Sherwin Williams Co v. County of Delaware

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
____________
No. 19-3561
____________
SHERWIN-WILLIAMS COMPANY,
Appellant
v.
COUNTY OF DELAWARE, PENNSYLVANIA; COUNTY
OF ERIE, PENNSYLVANIA; COUNTY OF YORK,
PENNSYLVANIA; JOHN P. MCBLAIN, in his official
capacity as Chairman of the County Council of the County of
Delaware, Pennsylvania; COLLEEN P. MORRONE, in her
official capacity as Vice Chairman of the County Council of
the County of Delaware, Pennsylvania; MICHAEL CULP, in
his official capacity as member of the County Council of the
County of Delaware, Pennsylvania; KEVIN M. MADDEN, in
his official capacity as member of the County Council of the
County of Delaware, Pennsylvania; BRIAN P. ZIDEK, in his
official capacity as member of the County Council of the
County of Delaware, Pennsylvania; DR. KYLE W. FOUST,
in his official capacity as County Council Chairman of the
Erie County Council; FIORE LEONE, in his official capacity
as County Vice Chairman of the Erie County Council;
KATHY FATICA, in her official capacity as Finance
Chairwoman and member of the Erie County Council;
CAROL J LOLL, in her official capacity as Finance Vice
Chairwoman and member of the Erie County Council;
ANDRE R. HORTON, in his official capacity as Personnel
Chairman and member of the Erie County Council; CARL
ANDERSON, III, in his official capacity as member of the
Erie County Council; SCOTT R. RASTETTER, in his official
capacity as member of the Erie County Council; SUSAN
BYRNES, in her official capacity as President of the Board of
Commissioners for York County, Pennsylvania; DOUG
HOKE, in his official capacity as Vice President of the Board
of Commissioners for York County, Pennsylvania; CHRIS
REILLY, in his official capacity as a member of the Board of
Commissioners for York County, Pennsylvania; JOHN DOE
COUNTIES; JOHN DOES
____________
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. No. 2-18-cv-04517)
District Judge: Honorable Nitza I. Quiñones Alejandro
____________
Argued June 2, 2020
Before: AMBRO, HARDIMAN, and RESTREPO, Circuit
Judges
(Filed: July 31, 2020)
Leon F. DeJulius, Jr. [Argued]
Jones Day
250 Vesey St.
New York, NY 10281
2
Anderson T. Bailey
Charles H. Moellenberg, Jr.
Jones Day
500 Grant St.
Suite 4500
Pittsburgh, PA 15219
Attorneys for Appellant Sherwin-Williams Company
David S. Senoff [Argued]
Hillary B. Weinstein
First Law Strategy Group
121 South Broad St.
Suite 300
Philadelphia, PA 19107
Attorneys for Appellees County of Delaware, et al.
____________
OPINION OF THE COURT
____________
HARDIMAN, Circuit Judge.
It has been said that the best defense is a good offense.
True to that adage, Sherwin-Williams Company sued several
Pennsylvania counties to forestall lead-paint litigation those
counties seemed poised to file with the assistance of outside
counsel motivated by a contingent-fee agreement. The District
Court dismissed Sherwin-Williams’s complaint for lack of
Article III standing. We will affirm.
3
I
Sherwin-Williams is an Ohio corporation that
manufactures and distributes paint. In Pennsylvania, the
company employs nearly 2,000 people in 200 stores, offices,
manufacturing plants, and a research and development facility.
