1 2
3 4 5 UNITED STATES DISTRICT COURT
6 EASTERN DISTRICT OF WASHINGTON 7 RS TITAN, LLC, No. 2:25-cv-00504-MKD Plaintiff, 8 ORDER GRANTING IN PART AND v. DENYING IN PART 9 DEFENDANTS’ MOTION TO PUBLIC UTILITY DISTRICT NO. 2 DISMISS 10 OF GRANT COUNTY; TERRY PYLE; LARRY SCHAAPMAN; JUDY ECF No. 9 11 WILSON; NELSON COX; TOM FLINT, 12 Defendants. 13 Before the Court is Defendants’ Motion to Dismiss. ECF No. 9. The Court 14 held a hearing on May 26, 2026. ECF No. 14. David Steele and Jonathan Hawley 15 represented Plaintiff. John Cadagan and Mark Wilner represented Defendants. 16 The Court has reviewed the motion and record, heard from counsel, and is fully 17 informed. For the reasons explained below, the Court GRANTS in part and 18 DENIES in part the motion. 19 BACKGROUND 20 Plaintiff operates a data center at the Randolph Road facility in Moses Lake, 1 Washington. ECF No. 7 at 2 ¶ 1. The facility’s electrical service is supplied by 2 Defendant Grant County PUD, a municipal public utility district. Id. at 6 ¶ 13.
3 Plaintiff alleges that, for more than two decades, Plaintiff, its predecessors, and 4 affiliates worked with Grant County PUD to expand Defendants’ facilities and 5 increase the electrical capacity available to the Randolph Road facility. Id. at 7 ¶
6 19. 7 Beginning in 2000, Plaintiff’s predecessors and affiliates entered a series of 8 agreements with Grant County PUD related to increased electrical service at the 9 Randolph Road facility. Id. at 7-9 ¶¶ 20-24. In July 2000, Plaintiff’s predecessor
10 executed a Letter of Commitment agreeing to reimburse Defendants up to $1 11 million for design and procurement work needed to expand power to the facility. 12 Id. at 7-8 ¶ 20. In December 2002, Plaintiff’s predecessor and Grant County PUD
13 entered a Use of Facilities and Service Agreement under which Grant County PUD 14 agreed to install and modify electrical infrastructure and Plaintiff’s predecessor 15 agreed to pay a monthly charge for use of the PUD’s facilities. Id. at 8 ¶ 21. 16 Between 2005 and 2007, Plaintiff or its affiliates made additional facilities-cost
17 payments to the PUD, including payments associated with additional increments of 18 electrical service. Id. at 8-9 ¶¶ 22-23. Plaintiff alleges that, by the end of 2007, 19 these payments totaled more than $1.9 million. Id. at 9 ¶ 24.
20 On January 31, 2008, the parties entered a New Customer Agreement. Id. at 1 9 ¶ 26. Plaintiff alleges that the 2008 Agreement consolidated and superseded the 2 prior agreements. Id. Under the agreement, Grant PUD agreed to continue actions
3 to expand or modify its electrical facilities and to use reasonable efforts to 4 complete those actions so that it would be able to serve up to a maximum of 34.4 5 MVA of electrical service to the Randolph Road facility. Id. at 9-10 ¶ 27. Plaintiff
6 was responsible for charges relating to the PUD’s furnishing of electricity to the 7 facility, as well as a monthly minimum payment. Id. 8 Plaintiff alleges that it relied on the 2008 Agreement and the PUD’s prior 9 commitments in acquiring and investing in the Randolph Road facility. Id. at 10 ¶
10 28. Plaintiff further alleges that, in 2009, it deeded land to Grant County PUD to 11 facilitate construction of substations and related infrastructure needed to serve 12 increased load at the facility. Id. at 10-11 ¶ 29. Plaintiff also alleges that Grant
13 County PUD later confirmed the anticipated capacity: in 2009, it allegedly stated 14 that it intended to provide Plaintiff adequate capacity as Plaintiff’s need developed 15 “up to what has been paid for,” and in 2019, it allegedly confirmed that it had the 16 capability to meet approximately 34 MVA at the Randolph Road facility. Id. at 11
17 ¶¶ 30-32. 18 In late 2024 and 2025, Defendants adopted and applied new load-limit 19 policies. Plaintiff alleges that Defendants adopted Resolution 9074 in December
20 2024, giving the PUD authority to set and enforce load limits, and later adopted 1 Resolution 9098 in August 2025 as part of its Customer Service Policies. During 2 that same period, Defendants sent Plaintiff letters stating that Plaintiff’s allowable
3 load at the Randolph Road facility would be limited to 9.2 MW. Plaintiff alleges 4 that it demanded Defendants honor the 34.4 MVA level of service, but Defendants 5 did not do so. Id. at 12 ¶¶ 35-38.
