Toll Bros Inc v. Readington ( 2009 )

Opinions of the United
2009 Decisions States Court of Appeals
for the Third Circuit
2-4-2009
Toll Bros Inc v. Readington
Precedential or Non-Precedential: Precedential
Docket No. 06-1053
Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2009
Recommended Citation
"Toll Bros Inc v. Readington" (2009). 2009 Decisions. Paper 1810.
http://digitalcommons.law.villanova.edu/thirdcircuit_2009/1810
This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova
University School of Law Digital Repository. It has been accepted for inclusion in 2009 Decisions by an authorized administrator of Villanova
University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu.
PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
____________
No. 06-1053
____________
TOLL BROS., INC.,
Appellant
v.
TOWNSHIP OF READINGTON; MAYOR AND
COMMITTEE FOR THE TOWNSHIP OF READINGTON,
individually and in their official capacities; TOWNSHIP OF
READINGTON PLANNING BOARD; MEMBERS OF THE
TOWNSHIP OF READINGTON PLANNING BOARD,
individually and in their official capacities; JULIA C. ALLEN,
individually and in her official capacity; RONALD P.
MONACO, individually and in his official capacity; BEATRICE
MUIR, individually and in her official capacity; GERARD J.
SHAMEY, individually and in his official capacity; FRANK L.
GATTI, individually and in his official capacity; JOHN AND
JANE DOES 1-20; ABC MUNICIPAL AGENCIES 1-10,
fictitious agencies
____________
On Appeal from the United States District Court
for the District of New Jersey
(No. 04-cv-06043)
District Judge: Hon. Garrett E. Brown, Jr., Chief Judge
Argued: Tuesday, January 23, 2007
Before: SCIRICA, Chief Judge, FUENTES and CHAGARES,
Circuit Judges.
______________________
(Filed: February 4, 2009)
Darren H. Goldstein [Argued]
James A. Kozachek
Albert M. Belmont, III
Carl S. Bisgaier
Flaster Greenberg, P.C.
1810 Chapel Avenue West
Cherry Hill, NJ 08002
Counsel for Appellant
Valerie J. Kimson [Argued]
Susan A. Lawless
Purcell, Ries, Shannon, Mulcahy & O’Neill
One Pluckemin Way
Suite 210, P.O. Box 754
Bedminster, NJ 07921
John M. Bowens, Esq.
Schenck, Price, Smith & Smith
10 Washington Street
P.O. Box 905
Morristown, NJ 07963-0905
Counsel for Appellees
_________
OPINION OF THE COURT
____________
CHAGARES, Circuit Judge.
We consider whether a real estate developer with an option
to buy a parcel of land has standing to challenge zoning restrictions
that prevent its planned development from going forward. We hold
2
that it does.
I.
Appellant Toll Brothers, Inc. describes itself as “the nation’s
leading builder of luxury homes . . . .” See Toll Brothers,
http://www.tollbrothers.com (last visited January 15, 2009).1 Toll
Brothers prides itself on developing communities in prime
locations; it carefully chooses “the most scenic areas that offer a
blend of rural charm and suburban convenience.” Id. In early
2001, Toll Brothers found just such a setting on a 160-acre tract of
land in the Township of Readington, New Jersey (“the Township”).
Toll Brothers entered into an option contract with the tract’s owner,
Readington Properties, LLC.
Pursuant to the contract, Readington Properties granted Toll
Brothers an exclusive option to buy the tract at a fixed price. In
exchange, Toll Brothers promised to make periodic payments to
Readington Properties. The original contract stated a five-year
option with an expiration date of January 2006. Subsequent
amendments have extended the option period, and Toll Brothers’
exclusive option remains in force. During the life of the option,
Readington Properties cannot “enter into any lease, agreement of
sale,” or any other agreement affecting the property. Appendix
(“App.”) 203. In addition, Toll Brothers has the right to come onto
the property “to perform engineering, environmental and such other
feasibility studies” as it deems necessary. App. 200.
At the time of the contract’s formation, the Township’s
zoning laws classified part of the tract as “research-office,” and
part as “rural-residential.” The rural-residential classification
allowed for “development of detached single-family dwelling units,
1
“For purposes of ruling on a motion to dismiss for want of
standing, both the trial and reviewing courts must accept as true all
material allegations of the complaint, and must construe the
complaint in favor of the complaining party.” Warth v. Seldin, 422
U.S. 490, 501 (1975); see Bennett v. Spear, 520 U.S. 154, 168
(1997). Our recitation of the facts reflects this standard.
3
farm and agricultural uses, and open space and parks.” App. 45.
Residential development in this zone could not exceed one unit per
three acres. In the research-office zone, “general office
development” was permitted. Id.
