. & Parole, 513 F.3d 95, 115–16 (3d Cir. 2008) (quoting Heller v.
Doe, 509 U.S. 312, 320 (1993)) (quotations, citations, and internal alterations omitted).
18
Similarly, showing that an authority violated a plaintiff’s constitutional rights to
equal protection in its implementation of a law on a “class of one” theory, the plaintiff
must show that its selective treatment “was based on an unjustifiable standard,” such as
an “arbitrary factor,” and that it was taken with “discriminatory purpose.” Jewish Home
v. Ctrs. for Medicare & Medicaid Servs., 693 F.3d 359, 363 (3d Cir. 2011) (citing Yick
Wo v. Hopkins, 118 U.S. 356, 373 (1886)). “Hence, to maintain an equal protection
claim of this sort, [a plaintiff] must provide evidence of discriminatory purpose, not mere
unequal treatment or adverse effect. [It] must show that the decisionmaker selected or
reaffirmed a particular course of action at least in part because of, not merely in spite of,
its adverse effects.” Id. (citing Wayte v. United States, 470 U.S. 598, 610 (1985)).
The reason for this deference to the legislature is that
[t]he Constitution presumes that, absent some reason to infer
antipathy, even improvident decisions will eventually be
rectified by the democratic process and that judicial
intervention is generally unwarranted no matter how unwisely
we may think a political branch has acted. Thus, we will not
overturn such a statute unless the varying treatment of
different groups or persons is so unrelated to the achievement
of any combination of legitimate purposes that we can only
conclude that the legislature’s actions were irrational.
Congregation Kol Ami v. Abington Twp., 309 F.3d 120, 133 (3d Cir. 2002) (citation
omitted).
Here, the plaintiff has not shown that the NIZ Act, the implementing Guidelines,
or the Resolutions are so unrelated to the achievement of any legitimate purpose as to be
irrational, or that they were implemented with discriminatory purpose. The NIZ Act
subsidizes development in designated urban zones in Pennsylvania. One conceivable
19
(and, indeed, stated) reason for this Act is to further the legitimate goal of economic
revitalization. Similarly, ANIZDA seeks to implement the aims of the Act; thus, one
plausible reason for ANIZDA’s decision not to award the plaintiff NIZ funds might be
that subsidizing the plaintiff’s building does not foster development because the building
has already been developed. This is the basis provided in the complaint and attached
exhibits.
Finally, the complaint does not show that the resolutions are based on an
unjustifiable standard. In fact, the plaintiff itself supplies a rational reason for the
ANIZDA resolutions. (Pl.’s Br. in Opp. to Defs.’ Mots. to Dismiss 33 (Document #50)).
The plaintiff states that the defendants “concluded that PPL Plaza could not retain Talen
as a tenant. In their view, this greatly increased the risk that Talen would leave
Allentown completely.” Id. From this, the plaintiff concludes that “[t]he regulatory
process was therefore tainted by Defendants’ objective of keeping Talen as a downtown
Allentown employer.” Id. But the plaintiff is mistaken that alleging that an authority
helped one particular business is sufficient to show that the authority acted arbitrarily,
unjustifiably, or otherwise with discriminatory purpose against the plaintiff. On the
contrary, the reason the plaintiff describes is a justifiable policy reason to pass the
Resolutions. The same goes for the plaintiff’s argument that the defendants facilitated
Talen’s move to the Waterfront Development because of a desire to “effectuate their
vision of a new civic landscape in the [waterfront] region.” Id. at 34. This is also a
legitimate policy reason for the resolution. Thus, while the plaintiff shows that
ANIZDA’s implementation in the Guidelines and the Resolutions has rendered the
20
plaintiff unable to continue leasing its building, it does not show discriminatory
purpose—that ANIZDA or any other defendant interpreted the NIZ Act to exclude the
plaintiff’s building in part because of, not merely in spite of, its likelihood to cause the
plaintiff to default on its debt.13
The plaintiff appears to focus its argument with respect to its Equal Protection
claim not on the unjustifiability of the NIZ Act or the standards used in its
implementation, nor on any discriminatory purpose, but instead on whether ANIZDA’s
interpretation of the NIZ Act is permissible as a matter of statutory interpretation. (See,
e.g., Pl.’s Br. in Opp. to Defs.’ Mots. To Dismiss 34–35 (“Defendants’ promotion of new
construction at the expense of existing buildings may or may not constitute ineffective
urban planning, but it is undoubtedly a material issue of fact as to whether such conduct
can be said to be rational under the NIZ Act.”)). But even if ANIZDA employed an
unsupported interpretation of the NIZ Act, that does not on its own make out an Equal
Protection claim. The plaintiff must go further and show that the implementation was
arbitrary, unjustifiable, and taken in part because of the adverse effect it would have on
the plaintiff. The plaintiff has not done so.