6 Separately, in August 2023, Plaintiff submitted a large-power application to 7 Defendants seeking an additional 41 MVA of electrical service for the Randolph 8 Road facility, beyond the 34.4 MVA Plaintiff alleges it was already entitled to 9 receive. Id. at 13 ¶ 41. Plaintiff paid the then-required $21,000 nonrefundable
10 application fee. Id. Plaintiff alleges that this payment placed its application in 11 Defendants’ large electric service queue. Id. at 13-14 ¶ 42. After submitting the 12 application, Plaintiff followed up with Defendants about timing and alleges it was
13 told that there were long delays, that no action was required from Plaintiff, and that 14 Plaintiff could continue checking in. Id. at 14 ¶ 43. 15 In September 2025, the PUD informed Plaintiff that it had updated its large- 16 power application fee schedule effective September 1, 2025, and that existing
17 applications in the queue without a Facilities Construction Agreement would be 18 subject to the updated fee structure. Id. at 14-15 ¶ 44. For Plaintiff’s 41 MVA 19 request, the PUD assessed a total application fee of $1,640,000. Id. at 15 ¶ 45.
20 After crediting Plaintiff’s prior $21,000 payment, the PUD required Plaintiff to pay 1 an additional $1,619,000. Id. The PUD’s communication stated that if Plaintiff 2 did not timely respond or pay, its application would be deemed forfeited and
3 cancelled, and reapplication would require starting at the end of the queue. Id. at 4 16 ¶ 48. Plaintiff responded that it wished to remain in the queue with no change 5 to its requested load and was later billed the outstanding balance. Id. at 16 ¶¶ 49-
6 50. 7 LEGAL STANDARD 8 “To survive a [Fed. R. Civ. P. 12(b)(6)] motion to dismiss, a complaint must 9 contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is
10 plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell 11 Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “Threadbare recitals of the 12 elements of a cause of action, supported by mere conclusory statements, do not
13 suffice.” Id. In considering a motion to dismiss for failure to state a claim, the 14 Court must accept as true the well-pleaded factual allegations and any reasonable 15 inference to be drawn from them, but legal conclusions are not entitled to the same 16 assumption of truth. Id. A complaint must contain either direct or inferential
17 allegations respecting all the material elements necessary to sustain recovery under 18 some viable legal theory. Twombly, 550 U.S. at 562. “Factual allegations must be 19 enough to raise a right to relief above the speculative level.” Id. at 555.
20 1 DISCUSSION 2 Defendants move to dismiss all claims asserted in Plaintiff’s First Amended
3 Complaint. As discussed below, the Court dismisses the official capacity claims 4 against the individual Commissioners as redundant, dismisses Plaintiff’s federal 5 and state due process claims, and otherwise denies the motion.
6 A. Official Capacity Claims 7 Defendants move to dismiss the claims against the Commissioners as 8 redundant because Grant County PUD itself is named as a defendant. An official 9 capacity claim is treated as a claim against the entity itself. Kentucky v. Graham,
10 473 U.S. 159, 166 (1985). “When both a municipal officer and a local government 11 entity are named, and the officer is named only in an official capacity, the court 12 may dismiss the officer as a redundant defendant.” Ctr. for Bio-Ethical Reform,
13 Inc. v. Los Angeles Cnty. Sheriff Dep’t, 533 F.3d 780, 799 (9th Cir. 2008) 14 Plaintiff argues the Commissioners were properly named because Plaintiff 15 seeks prospective declaratory and injunctive relief. However, Plaintiff need not 16 rely on an official capacity suit to obtain prospective relief against an otherwise
17 immune state entity. The PUD is a municipal corporation, and municipal 18 corporations do not share the States’ Eleventh Amendment immunity. Alden v. 19 Maine, 527 U.S. 706, 756 (1999) (“[Sovereign immunity] does not extend to suits
20 prosecuted against a municipal corporation or other governmental entity which is 1 not an arm of the State.”). Local government units may be sued directly for 2 damages, injunctive relief, and declaratory relief. See Graham, 473 U.S. at 167
3 n.14. The Court thus dismisses all claims asserted against the Commissioners in 4 their official capacities. 5 B. Breach of Contract
6 Defendants move to dismiss Plaintiff’s breach of contract claim. To 7 sufficiently plead breach of contract, Plaintiff must allege: (1) the existence of a 8 valid contract; (2) breach of that contract; and (3) resulting damages. Nw. Indep. 9 Forest Mfrs. v. Dep’t of Labor & Indus., 899 P.2d 6, 9 (Wash. Ct. App. 1995). The
10 necessary elements of contract formation are: (1) offer; (2) acceptance; (3) 11 competent parties; (4) legal subject matter; and (5) consideration. Lager v. 12 Berggren, 60 P.2d 99, 101 (Wash. 1936). “Under Washington law, a contract
13 requires mutual assent to its essential terms in order to be binding.” Lee v. Intelius 14 Inc., 737 F.3d 1254, 1259 (9th Cir. 2013). To sufficiently allege breach, Plaintiff 15 must allege the PUD failed to perform a contractual duty. Nw. Indep. Forest Mfrs., 16 899 P.2d at 9.
17 Under Washington law, contracts are interpreted in accordance with the context rule. Under the context rule, extrinsic evidence is admissible to 18 assist the court in ascertaining the parties’ intent and in interpreting the contract. The court may consider (1) the subject matter and objective of the 19 contract, (2) the circumstances surrounding the making of the contract, (3) the subsequent conduct of the parties to the contract, (4) the reasonableness 20 of the parties’ respective interpretations, (5) statements made by the parties in preliminary negotiations, (6) usages of trade, and (7) the course of dealing 1 between the parties. Such evidence is admissible regardless of whether the contract language is deemed ambiguous, though extrinsic evidence cannot 2 be considered: (a) to show a party’s unilateral or subjective intent as to the meaning of a contract word or term; (b) to show an intention independent of 3 the instrument; or (c) to vary, contradict, or modify the written word.