Toll Brothers quickly began to formulate plans for both the
rural-residential and research-office portions of the property. For
the rural-residential zone, the company “engaged in preliminary
planning” to develop housing “for families with children.” App.
46, 49. As to the research-office zone, Toll Brothers drafted plans
for an office park. For whatever reason, the office plans advanced
more rapidly than the residential plans. In May 2002, Toll Brothers
submitted a formal application to the Township Planning Board
requesting approval for construction of an office development.
Toll Brothers claims that this proposal was consistent with the
Township’s zoning ordinance “and with the general character” of
the area. App. 46.
The Township did not approve Toll Brothers’ application.
Instead, it passed an ordinance rezoning the entire tract
“agricultural-residential.” The agricultural-residential zone
allowed for just three uses by right: “(1) farms; (2) open space and
parks; and (3) residential uses at one residential dwelling per six
acres.” App. 47. As a result, office parks were prohibited. The
requirement of six acres per dwelling, according to Toll Brothers,
made any residential development economically unfeasible. Toll
Brothers’ development plans thus have been thwarted.
Toll Brothers contends that this change in law was no
ordinary zoning decision. It was instead part of a nefarious plot
hatched by Township officials to “reduce the fair market value of
properties held by disfavored landowners.” App. 33. By
frustrating the lawful plans of Toll Brothers and other developers,
Township officials sought to “drive down the value of the
[targeted] propert[ies] and acquire [them] cheaply at . . . price[s]
below their fair market values.” App. 36. They also “intended to
discriminate against families with children . . . in an effort to
reduce [their] residential opportunities” within the Township. App.
41-42.
4
Toll Brothers claims the Township’s actions have caused it
considerable injury. The company is in the real estate development
business, but the Township has prevented all profitable
development of the Readington Properties parcel. Toll Brothers is
maintaining its option by rendering periodic payments to
Readington Properties. If and when the Township approves Toll
Brothers’ plans, the company still intends to exercise its option. In
the meantime, Toll Brothers has spent considerable amounts of
money on planning, including fees for “architects and other
professionals.” App. 291. In addition to these “sunk costs,” Toll
Brothers has also lost out on the potential profits.
In August 2002, Toll Brothers filed a lawsuit against the
Township in New Jersey Superior Court. The complaint alleged
violations of the New Jersey Municipal Land Use Law, N.J. Stat.
Ann. §§ 40:55D-1 to -163; the Equal Protection Clause; the Due
Process Clause; the Takings Clause; equivalent provisions of the
New Jersey Constitution; and the public policy and law of New
Jersey as expressed in the state Supreme Court’s Mount Laurel
decisions.2 That action remains pending.
In December 2004, Toll Brothers brought this suit against
the Township, the Township Committee, the Township Planning
Board, and various Township officials (collectively, “defendants”).
The allegations in this case are quite similar to the claims pending
in state court, but they do not overlap completely. In this case, Toll
Brothers brings claims under the Equal Protection Clause; the Due
Process Clause; the Takings Clause; The Fair Housing Act of 1968,
as amended, 42 U.S.C. §§ 3601-31; the New Jersey Law Against
Discrimination, N.J. Stat. Ann. §§ 10:5-1 to -49; the federal
Racketeer Influenced and Corrupt Organizations (RICO) Act, 18
U.S.C. §§ 1961-66; and New Jersey’s RICO Act, N.J. Stat. Ann. §§
2C:41-1 to -6.2. Toll Brothers seeks an order “[i]nvalidating and
setting aside” the Township’s zoning ordinance, an order
“enjoining Defendants . . . from enforcing” the ordinance, and
2
See generally S. Burlington County NAACP v. Twp. of
Mount Laurel, 456 A.2d 390 (N.J. 1983); S. Burlington County
NAACP v. Twp. of Mount Laurel, 336 A.2d 713 (N.J. 1975).
5
money “damages sustained as a result of Defendants’ illegal
actions.” App. 67.
The defendants moved to dismiss Toll Brothers’ complaint
for, inter alia, lack of standing.3 Toll Brothers opposed the motion
and, in the alternative, sought leave to file an amended complaint.
In an unreported decision, the District Court granted the motion to
dismiss. See Toll Bros. v. Twp. of Readington, No. 04-6043, 2005
U.S. Dist. LEXIS 25793 (D.N.J. Oct. 31, 2005). The court found
it significant that Toll Brothers was “the owner of an unexercised
option.” Id. at *14. It noted that a favorable decision would still
leave Toll Brothers “free to elect not to exercise the option.” Id.
Thus, the court concluded, Toll Brothers’ claimed injury was “not
concrete and particularized, nor [was] it likely to be redressed by
a favorable decision.” Id. at *14-*15 (quotation marks omitted).
Independent of that analysis, the court also pointed out that Toll
Brothers’ complaint alleged discrimination against families with
children. These families, however, were not parties. Id. at *12.
