Glen Allen Farm, LLC v. New Castle County

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
GLEN ALLEN FARM, LLC, )
)
Petitioner, )
)
v. ) C.A. No. 2019-0425-PAF
)
NEW CASTLE COUNTY, a )
Political subdivision of the State )
of Delaware, and MATTHEW S. )
MEYER, individually and in his )
official capacity as the County )
Executive for New Castle County, )
TRACY SURLES, individually )
and in her official capacity as )
the General Manager of Public )
Works for New Castle County; and )
RICHARD E. HALL, individually )
and in his official capacity as the )
General Manager of Land Use for )
New Castle County, )
)
Respondents. )
MEMORANDUM OPINION
Date Submitted: June 3, 2020
Date Decided: September 29, 2020
Sidney S. Liebesman, E. Chaney Hall, and Wali W. Rushdan, FOX ROTHSCHILD
LLP, Wilmington, Delaware; Attorneys for Petitioner.
Max B. Walton and Lauren P. DeLuca, CONNOLLY GALLAGHER LLP,
Wilmington, Delaware; Brian J. Merritt, NEW CASTLE COUNTY OFFICE OF
LAW, New Castle, Delaware; Attorneys for Respondents.
FIORAVANTI, Vice Chancellor
Nearly two decades ago, a group of property owners in southern New Castle
County sought to develop their property into a residential development. The
property owners entered into an agreement with developer Toll Brothers, Inc. (“Toll
Brothers”) that contained several contingencies, one of which was obtaining sewer
service from the County. The County rejected the development application. Toll
Brothers and the owners of one of the properties in the group filed an action against
the County and certain County officials in the United States District Court for the
District of Delaware seeking to compel the County to provide sewer service to their
property (the “Federal Action”). The parties to the Federal Action settled their
dispute in 2010, which is memorialized in a settlement agreement with the County
(the “Settlement Agreement”). The Settlement Agreement obligates the County to
build a sewer main and provide sanitary sewer service to all of the properties if
certain conditions are met. The County’s obligations to build the sewer main expire
on July 1, 2021, unless certain conditions in the Settlement Agreement are satisfied
by that date.
Petitioner Glen Allen Farm, LLC (“Petitioner” or “GAF”) was among the
property owners that had signed on to the Toll Brothers development agreement.
GAF was not a party in the Federal Action and is not a signatory to the Settlement
Agreement. Nevertheless, GAF’s property would be among the properties obtaining
sanitary sewer service if the County were to provide sewer service under the terms
2
of the Settlement Agreement. In this action, GAF seeks to enforce the Settlement
Agreement against the County and certain County government officials
(collectively, “Respondents”), contending that GAF is a third-party beneficiary to
that agreement. GAF makes no secret of its objective:
Petitioner has been approached by one or more prospective purchasers
of the Property whom have indicated that they would be willing to
purchase the Property, at a premium, if Petitioner can confirm the
County still intends to honor its obligation under the Settlement
Agreement to provide sanitary sewer service to the Property.
Compl. ¶ 31. GAF seeks an order compelling the County to perform under the
Settlement Agreement if GAF, a purchaser of its property, or a developer other than
Toll Brothers satisfies the terms of the Settlement Agreement that obligate the
County to provide sanitary sewer service to GAF’s property. Respondents have
moved to dismiss the complaint. Their primary argument is that the Petitioner’s
claims are not ripe for resolution. This Opinion resolves the motion to dismiss in
favor of Respondents.
3
I. BACKGROUND
The facts recited in this opinion are drawn from Petitioner’s Verified
Amended Complaint (“Complaint” or “Compl.”), documents incorporated by
reference or integral thereto, and matters to which the Court may take judicial notice.
A. The Parties
GAF is a Delaware limited liability company and the owner of record of
approximately 141 acres of undeveloped farmland located on the northern side of
Port Penn Road in New Castle, Delaware (the “Property”). 1
Petitioner seeks relief from the County and three County government
officials: Respondent Matthew S. Meyer (individually and in his capacity as the
County Executive for the County), Respondent Tracy Surles (individually and in her
capacity as the General Manager of Public Works for the County), and Respondent
Richard E. Hall (individually and in his capacity as the General Manager of Land
Use for the County). 2
Under Delaware law, the County has “all powers which, under the
Constitution of [Delaware], it would be competent for the General Assembly to grant
by specific enumeration, and which are not denied by statute[.]” 3 The County has
1
Compl. ¶ 1.
2
Id. ¶¶ 2-5.
3
9 Del. C. § 1101.
4
authority over zoning and the power to regulate land use within the territory of New
Castle County. 4 The County’s authority includes the power “to act upon all matters
pertaining to sewers, sewerage disposal plants, trunk line sewers and sewerage
systems generally.” 5
B. The Planned Development of the Port Penn Assemblage
The Property is part of a sanitary sewer district for the southern portion of the
County designated as the County Southern Sewer Service Area (the “SSSA”). 6 In
2003, the County Council, the legislative branch of the County government, passed
a resolution affirming the County’s commitment to construct a sewer system in the
SSSA. 7
4
Id. § 2602(a) (“[T]he County Council may divide the territory of New Castle County into
districts or zones of such number, shape, or area as it may determine, and within such
districts . . . may regulate the erection, construction, reconstruction, alteration, and uses of
buildings and structures and the uses of land.”).
5
Id. § 1521(a)(1).
6
Compl. ¶ 7.
7
Id. ¶ 8.
5
 In the early 2000s, Petitioner and four other owners of contiguous land entered
into a development agreement with Toll Brothers to create a large residential home
tract within the SSSA named the “Port Penn Assemblage.”8 The Toll Brothers
development agreement with the Port Penn Assemblage was subject to
contingencies, including that the County would provide sewer service sufficient for
the development. 9 According to the Complaint, Toll Brothers and the Port Penn
Assemblage, including Petitioner, relied upon representations from the County that
the SSSA would receive sewer service. 10
After developing engineering plans and conducting due diligence, Toll
Brothers submitted a land development application to the County for the Port Penn
Assemblage (the “Application”). 11 The County rejected the Application.12 Toll
Brothers and the property owners of the Port Penn Assemblage pressed the County
to make public sewer service available for the Port Penn Assemblage.13
In November 2007, Toll Brothers and Gary and Gale Warren, the owners of
the Warren Farm—a property in the Port Penn Assemblage—filed litigation against
8
Id. ¶¶ 10-11.
