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Growth Horizons, Inc. v. Delaware County

filed: January 21, 1993.


On Appeal From the United States District Court For the Eastern District of Pennsylvania. (D.C. Civil Action No. 91-06710).

Before: Stapleton, Scirica, and Nygaard, Circuit Judges.

Author: Stapleton


STAPLETON, Circuit Judge:

Plaintiff/appellant, Growth Horizons, Inc., ("Growth") appeals an order dismissing its Fair Housing Act ("FHA") and breach of contract claims for lack of subject matter jurisdiction. Growth Horizons, Inc. v. Delaware County, 784 F. Supp. 258 (E.D. Pa. 1992). Given the rather unusual procedural context of this case, we are required to address three distinct issues--whether the district court possessed jurisdiction over Growth's FHA claim, whether Growth has a claim under that Act on which relief could be granted, and whether the district court had supplemental jurisdiction over the breach of contract claim.


Growth is a Pennsylvania corporation which provides Community Living Arrangements (CLA's) to retarded individuals in which these individuals are cared for and taught "normal living skills" in as normal an environment as possible. In July 1990, Growth signed a contract with Delaware County to provide fifteen retarded individuals, who are class members in the prolonged ongoing litigation in Halderman v. Pennhurst State School and Hospital, No. 74-1345, with CLA placements. Growth proceeded to lease and renovate four sites for this purpose.

The first site Growth opened developed substantial operating problems which were, Growth admitted, at least partially its own fault. The Special Management Unit ("SMU"), a state monitoring agency, expressed serious concerns about Growth's management of the first facility*fn1 and recommended that the County not permit Growth to open any other sites until the first CLA met appropriate standards.

The contract with Growth was canceled by the County, after giving the required notice, on June 30, 1991. At that time three of the four sites remained unoccupied by retarded individuals. Growth then brought suit against the County alleging that under the contract, the County is obligated to assume Growth's interests in the sites, or alternatively, to force the successor provider to assume Growth's interests.*fn2 Growth also alleged that the County's failure to assume the leases was the result of political pressure emanating from bias against the handicapped.*fn3 For this reason, Growth contends that the County's refusal to assume the leases constituted unlawful discrimination against handicapped individuals under the Fair Housing Act Amendments of 1988, 42 U.S.C.A. § 3601 et. seq. (West Supp. 1992).

Shortly after service of the complaint, the County filed a motion to dismiss pursuant to Rules 12(b)(1) and 12(b)(6), and Growth moved for a preliminary injunction. At the hearing on these motions, the court initially expressed reservations concerning whether Growth had standing and suggested the possibility of hearing evidence on that issue first in order to resolve the County's motion to dismiss for lack of subject matter jurisdiction. Ultimately, however, as a matter of convenience, the court decided to hear all evidence from both parties concerning the merits of the action, or as the court put it, concerning both "the discrimination issue" and the "standing issue," (App. at 271), reserving only the issue of damages for possible later consideration. See Growth Horizons, 784 F. Supp. at 260 n.6.

The district court concluded that subject matter jurisdiction was lacking because the County's conduct did not run afoul of the statute's prohibitions and therefore did not raise a federal question. The court declined to reach the issue of whether Growth had standing. It also did not discuss the issue of supplemental jurisdiction but rather dismissed Growth's state law claim on the grounds that Growth had conceded that such claim would "fall by the wayside" if the federal claim were dismissed. Growth Horizons, 784 F. Supp. at 261. Growth Horizons filed this timely appeal.


Because the presence or absence of subject matter jurisdiction over a complaint invoking federal question jurisdiction is an issue of law, we consider the district court's action on the FHA claim under a plenary standard of review. See, e.g., York Bank & Trust v. Federal Savings and Loan Insurance Corp., 851 F.2d 637, 638 (3d Cir. 1988), cert. denied, 488 U.S. 1005, 102 L. Ed. 2d 777, 109 S. Ct. 785 (1989).

The district court dismissed plaintiff's FHA claim pursuant to Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction rather than under Rule 12(b)(6) for failure to state a claim. It first took note of the federal statute on which Growth relied most heavily in asserting its federal claim: "The Fair Housing Act makes it illegal to 'discriminate in the sale or rental, or to otherwise make unavailable or deny, a dwelling to any buyer or renter because of a handicap . . . .'" Growth Horizons, 784 F. Supp. at 261 (quoting 42 ...

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