Frall Developers, Inc. v. Board of County Commissioners

Full title: FRALL DEVELOPERS, INC. v. BOARD OF COUNTY COMMISSIONERS FOR FREDERICK…

Court: United States District Court, D. Maryland

Date published: Sep 30, 2008

Civil Action No. CCB-07-2731 (D. Md. Sep. 30, 2008)

Opinion

Civil Action No. CCB-07-2731.

September 30, 2008

MEMORANDUM

CATHERINE BLAKE, District Judge

I. SUMMARY

Plaintiff Frall Developers, Inc. ("Frall") has brought suit against the Board of County Commissioners for Frederick County ("the Board") as a result of the Board's allegedly unconstitutional denial of plaintiff's water and sewer developer reclassification request for its proposed subdivision. (Compl. ¶¶ 3, 6.) Plaintiff alleges that, as a result of the denial, it could not satisfy one of the conditions precedent set forth in a Letter of Understanding ("LOU") executed between plaintiff and the Frederick County Planning Commission ("the Planning Commission"), and therefore cannot proceed with development. ( Id. ¶ 79.) Frall asserts essentially four causes of action for damages, including breach of contract (Count IV), unconstitutional impairment of contract under 42 U.S.C. ¶ 1983 (Count II), taking of property and inverse condemnation in violation of the United States and Maryland Constitutions (Counts III, V, and VI), and a violation of plaintiff's substantive due process rights under the United States and Maryland Constitutions (Counts III, V, and VI).¹ ( Id. ¶¶ 69-92.) In addition, Frall seeks an injunction ordering the Board to grant Frall's water and sewer developer reclassification (Count VII) and a declaratory judgment that the preliminary plat of its proposed subdivision is still valid (Count I). ( Id. ¶¶ 61-68, 93-96.)

1 Although Counts III, V, and VI are entitled "Maryland Declaration of Rights," " 42 U.S.C. § 1983 — Due Process," and "Inverse Condemnation," respectively, each count repeats essentially two claims: (1) a takings claim (brought under the theory of inverse condemnation), and (2) a substantive due process claim. ( See Compl. ¶¶ 74, 76, 82, 85, 87, 89, 91.)

The Board has moved to dismiss plaintiff's claims on several grounds. First, the Board argues that Frall's breach of contract claim fails because the LOU does not require the Board to reclassify the public water and sewer designations for the property. (Def.'s Mem. at 2.) Second, the Board contends that Frall's impairment of contract claim should be dismissed because 42 U.S.C. § 1983 does not provide relief for an impairment of contract, and because plaintiff's demand for monetary damages "belies" the impairment of a contract. ( Id.) Third, the Board moves to dismiss plaintiff's takings and inverse condemnation claims because it argues that access to public water and sewer service is not a constitutionally protected property interest, and that there has been no government taking. ( Id. at 2-3.) Fourth, the Board argues that its denial of plaintiff's reclassification request was not arbitrary and capricious, and thus did not violate plaintiff's substantive due process rights. ( Id. at 21.) Finally, the Board argues that plaintiff has not met the requirements for injunctive or declaratory relief. ( Id. at 3.)

For the reasons detailed below, the court will grant the defendant's motion to dismiss plaintiff's breach of contract claim, impairment of contract claim, and procedural due process claims (takings and inverse condemnation). However, the court will not dismiss plaintiff's substantive due process claim and its requests for injunctive and declaratory relief.

II. BACKGROUND

The facts, as alleged in plaintiff's complaint, are as follows. Frall owns an approximately 34.4 acre development property, known as "Supply to Barren," located on the west side of Yeagertown Road, north of Maryland Route 144, in Frederick County, Maryland (the "County"). (Compl. ¶ 5.) Frall has tried unsuccessfully to develop this residentially zoned parcel since 1999. (Pl.'s Opp'n at 1.) Frall's development requests for a twenty-four lot subdivision in 1999 and a four lot subdivision in 2000 were denied by the Planning Commission.² After Frall sought judicial review of the Planning Commission's decision, the Circuit Court for Frederick County reversed the decision on April 6, 2001 and remanded the matter for a more detailed statement of the basis for the denial of the application. (Compl. ¶ 14.) On remand, on December 12, 2001, the Planning Commission granted conditional approval of the four-lot plan subject to the requirement that Frall improve the entirety of Yeagertown Road to County standards.³

2 In February 1999, Frall submitted a request for approval to the Planning Commission of a combined preliminary/cluster plan for twenty-four lots on Supply to Barren. (Compl. ¶ 9.) Included in Frall's application were "detailed" studies of the water and sewer systems and the traffic impact on Yeagertown Road. ( Id. ¶ 10.) On December 8, 1999, the Planning Commission denied Frall's plan because a three-year Adequate Public Facilities Ordinance ("APFO") test for schools could not be met. ( Id. ¶ 11.) Plaintiff alleges that the Planning Commission imposed this test on the property notwithstanding that there was no requirement at that time for the application of a three-year test, and the proposed development met the one-year APFO test for schools. ( Id.) Following the denial, Frall revised its plan to a four-lot minor subdivision and resubmitted it to the Planning Commission. On May 10, 2000, the Planning Commission, at a public hearing, also denied this plan, citing the inadequacy of Yeagertown Road as justification. ( Id. ¶ 13.)

3 Plaintiff alleges that this requirement was created notwithstanding that the subdivision only abutted a small portion of the road and the traffic study demonstrated at most only minimal impact on the road as a result of the proposed development, even with twenty-four lots. (Compl. ¶ 15.)

Frall again sought judicial review of the Planning Commission's determination, and on November 27, 2002, the Circuit Court for Frederick County again reversed the Planning Commission's decision. ( Id. ¶ 16.) The court found that the Planning Commission failed to perform the proportionality analysis required by Dolan v. City of Tigard, 512 U.S. 374 (1994), which held that assessment improvements required by local governments of developers must correspond to the impact of the proposed development. (Compl. ¶ 16, Ex. 5.) The Circuit Court remanded the case to the Planning Commission to make the necessary factual determinations and to perform the proportionality analysis. ( Id.) On November 12, 2003, the Planning Commission held another public hearing on Frall's application. ( Id. ¶ 17.)

In an "attempt to put an end to the litigation," Frall proposed a settlement to the Planning Commission in December 2003. (Pl.'s Opp'n at 1; Compl. ¶ 18, Ex. 6.) Frall proposed that the Planning Commission permit Frall's original twenty-four lot subdivision to go to "record plat" so long as Frall met the conditions to be set forth in a Letter of Understanding ("LOU") between plaintiff and the Planning Commission. ( Id. ¶ 18.) Although the Planning Commission accepted Frall's proposal on January 14, 2004, it did not grant Frall conditional preliminary plan approval until a public meeting on August 18, 2004.⁴ ( Id. ¶ 22, Ex. 15.) Only after another year, ⁵ on August 26, 2005, did the Planning Commission notify the plaintiff of final preliminary plat approval, enclosing documents indicating a final approval date for the preliminary plat of August 16, 2005. ( Id. ¶ 23, Ex. 16.) Almost seven more months passed⁶ before Frall and the Planning Commission entered into their LOU on March 15, 2006. ( Id. ¶ 36, Ex. 30.) The LOU incorporated as "Exhibit A" the Planning Commission's March 23, 2004 letter ( id. Ex. 8) and as "Exhibit B" the Planning Commission's erroneously dated February 2, 2004 letter ( id. Ex. 14).⁷ ( Id. Ex. 30.)

4 After Frall inquired in February 2004 with the Office of the Frederick County Attorney ("County Attorney") as to the status of the resolution by the Planning Commission agreeing to the settlement, (Compl. ¶ 20, Ex. 7), the Planning Commission commemorated its agreement to this proposal in its March 23, 2004 letter to Frall. ( Id. ¶ 20, Ex. 8.) Numerous matters remained unclear under that commemorative letter, however, including water and sewer classification. ( Id. ¶ 21.) Frall sought clarification in its April 20, 2004 letter to the County Attorney. ( Id. ¶ 21, Ex. 11.) The Planning Commission, however, allegedly furthered the confusion by not conveying the results of that meeting to its planning staff. ( Id. ¶ 21, Exs. 12-13.) Finally, the County Attorney provided written clarification, in a letter erroneously dated February 2, 2004. ( Id. ¶ 21, Ex. 14.) On August 17, 2004, Frall sent the County Attorney a draft LOU. ( Id. ¶ 25, Ex. 19.) The County Attorney responded but included items allegedly outside the agreed upon settlement. ( Id. ¶ 25, Ex. 20.)

5 On September 13, 2004, the Planning Commission provided a draft resolution that allegedly did not reflect the agreement reached at the hearings. (Compl. ¶ 26.) That same day, Frall wrote the County Attorney: "It appears that the County had and continues to have no real intention of resolving this matter and the County is acting in bad faith. The draft approval letter I just reviewed reinserts items that were previously specifically rejected. . . ." ( Id. ¶ 27, Ex. 21.) On October 12, 2004 and February 8, 2005, Frall again corresponded with the County Attorney, provided a revised LOU and requested the Planning Commission to call after its review of the documents. ( Id. ¶¶ 28-29, Exs. 22-24.) On April 29, 2005, Frall sent another letter to stress the importance of concluding the agreement as soon as possible, and to request advice on what remained to be done. ( Id. ¶ 30, Ex. 25.) On July 19, 2005, Frall sent a new revision of the LOU, requesting a response upon review. ( Id. ¶ 31, Ex. 26.)