9
Id. ¶ 12.
10
Id. ¶ 13.
11
Id.
12
Id. ¶ 14.
13
Id. ¶ 16.
6
the County in an action captioned Warren et al. v. New Castle Cty., C.A. No. 07-
725-SLR-LPS (D. Del.) (i.e., the Federal Action) to compel the County to process
the Application and to provide sewer service necessary to service the development
contemplated by the Application. On June 26, 2008, the Magistrate Judge, now-
Chief Judge Leonard P. Stark, issued a report and recommendation recommending
dismissal of the Federal Action. See Warren v. New Castle Cty., 2008 WL 2566947
(D. Del. 2008).
C. The Settlement Agreement
The County, Gary Warren, Gale Warren, and Toll Brothers entered into the
Settlement Agreement, dated November 29, 2010, providing for a settlement of their
disputes, including the Federal Action.14 The Settlement Agreement defines the
Warrens and Toll Brothers as the “Developer.” 15
In Paragraph 1 of the Settlement Agreement, the County agreed that the
properties in the Port Penn Assemblage could connect to the County sewer system
in the SSSA and that the County would provide guaranteed sewer capacity to those
properties.16 The Settlement Agreement identifies, using Tax Parcel Numbers, the
14
The Settlement Agreement, entitled “Settlement Agreement and Mutual Release,” is
attached to the Complaint as Exhibit A.
15
Id. 1.
16
Settlement Agreement ¶ 1 (“The County agrees that the Properties may connect to the
County sewer system in the SSSA for a maximum of 631 housing units.”).
7
properties that may connect to the County sewer system. 17 Petitioner’s Property is
among the properties identified in the Settlement Agreement. The County further
agreed that “[t]his guaranteed sewer capacity shall be available even if the Developer
or the property owners abandon the applications for the [then-pending development
plans] and pursue other development options for the Properties.” 18
Under the Settlement Agreement, the County and the Developer each has
obligations to construct sewer infrastructure to connect the Port Penn Assemblage
to the County’s sewer system. Paragraph 2 addresses the County’s side of the
equation and, in pertinent part, states that “[t]he County agrees to construct, at its
own cost and expense, a force main line from the current central core facilities in the
SSSA,” at a location “just east of the existing SSSA central core boundary.” 19 The
Settlement Agreement defines the sewer line referenced in Paragraph 2 as the
“County Force Main.” 20 Under the Settlement Agreement, the Developer or the
property owners may provide notice of commencement of physical construction of
sewer service infrastructure to connect to the County Force Main (defined in
Paragraph 3 of the Settlement Agreement as “Developer’s Infrastructure
17
Id. at 1.
18
Id. ¶ 1.
19
Id. ¶ 2.
20
Id.
8
Improvements”) to trigger the County’s obligation to begin construction of the
County Force Main. 21 The County’s obligation to provide sewer capacity and to
build the County Force Main expires on July 1, 2021 “unless Developer has
connected two or more owner/renter occupied housing units to the County’s Force
Main by such date.”22
Paragraph 3 addresses the Developer’s obligation to construct infrastructure
improvements to connect to the County Force Main. Under Paragraph 3, the
Developer is responsible for constructing Developer’s Infrastructure Improvements
from the Properties to the County Force Main at its own cost and expense, and is to
do so “in accordance with all applicable laws, regulations, standards, and policies.”23
Paragraph 3 further obligates the Developer to apply for and receive approval for
“all sewer infrastructure construction” from all applicable governmental
21
Id. ¶ 4 (“The County agrees to commence construction of the County Force Main under
Route 1 and Route 13 . . . within sixty (60) days of receiving written notice from Developer
or the property owners of commencement of physical construction of Developer’s
Infrastructure Improvements.”).
22
Id. ¶ 5.
23
Id. ¶ 3 (“For connection to the County Force Main described in paragraph 2 above,
Developer, at its own cost and expense, shall be responsible for running all necessary sewer
service infrastructure from the Properties to connect to the County Force Main, in
accordance with all applicable laws, regulations, standards, and policies (“Developer’s
Infrastructure Improvements”). Developer shall be responsible for all infrastructure costs
for Developer’s Infrastructure Improvements, including, but not limited to, all costs and
expenses associated with design, construction, engineering, and right of way acquisition.”).
9
authorities.24 The Settlement Agreement also provides Toll Brothers an extension
of time to complete its Application to develop the Port Penn Assemblage, but it does
not limit the Developer or the property owners “from pursuing other development
options and/or different development plans for the Properties.”25
The parties to the Settlement Agreement agreed that the Settlement
Agreement would be “binding upon and inure to the benefit of the Parties and their
respective owners, investors, members, directors, officers, employees, heirs,
executors, successors, and assigns.”26 The parties further agreed that the
“Agreement shall run with the Properties.”27
According to Petitioner, in October 2016, Respondent Surles, the County’s
General Manager of Public Works, provided the Settlement Agreement to an
attorney for one of the Port Penn Assemblage property owners and told the attorney
24
Id. (“The County shall assist, if necessary, with the acquisition of required easements (at
the expense of the Developer) for the sewer lines to be owned by the County running from
the Properties to the connection point. Developer shall be required to apply for and receive
approval for all sewer infrastructure construction for Developer’s Infrastructure
Improvements from applicable governmental approvals bodies, including, but not limited
to, the County’s Department of Special Services. Developer shall also be required to pay
all applicable fees associated with the connection, including plan review fees and capital
recovery fees. One half of the applicable capital recovery fee shall be due upon the
application for each building permit, and the remainder of the capital recovery fee shall be
required to be paid upon application for a certificate of occupancy.”).
