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KUFALK v. HART
March 18, 1985
ROBERT L. KUFALK, PLAINTIFF,
DONALD W. HART, FRED W. KRAISS, RICHARD F.KUNNERT, PATRICIA A. MCGRAIL, RANDALL J. MANUS, STEVEN L. NORDQUIST, ANNE M. BRANNON, MICHAEL C. SABO, BEATRICE PRESTON, AND BARBARA OLSON SCHOOL OF HOPE, DEFENDANTS.
The opinion of the court was delivered by: Roszkowski, District Judge.
Before the court are defendants' motions to dismiss. The
court's subject matter jurisdiction is asserted to rest upon
28 U.S.C. § 1343 (1982) and 42 U.S.C. § 1983 (1982). For the
reasons set forth herein, defendants' motions are denied.
Plaintiff's complaint alleges a violation of § 1983 and also
alleges pendent state tort and contract actions. For purposes
of the present motions, the facts alleged in the plaintiff's
complaint must be accepted as true. The relevant factual
allegations are essentially as follows.
Plaintiff, Robert L. Kufalk, was employed as executive
director of the defendant, Barbara Olson School of Hope
("School of Hope"), from September 2, 1974 until June 9, 1983.
The defendant, School of Hope, is a not-for-profit corporation
providing day training, work activity programs and sheltered
workshop programs for developmentally disabled adult clients.
At least since 1974, a "major portion" of the operating funds
of the defendant, School of Hope, have been provided by the
Illinois Department of Mental Health and Developmental
Disabilities ("DMH"). These funds are provided for the purpose
of affording education, training and supervision for
developmentally disabled wards of the state.
As a result of his criticisms, plaintiff alleges he became
the object of a conspiracy to injure him in his employment and
to deprive him of rights secured by the First, Fifth and
Fourteenth Amendments. The paticipants in the alleged
conspiracy included defendants, Hart, Kraiss and Kunnert,
along with defendants, Patricia A. McGrail and Randall J.
Manus, employees of the Illinois Guardianship and Advocacy
Commission (collectively referred to as "the state
defendants"). The state defendants allegedly conspired with
the defendant, School of Hope, and with defendants, Steven L.
Nordquist, Anne M. Brannon and Michael C. Sabo, officers and
directors of the School of Hope, and Beatrice Preston, a
member of the School of Hope's education Committee
(collectively referred to as the "Hope defendants").
According to the allegations in the complaint, in June 1982,
the state defendants issued findings based upon an
investigation of the defendant, School of Hope. Those findings
disclosed that over one hundred confirmed reports of physical
injuries to clients "resulting from accident or abuse had been
made since January, 1982." The tone of the report was critical
of the plaintiff's personnel policies and of the
administration's failure to agree on the issues. Plaintiff
alleges various reasons why the state defendants "knew or
should have known upon reasonable inquiry that said findings
were false, misleading, and pretextual."
On April 22, 1983, plaintiff alleges the state defendants
caused a letter to be sent to the defendant, School of Hope's,
Board of Directors referring to him as the "administration"
and charging him with a "lack of cooperation",
"defensiveness", and an incorrect "behavioral attitude"
concerning the issue of client abuse. In addition, the letter
allegedly stated that recommended policy and procedural
changes could not be successfully implemented "until the
attitude and philosophy of the administration changes to
provide a more appropriate treatment environment within the
agency." Plaintiff again alleges various reasons why state
defendants, Manus and McGrail, the authors of the letter,
"knew or should have known upon reasonable inquiry that the
statements concerning plaintiff in the said letter of April
22, 1983, were false, misleading, and pretextual."
On or about April 29, 1983, defendant, Hart, allegedly
notified defendant, Nordquist, then president of the School of
Hope's Board of Directors, that DMH funding would be held up
pending resolution of "serious issues". Without citing any
specific provisions, plaintiff alleges there "were no issues
justifying withholding the funding under the law or
constitution of the State of Illinois." Plaintiff alleges the
"alleged issues were merely pretextual reasons to pressure
plaintiff's employer to punish plaintiff for his expression of
his opinions in disagreement with those of the [state
On May 19, 1983, certain of the state defendants met with
certain of the Hope defendants to discuss the withholding of
DMH funds. At that meeting, plaintiff alleges that state
defendants, Hart, Kraiss and Kunnert, "made certain false,
misleading, and pretextual statements concerning the
withholding of funding . . . and concerning plaintiff's
suitability as executive director" Specifically, plaintiff
alleges state defendant, Kraiss, expressed dissatisfaction
"with how $20,000 of a prior state appropriation had been
spent by plaintiff." Once again, citing various reasons,
plaintiff alleges the state defendants "knew or should have
known upon reasonable inquiry that said statements of May 19,
1983 were false, misleading and pretextual."
On May 20, 1983, at a Board of Directors meeting, plaintiff
alleges Hope defendants, Nordquist and Preston, "acting in
concert with [the state defendants] and in furtherance of
their plan to interfere with plaintiff's employment, made
certain false, misleading and pretextual statements"
concerning the events transpiring at the May 19, 1983 meeting.
Specifically, plaintiff alleges defendant, Preston, stated the
plaintiff "had misused $20,000 of funds received under a
contract with [the state]." Plaintiff alleges the Hope
defendants "knew or should have known upon reasonable inquiry
that their said statements of May 20, 1983 were false,
misleading and pretextual."