6 On September 13, 2005, Frall wrote the County Attorney, requesting a status report on the LOU and noting that Frall had not yet received feedback on the draft LOU sent in July. (Compl. ¶ 32, Ex. 27.) On November 29, 2005, Frall again wrote to the County Attorney requesting action. ( Id. ¶ 33, Ex. 28.) Shortly thereafter, Frall requested a meeting with the County Attorney to conclude the written agreement; the meeting was held on February 8, 2006. ( Id. ¶ 34.) On March 14, 2006, Frall again wrote the County Attorney, following up on a letter of February 9, 2006, mentioning that Frall had been waiting since the meeting on February 8, 2006 to formalize the agreed-upon LOU. ( Id. ¶ 35, Ex. 29.) Frall advised that it had called several weeks earlier regarding issues relating to water and sewer reclassification and had still not received a response. ( Id.)

7 In the LOU, plaintiff and the Planning Commission first recited and incorporated the details of their dealings since February 1999, including plaintiff's development requests, the Planning Commission's denials, and the Circuit Court for Frederick County's rulings. (Compl. Ex. 30, at 1.) This history was provided presumably in the context of Exhibit A's statement that "[t]he parties will enter into a settlement agreement and stipulation of dismissal for the pending Circuit Court appeal, Case No. 10-C-02-0082 in the Circuit Court for Frederick County, Maryland." ( Id. Ex. 8, at 2.)

In the LOU and the two attached exhibits, Frall and the Planning Commission agreed that four essential conditions must be met for Frall to record its subdivision. The condition at the center of this litigation stated that "Frall may record the twenty-four lot plat considered by [the Planning Commission] in December 1999 as modified and approved for recordation by [the Planning Commission] as reflected in Exhibits A and B provided staff comments are addressed." (Id. Ex. 30, at 2 (emphasis added).) In Exhibit A, the Planning Commission approved the four lot subdivision

with staff conditions 1 through 4 as previously stated in the December, 2001 decision of [the Planning Commission] as follows: (1) Prior to recordation, obtain a sewer classification to the S-3 (Dev.) classification; (2) Comply with road improvements to Yeagertown Road, as required by DPW [Department of Public Works]; (3) Comply with the FRO regulations; (4) Comply with Agencies' comment, and; (5) Revised as follows: The applicant will complete all on-site infrastructure necessary to serve all 24 lots.

( Id. Ex. 8, at 1 (emphasis added).)⁸

8 The other three essential conditions for recordation provided that: (1) "Frall shall pay a total of $500,000 to Frederick County for road improvements at a rate of $20,800 per lot. Of the $500,000, $83,200 will be paid at such time as the twenty four lot plat goes to record. . . . After the plat goes to record, Frall shall be permitted to convey no more than four identified lots." (Compl. Ex. 30 at 2.); (2) "Frall will not convey, sell, transfer or assign any of the remaining twenty lots until all twenty lots meet the APFO [Adequate Public Facilities Ordinance, Frederick County Code §§ 1-20-1 et seq.] approval for schools. Upon issuance of the first of the building permits for the remaining twenty lots, the remaining $416,800 shall be paid and all conditions under Exhibit A as modified in Exhibit B for development of the twenty-four lot plan identical to that proffered by Frall in 1999, other than road improvements, shall be satisfied." ( Id.); and (3) "Other than that expressly set forth herein relating to schools, the property shall not be subject to restrictions imposed by or terms and conditions otherwise set forth in any Adequate Public Facilities Ordinance or other subdivision regulations which may have the effect of restricting or delaying development of the Property, which such law or ordinance may be passed by the County subsequent to May 12, 2004." ( Id.)

Knowing that it could not proceed with its development plan absent sewer reclassification from S-5 to S-3 (as provided in Exhibit A of the LOU), on September 28, 2004, Frall sought reclassification of the property from S-5/W-5 to S-3/W-3.⁹ ( Id. ¶¶ 38-39, Ex. 31.) Frall paid $2,610 with its request for reclassification, and obtained engineering work in the amount of $29,000 for the re-alignment of Yeagertown Road. ( Id. ¶¶ 37, 39-40.) Frall also built the sewer line from an adjacent development and ensured water was available. ( Id. ¶ 39.) The Planning Commission heard the application and approved the change for S-5/W-5 to S-4/W-4 in December 2004. ( Id. ¶ 40.) The Board then heard the request and approved the reclassification to S-4/W-4 in February 2005. ( Id. ¶ 40, Ex. 32.)

9 A designation of S-5/W-5 indicates that between seven and twenty years will pass prior to connection of the sewer and water lines; a designation of S-4/W-4 indicates a connection time between four and six years; and a classification of S-3/W-3 indicates that public facilities will be complete and operational within three years. (Def.'s Mem. Ex. A (Frederick County Water and Sewage Plan) at 16-18.)

Having obtained the necessary S-4/W-4 classification as a prerequisite to S-3/W-3 classification for approval of final plats, and having completed and gained approval of the required improvement plans on January 19, 2007, Frall submitted its next request for reclassification for S-4/W-4 to S-3/W-3 on February 5, 2007, and paid another $2,610 fee. ( Id. ¶ 41, Ex. 33.) The planning staff and Division of Utilities and Solid Waste Management ("DUSWM") reviewed Frall's application and recommended approval of the request. ( Id. ¶ 42, Ex. 34.) On May 16, 2007, the planning staff presented the application to the Planning Commission, which voted to approve the reclassification to S-3/W-3 and transmitted the file to the Board for review. ( Id. ¶ 43, Ex. 35.)

On July 17, 2007, at public hearing before the Board, plaintiff presented the request for reclassification of the 34.4 acre property from the S-4/W-4 Developer category to the S-3/W-3 Developer category.¹⁰ The Board, by a vote of 3-2, directed the Deputy County Attorney to prepare a resolution denying approval.¹¹ ( Id. ¶¶ 6, 45; Ex. 2 at 4, 35-36.) On August 30, 2007, the Board denied Frall's request for reconsideration by a vote of 5-0 and approved Resolution 07-43 denying the request for reclassification because the Board concluded that three of the seven requirements for S-3/W-3 reclassification had not been met.¹² ( Id. Ex. 3, at 2-4; Ex. 36.) First, the Board found that Frall had not furnished a study of the components of the existing water and sewer wastewater system "in conjunction with the Adequate Public Facilities Ordinance [("APFO")] as required." ( Id. Ex. 3, at 2; Def.'s Mem. Ex. B (APFO, Frederick County Code §§ 1-20-1 et seq.).) Second, the Board found that a preliminary subdivision plan had not been approved by the Planning Commission because "the proposed subdivision did not receive APFO approval for schools and water and sewer, both of which are statutory prerequisites for preliminary subdivision plan approval." (Compl. Ex. 3, at 3 (emphasis in original).) Finally, the Board found that the documents and testimony had failed to establish that the applicant had obtained "approved improvement plans and an approved cost proposal for all improvements required to bring the water and sewer service to the site." ( Id.)

10 The Water and Sewer Reclassification Checklist used by the Board included seven requirements for S-3 Dev./W-3 Dev. (Compl. Ex. 36.) The Water and Sewerage Plan listed nine requirements, which included the seven requirements on the Checklist and two additional requirements not pertinent to this litigation. (Def.'s Mem. Ex. A (Frederick County Water and Sewage Plan) at 17-18.)

11 Plaintiff alleges that President of the Board, Jan Gardner, was particularly critical of Frall's development proposals. Plaintiff states: "Searching for a way to justify her negative position[,] [Gardner] asserted that the [S-3/W-3 reclassification] should be denied on the purported basis that plaintiff had failed to submit a required study." (Compl. ¶ 45, Ex. 2 at 25-26.) Furthermore, plaintiff alleges that in voting against Frall's development proposal on December 8, 1999, Gardner, as the County Commissioner representative on the Planning Commission, insisted on the application of the three-year APFO school test to the property, notwithstanding that there was no requirement at that time for the application of a three-year test. ( Id. ¶ 12.) On May 10, 2000, Gardner voted against Frall's revised plan, relying on the purported inadequacy of the road, allegedly notwithstanding the fact that the Frederick County engineer had testified that the four-lot development would have no impact on the road. ( Id. ¶ 13.) As plaintiff points out, when the Planning Commission accepted Frall's settlement agreement on January 14, 2004, Gardner was no longer the County Commissioner representative. ( Id. ¶ 19.)

12 Frall alleges that the Board's vote to deny approval of S-3/W-3 reclassification was also reconsidered by the Board at its August 30, 2007 meeting. (Compl. ¶ 47.) Frall contends that the Board "disenfranchised" Frall by not giving it notice of the time of reconsideration, and thus not allowing Frall the opportunity to present its claims in support of reconsideration based on Commissioner Gardner's alleged misrepresentation of the record that no study had been done. ( Id. ¶ 48.)

Following the denial of reclassification, the County Attorney informed Frall by letter on August 24, 2007 that Frall's Supply to Barren preliminary plat was no longer valid. ( Id. ¶ 56, Ex. 4.) According to the County Attorney, the preliminary plat, which was conditionally approved on August 18, 2004 by the Planning Commission, expired after three years.¹³ ( Id.)

