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Chicago United Industries, Ltd. v. City of Chicago

September 10, 2010

CHICAGO UNITED INDUSTRIES, LTD., AN ILLINOIS CORPORATION, GEORGE LOERA, AND NICK MASSARELLA, PLAINTIFFS,
v.
CITY OF CHICAGO, MARY DEMPSEY, AND LOUIS LANGONE, DEFENDANTS.



The opinion of the court was delivered by: Judge Robert M. Dow, Jr.

MEMORANDUM OPINION AND ORDER

This matter is before the Court on Plaintiff Chicago United Industries, Ltd.'s ("CUI") motion to reconsider [323] the Court's Memorandum Opinion and Order [318] dated January 15, 2010, which granted Defendants' motion for summary judgment [269] and denied as moot Defendants Dempsey and Langone's motion for summary judgment based on qualified immunity [274].*fn1 For the following reasons, CUI's motion to reconsider [329] is denied.

I. Background

This case involves a now long-standing dispute between the City of Chicago and CUI, a City contractor. The relevant facts are set forth in detail in the Court's January 15, 2010 Memorandum Opinion and Order ("the Opinion"), and will not be restated in their entirety here. In brief, the dispute dates back to March 17, 2005, when the City issued a Preliminary Notice of Intent to Decertify CUI as a minority-owned business enterprise ("MBE") based on the allegation that CUI was operating as a broker. Shortly thereafter, on March 31, 2005, the City issued a notice of intent to debar CUI from doing business with the City based on the allegation that CUI had submitted a false shipping ticket in connection with a delivery of aluminum sign blanks (unpainted traffic signs) to the City's Department of Transportation ("CDOT"). CUI contends that, since that time, the City essentially has systematically mistreated CUI (by, among other things, stopping or reducing orders on existing contracts with CUI, failing to award CUI new contracts when it was the lowest bidder, failing to extend existing CUI contracts, and refusing to communicate with CUI) in an effort to drive CUI out of business.

On August 24, 2005, the City debarred CUI and its owners from doing business with the City and terminated its existing contracts with CUI. CUI then filed this suit, seeking injunctive relief on the ground that the City had violated the due process clause of the Fourteenth Amendment by failing to give CUI a predeprivation hearing. Judge Shadur, the district court judge assigned to the case at that time, issued a temporary restraining order on August 31, 2005 enjoining the Defendants from enforcing the debarment and from canceling any of CUI's existing contracts with the City. Shortly thereafter, the City reinstated CUI's contracts with the City and rescinded the debarment order. However, according to CUI, the pattern of mistreatment (again including stopping or reducing orders on existing contracts with CUI, failing to award CUI new contracts when it was the lowest bidder, failing to extend contracts with CUI, and restricting communications with CUI) did not stop.

CUI characterizes the alleged mistreatment that occurred between April and August of 2005 as an effort by the City to deprive it of its MBE certification (i.e., de facto decertification) in violation of CUI's due process rights. CUI characterizes the mistreatment that allegedly has continued since the August 2005 as retaliation in violation of the First Amendment for the filing of this suit.

The Opinion, which CUI asks the Court to reconsider, addressed Counts III, IV, V, and VI of CUI's six-count Third Amended Complaint. With respect to Count III, a procedural due process property interest claim against the City and Dempsey, the Court concluded that CUI has a constitutionally protected property interest in its MBE certification. However, the Court nevertheless granted summary judgment in favor of Defendants on Count III, finding that CUI failed to present sufficient evidence from which a reasonable jury could conclude that CUI had suffered a loss of that interest amounting to a constitutional deprivation. The Court granted summary judgment in favor of Defendants on Count IV, in which CUI alleged that Defendants retaliated against it for filing the instant lawsuit in violation of the First Amendment, on the ground that CUI had failed to establish a genuine issue of material fact as to causation (i.e., whether its protected speech caused Defendants' adverse actions). In Count VI, CUI alleged that the City breached a number of its contracts with CUI by (1) stopping or reducing orders on contracts, (2) refusing to extend contracts despite regularly doing so in the past, and (3) failing to communicate with CUI. The Court concluded that Count VI could not survive summary judgment because: (1) CUI presented no evidence from which a reasonable jury could conclude that the City reduced or terminated its requirements in bad faith; (2) the parties' course of dealing with respect to extensions could not be used to imply a term requiringthe City to extend its contracts because such a term would contradict the express terms of the contracts; and (3) the contracts did not require that the City maintain any particular level of communication with CUI. Finally, the Court granted summary judgment in favor of Defendants on Count V, concluding that there was no basis for awarding CUI injunctive relief because none of CUI's substantive claims had survived summary judgment.