On or about May 28, 1983, plaintiff alleges an ad hoc meeting
of the defendant, School of Hope's, Board of Directors was held
to investigate the withholding of funds. At the meeting, the
plaintiff alleges the state defendants "repeated and added to
the earlier, false, misleading and pretextual statements
concerning the plaintiff." Plaintiff alleges the state
defendants' statements were intended to convince the Directors
that DMH funds "would not be released unless plaintiff [was]
fired from his position with [the] defendant, [School of
On June 8, 1983, plaintiff alleges that similiar statements
were made by state defendants, Manus and McGrail, at another
special meeting of the Board of Directors. Earlier that day,
plaintiff alleges Hope defendants, Nordquist, Brannon and
Sabo, had asked the plaintiff for the documents he had
prepared in response to the DMH demands and had been shown
"that the documents were complete, or virtually complete." At
the special meeting, however, plaintiff alleges those same
Hope defendants, "failed to disclose and concealed that
plaintiff had completed the tasks requested [by DMH] . . .
although [state] defendant[s] Manus and McGrail then and there
charged that plaintiff had failed to carry out those tasks."
As a result, plaintiff alleges the Board of Directors voted to
give the plaintiff the "option" to voluntarily resign or be
terminated. On June 9, 1983, plaintiff resigned.
Defendants initially move for dismissal contending the
plaintiff has failed to allege a sufficient nexus between his
constructive discharge and any "state action." Section 1983
prohibits persons acting under "color of" state law from
depriving any person of any rights, privileges or immunities
secured by the Constitution or federal law; it does not,
however, prohibit wholly private deprivations of
Constitutional rights. See Loyd v. Loyd, 731 F.2d 393, 398 (7th
The state defendants argue there is not a sufficient nexus
between the plaintiff's forced resignation and their actions
to invoke § 1983. The state defendants contend the decision to
force the plaintiff's resignation was a wholly private one.
Thus, despite the state's funding and regulation of the School
of Hope, the state defendants contend Blum v. Yaretsky,
457 U.S. 991, 102 S.Ct. 2777, 73 L.Ed.2d 534 (1982) bars the
In Blum, a class of state medicaid patients brought an action
complaining of nursing home transfers and discharges without
notice or an opportunity for hearing. 102 S.Ct. at 2780. While
the class members conceded the transfer and discharge decisions
originated with the private nursing homes, they attempted to
hold the state regulating officials liable for the private
nursing homes' decisions. 102 S.Ct. at 2785. Despite the
state's funding and regulation of the Medicaid program,
however, the Court held there was no state action sufficient to
invoke § 1983.
While the Court in Blum held that mere approval of, or
acquiescence in, the actions of private parties is insufficient
to constitute state action, it was also recognized that a state
can be held liable for an ostensibly private decision where "it
has exercised coercive power or has provided such encouragement
either overt or covert, that the choice in law must be deemed
to be that of the state." 102 S.Ct. at 2786. In the view of
this court, the plaintiff's complaint alleges sufficient facts
to fall within the cited exception. Plaintiff alleges far more
than mere acquiescence by the state defendants in a private,
unilateral decision to terminate his employment. Rather,
plaintiff alleges the state defendants "pressure[d] plaintiff's
employer to punish plaintiff for his expression of his
opinions" Moreover, plaintiff alleges various facts, including
the withholding of funds, that indicate the exercise of
coercive power by the state defendants. Thus, in the view of
this court, the plaintiff has adequately alleged the state
defendants acted under "color of" state law.
Similarly, the Hope defendants contend they did not act
under "color of" state law so as to be liable under § 1983.
Plaintiff, on the other hand, contends the Hope defendants
acted under "color of" state law because: (1) the defendant,
School of Hope, is largely state funded, (2) the defendant,
School of Hope, fulfills a traditional state function, and (3)
the Hope defendants acted in concert with the state defendants.
In Rendell-Baker v. Kohn, 457 U.S. 830, 102 S.Ct. 2764, 73
L.Ed.2d 418 (1982), the Court was asked to decide whether a
private school, whose income was derived primarily from public
sources and which was regulated by public authorities, acted
under color of state law when it discharged certain employees.
102 S.Ct. at 2766. The private school in Rendell-Baker
specialized in dealing with students who had experienced
difficulty completing public high school because of drug,
alcohol, behavioral problems, or other special needs. 102 S.Ct.
at 2767. Nearly all of the school's students were referred
directly by public agencies which paid their full tuition. Id.
Indeed, between 90 and 99 percent of the school's operating
budget was provided by the state, and the school was subject to
detailed state regulation. Id.
The plaintiffs in Rendell-Baker alleged the school's
officials had violated 42 U.S.C. § 1983 by discharging them
because of their exercise of their First Amendment right of
free speech. 102 S.Ct. at 2769. In addition, the plaintiffs
alleged the school violated § 1983 by discharging them without
the process due them under the Fourteenth Amendment. Id. The
Court dismissed the plaintiffs' actions concluding the school's
relationship with the state was not sufficient to satisfy the
"color of" state law requirement of § 1983.
In the view of this court, Rendell-Baker is fully applicable
to the present case. In the instant case, plaintiff merely
alleges a "major portion" of the operating funds of the
defendant, School of Hope, are provided by the state. Even if a
"major portion" is equivalent to 99 percent, Rendell-Baker
makes clear that such funding, standing alone, is insufficient
to make the defendant, School of Hope, a de facto state agency.
Plaintiff seeks to distinguish Rendell-Baker on the grounds
that the services in the present case constitute an "exclusive
state function." In Rendell-Baker, the Court stated:
our holdings [have] made clear that the relevant question is
not simply whether a private group is serving a `public
function'. We have held that the question is whether the
function performed has been ...