As a result, the court concluded that Toll Brothers lacked third-
party standing to assert the families’ rights. Id. The court did not
specifically consider Toll Brothers’ request for leave to amend the
complaint in its decision, but the court squarely rejected the request
in its opinion denying Toll Brothers’ motion for reconsideration.
This appeal followed.
II.
3
The defendants’ motion to dismiss also raised the issue of
Colorado River abstention. See Colorado River Water
Conservation Dist. v. United States, 424 U.S. 800 (1976). Under
Colorado River, the threshold question is whether a parallel state
proceeding raises “substantially identical claims [and] nearly
identical allegations and issues.” Yang v. Tsui, 416 F.3d 199, 204
n.5 (3d Cir. 2005) (quotation marks omitted). If so, then the court
must consider the relative inconvenience of federal litigation, the
need to avoid piecemeal adjudication, and the order in which the
actions were filed. See Colorado River, 424 U.S. at 818. We note
the Colorado River issue, but leave it for the District Court to
address in the first instance.
6
Toll Brothers alleged that the District Court had jurisdiction
pursuant to 28 U.S.C. §§ 1331 and 1332 and supplemental
jurisdiction over its state law claims pursuant to 28 U.S.C. § 1367.
This Court has jurisdiction pursuant to 28 U.S.C. § 1291.
We exercise plenary review over the District Court’s
dismissal of the complaint for lack of standing. See Goode v. City
of Philadelphia, 539 F.3d 311, 316 (3d Cir. 2008); ACLU-NJ v.
Twp. of Wall, 246 F.3d 258, 261 (3d Cir. 2001). We review the
District Court’s denial of Toll Brothers’ request for leave to file an
amended complaint for abuse of discretion. Winer Family Trust v.
Queen, 503 F.3d 319, 325 (3d Cir. 2007).
III.
Article III of the Constitution limits federal “judicial Power”
to the adjudication of “Cases” or “Controversies.” U.S. Const. art.
III, § 2. This limitation is essential to our system of separated
powers. See Valley Forge Christian Coll. v. Ams. United for
Separation of Church & State, Inc., 454 U.S. 464, 473-74 (1982);
see also Hein v. Freedom From Religion Found., Inc., 551 U.S. —,
127 S. Ct. 2553, 2570 (2007) (plurality opinion). In cases
involving state or local government, “it also serves to protect and
preserve the principle of dual sovereignty” embedded in our
founding charter. Storino v. Borough of Point Pleasant Beach, 322
F.3d 293, 300 (3d Cir. 2003). Without a case-or-controversy
requirement, the judicial power would “‘extend[] to every question
under the constitution,’” and “‘the other departments would be
swallowed up by the judiciary.’” DaimlerChrysler Corp. v. Cuno,
547 U.S. 332, 341 (2006) (quoting 4 Papers of John Marshall 95
(C. Cullen ed. 1984)) (emphasis removed). With the case-or-
controversy requirement, on the other hand, courts stay confined to
their “proper—and properly limited—role,” Warth v. Seldin, 422
U.S. 490, 498 (1975), of “decid[ing] on the rights of individuals,”
Marbury v. Madison, 5 U.S. (1 Cranch) 137, 170 (1803). There is,
therefore, “‘[n]o principle . . . more fundamental to the judiciary’s
proper role in our system of government than the constitutional
limitation of federal-court jurisdiction to actual cases or
controversies.’” Raines v. Byrd, 521 U.S. 811, 818 (1997)
(quoting Simon v. E. Ky. Welfare Rights Org., 426 U.S. 26, 37
7
(1976)).
Courts enforce the case-or-controversy requirement through
the several justiciability doctrines that “‘cluster about Article III.’”
Allen v. Wright, 468 U.S. 737, 750 (1984) (quoting Vander Jagt v.
O’Neill, 699 F.2d 1166, 1178-79 (D.C. Cir. 1983) (Bork, J.,
concurring)). They include standing, ripeness, mootness, the
political-question doctrine, and the prohibition on advisory
opinions. See DaimlerChrysler, 547 U.S. at 352; Erwin
Chemerinsky, Federal Jurisdiction § 2.1 (5th ed. 2007). “[P]erhaps
the most important of these doctrines” is standing. Allen, 468 U.S.
at 750.
The “irreducible constitutional minimum” of Article III
standing consists of three elements. Lujan v. Defenders of
Wildlife, 504 U.S. 555, 560 (1992). First, the plaintiff must have
suffered a “concrete,” “particularized” injury-in-fact, which must
be “actual or imminent, not conjectural or hypothetical.” Id.
(quotation marks omitted). Second, that injury must be “fairly
traceable to the challenged action of the defendant, and not the
result of the independent action of some third party not before the
court.” Id. (quotation marks and alterations omitted). Third, the
plaintiff must establish that a favorable decision likely would
redress the injury. Id.; see AT&T Commc’ns of N.J., Inc. v.
