                                                                                                                           Opinions of the United
2006 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


1-31-2006

R&J Holding Co v. Redev Auth
Precedential or Non-Precedential: Non-Precedential

Docket No. 04-1666




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                                                               NOT PRECEDENTIAL

                       UNITED STATES COURT OF APPEALS
                            FOR THE THIRD CIRCUIT


                                      No: 04-1666


        R & J HOLDING COMPANY; RJ FLORIG INDUSTRIAL COMPANY, INC.,
                                              Appellants
                                     v.

     THE REDEVELOPMENT AUTHORITY OF THE COUNTY OF MONTGOMERY;
     DONALD W. PULVER; GREATER CONSHOHOCKEN IMPROVEMENT CORP.;
                          TBFA PARTNERS, L.P.




                    On Appeal from the United States District Court
                       for the Eastern District of Pennsylvania
                                (D.C. No. 02-cv-09530 )
                     District Judge: Honorable Legrome D. Davis


                      Submitted Under Third Circuit LAR 34.1(a)
                                 on January 10, 2005

           BEFORE: ROTH, CHERTOFF* and RESTANI**, Circuit Judges
                       (Opinion filed January 31, 2006)


                                       OPINION




    *This case was submitted to the panel of Judges Roth, Chertoff and Restani. Judge
Chertoff resigned after submission, but before the filing of the opinion. The decision is
filed by a quorum of the panel. 28 U.S.C. § 46(d).
    **Honorable Jane A. Restani, Chief Judge, United States Court of International Trade,
sitting by designation.
ROTH, Circuit Judge:

       This suit was brought beyond time period prescribed by the governing statute of

limitations. For that reason, and others elaborated below, we will affirm the District

Court’s orders dismissing Appellants’ substantive due process claim.

                    I. Factual Background and Procedural History

       As the facts are well known to the parties, the court gives only a brief description

of the facts and procedural posture of the case.

       Plaintiff R & J Holding Company is a Pennsylvania partnership that owns property

at 110 Washington Street, Borough of Conshohocken, Pennsylvania. Plaintiff RJ Florig

Industrial is a Pennsylvania corporation operating a steel processing business on the

premises (“the Florig Property”). Defendant Redevelopment Authority of the County of

Montgomery (“RACM”) is a state-created public entity. Defendant Donald Pulver is the

principal of the remaining two Defendants: Greater Conshohocken Improvement

Corporation (“GCIC”) and TBFA Partners, LP.

       In 1986, Defendant RACM entered into an agreement with Defendant GCIC.

RACM agreed to acquire properties by eminent domain, agreed to convey them to GCIC

for development, and GCIC agreed to pay all costs incurred and to provide security. In

1993, RACM entered into a second agreement with GCIC. RACM agreed to acquire the

Florig Property by eminent domain. GCIC agreed to cover all direct condemnation costs

in excess of the Commonwealth’s grant. Under the terms of the agreement, RACM was

                                             2
authorized to file a Declaration of Taking for the Florig Property only on the prior written

consent of GCIC. In 1995, RACM entered an agreement with Defendant TBFA: the

Surety Agreement. Under the terms of the Surety Agreement, TBFA was assigned all the

rights of GCIC under the prior 1993 agreement. TBFA agreed to pay funds necessary for

the acquisition of the Florig Property which were not paid by the Commonwealth and

TBFA agreed to provide surety that such payments would be forthcoming when they

became due.

       On July 11, 1996, RACM filed a Declaration of Taking for the Florig Property.

Plaintiffs contested the taking in state court proceedings. Plaintiffs filed preliminary

objections in the state court proceedings on August 26, 1996, and filed amended

preliminary objections on June 4, 1997, seeking to set aside the Declaration of Takings.

Plaintiffs alleged that (1) RACM unlawfully delegated its eminent domain authority to

Defendant Pulver, a private person; (2) RACM acted in bad faith; and (3) the posted

security was inadequate. On December 17, 1998, the Pennsylvania Court of Common

Pleas overruled the objections based on unlawful delegation and bad faith, although

granting additional security. This decision was appealed. On February 13, 2001, the

Commonwealth Court reversed the Court of Common Pleas and held that, inter alia,

RACM unlawfully delegated its eminent domain authority to Pulver. Neither state court

held that Defendants acted with bad faith.

