Cornell Companies, Inc. v. Borough of New Morgan

512 F.Supp.2d 238

CORNELL COMPANIES, INC., Plaintiff, v. BOROUGH OF NEW MORGAN, et al., Defendants.

Civil Action No. 06-4113.

United States District Court, E.D. Pennsylvania.

May 31, 2007.

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Antoinette R. Stone, Brown Stone Nimeroff L LC, Brian J. McCormick, Jr., Sheller PC, H. Marc Tepper, Buchanan Ingersoll, P.C., Philadelphia, PA, Peter J. Ennis, Buchanan Ingersoll & Rooney P.C., Pittsburgh, PA, for Plaintiff.

Curtis P. Cheyney, III, Swartz Campbell & Detweiler, Philadelphia, PA, Mark F. Himsworth, Hamburg Rubin Mullin Maxwell & Lupin, Lansdale, PA, James C Sargent, Jr., Law Offices of "Windle & McErlane, P.C., Thomas P. Hogan, Jr., Lamb McEriane PC, West Chester, PA, for Defendants.

OPINION

STENGEL, District Judge.

Cornell Companies, Inc. provides correction, treatment, and rehabilitation services for juveniles who have been adjudicated delinquent. The New Morgan Academy is a secure care facility for juvenile offenders owned and operated, by Cornell in the Borough of New Morgan. The Academy opened in 2000, but closed in 2002 because of some operational and administrative difficulties. Cornell is trying to re-open the New Morgan facility, but the Borough is now opposed. In this lawsuit, Cornell claims that the Borough, its council, and various public officials have engaged in a course of improper acts and unconstitutional behavior in an attempt to prevent the Academy from reopening. The defendants argue that Cornell's claims are unripe, unmeritorious, barred under various immunity doctrines, or not specific enough. The Borough contends that Cornell is trying to circumvent the local zoning process with its federal complaint. The defendants have filed several motions to dismiss Cornell's complaint. For the reasons set forth below, I will grant the motions in part and deny them in part.

TABLE OF CONTENTS
  I.  Background................................................................250
      A.  Initial Opening of New Morgan Academy.................................250
      B.  Sewage Facilities Agreement and Maintenance Agreement.................250
      C.  Cornell's Attempt to Reopen and the Defendants' Interference..........251
      D.  Defendants' Promotion of Third Parties' Interests.....................252
 II.  Procedural History........................................................253
III.  Rule 12(b)(6) Motion to Dismiss Standard..................................254
 IV.  Discussion of Borough Defendants' Motion to Dismiss.......................255
      A.  Plaintiffs Constitutional Claims......................................255
          1.  Ripeness..........................................................255
              a. Substantive Due Process........................................255
                 i. Facial Challenge to Ordinance...............................256
                ii. Course of Conduct Claim ....................................257
              b. Equal Protection Claim ........................................258
              c. Procedural Due Process Claim...................................258
              d. Remaining Constitutional Claims................................259
          2.  Merits of Substantive Due Process Claims..........................259
              a. Facial Attack of 2006 Amendment................................259
              b. Course of Conduct Claim........................................261
          3.  Merits of Remaining Constitutional Claims.........................262
       B.  Count Seven's Claim Under Title II of ADA............................262
       C.  Count Nine's Breach of Contract Claim ...............................265
       D.  Count Ten's Unjust Enrichment Claim..................................265
       E.  Count Twelve's Promissory Estoppel Claim.............................266
       F.  Count Thirteen's Zoning Estoppel Claim...............................267
  V.  Discussion of Individual Defendants' Motion to Dismiss....................268
      A.  Notice Pleading Requirement of the Federal Rules......................268
      B.  Count Eight's Tortious Interference with Prospective Contractual
          Relationship..........................................................270
      C.  Count Eleven's Defamation Claim ......................................271

      D.  Estoppel Claims Against Individual Defendants.........................272
      E.  Immunity Defenses.....................................................273
          1. Legislative Immunity...............................................273
          2. High Public Official Immunity......................................274
          3. Pennsylvania Government Immunity Act...............................276
 VI.  Motion for Expedited Discovery and Expedited Consideration................277
VII.  Conclusion................................................................278

