Independent Entr Inc v. Pittsburgh Water

Opinions of the United
1997 Decisions States Court of Appeals
for the Third Circuit
1-9-1997
Independent Entr Inc v. Pittsburgh Water
Precedential or Non-Precedential:
Docket 96-3009
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
N0. 96-3009
INDEPENDENT ENTERPRISES INC.; THOMAS LOZECKI
Appellants
v.
PITTSBURGH WATER AND SEWER AUTHORITY;
CITY OF PITTSBURGH
On Appeal From the United States District Court
For the Western District of Pennsylvania
(D.C. Civil Action No. 95-cv-01358)
Argued July 25, 1996
BEFORE: BECKER, STAPLETON and MICHEL,* Circuit Judges
(Opinion Filed January 9, 1997)
Alan S. Miller (Argued)
Picadio, McCall, Kane & Norton
Suite 3180 USX Tower
600 Grant Street
Pittsburgh, PA 15219
Attorneys for Appellants
Kimberly A. Brown (Argued)
Stacey L. Jarrell
Thorp, Reed & Armstrong
One Riverfront Center
Pittsburgh, PA 15222
and
Craig E. Frischman
Kapetan, Meyers, Rosen, Louik &
Raizman
Suite 200, The Frick Building
Pittsburgh, PA 15219-6003
Attorneys for Appellee
Pittsburgh Water and Sewer Authority
1
* Hon. Paul R. Michel, United States Circuit Judge for the
Federal Circuit, sitting by designation.
Virginia S. Scott (Argued)
City of Pittsburgh
Department of Law
313 City County Building
Pittsburgh, PA 15219
Attorney for Appellee
City of Pittsburgh
OPINION OF THE COURT
STAPLETON, Circuit Judge:
We here review the district court’s dismissal under
Fed. R. Civ. P. 12(b)(6) of a multiple-count complaint brought
against the City of Pittsburgh (the “City”) and the Pittsburgh
Water & Sewer Authority (the “Authority”) by Independent
Enterprises Inc. (“Independent”), a construction company, and
Thomas Lozecki, a City taxpayer and Authority ratepayer.1 The
claims asserted in the complaint include a civil contempt of
court claim, an equal protection claim and procedural and
substantive due process claims brought under 42 U.S.C. § 1983,
and pendent state law claims. All of these claims arose in the
context of the Authority’s failure to award Independent three
Authority contracts on which Independent had submitted the lowest
bids.
1. Lozecki is a party only to the pendent state law claims.
2
I. The Facts
Because the district court dismissed Independent's
claims pursuant to a motion to dismiss under Fed R. Civ. P.
12(b)(6), we accept as true all factual allegations in
Independent’s complaint and all reasonable inferences therefrom.2
Nami v. Fauver, 82 F.3d 62, 65 (3d Cir. 1996); Spence v. Straw,
54 F.3d 196, 197 (3d Cir. 1995).
In 1986, Independent sued the City and Authority in the
United States District Court for the Western District of
Pennsylvania after the City declared that Independent was
"noncompetent" to bid on any projects in which it had an interest
and the Authority consequently rejected a low bid by Independent.
In settlement of that suit, the parties agreed to a consent
decree that was ultimately entered by the court. The consent
decree provided that Independent could not be "debarred" from
bidding on City contracts based on any past performance, and that
if the City or Authority wanted to "disqualify" Independent from
2. The Appellees filed a "Motion to Dismiss or For Judgment on
the Pleadings." Independent argues on appeal that the district
court converted the Appellees' motion to one for summary judgment
by considering matters outside of the pleadings, and that such
conversion was improper because Independent was not given notice
of the conversion or an opportunity to submit relevant materials.
See Fed. R. Civ. P. 12(b). Independent thus asserts that "it
was reversible error for the district court to grant the motion
without having afforded Independent any opportunity to submit
materials under Rule 56." Appellant's Brief at 34. Because
Independent indeed was not given an opportunity to submit
evidence to defeat a motion for summary judgment, we will treat
the district court's decision as a 12(b)(6) dismissal and will
disregard anything other than the allegations of the complaint
when conducting our plenary review of that decision.
3
City or Authority work because of problems with future
performances, it would first have to conduct a hearing under the
Pennsylvania Local Agency Law. Between the issuance of the
consent decree and the solicitation of bids for the 1995
contracts at issue here, Independent satisfactorily performed
"numerous" contracts for both the City and Authority.
In May 1995, the Authority solicited bids for two
projects, the "Annual Water Line Contract" and the "Grandview
Avenue Project." Independent submitted bids for both projects.
In accordance with the Authority's "MBE/WBE Utilization
Requirements," each of Independent's bids included a list of
minority- and women-owned business enterprises ("MBE/WBEs") that
Independent intended to use as subcontractors if awarded the
contract. One of the MBEs Independent listed was Whaley & Sons,
a firm that Independent claims was certified by the Authority as
an approved MBE/WBE vendor. Independent's bids were the lowest
for both projects, and an independent consultant recommended that
the Authority award both contracts to Independent.
Before the Authority made a decision about awarding
the contracts, the City's Deputy Mayor of Government Operations,
Salvatore Sirabella, issued a memorandum (the "Sirabella
memorandum") to the Authority's Executive Director. In the
memorandum Sirabella expressed concern about the cost over-run on
a recent Authority project that had been completed by
Independent, and directed the Authority to "temporarily halt
awarding any contracts to Independent ...." App. at 87. Shortly
after receiving the Sirabella memorandum, the governing body of
4
the Authority (the "Board") decided that Whaley & Sons was an
unacceptable MBE subcontractor and resolved to reject
Independent's bids for both the Water Line Contract and the
Grandview Avenue Project "for failure to meet the MBE/WBE
requirements of the specifications." Auth. Res. 67 & 68, App. at
197-98. The Board then awarded the two contracts to the next
lowest bidders. About a month later, the contracts with those
bidders were rescinded, all bids were rejected, and the Authority
resolved to readvertise both the Water Line and Grandview Avenue
projects.