25
Id. ¶ 6.
26
Id. ¶ 16.
27
Id. ¶ 13.
10
“that the Settlement Agreement was intended to benefit all of the Properties, not just
the named individual parties to the Settlement Agreement.”28
D. The County Has Not Committed to Constructing the County Force
Main.
The Complaint alleges that Petitioner approached the County, including
Respondent Meyer, in an attempt to “confirm the County’s commitment to the public
sewer rights provided for in the Settlement Agreement.” 29 Other Port Penn
Assemblage property owners have also approached the County to confirm that the
County would “honor its obligation under the Settlement Agreement.” 30 According
to the Complaint, Respondents did not provide the requested confirmation to
Petitioner or the other members of the Port Penn Assemblage.31 To the contrary,
Respondents have “indicated to prospective developers and purchasers of the
property that the County is not obligated to perform its obligation to provide water
and sewer service under the Settlement Agreement.” 32
Petitioner alleges that the County has treated it and other Port Penn
Assemblage property owners unfairly in three respects. First, Meyer and certain
28
Compl. ¶ 24.
29
Id. ¶ 32.
30
Id. ¶ 28.
31
Id. ¶¶ 28-33.
32
Id. ¶ 29.
11
other former public officials have met with real estate developer Louis J. Capano to
develop and provide public sewer service to Carter Farm, a property outside of the
Port Penn Assemblage. 33 Second, the County has enacted an ordinance preventing
the installation of on-site septic systems in suburban subdivisions of the County until
August 2021, and selected that date because the County’s obligations under the
Settlement Agreement to construct the County Force Main expire in July 2021.34
Third, the County settled a different lawsuit filed by another Port Penn Assemblage
property owner against Respondents, captioned Good v. Meyer, C.A. No. 2018-
0152-PAF. 35
Petitioner principally seeks an order compelling Respondents “to affirm,
confirm, honor, and perform the County’s obligations under the Settlement
Agreement to (a) build the County Force Main . . . and (b) provide sanitary sewer
service to the Petitioner’s Property.” 36 Petitioner also seeks an order requiring
Respondents to “process, evaluate, and review any development application for the
Property submitted to the County as if the Property will have County sewer and
water service once it is developed.” 37
33
Id. ¶ 34.
34
Id. ¶ 36.
35
Id. ¶ 37.
36
See id. ¶ 57.
37
Id.
12
 The Complaint contains eleven counts, listed here for ease of reference:
Count Number Count Title Compl. ¶
I Breach of Contract 38-43
II Declaratory Judgment 44-50
III Permanent Injunctive Relief 51-59
IV Specific Performance 60-64
V Equal Protection Violation Pursuant to the 65-71
14th Amendment of the U.S. Constitution
VI Modification of Settlement Agreement 72-76
VII Bad Faith 77-81
VIII Equitable Enforcement of Covenant 82-86
IX Breach of Implied Covenant of Good Faith 87-90
and Fair Dealing
X Anticipatory Breach of Contract 91-95
XI Preliminary Injunctive Relief 96-106
Petitioner filed its original complaint on June 6, 2019, and filed the operative
amended complaint on January 30, 2020. The parties completed briefing on the
Respondents’ motion to dismiss on May 22, 2020, and the Court held oral argument
on June 3, 2020.
13
II. ANALYSIS
A. Legal Standard for Motion to Dismiss for Lack of Ripeness
Respondents have moved to dismiss, arguing the Complaint is not ripe and
fails to state a claim. The parties dispute whether Court of Chancery Rule 12(b)(1)
or 12(b)(6) applies to the ripeness challenge. If Rule 12(b)(1) applies, the Court may
consider facts outside the complaint. If Rule 12(b)(6) applies, the Court is generally
limited to the Complaint, all documents incorporated by reference therein, and facts
subject to judicial notice.38
This Opinion analyzes the ripeness challenge under Court of Chancery Rule
12(b)(6) for two reasons. First, the ripeness challenge involves a threshold question
of contract construction and, therefore, should be resolved pursuant to Court of
Chancery Rule 12(b)(6). Appriva S’holder Litig. Co., LLC v. ev3, Inc., 937 A.2d
1275, 1285 (Del. 2007) (noting that “the interpretation of a contract as a prerequisite
to . . . standing is . . . a determination involving the merits” warranting review
38
Compare Shellburne Civic Ass'n, Inc. v. Brandywine Sch. Dist., 2006 WL 2588959, at
*1 (Del. Ch. Sept. 1, 2006) (evaluating a motion to dismiss under Court of Chancery Rule
12(b)(6) and noting that, “[w]hen reviewing a motion to dismiss, generally only the matters
referred to in the pleadings are considered. The court may also take judicial notice of
certain facts pursuant to Delaware Rule of Evidence 201.”), with Acierno v. New Castle
Cty., 2006 WL 1668370, at *1 n.8 (Del. Ch. June 8, 2006) (holding that the Court of
Chancery may consider documents external to the complaint on a motion to dismiss for
lack of subject matter jurisdiction).
14
pursuant to Rule 12(b)(6)). Second, even under the plaintiff-friendly standard of
Court of Chancery Rule 12(b)(6), the Complaint is not ripe and must be dismissed.39
On a motion to dismiss for failure to state a claim under Court of Chancery
Rule 12(b)(6):
(i) all well-pleaded factual allegations are accepted as true; (ii) even
vague allegations are well-pleaded if they give the opposing party
notice of the claim; (iii) the Court must draw all reasonable inferences
in favor of the non-moving party; and ([iv]) dismissal is inappropriate
unless the plaintiff would not be entitled to recover under any
reasonably conceivable set of circumstances susceptible to proof.
Savor, Inc. v. FMR Corp., 812 A.2d 894, 896-97 (Del. 2002) (internal citations and
quotation marks omitted); accord Central Mortg. Co. v. Morgan Stanley Mortg.