13 Frederick County Code § 1-16-71(p) (2000), in effect when the preliminary plat was approved, provides that "[p]reliminary plat approval shall become null and void at the end of three (3) years from the date of approval." (Compl. Ex. 38.)

To date, plaintiff has allegedly spent over $440,000 to develop its property, not including the costs of land acquisition. ( Id. ¶ 60.) Frall filed the instant lawsuit against the Board on October 8, 2007 as a result of the Board's decision to deny plaintiff's request to reclassify the public water and sewer service for Supply to Barren. Frall alleges that the Board's decision violated Frall's contract and property rights under the United States and Maryland Constitutions, and accordingly seeks injunctive relief ordering the Board to reclassify the property as requested, damages of $4.25 million, and attorneys' fees under 42 U.S.C. § 1988. ( Id. ¶¶ 61-96.)

III. ANALYSIS A. Legal Standard

In Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955, 1974 (2007), the Supreme Court held that, in order to survive a motion to dismiss, a plaintiff must plead plausible, not merely conceivable, facts in support of her claim.¹⁴ The complaint must state "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. . . . Factual allegations must be enough to raise a right to relief above the speculative level. . . ." Id. at 1965. "[O]nce a claim has been stated adequately, it may be supported by showing any set of facts consistent with the allegations in the complaint." Id. at 1969. In considering a motion to dismiss, a court must "accept the factual allegations of the complaint as true and must view the complaint in the light most favorable to the plaintiff." GE Inv. Private Placement Partners II v. Parker, 247 F.3d 543, 548 (4th Cir. 2001).

14 Prior to Twombly, Conley v. Gibson, 355 U.S. 41, 45-46 (1957), set the standard, granting 12(b)(6) dismissals for failure to state a claim only where "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief."

B. Breach of Contract (Count IV)

Frall alleges that the Board breached the LOU by denying Frall's request for water and sewer developer reclassification. (Compl. ¶ 79.) Specifically, Frall alleges that the Board "has not acted under the LOU in good faith but has breached the LOU making it impossible for plaintiff to perform its condition precedent [S-3 classification] and gain the bargained-for benefit." ( Id. ¶ 80.)

The Board moves to dismiss Frall's claim on three grounds. First, the Board argues that it is not a signatory on the LOU, which was executed only by and between plaintiff and the Planning Commission, and therefore cannot be construed as a contract with the Board. (Def.'s Mem. at 13.) Second, even if it were considered a party to the LOU, the Board contends that nothing in the LOU requires it to reclassify plaintiff's water and sewer designation to S-3/W-3 or to exempt Frall from the normal review and approval process for preliminary subdivision plans. ( Id. at 14-16.) Rather, the Board submits that the LOU merely set forth certain criteria, including S-3 classification, that Frall was required to satisfy prior to recordation of the first four lots. ( Id. at 13.) Because the Board concluded that Frall did not meet three of the requirements for S-3 classification, the Board asserts that it was justified in denying Frall's request. ( Id.) Finally, the Board argues, even assuming that the terms of the LOU directed the Board to reclassify Frall's water and sewer designation, the Planning Commission has no authority to bind the Board, and "therefore the LOU could not, as a matter of law, usurp the [Board's] legislative authority and commit the County's governing body to alter the sewer designation under the Water and Sewerage Plan [Def.'s Mem. Ex. A]." ( Id. at 16.)

It is well established that "Maryland follows `the principle of the objective interpretation of contracts.'" Wash. Metro. Area Transit Auth. v. Potomac Inv. Prop., Inc., 476 F.3d 231, 235 (4th Cir. 2007) (quoting Walker v. Dep't of Human Res., 842 A.2d 53, 61 (Md. 2004)). The purpose of contract interpretation "is to determine and effectuate the intent of the parties, and the primary source for identifying this intent is the language of the contract itself." Id. (internal quotations and citation omitted). "To prevail in an action for breach of contract, a plaintiff must prove that the defendant owed the plaintiff a contractual obligation and that the defendant breached that obligation." Taylor v. NationsBank, 776 A.2d 645, 651 (Md. 2001) (emphasis added).

The court concludes that Frall's breach of contract claim must be dismissed on the grounds the Board has asserted. As an initial matter, because the Board was not a signatory to the contract, it did not owe any contractual obligation to Frall, and thus also did not breach any obligation. See Taylor, 776 A.2d at 651. The LOU explicitly stated that "[i]t is . . . hereby agreed and acknowledged by and between, [Frall] and [the Planning Commission], that for good and valuable consideration, including the resolution of outstanding litigation between Frall and [the Planning Commission] that the parties hereto enter into this [LOU]." (Compl. Ex. 30, at 1.) Plaintiff argues, however, that the Board "is the appropriate defendant in an action against the County" and cannot "escape contractual obligations incurred in settling litigation by simply pleading that the resolution only involved a different branch or arm of County government." (Pl.'s Opp'n at 34, 38.)

There are two fallacies in plaintiff's argument. First, in specifying that "[a]ny person aggrieved by any action of the Planning Commission pursuant to this chapter may appeal to the Circuit Court," the Frederick County Code ("Fred. Co. Code") makes clear that private parties can bring suit directly against the Planning Commission. Fred. Co. Code § 1-20-22(A). Accordingly, the Board is not "the appropriate defendant" in a breach of contract action against the Planning Commission, as plaintiff asserts.¹⁵ ( See Pl.'s Opp'n at 34.) Second, it seems clear that Frall is alleging the Board, not the Planning Commission, breached the contract, because the Board was the entity that denied S-3 classification. Thus, the Board would not be "escap[ing] contractual obligations" that the Planning Commission breached, as plaintiff's argument implies. ( See id. at 38.) Regardless of the flaws of plaintiff's argument, the Board was not a party to the contract, and thus cannot be liable for breach.

15 Plaintiff is correct that Fred. Co. Code § 1-20-22(B) provides that the Board "may file a responsive pleading and be a party to or take an appeal to the Circuit Court of the county. . . ." (Pl.'s Opp'n at 34 (citing Fred. Co. Code § 1-20-22(B)).) That the Board has the option to intervene in litigation between a private party and the Planning Commission does not, however, mean that it is responsible for the Planning Commission's contractual obligations.

Even assuming the Board could be liable for the contractual obligations of the LOU, the court finds no breach. The LOU expressly stated that "Frall may record the twenty-four lot plat . . . provided staff comments are addressed." (Compl. Ex. 30, at 2 (emphasis added).) In the Planning Commission's staff comments, it made clear that "[t]he four lot subdivision is approved with staff conditions 1 through 4 . . . as follows: 1. Prior to recordation, obtain a sewer classification to the S-3 (Dev.) classification. . . ." ( Id. Ex. 30, Attach. A at 1.) According to the plain language of the contract, the LOU did not require the Board to grant Frall's reclassification request or exempt Frall from the normal procedures and requirements of S-3 classification. Although Frall is correct that S-3 classification was a "condition precedent" to recordation of the preliminary plat, ¹⁶ it was a condition that Frall, not the Board, was obligated to satisfy before recordation. ( See Compl. Ex. 36.) Accordingly, the Board could not be liable for breach of contract as a result of denying S-3 classification.

16 A "condition [precedent] is an event, not certain to occur, which must occur, unless its non-occurrence is excused, before performance under a contract becomes due." Chesapeake Bank of Md. v. Monro Muffler/Brake, Inc., 891 A.2d 384, 391 (Md. Ct. Sp. App. 2006) (quoting Restatement (Second) of Contracts § 224 (1981)). Frall contends that the "County cannot . . . prevent Frall's performance of the condition and then claim . . . [that] it has no contractual obligation to Frall because Frall failed to meet a condition." (Pl.'s Opp'n at 38 n. 24 (citing Baltimore Teachers Union v. Mayor and City Council of Baltimore, 671 A.2d 80, 90 (Md.Ct.Spec.App. 1996) ("where a promise is conditioned upon the happening of an event, the condition is dispensed with if the promisor prevents the event from happening")).) However, in contrast to Baltimore Teachers Union, in the instant case the Board did not improperly "prevent" the condition from occurring if it was justified in denying Frall's S-3 classification request. Accordingly, only if the Board acted arbitrarily and capriciously in denying classification (discussed infra Part III(D)(2)) would Frall's argument have merit.

As Frall clarifies in its Opposition, however, the gravamen of its claim is not that the LOU "binds the County in connection with its review of Frall's water and sewer reclassification," but rather that the Board "had no lawful basis to deny [Frall's] request for reclassification." (Pl.'s Opp'n at 34.) This allegation — like Frall's allegation that the Board acted without "requisite good faith and fair dealing" (Compl. ¶ 79) — does not state a claim for breach of contract, however, because it does not allege that the Board failed to perform a contractual obligation. See Taylor, 776 A.2d at 651. Instead, such allegations go to whether the Board denied Frall due process by arbitrarily and capriciously denying reclassification. Accordingly, the court will address these allegations insofar as they are pled as part of Frall's remaining claims ( see infra Part III(D)).¹⁷

17 The Board's third argument — that even assuming the terms of the LOU directed the Board to reclassify Frall's water and sewer designation, the Planning Commission has no authority to bind the Board (Def.'s Mem. at 16) — will almost certainly be moot because it is unreasonable to read the LOU as requiring the Board to grant Frall's reclassification request. Nevertheless, both the Maryland Code and the Fred. Co. Code make clear that the Board has ultimate authority in planning decisions. Fred. Co. Code § 1-13-21 provides that "[t]he County Planning Commission [the Planning Commission] shall have all the powers, functions and duties provided for in Md. Ann. Code, Art. 66B § 3.05," which states that the Planning Commission "shall make and approve a plan which the commission shall recommend to the local legislative body [the Board] for adoption," Md. Code Ann., Art. 66B § 3.05(a)(1) (emphasis added). Furthermore, the Maryland Code provides that the "county governing body" — the Board — has the ultimate authority to administer the Water and Sewerage Plan mandated by state law. See generally Md. Code Envir., § 9-503. Accordingly, the Planning Commission does not have the statutory power to require the Board to grant the reclassification. See also U.S. Trust Co. v. N.J., 431 U.S. 1, 23 (1977) (holding that a state government entity is not required to adhere to a contract that "surrenders an essential attribute of its sovereignty").)