In June, 1995, Independent submitted a bid to the
Authority for the "Annual Sewer Improvement Contract." Again,
Independent's was the lowest responsible bid. And again, despite
its low bid, Independent was not awarded the contract. There was
apparently some communication between the attorney for the
Authority and Independent regarding the absence of a Power of
Attorney form in Independent's bid package, but ultimately the
Authority did not reject Independent's bid on that basis.
Instead, the Authority's Board simply rejected all of the Sewer
Improvement Contract bids without explanation and readvertised
the project.
In response to the Authority's failure to award it the
Water Line Contract, the Grandview Avenue Project, and the Sewer
Improvement Contract, Independent filed this suit. Its
complaint alleged that: (1) the Authority and City violated the
terms of the consent decree by "disqualifying" Independent from
Authority and City contracts; (2) the Authority's MBE/WBE
5
Utilization Requirements discriminate against Independent and
other construction companies on the basis of race, ethnicity,
national origin, and/or sex, thereby denying them the equal
protection of the laws; and (3) the Authority's and the City's
disqualification of Independent, and the Authority's resulting
refusal to award it the Water Line Contract, the Grandview Avenue
Project, and the Sewer Improvement Contract, deprived Independent
of property without procedural and substantive due process.
The district court dismissed all of Independent’s
federal claims. First, the court dismissed the § 1983 claims
against the Authority on the ground that the Authority is not a
"person" within the meaning of § 1983. The district court then
dismissed the civil contempt claim on the ground that Independent
had not been "debarred" from bidding on City or Authority
contracts.
Turning to Independent's procedural due process claim,
the district court held that "Pennsylvania provides a judicial
procedure for unsuccessful bidders to challenge whether a local
contracting authority has violated a bidder's rights under the
Municipal Authority Act." Op. at 7. In the court's view, an
adequate post-deprivation procedure thus existed to satisfy the
demands of the Due Process Clause. The court dismissed
Independent's substantive due process claims because it found
that Independent had not alleged facts showing that the City had
deprived it of a protected property interest.
With respect to the equal protection claim, the court
held that Independent lacked standing because the complaint
6
failed to allege a causal connection between the MBE/WBE
requirements and the injury Independent had suffered from the
rejection of its bids.3
We will affirm the dismissal of Independent's due
process claims. We will reverse the judgment of the district
court, however, and remand for further proceedings on
Independent's civil contempt and equal protection claims.
II. The Civil Contempt Claim
In Count I of its complaint, Independent alleges that
the Authority and City are in civil contempt of court because
their disqualification of Independent pursuant to the Sirabella
memorandum and the Authority's resulting rejection of
Independent's three low bids violated the terms of the 1986
consent decree. The district court dismissed the contempt claim
because it found that the facts alleged did not show a violation
of the terms of the consent decree. We disagree.
The 1986 consent decree provided in part:
2. Independent shall not be debarred from bidding on
any City of Pittsburgh Contract based on past
conduct or performance.
3. Independent, City and Authority shall act in a
cooperative manner on all contracts.
Independent shall:
(a) cooperate with inspectors at job
site; and
3. The district court, having dismissed the federal claims,
declined to exercise supplemental jurisdiction over Independent's
state claims and dismissed them without prejudice. It may
reconsider that decision on remand in light of our disposition of
the federal claims.
7
(b) cooperate with consultants and
officials of the City and Authority
in regard to problems that occur at
the job site and administrative
matters; and
(c) move quickly to resolve any disputes
with adjoining property owners as a
result of their work.
4. If, because of problems with future performances,
the City or Authority desire to disqualify
Independent from City or Authority work, a
hearing shall be held prior to
disqualification under the Pennsylvania Local
Agency Law, and Independent shall have all
rights afforded thereunder.
App. at 138-39.
At the time the consent decree was entered, the
Pittsburgh Code contained a provision entitled "Debarment from
Bidding On and Participating in City Contracts." § 161.22. This
provision states that any person or enterprise that had committed
an "offense," as defined therein, will not be allowed to bid and
will not be "a responsible bidder on any city contract."
"Offense" is defined in a non-exclusive list to include sixteen
different categories of conduct ranging from fraud in connection
with the obtaining or performance of a contract to the following:
(10) Willful or material failure to perform
the terms of a contract or agreement in
accordance with specifications or within
contractual time limits;
(11) A record of failure to perform or of
unsatisfactory performance in accordance with
the terms of one or more contracts, provided
that the failure or unsatisfactory
performance was within a reasonable period of
time preceding the determination to debar and
was caused by acts within the control of the
person or enterprise debarred;
* * *
8
(16) Other cause affecting responsibility as
a city contractor or vendor as may be
determined by the city.
Pittsburgh Code § 161.22(b). Debarments under this provision are
to last for "a reasonable, definitely stated period . . .
commensurate with the seriousness of the cause therefore," but
"as a general rule [are not to] exceed three years." Id.
§ 161.22(d)(3). Debarment proceedings are initiated at the
discretion of the Mayor and the City's Director of the Department
of General Services. The stipulated process includes a notice to
the contractor and a right to a hearing before the Director at
which the cause for the debarment has to be established by a
preponderance of the evidence.
The Pennsylvania Local Agency Law referenced in
paragraph 4 of the consent decree is found in Title 2 of the
Pennsylvania Consolidated Statutes Annotated at §§ 551-555 and
751-754.4 These subchapters relate solely to process; they
stipulate the procedural rights that interested parties will have
in any "adjudication" by a local agency, e.g., the rights to a
hearing, representation by counsel, cross-examination, a written
decision, judicial review, etc. Nothing in these subchapters
4. Title 2 is devoted to "Administrative Law and Procedure."
Subchapter 5A provides procedure for "Commonwealth agencies" and
subchapter 5B stipulates procedure for "local agencies", which
include any "government agency other than a Commonwealth agency."
2 Pa. C.S.A. § 101. Section 105 of Title 2 provides:
The provisions of Subchapter B of Chapter 5
(relating to practice and procedure of local
agencies) and Subchapter B of Chapter 7
(relating to judicial review of local agency
action) shall be known and may be cited as
the "Local Agency Law."
9
describes the circumstances under which a would-be contractor may
be foreclosed from contracting with a local agency.