4 Washington State Republican Party v. Washington State Grange, 676 F.3d 784, 5 796 (9th Cir. 2012) (simplified). 6 The Court analyzes this claim in two parts, consistent with how the claim is 7 treated in both the amended complaint and the parties’ briefing. Plaintiff first 8 alleges that the 2008 Agreement obligated the PUD to provide 34.4 MVA of 9 electrical service to the Randolph Road facility and that the PUD breached by 10 limiting Plaintiff to 9.2 MW. Plaintiff separately alleges that the 2023 large-power 11 application created an enforceable agreement because Plaintiff paid the required 12 $21,000 fee in exchange for application processing and a secure place in the queue,
13 and that the PUD breached by threatening to remove Plaintiff from the queue 14 unless Plaintiff paid an additional $1.619 million. 15 1. 2008 Agreement 16 Plaintiff plausibly states a breach of contract claim based on the 2008
17 Agreement. Defendants argue the contract did not promise delivery or reservation 18 of 34.4 MVA. In their view, the relevant clause required only that the PUD use 19 reasonable efforts to expand or modify facilities so the PUD would be able to serve
20 “up to a maximum of 34.4 MVA.” Defendants emphasize that the agreement does 1 not identify a delivery date, duration, exclusive reservation, or fixed obligation to 2 supply 34.4 MVA on demand.
3 Those points may ultimately narrow Plaintiff’s contract theory, but they do 4 not defeat the claim at the pleading stage. Plaintiff alleges a valid 2008 5 Agreement, its performance, Defendant’s obligation to make capacity up to 34.4
6 MVA available, and breach through the later 9.2 MW limit. The written 7 agreement at least contains a reasonable-efforts obligation tied to the PUD’s ability 8 to serve up to 34.4 MVA. Plaintiff alleges that the PUD later imposed a 9.2 MW 9 cap, refused to provide the 34.4 MVA level of service, and refused to acknowledge
10 the alleged contractual obligation. Those allegations are sufficient to plead breach 11 of a capacity-related obligation under the 2008 Agreement. 12 The incorporated Customer Service Policies and Rate Schedules do not
13 defeat the claim at this stage. Defendants argue those policies, including later 14 amendments, govern the amount and conditions of electrical service. But Plaintiff 15 responds that general service policies cannot be read on the pleadings to nullify the 16 alleged specific obligation in the 2008 Agreement. Washington contract law
17 generally favors harmonizing provisions where possible and avoiding 18 interpretations that render obligations illusory. See, e.g., Nishikawa v. U.S. Eagle 19 High, LLC, 158 P.3d 1265, 1268 (Wash. Ct. App. 2007) (citations omitted).
20 1 While the 2009 and 2019 communications do not independently rewrite the 2 agreement, they may be relevant under Washington’s context rule to the extent
3 they illuminate the parties’ objective understanding of the contract language. 4 Plaintiff alleges the PUD stated in 2009 that it intended to provide capacity “up to 5 what has been paid for” and later confirmed in 2019 that it had capability to meet
6 approximately 34 MVA at the Randolph Road facility. Defendants argue those 7 statements are consistent with facilities capability only, not a guaranteed delivery 8 or reservation obligation. That dispute reinforces that the Court should not resolve 9 the parties’ competing interpretations unless the contract unambiguously forecloses
10 Plaintiff’s theory. Because it does not, the Court declines to dismiss this claim. 11 2. 2023 Application 12 Plaintiff also plausibly states a breach of contract claim based on the 2023
13 application, although the Court acknowledges this claim is narrower than 14 Plaintiff’s 2008 Agreement theory. Plaintiff alleges that it submitted a large-power 15 application for an additional 41 MVA, paid the required $21,000 application fee, 16 and thereby secured a place in the PUD’s large electric service queue. Plaintiff
17 further alleges that the PUD later imposed a new $1.64 million fee, credited 18 Plaintiff’s prior $21,000 payment, and threatened that nonpayment of the 19 remaining $1.619 million would result in forfeiture, cancellation, and reapplication
20 at the end of the queue. 1 Defendants argue the application documents defeat any contract theory 2 because the application contemplated only preliminary estimates, stated the fee did
3 not cover “studies & scope,” and provided that additional agreements would 4 follow. That argument is persuasive to the extent Plaintiff seeks to plead that the 5 $21,000 fee entitled it to complete processing, construction, or delivery of the
6 additional 41 MVA without further costs. The application language does not 7 plausibly support that broad theory. 8 But Plaintiff’s claim can be read more narrowly and plausibly: the $21,000 9 fee secured an application status and queue position under the rules then in effect.