       On March 1, 2001, after the Commonwealth Court announced its decision, RACM



                                              3
entered into a final agreement with GCIC and TBFA.1 That agreement, the March Letter

Agreement, stated that RACM “has acted to appeal the decision of the Commonwealth

Court” to the Pennsylvania Supreme Court. The Complaint indicates at paragraphs 45

and 49 that RACM filed the appeal on March 13, 2001 – after the March Letter

Agreement had been executed. Furthermore, the March Letter Agreement recognized

GCIC as RACM’s developer with regard to the Florig Property, subject to the limitation

that provisions in prior agreements found unenforceable by the Commonwealth Court

were of “no further force and effect unless and until a contrary decision is rendered” on

appeal. On July 19, 2001, the Pennsylvania Supreme Court denied RACM’s petition to

appeal.2

       On December 31, 2002, Plaintiff-Appellants instituted the instant action. In

District Court proceedings, they brought a federal due process claim, a federal takings

claim, and several state law claims. The federal takings claim was dismissed without

prejudice and thereafter pursued in state court proceedings.3


       1
        The date on the letterhead of this agreement was March 1, 2001. But it was
countersigned by Defendant Pulver on behalf of the entities he controlled on March 6,
2001. See Joint Appx. at A-103 to A-104.
       2
         After the Pennsylvania Supreme Court denied RACM’s petition to appeal,
Plaintiffs in the instant litigation filed a fee petition. The fee petition was granted.
Apparently, Appellants recovered $550,000.
       3
       On October 26, 2005, the Commonwealth Court ruled that where a de jure
condemnation is declared unlawful and void, condemnee’s remedy under the Eminent
Domain Code is limited to reimbursable costs and expenses pursuant to 26 P.S. § 1-408.
R & J Holding Co. v. RDA, 885 A.2d 643 (PA Cmwlth 2005)

                                               4
       Regarding the only remaining federal claim, brought under § 1983, that

Defendants violated Plaintiffs’ substantive due process rights by unlawfully delegating

eminent domain authority to Pulver and to entities he controlled, the District Court held

that a two-year statute of limitations applied. Because the Complaint was filed December

31, 2002, violations occurring prior to December 31, 2000, were not actionable.4 The

District Court further held that Plaintiffs knew of their injury “at least by December 17,

1998, when the Court of Common Pleas issued the December Order overruling R & J

Holding’s preliminary objections to the Declaration of Taking.” Dist. Ct. Op. at A-016.

Therefore, the Complaint, filed on December 31, 2002, was not timely. Plaintiff-

Appellants have taken the position that the statute of limitations did not begin to run until

2001 – when the Commonwealth Court reversed the order of the Court of Common Pleas

– thereby finding and clarifying the extent of Appellants’ constitutional injuries. The

District Court rejected this position.

       Furthermore, Plaintiff-Appellants took the position that the March Letter

Agreement, executed less than two years prior to their filing the Complaint in this action,

constituted a continuing violation, again tolling the statute of limitations. The District

Court rejected this argument. The District Court held that the March Letter Agreement

on its face only purported to oblige the parties to perform legal acts, or acts later



       4
        The District Court opinion mistakenly indicated December 31, 1999, rather than
December 31, 2000, as the relevant date. This minor error does not change the District
Court’s analysis.

                                               5
determined to be legal by the Pennsylvania Supreme Court, should the latter overturn any

part of the order issued by the Commonwealth Court. Thus, no continuing violation or

affirmative acts of unlawful conduct were alleged in the two years prior to filing the

Complaint.

       Having rejected both federal claims, the District Court declined to take jurisdiction

of the remaining state law claims. Plaintiffs sought reconsideration. No relief was

granted, although the District Court clarified its prior holding.

       Plaintiff-Appellants have appealed to this court.