In the context of these statutory provisions and the
litigation that produced the consent decree, the intent of
paragraph 4 seems clear and unambiguous. Independent was
concerned about being foreclosed from doing City and Authority
work based on complaints about its conduct and contract
performance. In the interest of settling the pending lawsuit,
the City was willing to assure that there would be no foreclosure
based on past conduct or performance. While it and the Authority
were not willing to give the same assurance with respect to
future contract performance, they were willing to commit to
hearing Independent's side of the story regarding any alleged
deficiency in its performance before foreclosing it from City and
Authority work. Independent would be able to give its side in a
hearing to be held in accordance with the Pennsylvania Local
Agency Law. This reading of paragraph 4 gives the word
"disqualified" its commonly understood meaning. "Disqualify,"
according to Webster, means "to deprive of a power, right or
privilege" or make "ineligible . . . for further competition
because of violations of the rules," Webster's Ninth New
Collegiate Dictionary 366 (1990); Black defines "disqualify" as
"to render ineligible." Black's Law Dictionary 472 (6th ed.
1990).
Given this intent, we further think it clear that if
Independent can prove its allegations, it will have established a
violation of paragraph 4 of the consent decree. If the Sirabella
10
directive, as alleged, resulted in Independent's not being
considered for City or Authority work for a period of time
because of a cost overrun on a contract entered after the consent
decree, the failure to give Independent a hearing on the overruns
was a violation of paragraph 4.
In reaching its contrary conclusion, the district court
reasoned that (1) "debarred" in paragraph 2 was intended to
include only disqualifications for City work pursuant to the
"formal procedure" spelled out in § 161.22 of the City Code; (2)
"disqualify" in paragraph 4 is synonymous with the concept of
"debar" in paragraph 2; (3) there was no "formal procedure" under
§ 161.22 conducted in connection with the Sirabella directive;
and (4) therefore, there was no disqualification of Independent
and no need for a hearing. We believe this approach leaves
paragraphs 2 and 4 virtually without effect.
Even assuming that "debarred" in paragraph 2 refers to
a foreclosure from City work for a period of time for the reasons
set forth in § 161.22, it seems highly unlikely to us that the
parties intended to limit its scope to situations in which the
City both foreclosed Independent and invoked the formal process
of § 161.22. After all, paragraph 2 simply says that the City
won't debar Independent, i.e., declare it a non-responsible
bidder, for past performance. But even further assuming that
paragraph 2 is so limited, "disqualified" could not have been
intended to limit the scope of paragraph 4 to situations where
the "formal process" of § 161.22 is invoked. That process is
11
City-specific and, by its own terms, cannot be invoked by the
Authority.5
Giving the word "disqualify" and the phrase "because of
problems with future performances" in paragraph 4 their commonly
understood meaning, we find paragraph 4 broad enough to include a
blanket foreclosure of Independent from City or Authority work
because of an overrun on a post-consent decree contract.
Moreover, it seems to us that the stated causes for debarment
under § 161.22 are broad enough to include such a foreclosure.
Accordingly, our conclusion would not be different even if we
regarded the term "disqualify" in paragraph 4 as limited by the
use of "debarred" in paragraph 2.
III. The § 1983 Claims
A. The "Person" Requirement
Independent brought its equal protection and due
process claims against the City and Authority under 42 U.S.C.
5. In its opinion, the district court commented that, even
assuming there had been a violation of the consent decree, the
appropriate remedy would have been to file an application in the
earlier suit. In response to the district court's suggestion,
Independent stresses that the judge who presided over the former
civil action had retired before the present action was commenced.
Therefore, Independent argues, nothing should preclude it from
including the contempt of court claim with its other claims
against Appellees, and indeed that "[t]he assertion of all claims
in one action serves the interests of judicial economy of
resources. Moreover, even if the civil action was required to be
brought at the old docket number, the proper action would be to
transfer the matter rather than dismissal [sic]." Appellant's
Brief at 21 n.6. We agree that Independent should not be
precluded from pursuing its contempt claim merely because it, for
apparently logical reasons, failed to file that claim under the
docket number under which the consent decree was entered.
12
§ 1983, which provides that:
Every person who, under color of any statute,
ordinance, regulation, custom, or usage, of
any State . . . subjects, or causes to be
subjected, any citizen of the United States
or other person within the jurisdiction
thereof to be deprived of any rights,
privileges, or immunities secured by the
Constitution or laws, shall be liable to the
party injured in an action at law, suit in
equity, or other proper proceeding for
redress.
42 U.S.C. § 1983.
In support of its conclusion that the Authority "is not
a 'person' within the meaning of section 1983," Op. at 4, the
district court cited Will v. Michigan Department of State Police,
491 U.S. 58 (1989). Will held that "neither a State nor its
officials acting in their official capacities are 'persons' under
§ 1983." Id. at 71. We cannot accept the district court's
conclusion that Will compels a finding that the Authority is not
a "person" under § 1983. Indeed, the limited record presently
available on the issue indicates that the Authority, in all
likelihood, is a "person" under § 1983.6
6. At oral argument, counsel for the Authority informed us that
the Authority had not argued before the district court that it
was not a "person" under § 1983. Counsel further candidly
acknowledged that she could cite no case in which a public entity
had been held not to be a "person" on the basis of a record
similar to the one before us. Counsel stopped short of
conceding, however, that the Authority is a "person" under §
1983. As a result, the district court, on remand, will have to
determine whether the Authority is a "person." This will
require it to afford the parties the opportunity to develop a
record and to then weigh, with the assistance of the parties, the
factors identified by this court in Fitchik v. New Jersey Transit
Rail Operations, Inc., 873 F.2d 655 (3d Cir.) (in banc), cert.
denied, 493 U.S. 850 (1989), and Bolden v. Southeastern
Pennsylvania Transportation Authority, 953 F.2d 807 (3d Cir.
1991) (in banc), cert. denied, 504 U.S. 943 (1992).