For the foregoing reasons, Frall's breach of contract claim must be dismissed.

C. Impairment of Contract under 42 U.S.C. § 1983 (Count II)

Plaintiff alleges that the Board's denial of Frall's reclassification request violated the Contract Clause of the U.S. Constitution (Compl. ¶ 70), which states that "[n]o State shall . . . pass any . . . Law impairing the Obligation of Contracts . . .," U.S. Const. art. I, § 10, cl. 1. Plaintiff asserts that the Board's denial of reclassification "effectively nullifies the LOU by rendering impossible plaintiff's compliance with a condition precedent, the reclassification of Supply to Barren to W-3 Developer/S-3 Developer." (Compl. ¶ 70.) Furthermore, Frall alleges that the Board acted "under color of local law" and "ha[s] deprived plaintiff of its rights under the Constitution of the United States, thereby violating also 42 U.S.C. § 1983." ( Id. ¶ 71.)

The Board argues that plaintiff's impairment of contract claim should be dismissed because a § 1983 claim does not lie for a Contract Clause violation. (Def.'s Mem. at 17 (citing Andrews v. Anne Arundel County, Md., 931 F. Supp. 1255, 1267 (D. Md. 1996) (Davis, J.) ("[N]o § 1983 claim lies for a Contract Clause violation.").) The Board further contends that, regardless of whether a § 1983 claim can be brought for a Contract Clause violation, plaintiff's impairment of contract claim must be dismissed because plaintiff's request for monetary damages "belies" it. (Def.'s Mem. At 17.) The court need not address these arguments, however, because Frall has failed to state a claim for impairment of contract. Frall has not shown that the Board passed a law that, through its enforcement, has prevented plaintiff from fulfilling its obligation under the LOU. See Hays v. Port of Seattle, 251 U.S. 233, 237 (1920) (holding that a plaintiff only had a claim for damages, not for impairment of contract in violation of the Contract Clause, because the offending state legislation had the effect of "violating or repudiating a contract previously made by the state," not of "impair[ing] its obligation"); E E Hauling, Inc. v. Forest Preserve Dist. of Du Page County, Ill., 613 F.2d 675, 680 (7th Cir. 1980) ("[o]nly if th[e] statute [impairing the contract] were declared unconstitutional could the plaintiff get a remedy for a breach of contract").

D. Constitutional Takings, Inverse Condemnation, and Substantive Due Process Claims (Counts III, V, and VI)

Plaintiff alleges that the Board's denial of its reclassification request constituted an unconstitutional taking and inverse condemnation of plaintiff's property in violation of the United States and Maryland Constitutions. (Compl. ¶¶ 74-77, 82-85, 87-92.) Although plaintiff brings these claims under separate counts ("Maryland Declaration of Rights," " 42 U.S.C. § 1983 — Due Process," and "Inverse Condemnation," respectively), each count repeats essentially two claims. First, plaintiff alleges a takings claim, contending that the Board's ruling, "in light of Frall's rights in the LOU and real estate — which are constitutionally protected property interests — is an uncompensated taking in violation" of the Fourteenth Amendment to the United States Constitution, 42 U.S.C. § 1983, and the Maryland Constitution.¹⁸ ( Id. ¶¶ 82, 85, 87, 91.) Second, plaintiff alleges a violation of its substantive due process rights. Plaintiff asserts that despite meeting all criteria for S-3/W-3 reclassification, the Board "arbitrar[ily] and capricious[ly]" denied plaintiff's request, "depriv[ing] [it] of all beneficial use of the land upon which it attempts to complete the subdivision project" in violation of the Fourteenth Amendment to the United States Constitution and Article 24 of the Maryland Constitution. ( Id. ¶¶ 74, 76, 89.) I will address these claims, and the grounds upon which defendant moves to dismiss them, in turn.

18 Plaintiff also apparently alleges a takings claim based on an exaction, contending that "[t]here is no reasonable nexus between the Board's arbitrary denial to reclassify Supply to Barren and the impact of the development of Frall's property." (Compl. ¶¶ 75, 90.) An exaction occurs when the governmental entity conditions the grant of a permit to develop property based on a specific dedication of a certain portion of that property. See Dolan v. City of Tigard, 512 U.S. 374, 384 (1994). Dolan held that, "[u]nder the well-settled doctrine of `unconstitutional conditions,' the government may not require a person to give up a constitutional right — here the right to receive just compensation when property is taken for a public use — in exchange for a discretionary benefit conferred by the government where the benefit sought has little or no relationship to the property." 512 U.S. at 385. In the instant case, however, plaintiff does not allege any facts, nor have I found any, that demonstrate an exaction, as defined in Dolan.

(1)

Both the United States and Maryland Constitutions prohibit the government from taking private property for public use without just compensation.¹⁹ The U.S. Supreme Court has described an inverse condemnation claim as "`a shorthand description of the manner in which a landowner recovers just compensation for a taking of his property when condemnation proceedings have not been instituted.'"²⁰ College Bowl, Inc. v. Mayor and City Council of Baltimore, 907 A.2d 153, 157 (Md. 2006) (quoting United States v. Clarke, 445 U.S. 253, 257 (1980)). An inverse condemnation (or "taking") can take many different forms, including "the denial by a governmental agency of access to one's property [or] regulatory actions that effectively deny an owner the physical or economically viable use of the property. . . ." Id.

19 The Takings Clause of the Fifth Amendment of the United States Constitution, made applicable to the states through the Fourteenth Amendment, provides: "[N]or shall private property be taken for public use, without just compensation." U.S. Const. amend. V. Article III, section 40 of the Maryland Constitution is essentially identical: "The General Assembly shall enact no Law authorizing private property to be taken for public use without just compensation. . . ." Md. Const. art III, § 40. "The decisions of the [U.S.] Supreme Court are practically direct authorities for the Fifth and Fourteenth Amendments to the United States Constitution and Article III, § 40, of the Maryland Constitution. . . ." Neifert v. Dep't of the Env., 910 A.2d 1100, 1119 (Md. 2006) (internal quotations omitted).

20 In traditional condemnation (or eminent domain) proceedings, "[t]he government files suit against the property owner to condemn the property; the property owner obtains judgment for the fair value of what is taken." Millison v. Wilzack, 551 A.2d 899, 902 (Md.Ct.Spec.App. 1989) (internal quotations omitted); see also Reichs Ford Road Joint Venture v. State Roads Comm'n of the State Highway Admin., 880 A.2d 307, 312-13 (Md. 2005). On the other hand, in inverse condemnation proceedings, "the government does not file suit; rather, the property owner, because of governmental action which he perceives results in a taking of his property, . . . sues the government to recover compensation for the taking." Millison, 551 A.2d at 902.

In the instant case, plaintiff alleges that the Board "has deprived Frall of its contractual right under the LOU to record its lots by creating a post hoc rationalization to deny plaintiff the water and sewer reclassification that is a prerequisite to Frall's ability to proceed any further with development and by imposing requirements on Frall beyond those stated for W-3/S-3." (Pl.'s Opp'n at 27-28.) Specifically, plaintiff alleges that the Board took the following property rights: "its rights in its real property; its $31,000 engineering study; and its rights in the LOU."²¹ (Pl.'s Opp'n at 27 (citing Compl. ¶¶ 37, 74, 82).) According to plaintiff, the result of this "taking" was a "functional condemnation" that prevents development of plaintiff's property. ( Id. at 28.) Defendant argues, however, that its denial of plaintiff's reclassification request does not, as a matter of law, constitute an inverse condemnation of plaintiff's property because plaintiff has not plausibly alleged (1) that it possesses a constitutionally protected property interest, and (2) that such protected property interest has been taken by some government action. (Def.'s Mem. at 19, 24.)

21 Plaintiff points out that "[t]he meaning of `property' under Maryland law is quite broad" and "includes real, personal, mixed, tangible or intangible property of every kind." Dua v. Comcast Cable of Md., Inc., 805 A.2d 1061, 1077 n. 10 (Md. 2002) (internal quotations and citation omitted).

