Whisper Lake Developments, Inc. filed a Section 1983 lawsuit against Whatcom County and various county officials, alleging violations of the Fourteenth Amendment's Due Process Clause and the Fifth Amendment's Takings Clause. The dispute centered on a development project in Division B, where Whisper Lake claimed it retained a constitutionally protected property interest in the land, a preliminary plat, and a contractual entitlement to payment for 108 lots under a Purchase and Sale Agreement. The district court dismissed these federal claims and denied leave to amend the complaint. Whisper Lake appealed, arguing that the contract and the circumstances created a protected property interest that the county violated.
The panel applied de novo review to the dismissal and reviewed the denial of leave to amend for abuse of discretion, noting that amendment is futile if the complaint cannot be saved. The court first addressed whether the plaintiff could rely on exhibits attached to the complaint, ruling that the district court properly considered them and was not required to accept allegations contradicting those exhibits. The court then analyzed the three specific property interests claimed by Whisper Lake. First, regarding the Division B property, the court found that because the plaintiff conveyed legal title via statutory warranty deed, it could not claim a property interest under a Real Estate Installment Sales Agreement (RISA) which requires the seller to retain title. Second, concerning the preliminary plat, the court applied Washington state law stating that land use permit rights run with the land; since the land was sold, the rights to the plat were transferred. Third, regarding the contractual entitlement to payment, the court held that a 'legitimate claim of entitlement' requires more than an abstract desire. The contract explicitly acknowledged that the lot count could change, meaning the plaintiff had no vested right to payment for exactly 108 lots. Under the Takings Clause, the standard for a 'legally recognizable property interest' is even higher, requiring a high threshold of certainty, which the plaintiff failed to meet. Finally, the court rejected an argument for inferring a Contracts Clause claim, noting that the complaint did not provide fair notice of such a claim, and found that even if pleaded, it would be futile because the county's approval of 88 lots did not substantially impair the contract given the parties' reasonable expectations.
The decision leaves Whisper Lake's federal constitutional claims dismissed without prejudice, meaning the developer cannot pursue these specific federal theories in this case. However, the dismissal does not bar potential state law remedies that were not part of the federal claims. The ruling reinforces the high bar for establishing a 'legitimate claim of entitlement' in land use disputes, requiring clear contractual language that creates a vested right rather than a mere expectation.
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