13
The framework for addressing the question of whether
the Authority is a "person" within the meaning of § 1983 was
established by Will and the earlier case of Monell v. New York
City Department of Social Services, 436 U.S. 658 (1978). In
Monell, the Supreme Court overturned its earlier decision in
Monroe v. Pape, 365 U.S. 167 (1961), and held that municipalities
and other local government units are "persons" subject to
liability under § 1983. 436 U.S. at 690. However, the Court
limited its holding "to local government units not considered
part of the State for Eleventh Amendment purposes." Id. at 690
n.54.
In Will, the Court gave effect to the limitation
expressed in Monell. Relying on the ordinary meaning of the term
"person," the legislative history of § 1983, and federalism
concerns, the Court held that "neither a State nor its officials
acting in their official capacities are 'persons' under § 1983."
491 U.S. at 71. The Will Court emphasized the continuing
validity of Monell, however, and limited Will's holding "only to
States or governmental entities that are considered 'arms of the
State' for Eleventh Amendment purposes." Id. at 70.
The limitations that define the boundaries of the
holdings in Monell and Will establish that the most important
inquiry in determining whether a governmental entity is a
"person" within the meaning of § 1983 is whether the entity is an
"'arm[] of the State' for Eleventh Amendment purposes." Id.; see
also Monell, 463 U.S. at 690 n.54. In Fitchik v. New Jersey
Transit Rail Operations, Inc., this court summarized the factors
14
to be considered in analyzing an entity's status as an "arm of
the State" entitled to Eleventh Amendment immunity:
(1) Whether the money that would pay the judgment would
come from the state (this includes three ...
factors--whether payment would come from the
state's treasury, whether the agency has the
money to satisfy the judgment, and whether
the sovereign has immunized itself from
responsibility for the agency's debts);
(2) The status of the agency under state law (this
includes four factors--how state law treats
the agency generally, whether the entity is
separately incorporated, whether the agency
can sue or be sued in its own right, and
whether it is immune from state taxation);
and
(3) What degree of autonomy the agency has.
873 F.2d at 659 (summarizing more detailed list of factors set
forth in Urbano v. Board of Managers, 415 F.2d 247 (3d Cir.
1969), cert. denied, 397 U.S. 948 (1970)). See also Bolden, 953
F.2d at 814-16.
We have repeatedly held that the most important factor
in determining whether an entity is an "arm of the State" for
purposes of the Eleventh Amendment is "whether any judgment would
be paid from the state treasury." Fitchik, 873 F.2d at 659; see
also Christy v. Pennsylvania Turnpike Comm'n, 54 F.3d 1140, 1145
(3d Cir.), cert. denied, 116 S. Ct. 340 (1995); Bolden, 953 F.2d
at 818; Urbano, 415 F.2d at 251. According to Pennsylvania's
Municipal Authorities Act of 1945 (the "MAA"), under which the
Authority is organized, the Authority "shall have no power ... to
pledge the credit or taxing power of the Commonwealth of
Pennsylvania ..., nor shall any of its obligations be deemed to
be obligations of the Commonwealth ..., nor shall the
Commonwealth ... be liable for the payment of principal or
15
interest on such obligations." 53 P.S. § 306(C). The MAA also
grants the Authority the power "[t]o fix, alter, charge and
collect rates and other charges ... for the purpose of providing
for the payment of the expenses of the Authority, ... [and] the
payment of the principal and of interest on its obligations ...."
Id. § 306(B)(h). Because the Authority also has the power "[t]o
sue and be sued," id. § 306(B)(b), the "obligations" which the
Authority will pay from the funds collected through "rates and
other charges" presumably include judgments. Under these
provisions, it appears that the Authority's funding does not come
primarily from the State, and that any judgment against the
Authority would not be "paid from the state treasury." This
would weigh heavily against the Authority's being considered "an
arm of the State" for Eleventh Amendment purposes.
The second factor, the Authority's status under state
law, also appears to weigh against a finding that the Authority
is an "arm of the State," if less clearly. Like SEPTA, which we
held in Bolden is a “person” under § 1983, 953 F.2d at 820, the
Authority appears to exhibit some attributes not characteristic
of an arm of the State and other attributes that are associated
with the State. On the one hand, a municipal authority is "a
body politic and corporate," 53 P.S. § 302, with the power to sue
and be sued. Id. § 306(B)(b). In addition, municipal agencies
are not entitled to sovereign immunity from state tort actions
under 42 Pa. C.S.A. § 8521, but instead are "local agencies"
entitled only to governmental immunity under 42 Pa. C.S.A.
16
§ 8541. See Miller v. McKeesport Mun. Water Auth., 555 A.2d 790
(Pa. 1989); E-Z Parks, Inc. v. Larson, 498 A.2d 1364, 1369 (Pa.
Cmwlth. 1985), aff'd per curiam, 503 A.2d 931 (Pa. 1986).
On the other hand, municipal authorities have the power
of eminent domain, 53 P.S. §306(B)(l), and have been held to be
"agencies of the Commonwealth" independent from their
incorporating municipality and not governed by laws empowering
local municipalities. Whitemarsh Township Auth. v. Elwert, 196
A.2d 843, 845-46 (Pa. 1964); Forney v. State Ethics Comm'n, 425
A.2d 66, 68 (Pa. Cmwlth. 1981); Highland Sewer & Water Auth. v.
Engelbach, 220 A.2d 390, 392 (Pa. Super. 1966).
Like the first two, the third factor, the Authority’s
“degree of autonomy” from the state, seems to weigh against a
finding that the Authority is an “arm of the State.” The
provisions of the MAA afford the Authority a high degree of
autonomy from the Commonwealth of Pennsylvania. For example, the
members of the Board--which exercises all of the Authority's
powers--are appointed not by the State but by the governing body
of the City of Pittsburgh, the incorporating municipality. 53
P.S. § 309(A)(a). The Authority is granted "all powers necessary
or convenient" for carrying out its purposes, including, inter
alia, the power to sue and be sued, to purchase property, to make
by-laws, to appoint officers and define their duties, and to make
contracts. Id. § 306(B).