13
Although the plaintiff argues the Guidelines are arbitrary and irrational in that they
deem ineligible “any project proposing to relocate tenants, occupants or business existing in the
NIZ to another location within the NIZ;” “working capital,” “rolling stock,” and
“inventory/receivable financing,” “relocation costs for a business or its employees moving into
the NIZ,” and “molds and dies,” (id. ¶ 84), it is unclear how this disadvantaged the plaintiff in
particular.
21
E.
Takings Clause
In Count V, the plaintiff argues that the NIZ Act and its implementation constitute
an unconstitutional taking under the Fifth Amendment, which provides that private
property shall not “be taken for public use, without just compensation.” U.S. Const. Am.
V. The plaintiff alleges that what occurred here is not a classic taking—the government’s
physical intrusion onto a person’s land—but rather a regulatory taking. Lingle v.
Chevron U.S.A. Inc., 544 U.S. 528, 537 (2005). A regulatory taking occurs when
“government regulation of private property [is] . . . so onerous that its effect is
tantamount to a direct appropriation or ouster . . . .” Id. The plaintiff alleges the NIZ Act
“forcibly and substantially reduces prevailing or market rates for rent of office space in
Allentown without addressing the impact of such actions on PPL Plaza,” “substantially
reduces the value of PPL Plaza” (id. ¶ 149), and will “lead to foreclosure and total loss of
Plaintiff’s property.” Id. ¶ 150. Thus, it alleges the NIZ Act “interferes with the
Plaintiff’s reasonable investment-backed expectations,” (id. ¶ 151) and “has rendered [the
plaintiff’s] ownership of PPL Plaza essentially valueless.” Id. ¶ 150.
The defendants argue—and I agree—that the plaintiff’s takings claim fails for two
reasons: first, because the plaintiff did not exhaust its opportunity for compensation from
the state before bringing this claim, and second, because the NIZ Act and its
implementation are not “tantamount to a direct appropriation or ouster,” as necessary to
constitute a regulatory taking.
22
1.
Exhaustion
A Fifth Amendment takings claim is not ripe unless the plaintiff first sought and
was denied just compensation for the taken property from the government. Cowell v.
Palmer Township, 263 F.3d 286, 290 (3d Cir. 2001); Cty. Concrete Corp. v. Town of
Roxbury, 442 F.3d 159, 164 (3d Cir. 2006) (explaining that the plaintiff must show that it
“has unsuccessfully exhausted the state’s procedures for seeking ‘just compensation’”)
(quoting Williamson Cty Regional Planning Comm’n v. Hamilton Bank, 473 U.S. 172,
186 (1985)). This requirement, known as the “exhaustion requirement,” applies to both
facial and as-applied constitutional challenges. Id. at 168.14 As long as “a reasonable,
certain, and adequate provision for obtaining compensation exists at the time of the
taking,” the plaintiff must avail itself of that provision before bringing a claim.
Williamson Cty., 473 U.S. at 194.
Pennsylvania’s Eminent Domain Code, 26 Pa. Cons. Stat. § 102 et seq., is such a
provision. Cowell, 263 F.3d at 290. “Pennsylvania’s Eminent Domain Code provides
inverse condemnation procedures through which a landowner may seek just
compensation for the taking of property.” Cowell, 263 F.3d at 290. Section 102(a) of the
Eminent Domain Code states that it is the “complete and exclusive procedure and law to
14
For as-applied constitutional challenges, which the plaintiff also brings, a plaintiff must
also show that “the government entity charged with implementing the regulations has reached a
final decision regarding the application of the regulations to the property at issue’ (the ‘finality
rule’).” Cty. Concrete Corp., 442 F.3d at 164. Unlike the finality rule, the exhaustion
requirement applies to both as-applied and facial challenges. Id. at 168 (“[T]he fact that [the
plaintiffs] allege a facial Just Compensation Takings claim against the Ordinance may save them
from the finality rule, [but] it does not relieve them from the duty to seek just compensation from
the state before claiming that their right to just compensation under the Fifth Amendment has
been violated.”).