Cap. Hldgs. LLC, 27 A.3d 531, 536 (Del. 2011). “[A] trial court is required to accept
only those ‘reasonable inferences that logically flow from the face of the complaint’
and ‘is not required to accept every strained interpretation of the allegations
proposed by the plaintiff.’” In re Gen. Motors (Hughes) S’holder Litig., 897 A.2d
162, 168 (Del. 2006) (quoting Malpiede v. Townson, 780 A.2d 1075, 1083 (Del.
2001)). “Moreover, a claim may be dismissed if allegations in the complaint or in
the exhibits incorporated into the complaint effectively negate the claim as a matter
of law.” Malpiede, 780 A.2d at 1083.
39
Because this Opinion concludes that the Complaint must be dismissed because the
dispute is not yet ripe, the Opinion does not address whether the Complaint otherwise states
a claim, except to the extent the Court must address threshold matters of contract
construction to determine whether the dispute is ripe.
15
B. The Complaint Is Not Ripe.
This Court may decline to exercise jurisdiction over a case if the underlying
dispute is not ripe. XI Specialty Ins. Co. v. WMI Liquidating Trust, 93 A.3d 1208,
1217 (Del. 2014). “Generally, a dispute will be deemed ripe if litigation sooner or
later appears to be unavoidable and where the material facts are static. Conversely,
a dispute will be deemed not ripe where the claim is based on uncertain and
contingent events that may not occur, or where future events may obviate the need
for judicial intervention.” Id. 1218-19 (internal citations and quotations omitted);
see also New Castle Cty. v. Pike Creek Recreational Servs., LLC, 2013 WL 6904387,
at *7 (Del. Ch. Dec. 30, 2013) (noting that the ripeness doctrine exists “to prevent
the courts, through avoidance of premature adjudication, from entangling
themselves in abstract disagreements over administrative policies”), aff’d, 105 A.3d
990 (Del. 2014). The purpose of the ripeness doctrine is “to conserve limited judicial
resources and to avoid rendering a legally binding decision that could result in
premature and possibly unsound lawmaking.” XI Specialty, 93 A.3d at 1217. The
ripeness doctrine further serves to “to protect . . . agencies from judicial interference
until an administrative decision has been formalized and its effects felt in a concrete
way by the challenging parties.” Pike Creek, 2013 WL 6904387, at *7.
16
The Complaint does not present a ripe dispute for two reasons. First,
Petitioner has not exhausted its administrative remedies. Second, Petitioner’s claims
are too contingent and hypothetical to be justiciable.
1. The Doctrine of Exhaustion of Administrative Remedies
Delaware “has adopted the doctrine of exhaustion of administrative
remedies,” Levinson v. Del. Comp. Rating Bureau, Inc., 616 A.2d 1182, 1187 (Del.
1992), which this Opinion will refer to as the “Finality Doctrine.” As the Delaware
Supreme Court has explained the doctrine:
A judicially created rule, the doctrine requires that where a remedy
before an administrative agency is provided, relief must be sought by
exhausting this remedy before the courts will either review any action
by the agency or provide an independent remedy. The policy which
sustains the doctrine is one of maintaining the proper relationship
between the courts and administrative agencies. It accomplishes this
by: (1) favoring a preliminary administrative sifting process, especially
when matters at issue are largely within the expertise of the involved
agency; (2) avoiding interference with the administrative agency by
withholding judicial action until the administrative process has run its
course; and (3) preventing attempts to burden the courts by a resort to
them in the first instance. It applies only where a claim must be
initiated before an administrative agency which has exclusive
jurisdiction over the matter and is able to provide an adequate remedy.
Id. (internal citations omitted). Although the Finality Doctrine is “a matter for
discretionary determination,” that discretion is constrained by the “strong
presumption favoring the requirement of exhaustion of administrative remedies.”
Id. 1190.
17
 New Castle County Council has statutory jurisdiction over sewer service to
the County: “New Castle County Council shall have general jurisdiction over all
matters pertaining to the County . . . including the power to act upon all matters
pertaining to sewers[.]” 40 The Delaware Code further provides that the “Department
of Special Services . . . [i]n cooperation with the Department of Land Use” may
“manage and develop plans for public facilities and infrastructure including sanitary
sewers and treatment facilities.”41
The New Castle County Unified Development Code (the “UDC”) provides
“standards, procedures, and minimum requirements . . . which regulate and control
the planning and subdivision of lands . . . and the general development of real estate
in the unincorporated areas of New Castle County, Delaware.” 42 Thus, under the
UDC, the Department of Special Services (“Special Services”)43 has authority over
40
9 Del. C. § 1521.
41
Id. § 1341.
42
UDC § 40.01.010. The Court can take judicial notice of the UDC. D.R.E. 202(d)(1)(B)
(“The court may, without request by a party, take judicial notice of . . . the duly enacted
ordinances and duly published regulations and determinations of governmental
subdivisions or agencies of . . . this State”); see also Prince v. Ferritto, LLC, 2019 WL
5787988, at *2 (Del. Super. 2019) (taking judicial notice of the Kent County Code).
43
The Department of Special Services is now known as the Department of Public Works.
Because the Delaware Code and the UDC have not yet been amended to reflect the new
name, for clarity and consistency, this Opinion refers to the Department of Public Works
as “Special Services.”
18
determining the availability of sewer capacity. 44 In that regard, “land development
applications that contemplate connection to County sewer,” must attach “a letter
from the Department of Special Services indicating that sewer is or will be available
for the proposed development.” 45
a. Petitioner Has Not Requested Sewer Capacity.
Petitioner’s claim for sewer capacity is premature. Petitioner has not
requested a letter from the Department of Special Services indicating whether sewer
will or will not be available for any proposed development. Hence, the
administrative agency has not had an opportunity to decide on Petitioner’s request
to extend sewer service to the Property. Petitioner has not even initiated the
administrative review process for connecting the Property to the County’s public
sewer system. As a result, each of the three policy rationales for the application of
the doctrine of administrative remedies articulated in Levinson applies here, and all
three warrant dismissal of the Complaint.