We have thus far discussed only the most significant
inquiry identified by Will and Monell, i.e., whether an entity is
an "arm of the State" for Eleventh Amendment purposes. Will also
17
relied on two additional factors in reaching the conclusion that
a State is not a "person" within the meaning of § 1983 -- (1)
"the language of Section 1983 and the meaning of the word
'person'" and (2) the fact that "states enjoyed sovereign
immunity from suit at common law, and ... Section 1983 was not
intended to override 'well established immunities or defenses
under common law.'" Bolden, 953 F.2d at 816. We note that
neither of these factors supports the district court's finding
that the Authority is not a "person" under § 1983.
First, although the term "person" in common usage does
not include the "sovereign," Will, 491 U.S. at 64, the term does
refer to "bodies corporate and politic," meaning "corporations,
both private and public (municipal)." Id. at 70. Because the
Authority is expressly identified under the MAA as a "body
politic and corporate," 53 P.S. § 302, and appears to be the sort
of "public corporation" that is included in the "common usage" of
the term "person," the linguistic rationale underlying Will's
exclusion of States from the "persons" suable under § 1983 does
not apply to the Authority.
Second, the Will Court also recognized that "in
enacting § 1983, Congress did not intend to override well-
established immunities under the common law." 491 U.S. at 67.
Therefore, because the sovereign immunity to which States are
entitled was a well-recognized principle of the common law at the
time § 1983 was enacted, the Court was unwilling to extend § 1983
liability to States. Id. The Authority, however, cannot claim
the same common law immunity from suit historically enjoyed by
18
States. In Owen v. City of Independence, 445 U.S. 622, 646
(1980), the Supreme Court noted that municipalities had lost
their entitlement to sovereign immunity by the end of the 19th
century. In addition, Pennsylvania courts have explicitly held
that local municipal authorities such as a public parking
authority and a local redevelopment authority are not entitled to
the sovereign immunity enjoyed by the Commonwealth. See, e.g.,
Trustees of Second Presbyterian Congregation v. Public Parking
Auth. of Pittsburgh, 119 A.2d 79 (Pa. 1956); Greer v.
Metropolitan Hosp., 341 A.2d 520, 528 (Pa.Super. 1975).
Therefore, treating the Authority as a "person" under § 1983
would not override any common law immunity to which the Authority
is entitled.
It would be premature to express an opinion on the
result that the required weighing process should produce. A
record must first be developed and the parties permitted to
comment upon it. We hold only that the Authority may be a person
within the meaning of § 1983 and that the district court erred in
ruling to the contrary on the present record.
B. The Equal Protection Claim
Having concluded that it was error to dismiss the
§ 1983 claims against the Authority on the ground that it is not
a "person," we now turn to Independent's equal protection claim.
It alleges that the Authority's MBE/WBE Utilization
Requirements, which were the asserted basis for the Authority's
rejection of Independent's bids for the Water Line Contract and
19
Grandview Avenue Project, discriminate against Independent and
its owners on the basis of race, sex, or national origin, thereby
violating their right to equal protection. The district court
dismissed the claim for lack of standing because it found that
Independent "fail[ed] to allege facts that establish a causal
relationship between the injury--its rejected bids--and the
challenged conduct--the minority utilization requirement." Op.
at 11. It reached this conclusion by focusing on those portions
of the complaint alleging that Independent had submitted bids in
compliance with the utilization requirements and that those bids
were rejected because of the Sirabella memorandum.
Standing is "an essential and unchanging part of the
case-or-controversy requirement of Article III" of the
Constitution. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560
(1992). In order to satisfy the standing requirement, a party
must demonstrate (1) an "injury in fact" which is both "concrete
and particularized" and "actual or imminent"; (2) a causal
relationship between the injury and the challenged conduct such
that the injury "fairly can be traced to the challenged action of
the defendant"; and (3) a likelihood that the injury will be
redressed by a favorable decision. Northeast Fla. Chapter of
Assoc'd Gen. Contractors of America v. City of Jacksonville, 508
U.S. 656, 663 (1993) (citations omitted). At this stage in the
proceeding, we look to the plaintiff's complaint to determine
whether these requirements for standing have been met.
20
In construing the plaintiff's complaint, we are of
course bound by the Federal Rules of Civil Procedure. Rule
8(e)(2) of those Rules provides that:
A party may set forth two or more statements of a claim
or defense alternatively or hypothetically,
either in one count or defense or in separate
counts or defenses. ... A party may also
state as many separate claims or defenses as
the party has, regardless of consistency ....
This Rule permits inconsistency in both legal and factual
allegations, see, e.g., Babcock & Wilcox Co. v. Parsons Corp.,
430 F.2d 531, 536 (8th Cir. 1970); Dugan v. Bell Telephone of
Pa., 876 F. Supp. 713, 722 (W.D. Pa. 1994); 5 Wright & Miller,
Federal Practice & Procedure § 1283, at 533 (1990), and has been
interpreted to mean that a court "may not construe [a
plaintiff's] first claim as an admission against another
alternative or inconsistent claim." Henry v. Daytop Village, 42
F.3d 89, 95 (2d Cir. 1994); Molsbergen v. United States, 757 F.2d
1016, 1019 (9th Cir.), cert. dismissed, 473 U.S. 934 (1985).
This is especially the case in circumstances in which proving the
plaintiff's alternative claims may require "complex inquiries
into the parties' intent." Henry, 42 F.3d at 95.
The district court here failed to afford Independent
the privilege of asserting alternative and inconsistent claims.
Independent's complaint alleges, inter alia, two inconsistent
claims: First, Independent claims that the Authority and the
City disqualified it from Authority work, per the instruction in
the Sirabella memorandum, in violation of the 1986 consent
decree. In connection with this claim, Independent claims that
21
the Authority's asserted reason for rejecting it's Water Line and
Grandview Avenue bids, i.e., the alleged failure to comply with
the MBE/WBE requirements, was a pretext intended to mask the
Authority's disqualification of Independent in a manner which
violated the consent decree. Alternatively, Independent asserts
that if the Authority in fact rejected its bids because
Independent failed to satisfy the MBE/WBE requirements, that
rejection was a violation of Independent's Fourteenth Amendment
right to equal protection. Thus, in accordance with Rule
8(e)(2), Independent's equal protection claim must be examined
independently of its contempt claim to determine whether
Independent has standing to pursue the claim.