23
govern all condemnations of property for public purposes and the assessment of
damages.” 26 Pa. Cons. Stat. §102(a). Any “owner of a property interest taken, injured
or destroyed,” 26 Pa. Cons. Stat. Ann. § 103, “may file a petition requesting the
appointment of viewers . . . to ascertain just compensation.” 26 Pa. Cons. Stat. Ann. §
502(a).
Numerous courts have required plaintiffs to seek compensation through
Pennsylvania’s Eminent Domain Code before bringing federal takings claims. See, e.g.,
Cowell, 263 F.3d at 290–91 (holding that the plaintiffs’ claims that two municipal liens
on their property were regulatory takings were unripe for failure to use the Eminent
Domain Code’s procedures); Prop. Mgmt. Grp., Ltd. v. City of Phila., No. 17-1260, 2017
U.S. Dist. LEXIS 77924, at *19-25 (E.D. Pa. May 23, 2017) (holding that parking lot
owners’ challenge to an ordinance requiring vehicles be ticketed before being towed, and
therefore prohibiting lot owners from towing them immediately, was subject to the
Eminent Domain Code’s process requirements); Gould v. Council of Bristol Borough,
2014 U.S. Dist. LEXIS 9995 at *19 (E.D. Pa. Jan. 27, 2014) (explaining that the plaintiff
had to first seek compensation under the Eminent Domain Code before bringing his claim
that the Borough misapplied its zoning law to prevent him from developing his property).
The plaintiff alleges it is the owner of a property interest that was injured by
legislation and the legislation’s implementation. The plaintiff’s claim therefore falls
within the purview of the Eminent Domain Code. The plaintiff does not allege it has
24
availed itself of the procedure in the Eminent Domain Code. Thus, the plaintiff’s Fifth
Amendment takings claim is not ripe for adjudication.15
2.
Takings Claim
In addition to failing to show ripeness, the plaintiff’s Takings Clause claim suffers
from substantive deficiencies.
The Fifth Amendment’s Takings Clause is “designed to bar Government from
forcing some people alone to bear public burdens which, in all fairness and justice,
should be borne by the public as a whole.” Armstrong v. United States, 364 U.S. 40, 49
(1960). “The paradigmatic taking requiring just compensation is a direct government
appropriation or physical invasion of private property.” Lingle, 544 U.S. at 537.
However, in certain circumstances, burdensome regulation may “be so onerous that its
effect is tantamount to a direct appropriation or ouster” so as to be compensable under the
Fifth Amendment. Id. “The rub, of course, has been—and remains—how to discern how
far is ‘too far.’ In answering that question, we must remain cognizant that ‘government
regulation—by definition—involves the adjustment of rights for the public good,’ and
15
The plaintiff argues the exhaustion requirement is excused here because there is no
adequate remedy and exhaustion would be futile. Trauma Serv. Grp. v. Keating, 907 F. Supp.
110, 113 (E. D. Pa. 1995). First, the plaintiff argues there is an absence of an adequate statutory
remedy because “nothing in the [Eminent Domain Code] provides a procedure for a property
owner to challenge administratively the constitutionality of the NIZ or the availability of NIZ
benefits.” (Pl.’s Br. in Opp. to Defs.’ Mots. To Dismiss 29.) But the existence of the Eminent
Domain Code is determinative of the ripeness of the plaintiff’s claim because just compensation
through its procedures would render the alleged taking constitutional, and therefore would
obviate the need to challenge the constitutionality of the NIZ and its benefits.
Second, the plaintiff argues that exhaustion would be futile because the plaintiff already
met with ANIZDA officials and was twice turned away. (Pl.’s Br. in Opp. to Defs.’ Mots. To
Dismiss 29.) This does not, however, show that seeking compensation through the Eminent
Domain Code’s procedures would be futile—an effort the plaintiff does not contend it has made.
25
that ‘Government hardly could go on if to some extent values incident to property could
not be diminished without paying for every such change in the general law.’” Id. at 538
(quoting Andrus v. Allard, 444 U.S. 51, 65 (1979), and Pennsylvania Coal Co. v. Mahon,
260 U.S. 393, 413 (1922)).
Court precedent has established two narrow categories of “per se” takings:
permanent physical invasion of an owner’s property and regulations that “completely
deprive an owner of all economically beneficial use of her property.” Id. (emphasis in
original). Beyond these two categories of per se taking, the law is murkier. Id.