(a)

To make a successful claim under the Takings Clause, a plaintiff must establish that it possesses a constitutionally protected property interest before the court will examine whether governmental use or regulation of that property constitutes a taking. Washlefske v. Winston, 234 F.3d 179, 184-86 (4th Cir. 2000); see also Scott v. Greenville County, 716 F.2d 1409, 1418 (4th Cir. 1983) (noting that the "starting point" for analyzing any procedural due process claim is to determine whether the plaintiff has a protected property interest "sufficient to trigger federal due process guarantees"). "`To have a property interest in a benefit, a person clearly must have more than an abstract need or desire for it. He must have more than a unilateral expectation of it. He must, instead, have a legitimate claim of entitlement to it.'" Gardner v. Baltimore Mayor City Council, 969 F.2d 63, 68 (4th Cir. 1992) (quoting Bd. of Regents v. Roth, 408 U.S. 564, 577 (1972)). "Property interests `are created and their dimensions are defined by existing rules or understandings that stem from an independent source such as state law — rules or understandings that secure certain benefits and that support claims of entitlement to those benefits.'" Coastland Corp. v. Currituck County, 734 F.2d 175, 177-78 (4th Cir. 1984) (quoting Roth, 408 U.S. at 577). Defendant contends that plaintiff's "rights in its real property, its $31,000 engineering study, and its rights in the LOU" (Pl.'s Opp'n at 27), are not constitutionally protected property interests. (Def.'s Mem. at 19, 22; Def.'s Reply at 7.) According to defendant, the LOU did not create an "entitlement" to either a certain water/sewer designation or the recordation of lots; rather, the LOU required that prior to recordation of the plat, "staff comments" needed to be addressed, among them that plaintiff obtain S-3 classification. (Def.'s Reply at 7.) Furthermore, according to defendant, contract rights are not property rights that are accorded protection under the Due Process Clause. ( Id. at 9.) Defendant asserts: "In the absence of certainty or even a very strong likelihood that reclassification would be granted, plaintiff does not have an entitlement under the LOU."²² ( Id. at 8 (citing Southside Trust v. Town of Fuquay-Varina, 69 Fed. App'x 136, 139 (4th Cir. 2003) (noting that "contract rights . . . are not protected by the Due Process Clause").

22 Plaintiff challenges this assertion, citing U.S. Trust Co., 431 U.S. at 19 n. 16, which stated: "Contract rights are a form of property and as such may be taken for a public purpose provided that just compensation is paid." (Pl.'s Opp. at 26.) The proper test for determining whether contract rights are protected by the Due Process Clause seems to be the same as for property rights generally. For a contract right to constitute a constitutional property right, "the contract must create an entitlement," and "the property right must be of a type accorded protection under the due process clause." Blackwell v. Mayor Comm'rs of Delmar, 841 F. Supp. 151, 155-56 (D. Md. 1993) (Northrop, J.) (citing S D Maint. Co. v. Goldin, 844 F.2d 962, 967 (2d Cir. 1988)). Furthermore, "[t]he law is well-settled that an ordinary breach of contract is not actionable under § 1983." Blackwell, 841 F. Supp. at 156 (citing Coastland Corp. v. Currituck County, 734 F.2d 175, 178 (4th Cir. 1984) (holding that a "mere breach of [a] contractual right is not a deprivation of property without constitutional due process of law. . . . Otherwise, virtually every controversy involving an alleged breach of contract by a government . . . would be a constitutional case") (internal quotations and citation omitted) (emphasis in original)).

In Southside Trust, the Fourth Circuit held that because under state law, defendant was permitted to terminate sewer service to non-residents at will, defendant's breach of its contract with plaintiff was not protected by the Due Process Clause. 69 Fed. App'x at 139. The Fourth Circuit explained: "The Constitution's due process guarantee protects non-tangible property rights, like employment, welfare benefits, or utility services, when applicable law mandates that such rights may be terminated or withheld only for cause." Id. at 138. Defendant points out that Maryland courts have refused to recognize "public sewer access" as a constitutionally protected property interest. (Def.'s Mem. at 19-22; Def.'s Reply at 8.) In Neifert v. Dep't of the Env, 910 A.2d 1100 (Md. 2006), the Maryland Court of Appeals held:

Appellants' takings claim fails also because they have not demonstrated that access to sewer service is an interest that qualifies for protection as `property' under the United States or Maryland Constitution. . . . Appellants have not demonstrated that the denial of sewer service has interfered with interests that were sufficiently bound up with the reasonable expectations of the claimant to constitute `property' for Fifth Amendment purposes. . . . Appellants also fail to demonstrate a property interest established by existing rules or understandings that stem from an independent source such as state law.

Id. at 1121-22 (internal quotations omitted).

Defendant also cites Front Royal Warren County Industrial Park Corp. v. Front Royal, 135 F.3d 275, 286 (4th Cir. 1998), which held that, under Virginia law, plaintiff's interest in defendant's promise to construct sewer lines to plaintiff's lots was "nothing but an inchoate interest in the conferral of a benefit to enhance market value. . . . To find [that defendant's refusal to construct the lines to be] a compensable taking would open an incredible Pandora's Box[;] . . . it is clearly not one of the classical property rights of possession, use, and disposition." Accordingly, the Board submits, Frall has no constitutionally protected interest in obtaining reclassification under the Water and Sewerage Plan. (Def.'s Reply at 9 (citing Def.'s Mem. Ex. A, at 17-18).)

As to plaintiff's "right" to record lots, defendant asserts that plaintiff's interest in the property itself has not been impacted, because there has been no exaction or change in ownership or title. ( Id. at 10.) Furthermore, defendant states, Frall cannot "successfully transform a perceived `ability to utilize the property for any purpose,' into a constitutionally protected `right' to develop, which is non-existent." ( Id. (citing Kaiser Dev. Co. v. City County of Honolulu, 649 F. Supp. 926, 933 (D. Hawaii 1986) (holding that developer "cannot turn a contract right into a property right simply by investing in the subject matter of the contract").)

Although it is a close question, I cannot conclude as a matter of law that plaintiff has no constitutionally protected property interest in the LOU. In agreeing to the LOU, the Planning Commission provided plaintiff with more than an "abstract need" or "unilateral expectation" of the benefit of developing its land. Gardner, 969 F.2d at 68. The LOU specifically promised that "Frall may record the twenty-four lot plat . . . provided staff comments are addressed." (Compl. Ex. 30, at 2.) Furthermore, both DUSWM and the Planning Commission reviewed and approved Frall's reclassification request to S-3/W-3 in the spring of 2007, shortly before the plaintiff's Board hearing in July 2007. ( Id. Ex. 34-35.) These facts support that plaintiff had a "legitimate claim of entitlement" to a reasonable review of its S-3 reclassification request and a fair opportunity to develop its property. Gardner, 969 F.2d at 68.

The cases upon which defendant relies — Southside Trust, 69 Fed. App'x at 139; Neifert, 910 A.2d at 1121-22; Front Royal, 135 F.3d at 286 — do not require a different conclusion. Southside Trust explained that "if the government may refuse to provide the benefit at will, without any constraints on its reasons, then the benefit is not a protected property interest. . . ." 69 Fed. App'x at 138 (citing Memphis Light, Gas Water Div. v. Craft, 436 U.S. 1, 11-12 n. 11 (1978)). Because North Carolina law imposed no obligation to provide sewer service to those living outside corporate limits, the government was free to terminate sewer service to non-residents at will. Id. at 138-39. By contrast, it seems very likely from the record in the instant case that the Board was constrained by Frederick County's Water and Sewerage Plan's seven criteria checklist for S-3 sewer classification; if plaintiff met the checklist's criteria, the Board was required to grant reclassification.²³ ( See Compl. Ex. 36; Def.'s Mem. Ex. A, at 17-18.) Accordingly, Frall had a claim of entitlement to a reasonable review of its S-3 reclassification request.²⁴ Neifert and Front Royal are also distinguishable. Although both cases held that access to sewer service was not a constitutionally protected property interest, Neifert, 910 A.2d at 1121; Front Royal, 135 F.3d at 286, access to sewer service is not the interest Frall asserts. Instead, Frall's interest is grounded in the LOU's promise that it will be able to develop its land after obtaining S-3 classification. Furthermore, both cases are distinguishable factually. In Neifert, the court based its holding primarily on its finding that the denials of plaintiffs' permits were not the proximate cause of their lots being undevelopable, and that the denials did not constitute a taking because they fell within the "nuisance exception" recognized by the Supreme Court in Lucas v. South Carolina Coast Council, 505 U.S. 1003, 1028-29 (1992). Neifert, 910 A.2d at 1119. Likewise, in Front Royal, the court found that plaintiff's "original investment could not have contemplated the public provision of sewer service, and it could have fulfilled its later expectations by providing its own sewer lines." Front Royal, 135 F.3d at 286 (emphasis added). There is no evidence in the instant case that Frall could have provided its own sewer lines, which it depended upon (and expected) Frederick County to provide.

23 The Frederick County Water and Sewerage Plan provided that "[p]roperties requesting [S-3/W-3] classification shall meet the following criteria. . . ." (Def.'s Mem. Ex. A, at 18.) Similarly, the Board in its resolution denying reclassification stated that "[t]he criteria to be satisfied to secure a reclassification to S-3/W-3 include. . . ." (Compl. Ex. 3, at 2.) The court recognizes that neither of these statements indicates that the Board was required to grant a reclassification request if all the criteria were met. Neither plaintiff nor defendant has pointed to anything in the record, nor have I found anything, that resolves the issue of whether the Board had discretion to deny reclassification notwithstanding a finding that all the criteria had been met. However, if the Board had had the discretion to deny reclassification even if the criteria had all been met, it seems odd that the Board did not present that defense in its briefs. Rather, defendant asserts that it "denied the reclassification request because three (3) separate established criteria had not been satisfied to secure S-3 classification," and insists that plaintiff "asks this Court to circumvent the [Board's] legitimate right and duty to require compliance with its regulations relating to its public water and sewer supply." (Def.'s Mem. at 9-10.) For these reasons, it seems likely the Board was bound by the reclassification criteria, although a more fully developed record might prove otherwise.