In 2018, Lehigh and Montgomery Counties sued
Sherwin-Williams (and others) in state court over its
manufacture and sale of lead-based paint. The counties pleaded
a public nuisance theory of liability and sought abatement of
the nuisance caused by lead-based paint, an order enjoining
“future illicit conduct” by Sherwin-Williams, and a declaration
acknowledging the existence of a public nuisance and
Sherwin-Williams’s contribution to it. App. 273–74 (Lehigh
County complaint); App. 119–21 (Montgomery County
complaint). Both counties hired the same law firm on a
contingency. Anticipating the same treatment from other
counties, Sherwin-Williams went on the offensive. It sued
Delaware, Erie, and York Counties, members of each county
council, and “John Doe Counties” and “John Does” in the
United States District Court for the Eastern District of
Pennsylvania to try to prevent them from suing or hiring
outside contingent-fee counsel. App. 22–23. When Erie and
York Counties responded by stating they would not sue or hire
outside counsel, Sherwin-Williams dismissed its claims
against them and their councilmembers. So this appeal
concerns only Delaware County and its councilmembers.
In its complaint, Sherwin-Williams alleged Delaware
County “retained or [is] in the process of retaining counsel and
intend[s] to sue Sherwin-Williams in various courts throughout
Pennsylvania to pay for the inspection and abatement of lead
paint in or on private housing and publicly owned buildings
4
and properties, including federal buildings and properties.”
App. 26 ¶ 1. It claimed the County, by merely filing suit, will
violate its constitutional rights. Sherwin-Williams also alleged
“[i]t is likely that the fee agreement between [Delaware
County] and the outside trial lawyers [is] or will be
substantively similar to an agreement struck by the same
attorneys and Lehigh County to pursue what appears to be
identical litigation.” App. 47 ¶ 65. And it asserted that, by
forming (or planning to form) this agreement with outside
counsel, “the Count[y] ha[s] effectively and impermissibly
delegated [its] exercise of police power to the private trial
attorneys.” Id. Based on these allegations, Sherwin-Williams
raised three claims under 42 U.S.C. § 1983.
In Count I, the company pleaded a First Amendment
violation, seeking declaratory and injunctive relief. It asked the
District Court to prevent the County from trying to hold
Sherwin-Williams liable for “(i) its membership in [trade
associations]; (ii) the activities of the [trade associations],
including those that Sherwin-Williams did not join, fund, or
approve; (iii) Sherwin-Williams’ purported petitioning of
federal, state and local governments; and (iv) Sherwin-
Williams’ commercial speech.” App. 49–50 ¶ 73. To support
this claim, the company alleged it “has reconsidered and
continues to question its membership in various trade
organizations and its petitioning to the government on any
issues.” App. 33 ¶ 14. And it claimed that the County’s
potential lawsuit “impermissibly chills its speech and
associational activities.” Id.In Count II, Sherwin-Williams sought declaratory and
injunctive relief to preclude the County’s potential lawsuit. It
claimed the County’s (unarticulated) public nuisance theory
would seek to impose liability “(i) that is grossly
5
disproportionate; (ii) arbitrary; (iii) impermissibly retroactive;
(iv) without fair notice; (v) impermissibly vague; and (vi) after
an unexplainable, prejudicial and extraordinarily long delay, in
violation of the Due Process Clause.” App. 52 ¶ 83.
Finally, in Count III, the company alleged the County’s
contingent-fee agreement (or possible future agreement) with
outside counsel violates the Due Process Clause because “[t]he
Constitution prohibits vesting the prosecutorial function in
someone who has a financial interest in using the government’s
police power to hold a defendant liable.” App. 56 ¶ 94.
Sherwin-Williams asked for declaratory and injunctive relief
before the County files suit because “once the[] lawsuit[] [is]
filed, the Count[y’s] financial arrangement with trial attorneys
will unlawfully interfere with [its] decision-making, including
altering [its] positions or dissuading [it] from seeking
appropriate resolutions to the alleged health hazards with
which [it is] concerned.” App. 57 ¶ 96.
Delaware County moved to dismiss the complaint and
Sherwin-Williams moved for partial summary judgment on its
due process claim related to the County’s agreement with
outside counsel. Sherwin-Williams Co. v. County of Delaware,
2019 WL 4917154, at *1 (E.D. Pa. 2019). The District Court
granted the County’s motion to dismiss, holding Sherwin-
Williams lacked Article III standing because its “complaint
fail[ed] to state facts sufficient to show an actual case [or]
controversy.” Sherwin-Williams Co., 2019 WL 4917154, at *4.