10 Plaintiff does not need to plausibly plead that the application guaranteed final 11 service. It needs to plausibly plead a contractual duty that the PUD allegedly 12 breached. The FAC alleges the PUD’s own policies placed completed large-power
13 applications into the large electric service queue, that Plaintiff paid the fee required 14 for that placement, and that the PUD later threatened cancellation and reapplication 15 at the end of the queue if Plaintiff did not pay the new fee. That alleged forfeiture 16 language supports the inference that Plaintiff had a queue position or application
17 status capable of being lost. 18 Defendants rely on Fee Schedule language stating that fees are set by the 19 Commission and subject to change, arguing the revised fee applies generally to
20 large-power applicants. That argument does not resolve Plaintiff’s narrower theory 1 at the pleading stage. Plaintiff does not maintain that the PUD can never change 2 fees or charge for future studies, scope, or facilities work. Rather, Plaintiff argues
3 that the PUD could not impose a new, materially larger application fee on an 4 existing queued applicant as a condition of preserving the queue position allegedly 5 obtained by paying the earlier required fee. Although the application documents
6 contemplate future studies, scope work, and additional agreements, they do not 7 conclusively defeat Plaintiff’s narrower allegation that the original fee secured a 8 queue position and that the PUD later breached by conditioning retention of that 9 position on payment of the new fee. The application’s references to preliminary
10 estimates, studies, and additional agreements may limit the scope of the alleged 11 contract, but they do not necessarily eliminate the alleged bargain that Plaintiff 12 paid $21,000 to obtain and maintain a place in the large-power queue absent a
13 valid basis for forfeiture. The PUD’s later demand that Plaintiff pay $1.619 14 million or lose its queue position is the alleged breach. The Court therefore 15 permits Count 1 to proceed on this narrower queue-position theory. 16 C. Promissory Estoppel and Unjust Enrichment
17 Defendants move to dismiss Plaintiff’s promissory estoppel and unjust 18 enrichment claims. Counts 2 and 4 are addressed together because both are 19 equitable theories pleaded in the alternative to Plaintiff’s contract claims. “To
20 obtain recovery in promissory estoppel, plaintiff must establish (1) a promise 1 which (2) the promisor should reasonably expect to cause the promisee to change 2 his position and (3) which does cause the promisee to change his position (4)
3 justifiably relying upon the promise, in such a manner that (5) injustice can be 4 avoided only by enforcement of the promise.” Havens v. C & D Plastics, Inc., 876 5 P.2d 435, 442 (Wash. 1994) (simplified). The “elements of a contract implied in
6 law”—or unjust enrichment—“are: (1) the defendant receives a benefit, (2) the 7 received benefit is at the plaintiff’s expense, and (3) the circumstances make it 8 unjust for the defendant to retain the benefit without payment.” Young v. Young, 9 191 P.3d 1258, 1262 (Wash. 2008).
10 Defendants argue both claims fail because express written agreements 11 govern the parties’ relationship. That argument does not require dismissal at the 12 pleading stage. Under Washington law, promissory estoppel generally may not
13 displace an enforceable contract governing the same promise and unjust 14 enrichment is ordinarily unavailable where a valid express contract governs the 15 same subject matter. However, those rules generally prevent duplicative recovery 16 or equitable relief that contradicts an enforceable contract and do not bar Plaintiff
17 from alternatively pleading where the scope, meaning, or enforceability of the 18 alleged contractual obligations remains disputed. This is appropriate here because 19 Defendants dispute that the written documents impose the obligations Plaintiff
20 seeks to enforce. 1 For promissory estoppel, Plaintiff alleges the PUD promised that it would 2 provide the Randolph Road facility with 34.4 MVA and that payment of the
3 $21,000 application fee would secure a place in the large-power queue. Plaintiff 4 further alleges it reasonably relied on those promises by entering customer 5 contracts, making facility investments, providing payments and property to the
6 PUD, and paying the application fee. Those allegations are enough if pleaded in 7 the alternative. The claim may later fail if the Court determines that enforceable 8 written agreements govern the same promises, or that the alleged promises were 9 not sufficiently clear and definite. Dismissal now, however, would be premature
10 while Defendants simultaneously dispute that the written documents contain the 11 obligations Plaintiff seeks to enforce. 12 For unjust enrichment, Plaintiff alleges the PUD retained substantial
13 benefits, including more than $1.9 million in payments, real property, and the 14 $21,000 application fee, while refusing to provide the promised capacity and 15 threatening to remove Plaintiff from the queue. If the express agreements govern 16 those benefits and provide an adequate remedy, unjust enrichment will not provide
17 separate relief. But because Defendants dispute the scope of the alleged contracts, 18 Plaintiff may plead unjust enrichment in the alternative at this stage to prevent the 19 PUD from retaining benefits without providing the corresponding alleged
20 consideration. 1 D. Breach of Implied Duty of Good Faith and Fair Dealing 2 Defendants move to dismiss Plaintiff’s breach of implied duty of good faith
3 and fair dealing claim. “There is in every contract an implied duty of good faith 4 and fair dealing. This duty obligates the parties to cooperate with each other so that 5 each may obtain the full benefit of performance.” Badgett v. Sec. State Bank, 807
6 P.2d 356, 360 (Wash. 1991) (citations omitted). The duty applies only in relation 7 to performance of a specific contract term; it does not create a free-floating 8 obligation of good faith, require a party to accept new substantive duties, or “inject 9 substantive terms into the parties’ contract.” Id. “[T]he duty of good faith and fair
10 dealing arises when the contract gives one party discretionary authority to 11 determine a contract term.” Rekhter v. State, Dep’t of Soc. & Health Servs., 323 12 P.3d 1036, 1041 (Wash. 2014) (simplified).