24 Memphis Light, 436 U.S. at 9-11, also supports plaintiff's position. The utility company in Memphis Light was obligated under Tennessee law to continue service to the plaintiffs unless it had cause to terminate. Therefore, the plaintiff had a property right in continued service and could claim a constitutional guarantee of due process. Id.

(b)

Defendant contends that, even assuming a constitutionally protected property interest exists, plaintiff has not alleged sufficient facts that a government action has "taken" plaintiff's property. (Def.'s Mem. at 22.) In Lucas, the Supreme Court held that there exist at least two distinct categories of governmental regulatory action that may result in a taking for which just compensation is due under the Fifth Amendment: (1) regulations that compel a physical invasion of an owner's property, and (2) regulations that deny "all economically beneficial or productive use of land." 505 U.S. at 1015. By contrast, defendant points out (Def.'s Mem. at 24-25), the Supreme Court has held it "quite simply untenable" that property owners "may establish a `taking' simply by showing that they have been denied the ability to exploit a property interest that they heretofore had believed was available for development." Penn Central Transp. Corp. v. New York City, 438 U.S. 104, 130 (1978).

Defendant argues that "absolutely nothing . . . has been taken away from plaintiff." (Def's Mem. at 22.) According to defendant, it "simply declined to grant Frall's water and sewer reclassification application," which it was "entitled (in fact, mandated)" to do when certain criteria for approval had not been met. ( Id.) Defendant asserts that the property at issue "is still located within the public water and sewer service areas. While plaintiff may not be able to proceed with the development of the property on its timetable, the thwarting of its desire to profit more quickly simply does not convert legitimate government action into a `constitutional taking.'" ( Id.)

The court concludes that plaintiff's takings claim fails as a matter of law because no property has been "taken" from plaintiff. There has not been a "physical invasion" of Frall's property or a regulation that denies Frall of "all economically beneficial or productive use of land." Lucas, 505 U.S. at 1015. The Board's ruling has not denied Frall of all beneficial or productive use of its land, and does not prevent Frall from again requesting S-3 reclassification, and upon obtaining it, productively developing its property in accordance with the LOU. More generally speaking, the Board's ruling has not violated Frall's procedural due process rights because the Board provided Frall with a hearing before denying reclassification.²⁵ See Southside Trust, 69 Fed. App'x at 139 ("The constitutional violation is not the failure to provide a hearing, but the act of cutting off service without a hearing — the deprivation of property without due process.") (citing Zinermon v. Burch, 494 U.S. 113, 125 (1990)).

25 I recognize, however, that, according to Frall, it was denied due process because the Board did not give Frall notice that the Board would be reconsidering its July 17, 2007 vote to deny approval of S-3/W-3 reclassification at its August 30, 2007 meeting. (Compl. ¶ 47-48.) If this allegation proves true, it might itself be a violation of due process. Plaintiff seems to allege this violation under its substantive due process claim ( see id.), to be considered infra.

(2)

Plaintiff argues that even if the Board's denial of its reclassification request does not constitute a taking, it was a violation of plaintiff's substantive due process rights. (Compl. ¶¶ 74, 76, 89; Pl.'s Opp'n at 30-33.) For Frall to prevail on a substantive due process claim, it must show (1) that it had a property interest in the LOU "that is cognizable under the Fourteenth Amendment's Due Process Clause," and (2) that defendant arbitrarily and capriciously deprived it of that right.²⁶ Gardner v. Baltimore Mayor City Coucil, 969 F.2d 63, 68 (4th Cir. 1992). "Substantive due process is a far narrower concept than procedural; it is an absolute check on certain governmental actions notwithstanding the fairness of the procedures used to implement them." Love v. Pepersack, 47 F.3d 120, 122 (4th Cir. 1995) (internal quotations omitted).

26 Plaintiff's substantive due process rights are rooted in the Fourteenth Amendment's provision: "[N]or shall any State deprive any person of life, liberty, or property, without due process of law. . . ." U.S. Const. amend. XIV, § 1. Article 24 of the Maryland Declaration of Rights similarly provides: "[N]o man ought to be . . . deprived of his life, liberty, or property, but by the judgment of his peers, or by the Law of the land." Md. Const., Decl. of Rights, art. 24.

"Federal courts have understandably shown a reluctance to sit as zoning boards of appeals when presented with claims which, though couched in constitutional language, at bottom amount only to the run of the mill dispute between a developer and a town planning agency." Scott, 716 F.2d at 1419 (internal quotations omitted); see also Gardner, 969 F.2d at 68 ("[F]ederal courts should be extremely reluctant to upset the delicate balance at play in local land-use disputes. Section 1983 does not empower us to sit as a super-planning commission or a zoning board of appeals. . . ."). "Regardless of the deference normally accorded zoning practices by the courts, [however,] the Constitution does not tolerate arbitrary and unreasoned action." Scott, 716 F.2d at 1420 (internal quotations and citation omitted). "[W]here there is fairly alleged a basis for finding either abuse of discretion or caprice in a zoning administrator's refusal to issue a building permit, a Fourteenth Amendment claim is properly stated." Id. at 19 (internal quotations omitted).

(a)

Before addressing whether the Board's ruling was arbitrary and capricious, this court must decide whether Frall had a property interest in the LOU "that is cognizable under the Fourteenth Amendment's Due Process Clause." See Gardner, 969 F.2d at 68. The Fourth Circuit has established a stricter standard for determining whether a property interest is constitutionally protected in substantive (as opposed to procedural) due process challenges to municipal land-use decisions. Id. Citing the approach taken by several other circuits, the Fourth Circuit explained that in substantive due process cases:

[W]hether a property-holder possesses a legitimate claim of entitlement to a permit or approval turns on whether, under state and municipal law, the local agency lacks all discretion to deny issuance of the permit or to withhold its approval. Any significant discretion conferred upon the local agency defeats the claim of a property interest. . . . Under this standard, a cognizable property interest exists only when the discretion of the issuing agency is so narrowly circumscribed that approval of a proper application is virtually assured.²⁷

Id. (internal quotations and citation omitted) (emphasis in original).

27 The Fourth Circuit explained further: "We believe that this standard appropriately balances the need for local autonomy in a matter of paramount local concern with recognition of constitutional protection at the very outer margins of municipal behavior. The standard represents a sensitive recognition that decisions on matters of local concern should ordinarily be made by those whom local residents select to represent them in municipal government — not by federal courts. It also recognizes that the Fourteenth Amendment's Due Process Clause does not function as a general overseer of arbitrariness in state and local land-use decisions. In our federal system, that is the province of the state courts." Gardner, 969 F.2d at 68.

27 The Fourth Circuit explained further: "We believe that this standard appropriately balances the need for local autonomy in a matter of paramount local concern with recognition of constitutional protection at the very outer margins of municipal behavior. The standard represents a sensitive recognition that decisions on matters of local concern should ordinarily be made by those whom local residents select to represent them in municipal government — not by federal courts. It also recognizes that the Fourteenth Amendment's Due Process Clause does not function as a general overseer of arbitrariness in state and local land-use decisions. In our federal system, that is the province of the state courts." Gardner, 969 F.2d at 68.

Gardner cited the Fourth Circuit's decisions in Scott, 716 F.2d at 1418, and United Land Corp. v. Clarke, 613 F.2d 497, 501 (4th Cir. 1980), to demonstrate the application of this standard. In Scott, the court held that a developer had a cognizable property interest in a permit because the county was required by state law to issue a building permit "upon presentation of an application and plans showing a use expressly permitted under the then-current zoning ordinance." 716 F.2d at 1418. By contrast, in Clarke, the court held that the failure of county authorities to issue a soil erosion permit did not deprive the developers of due process because those authorities had discretion under county law to refuse to issue the permit. 613 F.2d at 501.

In this case, I conclude (as I did supra Part III(D)(1)(a)) that Frall has stated a claim for a constitutionally protected property interest in the LOU. As in Scott (and in contrast to Clarke), it seems likely from the record that the Board did not have discretion to deny Frall S-3 classification. As discussed supra note 33, it seems likely that the criteria provided in the Frederick County's Water and Sewerage Plan checklist for S-3 sewer classification were dispositive; if plaintiff met those criteria, the Board was required to grant reclassification. ( See Compl. Ex. 36; Def.'s Mem. Ex. A, at 17-18.) If "the discretion of the issuing agency [was] so narrowly circumscribed that approval of a proper application [was] virtually assured," then Frall possessed a constitutionally protected property interest. Gardner, 969 F.2d at 68 (internal quotations and citation omitted).

(b)

Assuming plaintiff had a cognizable property interest, plaintiff alleges that the Board's "arbitrary and capricious" denial of its request "deprived [it] of all beneficial use of the land upon which it attempts to complete the subdivision project. . . ." (Compl. ¶ 74.) Frall contends that the reasons the Board gave for denying Frall's reclassification "are specious and are only an attempt to cover up the Board's July 17, 2007 vote as an abuse of discretion by providing post hoc `evidence' of a rational decisional process." ( Id. ¶ 50.) Further, plaintiff asserts that the Board's denial was "a conscious deliberate attempt to undo the LOU."²⁸ (Pl.'s Opp'n at 30.)