The Court then denied Sherwin-Williams’s motion for partial
summary judgment as moot.
Because Sherwin-Williams sought only declaratory and
injunctive relief, the District Court construed its claims as
arising under the Declaratory Judgment Act and explained that
6
a “substantial controversy” must exist between the parties for
a plaintiff to sustain a claim under the Act and Article III of the
Constitution. Sherwin-Williams Co., 2019 WL 4917154, at *2.
The Court observed that “[t]he entirety of Plaintiff’s complaint
reads like a request for an advisory opinion regarding potential
affirmative defenses to a state law case that has not yet been,
and may never be, filed.” Id. at *4. It therefore concluded
Sherwin-Williams failed to plead an injury in fact or a ripe case
or controversy because the alleged harms hinged on the County
actually filing suit. Id. at *3–4.
Sherwin-Williams filed this timely appeal.1
II
Article III standing requires “(1) an injury-in-fact, (2) a
sufficient causal connection between the injury and the
conduct complained of, and (3) a likelihood that the injury will
be redressed by a favorable decision.” Finkelman v. Nat’l
Football League, 810 F.3d 187, 193 (3d Cir. 2016). The
plaintiff bears the burden of establishing standing. Lujan v.
Defenders of Wildlife, 504 U.S. 555, 561 (1992). The District
1
The District Court had jurisdiction to determine its
own jurisdiction. See, e.g., In re Lipitor Antitrust Litig., 855
F.3d 126, 142 (3d Cir. 2017). We have jurisdiction under 28
U.S.C. § 1291 to review the District Court’s orders. We review
Rule 12(b)(1) dismissals de novo. Batchelor v. Rose Tree
Media Sch. Dist., 759 F.3d 266, 271 (3d Cir. 2014).
7
Court dismissed Sherwin-Williams’s complaint because the
company failed to plead actual injury. We agree.2
Injury in fact requires “the invasion of a concrete and
particularized legally protected interest resulting in harm that
is actual or imminent, not conjectural or hypothetical.”
Finkelman, 810 F.3d at 193 (citation and internal quotation
marks omitted). “A harm is ‘actual or imminent’ rather than
‘conjectural or hypothetical’ where it is presently or actually
occurring, or is sufficiently imminent. . . . [P]laintiffs relying
on claims of imminent harm must demonstrate that they face a
realistic danger of sustaining a direct injury from the conduct
of which they complain.” Blunt v. Lower Merion Sch. Dist.,
767 F.3d 247, 278 (3d Cir. 2014) (citation omitted).
“Allegations of possible future injury do not satisfy the
requirements of Art. III. A threatened injury must be ‘certainly
impending’ to constitute injury in fact.” Whitmore v. Arkansas,
495 U.S. 149, 158 (1990) (citation omitted). And a party
seeking equitable relief for a prospective injury, like Sherwin-
Williams here, must show a “likelihood of substantial and
2
Sherwin-Williams argues the District Court’s order
“cannot stand” based, in part, on two particular errors.
Sherwin-Williams Br. 34. First, the District Court relied on the
dissenting opinion in MedImmune, Inc. v. Genentech, Inc., 549
U.S. 118 (2007), as if it were the majority opinion. Sherwin-
Williams Co., 2019 WL 4917154, at *4. Second, in addressing
whether Sherwin-Williams had Article III standing, the Court
erroneously relied on Pub. Serv. Comm’n of Utah v. Wycoff
Co., 344 U.S. 237 (1952). In Wycoff Co., the Supreme Court
addressed statutory federal question jurisdiction, not Article III
standing. These errors do not require reversal because the
District Court’s holding is well supported by applicable law.
8
immediate irreparable injury” to establish standing. O’Shea v.