II. Standard for a Motion to Reconsider

A court may alter or amend a judgment under Federal Rule of Civil Procedure 59(e) when the movant "clearly establish[es]" that "there is newly discovered evidence or there has been a manifest error of law or fact." Harrington v. City of Chicago, 433 F.3d 542, 546 (7th Cir. 2006). In regard to the "manifest error" prong, the Seventh Circuit has elaborated that a motion to reconsider is proper only when "the Court has patently misunderstood a party, or has made a decision outside the adversarial issues presented to the Court by the parties, or has made an error not of reasoning but of apprehension." Bank of Waunakee v. Rochester Cheese Sales, Inc., 906 F.2d 1185, 1191 (7th Cir. 1990). Rule 59(e) "does not provide a vehicle for a party to undo its own procedural failures, and it certainly does not allow a party to introduce new evidence or advance arguments that could and should have been presented to the district court prior to the judgment." Bordelon v. Chicago School Reform Bd. of Trustees, 233 F.3d 524, 529 (7th Cir. 2000). Because the standards for reconsideration are exacting, our court of appeals has stressed that issues appropriate for reconsideration "rarely arise and the motion to reconsider should be equally rare." Bank of Waunakee, 906 F.2d at 1191.

III. Analysis

A. Procedural Due Process Property Interest Claim

CUI maintains that, between April and August of 2005, the City and Dempsey deprived it of its constitutionally protected property interest in its MBE certification without due process of law, by, inter alia, stopping or reducing orders on existing contracts with CUI, failing to award CUI new contracts, failing to extend existing CUI contracts, and telling prime contractors that CUI was no longer certified as an MBE. To state a Fourteenth Amendment claim for the deprivation of a property interest without due process, a plaintiff must demonstrate that (1) he had a constitutionally protected property interest, (2) he suffered a loss of that interest amounting to a deprivation, and (3) the deprivation occurred without due process of law. Moss v. Martin, 473 F.3d 694 (7th Cir. 2007). In the Opinion, the Court concluded that CUI established the first element -- namely, that it had a protectable property interest in its MBE certification. However, the Court found that CUI failed to present sufficient evidence from which a reasonable jury could conclude that CUI had suffered a loss amounting to a deprivation because the evidence indicates that CUI's MBE certification retained significant value. In particular, the record evidence shows that CUI continued to serve as an MBE subcontractor on multiple contracts without issue, that CUI retained approximately 35 target market contracts, and that the City made $939,307.61 in expenditures on those contracts during the period of alleged de facto decertification. Having concluded that CUI failed to raise a genuine issue of material fact as to the deprivation element of its due process property interest claim, the Court did not consider whether CUI received all the process it was due.*fn2

In its reconsideration motion, CUI argues that the Court applied the wrong legal standard is assessing the deprivation prong of its due process property interest claim. In particular, the Court held that CUI was required to present evidence from which a reasonable jury could conclude that its MBE certification was rendered valueless. According to CUI, the Court set the bar too high; a party need not demonstrate that its protected property interest has been rendered valueless in order to establish a constitutional deprivation. Rather, CUI contends that it merely needs to demonstrate that Defendants' actions diminished the value of its MBE certification. In the alternative, CUI argues that even if the Court applied the correct standard, it erred by not construing the facts and drawing all reasonable inferences in the light most favorable to CUI.

1. Proper Standard for Determining Whether a Deprivation Occurred

In considering whether Defendants could be found to have deprived CUI of its property interest in its MBE certification, the Court looked to cases discussing the effective or de facto revocation of a certificate or license in which the holder has a protectable property interest. The Court found that, in factually analogous cases, courts have required plaintiffs to show that the defendant destroyed the value of the property right in order to establish a deprivation. See Reed v. Village of Shorewood, 704 F.2d 943, 949 (7th Cir. 1983) (where defendants' actions "destroyed the value of the plaintiffs' licensed business and forced them ultimately to give up their Class A license, the plaintiffs were deprived of their property right in the license even though the license was never actually revoked") (emphasis added); Stidham v. Peace Officer Standards and Training, 265 F.3d 1144, 1153 (10th Cir. 2001) (stating that "[a]ctions taken by the State which destroy the value or utility of a protected property interest constitute a Fourteenth Amendment deprivation," and holding that plaintiff stated a claim for the deprivation of a protected property interest in his peace officer certification where he alleged that, as a result of the defendants' actions, he could not use his peace officer certification to obtain employment) (emphasis added); Westborough Mall, Inc. v. City of Cape Girardeau, Mo., 794 F.2d 330, 336-37 (8th Cir. 1986) (holding that city officials who prevented builders from completing a shopping mall on land that had been zoned for the mall's construction deprived the builders of their property interest in the zoning classification, even though the zoning classification never was officially revoked, because they "destroyed the value" of the builders' zoning right) (emphasis added). Based on that case law, the Court concluded that CUI was required to present evidence from which a reasonable jury could conclude that the Defendants' actions had rendered its MBE certification valueless.