28 Plaintiff alleges that Board President Gardner "made her hostility to the LOU abundantly clear." (Pl.'s Opp'n at 30 (citing Compl. Ex. 2 at 10-11 ("I personally think that it . . . sets a very bad precedent. It was inappropriate for the Planning Commission to allow them to record these lots without passing APFO . . . I would never vote for . . . I don't think . . . [it is] something I would ever vote for.")).)

Defendant argues in response that its denial of reclassification was a "reasoned, rational and justified decision," made only after a public hearing at which plaintiff was represented by counsel and documents and testimony were presented. (Def.'s Mem. at 21.) The Board submits that its ruling "was based on an appropriate evaluation of the information presented by plaintiff, applied to the previously established and published evaluation criteria that had been created with due considerations of the public health, safety, and welfare and legitimate concerns regarding the orderly provision of public water and sewer capacity." ( Id.)

Plaintiff cites three cases in support of its position: Scott, 716 F.2d at 1419; Prince George's County v. Carusillo, 447 A.2d 90 (Md.Ct.Spec.App. 1982); and Browning-Ferris Indus. of S. Atlantic, Inc. v. Wake County, 905 F. Supp. 312 (E.D. N.C. 1995). In Scott, the Fourth Circuit held that plaintiff was deprived of his building permit by the County Council because there was "no basis" for the Council, acting through its subordinate Zoning Administrator, to "call a halt to what should otherwise have been the routine issuance of a permit." 716 F.2d at 1419. In Carusillo, the Maryland Court of Special Appeals held that defendant County's refusal to upgrade plaintiff's property from sewer "area 5" to "area 3" was arbitrary and capricious because "[t]he record amply support[ed]" that plaintiff had met all the criteria required for reclassification. 447 A.2d at 97. Specifically, the court found that contrary to the County's conclusion, the evidence supported, inter alia, that a site plan was not required for a sewer area upgrade; the County could handle the increased traffic; there was sufficient sewage capacity in areas 1 through 3; and the property's proximity to a church and the lack of need for plaintiff's shopping center were not appropriate factors to consider under the "related aspects of planning" subsection. Id. at 96-97.

Also, in Browning-Ferris, the County Commissioners denied a landowner's request for access to a county-owned sewage interceptor because the solid waste disposal facility that the landowner planned to develop would be near a recreational lake. 905 F. Supp. at 319-20. One commissioner stated: "I think you have an excellent site plan. . . . It's just in the wrong place." Id. at 320. The court held that the County's decision was "arbitrary and capricious" and based on "improper motives" because access was denied "for a reason wholly unrelated to the effluent that would actually pass through the interceptor." Id. at 321. Observing that "denial of a benefit for an unrelated reason constitutes a violation of due process," the court concluded that plaintiff's right to substantive due process under the Fourteenth Amendment had been contravened.²⁹ Id.

29 The Board's attempt to distinguish Scott, 716 F.2d at 1419, Carusillo, 447 A.2d at 96-97, and Browning-Ferris, 905 F. Supp. at 321, is unpersuasive. ( See Def.'s Reply at 11.) Furthermore, defendant's citation to New Burnham Prairie Homes v. Vill. of Burnham, 910 F.2d 1474, 1480-81 (7th Cir. 1990) (denial of building permit not cognizable under § 1983 in absence of allegation that state remedies were constitutionally inadequate), (Def.'s Mem. at 21), is not persuasive in light of the Fourth Circuit's observation in Scott, 716 F.2d at 1421 n. 17. Scott observed that the Supreme Court's holding that the availability of state court postdeprivation relief precludes a due process action under § 1983 "at most addresses `random and unauthorized' . . . derelictions by officials of the lowest level, resulting in deprivations which are in no sense of the term systemic." Id. (citing Parratt v. Taylor, 451 U.S. 527, 541 (1981)). In the instant case, the alleged "derelictions" were not by low level officials, but by the Board.

In the instant case, Frall contends that all three grounds upon which the Board denied Frall's reclassification request on August 30, 2007 were arbitrary and capricious. (Pl.'s Opp'n at 35-37.) Although it is a very close question, the court concludes that Frall has alleged facts in support of its substantive due process claim that are "enough to raise a right to relief above the speculative level. . . ." Twombly, 127 S. Ct. at 1965. The Board's first ground for denying reclassification was that Frall had not furnished a study of the components of the existing water and sewer wastewater system "in conjunction with the [APFO] as required." (Compl. Ex. 3, at 2.) Frall, however, clearly had furnished a study of the wastewater system in 1999, which DUSWM in 2005 considered "reasonably sufficient `historic' data to continue consideration of the application." (Compl. Ex. 37, at 2.) That DUSWM "suggest[ed] that the study be updated in conjunction with the preliminary plan" does not change this fact. ( Id. Ex. 37, at 2 n. 18.) Furthermore, in evaluating Frall's July 2007 reclassification request, the Board observed that DUSWM had recommended approval for S-3/W-3 reclassification. ( Id. Ex. 2, at 3-4.) Although it is unclear what furnishing a study "in conjunction with" the APFO means, presumably it means that the study has met APFO requirements. There is no evidence currently in the record from which this court could conclude as a matter of law that the study did had not met these APFO requirements. ( See id. Ex. 36, at 3.)

The Board's second ground for denying reclassification was that a preliminary subdivision plan had not been approved by the Planning Commission because "the proposed subdivision did not receive APFO approval for schools and water and sewer, both of which are statutory prerequisites for preliminary subdivision plan approval." ( Id. Ex. 3, at 3 (emphasis in original).) Unlike the Board's first ground, ³⁰ this second ground went beyond the text of the specific criterion, Criterion #3 (which the Board concluded plaintiff had not met). Criterion #3 stated: "A preliminary subdivision plan . . . has been approved by the Planning Commission." ( Id. Ex. 36.) The Board recognized at the hearing that the Planning Commission had approved Frall's preliminary subdivision plan on August 16, 2005 ( id. Ex. 2, at 15:4-7), but concluded that this approval was invalid because it could only come after APFO approval ( id. Ex. 2, at 14:12-18, 26:19-22.) The Board President Gardner refused to vote for reclassification precisely for this reason: she found that "[i]t was inappropriate for the Planning Commission to allow [Frall] to record these lots without passing APFO. . . ." ( Id. Ex. 2, at 10-11.)

30 In its first ground for denial of reclassification, the Board concluded that plaintiff had failed to meet Criterion #2, which stated: "In conjunction with the [APFO], furnish a study of the components of the existing water and wastewater system and identify inadequacies that may result from the developed property." (Compl. Ex. 36; Def.'s Mem. Ex. A at 18.)

Plaintiff contends, however, that because a preliminary plat must meet the APFO requirements for the Planning Commission to approve it ( see id. Ex. 18, Fred. Co. Code § 1-20-8), the Planning Commission's approval of Frall's preliminary plat on August 16, 2005 necessarily meant that the plat had met APFO requirements, ( id. ¶ 24.) This argument is flawed, because it ignores (as Gardner asserted) that the Planning Commission could have mistakenly granted approval of the plat without having first ensured that the plat met APFO requirements. Nevertheless, plaintiff's argument does raise the critical issue of whether the Board acted arbitrarily and capriciously in not following the plain language of the criteria for S-3/W-3 reclassification. On the one hand, there is authority that approving preliminary plats is within the Planning Commission's powers. The APFO provides: "Final determination of adequacy [of a preliminary plat] shall be the responsibility of the Planning Commission."³¹ (Def.'s Mem. Ex. B, at 15, Fred. Co. Code § 1-20-20.)

31 Plaintiff cites other Maryland and Frederick County code sections supporting the proposition that the Planning Commission had power over preliminary plat approval. ( See Pl.'s Opp'n at 24 (citing Md. Code Ann., Art. 66B § 5.02 (requiring county planning commission approval prior to recordation of a subdivision plat); Fred. Co. Code, § 1-16-3 (defining preliminary plat as a proposed drawing of a subdivision layout "submitted to the Planning Commission for its consideration"); Fred. Co. Code § 1-16-5(B) (stating that subdivider will record plat "after having secured the approval thereof by the Planning Commission"); Fred. Co. Code, § 1-16-71(J) (mandating that the Planning Commission "approve, conditionally approve or disapprove" a preliminary plat application); Fred. Co. Code, § 1-16-29 (providing that person aggrieved by the Planning Commission's action may appeal to the circuit court)).)

On the other hand, there is perhaps stronger authority for the proposition that the Board was justified in voiding the Planning Commission's approval of the preliminary plat. The APFO provides: "Subdivision plats or site plans that do not meet the requirements for adequate public facilities in Articles III-VI [which listed the requirement for roads, water, sewer, and schools, respectively] herein shall not be granted preliminary subdivision or site plan approval by the Planning Commission." (Def.'s Mem. Ex. B at 9, Fred. Co. Code § 1-20-8(B).) Notwithstanding the Planning Commission's power over approving preliminary plats, the Board's position as the governing body in Frederick County ( see Md. Code Envir., § 9-503; Md. Code Ann., Art. 66B § 3.05(a)(1)), arguably empowered it to void the Planning Commission's decision if the Planning Commission had violated a statutory provision in reaching its decision.³²

32 Frall also argues in contesting the Board's second ground for denying reclassification that APFO approval for schools "is not even part of a lawful approval process for water and sewer." (Pl.'s Opp'n at 37.) Although the Frederick County Water and Sewer Classification checklist did not specifically mention APFO approval for schools, ( see Compl. Ex. 36), the APFO does provide explicitly in Articles IV-VI that water, sewer, and school "adequacy" must be achieved for preliminary plat approval. ( See Def.'s Mem. Ex. B at 21-24, Fred. Co. Code §§ 1-20-41, 51, 61.)