                        II. Jurisdiction and Standards of Review

       District Court jurisdiction was founded on 28 U.S.C. § 1331, 42 U.S.C. § 1983,

and 28 U.S.C. § 1367. We have jurisdiction under 28 U.S.C. § 1291.

       The District Court granted Defendant-Appellees’ motion to dismiss and denied

Plaintiff-Appellants’ motion to reconsider. On appeal of a grant of a motion to dismiss,

our standard of review is the same as that applied by the District Court. Our standard of

review of the District Court’s dismissal under Federal Rule of Civil Procedure 12(b)(6) is

plenary. We are required to accept as true all allegations in the complaint and all

reasonable inferences that can be drawn therefrom, viewing them in the light most

favorable to the plaintiff. A Rule 12(b)(6) motion should be granted if it appears to a

certainty that no relief could be granted under any set of facts which could be proved.




                                              6
See Evancho v. Fisher, 423 F.3d 347, 351 (3d Cir. 2005).5

       In District Court proceedings, Plaintiff-Appellants brought a multicount

Complaint. Here, on appeal, they only press their substantive due process claim arising

from Defendants’ unlawful delegation of eminent domain authority to a private

individual. “Substantive due process is an area of law famous for its controversy, and not

known for its simplicity.” DeBlasio v. Zoning Bd. of Adjustment for the Twp. of

W. Amwell, 53 F.3d 592, 598 (3d Cir. 1995) (quoting Schaper v. City of Huntsville, 813

F.2d 709, 716 (5th Cir.1987)), abrogated on other grounds by United Artists Theatre

Circuit, Inc. v. Twp. of Warrington, 316 F.3d 392 (3rd Cir. 2003). Where, as here, a party

makes a § 1983 claim alleging violations of federal due process rights by government

action depriving a party of property, the party must allege, and later prove, that it was

deprived of a property interest by arbitrary or capricious government action. Not all

property interests are protected, notwithstanding recognition of the interest in state law.

Rather, to state a substantive due process claim in violation of the Fourteenth Amendment

as protected by Section 1983, “a plaintiff must have been deprived of a particular quality

of property interest.” DeBlasio, 53 F.3d at 600. The property interest must be in some

sense “fundamental” under the United States Constitution, notwithstanding recognition in



       5
        Generally, “an appeal from a denial of a Motion for Reconsideration brings up
the underlying judgment for review, [therefore] the standard of review [on a motion to
reconsider] varies with the nature of the underlying judgment.” McAlister v. Sentry Ins.
Co., 958 F.2d 550, 552-53 (3d Cir. 1992).


                                              7
state law. Nicholas v. Pennsylvania State University, 227 F.3d 133, 140 (3d Cir. 2000).

Additionally, plaintiff must allege, and later prove, government conduct that shocks the

conscience. See United Artists, 316 F.3d at 400-02. A mere improper motive by

government officials, even if unrelated to the merits of the administrative determination

impinging upon plaintiff’s property rights, is insufficient to establish a substantive due

process claim. Id.

                                      III. Discussion

       As explained above, the District Court held that Plaintiffs knew of their injury “at

least by December 17, 1998, when the Court of Common Pleas issued the December

Order overruling R & J Holding’s preliminary objections to the Declaration of Taking.”

Dist. Ct. Op. at A-016. Therefore, the Complaint, filed on December 31, 2002, based on

a two-year statute of limitations for a § 1983 action, was not timely. Appellants do not

contest the application of a two-year statute of limitations periods, but they have taken the

position that the statute of limitations did not begin to run until 2001 – when the

Commonwealth Court reversed the order of the Court of Common Pleas – thereby finding

and clarifying the extent of Appellants’ constitutional injuries. The District Court

rejected this position. We agree with the position taken by the District Court.

