The opinion of the court was delivered by: Matthew F. Kennelly, District Judge
MEMORANDUM OPINION AND ORDER
The City of Chicago; Mary Dempsey, the City's Interim Chief Procurement Officer; and Louis Langone, the Director of Administration of the City's Department of Transportation, have moved to dismiss the second amended complaint of Chicago United Industries, Ltd. (CUI) and its owners George Loera and Nick Massarella.
For the reasons stated below, the Court grants the defendants' motion in part and denies it in part.
The plaintiffs' claims arise from the City's debarment of CUI, Loera, and Massarella in August 2005 from doing business with the City of Chicago. Prior to the debarment, CUI had been awarded contracts to provide stop signs, traffic control signals, fire extinguisher boxes, emergency telecommunications equipment, and other items. Allegedly as a result of the debarment, the City terminated or stopped performing on over forty contracts that CUI had with the City, whose value, CUI alleges, was around $12 million. The debarment also had the effect, plaintiffs contend, of preventing them from doing business with others that had City contracts. The plaintiffs allege that the debarment and termination violated Loera and Massarella's rights to due process, as they Loera and Massarella were never notified that the City was considering debarring them personally, and the procedure the City used allegedly was a sham. The plaintiffs also allege that during the debarment proceedings, the City and its representatives made false and defamatory statements about CUI, Loera, and Massarella to the press, City departments, and companies with which CUI does business. They also allege that the defendants later retaliated against them for filing suit to challenge the debarment.
1. The Original Complaint
The plaintiffs filed this suit shortly after the debarment took place. They obtained a temporary restraining order from the judge of this Court to whom the case was then assigned. The order was reversed on appeal after the Court of Appeals concluded that it amounted to an appealable preliminary injunction due to its duration, and then found that the claim for injunctive relief had been rendered moot by the City's later reinstatement of the cancelled contracts and rescission of the debarment order and its amendment of debarment rules to provide for additional process in advance of debarment. See Chicago United Inds., Ltd. v. City of Chicago, 445 F.3d 940 (7th Cir. 2006). The court vacated the injunction but remanded the case for consideration of any claims for damages.
2. The First Amended Ccomplaint
CUI and the other plaintiffs filed an amended complaint following remand. They alleged that the City had retaliated against CUI for filing suit by threatening to reinstate debarment proceedings, canceling contracts, refusing to accept CUI as the low bidder on various contracts, failing to advise City departments and outside vendors that CUI was again eligible to do business with the City, and making defamatory statements about CUI, Loera, and Massarella. They asserted claims for damages on behalf of all three plaintiffs for violation of their procedural and substantive due process rights and for retaliation for exercising their First Amendment rights (Counts 1, 2, 3, and 6); a claim for an injunction against further debarment proceedings (Count 4); and a state law defamation claim (Count 5). On December 7, 2006, the Court dismissed CUI's due process claims and all three plaintiffs' state law claims. The Court declined to dismiss the due process claims of Loera and Massarella and the First Amendment retaliation claims of the three plaintiffs.
3. The Second Amended Complaint
Following the December 2006 ruling, plaintiffs filed a second amended complaint adding Dempsey as a defendant. The Court will describe the second amended complaint's allegations in some detail.
Plaintiffs allege that CUI, a minority business enterprise and a supplier of goods, has been doing business with the City for approximately twenty years. They allege that on an unspecified date, CUI was awarded a contract by the City with a total value of $1,530,000 to provide over 300,000 "sign blanks" to the City's Department of Transportation (DOT). CUI delivered the required items in January 2005.
Shortly thereafter, Louis Langone, DOT's Director of Administration, claimed that CUI had shorted the City by 222 blanks, saying he had counted the blanks by hand. Massarella allegedly visited the DOT's sign shop and saw that the blanks were still shrink-wrapped; he believed that Langone could not possibly have counted the blanks and had made a false allegation against CUI as an excuse to avoid or delay payment. CUI then provided the City with documentation that the requested number of sign blanks had been delivered, and it requested payment. CUI was then told to deal only with the City's Department of Procurement Services (DPS) and its attorneys. According to plaintiffs, CUI was eventually paid for all but 222 sign blanks.
On March 31, 2005, plaintiffs allege, the City issued a notice of intent to debar CUI. In that notice, the City alleged that CUI had submitted a false shipping ticket to DOT regarding the delivery of the sign blanks and had tried to collect $2,400 that it knew was not owed. According to plaintiffs, the notice did not state or suggest that the City was considering debarring Loera or Massarella personally. Plaintiffs also allege that at the time the City issued the notice, it also issued press releases falsely claiming that CUI was dishonest and that it had committed a fraud on the City.
Plaintiffs allege that on April 29, 2005, CUI submitted a written response to the notice of intent to debar, including a sworn affidavit from the manufacturer of the sign blanks stating that any shortage was the result of his own error and that CUI and its representatives were unaware of the error.
The debarment proceedings remained pending without action by the City for approximately four months. During this period, plaintiffs allege, DPS directed other City departments not to honor their contracts with CUI or do business with CUI and advised other City contractors to do the same, even though this allegedly violated the City's debarment procedures. As a result, plaintiffs allege, manufacturers and suppliers under contract with CUI terminated their relationships with the company. Plaintiffs say that they repeatedly protested these actions by ...