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United States District Court, Northern District of Illinois, E.D

January 26, 1984


The opinion of the court was delivered by: Shadur, District Judge.


Chester Folak ("Folak") filed a Complaint and then a First Amedended Complaint (for convenience the latter will be termed the "Complaint") asserting one of the classic causes of action under 42 U.S.C. § 1983 ("Section 1983"): Folak alleged his employers (Sheriff's Office of Cook County*fn1 and Sheriff Richard J. Elrod (collectively "Elrod")), in firing him as a Deputy Sheriff, deprived him of a property interest in public employment without a hearing. Elrod has filed a non-classic response: a 50-page factual stipulation by Folak, publicly filed in the criminal case United States v. Folak, No. 82 CR 467 (N.D.Ill. Nov. 1, 1983), in which Folak admitted to facts underlying numerous counts of alledged mail fraud (18 U.S.C. § 1341) and extortion (18 U.S.C. § 1951) perpetrated in the course of his employment.

In light of Folak's stipulation Elrod offers two motions:

    1. one under Fed.R.Civ.P. ("Rule") 12(b)(6) for the
  Complaint's dismissal for failure to state a claim
  upon which relief can be granted;*fn2 and

    2. the other under (a) Rule 11 or (b) the bad faith
  exception to the American Rule Or (c) 28 U.S.C. § 1927
  ("Section 1927") or a combination of them for
  imposition of attorneys' fees and other sanctions on
  Folak and his attorney Jeffrey B. Steinback
  ("Steinback") for bringing this action vexatiously,
  unreasonably and in bad faith.

Despite Elrod's indignation at being haled into court by a former employee who has admitted offical malfeasance, he has not established the bad faith of either Folak or Steinback. Through Elrod ultimately prevails on his motion to dismiss, his sanctions motion is denied.


Folak was a Cook County Deputy Sheriff from 1971 to March 1983, when he was fired without written notice or a statement of reasons for his termination. Elrod's failure to afford Folak procedural safeguards before termination was allegedly in contravention of Elrod's commitment, voluntarily undertaken in General Order 7000 of the Court Services Department (the "Order"),*fn4 to provide Folak notice and a hearing on the reasons for termination. Elrod's position, that the Order's language establishes as a matter of law its inapplicability to Folak's termination, is considered below in the discussion of controlling legal principles.

Folak was indicted July 6, 1982 on numerous counts of mail fraud and extortion. On February 28, 1983 he stipulated to the facts underlying the indictment. Elrod dismissed him from his job the following month. Judge McMillen later tried Folak and his co-defendants via a "stipulated bench trial" (based solely on the facts agreed upon in the stipulation, without presentation of other evidence). Folak's defense was that the facts as stipulated did not constitute federal offenses. Judge McMillen's November 1, 1983 decision credited Folak's defense on 11 counts but convicted him on the remaining 28.

Because Folak was not convicted until after he had been fired, Elrod's argument for the propriety of the firing is based not on the conviction but on the stipulation. That stipulation undeniably constitutes good cause for dismissal. For example, describing the stipulated facts regarding two of the counts on which Folak was found guilty,*fn5 Judge McMillen wrote (slip op. at 30-31):

  Counts Thirty Nine and Forty involve a seizure warrant
  of the Department of Revenue against the William Tell
  II, Inc. for $106,772.72, assigned to defendant
  Folak. Defendant [Hyman] Schmidt went to the premises
  on July 30, 1980, and the owner Louis Patras told
  Schmidt that he intended to make a partial payment of
  $25,000 to the Department of Revenue that day. Schmidt
  suggested that they make their own deal, and defendant
  Folak then came to the premises. Folak and Schmidt
  advised Patras to change the name of the corporation
  and give them a $10,000 check payable to Gebel
  Liquidators and $5,000 in cash.