       In Williamson County Regional Planning Comm’n v. Hamilton Bank of Johnson

City, 473 U.S. 172 (1985), the Supreme Court of the United States held that “there is no

requirement that a plaintiff exhaust administrative remedies before bringing a § 1983



                                              8
action. The question of whether administrative remedies must be exhausted is

conceptually distinct, however, from the question whether an administrative action must

be final, before it is judicially reviewable.” Id. at 192 (citations omitted). “While the

policies underlying the two concepts often overlap, the finality requirement is concerned

with whether the initial decisionmaker has arrived at a definitive position on the issue that

inflicts an actual concrete injury . . . .” Id. (emphasis added). The policy requiring

finality, as opposed to exhaustion, is that resolution of the extent of the injury “depends in

significant part, upon an analysis of the effect” of the contested government activity

allegedly causing plaintiff harm. Id. at 200. “That effect cannot be measured until a final

decision is made as to how the regulations will be applied to respondent’s property.” Id.

       In the instant litigation, Appellants take the position that until the intermediate

state court of appeals, the Commonwealth Court, determined that RACM unlawfully

delegated eminent domain powers to Pulver, no final decision had been made under

Williamson. We disagree. Under Williamson, only the decision of the “initial

decisionmaker” must be final. Id. at 192. On these facts, the initial decisionmaker is

RACM.6 Its decision became final for § 1983 purposes once Appellants had notice of the

filing of the Declaration of Taking in 1996.7 Or, at the very latest, with the close of


       6
        The initial decisionmaker was RACM, or, perhaps, it was RACM in conjunction
with Pulver and Pulver controlled entities, which together decided to file the Declaration
of Taking.
       7
       We assume that no administrative review by state agencies of the Declaration of
Taking was possible. See 26 P.S. §§ 1-402, 1-407; cf. Acierno v. Mitchell, 6 F.3d 970

                                              9
discovery in state court trial proceedings, by which time Appellants, exercising due

diligence, should have been aware of all the relevant facts 8 supporting their § 1983 claim.

Cf. Lake v. Arnold, 232 F.3d 360, 367 (3d Cir. 2000) (noting that “Pennsylvania common

law ... recognizes the discovery rule, which tolls the statute of limitations until a plaintiff

actually discovers the harm caused by an earlier inflicted but latent injury”); Corn v. City

of Lauderdale Lakes, 904 F.3d 585 (11th Cir. 1990) (noting that “a federal claim is

generally considered to accrue when the plaintiff knows or has reason to know of the

injury which is the basis of the action”). The state trial court issued its opinion on

December 17, 1998. Therefore, by 1998 Appellants had notice of the final administrative

action causing Appellants’ injury. Thus this 2002 action was brought well beyond the

two-year statute of limitations. We note that in Williamson, the Supreme Court referred

to “judicial procedures” in its discussion of exhaustion, not finality. Williamson, 473 U.S.

at 193. We know of no Third Circuit authority holding that state courts are adjuncts of

administrative agencies for finality or ripeness purposes. We have expressly held

otherwise. See Taylor Investment, Ltd. v. Upper Darby Twp., 983 F.2d 1285, 1293 n.12


(3d Cir. 1993) (“There has been no action by any authoritative body to reverse these
actions, and thus we assume without deciding, plaintiff has a property interest in his
plans” under state law). If such review were possible, then again this § 1983 action
would not be ripe for review even now. And in those circumstances, we could not reach
the merits of the dispute.
       8
         We note that at no point do Appellants even allege that they first discovered
subsequent to the 1998 state trial court decision any fact necessary to put them on notice
that this § 1983 litigation accrued, much less why such a fact could not have been
discovered with the exercise of due diligence prior to 1998.

                                               10
(3d Cir. 1993) (“Of course, an aggrieved party may appeal for judicial review. A claim is

‘final,’ however, after the ... board has rendered a decision. Finality does not require state

court review of the board’s decision.”); id. at 1292 (holding that Williamson’s finality

requirement applies to § 1983 alleging violations of equal protection, procedural due

process, and substantive due process); see also Lauderbaugh v. Hopewell Twp., 319 F.3d

568, 575 (3d Cir. 2003) (“The ripeness doctrine prevents judicial interference until an

administrative decision has been formalized and its effects felt in a concrete way by the

challenging parties.”).