Verizon N.J., Inc., 270 F.3d 162, 170-71 (3d Cir. 2001).
A.
While all three of these elements are constitutionally
mandated, the injury-in-fact element is often determinative.4 Under
4
See Teva Pharm. USA, Inc. v. Novartis Pharm. Corp., 482
F.3d 1330, 1337 (Fed. Cir. 2007) (“Of the three standing
requirements, injury-in-fact is the most determinative.”); Nat’l
Wildlife Fed’n v. Hodel, 839 F.2d 694, 704 (D.C. Cir. 1988)
(describing the injury-in-fact prong as “the core of standing”);
Gregory P. Magarian, Note, Fighting Exclusion from Televised
Presidential Debates: Minor Party Candidates’ Standing to
Challenge Sponsoring Organizations’ Tax-Exempt Status, 90 Mich.
8
it, the plaintiff must suffer a palpable and distinct harm. See Allen,
468 U.S. at 751. That harm “must affect the plaintiff in a personal
and individual way.” Lujan, 504 U.S. at 560 n.1. The injury can
be widely shared, FEC v. Akins, 524 U.S. 11, 24 (1998), but it
must nonetheless be concrete enough to distinguish the interest of
the plaintiff from the generalized and undifferentiated interest
every citizen has in good government. See Lujan, 504 U.S. at 573-
74; Schlesinger v. Reservists Comm. to Stop the War, 418 U.S.
208, 220-21 (1974). In this way, injury-in-fact “keeps the judicial
branch from encroaching on legislative prerogatives, thereby
preserving the separation of powers.” Danvers Motor Co., Inc. v.
Ford Motor Co., 432 F.3d 286, 291 (3d Cir. 2005); see also John G.
Roberts, Jr., Article III Limits on Statutory Standing, 42 Duke L.J.
1219, 1224 (1993) (“The need to insist upon meaningful limitations
on what constitutes injury for standing purposes . . . flows from an
appreciation of the key role that injury plays . . . in a limited and
separated government.”).
The critical issue for us is whether the Township’s rezoning
of the Readington Properties parcel has cognizably injured Toll
Brothers, an optionee with a plan to develop the property.5 No
L. Rev. 838, 844 n.45 (1992) (“[C]ourts rarely recognize an injury
as cognizable and proceed to deny standing on one of the other
constitutional grounds.”).
5
We note that Toll Brothers seeks both injunctive relief and
damages. Standing, the Supreme Court has stated, “is not
dispensed in gross.” Lewis v. Casey, 518 U.S. 343, 358 n.6 (1996).
Toll Brothers “must demonstrate standing separately for each form
of relief sought.” Friends of the Earth, Inc. v. Laidlaw Envtl.
Servs. (TOC), Inc., 528 U.S. 167, 185 (2000) (citing City of Los
Angeles v. Lyons, 461 U.S. 95, 109 (1983)). This is because
“[p]ast exposure to illegal conduct does not in itself show a present
case or controversy regarding injunctive relief . . . if
unaccompanied by any continuing, present adverse effects.”
O’Shea v. Littleton, 414 U.S. 488, 495-96 (1974). Here, though,
Toll Brothers claims both past and present injury from the
Township’s zoning ordinance. So long as both the zoning
ordinance and Toll Brothers’ option remain in force, the standing
9
binding authority directly addresses an optionee’s standing to
challenge zoning restrictions. Three decisions of our sister courts
of appeals, however, indicate that an optionee with a plan to
develop the underlying property suffers the requisite injury from
zoning restrictions that block the planned development. See Scott
v. Greenville County, 716 F.2d 1409, 1412, 1415 (4th Cir. 1983)
(holding that a real estate developer who “acquired a purchase
option for the land; . . . put together a partnership to pursue the
project; and . . . obtained earmarking of federal subsidy funds” had
standing to challenge zoning restrictions that prevented
construction of multi-family low-income housing); Chipanno v.
Champion Int’l Corp., 702 F.2d 827, 829, 831-32 (9th Cir. 1983)
(concluding that the holder of “an option to purchase certain timber
lands in Oregon” had standing to challenge defendants’ conspiracy
“to eliminate competition, fix prices, and allocate timber from”
Oregon lands); Huntington Branch, NAACP v. Town of
Huntington, 689 F.2d 391, 392, 394-95 (2d Cir. 1982) (holding that
“a non-profit housing assistance corporation” with “an option to
purchase a 14.6 acre tract” and a plan to develop the property had
standing to challenge a local zoning ordinance as racially
discriminatory). In addition, two Supreme Court decisions, while
not directly on point, provide useful guideposts.