The Board's third ground for denying reclassification was that the documents and testimony had failed to establish that the applicant had obtained "approved improvement plans and an approved cost proposal for all improvements required to bring the water and sewer service to the site." (Compl. Ex. 3, at 3.) Frall contends that the Board's ruling was flawed because Frall's approved improvement plans and costs had been accepted by the staff, and neither the Planning Commission nor DUSWM requested anything else before recommending approval to the Board. (Pl.'s Opp'n at 37 (citing Compl. ¶¶ 42, 54).) There is no evidence currently in the record from which this court could conclude as a matter of law that the Board's ruling as to this third criteria was not arbitrary and capricious.

After the record is more fully developed, it could become clear that the grounds upon which the Board denied Frall's reclassification request were not arbitrary and capricious, but instead proper rulings in light of a flawed land recordation process directed by the Planning Commission and other Frederick County agencies. Because of the lack of evidence currently in the record supporting the grounds for the Board's denial, however, the court finds that, at this motion to dismiss stage, Frall has plausibly alleged a substantive due process violation.

E. Injunctive Relief (Count VII)

Plaintiff requests that this court issue an injunction ordering the Board to reclassify Supply to Barren from S-4/W-4 to S-3/W-3 developer status and "to comply with its obligations under the settlement agreement and to follow County law and accept the final subdivision plan for recordation in a timely fashion." (Compl. ¶ 96.) Further, plaintiff requests that this court enjoin the County from invalidating its preliminary plan. ( Id.) A plaintiff seeking a permanent injunction must demonstrate that: (1) it has suffered an irreparable injury; (2) monetary damages are inadequate to compensate for that injury; (3) considering the balance of the hardships to the parties, an equitable remedy is "warranted"; and (4) "the public interest would not be disserved by a permanent injunction." eBay Inc. v. MercExchange, LLC, 547 U.S. 388, 391 (2006).

"An injunction is a drastic remedy and will not issue unless there is an imminent threat of illegal action." Bloodgood v. Garraghty, 783 F.2d 470, 475 (4th Cir. 1986). To justify this remedy, the "movant must provide proof that the harm has occurred in the past and is likely to occur again, or proof indicating that the harm is certain to occur in the near future." Id. at 476 (internal quotations omitted). The Fourth Circuit has "assume[d], absent evidence to the contrary, that state agencies and agents act in good faith." Id. at 475. Accordingly, "[t]o slap injunctions on state officials who have never violated the law or shown any intention to violate the law would exceed the proper bounds of equitable discretion." Id. at 476.

Plaintiff argues that it has satisfactorily met all four requirements. First, it contends that it has suffered irreparable harm "in that it [has] los[t] the economically viable use of its land and, with expense mounting day-by-day, cannot move forward with its development due to defendant's bad faith violations of the contract." (Pl.'s Opp'n at 40.) Specifically, according to plaintiff, the Board has engaged in "dilatory tactics," has breached the LOU by "arbitrarily and capriciously" denying the reclassification, and has declared, "contrary to its own ordinance, the Supply to Barren preliminary plat void, without providing the mandatory 90-day notice and opportunity to obtain an extension." ( Id. at 43.) Second, Frall asserts that monetary damages are inadequate because they "will not permit the development of the property . . . [or] make the County comply with state law and its own ordinances and regulations." ( Id. at 44.) Third, Frall argues that while "being forced to abide by the law and its settlement agreement" causes the Board no hardship, the hardship to plaintiff is significant, warranting an equitable remedy. ( Id.) Finally, plaintiff states that the public interest is served by an injunction because "the public has a definite interest in its government behaving lawfully and honoring its agreements."³³ ( Id.)

33 As an example in support of its position, plaintiff cites Carusillo, 447 A.2d at 96, in which the Maryland Court of Special Appeals affirmed the lower court's grant of a writ of mandamus to order county officials to grant the plaintiff's water and sewer reclassification request because the officials had arbitrarily and capriciously denied reclassification. (Pl.'s Opp'n at 39-40.) The standard for a writ of mandamus is similar to the permanent injunction standard: plaintiff "must demonstrate that a public official has a plain duty to perform certain acts, that the plaintiff has a plain right to have those acts performed, and that no other adequate remedy exists by which plaintiff's rights can be vindicated." Carusillo, 447 A.2d at 94 (citing Univ. of Md. v. Cleland, 504 F. Supp. 351, 354 (D. Md. 1980)).

Defendant moves to dismiss plaintiff's request for an injunction on the ground that none of the first three requirements for a permanent injunction has been met. (Def.'s Mem. at 25.) The Board contends that "there is absolutely no basis" for Frall's assertion that because it is now unable to proceed with the development of its property "under its timetable," it will incur irreparable harm for which damages are an inadequate remedy. ( Id. at 27.) Rather, defendant asserts, "plaintiff could, and should, move forward with development by curing the deficiencies of its reclassification application and complying with . . . all County rules and regulations required for development." ( Id.) Defendant reiterates that "[n]ot only is there no provision in the LOU requiring [the Board] to give rubber stamp approval for water/sewer reclassifications, but the Board did, as it is required to do, follow `County law' when it denied Frall's request for the classification change." (Def.'s Reply at 18.)

Plaintiff's request for an injunction will not be dismissed at this stage in the litigation because, although plaintiff has not yet met the requirements for injunctive relief, it might meet them in the future. If, after the record is further developed, Frall proves that defendant was arbitrary and capricious in denying plaintiff's reclassification request, an injunction might very well be the appropriate remedy, for the reasons plaintiff has asserted in its Opposition brief and the Maryland Court of Special Appeals gave in Carusillo, 447 A.2d at 96 ( see supra note 44).

F. Declaratory Judgment (Count I)

The Declaratory Judgment Act provides that, "[i]n a case of actual controversy within its jurisdiction . . . any court of the United States . . . may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought." 28 U.S.C. § 2201(a). To satisfy Article III's case-or-controversy requirement, a declaratory judgment action involves a dispute that is

definite and concrete, touching the legal relations of parties having adverse legal interests; and that it be real and substantial and admi[t] of specific relief through a decree of a conclusive character, as distinguished from an opinion advising what the law would be upon a hypothetical state of facts. . . . Basically, the question in each case is whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment."

MedImmune, Inc. v. Genentech, Inc., 127 S. Ct. 764, 771 (2007) (internal quotations and citations omitted) (emphasis added).

Plaintiff seeks a declaratory judgment that its preliminary plat is still valid on the ground that the three year period of validity provided in Frederick County Code § 1-16-71(p) (2000) ran from the date of final approval (August 16, 2005).³⁴ If the court concludes instead that the time ran from the date of conditional approval (August 18, 2004), plaintiff contends that its preliminary plat is still valid on the ground that the Planning Commission did not give Frall 90-day notice of its right to file a request for an extension under Frederick County Code § 1-16-71(q) (2000).³⁵ (Compl. ¶ 68.)

34 Fred. Co. Code § 1-16-71(p) provided that "[p]reliminary plat approval shall become null and void at the end of three (3) years from the date of approval." (Compl. Ex. 38 (emphasis added).)

35 Frall does not dispute that Frederick County Code § 1-16-71 (2000) applies in the instant case because it — not the regulation as amended on October 25, 2005 — was in effect at the time that the conditional and final approvals were granted in August 2004 and August 2005, respectively. (Compl. ¶¶ 64, 68.)

Defendant argues that a declaratory judgment is not appropriate because there is no "real and substantial" dispute between the parties and there is not "sufficient immediacy" to warrant the issuance of a declaratory judgment. (Def.'s Mem. at 28-29; Def.'s Reply at 15.) According to defendant, a declaration of rights is not necessary because, even if plaintiff's preliminary plan had been valid as of August 30, 2007 (the date of the resolution denying reclassification), plaintiff could not have recorded the plat to proceed with development because it did not meet the requirements for S-3 reclassification. ( Id.)

In opposition, plaintiff contends that to reach the conclusion that this case does not have "sufficient immediacy," the court must first make a finding on a disputed issue of fact — whether Frall has met all criteria for the reclassification of its property and whether the reclassification should have been granted. Because, plaintiff argues, this predicate finding cannot be made on a motion to dismiss, the Board's motion to dismiss Count I must necessarily fail. (Pl.'s Opp'n at 18.)

This court concludes that plaintiff's declaratory judgment request should not be dismissed on the ground that it does not meet the requirements set forth in 28 U.S.C. § 2201(a) and MedImmune, 127 S. Ct. at 771. If, after the record is further developed, it appears that defendant did not arbitrarily and capriciously deny reclassification, it would not be inappropriate to declare whether Frall's preliminary plat is still valid for further development. If, on the other hand, Frall proves that defendant did act arbitrarily and capriciously, and the court determines that an injunction ordering reclassification (and thus also recordation under the terms of the LOU) would be proper, a declaratory judgment would be inappropriate, as the issue of preliminary plat validity would be moot.

A separate Order follows.