          Appellants point to persuasive authority from another circuit holding that the

“status of [plaintiff’s] property was not determined [for finality purposes] until the state

appellate court” reached its decision. Corn, 904 F.2d at 588. Since Corn was published,

it has been heavily criticized by the circuit judge that wrote the opinion, by other Eleventh

Circuit judges, and by judges within this circuit. See New Port Largo, Inc. v. Monroe

County, 985 F.2d 1488, 1498 (11th Cir. 1993) (Edmondson, J., concurring) (criticizing

Corn); id. at 1495 (Tjoflat, C.J., concurring) (criticizing Corn); Sameric Corp. of

Delaware v. City of Philadelphia, No. Civ. A. 95-7057, 1996 WL 47973, at *3 & n.4

(E.D. Pa. 1996) (Kelly, J.) (rejecting Corn). We see no reason to embrace the much

criticized view announced in Corn, and this panel is, in any event, bound by our prior

precedents distinguishing agency determinations from state court review of final agency

action.



                                               11
       As explained above, Plaintiff-Appellants took the position that the March Letter

Agreement, executed less than two years prior to their filing the Complaint in this action,

constituted a continuing violation, again tolling the statute of limitations. The District

Court rejected this argument. The District Court held that the March Letter Agreement

on its face only purported to oblige the parties to perform legal acts, or acts later

determined to be legal by the Pennsylvania Supreme Court, should the latter overturn any

part of the order issued by the Commonwealth Court. Thus, no continuing violation or

affirmative acts of unlawful conduct were alleged in the two years prior to filing the

Complaint. Additionally, the District Court held:

       [T]he continuing violation doctrine is a narrow and equitable exception.

       The doctrine “should not provide a means for relieving plaintiffs from their

       duty to exercise reasonable diligence in pursuing their claims.” Cowell [v.

       Palmer Twp.], 263 F.3d [286], at 295 [(3d Cir. 2001]. On the contrary, “if

       prior events should have alerted a reasonable person to act at that time the

       continuing violation theory will not overcome the relevant statute of

       limitations.” King v. Township of E. Lambert, 17 F. Supp. 2d 394, 416

       (E.D. Pa. 1998).

       Dist. Ct. Op. at A-019.

       Although the Appellants put forward a substantial response to the District Court’s

first rationale, the only argument put forward by way of response to the District Court’s



                                              12
second rationale is that “the substantive due process claim was not ripe until Plaintiffs’

completed their appeal to the Commonwealth Court and the Commonwealth Court

determined the status of the Florig property, in February 2001. Plaintiffs diligently

brought their federal claims within two years of the Commonwealth Court’s decision.”

Appellants’ Br. at 54; Appellants’ Reply at 9. We have already rejected this argument as

to finality and ripeness. It can hardly resuscitate their claim under the aegis of the

continuing violations doctrine.

       Also troubling for Appellants’ continuing violations argument in support of their

substantive due process claim is their general litigation position that Appellees’ conduct

shocks the conscience, a necessary element to their due process claim. Although this

question was not reached by the District Court, it was briefed before us on appeal. We

note that neither the Court of Common Pleas, nor the Commonwealth Court (nor the

dissent) made any express finding of bad faith against Appellees, although this matter was

briefed in state court proceedings. See Joint Appx. at A-624 (holding by state trial court

that Plaintiff failed to establish bad faith); id. at A-822 to A-833 (state appellate court did

not reach bad faith issue); id. at A-835 to A-841 (dissenters on appeal taking the position

that the state trial court correctly found no bad faith). It seems clear that “bad faith” is

much like the “improper motive” test that this court applied in Bello and its progeny.

That standard was later rejected in favor of the much more burdensome “shocks the

conscience” standard announced in United Artists. See Bello v. Walker, 840 F.2d 1124,



                                              13
1129 (3d Cir.1988) (adopting improper motive test), abrogated by United Artists Theatre,

316 F.3d at 400-02 (adopting shocks the conscience standard). Again, it seems

reasonable that if Appellants could not meet the lower threshold, then they cannot meet

the higher standard.




                                     IV. Conclusion

       For the reasons elaborated above, we will affirm the District Court’s orders

dismissing Appellants’ substantive due process claim. Applications for fees are denied.




                                            14