The first is Warth v. Seldin, 422 U.S. 490 (1975). Warth
involved a challenge to an exclusionary zoning ordinance in
Pennfield, New York. One of the many plaintiffs was an
association of “firms engaged in the development and construction
of residential housing” in the area. Id. at 514. The association
analyses for both forms of relief are identical. We will therefore
analyze them together.
Also, Toll Brothers’ complaint contains eleven separate
claims, and the company must “demonstrate standing for each
claim [it] seeks to press.” DaimlerChrysler, 547 U.S. at 352. All
the claims, however, challenge the Township’s rezoning of the
Readington Properties parcel, and they all allege precisely the same
injuries to Toll Brothers. As such, a claim-by-claim discussion of
Toll Brothers’ constitutional standing is unnecessary.
10
claimed the ordinance “had deprived some of its members of
substantial business opportunities and profits.” Id. at 515
(quotation marks omitted). The Supreme Court, however, found
these allegations insufficient to establish injury-in-fact. The
association “refer[red] to no specific project of any of its members
that [was] precluded . . . by the ordinance,” and there was “no
averment that any member ha[d] applied . . . for a building permit
or a variance with respect to any current project.” Id. at 516. As
a result, the association “failed to show the existence of any injury
to its members of sufficient immediacy . . . to warrant judicial
intervention.” Id.
The second Supreme Court decision is Village of Arlington
Heights v. Metropolitan Housing Development Corp., 429 U.S. 252
(1977). The plaintiff there was a nonprofit corporation seeking to
develop low-income housing in the Village of Arlington Heights,
Illinois. Id. at 256. The developer entered into a 99-year lease on
a parcel within the Village, and it also contracted to purchase the
parcel. Id. The sale was contingent on the developer “securing
zoning clearances from the Village and . . . housing assistance from
the Federal Government.” Id. When the Village denied the
developer’s request for rezoning, the developer brought an equal
protection challenge. Id. at 258-59. The Supreme Court first noted
that injunctive relief “would not . . . guarantee that [the project
would] be built.” Id. at 261. After all, the developer “would still
have to secure financing, qualify for federal subsidies, and carry
through with construction.” Id. The developer, though, had a
“detailed and specific” plan, and, as such, the Court was “not
required to engage in undue speculation as a predicate for finding
that the plaintiff ha[d] the requisite personal stake in the
controversy.” Id. at 261-62. The Village claimed the developer
had “suffered no economic injury” because it was “not the owner
of the property in question,” and it “owe[d] the owners nothing if
rezoning [was] denied.” Id. at 262. The Court disagreed, noting
that the developer had “expended thousands of dollars on the plans
for [the project] and on the studies submitted to the Village in
support of the petition for rezoning.” Id. If rezoning was not
granted, “many of these plans and studies [would] be worthless.”
Id. The developer thus established cognizable economic injury. Id.
11
Both cases are instructive here. First, Toll Brothers’ alleged
injuries are far more particularized and concrete than those of the
Warth homebuilders. For example, where the Pennfield ordinance
prevented none of the Warth homebuilders from developing any
particular project, 422 U.S. at 516, the Township’s agricultural-
residential zone has thwarted Toll Brothers’ specific development
plans. Where none of the Warth homebuilders “ha[d] applied . . .
for a building permit or a variance with respect to any current
project,” id., Toll Brothers has submitted a formal application to
construct an office development on the Readington Properties
parcel. And, perhaps most significant of all, where the Warth
homebuilders alleged only unspecified losses of “business
opportunities and profits,” id. at 515, Toll Brothers points to a lost
opportunity to develop a specific tract of land for which it holds an
exclusive option to buy.6 Accordingly, Toll Brothers’ injuries are
more distinct and immediate than those of the Warth plaintiffs.
Toll Brothers’ alleged injuries also bear a strong
resemblance to the injuries of the developer in Arlington Heights.
Both plaintiffs had “detailed and specific” plans for the restricted
properties. See Arlington Heights, 429 U.S. at 261. The Arlington
Heights developer “expended thousands of dollars” on plans and
studies to support its rezoning petition. See id. at 262. So too has
Toll Brothers paid substantial sums in planning its proposed
developments, seeking approval for its office development, and
maintaining its option. Just as in Arlington Heights, these front-
end expenditures remain “worthless” so long as a restrictive zoning
ordinance remains in force. See id. (“[I]t is inaccurate to say that
6
Some have read Warth “to leave substantial latitude for
builders to obtain standing in other cases: the minimal property
interest necessary to apply for a zoning variance—such as a
conditional contract or option—would probably be sufficient to
establish the requisite concrete dispute.” The Supreme Court, 1974
Term: Standing to Challenge Exclusionary Zoning Ordinances, 89
Harv. L. Rev. 189, 194 (1976) (emphasis added). Indeed, the New
Jersey Municipal Land Use Law permits “the holder of an option
or contract to purchase” to apply for a zoning variance. N.J. Stat.