Independent's equal protection claim does allege facts
satisfying all of the requirements of standing. The complaint
alleges an injury in fact (the rejection of Independent's bids);
causation (that the rejection resulted, according to the
Authority, from Independent's inability to meet satisfactorily
the Authority's MBE/WBE Utilization Requirements)7; and
7. The Authority argues that Independent's allegation that its
bids were rejected "ostensibly" because of its failure to satisfy
the MBE/WBE requirements does not constitute an "affirmative
allegation" that Independent was precluded from getting the
contracts because of the allegedly discriminatory requirements.
However, reading the complaint as a whole and clarifying any
ambiguities in Independent's favor, it is clear that Independent
"affirmatively alleged" that the Authority rejected Independent's
bids on the ground that Independent did not satisfy the MBE/WBE
requirements. In accordance with Rule 8(e)(2), if that ground
was a pretense for the Authority's impermissible disqualification
of Independent from the bidding process, Independent should be
allowed to pursue its civil contempt claim. On the other hand,
if failure to satisfy the MBE/WBE requirements was the actual
ground for the Authority's rejection of the bids, Independent
should be allowed to pursue its claim that rejection on such
grounds violates its right to equal protection.
22
redressability (that the injury can be remedied through the award
of the contracts or damages and an injunction against future
enforcement of the Utilization Requirements).
Turning from standing to the issue of whether
Independent has stated a claim on which relief could be granted,
we conclude that it has. Independent's complaint alleges that
the Authority has established MBE/WBE Utilization Requirements
which require that all bidders on certain contracts provide with
their bids a "utilization plan" that identifies the portion of
work under the contract that will be subcontracted to "certified"
minority- or women-owned firms. According to the complaint, bids
that do not meet the MBE/WBE utilization goals are rejected.
Finally, the complaint alleges that the MBE/WBE Utilization
Requirements were not established to remedy past discrimination
or passive participation in discrimination by the City or
Authority against minority- or women-owned construction
companies. These allegations support an equal protection claim
under City of Richmond v. J.A. Croson Co., 488 U.S. 468 (1989),
in which the Supreme Court held that a race-based MBE utilization
program was unconstitutional because it was not narrowly tailored
to remedy specific discrimination or "passive participation" in
discrimination by the enacting government unit.8 See also
8. The gender-based preference embodied in the Authority's
MBE/WBE Utilization Requirements will be reviewed under
"intermediate scrutiny" rather than under the "strict scrutiny"
applied to review of race-based preferences. See Contractors'
Ass'n of E. Pa. v. City of Phila., 6 F.3d 990, 1000-01 (3d Cir.
1993). Nonetheless, Independent should still be afforded the
opportunity to demonstrate the absence of "probative evidence in
support of" the gender-based aspect of the Authority's MBE/WBE
requirements, id. at 1010, because it has alleged that the
23
Contractors' Ass'n of E. Pa. v. City of Phila., 91 F.3d 586, 596
(3d Cir. 1996).9
C. The Due Process Claims
Independent further alleges that the Authority deprived
it of property without procedural or substantive due process when
it disqualified Independent and rejected its bids on the Water
Line Contract, the Grandview Avenue Project and the Sewer
Improvement Contract. The property interest of which it was
allegedly deprived was an interest in these contracts created by
Pennsylvania statutes requiring that public contracts be awarded
to the lowest responsible bidder. 73 P.S. § 1622; 53 P.S. § 312.
(..continued)
Authority adopted the utilization requirements without having
established any history of discrimination against either MBEs or
WBEs.
9. We decline to accept the Authority's invitation to affirm the
district court's dismissal of the equal protection claim on the
merits on the ground that the MBE/WBE policy is "facially valid."
The Authority claims that the MBE/WBE Statement that must be
submitted with each bid "itself does not require the use of
minority or women subcontractors but merely requests information
regarding the percentage of such subcontractors that the bidder
intends to use on the project," and thus "does not create a
discriminatory set-aside or quota program" but "serves merely to
identify and guard against discrimination." Appellees' Brief at
16-17 (emphasis added). We agree with Independent that this
assertion of the facial validity of the Authority's MBE/WBE
policy "is an argument on the merits inappropriate at the Rule
12(b)(6) motion to dismiss stage." Appellant's Reply Brief at
12. At this stage in the proceedings, particularly in light of
the Authority Resolutions that expressly rejected Independent's
Water Line and Grandview Avenue bids "for failure to meet the
MBE/WBE requirements," Auth. Res. 67 & 68, App. at 197-98
(emphasis added), "Independent's allegation that the [Authority]
rejects bids which do not meet the MBE/WBE goals must be taken as
true, and forecloses [the Authority's] assertion that they are
not requirements but merely informational." Appellant's Reply
Brief at 12 (citations omitted).
24
The remedies that Independent seeks are an injunction barring
the Authority from awarding the three contracts to anyone other
than Independent, an injunction barring the City and the
Authority from refusing to consider Independent a competent
bidder on future City contracts, and an award of compensatory and
punitive damages. We will affirm the district court's dismissal
of Independent's substantive and procedural due process claims,
albeit for a reason different from that given by the district
court.
The district court dismissed Independent's procedural
due process claim on the ground that Pennsylvania law provided a
post-deprivation remedy that afforded all the "due process"
required by the Fourteenth Amendment. According to the district
court, the post-deprivation remedy, of which Independent had
attempted to avail itself, consisted of "a judicial procedure for
unsuccessful bidders to challenge whether a local contracting
authority has violated a bidder's rights under the Municipal
Authority Act." Op. at 7-8. The district court apparently
reached this conclusion based on a statement in the Authority's
Motion to Dismiss that there was a pending state action between
the parties. On appeal, however, the parties agree that
Pennsylvania law in fact provides no such procedure.
Nonetheless, the Authority and the City argue that the district
court's dismissal of Independent's procedural due process claim
should be affirmed on the alternative ground that their actions
did not deprive Independent of any property interest protected by
the due process clause.