44
UDC § 40.05.000(b) (“County sewer service may represent a limiting factor for
development. The County has conducted an analysis of various areas of the County to
determine the sewer capacity of each area. In all sewer service areas in the County, sewer
capacity shall be provided on a first come, first serve basis if and/or when sanitary sewer
service becomes available, as determined by the Department of Special Services.”).
45
UDC App’x 1 1(A)(10).
19
First, the “matters at issue are largely within the expertise of the . . . agency”
because determinations relating to sewer capacity are within the expertise of Special
Services. Levinson, 616 A.2d at 1187.
Second, it is desirable to “avoid[] interference with the administrative agency”
here because Special Services has not made any determination regarding the
availability of sewer capacity for the Property. Id. Petitioner argues that the County
has made its position known by allegedly ignoring Petitioner’s requests for meetings
“to discuss and confirm the County’s commitment to the public sewer rights
provided for in the Settlement Agreement.” Compl. ¶ 32. Special Services,
however, has promulgated a written policy stating that it will only respond to
requests in writing, and Petitioner has not made any written request to Special
Services. 46 Further, even if Special Services eventually determines that Petitioner
does not have any rights to connect to the County’s public sewer infrastructure under
the Settlement Agreement, that does not render the agency’s involvement
meaningless or excuse Petitioner from avoiding the administrative review process.
46
See New Castle County Sewer Capacity Policy (attached as Exhibit A to Respondents’
Opening Brief). Petitioner does not contest the applicability of the policy cited by
Respondents. The Court may take judicial notice of the County’s policies in evaluating a
motion to dismiss pursuant to Court of Chancery Rule 12(b)(6). Frank C. Sparks Co. v.
Huber Baking Co., 96 A.2d 456, 462 (Del. 1953) (taking judicial notice of Delaware
agency policy); In re Wheelabrator Techs., Inc. S’holders Litig., 1992 WL 212595, at *12
(Del. Ch. Sept. 1, 1992) (noting that the Court may take judicial notice of publicly filed
documents).
20
Third, the Finality Doctrine bars the Complaint because Petitioner is
improperly attempting to “burden the courts by a resort to them in the first instance.”
See Levinson, 515 A.2d at 1187. The Complaint expressly seeks to have this Court
usurp the role of Special Services in determining whether the Property is eligible for
sewer service. See Compl. ¶ 57 (seeking an order requiring Respondents “to process,
evaluate, and review any development application for the Property submitted to the
County as if the Property will have County sewer and water service once it is
developed”). Preventing the agency’s review of any development plan is
inconsistent with the Settlement Agreement and the role of the Court. Under the
Settlement Agreement, the County retained discretion regarding the approval or
disapproval of any development plans to provide the Property with sewer service.
See Settlement Agreement ¶ 6 (“Developer agrees to diligently pursue all
applications for the Plans, and nothing herein shall relieve Developer of its
obligation to obey all Federal, State, and County laws, ordinances, regulations, and
policies in seeking development approval for Plans or any future development
options for the Properties.”). More important, it would be inefficient to expend
judicial resources to adjudicate a dispute where the Petitioner has not requested a
sewer capacity determination for a development proposal upon which the County
could express a formal position. If “[t]he finality requirement is not satisfied when
a developer, unhappy with a mere recommendation of a first-level land use agency,
21
runs immediately to court,” Warren, 2008 WL 2566947, at *14, then it cannot be
satisfied when a party has not even taken the first step to obtain an administrative
recommendation, let alone a final ruling.
b. Exceptions to the Finality Doctrine
Petitioner argues that three exceptions to the Finality Doctrine apply. 47 As
discussed below, the exceptions cited by Petitioner only apply to claims that would
survive regardless of the administrative agency’s decision. Here, however,
administrative review remains relevant to Petitioner’s request for sewer capacity and
sewer infrastructure. Therefore, the exceptions to the Finality Doctrine do not apply.
“First, a party pressing a facial challenge to a zoning ordinance, on either
substantive due process or equal protection grounds, need not wait for a final
decision applying the zoning ordinance to the party’s particular project.” Warren,
2008 WL 2566947, at *15. Claims that zoning ordinances are unconstitutional on
their face are not subject to dismissal on the basis of the Finality Doctrine because
facial challenges claim that “‘any application of the regulation is unconstitutional.’”
Cty. Concrete Corp. v. Town of Roxbury, 442 F.3d 159, 164 (3d Cir. 2006) (quoting
Eide v. Sarasota Cty., 908 F.2d 716, 724 n.14 (11th Cir. 1990)) (emphasis in
original). By contrast, “for an as-applied challenge, the landowner is only attacking
47
Petitioner’s Answering Br. 21-23 (citing Warren, 2008 WL 2566947, at *15-16).
22
the decision that applied the regulation to his or her property.” Cty. Concrete Corp.,
442 F.3d at 164 (quoting Eide, 908 F.2d at 724 n.14).
Petitioner contends that its claims must survive because it “challenges the
County’s actions on equal protection grounds.”48 Petitioner’s equal protection
claim, however, is an as-applied challenge to the County’s purported decision
regarding Petitioner’s request for sewer service, not a facial claim that any
application of a legislative act or ordinance fails.49 In its briefing (but not its
pleading), Petitioner cites a 2003 ordinance as the subject of its equal protection
claim, but Petitioner does not argue that the ordinance is facially unconstitutional.
See Cty. Concrete, 442 F.3d at 164. Accordingly, the exception for facial equal
protection challenges is not applicable here.
Second, Petitioner invokes an exception to the finality doctrine for “as-applied
substantive due process claim[s] when the landowner alleges extreme ‘wrongful
conduct’ by the governmental entity directed at the landowner.” Warren, 2008 WL
2566947, at *16. The exception exists for substantive due process claims that do
“not really challenge the land use decision but . . . [are] directed to related wrongful
conduct, because the claim would survive ‘even if the ultimate outcome of plaintiff’s
permit applications was favorable.’” Id. (quoting Cty. Concrete, 442 F.3d at 164).