Ann. § 40:55D-4.
12
[the plaintiff] suffers no economic injury from a refusal to rezone
. . . . [where it] has expended thousands of dollars on the plans for
[the property] and on the studies submitted . . . in support of the
petition for rezoning.”). In addition, both the Village’s ordinance
in Arlington Heights and the Township’s ordinance stand as
“absolute barrier[s]” to moving forward with construction and
recouping up-front costs. See id. at 261. These parallels strongly
indicate that Toll Brothers has satisfied the injury requirement.
Yet, as the defendants point out, there are differences
between the harm alleged in Arlington Heights and the harm
alleged in this case. The Arlington Heights developer had a 99-
year lease on the restricted property and a conditional contract to
purchase the land. See id. at 256. The developer’s leasehold was
an estate in land. It gave the developer a present possessory
interest in the property. See William B. Stoebuck & Dale A.
Whitman, The Law of Property 74-77 (3d ed. 2000). As such, the
Arlington Heights developer could show injury-in-fact based on
harm to its own proprietary interest in the tract itself. Viewed this
way, Arlington Heights fits squarely within the “substantial body
of law recognizing that the owner of an interest in [real] property
has standing to challenge [zoning] restriction[s]” that affect its
development. von Kerssenbrock-Praschma v. Saunders, 48 F.3d
323, 326 (8th Cir. 1995) (citing cases).
Here, on the other hand, Toll Brothers is neither a lessee nor
a contract purchaser. It has only an option to buy. Although that
option does give Toll Brothers “an inchoate right to acquire the
land which . . . [is] protected in equity,” Toll Brothers does not
have any present interest in the Readington Properties parcel.
Bright v. Forest Hill Park Dev. Co., 31 A.2d 190, 198 (N.J. Ch.
1943); Stoebuck & Whitman, supra, at 802 (“An unexercised
option is not yet . . . an interest in real property.”).
The defendants say this distinction makes all the difference.
Toll Brothers’ option, they assert, is just a “phantom connection”
to the Readington Properties parcel, and the Township’s rezoning
of the tract has produced “nothing more than the loss of a
speculative business opportunity.” Def. Br. 13. The defendants
thus deride Toll Brothers’ allegations as abstract claims of future
13
harm insufficient to establish injury-in-fact. See Storino, 322 F.3d
at 297.7
But these arguments unfairly diminish the valuable rights
possessed by an optionee. Toll Brothers has paid (and continues to
pay) substantial sums to Readington Properties. In exchange, Toll
Brothers has gained the right to demand conveyance of the
Readington Properties parcel for a set price at any time during the
option period. See Stoebuck & Whitman, supra, at 799-800; see
also Brunswick Hills Racquet Club, Inc. v. Route 18 Shopping Ctr.
Assocs., 864 A.2d 387, 395 (N.J. 2005). That option is itself a
valuable property right.8 Its value is largely dependant on the value
of the Readington Properties parcel. If the tract’s market value
falls, then the value of Toll Brothers’ option to purchase it at a
predetermined price falls with it. And if the tract’s market value
falls below the option price, then the option becomes essentially
valueless. See In re Hannover Corp., 310 F.3d 796, 802 (5th Cir.
2002) (“Like all speculative financial instruments, the value of an
option can change over time, depending upon the value of the
underlying property.”).
7
The District Court also distinguished Arlington Heights by
noting that the developer there was “a non-profit organization
whose primary interest [was] making low-income housing
available,” while Toll Brothers’ “primary interest . . . is clearly
economic gain.” Toll Bros., 2005 U.S. Dist. LEXIS 25793, at *12.
This distinction has no bearing on constitutional standing. To say
Toll Brothers’ “primary interest . . . is clearly economic gain” is to
recognize the possibility of economic injury.
8
See Helvering v. San Joaquin Fruit & Inv. Co., 297 U.S.
496, 498 (1936) (“The option itself was property, and doubtless
was valuable.”); Chas. J. Smith Co. v. Anderson, 95 A. 358, 361
(N.J. Ch. 1915) (same); see also Tuecke v. Tuecke, 131 N.W.2d
794, 795 (Iowa 1964) (“[A]n option . . . is more than a mere right;
it is an asset of very substantial economic value.”) (quotation marks
omitted); In re Estate of Niehenke, 818 P.2d 1324, 1328 (Wash.
1991) (“[A]n option to purchase real estate is a valuable and
substantial property right.”).
14
Toll Brothers’ complaint alleges that the Township rezoned
the Readington Properties parcel to “drive down [its] value” and
“acquire [it] cheaply.” App. 36. By driving down the value of the
Readington Properties parcel, the Township has also driven down
the value of Toll Brothers’ option. See Hannover, 310 F.3d at 802.