13 Plaintiff alleges the PUD breached the implied duty of good faith and fair 14 dealing in connection with both the 2008 Agreement and the 2023 application. As 15 with the breach of contract claim, this claim is analyzed in two parts. 16 1. 2008 Agreement
17 Plaintiff plausibly states an implied-duty claim based on the 2008 18 Agreement. Plaintiff alleges the agreement required the PUD to use reasonable 19 efforts to expand or modify its facilities so that it would be able to serve up to 34.4
20 MVA at the Randolph Road facility. Plaintiff further alleges that, rather than using 1 reasonable efforts or cooperating so Plaintiff could receive the benefit of that 2 bargain, the PUD unreasonably delayed performance, adopted a load-limit policy,
3 limited Plaintiff to 9.2 MW, and refused to acknowledge the alleged contractual 4 obligation. 5 Defendants argue the claim fails because the implied duty cannot create a
6 contractual obligation to deliver 34.4 MVA if the 2008 Agreement does not 7 contain one. While Plaintiff cannot use Count 3 to add a delivery obligation that 8 the contract does not otherwise support, its implied duty theory is not limited to 9 adding a new term. The 2008 Agreement itself contains a “reasonable efforts”
10 obligation and incorporates policies that Defendants say govern service conditions. 11 To the extent those provisions gave the PUD discretion in how to perform, expand 12 facilities, apply policies, or administer load limits, Plaintiff plausibly alleges the
13 PUD exercised that discretion in a way that deprived Plaintiff of the benefit of the 14 agreement. 15 Because the underlying contract claim survives, the Court declines to 16 dismiss this claim. Plaintiff has plausibly pleaded a contractual capacity-related
17 obligation under the 2008 Agreement, as discussed above, and has also plausibly 18 pleaded that the PUD failed to cooperate in good faith with performance of that 19 obligation. The Court does not hold that the implied duty creates any obligation
20 independent of the 2008 Agreement. 1 2. 2023 Application 2 Plaintiff’s implied duty theory based on the 2023 application is narrower but
3 also plausibly stated at the pleading stage. Plaintiff alleges the PUD accepted the 4 $21,000 application fee in exchange for application processing and a place in the 5 large-power queue, then exercised its fee-setting or queue-management authority
6 to require an additional $1.619 million as a condition of preserving that position. 7 Defendants respond that the application expressly contemplated preliminary 8 estimates, studies and scope, and additional agreements, so the implied duty cannot 9 eliminate the PUD’s authority to require additional fees or agreements.
10 Defendants are correct that the implied duty cannot rewrite the application into a 11 guarantee of full processing or delivery of the additional 41 MVA for only 12 $21,000. But if Plaintiff plausibly alleges that the application fee secured at least a
13 queue-related contractual interest, then the implied duty may constrain the PUD’s 14 discretion in administering that interest. 15 The key distinction is between future fees for future work and a new fee 16 imposed as a condition of avoiding forfeiture of an allegedly existing queue
17 position. Plaintiff’s theory is that the PUD used its discretion over fees and queue 18 management to deprive Plaintiff of the benefit it allegedly obtained by paying the 19 original application fee. Because Plaintiff’s 2023 application-based breach of
20 1 contract claim survives dismissal on that narrower queue-position theory, the 2 implied duty claim based on the same alleged contractual interest also survives.
3 E. Federal Substantive Due Process 4 Defendants move to dismiss Plaintiff’s federal substantive due process 5 claim. Plaintiff asserts a federal substantive due process claim based on the
6 allegation that the PUD retroactively used later policies to repudiate vested 7 contractual rights—specifically, Plaintiff’s alleged right to 34.4 MVA under the 8 2008 Agreement and its alleged right to maintain its 2023 application/queue 9 position based on the $21,000 application fee.
10 The threshold question is whether Plaintiff has plausibly alleged a 11 constitutionally protected property interest. “Property interests, of course, are not 12 created by the Constitution. Rather they are created and their dimensions are
13 defined by existing rules or understandings that stem from an independent source 14 such as state law—rules or understandings that secure certain benefits and that 15 support claims of entitlement to those benefits.” The Bd. of Regents of State 16 Colleges v. Roth, 408 U.S. 564, 577 (1972). To state a federal substantive due
17 process claim, Plaintiff must plausibly allege that the PUD deprived it of such a 18 constitutionally protected property interest. Shanks v. Dressel, 540 F.3d 1082, 19 1087 (9th Cir. 2008).
20 1 In the public-contract context, the existence of a contract right does not 2 automatically create a substantive due process claim. The Supreme Court has
3 explained that where a contractor’s claim is for payment allegedly due under a 4 public contract, the availability of ordinary contract remedies generally satisfies 5 due process. Lujan v. G & G Fire Sprinklers, Inc., 532 U.S. 189, 196 (2001).
6 “Upon a careful reading of Lujan, it appears that the common law breach of 7 contract claim provides adequate process for the deprivation of a property right 8 derived from a contract, unless the deprivation constitutes a denial of a present 9 entitlement.” DeBoer v. Pennington, 287 F.3d 748, 749 (9th Cir. 2002)
10 (cautioning that a government breach of contract does not itself become a 11 constitutional deprivation where the asserted interest is “fully protected by an 12 ordinary breach-of-contract suit”).
