Local Interference with Developer’s Attempts To Secure Wastewater Treatment Services Does Not Rise to Level of Federal Civil Rights Violation

May 2013Articles In the Zone

In Fortune Development L.P. v. Bern Twp. et al., the Eastern District of Pennsylvania dismissed a federal civil rights action under 42 U.S.C. § 1983, brought by developer Fortune against various municipal entities and officials.

In 2005, Fortune obtained a deemed approval of its preliminary plan to develop an age restricted community known as “Waters Edge” in Bern Township, Pennsylvania. Nevertheless, Fortune’s development of Waters Edge was stalled by the actions of certain municipal entities and officials in obstructing Fortune’s efforts to obtain wastewater treatment services for the project.

Because Bern Township has no public wastewater treatment facility, Fortune initially contacted Bern Township to request some of its reserved capacity at neighboring Leesport Borough Authority (LBA). The Township denied the request, stating there was insufficient capacity. Fortune then applied to the Township to develop an on-site treatment facility. The Township denied that application on the basis that the property lacked access to the Schuylkill River.

Fortune thereafter hired a wastewater treatment expert who concluded that the LBA plant had additional capacity to serve the Waters Edge project. The LBA initially agreed to undertake a capacity analysis and apply for re-rating from the DEP if additional capacity was found. Fortune’s principal appeared at a LBA meeting with a check for $23,000. However, the LBA instructed Fortune that it needed to go through the Bern Township Municipal Authority (BTMA), per the request of Bern Township. Fortune’s principal then attended a BTMA meeting and advised BTMA of the additional capacity at LBA. The BTMA responded that another developer wanted the same capacity. Fortune and the other developer agreed to split LBA’s costs while reserving their individual rights to the capacity. Although LBA’s engineer confirmed the additional capacity existed, BTMA did not allocate the capacity to either developer, stating it needed an additional $20,000 from each for equipment and engineering work.

As another alternative, Fortune sought wastewater services from Reading Area Water Authority (RAWA). Fortune entered an agreement whereby RAWA agreed to use its eminent domain power to take an easement over land owned by the Greenway Association to enable Waters Edge to connect to RAWA for water and sewer services. After RAWA filed the Declaration of Taking, Bern Township and Greenway entered an agreement of sale purporting to convey the Greenway property to Bern Township for a dollar. That agreement of sale never actually closed and is alleged to be a sham transaction. Bern Township and Greenway thereafter filed preliminary objections to the taking. The trial court sustained the preliminary objections but the Commonwealth Court reversed. Bern Township and Greenway have since petitioned for allowance to the Pennsylvania Supreme Court.

Fortune filed a federal civil rights action under 42 U.S.C. § 1983 against Bern Township, BTMA, LBA, five individually named Bern Township Supervisors, Greenway and the Vice President of Greenway’s Board. Fortune asserted federal claims for procedural and substantive due process, as well as state law claims for intentional interference with contractual relations and civil conspiracy. The defendants all filed motions to dismiss. For the reasons set forth below, the court dismissed Fortune’s federal claims with prejudice and declined to exercise supplemental jurisdiction over the remaining state law claims.

The court first dismissed Fortune’s procedural due process claim. To state a procedural due process claim a plaintiff must allege: 1) deprivation of an individual interest encompassed within the 14th Amendment; and 2) the procedures available did not provide due process of law. Fortune alleged that the municipal defendants deprived it of its legitimate claim of entitlement to wastewater treatment services from LBA without due process of law. The court held that Fortune failed to state a claim for violation of procedural due process because the Pennsylvania Sewage Facilities Act (Act 537) provides a constitutionally adequate procedure known as a special request, by which Fortune could have sought a modification of the Township’s sewage plan and obtained administrative and judicial review of defendants’ denial of wastewater treatment services.

Next the court dismissed Fortune’s substantive due process claim. To establish a claim for substantive due process in the Third Circuit a plaintiff must show: 1) that government actors deprived him of an interest protected by the substantive due process clause; and 2) that the deprivation “shocks the conscience.” Fortune alleged that the municipal defendants violated its substantive due process rights by taking arbitrary and conscience-shocking actions intended to stop Fortune’s development, including: 1) denying Fortune’s request for capacity from the LBA plant; 2) denying Fortune’s application for a private, on-site wastewater treatment plant; 3) delaying implementation of additional capacity Fortune identified at the LBA plant and offering a portion of that additional capacity to another developer; and 4) entering into a sham sales agreement with intent of stopping the Waters Edge development.

The court held that Fortune’s substantive due process claim was foreclosed by Ransom v. Marrazzo, 848 F.2d 398 (3d Cir. 1988), in which the Third Circuit held that entitlement to water and sewer services is not a property interest entitled to substantive due process protection. The court noted that interests protected by the substantive due process clause are narrower than the interests protected by procedural due process. The author questions the court’s conclusion that Fortune’s substantive due process claim was predicated solely on entitlement to wastewater services. Rather, it would appear that Fortune’s fundamental interest in the use and enjoyment of its property was at issue because without wastewater services, Fortune could not make use of its property. Although it did not reach the second prong, the court also found it doubtful that the defendants’ actions rose to the level of “conscience-shocking.”

The Fortune case is one of a number of cases demonstrating the reluctance of federal courts to afford relief under Section 1983 in the land use context.

View the entire May 2013 issue of In the Zone