  No arm's length sale or auction was held, the warrant
  was not in fact executed, and the restaurant continued
  in operation under its original name during the entire
  period. No remittance was made of the $5,000 cash
  which was paid by Patras to the two defendants and to

Property Interest in Continued Employment

Folak disavows any assertion he has been deprived of a liberty interest.*fn6 Instead he contends the Order, entitled "Complaint and Disciplinary Procedures," conferred on him a property, in the interest in his continued employment in the Court Services Department — an intererest that could be taken away only by following the procedures outlined in the Order. Certainly the Order provides at least a foundation for the proposition Folak had a property interest in continued employment. If the phrase "complaints and disciplinary actions" is defined to include Folak's dismissal, Order ¶ II would support the existence of that property interest:

  II. PURPOSE. This order sets forth procedures for
      handling complaints and disciplinary actions
      against members of the Court Services Department
      and sets forth an Appeal Procedure for the accused

Moreover the Order may at least arguably be considered one of the "rules or understandings that secure certain benefits and that support claims of entitlement to those benefits" (Board of Regents v. Roth, 408 U.S. 564, 577, 92 S.Ct. 2701, 2709, 33 L.E.2d 548 (1972)), and therefore capable of conferring a property interest under Section 1983 and the Due Process Clause.

Elrod sums up his contrary position on the property interest issue this way (R.Mem. 2):

  General Order 7000 defines procedures for
  investigation of complaints and resulting discipline,
  one form of which may be termination. The procedure
  does not purport to govern all terminations, is not
  stated to be a right of all terminated deputies, and
  creates no property interest in employment.

Again that contention is a tenable one. It is not certain that the Order must be followed for all terminations. Resolution of that question — giving definitive content to the phrase "complaints and disciplinary actions" — requires more than a bare reading of those words: perhaps extrinsic evidence as to the scope of the Order*fn7 or considerations of state law not yet submitted by the parties. On the latter score, compare the Order with the ordinances permitting dismissal from public employment in Bishop v. Wood, 426 U.S. 341, 344 n. 5, 96 S.Ct. 2074, 2077 n. 5, 48 L.Ed.2d 684 (1976) and Brockert v. Skornicka, 711 F.2d 1376, 1383-84 (7th Cir. 1983) (the District Court's opinion, adopted and reprinted by the Court of Appeals).

Consequently at this threshold pleading stage this Court has not been afforded enough input to give a final reading. It suffices for present purposes to say (as is clearly true) Folak might establish facts showing he had a property interest in continued employment.

What Process Is Due

At this stage it must also be assumed for argument's sake that Elrod did not follow the procedures set forth in the Order. Folak urges such a failure, combined with his alleged property interest in continued employment, constitutes deprivation of procedural due process in support of his Section 1983 claim. But that position fundamentally misconstrues the nature of such rights under the Due Process Clause.

Assurances like the Order, promising continued benefits from the governmental employer until terminated under specified procedures, support claims of property interest — but they are not conclusive as to what process is due. Bishop, 426 U.S. at 344-47, 96 S.Ct. at 2077-79; Roth, 408 U.S. at 577-78, 92 S.Ct. at 2709-10. Failure to follow prescribed procedures does not always equate with deprivation of the property interest without due process. Rather, as summarized in Mathews v. Eldridge, 424 U.S. 319, 335, 96 S.Ct. 893, 903, 47 L.Ed.2d 18 (1976), what process is due depends on (1) the private interest affected, (2) the risk of an erroneous determination both under the challenged governmental course of action and under a system using additional procedural safeguards and (3) the government's interest in following the challenged course of action.

Two recent cases from our own Court of Appeals establish Folak in fact received all the process he was due. Though they speak to different issues, they point to the same result.

First, in Brockert (711 F.2d at 1386) further hearings on an employee's termination were held to serve no useful purpose because he conceded the facts the hearing would be required to prove. In our case Folak stipulated to many more instances of misconduct than would be required to justify his dismissal. To force a formal hearing, with its preordained conclusion, would serve only to waste Elrod's limited resources to no constructive end.*fn8 Any Mathews v. Eldridge balancing on the question whether further process is due must tip in Elrod's favor.