13 Although Plaintiff has plausibly alleged contract rights, it has not plausibly 14 alleged a constitutionally protected property interest distinct from those disputed 15 contractual rights and ordinary contract remedies. As to the 2008 Agreement, the 16 alleged right is framed through “reasonable efforts” and the ability to serve “up to”
17 a maximum level of electrical service. That may support a breach of contract 18 claim, but it is not a clearly vested entitlement to immediate delivery or reservation 19 of 34.4 MVA. As to the 2023 application, the asserted entitlement is even less
20 1 definite because the application documents contemplate preliminary estimates, 2 studies and scope, and additional agreements.
3 The gravamen of Plaintiff’s substantive due process claim is that the PUD 4 used later governmental action to impair earlier contractual obligations. That 5 theory sounds more directly in the Contract Clause, which specifically governs
6 laws impairing contractual obligations. Federal substantive due process does not 7 extend to every disputed public-contract entitlement, particularly where, as here, a 8 plaintiff has ordinary contract remedies and has separately pleaded Contract Clause 9 claims. The Court thus dismisses this claim. Dismissal of this claim, however,
10 does not foreclose Plaintiff’s theory that later PUD policies impaired alleged 11 contractual obligations. That theory is addressed under the Contract Clause claims, 12 as discussed below.
13 F. Washington Due Process 14 Defendants move to dismiss Plaintiff’s Washington Constitution-based due 15 process claim. This claim is similarly based on Plaintiff’s allegation that the PUD 16 retroactively used later policies to repudiate vested contractual rights. Those
17 alleged rights are Plaintiff’s asserted right to 34.4 MVA under the 2008 Agreement 18 and its asserted right to maintain its 2023 application/queue position after paying 19 the $21,000 application fee.
20 1 Article I, Section 3 of the Washington Constitution provides that “[n]o 2 person shall be deprived of life, liberty, or property, without due process of law.”
3 Washington courts have recognized that due process may be violated when a law is 4 applied retroactively to deprive a party of a vested right. In re Marriage of 5 MacDonald, 709 P.2d 1196, 1199 (Wash. 1985). A vested right must be more than
6 a mere expectation. Id. 7 Plaintiff relies on Caritas Servs., Inc. v. Dep’t of Soc. & Health Servs., 869 8 P.2d 28 (1994), where the Washington Supreme Court held that the parties’ 9 provider agreements created contractual reimbursement obligations. Id. at 35-36.
10 The court further held that the plaintiff had a vested right to reimbursement 11 because it had already performed services under contracts that incorporated a 12 specific reimbursement formula. Id. at 42. The right was not merely prospective
13 or contingent. The plaintiff had already performed under a defined contractual 14 reimbursement scheme before the later statutory change attempted to reduce 15 payment for that completed performance. Id. 16 Plaintiff’s alleged rights are different. As to the 2008 Agreement, Plaintiff
17 plausibly alleges a contractual duty, but that duty is framed in terms of “reasonable 18 efforts” and the PUD’s ability to serve “up to” a maximum level of electrical 19 service. That language may support a breach of contract claim, but it does not
20 establish the kind of fixed, accrued entitlement at issue in Caritas. As to the 2023 1 application, the alleged right is even less definite because the application process 2 contemplated preliminary estimates, studies and scope, and additional agreements.
3 Washington due process protects vested rights from retroactive deprivation, but 4 Plaintiff has alleged disputed contractual interests rather than an accrued or fixed 5 vested right comparable to Caritas. The Court thus dismisses this claim. This
6 dismissal does not foreclose Plaintiff’s separate theory that later PUD policies 7 impaired alleged contractual obligations under the Washington Contract Clause. 8 G. Federal Contract Clause 9 Defendants move to dismiss Plaintiff’s federal Contract Clause claim.
10 Plaintiff alleges the PUD had two contractual relationships with Plaintiff: 11 (1) the 2008 Agreement, under which the PUD allegedly promised to use 12 reasonable efforts to expand or modify facilities so that it would be able to serve
13 the Randolph Road facility with up to 34.4 MVA; and (2) the 2023 application, 14 under which Plaintiff allegedly paid the $21,000 application fee in exchange for 15 processing and a secure place in the large-power queue. Plaintiff alleges the PUD 16 substantially impaired those contractual relationships by later applying new load-
17 limit policies and the revised fee schedule. 18 The Contract Clause provides that “[n]o State shall . . . pass any . . . Law 19 impairing the Obligation of Contracts.” U.S. Const. art. I, § 10, cl. 1. The analysis
20 asks: first, whether a contractual relationship exists; second, whether a change in 1 law substantially impairs that contractual relationship; and third, whether the 2 impairment is justified. Energy Rsrvs. Grp., Inc. v. Kan. Power & Light Co., 459
3 U.S. 400, 411-13 (1983). 4 The Contract Clause is not an absolute bar to subsequent modification of a State’s own financial obligations. As with laws impairing the obligations of 5 private contracts, an impairment may be constitutional if it is reasonable and necessary to serve an important public purpose. In applying this standard, 6 however, complete deference to a legislative assessment of reasonableness and necessity is not appropriate because the State’s self-interest is at stake. 7 A governmental entity can always find a use for extra money, especially when taxes do not have to be raised. If a State could reduce its financial 8 obligations whenever it wanted to spend the money for what it regarded as an important public purpose, the Contract Clause would provide no 9 protection at all.