Outside these two relatively narrow categories . . . regulatory
takings challenges are governed by the standards set forth in
Penn Central Transp. Co. v. New York City, 438 U.S. 104
(1978). The Court in Penn Central acknowledged that it had
hitherto been “unable to develop any ‘set formula’” for
evaluating regulatory takings claims, but identified “several
factors that have particular significance.” Id. at 124. Primary
among those factors are ‘the economic impact of the
regulation on the claimant and, particularly, the extent to
which the regulation has interfered with distinct investmentbacked expectations.” Ibid. In addition, the “character of the
governmental action”—for instance whether it amounts to a
physical invasion or instead merely affects property interests
through “some public program adjusting the benefits and
burdens of economic life to promote the common good”—
may be relevant in discerning whether a taking has occurred.
Lingle, 544 U.S. at 537–39.
Thus, “[t]he question of what constitutes a ‘taking’ for purposes of the Fifth
Amendment has proved to be a problem of considerable difficulty . . . . [T]his Court,
quite simply, has been unable to develop any ‘set formula’ for determining when ‘justice
and fairness’ require that economic injuries caused by public action be compensated by
26
the government, rather than remain disproportionately concentrated on a few persons.”
Penn Cent. Transp. Co., 438 U.S. at 123–24.
Although the economic impact of a regulation is a “primary” factor, Lingle, 544
U.S. at 539, it is not dispositive. “That a regulation will put a particular plaintiff out of
business cannot be proof that a taking has occurred. Instead, the size of the deprivation
inflicted by a law must be evaluated in the context of the other relevant facts.” Unity
Real Estate Co. v. Hudson, 178 F.3d 649, 677 (3d Cir. 1999) (rejecting the plaintiffs’
argument that an act of legislation was a taking in part because it would force the
plaintiffs into bankruptcy). The Court of Appeals has explained that it is “unaware of any
principle of takings law under which an imposition of liability is deemed a per se taking
as to any party that cannot pay it.” Id. at 675.
With respect to interference with reasonable investment-backed expectations,
courts have considered this significant when the plaintiff shows it has a specific plan or
investment that was thwarted by government action. Keystone Bituminous Coal Ass’n v.
Duncan, 771 F.2d 707, 716 (3d Cir. 1985). A statute may “frustrate distinct investmentbacked expectations” when it has “nearly the same effect as the complete destruction of
rights [a party] had reserved from the owners of the surface land.” Penn Central, 438
U.S. at 127. Penn Central derives this factor from Pennsylvania Coal Co. v. Mahon, 260
U.S. at 413 (1922). See Keystone, 771 F.2d at 716. “[T]he coal owners in Mahon had
expressly contracted with individual surface owners for the waiver of any claim for
damages due to subsidence.” Id. Mining regulations were found to be a taking that
required just compensation to the coal owners in part because “[i]t was reasonable for
27
them to have distinct expectations, grounded upon those waivers, to be free to mine coal
without liability for damage caused to the surface owners’ estates.” Id. This exception is
not a broad one; rather, the Supreme Court has made clear that the “government may
execute laws or programs that adversely affect recognized economic values,” and has
thus “dismissed ‘taking’ challenges on the ground that, while the challenged government
action caused economic harm, it did not interfere with interests that were sufficiently
bound up with the reasonable expectations of the claimant to constitute ‘property’ for
Fifth Amendment purposes.” Penn Cent. Transp. Co. 438 U.S. at 124–25.
Lastly, and particularly significant here, is the character of the governmental
action. Certain government actions are of a character more akin to a taking. The Court
of Appeals has held that, “[t]o succeed on a [regulatory] takings claim, [the plaintiff]
must show that the State’s action affected a ‘legally cognizable property interest.’” Am.