Second, Simmons v. Drew, 716 F.2d 1160 (7th Cir. 1983) holds a judicial determination can take the place of an administrative proceeding. There a public housing authority ("PHA") expelled plaintiff without a hearing for sharing her apartment with too many people, but a state court had already evicted her from her apartment for the same reason. Our Court of Appeals wrote (id. at 1168):

  Since there is no reason to suppose that the Milwaukee
  PHA is in a better position than a court to determine
  how many people are living together under one roof or
  that Williams was prevented from presenting fully to
  the court her version of the facts, the Milwaukee PHA
  was not constitutionally required to afford her a
  second hearing before or after it decided to expel

True enough, the Simmons defendants relied on a final judicial determination, while Folak was dismissed in the midst of the proceedings against him. But Folak did stipulate to his own wrongful conduct, choosing to urge only that conduct was not a federal offense. Judge McMillen ultimately rejected Folak's position, but even if he had not (or if Folak's conviction is some day reversed on appeal), the stipulation would still establish Folak's wrongdoing. Once again the issue would be restricted to that discussed at n. 8.

In a nearly identical case recently decided by this Court's colleague Judge Moran, Greene v. Finley, No. 82 C 7037 (N.D.Ill. Oct. 5, 1983), an employee's conviction of conspiracy to violate the Hobbs Act had actually been reversed on appeal. Because the grounds for reversal did not implicate the truth of the finding that the employee had committed malfeasance in the course of his public employment, Judge Moran found the employee had received all the process he was due slip op. at 2-3):

  Plaintiff was convicted in a bench trial before Judge
  Bernard Decker of conspiracy to violate the Hobbs
  Act. In that trial the plaintiff, then defendant, had
  of course the full rights accorded defendants in a
  federal criminal proceeding. The government's burden
  of proof was proof beyond a reasonable doubt. Greene
  was represented by counsel and had a full opportunity
  to cross-examine and make his own defense. On appeal,
  the Court of Appeals reversed solely because the
  extortion did not sufficiently impact interstate
  commerce. It stated, however, that the "relevant facts
  unfolded at trial virtually without dispute or
  contradiction. . . ." United States v. Mattson,
  671 F.2d 1020, 1021 (7th Cir. 1982). The statement of
  facts in that

  opinion disclose that Greene was directly involved in
  extorting money from an electrician in return for us n
  his presumed influence to get the electrician a
  supervisor's license.

  Whether or not Greene had a property entitlement or,
  more likely, a liberty entitlement because his
  suspension and discharge were for reasons reflecting
  upon his honesty and integrity, it cannot be disputed
  that the conduct established at his criminal trial
  were reasons, indeed compelling reasons, for his
  suspension and discharge. That trial, with due process
  safeguards and an opportunity to be heard well beyond
  the procedural due process plaintiff now claims,
  provided ample cause for both the suspension and
  discharge. We live in a real world. Plaintiff cannot
  complain when the justification for his suspension and
  his discharge was conclusively established in the
  fullest of due process hearings, a criminal trial, and
  the defendants can hardly be faulted, when taking
  final action, in relying upon the results of that
  hearing. See McElwee v. Todd, 581 F.2d 1182 (5th Cir.
  1978), Simmons v. Drew, [716 F.2d 1160 (7th Cir

Folak cites Jessen v. Village of Lyndon Station, 519 F. Supp. 1183 (W.D.Wis. 1981) for the proposition a judicial determination cannot substitute for an administrative hearing by the firing entity. There an employee did obtain an injunction and the right to a hearing even though a state court had previously ordered him terminated as Lyndon Station police chief. But Folak chooses to ignore the vital differences: Jessen had not been a party to the state judicial proceedings (in fact he was denied the right to intervene in that case), and he did not concede the grounds on which the state court relied were adequate to justify his dismissal.*fn9

In summary, it cannot be determined at this early stage whether Folak had a property interest in his continued employment. In any event, however, it has been established — on Folak's own terms — he cannot demonstrate he did not receive all the process that was due him.