10 U.S. Tr. Co. of New York v. New Jersey, 431 U.S. 1, 25-26 (1977) (footnotes 11 omitted). 12 Defendants argue this claim fails because Plaintiff has not plausibly alleged 13 any contract that was impaired. Their argument tracks their breach of contract 14 arguments: the 2008 Agreement allegedly did not guarantee delivery or reservation 15 of 34.4 MVA, and the 2023 application allegedly did not secure a queue position 16 immune from later fees. Defendants also argue there was no impairment because 17 the 2008 Agreement incorporated the PUD’s Customer Service Policies and Rate 18 Schedules, including later amendments. In their view, the load-limit policies and 19 fee schedule were part of the contractual framework, not later laws impairing 20 independent contractual obligations. 1 Plaintiff responds that it has plausibly alleged existing contractual 2 relationships and that the PUD used later policies to rewrite or avoid those
3 commitments. As to the 2008 Agreement, Plaintiff alleges the PUD accepted 4 substantial consideration and then later adopted load-limit authority that reduced 5 Plaintiff’s available load to 9.2 MW, despite the alleged 34.4 MVA obligation. As
6 to the 2023 application, Plaintiff alleges the PUD accepted the $21,000 fee, placed 7 Plaintiff in the queue, and then retroactively imposed a $1.619 million payment 8 condition to preserve that position. 9 The key issue is whether the challenged PUD actions are merely alleged
10 breaches of contract, or whether they are legislative or policy actions that impaired 11 contractual obligations. That distinction matters because not every public-contract 12 breach is a Contract Clause violation. The Ninth Circuit has explained that the
13 Contract Clause is implicated where the later law has the legal effect of altering or 14 eliminating contractual obligations, but not where the government remains subject 15 to ordinary contract remedies and the dispute is simply whether the government 16 breached. Pure Wafer Inc. v. City of Prescott, 845 F.3d 943, 952-53 (9th Cir.
17 2017). 18 The Contract Clause claim presents a close question, but at the pleading 19 stage Plaintiff alleges the later policies did more than accompany a breach.
20 Plaintiff alleges the later policies provided the asserted legal basis for the PUD to 1 avoid the alleged contractual obligations altogether. Plaintiff alleges the PUD 2 adopted and applied new policies—load-limit authority and a revised fee
3 schedule—to defeat or materially alter preexisting contractual rights. Defendants 4 may ultimately show that the later policies were incorporated into the agreements 5 from the outset, that the PUD did not impair any independent obligation, or that
6 any impairment was reasonable and necessary to serve important public purposes 7 such as grid reliability, resource planning, and infrastructure funding. But those 8 arguments depend on the scope of the underlying contracts and the legal effect of 9 the later policies, issues not conclusively resolved on a motion to dismiss.
10 Because Plaintiff plausibly alleges a contractual capacity-related obligation 11 under the 2008 Agreement, it also plausibly alleges that later load-limit policies 12 impaired that alleged obligation. The 2023 application-based theory is closer, but
13 it also survives because Plaintiff plausibly alleges that the $21,000 fee secured at 14 least a queue-related contractual interest and that the later fee schedule impaired 15 that interest by conditioning preservation of the queue position on a new $1.619 16 million payment. Defendants’ arguments about future studies, additional
17 agreements, and fee-change discretion may narrow or defeat the claim later, but 18 they do not conclusively defeat the alleged impairment at this stage. 19 H. Washington Contract Clause
20 Defendants move to dismiss Plaintiff’s Washington Constitution Contract 1 Clause claim. Plaintiff alleges the PUD violated Article I, Section 23 of the 2 Washington Constitution, which provides that “[n]o . . . law impairing the
3 obligations of contracts shall ever be passed.” Plaintiff bases this claim on the 4 same two alleged contractual relationships: the 2008 Agreement and the 2023 5 application/queue-position agreement. Plaintiff alleges the PUD substantially
6 impaired those agreements by later applying new load-limit policies and a revised 7 large-power fee schedule. 8 The test for analyzing impairment of public contracts has three parts. First, the court must determine whether a contractual relationship exists; second, 9 the court must determine whether the legislation substantially impairs the contractual relationship; third, when a state impairs its own contracts, the 10 court must determine if the impairment was reasonable and necessary to serve a legitimate public purpose. 11 Caritas Servs., 869 P.2d at 35 (citations omitted). 12 Defendants’ arguments largely mirror their federal Contract Clause 13 arguments. They contend Plaintiff has not plausibly alleged a contractual 14 relationship that was impaired because the 2008 Agreement did not guarantee 15 delivery or reservation of 34.4 MVA, and the 2023 application did not secure a 16 queue position immune from later fees. Defendants also argue the challenged 17 policies were incorporated into the contractual framework through the Customer 18 Service Policies and Rate Schedules, including later amendments, so there was no 19 later legislative impairment of an independent contractual obligation. 20 1 Plaintiff responds that the PUD cannot accept consideration, enter 2 agreements, and then use later policy changes to avoid its own commitments. As
3 to the 2008 Agreement, Plaintiff alleges the PUD accepted more than $1.9 million 4 and land contributions, then later adopted load-limit authority and capped Plaintiff 5 at 9.2 MW despite the alleged 34.4 MVA obligation. As to the 2023 application,
6 Plaintiff alleges the PUD accepted the $21,000 fee and placed Plaintiff in the 7 queue, then later applied a new fee schedule requiring $1.619 million to preserve 8 that position. 9 Plaintiff’s Washington Contract Clause claim survives for the same reasons
10 as its federal Contract Clause claim. See Caritas Servs., 869 P.2d at 35 (relying on 11 federal Contract Clause jurisprudence). If Plaintiff has plausibly alleged 12 contractual obligations under the 2008 Agreement and the 2023 application, it has
13 also plausibly alleged that later PUD policies impaired those alleged obligations. 14 The PUD may ultimately show that the incorporated policies allowed the 15 challenged actions, that there was no substantial impairment, or that any 16 impairment was reasonable and necessary to serve legitimate utility purposes. But
17 those questions turn on the scope of the contractual relationships and the effect of 18 the later PUD actions—issues not properly resolved at this stage. 19 I. Arbitrary and Capricious Action
20 Defendants move to dismiss Plaintiff’s arbitrary and capricious action claim. 1 Plaintiff alleges the PUD acted arbitrarily, capriciously, and unreasonably in two 2 respects: first, by disregarding the parties’ longstanding relationship and limiting
3 Plaintiff to 9.2 MW despite the alleged 34.4 MVA obligation; and second, by 4 retroactively applying the revised large-power application fee schedule to 5 Plaintiff’s existing 41 MVA application.