Littleton, 414 U.S. 488, 502 (1974).
Declaratory judgments are often forward-looking, but
they are “limited to cases and controversies in the
constitutional sense.” Wyatt, Virgin Islands, Inc. v. Gov’t of
V.I., 385 F.3d 801, 805 (3d Cir. 2004) (citing Aetna Life Ins.
Co. of Hartford, Conn. v. Haworth, 300 U.S. 227, 240 (1937)).
We may review only “concrete legal issues, presented in actual
cases, not abstractions . . . . This is as true of declaratory
judgments as any other field.” Golden v. Zwickler, 394 U.S.
103, 108 (1969) (quoting United Public Workers of America
(C.I.O.) v. Mitchell, 330 U.S. 75, 89 (1947)) (internal quotation
marks omitted).
Sherwin-Williams asserts—and the County does not
dispute—that it leveled a “facial” attack on the District Court’s
jurisdiction. So “we accept [Sherwin-Williams’s] well-pleaded
factual allegations as true and draw all reasonable inferences
from those allegations in [its] favor.” In re Horizon Healthcare
Servs. Inc. Data Breach Litig., 846 F.3d 625, 633 (3d Cir.
2017). Although a complaint need only be “a short and plain
statement of the claim showing that the pleader is entitled to
relief,” Fed. R. Civ. P. 8(a)(2), it “must contain sufficient
factual matter . . . to ‘state a claim to relief that is plausible on
its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
9
III
We first consider whether Sherwin-Williams
established Article III standing by sufficiently pleading injury
in fact.
A
In Counts I and II of its complaint, Sherwin-Williams
failed to allege an existing injury or one that was “certainly
impending” as a result of the anticipated litigation from
Delaware County. See Whitmore, 495 U.S. at 158. The
company did not plead an existing First Amendment injury
based on the County’s potential lawsuit because “generalized
allegations” of chilled speech cannot establish an existing
injury. See Pa. Family Inst. v. Black, 489 F.3d 156, 166 n.10
(3d Cir. 2007). Instead, an allegation that certain conduct has
(or will have) a chilling effect on one’s speech must claim a
“specific present objective harm or a threat of specific future
harm.” Laird v. Tatum, 408 U.S. 1, 13–14 (1972). Sherwin-
Williams’s claim that the specter of the County’s potential
lawsuit has caused it to “reconsider[] and . . . question its
membership in various trade organizations and its petitioning
to the government on any issues,” App. 33 ¶ 14, is a
“generalized allegation[]” insufficient to satisfy Article III’s
requirements. Pa. Family Inst., 489 F.3d at 166 n.10.
Sherwin-Williams also claims it sufficiently alleged an
imminent injury in Counts I and II based on a potential lawsuit
by the County. But even if it could show that a lawsuit were
certainly impending, it did not establish that such a lawsuit
would cause a concrete injury to its constitutional rights. The
company’s constitutional claims in Counts I and II rest on what
it anticipates the County might allege in a hypothetical lawsuit.
10
Such speculation cannot satisfy Article III’s standing
requirements. See Aetna Life Ins. Co., 300 U.S. at 241(explaining federal courts may not issue “opinion[s] advising
what the law would be upon a hypothetical state of facts”).
Specifically, Sherwin-Williams asks us to assume not only that
the County will sue, but also its theory of liability, its litigation
tactics, and that the County will prevail. App. 49–52, ¶¶ 73–
80. The County may proceed as Sherwin-Williams predicts. Or
it may not. And who knows whether the County would win?
That uncertainty—and all of the contingencies that go along
with it—expose Sherwin-Williams’s inability to allege an
existing injury or one that is “certainly impending.” See
Whitmore, 495 U.S. at 155, 158.