Motion for Sanctions

Elrod seeks sanctions against Folak and Steinback under Rule 11, the bad faith exception to the American Rule and Section 1927. Essentially he points to the absence of merit in this lawsuit, from which he invites this Court to infer Folak and Steinback are in had faith.*fn10 There is authority suggesting an obvious lack of merit, even without a finding of subjective bad faith, may support an attorneys' fees award under the had faith exception or Section 1927. See McCandless v. Great Atlantic & Pacific Tea Co., 697 F.2d 198, 200-01 & n. 4 (7th Cir. 1983). Whatever the test, though, a key to the result is a determination that the legal insufficiency of the Complaint is obvious.

Elrod argues such obviousness by stating (R. Mem. 9):

  Plaintiff has absolutely no right to a hearing, and no
  basis for belief that one would serve any useful
  purpose, even if he had such a right.

As the initial discussion in this opinion makes plain, Folak's "right to a hearing" vel non is not plain at this stage. Thus Elrod's first point has not been established and cannot underpin sanctions. Elrod's second point, that a hearing would have no "useful purpose," deserves closer examination.

Of course neither Folak nor Steinback could have thought a hearing would be "useful" in terms of its ultimate outcome. That proposition however does not bear a one-to-one correlation to an obvious lack of any legal merit in Folak's claim. On that score the question is a different one: whether Folak or Steinback should have known the futility of a hearing would necessarily lead to the claim's dismissal.

That more refined question has been illuminated by Brockert, Simmons and Greene — three 1983 cases. No definitive solution had been provided in earlier cases. And it is ironic that Elrod himself — the proponent of the obviousness argument — cited none of those three cases until he filed an unsolicited Sur-reply Memorandum, to which he attached a copy of Greene (which in turn had cited Simmons but not Brockert). Steinback on the other hand did cite Jessen, albeit in a belated responsive memorandum. At the risk of repetition, the key to untangling the issues of this case is to realize the procedures outlined in the Order may create a property interest, but they do not establish what process is due. That analysis owes nothing to the parties, and the other side of the same coin is that the assertion of Folak's claim (only to be defeated by that analysis) cannot support a bad faith fee award against either Folak or Steinback.

Elrod also claims both the Complaint and Folak's original Complaint contain statements known to Steinback to be false, in violation of Rule 11. Paragraph 11 of the original Complaint may fairly be viewed as disingenuous:

  Plaintiff's employment with the Sheriff's Office of
  Cook County was not terminated for cause, that is, was
  terminated without justification.

The current Complaint ¶ 1 is perhaps less troublesome in that respect:

  This is an action for injunctive relief and damages on
  behalf of Plaintiff, formerly a deputy sheriff with
  the Sheriff's Office of Cook County, Illinois, who was
  summarily fired without cause in violation of the
  Constitution and laws of the United States.

Steinback argues the filing of the Complaint before interposition of a responsive pleading means this Court may ignore the original Complaint's allegations. That concept, developed for wholly different purposes,
*fn11 has no bearing whatever on the Rule 11 question whether counsel has played square with the court.

Nonetheless Rule 11 sanctions may be severe and should not be imposed lightly. This Court supposes it is arguable the pleading references to "without cause" or "without justification" could have been aimed at the alleged procedural flaws in the firing, rather than at the lack of substantive grounds. Certainly Steinback would not have expected to get away with the latter kind of bald misstatement (a factor that bears on whether such a deliberate misstatement was likely made). When the issue was posed by defendants' motion (as was to be expected), Steinback and Folak did not actively or obstinately deny Folak had indeed been fired for good cause in the substantive sense. This Court will not impute the requisite bad motives to Steinback.


Elrod's motion to dismiss is well founded. Moreover it is plain from the parties' submissions that Folak cannot cure the fatal flaw in his due-process-grounded claim. In the alternative terms available to this Court (see n. 2), there is no genuine issue of material fact and Elrod is entitled to a judgment as a matter of law. This action is dismissed with prejudice. Elrod's motion for sanctions is denied.

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