48
Petitioner’s Answering Br. 22.
49
See Compl. ¶¶ 65-71.
23
Here, the Complaint does not contain an as-applied substantive due process
claim. In fact, Petitioner conceded in its pleading and at oral argument that it did
not have a constitutional right to sewer access.50 In re New Maurice J. Moyer
Academy, Inc., 108 A.3d 294, 321 (Del. Ch. 2015) (“[T]he protections of substantive
due process attach only where a plaintiff has demonstrated deprivation of an interest
that is considered a ‘fundamental’ right under the United States Constitution.”). As
a result, the exception for as-applied substantive due process claims does not apply
in this case.
Third, the Court may decline to dismiss an action for failure to comply with
the Finality Doctrine where pursuit of the administrative remedy would be futile,
“generally because the administrative body the plaintiff avoided had no power to
provide the relief sought.” Warren, 2008 WL 2566947, at *16. Petitioner does not
argue that Special Services or the County lacks the power to provide sewer capacity
and construct the County Force Main. Rather, Petitioner maintains that it need not
pursue administrative remedies because the County has ignored its entreaties to
50
See Compl. ¶ 70 n.11; Oral Arg. Regarding Mot. to Dismiss 30 (COUNSEL FOR
PETITIONER: “We’re not alleging there’s a constitutional right to sewer.”) (Dkt. 34)
(“Oral Arg. Tr.”). The provision of sewer service is not a right protected by substantive
due process protections under the Due Process Clause of the Fourteenth Amendment to the
United States Constitution. Port Penn Hunting Lodge Ass’n v. Meyer, 2019 WL 2077600
at *3-4 (Del. Ch. May 9, 2019) (holding that sewer service is not an established
fundamental right protected by substantive due process), aff’d, 222 A.3d 1044 (Del. 2019).
24
confirm its purported rights under the Settlement Agreement. Petitioner’s reliance
on informal entreaties do not allow it to ignore administrative remedies. Petitioner
has not adequately pleaded—and the record does not support—that obtaining
administrative review of its proposal would be futile.51 Rather, Petitioner has only
pleaded facts indicating that, in its view, the County is likely to deny its request for
sewer capacity. 52 That is not sufficient to excuse Petitioner’s failure to seek
administrative remedies prior to litigation. See Levinson, 616 A.2d at 1190-91
(holding that an agency’s discretion to deny a proposal does not render obtaining
51
In their Reply Brief, Respondents state: “The County has confirmed and reaffirms that
if the contractual contingencies are satisfied by the Developer . . . the County will honor
its commitments.” Respondents’ Reply Br. 6.
52
Petitioner alleges that Respondents have anticipatorily repudiated any obligations owed
to Petitioner under the Settlement Agreement because the County has not responded to the
Petitioner’s requests. Compl. ¶¶ 28-31. These allegations do not adequately allege that
Respondents have repudiated the Settlement Agreement, especially in light of Special
Services’s policy requiring written requests. Ignoring Petitioners’ requests to confirm its
obligations under the Settlement Agreement does not constitute a statement that the County
“outright refus[es] . . . to perform [the Settlement Agreement].” HIFN, Inc. v. Intel Corp.,
2007 WL 1309376, at *14 (Del. Ch. May 2, 2007). Petitioner also alleges that the County
has “indicated to prospective developers and purchasers of the property that the County is
not obligated to perform its obligation to provide water and sewer service under the
Settlement Agreement.” Compl. ¶ 19. Again, this allegation is too vague to sustain a claim
for anticipatory repudiation and, in any event, the County’s statements to third parties could
not constitute an anticipatory repudiation. Restatement (Second) of Contracts § 250 cmt.
c (1981) (noting that the statement giving rise to a repudiation “must be made to an obligee
under the contract, including a third party beneficiary or an assignee”); see also id. at
illustration 4 (“A tells C, a third person having no right under the contract, and not B, that
he will not perform. C informs B of this conversation, although not requested by A to do
so. A's statement is not a repudiation.”).
25
administrative review “futile,” including where an agency had already preliminarily
disapproved an application).
Because none of the exceptions to the Finality Doctrine apply, in the exercise
of the Court’s discretion, dismissal for failure to exhaust administrative remedies is
appropriate.
C. Petitioner’s Claims Are Contingent and Hypothetical.
The Complaint does not present a ripe dispute because Petitioner’s claims are
too contingent and hypothetical to be justiciable. First, Petitioner seeks an order
requiring the County to construct the County Force Main. The County’s obligation
to construct the County Force Main, however, is contingent upon the County’s
receipt of notice that construction of sewer infrastructure has begun. There is no
allegation that the Developer (or any other developer) seeks to build the
infrastructure to connect the Property to the County Force Main. Second, Petitioner
seeks a general order requiring the County to affirm and comply with its obligations
under the Settlement Agreement to provide sewer service and capacity to the
Property if Petitioner or another developer seeks to connect the Property to the
County Force Main. This is a request for an impermissible advisory opinion.
“Delaware courts do not render advisory or hypothetical opinions.” XI Specialty, 93
A.3d at 1217.
26
1. The County’s Obligation to Construct the County Force
Main Is Contingent.
In Counts III, IV, X, and XI, Petitioner seeks an order requiring the County to
construct the County Force Main.53 Petitioner ignores, however, that the Settlement
Agreement does not impose upon the County an unconditional obligation to
construct the County Force Main. Rather, the Developer (i.e., the Warrens and Toll
Brothers) or the property owners listed in the Settlement Agreement must provide
notice to the County that construction of Developer’s Infrastructure Improvements
has begun in order to trigger County’s obligation to begin construction of the County
Force Main. Paragraph 4 of the Settlement Agreement states that the “County agrees
to commence construction of the County Force Main . . . within sixty (60) days of
receiving written notice from Developer or the property owners of commencement
of physical construction of Developer’s Infrastructure Improvements.”54 The same
paragraph states that “[t]he County may, but shall not be required to, begin
53
Count III (Permanent Injunctive Relief) alleges that “Respondents have repeatedly
refused to affirm or confirm the County’s obligations under the Settlement Agreement to
(a) build the County Force Main (as defined by the Settlement Agreement) and (b) provide
sanitary sewer service to the Petitioner’s Property, despite the plain language of the
Settlement Agreement.” Compl. ¶ 53. Counts IV and XI allege the same obligations. Id.