Moreover, Sherwin-Williams failed to show a
“likelihood of substantial and immediate irreparable injury”
absent declaratory and injunctive relief. See O’Shea, 414 U.S.
at 502. Any injury to Sherwin-Williams’s First Amendment or
due process rights would not be irreparable. If the County sues,
Sherwin-Williams can raise those claims as affirmative
defenses in state court. See Sherwin-Williams Co. v. City of
Columbus, 2008 WL 839788, at *3 (S.D. Ohio 2008). And the
company failed to explain why such defenses would be
inadequate. So any harm to its constitutional rights would be
neither “substantial” nor “irreparable.”
Sherwin-Williams’s preemptive suit differs
significantly from another pre-enforcement case in which we
found Article III standing. In Khodara Envt’l, Inc. v. Blakey,
376 F.3d 187, 194 (3d Cir. 2004), we considered whether a
federal statute precluded development of a landfill. Instead of
developing the landfill first and risking enforcement actions by
the government, the plaintiff sought a judgment declaring its
rights under federal law. We held that the plaintiff had standing
11
to pursue declaratory relief before the government took steps
to block the landfill’s development because “it [was] apparent
that it would [have been] inordinately expensive and
impractical from a business standpoint” to force the plaintiff to
act first and litigate later. Id. And it was undisputed that, if the
plaintiff received a favorable ruling, it would develop the
landfill. Id.Here, by contrast, Sherwin-Williams is not seeking
clarification of its rights so it can take some affirmative
business action, and any conduct for which Delaware County
might sue has already occurred. Sherwin-Williams is instead
trying to preempt the County’s supposedly imminent lawsuit
with affirmative defenses it could raise in response to any suit
that might be filed. And unlike the plaintiff in Blakey, Sherwin-
Williams has failed to show that defending against a lawsuit
(rather than pursuing this one) would be “inordinately
expensive and impractical.” Id.For these reasons, we hold that Sherwin-Williams lacks
standing to pursue Counts I and II of its complaint.
B
Sherwin-Williams also failed to plead an existing or
imminent injury sufficient to establish Article III standing for
12
its claim in Count III.3 There, the company claimed it suffered
(and continues to suffer) an injury to its due process rights
because the County formed a contingent-fee agreement with
outside counsel. In particular, it claimed this arrangement
“violate[s its] due process right to have a financially
disinterested public official prosecuting a public nuisance suit
brought on behalf of the public.” App. 56 ¶ 93.
Because Delaware County did not execute its current
agreement with outside counsel until more than a week after
Sherwin-Williams filed its complaint, the company did not
explain how the specific terms of that engagement letter
infringe its due process rights. Instead, it assumed the County’s
agreement would mirror other counties’ agreements and
attached Lehigh County’s engagement letter to its complaint.
That assumption turned out to be wrong—in its engagement
letter, Delaware County “retain[ed] complete control over the
course and conduct of the litigation.” See App. 226 (also
explaining that the County has “real (not illusory) control over
the litigation”). Sherwin-Williams cannot establish an existing
injury based on that agreement’s specific terms.
That leaves Sherwin-Williams’s argument that the
contingent-fee arrangement will nonetheless cause some future
injury by tainting an investigation and lawsuit by the County.
3
The District Court did not specifically address whether
Sherwin-Williams had standing to pursue this claim. The
company argues this “requires reversal,” Sherwin-Williams
Br. 18, but because this is a question of law we can resolve it
in the first instance. See Wujick v. Dale & Dale, Inc., 43 F.3d
790, 792–93 (3d Cir. 1994) (addressing, for the first time on
appeal, whether the district court had subject matter
jurisdiction).
13
The company alleged: “[O]nce these lawsuits are filed, the
Counties’ financial arrangement with trial attorneys will
unlawfully interfere with the Counties’ decision-making,
including altering their positions or dissuading them from
seeking appropriate resolutions to the alleged health hazards
with which they are concerned.” App. 57 ¶ 96. The actual
terms of the agreement with outside counsel belie this claim.