25
The Supreme Court outlined the parameters of the
Fourteenth Amendment’s procedural due process protection for
property interests in Board of Regents v. Roth, 408 U.S. 564
(1972). First, the Court emphasized that "[t]he requirements of
procedural due process apply only to the deprivation of interests
encompassed by the Fourteenth Amendment's protection of liberty
and property." Id. at 569. Second, the Court set forth the
rationale for affording procedural protection to those property
interests that are protected: "The Fourteenth Amendment's
procedural protection of property is a safeguard of the security
of interests that a person has already acquired in certain
benefits." Id. at 576 (emphasis added). Third, the Court
identified the attributes of the property interests protected by
procedural due process:
To have a property interest in a benefit, a person
clearly must have more than an abstract need
or desire for it. He must have more than a
unilateral expectation of it. He must,
instead, have a legitimate claim of
entitlement to it."
Id. at 577 (emphasis added). Finally, the Court identified the
sources to which courts should look to determine a plaintiff's
"entitlement" to a claimed property interest. Property
interests, the Court declared, "are created and their dimensions
are defined by existing rules or understandings that stem from an
independent source such as state law." Id.
According to the teachings of Roth, therefore,
Independent may not pursue its procedural due process claims
against the City and Authority unless “an independent source such
26
as state law” affords it a "legitimate claim of entitlement" to
be awarded a municipal contract for which it was the lowest
responsible bidder. Independent relies only on state competitive
bidding law as the "independent source" providing its "legitimate
claim of entitlement."10
Although Pennsylvania's competitive bidding statutes
require that public contracts be awarded to the lowest
responsible bidder, 53 P.S. § 312(A); 73 P.S. § 1622,
Pennsylvania courts have long held that such laws are for the
benefit of the public only and do not give a low bidder standing
to challenge a municipality's failure to award a contract in
accordance with the statute. See, e.g., R.S. Noonan, Inc. v.
School Dist. of York, 162 A.2d 623, 624-25 (Pa. 1960) (citing
Commonwealth ex rel. Snyder v. Mitchell, 82 Pa. 343 (1876)); J.P.
Mascaro & Sons, Inc. v. Township of Bristol, 505 A.2d 1071, 1074
(Pa. Cmwlth. 1986); see also ARA Servs., Inc. v. School District
of Phila., 590 F. Supp. 622, 629 (E.D. Pa. 1984) (“[T]he
existence of ... a property interest [in the award of a municipal
contract] cannot properly be derived from the regulations and
specifications governing the procurement process in light of the
Pennsylvania courts’ long and consistent refusal to recognize
10. At oral argument, Independent's counsel suggested for the
first time that paragraph 4 of the consent decree may have
created a property interest for Independent. This suggestion
mistakes a right to a particular process for a substantive right
in a contract. The right to a particular process does not alone
create a property interest. Olin v. Wakinekona, 461 U.S. 238,
250 (1983). Paragraph 4 gives Independent only a right to a
particular kind of hearing; it does not give Independent any more
legitimate expectation of receiving a contract than it has
without this portion of the consent decree.
27
such an interest.”). In R.S. Noonan, for example, the
Pennsylvania Supreme Court held that "a disappointed bidder ...
sustain[s] no personal injury which entitles him to redress in
court." 162 A.2d at 625. Statutes requiring the award of public
contracts to the lowest bidder exist solely for the benefit of
taxpayers, and only taxpayers suffer a legally cognizable injury
from a violation of the statute that entitles them to bring suit.
Thus, the statute bestows no legally enforceable right on a
bidder prior to the acceptance of its bid. Id.; see also Lutz
Appellate Printers, Inc. v. Commonwealth of Pa., 370 A.2d 1210
(Pa. 1977); Highland Express Lines v. Winter, 200 A.2d 300, 303
(Pa. 1964); Regional Scaffolding & Hoisting Co. v. City of
Phila., 593 F. Supp. 529, 534 (E.D. Pa. 1984) ("The competitive
bidding procedures are designed to protect the taxpayers from the
wasteful or fraudulent expenditure of public funds, and create no
rights in 'disappointed bidders' who are not also taxpayers.").11
11. Although the Pennsylvania Supreme Court has dealt only with
challenges brought under the bidding statutes themselves, the
Pennsylvania Commonwealth Court recently directly addressed the
issue of the applicability of the R.S. Noonan standing principle
to a due process challenge to the rejection of a low bid. J.P.
Mascaro & Sons, Inc. v. Township of Bristol, 505 A.2d 1071 (Pa.
Cmwlth. 1986). There, the court concluded that a disappointed
bidder "has no standing to assert violations of its due process
rights under either the federal or state constitutions as it has
no legitimate claim of entitlement to the [municipality's]
contract." Id. at 1074. The United States District Court for
the Eastern District of Pennsylvania reached the same conclusion
in ARA Servs. Inc. v. School District of Phila., 590 F. Supp.
622, 629 (E.D. Pa. 1984), and J.P. Mascaro & Sons, Inc. v.
Township of Bristol, 497 F. Supp. 625, 627 (E.D. Pa. 1980). A
line of cases from the Western District of Pennsylvania reached a
contrary conclusion. E.g., Teleprompter of Erie, Inc. v. City of
Erie, 537 F. Supp. 6, 10-11 (W.D. Pa. 1981) and 567 F. Supp.
1277, 1289 (W.D. Pa. 1983); Three Rivers Cablevision, Inc. v.
28
These Pennsylvania cases demonstrate that one who bids
on a public contract has no legitimate expectation of receiving
it until the contract is actually awarded. See Highway Express
Lines v. Winter, 200 A.2d 300, 303 (Pa. 1964) (“By their bid [the
unsuccessful bidders] proposed to contract for certain work; that
bid was not accepted. It was a mere proposal that bound neither
party, and as it was never consummated by a contract, the city
acquired no right against the [bidders] nor they against the
city.”). Since Independent's bids were never accepted, it never
acquired an enforceable right with respect to the contract being
awarded. It, therefore, has not been deprived of a property
interest that warrants procedural due process protection.