6 Washington law affords municipal utilities substantial discretion in 7 exercising their proprietary powers, but that discretion remains subject to review 8 for arbitrary, capricious, or unreasonable action. “[W]e have traditionally allowed 9 municipal corporations discretion in exercising their proprietary powers so long as
10 their actions are not arbitrary, capricious or unreasonable: if municipal utility 11 actions come within the purpose and object of the enabling statute and no express 12 limitations apply, this court leaves the choice of means used in operating the utility
13 to the discretion of municipal authorities. We limit judicial review of municipal 14 utility choices to whether the particular contract or action was arbitrary or 15 capricious or unreasonable.” Hite v. Pub. Util. Dist. No. 2, 772 P.2d 481, 485 16 (Wash. 1989) (simplified). “This is an extremely deferential standard of review.
17 Arbitrary and capricious refers to willful and unreasoning action, taken without 18 regard to or consideration of the facts and circumstances surrounding the action. 19 Where there is room for two opinions, an action taken after due consideration is
20 not arbitrary and capricious even though a reviewing court may believe it to be 1 erroneous.” Pub. Util. Dist. No. 2 of Pac. Cnty. v. Comcast of Washington IV, Inc., 2 438 P.3d 1212, 1225 (Wash. Ct. App. 2019) (simplified).
3 Defendants argue this claim fails because the FAC itself identifies rational 4 reasons for the challenged actions. As to the load-limit policy, Defendants point to 5 system reliability and safe operation of the electrical system. As to the revised
6 large-power fee, Defendants point to the PUD’s stated goals of securing additional 7 energy resources, funding significant transmission infrastructure, and 8 distinguishing speculative interest from firm demand. Defendants therefore 9 contend the challenged policies are rational utility-management decisions, not
10 arbitrary or capricious conduct. 11 Plaintiff responds that the issue cannot be resolved on the pleadings because 12 the FAC alleges the PUD acted without adequate consideration of Plaintiff’s
13 particular circumstances. As to the 34.4 MVA issue, Plaintiff alleges the PUD 14 ignored the 2008 Agreement, Plaintiff’s payments and property contributions, and 15 the PUD’s alleged later assurances. As to the 2023 application, Plaintiff alleges 16 the PUD imposed a massive new application fee on existing applicants even
17 though the stated policy goals could have been addressed through prospective fee 18 changes or later charges for actual studies, scope, and construction costs. 19 While the PUD’s stated rationales may ultimately defeat the claim on the
20 merits, particularly given the deference owed to municipal utility decision-making, 1 at this stage Plaintiff does plausibly allege willful and unreasoning action or action 2 taken without regard to relevant facts and circumstances. Plaintiff alleges the PUD
3 imposed the 9.2 MW limit and the revised fee without adequately considering 4 Plaintiff’s alleged existing contractual rights, prior contributions, and queue status. 5 On this record, that is sufficient.
6 CONCLUSION 7 For the reasons discussed above, Defendants’ motion is granted in part and 8 denied in part. 9 Accordingly, IT IS HEREBY ORDERED:
10 1. Defendants’ Motion to Dismiss, ECF No. 9, is GRANTED in part and 11 DENIED in part. The motion is GRANTED as to all claims asserted 12 against Defendants Terry Pyle, Larry Schaapman, Judy Wilson, Nelson
13 Cox, and Tom Flint, and those Defendants are DISMISSED. The motion 14 is also GRANTED as to Counts 5 and 6, which are DISMISSED. The 15 motion is otherwise DENIED as to Counts 1, 2, 3, 4, 7, 8, and 9 asserted 16 against Defendant Public Utility District No. 2 of Grant County.
17 IT IS SO ORDERED. The District Court Clerk is directed to enter this 18 Order and provide copies to counsel. 19
20 1 DATED June 7, 2026.
2 s/Mary K. Dimke MARY K. DIMKE 3 UNITED STATES DISTRICT JUDGE
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