Delaware County retained full control over potential litigation
and does not stand to benefit from the contingent-fee
arrangement, so Sherwin-Williams’s claims of impending
injury were (and are) unfounded. It also argues its “rights can
be protected only by determining” this issue before the County
sues, id., but it fails to show an irreparable injury justifying pre-
suit relief. See O’Shea, 414 U.S. at 502.
Like the company’s other claims, Count III assumes too
much. Sherwin-Williams will suffer no harm if the County
decides not to sue. And if it does sue, an injury may arise only
if the County violates its own agreement and cedes control to
outside counsel. That injury, if any, is neither existing nor
certainly impending. So it cannot satisfy the requirements for
Article III standing.
IV
Even if Sherwin-Williams could satisfy Article III’s
injury-in-fact requirement, its claims would not be ripe for
review. “At its core, ripeness works ‘to determine whether a
party has brought an action prematurely . . . and counsels
abstention until such a time as a dispute is sufficiently concrete
to satisfy the constitutional and prudential requirements of the
doctrine.’” Plains All Am. Pipeline L.P. v. Cook, 866 F.3d 534,
539 (3d Cir. 2017) (quoting Peachlum v. City of York, 333 F.3d
429, 433 (3d Cir. 2003)). “A dispute is not ripe for judicial
14
determination if it rests upon contingent future events that may
not occur as anticipated, or indeed may not occur at all. Claims
based merely upon assumed potential invasions of rights are
not enough to warrant judicial intervention.” Wyatt, 385 F.3d
at 806 (internal citations and quotation marks omitted).
Sherwin-Williams insists its claims are ripe by citing
our statement that a “party seeking declaratory relief need not
wait until the harm has actually occurred to bring the action.”
Travelers Ins. Co. v. Obusek, 72 F.3d 1148, 1154 (3d Cir.
1995). But it ignores the requirement that a party “must
demonstrate that the probability of that future event occurring
is real and substantial, ‘of sufficient immediacy and reality to
warrant the issuance of a declaratory judgment.’” Id. (quoting
Salvation Army v. Dep’t of Cmty. Affairs, 919 F.2d 183, 192
(3d Cir. 1990)). And it fails to overcome our holding that “[a]
dispute is not ripe for judicial determination ‘if it rests upon
contingent future events that may not occur as anticipated, or
indeed may not occur at all.’” Wyatt, 385 F.3d at 806 (quoting
Texas v. United States, 523 U.S. 296, 300 (1998)). Each of
Sherwin-Williams’s claims fits that description.
In Wyatt, we held an employer’s claims for declaratory
relief against the government of the Virgin Islands were not
ripe because, although the government issued cease-and-desist
letters telling the employer to stop certain business practices
and the Attorney General of the Virgin Islands issued an
opinion letter declaring the case “ripe for injunctive and/or
declaratory relief,” the government had taken no formal steps
to proscribe the employer’s conduct. Id. at 803–04. Delaware
County has taken even fewer steps than the government had
taken in Wyatt. In fact, according to Sherwin-Williams’s
complaint, the only action Delaware County has taken towards
filing suit is hiring outside counsel. The County might sue
15
Sherwin-Williams, but it might not. It might advance the same
arguments as other counties, but it might not. The uncertainty
surrounding these fundamental questions renders these claims
unfit for judicial resolution. Wyatt, 385 F.3d at 806.
In short, Sherwin-Williams’s claims are not ripe largely
for the same reasons they fail to satisfy the injury-in-fact
requirement—they require speculation about whether the
County will sue and what claims it would raise.
* * *
We agree with the District Court’s determination that
Sherwin-Williams lacked Article III standing. The harms it
alleges are hypothetical and conjectural. And any harm it may
suffer as a result of a future lawsuit by Delaware County is
redressable in the context of that case, should it ever occur. We
will therefore affirm the orders of the District Court.4
4
Because we will affirm the dismissal order, we will
also affirm the order denying partial summary judgment as
moot.
16