¶¶ 63, 100; see also Compl. 32 (seeking injunctive relief compelling Respondents to
“affirm, confirm, honor, and perform the County’s obligations under the Settlement
Agreement to (a) build the County Force Main (as defined by the Settlement Agreement)
and (b) provide sanitary sewer service to the Petitioner’s Property)”).
54
Settlement Agreement ¶ 4.
27
construction of the County Force Main . . . at an earlier time.” 55 It is undisputed that
construction on Developer’s Infrastructure Improvements has not yet begun. The
Complaint also contains no well-pleaded allegation that Developer’s Infrastructure
Improvements will be constructed (by either the Developer or by any other
developer), and that the County has repudiated its obligation to begin construction
of the County Force Main.
Thus, under the terms of the Settlement Agreement, the County owes no
present obligation to begin construction of the County Force Main, and any
obligation to do so remains contingent. Accordingly, the question of whether
Petitioner is entitled to an order compelling the County to begin construction of the
County Force Main does not present a ripe dispute. XI Specialty, 93 A.3d at 1218-
19 (holding that a dispute is “not ripe where the claim is based on uncertain and
contingent events that may not occur, or where future events may obviate the need
for judicial intervention”) (internal citations omitted); see also Energy P’rs Ltd. v.
Stone Energy Corp., 2006 WL 2947483, at *7 (Del. Ch. Oct. 11, 2006) (“[I]f a
plaintiff's action is ‘contingent,’ that is, if the action requires the occurrence of some
future event before the action's factual predicate is complete, the controversy is not
ripe.”) (internal quotations omitted).
55
Id.
28
2. Petitioner Seeks an Impermissible Advisory Opinion.
Counts III, IV, and XI seek to compel the County to guarantee and provide
sewer capacity for the Property in the event that Petitioner or another developer seeks
to build infrastructure improvements to connect the Property to the County Force
Main. 56 The remaining counts of the Complaint—Counts I, II, V, VI, VII, VIII, X,
and IX—also seek a determination of the parties’ respective rights and obligations
under the Settlement Agreement if someone other than the Developer seeks to
connect the Property to the County Force Main.
The foundation of the Complaint is not grounded in any specific breach of the
Settlement Agreement. Instead, Petitioner builds its Complaint on the theory that
the County has acted wrongfully by failing to confirm its purported legal obligations
under the Settlement Agreement. For example, Count I (Breach of Contract) claims
that Respondents have “intentionally delay[ed] any resolution of the inquiries of
Petitioner . . . as to the parties’ respective obligations under the Settlement
Agreement.” 57 Count VII (Bad Faith) argues that Respondents have acted in bad
faith because they “refused to confirm whether they believe the County is obligated
to abide by its terms.” 58 Petitioner further alleges in Count VII that this is an
56
See Compl. ¶¶ 53, 63, 92, 100.
57
Id. ¶ 42.
58
Id. ¶ 79.
29
“obvious effort to leave the Petitioner with no remedy due to the Petitioner’s
inability to meet the precedent condition necessary to obligate the County to provide
water and sewer service to the Property.” 59 Through Count X (Anticipatory Breach
of Contract), Petitioner seeks “the County’s assurance that it will comply with its
obligations” if Petitioner or another developer “satisfies the construction
requirements set forth in the Settlement Agreement.” 60 Similarly, Counts II, V, VI,
VIII, and IX advance alternative theories for relief on the grounds that the County
purportedly owes obligations to Petitioner under the Settlement Agreement.61
Petitioner argues that without an order requiring the County to confirm its alleged
59
Id. ¶ 79.
60
Petitioner’s Answering Br. 28.
61
Count II (Declaratory Judgment) generally seeks a declaration that the County owes
obligations under the Settlement Agreement. Compl. ¶ 50. Count V (Equal Protection)
alleges that the County has treated Petitioner differently from other property owners in the
Port Penn Assemblage “by acknowledging the rights of other beneficiaries to sewer service
or entering into negotiations to compensate those beneficiaries for the same rights to the
exclusion of the Petitioner.” Id. ¶ 66. Count VI (Modification of Settlement Agreement)
seeks a modification of the Settlement Agreement arising from the County’s failure to
provide assurances. Id. ¶ 74. Count VIII (Equitable Enforcement of Covenant) argues that
Petitioner has standing to enforce the Settlement Agreement against the County because
“Toll Brothers abandoned its Application to develop the Property and failed to perform its
contractual obligations to Petitioner.” See id. ¶¶ 83, 85. Count IX (Breach of the Implied
Covenant of Good Faith and Fair Dealing) alleges that the County has breached the implied
covenant of good faith and fair dealing, although the Complaint does not specify what the
implied terms are or how they arise from the contract. Id. ¶ 89.
30
obligations under the Settlement Agreement, Petitioner has been “delayed in
securing a buyer or developer willing to develop the Property.” 62
These claims seek a determination of Petitioner’s rights under the assumption
that the Petitioner, a future owner of the Property, or a developer other than the
Developer eventually seeks to connect the Property to the County public sewer.
These claims also assume that the County will disapprove every development plan
to do so. These claims are “an invitation for a court to render an advisory opinion
based on a hypothetical case.” Stroud v. Milliken Enters., Inc., 552 A.2d 476, 481
(Del. 1989). “Delaware courts do not render advisory or hypothetical opinions.” XI
Specialty, 93 A.3d at 1217; see Aviva Life and Annuity Co. v. Am. Gen. Life Ins. Co.,
2014 WL 1677798, at *13 (Del. Ch. Apr. 29, 2014) (declining to opine on plaintiff’s
claims based on its own contingencies, “which may never come to pass,” because
“the opinion sought would be advisory”).63 Here, considering all of the possibilities
that would render Court intervention unnecessary or uncertain “underscore[s] that
62
Id. ¶ 55.