This harm to Toll Brothers’ own property is a classic form of
economic injury. See Danvers, 432 F.3d at 291 (“‘Standing is
found readily, particularly when injury to some traditional form of
property is asserted.’”) (quoting 13 Wright & Miller, Federal
Practice and Procedure, § 3531.4, at 830 (Supp. 2005)). It satisfies
the constitutional requirement of injury-in-fact.
In sum, Toll Brothers holds an exclusive option to buy the
Readington Properties parcel, and the company has expended
considerable sums maintaining its option, planning office and
residential developments, and submitting an application to build an
office park on the property. The zoning restrictions that bar Toll
Brothers’ planned developments have left the company unable to
recoup these front-end costs, and the restrictions have also
decreased the value of the company’s option. These economic
harms amount to legally cognizable injury-in-fact.
B.
The second requirement for Article III standing is
“traceability.” Pitt News v. Fisher, 215 F.3d 354, 360 (3d Cir.
2000). If the injury-in-fact prong focuses on whether the plaintiff
suffered harm, then the traceability prong focuses on who inflicted
that harm. The plaintiff must establish that the defendant’s
challenged actions, and not the actions of some third party, caused
the plaintiff’s injury. See Lujan, 504 U.S. at 560. This causal
connection need not be as close as the proximate causation needed
to succeed on the merits of a tort claim. See Pub. Interest Research
Group of N.J., Inc. v. Powell Duffryn Terminals Inc., 913 F.2d 64,
72 (3d Cir. 1990). Rather, an indirect causal relationship will
suffice, Pitt News, 215 F.3d at 361 & n.4, so long as there is “a
fairly traceable connection between the alleged injury in fact and
the alleged conduct of the defendant,” Vt. Agency of Natural Res.
v. United States ex rel. Stevens, 529 U.S. 765, 771 (2000)
(quotation marks and alterations omitted).
15
The defendants do not seriously argue that Toll Brothers
fails to establish traceability. Toll Brothers challenges the
defendants’ rezoning of the Readington Properties parcel to
“agricultural-residential.” That rezoning directly caused Toll
Brothers’ inability to move forward with its development plans,
and it directly impacted the value of Toll Brothers’ option. No
action of a third party is a more immediate cause of these harms.
We therefore conclude that Toll Brothers easily satisfies the
traceability element.
C.
Redressability is the final element of constitutional standing.
This requirement is “closely related” to traceability, and the two
prongs often overlap. Powell Duffryn, 913 F.2d at 73; see
Dynalantic Corp. v. Dep’t of Def., 115 F.3d 1012, 1017 (D.C. Cir.
1997) (describing traceability and redressability “as two sides of a
causation coin”). The difference is that while traceability looks
backward (did the defendants cause the harm?), redressability looks
forward (will a favorable decision alleviate the harm?). See Lujan,
504 U.S. at 560-61. The redressability prong thus requires a
showing that “the injury will be redressed by a favorable decision.”
Laidlaw, 528 U.S. at 181.
Redressability is not a demand for mathematical certainty.
It is sufficient for the plaintiff to establish a “substantial likelihood
that the requested relief will remedy the alleged injury in fact.”
Stevens, 529 U.S. at 771 (quotation marks omitted); see also
Chemerinsky, supra, at § 2.3.3 (describing redressability as an
“assessment[] of probability”). Arlington Heights nicely illustrates
this point. As mentioned earlier, even if the developer in that case
had secured an injunction against the Village’s zoning practices,
there still would have been no “guarantee” of the development’s
successful completion. See 429 U.S. at 261. The developer still
would have needed “to secure financing, qualify for federal
subsidies, and carry through with construction.” Id. at 261. As the
Court noted, though, “all housing developments are subject to some
extent to similar uncertainties.” Id. And it was at least more likely
than not that the developer could procure the necessary federal
subsidies. See id. at 261 n.7. That likelihood was enough to satisfy
16
the redressability requirement. Id. at 262; see also Huntington
Branch, 689 F.2d at 395 (deeming the plaintiff’s injury redressable
where “[i]nvalidation of the challenged ordinance . . . would
tangibly improve the chances of construction”).
As in Arlington Heights, a decision striking down the
Township’s zoning ordinance would not “guarantee” successful
completion of Toll Brothers’ development plans. The District
Court correctly pointed out that “even if the Court were to rule in
[Toll Brothers’] favor, it need not exercise its option.” Toll Bros.,
2005 U.S. Dist. LEXIS 25793, at *14. But just as the uncertain
availability of federal subsidies did not defeat standing in Arlington
Heights, Toll Brothers’ freedom to refrain from exercising its
option does not defeat standing here. The relevant question is not
whether Toll Brothers might walk away from its development plans
after receiving a favorable decision; the relevant question is
whether it is likely to do so. Stevens, 529 U.S. at 771. Toll
Brothers has invested large sums of money on the plans for its
proposed developments. It has spent additional funds maintaining
its option. And it has now spent several years litigating this dispute
in state and federal court. The defendants have not provided any
reason why Toll Brothers would abandon the project. Indeed, Toll
Brothers has stated its intent to exercise the option and move
forward with construction if and when the Township approves its
plans. A favorable decision, therefore, is substantially likely to
result in construction of Toll Brothers’ planned developments.