Exp. Travel Related Servs. v. Sidamon-Eristoff, 669 F.3d 359, 371 (3d Cir. 2012). “Even
a regulation that prohibits the most beneficial use of property, or prevents an individual
from operating an otherwise lawful business, does not necessarily violate the Takings
Clause.” Id. For example, a taking can be shown where the government removes a
specific property right or interest. See, e.g., Kaiser Aetna v. United States, 444 U.S. 164
(1979) (holding that it was a taking for the government to require owners of a pond to
allow public access); Loretto v. Teleprompter Manhattan Catv Corp., 458 U.S. 419
(holding that a permanent physical installation on the land was a taking); Hodel v. Irving,
481 U.S. 704 (1987) (holding that a law effectively abolishing the power of testamentary
disposition of certain property was a taking). Certain types of regulations, however are
28
less likely, by their character, to constitute takings. For example, “[t]he Supreme Court
has repeatedly rejected the argument that a tax—even a tax on a small set of businesses—
may . . . constitute a taking simply because it may force some of the regulated entities
out of business.” Unity Real Estate Co., 178 F.3d at 675. Similarly, it is rare for a court
to find zoning laws to constitute a regulatory taking. Pace Res., Inc. v. Shrewsbury Twp.,
808 F.2d 1023, 1031 (3d Cir. 1987) (“[C]ourts will invoke the taking clause of the Fifth
Amendment only when zoning regulation interferes drastically with a property’s possible
uses.”); but see Village of Euclid v. Ambler Realty Co., 272 U.S. 365 (1926) (holding
that a regulatory taking had occurred when a zoning change caused a 75% diminution in
the value of a developer’s land); see also Midnight Sessions, Ltd. v. Philadelphia, 945
F.2d 667, 677 (3d Cir. 1991) (holding that denial of a license for a dance hall was not a
taking).
Here, the plaintiff’s allegations do not show, under the Penn Central factors, that
the NIZ Act or its implementation constituted a taking. Although the plaintiff has shown
a serious economic impact by alleging that the NIZ Act and the Guidelines caused the
plaintiff to face foreclosure proceedings, the other factors weigh against a finding of a
taking. First, the plaintiff has not alleged an investment-backed interest in any particular
use or right to the Plaza; rather, it alleges a general interest in maintaining the building’s
value and rentability. This is not sufficient to show an “investment-backed interest”
under Penn Central because every property owner has invested in its property to the
extent that it owns it. Second, the character of the government’s actions here—
subsidizing urban development—is not of a similar character to those that constitute
29
takings. The NIZ Act is less an intrusion into property rights than either zoning laws—
which restrict property from certain uses—or tax laws, which take proceeds from
property owners. Rather, the NIZ Act and its implementing regulations merely offer
construction subsidies through tax breaks for new developers. To the extent they have
decreased the value of the Plaza, they have done so indirectly, not through the removal of
a specific property right or interest, nor through the imposition of regulatory burdens, but
through subsidizing new competitors. Weighing the Penn Central factors, I hold that the
complaint does not show that the NIZ Act and its implementation enacted a taking for
which the plaintiff is entitled to compensation under the Fifth Amendment.
F.
Contract Clause
In Count VII, the plaintiff alleges the NIZ has “directly interfered with and
substantially impaired [the plaintiff’s] contractual relationship with its tenant under the
Lease” by making “it impossible for [the plaintiff] to renew or extend the Lease on terms
that satisfy [the plaintiff’s] capital needs.” (Compl. ¶ 98; see also id. ¶ 161.) The
plaintiff argues this violated its rights under the Contract Clause of the United States
Constitution.
Article I, Section 10 of the United States Constitution prohibits any state law
“impairing the Obligation of Contracts.” A law impairs the “Obligation of Contracts” if
there was an already-existing contractual relationship, a change in law impaired that
contractual relationship, and the impairment was substantial. Gen. Motors Corp. v.
Romein, 503 U.S. 181, 186 (1992). “Thus, under the Contract Clause, the contract in
30
question must preexist the passage of the state law.” Mabey Bridge & Shore, Inc. v.
Schoch, 666 F.3d 862, 874 (3d Cir. 2012).
The plaintiff does not argue or allege that the NIZ Act impaired its contractual
relationship with Talen under the current lease, which extends until April 2018. Rather,
the plaintiff argues that the NIZ Act impaired its likelihood of being able to renew this
lease—i.e., to create a new contract. This does not state a claim under the Contract
Clause because the future lease does not preexist the passage of the state law. I will
therefore dismiss this claim with leave to amend to the extent the plaintiff can allege facts
sufficient to state a claim under the Contract Clause.
IV.
CONCLUSION
The plaintiff has not stated a claim under the United States Constitution. For the
reasons described above, including the plaintiff’s failure to allege facts showing that it
has standing, I will dismiss the plaintiff’s federal Constitutional claims with leave to
amend. I will also dismiss the plaintiff’s claims under the Pennsylvania Constitution with
prejudice.
Because the plaintiff has not stated a claim under any provision of the United
States Constitution, I will also dismiss its separately stated claims under 28 U.S.C. § 1983
and the Declaratory Judgment Acts with leave to amend.
An appropriate Order follows.
31
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?