I. BACKGROUND¹

A. Initial Opening of New Morgan Academy

Cornell is an organization that builds and operates secure care facilities and detention centers throughout the country. In 1998, Cornell began the process of establishing a secure care facility for juvenile offenders in the Borough of New Morgan, Berks County.² In connection with the Borough's consideration of Cornell's request to construct a center, the Borough held a public hearing. At the hearing, Cornell explained to the community its plan to open a juvenile secure care facility which would include a fully accredited high school. In addition, prior to any approval by the Borough, representatives of the Borough Council toured Cornell's facility in South Mountain, Pennsylvania. Cornell represented to the defendants that its Borough of New Morgan facility would be similar to the South Mountain program.

Cornell was successful in its efforts. First, the Borough amended its zoning ordinance to allow the project to proceed. The Borough changed the definitions for "School" and "Boarding School" and permitted a "Boarding School or similar facility" by right in the "I" Industrial Zoning District. Next, Cornell bought land in the Borough and built the New Morgan Academy for $53 million. Eventually, Cornell obtained all the necessary state licenses and began operating the Academy in October 2000. Due to "problems with discipline and improper conduct by the staff," however, Cornell voluntarily shut down the Academy and relinquished its license to the Pennsylvania Department of Public Welfare ("DPW") on October 27, 2002.

B. Sewage Facilities Agreement and Maintenance Agreement

The Borough and Cornell entered into a Sewage Facilities Agreement ("SFA") and a Maintenance Agreement ("MA"). Under the SFA, Cornell agreed to design and construct a sewage facility at its own expense. In exchange, the Borough agreed to accept the dedication of the facility upon its completion and operate it going forward. In addition, the Borough was to reimburse Cornell within ten years for the cost it incurred in the construction of the sewage facility, mainly through mandatory hookup and user fees. Under the MA, Cornell would be liable for the failure of the sewage treatment plant to operate in accordance with approved plans, if the Borough reported such failure within 18 months of the date of the Maintenance Agreement.

In the summer of 2000, Cornell completed the construction of the sewage facility. The facility met the specifications approved by the Borough and the Pennsylvania Department of Environmental Protections and cost $2.15 million. The Borough, however, refused to accept dedication of the facility and refused to release Cornell from its maintenance bond under the MA. The Borough falsely claimed that the facility had flaws for which Cornell was responsible under the SFA and MA. The Borough took the additional step of misrepresenting to state agencies the condition and functionality of the sewage facility.

The Borough has failed to comply with its reimbursement obligations under the SFA. The Borough has not made any payments to Cornell and it has not required all Borough establishments to connect to the public sewer system. Due to the lack of additional users, the Borough has been billing Cornell for the operation and maintenance of the sewage facility at a rate of $13,000 per quarter and Cornell has paid the Borough at least $367,000 for the operation of the facility.

C. Cornell's Attempt to Reopen and the Defendants' Interference

In 2005, Cornell decided to resume the operation of the Academy under new leadership. Cornell informed the defendants of this decision several times over the next year and the defendants did not respond in any way. Beginning in June of 2006, the defendants began to interfere with Cornell's efforts to reopen the Academy.

First, Cornell began the process of obtaining the necessary licenses from the state. Cornell alleges that the defendants interfered with its efforts to obtain state approval by sending an ex parte letter to the Pennsylvania Department of Education complaining about the Academy. Despite these statements by the defendants, the state awarded Cornell the certificates necessary to reopen the Academy.

Second, on August 15, 2006, the Borough Council held a meeting in which an amendment ("2006 amendment") to the Borough's Zoning Ordinance was passed to specifically prohibit the operation of the Academy in its current location. According to Cornell, the defendants deliberately did not inform Cornell of the amendment or of the hearing, even though Cornell had repeatedly asked the defendants if there would be any impediments to the reopening of the Academy. In fact, the defendants continued to withhold information about the amendment from...