CUI now contends that it should not be required to show that the value of its MBE certification was reduced to zero. Rather, according to CUI, the law merely requires it to demonstrate that Defendants' actions "effectively diminished the value" of the MBE certification, or that they "adversely affected" CUI's business "to an intolerable point." In support of its position, CUI relies on the Seventh Circuit's en banc decision in Easter House v. Felder, 910 F.2d 1387 (7th Cir. 1990). But, contrary to CUI's reading of the case, Easter House does not stand for the proposition that the State can deprive a license-holder of its property interest in a license by "effectively diminishing" the value of that license. In Easter House, a private adoption agency brought a § 1983 action against officials of the Illinois Department of Children and Family Services ("DCFS"), alleging that the defendants had deprived it of its property interest in the renewal of its operating license.*fn3 After noting that it was "not wholly convinced that a deprivation of constitutional magnitude occurred," the Seventh Circuit expressly refused to resolve definitively the question of whether the agency had suffered a deprivation of its property interest. 910 F.2d at 1396. Instead, the court assumed that a deprivation had occurred (id.), and went on to conclude that the agency had received all of the process it was due. Id. at 1407. Because the Easter House court did not in fact find a deprivation, it does not support CUI's position.*fn4

In support of its claim that it is not required to show that its MBE certification was rendered valueless, CUI also points to a number of constructive discharge and takings clause cases. The applicability of constructive discharge cases to this context is far from clear.*fn5 A constructive discharge generally is thought to involve "a situation in which an employer, without firing an employee, makes his working conditions so miserable that a reasonable person would be compelled to resign." Townsend v. Vallas,256 F.3d 661, 677 (7th Cir. 2001). It is not clear to the Court -- and CUI has not explained -- how that standard might be applied to government contractors.

By contrast, as discussed in the Opinion, some of the basic principles informing the Supreme Court's takings jurisprudence are useful in addressing CUI's de facto decertification claim. Specifically, courts have long recognized that the government can effect a taking not only by transferring title to the property to the State or to another private party by eminent domain, but also by imposing regulations that "prohibit a property owner from making certain uses of her private property." Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency, 535 U.S. 302, 321-22 (2002) (noting the distinction between physical takings and regulatory takings). See also Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 415 (1922) ("if regulation goes too far it will be recognized as a taking"); Stop the Beach Renourishment, Inc. v. Florida Dept. of Environmental Protection, --- S.Ct. ---, 2010 WL 2400086, at *7 (June 17, 2010)("[al]though the classic taking is a transfer of property to the State or to another private party by eminent domain, the Takings Clause applies to other state actions that achieve the same thing"); Barbian v. Panagis, 694 F.2d 476, 483 n.6 (7th Cir. 1982) ("The government need not invoke the formal power of eminent domain to confiscate property for public use. The government may deny an owner dominion over his property simply by restricting its use.") (citations omitted). Likewise, as recognized by the Seventh Circuit in Reed and by this Court in the Opinion, the government can deprive an individual of their property right in a license not only by formally revoking the license, but also by taking actions that destroy the value or utility of the license, thereby achieving the same result.

Thus, the Court's regulatory takings jurisprudence is helpful to the extent that it explains "that government regulation of private property may, in some instances, be so onerous that its effect is tantamount to a direct appropriation or ouster." Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 537 (2005). The question here is whether the City's actions were "tantamount" or "functionally equivalent" to a formal revocation of CUI's MBE certification.

The takings cases on which CUI relies provide no guidance regarding that inquiry. In order to understand why that is the case, a short discussion of regulatory takings law is necessary. In the context of regulatory takings, the Supreme Court generally has "eschewed any 'set formula' for determining how far is too far, preferring to 'engag[e] in * * * essentially ad hoc, factual inquiries.'" Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1015 (1992) (citation omitted). However, the Supreme Court has identified "two categories of regulatory action that generally will be deemed per se takings." Lingle, 544 U.S. at 538. Those are: (1) regulations requiring "an owner to suffer a permanent physical invasion of her property -- however minor," and (2) "regulations that completely deprive an owner of 'all economically beneficial us[e]' of her property." Id.; see also Lucas, 505 U.S. at 1019. In the two takings cases CUI cites -- Griggs v. County of Allegheny, 369 U.S. 84 (1962) and United States v. Causby, 328 U.S. 256 (1946) -- the Court held that the use of private airspace by government airplanes constituted a taking. The Supreme Court has since explained that those cases fell into the first category of per se regulatory takings because they involved a physical invasion. See Penn Cent. Transp. Co. v. City of New York, 438 U.S. 104, 124, 128 (1978) (noting that Causby and Griggs involved a physical invasion); Brown v. Legal Foundation of Washington, 538 U.S. 216, 233-34 (2003) (noting that in Causby the government physically took possession of an interest in property -- the use of private airspace -- and thus was "required to pay for that share no matter how small"). Because Causby and Griggs involved physical invasions, which always constitute a taking, whether the property owners' land retained value was not relevant. Here, there is no equivalent to a physical invasion, and thus those cases are not applicable.

As noted above, the question before the Court is whether Defendants effectively revoked CUI's MBE certification. As stated in the Opinion, one way to determine whether a de facto decertification occurred is to look at the impact of the City's actions on the economic value of the MBE certification to CUI. Another might be to determine whether the City essentially precluded CUI from enjoying the benefits associated with an MBE certification. With ...


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