Moreover, even leaving aside the likelihood of construction,
a favorable decision likely will remedy the harm to Toll Brothers’
option. As discussed earlier, the option itself is property. If, as
Toll Brothers claims, the agricultural-residential ordinance has
decreased the value of the Readington Properties parcel, then it has
also decreased the value of Toll Brothers’ option. An order
striking down the ordinance is likely to redress that injury by
increasing the value of both the underlying real property and the
option. We therefore hold that Toll Brothers satisfies the
redressability requirement.
17
D.
As the previous discussion demonstrates, Toll Brothers
satisfies all three constitutional standing elements. Further
buttressing that conclusion are the very separation-of-powers
principles that animate the doctrine. Article III standing preserves
the separation of powers by limiting federal courts to matters “‘of
a Judiciary nature.’” DaimlerChrysler, 547 U.S. at 342 (quoting 2
Records of the Federal Convention of 1787 430 (M. Farrand ed.
1966)). Thus, “‘a plaintiff raising only a generally available
grievance about government—claiming only harm to his and every
citizen’s interest in proper application of the Constitution and laws,
and seeking relief that no more directly and tangibly benefits him
than it does the public at large—does not state an Article III case
or controversy.’” Hein, 127 S. Ct. at 2563-64 (plurality opinion)
(quoting Lujan, 504 U.S. at 573-74).9
In this case, Toll Brothers alleges the defendants
“specifically identified” the company as a “target[] for their illegal
enterprise.” App. 44. The defendants then enacted their ordinance
“to intentionally and maliciously block” Toll Brothers’
development of the Readington Properties parcel. App. 47. They
did this because Toll Brothers was a “disfavored” developer. App.
38.
These allegations are not even remotely akin to “generally
available grievance[s].” See Hein, 127 S. Ct. at 2563-64 (plurality
9
The Supreme Court has not always been consistent about
whether the prohibition on “generalized grievances” is an Article
III mandate or a prudential standing limitation. Compare Warth,
422 U.S. at 499 (referring to the bar on generalized grievances as
“[a]part from th[e] minimum constitutional mandate”), with Lujan,
504 U.S. at 573-74 (treating it as an Article III requirement). The
Court’s more recent standing cases clarify that a generalized
grievance is not a case or controversy under Article III. See Hein,
127 S. Ct. at 2563-64 (Alito, J., joined by Roberts, C.J., and
Kennedy, J.); id. at 2582 & n.5 (Scalia, J., joined by Thomas, J.,
concurring in the judgment); Lance v. Coffman, 549 U.S. 437, 439-
40 (2007) (per curiam).
18
opinion) (quotation marks omitted). Rather, Toll Brothers claims
to be the specific target of the defendants’ challenged ordinance.
The adjudication of such a dispute raises no separation-of-powers
problems at all. See Antonin Scalia, The Doctrine of Standing as
an Essential Element of the Separation of Powers, 17 Suffolk U. L.
Rev. 881, 894 (1983) (“[W]hen an individual who is the very
object of a law’s requirement or prohibition seeks to challenge it,
he always has standing.”).
* * * *
Toll Brothers has alleged cognizable injuries that are fairly
traceable to the defendants’ challenged actions and likely to be
redressed by a favorable decision. As such, the District Court erred
when it dismissed Toll Brothers’ complaint for lack of Article III
standing.10
IV.
Toll Brothers’ allegations, if true, give the company
constitutional standing to press its claims. We will vacate the
District Court’s contrary judgment and remand the case for further
proceedings, with instructions that the District Court grant Toll
Brothers leave to amend its complaint.
10
We also hold that the District Court abused its discretion
by refusing to grant Toll Brothers leave to amend its complaint.
Under Federal Rule of Civil Procedure 15(a), leave to amend
should be “freely given when justice so requires,” and we have
recognized that “a district court must permit a curative amendment
unless such an amendment would be inequitable or futile.” Phillips
v. County of Allegheny, 515 F.3d 224, 245 (3d Cir. 2008). Toll
Brothers’ proposed amendment would not have been inequitable
and was not futile. In fact, the proposed amended complaint would
have, inter alia, added Readington Properties as a plaintiff and the
addition of that entity as a plaintiff would likely have solved any
standing problem in this case.
19