As Independent stresses, the law of this circuit
recognizes that “an entitlement may exist for a benefit sought
but not yet obtained if state law limits the exercise of
discretion by the state official responsible for conferring the
benefit.” Midnight Sessions, Ltd. v. City of Phila., 945 F.2d
667, 679 (3d Cir. 1991) (citing Winsett v. McGinnes, 617 F.2d
996, 1007 (3d Cir. 1980) (in banc), cert. denied, 449 U.S. 1093
(1981)). Relying on this authority, Independent urges that the
limitations placed on the Authority’s discretion by the
competitive bidding laws rendered Independent “entitled” to
receive the contracts for which it was the low bidder as soon as
it submitted its low bids and the Authority decided to award the
contracts. Midnight Sessions and Winsett are inapposite here,
(..continued)
City of Pittsburgh, 502 F. Supp. 1118, 1131 (W.D. Pa. 1980). We
find the reasoning of this line unpersuasive.
29
however. Midnight Sessions involved the deprivation of a portion
of a property owner's interest in the use of his real property.
Winsett involved prison regulations that mandated work release
for an inmate when he satisfied certain criteria. We held that
state regulations conferred on the inmate a legally enforceable
right to work release. As a result, the inmate had a liberty
interest that warranted due process protection. Here, however,
under Pennsylvania law Independent clearly had no legally
enforceable interest in receiving the contracts and thus had no
"entitlement" to the benefit sought.
Finally, we turn to Independent's substantive due
process claim. Although the Third Circuit has recognized that a
governmental deprivation that comports with procedural due
process may still give rise to a substantive due process claim
“upon allegations that the government deliberately and
arbitrarily abused its power,” Midnight Sessions, 945 F.2d at 683
(citing Bello v. Walker, 840 F.2d 1124, 1129-30 (3d Cir.), cert.
denied, 488 U.S. 851, and cert. denied, 488 U.S. 868 (1988)), we
have also held that a substantive due process claim grounded in
an arbitrary exercise of governmental authority may be maintained
only where the plaintiff has been deprived of a “particular
quality of property interest.” DeBlasio v. Zoning Bd. of
Adjustment, 53 F.3d 592, 600 (3d Cir. 1993); see also Homar v.
Gilbert, 89 F.3d 1009, 1021 (3d Cir. 1996); Reich v. Beharry, 883
F.2d 239, 244 (3d Cir. 1989) (“[I]n this circuit at least, not
all property interests worthy of procedural due process
protection are protected by the concept of substantive due
30
process.”).12 Although our court has suggested that only
fundamental property interests are worthy of substantive due
process protection, DeBlasio, 53 F.3d at 599, it has provided
little additional guidance regarding what specific property
interests should receive substantive due process protection:
We have held that “ownership is a property interest
worthy of substantive due process
protection,” [DeBlasio, 53 F.3d at 600], but
we have found that neither interest in prompt
receipt of payment for professional services
12. Although Bello and Midnight Sessions both contained
language indicating that substantive due process is violated
whenever a governmental entity deliberately or arbitrarily abuses
government power by, for example, taking actions that are
motivated by bias, bad faith, or partisan or personal motives
unrelated to the merits of the matter before it, Midnight
Sessions, 945 F.2d at 683; Bello, 840 F.2d at 1129; see also
Blanche Rd. Corp. v. Bensalem Township, 57 F.3d 253, 267-68 (3d
Cir.), cert. denied, 116 S. Ct. 303 (1995); Neiderhiser v.
Borough of Berwick, 840 F.2d 213, 217 (3d Cir.), cert. denied,
488 U.S. 822 (1988), we do not read the cases to stand for that
broad principle. The court in Midnight Sessions expressly stated
that it was assuming, without deciding, that the plaintiffs were
entitled to substantive due process in the consideration of their
applications for dance hall licenses. 945 F.2d at 682 n.11.
Moreover, all of the cases involved zoning decisions, building
permits, or other governmental permission required for some
intended use of land owned by the plaintiffs, matters which were
recognized in DeBlasio as implicating the “fundamental” property
interest in the ownership of land. 53 F.3d at 600. Thus, in
light of the court’s explicit statement in DeBlasio that some
"particular quality of property interest" must be infringed
before substantive due process protection may be invoked, id. at
600, these cases cannot be understood as affording substantive
due process protection from every arbitrary and irrational
governmental act, but only for those that deprive the plaintiff
of a fundamental property right "implicitly protected by the
Constitution." Id. at 599; see also Blanche Rd., 57 F.3d at 268
(plaintiffs stated a substantive due process claim because they
claimed that defendants "acted deliberately and under color of
state law to deprive them of their property rights by interfering
in and delaying the issuance of permits") (emphasis added);
Neiderhiser, 840 F.2d at 218 ("[I]f [plaintiff] can successfully
demonstrate that the [town] arbitrarily and irrationally denied
the [zoning] exemption, visiting a constitutional deprivation on
[plaintiff], then [plaintiff] may prevail on its due process
claim.") (emphasis added).
31
provided to the state, Reich, 883 F.2d at
244-45, nor state law entitlement to water
and sewer services, Ransom v. Marrazzo, 848
F.2d 398, 411-12 (3d Cir. 1988), are the
“certain quality” of property interest worthy
of substantive due process protection. We
have also strongly suggested in dictum that a
student’s right to continued enrollment in a
graduate program does not rise to such a
level on the ground that such an interest
bears “‘little resemblance to the fundamental
interests that previously have been viewed as
implicitly protected by the Constitution.’”
Mauriello v. Univ. of Med. & Dentistry of
N.J., 781 F.2d 46, 40 (3d Cir. 1986) (quoting
Regents of Univ. of Michigan v. Ewing, 474
U.S. 214, 229-30 (Powell, J., concurring).
Homar, 89 F.3d at 1021.
We will leave for another day definition of the precise
contours of the “particular quality of property interest”
entitled to substantive due process protection. We have no
difficulty in concluding that the property interest alleged to
have been infringed here, which we have concluded is not entitled
to procedural due process protection, is not the sort of
“fundamental” interest entitled to the protection of substantive
due process. Accordingly, we conclude that Independent has
failed to state either a procedural due process claim or a
substantive due process claim upon which relief can be granted.
IV. Conclusion
We will reverse the judgment of the district court and
remand for further proceedings consistent with this opinion.
32