63
Petitioner’s claim for declaratory judgment regarding its rights under the Purchase
Agreement in Count II is not exempt from the ripeness requirement. Stroud, 552 A.2d at
479 (declaratory judgment cannot serve “‘as a means of eliciting advisory opinions from
the courts.’”) (quoting Ackerman v. Stemerman, 201 A.2d 173, 175 (Del. 1964)); see also
Aviva Life and Annuity Co., 2014 WL 1677798, at *10 (Del. Ch. Apr. 29, 2014)
(declaratory relief cannot be provided to resolve “hypothetical disputes or . . . situations in
which a judicial declaration will not end the dispute between the parties”) (quoting Hoechst
Celanese Corp. v. Nat'l Union Fire Ins. Co. of Pittsburgh, Pa., 623 A.2d 1133, 1137 (Del.
Super. 1992)).
31
any judicial determination at this stage would necessarily amount to an
impermissible advisory opinion.” XI Specialty, 93 A.3d at 1219.
First, it remains possible for the County to approve a development plan
connecting the Property to the County sewer. As noted above, Petitioner has not
adequately alleged that seeking administrative approval would be futile. It remains
possible that Special Services and the County could approve a plan to develop the
Property and to connect the Property to the County’s public sewer. That possibility
would render the Court’s intervention unnecessary. XI Specialty, 93 A.3d at 1217
(holding that a dispute is not ripe where “future events may obviate the need for
judicial intervention”) (internal quotations omitted). Even assuming that the County
owes contractual duties to Petitioner as a third-party beneficiary, the County’s
ultimate reasons for disapproving a plan to connect the Property to the County’s
public sewer could implicate different sections of the Settlement Agreement.64
Because Petitioner has neither presented a plan nor begun to seek administrative
approval, however, the nature and scope of any eventual dispute remains unclear.
64
In their briefing, the parties dispute whether Petitioner is a third-party beneficiary with
rights under the Settlement Agreement or whether Petitioner is a mere incidental
beneficiary. Because the Court dismisses the Complaint for failure to present a ripe
dispute, this Opinion does not address the issue of whether Petitioner is a third-party
beneficiary.
32
Second, it is possible that neither Petitioner nor any developer ultimately
seeks to develop the Property and connect the Property to the County’s public sewer.
As Petitioner acknowledged at oral argument, the Petitioner is not currently seeking
to develop the Property. 65 There is also no indication from the record that any
developer is willing to undertake development of the Property. In the event that no
developer seeks to connect the Property to the County’s public sewer, the County’s
purported obligations owed to Petitioner remain inchoate, and there will be no need
for the Court to issue an opinion. XI Specialty, 93 A.3d at 1217.
Third, the dispute is not ripe because the Court cannot assume that the
Developer will not construct Developer’s Infrastructure Improvements. The
Complaint does not allege that the Developer or its assignee66 could not initiate
construction of Developer’s Infrastructure Improvements. The Complaint also does
not allege that the Developer has waived or forfeited its rights under the Settlement
65
See Oral Arg. Tr. 38 (“THE COURT: [I]s it correct that your client is not pursuing any
development options for the properties? COUNSEL FOR PETITIONER: Yes.”).
66
See Oral Arg. Tr. 7 (Counsel for Respondents acknowledging that Toll Brothers’ rights
under the Settlement Agreement could be assigned); Settlement Agreement ¶ 16 (“This
Agreement shall be binding upon and inure to the benefit of the Parties and their respective
. . . assigns.”).
33
Agreement. 67 In the event the Developer seeks to construct Developer’s
Infrastructure Improvements, there would potentially be no need for an order
determining whether Petitioner or another developer could construct Developer’s
Infrastructure Improvements and obligate the County to construct the County Force
Main and to provide sewer capacity. XI Specialty, 93 A.3d at 1217.68
In sum, the Complaint is not ripe because Petitioner’s claims require the Court
to assume a hypothetical situation subject to numerous contingencies that would
significantly affect the dispute before the Court, or moot the dispute altogether.
Adjudicating this dispute would thus require the Court to issue an impermissible
67
The only allegation in the Complaint regarding Toll Brothers’ decision not to pursue
development pursuant to the Settlement Agreement in the Complaint is a conclusory
allegation. Compl. ¶ 83 (“When Toll Brothers abandoned its Application to develop the
Property and failed to perform its contractual obligations to Petitioner including those
under the Settlement Agreement, it effectively reconveyed the Property, of which it had
been equitable owner, back to Petitioner.”). This allegation is not sufficient to demonstrate
that Toll Brothers and the Warrens no longer have any right to construct Developer’s
Infrastructure Improvements pursuant to the Settlement Agreement. The Answering Brief
states that “[t]he Developer as defined by the Settlement Agreement is no longer involved
with the Property or any of the Port Penn Assemblage properties.” Petitioner’s Answering
Br. 12; see also id. 41 (“As the Developer is no longer involved in the development of the
Property, the Developer is not going to complete the conditions.”). This argument also
does not demonstrate that Toll Brothers and the Warrens waived or forfeited their rights
under the Settlement Agreement.
68
If this litigation continued on the theory that Petitioner or developers other than the
Developer could construct Developer’s Infrastructure Improvements to benefit Petitioner
in lieu of the Developer, it is possible that this action could affect the rights of the Warrens
and Toll Brothers under the Settlement Agreement. Because this Opinion dismisses the
Complaint, this Opinion does not reach the question of whether Toll Brothers and the
Warrens are indispensable parties to this litigation. See Ct. Ch. R. 19(a)(2).
34
advisory opinion regarding Petitioner’s potential rights over a dispute that is not yet
ripe.
III. CONCLUSION
For the foregoing reasons, the Respondents’ Motion to Dismiss the Complaint
is granted.
IT IS SO ORDERED.
35